Annual Report 2018 PHILIPPE CROONENBERGHS Chairman “2018 will go down in the history of Texaf as the year in which the Board decided to invest in a new sector of the future in Africa: digital.
This sector is booming in Africa and needs are much greater than in Europe: economic inclusion, identification of people, sharing information in rural areas, e-government, public health applications...
There will no doubt be many investment opportunities. Texaf is positioning itself to identify them, partnering with a leading venture capitalist, PARTECH AFRICA, and creating Kinshasa’s first digital hub, which is destined to become a point of reference in the region.”
JEAN-PHILIPPE WATERSCHOOT CEO “Resilience and capacity to invest in new fields of action is in TEXAF’s DNA.
In spite of the socio-political upheaval witnessed in 2018, TEXAF has pursued its investment policy. Its ability to constantly adapt to the demands of the high-end real estate market in the city of Kinshasa and the quality of the services it offers enables it to maintain an occupancy rate of almost 100% in this situation.
The group has solid fundamentals and maintains large-scale ambitions on this market by favoring an increasingly environ mentally responsible approach in its construction methods and management of its real estate portfolio.
TEXAF counts on skilled and devoted operational teams for both its real estate business and its quarrying activities. Their continual engagement in often difficult circumstances is a major resource in our pursuit of success.” CONTENTS
01 Profile 06
Who are we? 07 Our activities in DRC 10 Information for shareholders 17
02 Reports of the Board of Directors 20
Directors’ report 21 Corporate governance 32 Management team 38 Remuneration and Nomination Committee report 41
02 Corporate social responsibility 44
Comequi 46 Chirpa 48 Texaf Bilembo 50 Sankuru Yema-Yema 52 Ndako Ya Biso 54
04 Annual financial statements 56
Consolidated financial statements 58 Notes to the consolidated financial statements 64 Summary of the principal accounting policies 98 Report of the auditor 107 Directors’ report of TEXAF S.A. 110
TEXAF ANNUAL REPORT 2018 3 2018 IN SUMMARY
KEY FIGURES
Average RESULT (IN EUR k) 2014 2015 2016 2017 2018 growth Revenue 18,927 19,648 18,392 18,208 18,869 Growth 2% 4% (6%) (1%) 4% 0% Recurring EBITDA * 10,019 9,598 9,740 10,038 10,111 Growth 6% (4%) 1% 3% 1% 0% Recurring operating result ** 6,938 6,486 6,953 7,020 7,168 Growth 7% (7%) 7% 1% 2% 1% Net result (share of the group) 4,685 5,456 5,454 4,542 12,909 Growth (28%) 16% 0% (17%) 184% 29%
(*) Recurring EBITDA: recurring operating result before interest, taxes, depreciation and amortization. (**) Recurring operating result: operating result minus income or expenses that are not expected to be repeated in each accounting year, such as: - Gain or loss on disposals of non-current assets - Allocations to (or reversals of) write-downs on non-current assets - Costs relating to major restructuring, purchase or disposal of a business (such as redundancy costs, plant closure and commissions paid to third parties to acquire or dispose of an activity)
Average CASH FLOWS (IN EUR k) 2014 2015 2016 2017 2018 growth Cash-flows opérationnels 6,243 6,819 8,666 8,706 11,742 5% Cash-flows d’investissement (7,326) (9,401) (7,149) (6,421) (5,416) 18% Cash-flows de financement (1,649) 4,061 (3,067) (2,532) (4,436) -
CASH AS AT DECEMBER 31st 3,984 5,461 3,911 3,674 5,564 -
TEXAF dividend
€ 1.20 4,000,000 in EUR
3,500,000 € 1.00
3,000,000 € 0.80 2,500,000
€ 0.60 2,000,000
1,500,000 € 0.40
1,000,000
€ 0.20 500,000
€ 0.00 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Total gross dividend Gross dividend per share Net dividend per share
4 TEXAF ANNUAL REPORT 2018 Real estate Highlights
RENTAL REVENUE
18,000,000
in EUR VIRTUALLY 16,000,000
14,000,000
12,000,000
10,000,000 100%
8,000,000 OCCUPATION RATE
6,000,000
4,000,000
2,000,000
0 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 36 Carrigrès NEW HOMES
SALES 600,000
500,000 in metric tons
400,000 CARRIGRÈS
300,000 RETURN TO PROFIT 200,000
100,000
0 1987 1990 1994 1998 2002 2006 2010 2014 2018 CAPITAL GAIN
AVERAGE TEXAF PRICE + MAX & MIN EUR 1.5 m 45
in EUR 40
35
30 25 REDUCTION IN 20 DEFERRED TAXES 15
10 5 EUR m 0 5.8 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
TEXAF ANNUAL REPORT 2018 5 01 Profile
6 TEXAF ANNUAL REPORT 2018 PROFILE
WHO ARE WE?
Organigram
TEXAF S.A. BRUSSELS
REAL ESTATE INDUSTRIAL FINANCIAL
98.9% 100% 100% i-Finance 10% Anagest Cotex Carriaf* Holding Brussels Kinshasa Brussels Brussels Holding Office rental Holding Holding
100% 100%
99.6% Utexafrica 94.1% Carrigrès i-Finance* Kinshasa La Kinshasa Kinshasa Residential Cotonnière Kinshasa Sandstone quarries Microfinance rental
35.3%
64.7% Immotex 100% Estagrico Kinshasa Kinshasa Office rental
35% 8.8% Congotex* Kinshasa
(*) in liquidation
Our history - A destiny linked to DRC
TEXAF is a public company, formed on August 14, 1925 Between its formation and the early 2000s, the group’s on the initiative of visionary trailblazing entrepreneurs, business was centered on textile. Its primary subsidiary, registered and domiciled in Belgium. It is unique in UTEXAFRICA, whose plants produced more than 30 million that it is the only company, listed since its formation on meters of fabric annually, was involved in every step of cotton an international stock exchange, that has all its assets processing. At its peak, the group’s textile business employed concentrated in the Democratic Republic of Congo. up to 6,000 people in Kinshasa, making it the city’s biggest private employer at the time, and supervised more than 100,000 smallholders in the cotton sector, spread over several provinces in the center and east of the country.
TEXAF had also diversified its business interests into metal construction, a sandstone quarry and agriculture.
It owns many properties in today’s provinces of Sankuru, Maniema, South Kivu, Tanganyika, Lomami and Kasaï Oriental.
Facade of TEXAF office in 1929.
TEXAF ANNUAL REPORT 2018 7 PROFILE
The plunderings of 1991 and 1993 had a profound impact Our DNA: on the country’s economy. The deterioration of the roads and railways made trade with the interior of the country very resilience difficult. Political instability, armed conflict, a failing banking system and contraband copies of UTEXAFRICA textiles significantly weakened the group’s textile business.
In this situation, BNP-PARIBAS, the last in a succession of Our ambitions financial groups to hold a shareholding, decided to pull out of DRC in 2002, selling its majority stake in TEXAF to Philippe Real estate continues to be TEXAF’s main business. Croonenberghs, the current chairman of TEXAF group. There are very substantial future development opportunities With Albert Yuma and Jean-Philippe Waterschoot, in various areas: the two managers heading the group in DRC, every possible step was taken to save the textile business by focusing on 1. The construction of homes on free space estimated niche markets generating higher added value for African at 15 hectares of industrial wasteland print, developing its clothing business and going into part- nership with another textile group in Africa. These efforts 2. The construction of office blocks on spaces estimated could not prevent the plant from closing in 2007. at 10 hectares along Avenue Colonel Mondjiba, including the very attractive 3.5 ha site opposite the The group opted for a radical transformation, focusing its French embassy and a 3,500 m2 lot ideally located on business on the development of a large real estate portfolio the roundabout at the end of the imposing Boulevard ((> 150 hectares), ideally located along the Congo river du 30 Juin. in Kinshasa. 3. Development of the “Les Jardins de Kinsuka” project Within a decade it became an important name in the field, for the construction on a 104 ha space of more than a offering a unique quality concept in Kinshasa. thousand ecologically responsible homes and several thousand square meters of commercial, educational, As such, TEXAF has come through the many periods of medical and office premises, as well as many sports and unrest that have punctuated the political, economic and recreational grounds along with a large proportion of social history of the country. Its capacity to reinvent itself green space. and explore new opportunities in a constantly changing environment has made it a leading operator in DRC. There are development opportunities in the agro-industrial domain, particularly based on the group’s assets in the inte- rior of the country through its subsidiaries LA COTONNIERE and ESTAGRICO, but they can only be envisaged as part of a huge infrastructure renovation project to open up these areas by road and rail.
The group is also studying projects to diversify its business and hired several engineers in 2018 to strengthen its analysis and implementation capacities.
The first domain of diversification TEXAF has decided to enter is digital, both for training and to support promising new initiatives.
Bois Nobles district.
8 TEXAF ANNUAL REPORT 2018 PROFILE
TEXAF DIGITAL Our rules of conduct
“The European Union currently has an ageing population TEXAF wishes to realize its ambitions: of 510 million; Africa 1.25 billion, 40% of whom are under 15 years of age. In 2050, there will be 450 million Europeans ██ By purposefully working within the formal economy and 2.5 billion Africans. By 2100, three in four people globally ██ By pursuing a good governance policy toward all will be born south of the Sahara.” These are forecasts in “The economic and social actors scramble for Europe” by Stephen Smith, a staunch believer in ██ By communicating transparently the emergence of Africa. ██ By preferring partnerships with Congolese operators and bringing in high-quality Congolese and expatriate This advancing sub-Saharan Africa that TEXAF operates in is managers when business is running smoothly facing huge challenges. The economic stakes of this demo- ██ By maintaining the listing of TEXAF shares on Euronext graphic evolution are enormous. and favoring measures that help improve the liquidity of shares to give the largest number of savers the opportu- TEXAF believes that the digital revolution is on the way nity to participate in the anticipated growth of DRC. to becoming a significant economic growth industry in Africa, because these technologies can help accelerate development.
TEXAF is backing Congolese youth, which is pushing for modernity and has decided to invest in African businesses that are innovating in these technologies.
The first million euros has been invested in the new PARTECH AFRICA venture capital fund (https://partechpartners.com)
Through this investment, the group expects to quickly gain a better understanding of this sector, enabling it to invest in companies and create a new growth hub alongside real estate and the sandstone quarry, either in association with PARTECH AFRICA or on its own.
TEXAF can share its knowledge of DRC and its stock listing will help improve the visibility of the companies it assists.
The very nature of this new business means that TEXAF will spread its geographical risk. DRC’s first ever digital campus.
Since the December 2018 announcement of its intention to develop a technology hub, it has been in contact with many entrepreneurs in the industry, including the specialists presented by PARTECH AFRICA. The response has been very encouraging.
This has persuaded TEXAF to study the creation of a digital campus at its Kinshasa sites to house an incubator and training center. This is a first for DRC.
A place with both an incubator and training function.
TEXAF ANNUAL REPORT 2018 9 PROFILE
OUR ACTIVITIES IN DRC
Real estate business
In 1926 the textile plant and the compound to house its Just over a decade later, there are 287 homes on the site, managers were located on a 48 ha site in what at the time where more than 1000 people of 35 different nationalities was a large unoccupied suburb of the future city of Kinshasa. live together. It has become Kinshasa’s leading residential concession. This area, ideally located along the Congo river is bounded by the Gombe and Makelele rivers. These natural borders have traditionally protected the site from the frenzy of the metropolis that gradually grew into the city of Kinshasa. Occupancy rate After the closure of its textile plant, in 2007 the group decided to focus on its real estate portfolio, which had until close to 100% then been a secondary business.
The domain has a great many green areas, various walking paths, sports grounds, a swimming pool, a bar/lounge and a restaurant, making it a unique location in Kinshasa. 2014 2015 2016 2017 2018 New gyms and group classrooms will be added in 2019, Occupancy rate* 99.5% 100.0% 95.9% 97.6% 98.2% along with a new children’s playground.
* Occupation rate: total rent billed over the period
2018 REVENUE BY CLIENT CATEGORY
2%
16% 24%
19% 39%
Embassies and development agencies Private businesses International institutions Private individuals Congolese bodies
Bois Nobles district.
10 TEXAF ANNUAL REPORT 2018 PROFILE
The satisfaction of our clients is what drives us
Security is effective but discrete. Overall, there is a family atmosphere, characterized by mutual respect among everyone in the “UTEXAFRICA community”.
Thirty-six homes were completed in the first phase of the “Bois Nobles” project in 2018, enlarging the range of homes offered on the market with 1-4 bedroom apartments and 2-4 bedroom freestanding houses.
It is also important to note that the TEXAF BILEMBO cultural center, which opened in a preserved part of the plant on the site in 2014, has become one of the leading venues for the exhibition and promotion of contemporary art in all of its forms over the past five years.
Champs de Coton district.
RENT IN DECEMBER 2018 RENT IN DECEMBER 2018 BY CONDITION BY PROPERTY TYPE
1% 0% 5% 10%
11% 3%
11% 19%
72% 68%
New or completely renovated Old but in good condition Residential Offices Retail Due for renovation Run-down Other Warehouses Other
TEXAF ANNUAL REPORT 2018 11 8 LEISURE POOL RESTAURANT TENNIS Congo river FITNESS
9 CULTURAL AREA TEXAF BILEMBO
Gombe river PETIT PONT
5 4
7 9 7 6 8 3
2 Avenue Colonel Mondjiba
1
3 District LES BOIS NOBLES ██ 82 villas and apartments – under construction Utexafrica and Cotex concessions: 60 ha: 21 ha occupied by new buildings or old ones in good condition 14 ha occupied by old buildings earmarked for demolition 9 ha of land to be built on 16 ha of sites that cannot be built on and roads
12 TEXAF ANNUAL REPORT 2018 PROFILE
Boulevard du 30 Juin
4 District LES MUSICIENS ██ 81 apartments, with the last 33 units rented in October 2016. District 7 OFFICES ██ loft offices on industrial wasteland (2011-2015) – 5,300 m2 ██ gradual development of offices in former COTEX industrial buildings (2007-2013) – 3,500m2
District 5 NEW COMPOUND ██ 18 villas (new build) and apartments (duplexes in the former clothes workshops of District 1 the textile factory) CHAMP DE COTON ██ first real estate developments ██ 52 apartments between 2003 and 2005 ██ Contemporary style ██ Three-phase project put on the market between 2013 and 2015.
2 District HISTORICAL COMPOUND ██ 99 villas and apartments, 51 of which renovated. ██ “Garden neighborhood” architectural style from the end of the 1920s. ██ Currently being renovated District 6 COTEX ██ 3,200m2 office development
TEXAF ANNUAL REPORT 2018 13 PROFILE
Valuation of the real estate portfolio
The Board of Directors calculated the value of the Group’s investment property. The detail of this calculation and Real estate assets the underlying assumptions are provided in appendix 7 to the consolidated financial statements. valued at EUR 324 m.
The main points are as follows:
Area total: 470 ha
Value total EUR 324 M
0 20 40 60 80 100
Building land in downtown Kinshasa Non-building land in downtown Kinshasa Undeveloped land in Kinsuka Undeveloped land in the province Developed areas
Annuel rent total EUR 18,5 M
Area total: 39 ha
Value total EUR 223 M
0 20 40 60 80 100
New or completely renovated buildings Old buildings in good condition Buildings to be renovated Run-down buildings
14 TEXAF ANNUAL REPORT 2018 PROFILE
Jardins de Kinsuka
The group holds 470 ha, valued at EUR 324 m, the greater The TEXAF group has a large 104 ha site on the outskirts of part of which - EUR 223 m - relates to built land in the Kinshasa, more than half of which runs along the Congo river. concessions in downtown Kinshasa. The higher elevation and location by the Congo river make These built zones cover 39 ha, but 84% of the EUR 18.5 m in this an exceptional site. rent is generated by new buildings or old buildings that are in good condition, which cover only 54% of this area. However, it is situated in a highly urbanized area. In the absence of any regional development plan, the access roads In other words, the development potential of the Group are no longer able to guarantee free-flowing traffic to this solely in its downtown concessions includes not only 10 ha part of Kinshasa. Studies are expected to identify solutions of building land, but also 18 ha of old industrial buildings that to the traffic and site access problems with the assistance of are to be renovated or are run-down and are currently rented the public authorities. at very low rents per m2. Studies are ongoing with the architectural firm ORG2 (http://orgpermod.com) for the design of a sustainable development project that is environmentally friendly and Ongoing projects fits in with the surrounding area. The aim is to offer a wide enough portfolio of services on the site (schools, polyclinics, TEXAF is constantly looking to improve and diversify the commercial spaces, and sports and leisure spaces) to limit range of services it offers to its clients. the need of occupants to take their cars.
For example, several months have been devoted to further This project adopts a different business model from other improving the layout of homes in the second phase of the group developments, which are build-for-rent projects. “Bois Nobles” project, incorporating the observations and The properties in the Jardins de Kinsuka will be sold to recommendations of the new occupants in the first phase. the Congolese middle class.
The second phase of 39 homes will begin in mid-2019, with the results expected to be put on the market at the end of 2020.
Construction of a gym and a group classroom will begin this year.
A playground for children and tweens will open in 2019.
We are also considering new commercial and office projects along the important Avenue Colonel Mondjiba. The aim is the develop a variety of multi-use spaces to meet the expectations of occupants and offer workspaces close to homes.
"Jardins de Kinsuka".
TEXAF ANNUAL REPORT 2018 15 PROFILE
After a very poor 2017, the implementation of an Sandstone quarry ambitious plan to quickly The CARRIGRES open-air quarry opened at the beginning restructure the business of the 1950s. It is located in the nearby suburb of Kinshasa, which was completely unoccupied back then. led to a return to stability
The anarchic development of the city has hampered its in 2018 operations for many years.
It is the biggest gravel production unit of all Inkisi pink sand- stone grades in Kinshasa, with its installed annual capacity of 600 kT, a sandstone deposit estimated at 25 million tons and Cotton companies a primary crusher that can get through 400 metric tons per hour. This material is used in the production of concrete and The group holds real estate assets through its subsidiaries asphalt for roads and civil engineering projects. LA COTONNIERE and ESTAGRICO in several provinces of the DRC (Kasaï Oriental, Sankuru, Lomami, Haut Lomami, The company operates in a highly competitive environment Maniema, Tanganyika and Sud Kivu), the legacy of cotton dominated by the informal sector. It distinguishes itself from cultivation business to supply its textile plant in Kinshasa. its competitors by the quality of its products and the strict control of the quantities delivered. These assets could be used to develop new agricultural activities. CARRIGRES employs about forty people, working under operations manager Hilarion Mwayesi and commercial manager Paulo Barril, who rely on the services of TEXAF’s real estate business for all other aspects (finance, legal, adminis- Corporate social tration, human resources, security). responsibility
Aware of the difficulties the people of Congo find them- selves in and grateful for the opportunities the country provided TEXAF, the group attaches increasing importance to developing activities that, while not necessarily directly connected to its corporate purpose, do contribute to the human development of the country.
Chapter 3 of this annual report is devoted to these activities.
A historical presence in eight of the 26 of the country’s provinces
Sandstone quarry.
16 TEXAF ANNUAL REPORT 2018 PROFILE
INFORMATION FOR SHAREHOLDERS
Dividend TEXAF HAS DISTRIBUTED A DIVIDEND SINCE 2005
IN EUR 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Gross dividend par share 0.16 0.19 0.23 0.28 0.33 0.40 0.48 0.58 0.69 0.81 0.97 Net dividend per share 0.12 0.14 0.17 0.21 0.25 0.30 0.36 0.42 0.48 0.57 0.68 TOTAL GROSS DIVIDEND 506 612 736 893 1,063 1,276 1,701 2,039 2,430 2,886 3,442 (IN EUR k) Difference 20% 21% 20% 21% 19% 20% 33% 20% 19% 19% 19%
PAYOUT RATIOS
90% 4,000,000
80% in EUR 3,500,000 70% 3,000,000 60% 2,500,000 50% 2,000,000 40% 1,500,000 30%
20% 1,000,000
10% 500,000
0% 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
% gross dividend / Consolidated recurring operating result % gross dividend / Consolidated net result Total gross dividend
The TEXAF share
The TEXAF share has been listed on the continuous market launched a new index to highlight European family compa- since December 12, 2012. It was added to the BEL Small nies: Euronext Family Business Index. TEXAF is part of this index on March 18, 2013, which has led to an improvement index, which comprises 90 family companies from France, in the liquidity of the share. On February 21, 2017, Euronext Belgium, the Netherlands and Portugal.
MARKET CAPITALIZATION (AVERAGE PRICE) EQUITY
140 in EUR m 120
100
80
60
40
20
0
‘85 ‘86 ‘87 ‘88 ‘89 ‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 Equity
TEXAF ANNUAL REPORT 2018 17 PROFILE
VOLUME OF SHARES HANDLED 12-month mobile average AVERAGE TEXAF PRICE + MAX & MIN
600,000 45 in EUR in EUR 40 500,000 35 CONTINUOUS MARKET 400,000 30
25 300,000 20
200,000 15
10 100,000 5
0 0
‘05 ‘07 ‘09 ‘11 ‘13 ‘15 ‘17 ‘19 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
Old concession district.
18 TEXAF ANNUAL REPORT 2018 PROFILE
Shareholding structure Market return
TOTAL SHARES ISSUED 3,543,700 100% 20-YEAR MARKET RETURN (AS A % COMPOSED PER YEAR) Holders: Société Financière Africaine 2,212,765 62.42% BOND INDEX 4.29% Middle Way Ltd 354,370 10.00%
BEL20 3.85% Société Financière Africaine is controlled by Chagawirald SCS, which in turn is controlled by Philippe Croonenberghs. TEXAF 28.17%
Middle Way Ltd is wholly owned by Member Investments 0% 5% 10% 15% 20% 25% 30% Ltd. The ultimate beneficiary of Member Investments Ltd is CCM Trust (Cayman) Ltd, a trust of the Cha family in Hong Kong.
Shareholders’ calendar
Friday Tuesday Friday Friday 10 14 17 06 May 2019 May 2019 May 2019 September 2019 Quarterly (11am): Annual Dividend Publication of press release General Meeting payment half-yearly results
Friday Friday Tuesday End of 08 February 10 12 November 2019 2020 April 2020 May 2020 Quarterly Publication of 2019 Publication of the 2019 (11am): Annual press release annual results annual report General Meeting
The TEXAF website is at www.texaf.be. This website contains all information useful to shareholders.
TEXAF ANNUAL REPORT 2018 19 02 Reports of the Board of Directors
20 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
DIRECTORS’ REPORT
General context in 2018
The political uncertainties connected with the postpone- ment of the presidential elections led to the freezing of many national and international loans, including financing for infra- structure projects and work on the road network.
Increased tension was observed in the second half of the year in the run-up to the polls, leading to a deterioration in relations between the DRC and several partner countries, specifically Belgium.
At the end of an electoral process that was devoid of any major incidents President Tshisekedi was declared the winner.
Real estate business
In spite of the majority of economic parties active in DRC expressing great concern about the brutal deterioration of the security situation, TEXAF opted to continue its investment program and to complete the first phase of its “Bois Nobles” real estate project. RENTAL INCOME The investments totaled EUR 6.2 m in 2018. 18,000,000
in EUR 16,000,000 This project offers a wide range of 1-4 bedroom homes 14,000,000 split between apartments and freestanding houses. New exclusive services are proposed in this project: 12,000,000
a ready-for-installation fiber-optic network, a water reserve 10,000,000 and the general use of LED lighting. Reports of 8,000,000 All new homes in this first phase, which were put on 6,000,000
the market in the fourth quarter of 2018, have been snapped 4,000,000 up and their overall annual rental potential is EUR 1.6 m. 2,000,000
0 the Board of Directors ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18
TEXAF ANNUAL REPORT 2018 21 REPORTS OF THE BOARD OF DIRECTORS
As a consequence, the group portfolio comprises 287 homes, with a total rental surface area of 57,000 square meters, 281 homes and 22,000 square meters of office and commercial space and 2 36,000 square meters of warehousing. 20,000 m of office
The occupancy rate was 98% at December 31, 2018. space 98% rented.
The group activities were not impacted by the socio-political unrest observed in 2018, with 43% of revenue generated from international institutions and 39% by large companies. The recurring operating result fell by 2.5% to EUR 8,638 k, The sites are managed, cleaned and maintained by our teams after an increase in the maintenance costs of the concession and accredited partners carefully selected on the basis of and the costs of ensuring the legal security of the properties. their competences. After a non-recurring pre-tax result of EUR 1.412 k on the The “Jardins de Kinsuka” project development studies cashed in part of the expropriation indemnity due by the initiated in 2016 with the assistance of the architectural firm DRC was taken into account, the operating result was EUR ORG2 (http://orgpermod.com) continued in 2018 with the 10,016 k (+13%) and the result before deferred taxes was EUR presentation of a master plan and block diagrams of housing 7,224 k (+215%). constituting the biggest part of the project. The decision was made to build the first prototypes of these homes on the The net result (share of the group) increased by 73% to Kinsuka site in 2019. EUR 13,148 k, after a remeasurement of deferred taxes. The pending reduction in the DRC tax rate (35% to 30%) and the In 2018 real estate revenue increased from 3% to EUR 17.3 m, divergence of the exchange rate of the Congolese franc and as the new “Bois Nobles” subdivision only impacted the final the tax reevaluation coefficient for fixed assets result in a months of the financial year. reduction in deferred taxes.
A new contemporary design district, Bois Nobles.
22 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
REAL ESTATE OPERATING RESULT TREND
10,000 545 in EUR k 9,000 8.856 (34) 8.638
(631) (7) 8,000 (91)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
2017 n rea e n rea e n rea e n rea e e de rea e 2018 in revenue in er onnel o in o er e en e in de re ia ion in value
Results of the real estate business
REAL ESTATE (EUR k) 2014 2015 2016 2017 2018 Diff.
Revenue from ordinary activities 13,588 14,534 15,268 16,730 17,305 3.4% Recurring operating result 7,247 6,183 7,952 8,861 8,638 (2.5%) Operating result* 7,204 5,679 8,100 8,861 10,016 13.0% Result before deferred taxes 5,522 3,779 5,764 6,141 7,224 17.6% Net result (share of the group) 4,117 4,256 6,249 7,604 13,148 72.9%
* The classification of charges by sector has been refined compared with previous financial years.
TEXAF ANNUAL REPORT 2018 23 REPORTS OF THE BOARD OF DIRECTORS
CARRIGRÈS sandstone quarry
CARRIGRES OPERATING Major restructuring was quickly implemented after a very RESULT TREND poor 2017. 0
Although conditions continued to be tough in 2018, not least in EUR k - 100 due to the absence of financing for infrastructure projects, - 200 108 the quarry was able to increase its sales in volume by 30% to - 300 403 (60) (261) 133,000 tons, but at lower average sales price. - 400
- 500 Revenue from ordinary activities increased by almost 2% to - 600 EUR 1,612 k. - 700 193 A major cost reduction program reduced the recurring - 800
operating loss by 71% to EUR -261 k. - 900 (894) (12) - 1,000 After taking account of the sale at a gain of an unused asset, 2017 2018 there was an operating loss of EUR -109 k, compared with EUR -4.454 k in 2017 (which was affected by an exceptional
depreciation on the deposit). e rea e in revenue e de rea e in value e rea e in de re ia ion e rea e in er onnel e rea e o o o er e en e The result before deferred taxes and the net result (share of the group) returned to profit at EUR 248 k and EUR 335 k respectively.
SALES
600,000
500,000
400,000
300,000
200,000
100,000
0
1987 1990 1994 1998 2002 2006 2010 2014 2018
CARRIGRES (EUR k) 2014 2015 2016 2017 2018 Diff.
Revenue from ordinary activities 5,327 5,071 3,266 1,584 1612 1.8%
Recurring operating result 1,073 1,451 178 (894) (261) (70.8%) Operating result* 847 1,359 98 (4,454) (109) (97.6%) Result before deferred taxes 844 1,407 616 (3,954) 248 n.s. Net result (share of the group) 919 1,554 638 (2,762) 335 n.s.
* The classification of charges by sector has been refined compared with previous financial years.
24 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
Holding
The expenses of the holding company, which include the expenses of the Brussels office and those related to the Sandstone sales consolidation of the financial statements and the stock market listing, are presented separately to those of the real estate business. +30% in volume They total EUR 1.2 m, which is higher than in 2017, after taking account of a provision for variable remuneration.
HOLDING (EUR K) 2014 2015 2016 2017 2018 Diff.
Revenue from ordinary activities 12 43 5 0 0 n.s. Recurring operating result (1,384) (1,149) (1,176) (947) (1,208) 27.6% Operating result* (1,384) (1,149) (2,018) (997) (1,208) 21.2% Result before deferred taxes (157) (186) (1,228) (96) (351) 265.8% Net result (share of the group) (351) (354) (1,432) (300) (573) 91.1%
* The classification of charges by sector has been refined compared with previous financial years.
Sandstone quarry.
TEXAF ANNUAL REPORT 2018 25 REPORTS OF THE BOARD OF DIRECTORS
Consolidated result
The recurring operating result increased by 2% to EUR 7.2 m. The larger part of these deferred taxes relate to latent gains on the group’s real estate portfolio in DRC (including the After taking account of non-recurring operating items, Carrigrès deposit). This provision was substantially reduced which mainly (EUR 1.4 m) relate to the gain recognized on in 2018 due, on the one hand, to a difference between the the occasion of the first two payments of an expropriation, depreciation of the Congolese franc and the reevaluation the operating result increased to EUR 8.7 m and the net coefficient authorized by the DRC tax authorities and, on the result increased to EUR 12.9 m (share of the group). other, a reduction in the corporate tax rate in DRC from 35% to 30%. This net result was increased to a large extent by the reduc- tions in deferred taxes, which totaled EUR 5.8 m. Deferred taxes are provisions for possible future taxes that are only recognized in the consolidated accounts under IFRS.
EUR k 2014 2015 2016 2017 2018
Revenue from ordinary activities 18,927 19,648 18,392 18,208 18,869 Other recurring operating income 1,167 1,451 1,844 1,493 1,423 Recurring operating expenses (10,076) (11,501) (10,496) (9,663) (10,180) Recurring EBITDA 10,019 9,598 9,740 10,038 10,111 % of turnover 50% 45% 48% 51% 50% Depreciations (3,080) (3,112) (2,787) (3,018) (2,943) Recurring operating result 6,939 6,486 6,953 7,020 7,168 % of turnover 35% 31% 34% 36% 35% Non-recurring operating items (271) (597) (774) (3,610) 1,531 Operating result 6,668 5,889 6,179 3,410 8,699 Financial expenses (593) (470) (754) (1190) (438) Results before tax (from continuing operations) 6,081 5,423 5,428 2,220 8,261 Current taxes 322 (255) (73) 75 (1,140) Result before deferred taxes 6,403 5,168 5,355 2,295 7,121 % of turnover 32% 24% 26% 12% 35% Deferred taxes (1,610) 282 101 2,255 5,811 Net result after tax 4,793 5,450 5,456 4,550 12,932 Consolidated net result (share of the group) 4,685 5,456 5,454 4,542 12,909
BY SECURITY Recurring operating result (in EUR) 1.96 1.83 1.96 1.98 2.02 Operating result in EUR 1.88 1.66 1.74 0.96 2.45 Consolidated net result (share of the group) in EUR 1.32 1.54 1.54 1.28 3.64 Number of outstanding shares 3,543,700 3,543,700 3,543,700 3,543,700 3,543,700
The alternative performance indicators are defined on page 113
26 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
CONSOLIDATED RESULT 14,000
in EUR k 13,000
12,000
11,000
10,000
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Recurring operating result Consolidated net result (share of the group)
RECURRING EBITDA as a % of revenue from ordinary activities
80%
66% 60% 55% Recurrent 40% operating result: 20% stable
0% (4%)
-20%
-40%
2014 2015 2016 2017 2018
Total Real estate Quarries
The alternative performance indicators are defined on page 113
TEXAF ANNUAL REPORT 2018 27 REPORTS OF THE BOARD OF DIRECTORS
Consolidated statement of comprehensive income
EUR k 2014 2015 2016 2017 2018
Result for the financial year 4,792 5,450 5,456 4,550 12,932
Variations (after tax) in revaluation reserves 117 0 Variations (after tax) in pension provisions (126) (16) (52) COMPREHENSIVE INCOME 4,792 5,324 5,557 4,498 12,932
ALLOCATED TO: TEXAF shareholders 4,685 5,330 5,549 4,490 12,909 By security 1.32 1.50 1.57 1.27 3.64 Minority interests 107 (6) 8 8 23
Consolidated balance sheet (before appropriation of the result)
The structure of the balance sheet changes slowly except for the deferred taxes under liabilities, which fell by EUR 5.8 m as EUR 5.8 m reduction explained above, in favor of equity. in deferred taxes Otherwise, the low debt ratio on the balance sheet is remark- able for a company mainly active in real estate. Financial debt* net of cash and cash equivalents was EUR 2.1 m as at December 31, 2018, or 2.3% of equity, compared with EUR 5.6 m at the end of 2017.
FINANCIAL DEBT as % of the balance sheet total
10.0%
9.0%
8.0%
7.0%
6.0% 6.2%
5.0%
4.0% 4.2%
3.0%
2.0% 1.7% 1.0%
0% 0.6%
2014 2015 2016 2017 2018
Gross debt Net debt
The alternative performance indicators are defined on page 113
28 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
December 31
EUR k 2014 2015 2016 2017 2018
ASSETS NON-CURRENT ASSETS 97,344 103,995 107,866 109,125 112,236 Property, plant and equipment 14,878 14,830 13,728 9,955 9,658 Investment property 81,644 87,880 93,867 99,100 102,347 Intangibles 32 43 41 23 15 Other financial assets 790 1,242 230 47 217 CURRENT ASSETS 13,129 16,395 13,156 11,129 12,296 Assets available for sale 1,180 1,180 1,180 0 0 Stocks 5,026 6,584 4,905 4,769 4,948 Receivables 1,226 1,491 1,114 1,469 692 Tax assets 731 1,190 1,518 919 807 Cash and cash equivalents 3,984 5,461 3,911 3,674 5,564 Other current assets 982 489 528 298 285 TOTAL ASSETS 110,473 120,390 121,022 120,254 124,531
LIABILITIES EQUITY 70,964 74,587 78,099 80,167 90,213 Capital 21,508 21,508 21,508 21,508 21,508 Group reserves 49,136 52,765 56,278 58,338 68,361 Minority interests 320 314 313 321 344 NON-CURRENT LIABILITIES 31,211 34,531 32,240 30,716 23,426 Deferred tax liabilities 22,215 21,866 21,756 19,810 13,999 Other non-current liabilities 8,996 12,665 10,484 10,906 9,427 CURRENT LIABILITIES 8,298 11,272 10,683 9,371 10,892 Liabilities associated with assets available for sale 337 337 337 0 0 Other current liabilities 7,961 10,935 10,346 9,371 10,892 TOTAL LIABILITIES 110,473 120,390 121,022 120,254 124,531
A net financial debt of scarcely 2.3% of equity
TEXAF ANNUAL REPORT 2018 29 REPORTS OF THE BOARD OF DIRECTORS
Cash flow Dividend
There was a clear increase in operational cash flow (+35%), The Board proposes to the General Meeting a dividend thanks, on the one hand, to the first payment of USD 1 m of EUR 3,442,451 or EUR 0.97 (EUR 0.68 net) per share, for an expropriation and, on the other, an improvement in an increase of 19.3%. working capital.
This enables the financing of the investments in the financial year (EUR 6.2 m), a 20% higher dividend (EUR 2.9 m) and a reduction in debt (EUR 1.6 m). Dividend : +19.3% This is in line with the long-term policy of the group to reinvest its operating cash flow, as shown in the table below. multiplied by 5 in 10 years
SOURCE OF FUNDS 2014-2018 (IN EUR K) USE OF FUNDS
Cash flow from operating activities * 53,587 51,966 CAPEX ** Divestments 2,507 11,411 Tax Increase in debt 2,718 10,331 Dividends Decrease in cash and cash equivalents 1,150 Increase in capital ** 13,746 TOTAL 73,708 73,708 TOTAL
(*) Net of tax (**) Including the contribution in kind of 50% of Immotex
EUR K 2014 2015 2016 2017 2018
Cash and cash equivalents at the beginning of the year 7,216 3,984 5,461 3,911 3,674 Cash flow from operating activities after tax 6,229 6,774 8,331 8,704 8,892 Change in need of working capital 14 45 335 2 2,850 Cash flows from operating activities 6,243 6,819 8,666 8,706 11,742 Investments (8,556) (9,418) (7,4 41) (6,625) (6,180) Divestments 1,230 17 292 204 764 Cash flows from investment activities (7,326) (9,401) (7,149) (6,421) (5,416) Dividends (1,275) (1,701) (2,039) (2,430) (2,886) Changes in debts (374) 5,762 (1,028) (92) (1,550) Cash flows from financing activities (1,649) 4,061 (3,067) (2,522) (4,436) Net increase (decrease) of cash and cash equivalents (2,732) 1,479 (1,550) (237) 1,890 Value adjustment, translation differences and changes in scope (500) (2) 0 0 0 Cash and cash equivalents at year’s end 3,984 5,461 3,911 3,674 5,564
30 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
Events after the reporting Statement of corporate period governance
There were no significant events after the reporting period. The statement of corporate governance (see below) is an integral part of the consolidated management report.
Statement of risk Statement of The Board of Directors wishes to point out that the compa- ny’s assets are located in the DRC and that the specific responsibility environment of the country entails certain risks. There is a lack of governance in DRC. Accounts were drawn up We hereby confirm that, to the best of our knowledge, the cautiously, based on the assumption of stability in the consolidated financial statements prepared in accordance social-economic and regulatory environment. with applicable accounting standards, faithfully represent the financial situation and the results of the company and TEXAF, whose reference currency is the euro, holds stakes in the undertakings included in this consolidation and that other companies transacting in foreign currencies (USD and the management report gives a faithful account of the Congolese franc), so the business is exposed to exchange development of business, the results and the situation of risks. The group does not use hedging instruments as the company and the undertakings included in the consoli- the terms are unpredictable. However, this risk is limited, dation as well as a description of the main risks and uncer- given the low proportion of these transactions in foreign tainties it faces. currencies.
A more detailed presentation of the risks the group may be In the name of and on behalf of exposed to is provided on page 67. the Board of Directors
Performance criteria
TEXAF expects to achieve the performance targets in Jean-Philippe Waterschoot relation to the risk factor of its environment. Real estate and CEO industrial investment projects must fulfil an internal yield criterion greater than the one used by financial companies active in more stable regions. These criteria are reviewed against the development of this environment.
TEXAF ANNUAL REPORT 2018 31 REPORTS OF THE BOARD OF DIRECTORS
CORPORATE GOVERNANCE
Adherence to the Corporate Composition of the Board Governance Code of Directors
The Board regularly examines the compliance of the PHILIPPE CROONENBERGHS (1950) contents of the charter with applicable laws and regu- Term of office ends 2021 lations. The current version of the charter was approved President, non-executive on November 15, 2017. After graduating from University of Antwerp (UFSIA) with a master’s degree in applied economic sciences, Philippe This charter confirms the adherence of TEXAF to the Croonenberghs began his career with a three-year posting Belgian Corporate Governance Code (2009), its principles in Iraq after completing his military duty as a special forces and virtually all of its guidelines. Some departures are officer. He joined TEXAF in 1985. Put in charge of investments justified due to the size of TEXAF, that is the non-executive by the shareholder Cobepa, he fulfilled various directorships directors did not meet without the executive directors between 1992 and 2002 within companies such as Ibel, (article 4.1) and there are no internal rules for the executive Zénitel, Uco, Aon and Fortales. In 2002, he organized an MBO management (article 6.1). of TEXAF and, on his initiative and under his direction, TEXAF reoriented its business model, abandoning the heavily The Board has also adopted the charters of the Audit loss-making textile business in favor of a real estate business. Committee and the Remuneration and Nomination He has been CEO of TEXAF for 20 years and chairman of Committee. the Board since 2017.
The full text of the Governance Charter is available on the website at www.texaf.be. DOMINIQUE MOORKENS (1948) Term of office ends 2020 The governance report in this 2018 annual report is Vice-president, non-executive an integral part of the management report. Dominique Moorkens began his career within the Alcopa family group as an automobile dealership manager. He took over as director in 1981 and in this role he restructured the group, based on the principles of good governance. The Alcopa group, of which he was CEO and chairman of the board for very many years, is active in the distribution of two- and four-wheeled vehicles. It has turnover exceeding EUR 2 billion, generated in Europe and internationally. The group employs more than 2,300 people.
Dominique Moorkens is also a director of Carmeuse, and chairman of the board of Coprem and Connect Group. He is involved in numerous organizations dedicated to philanthropy and entrepreneurship; chairman of the Board of Pulse Foundation as well as Mékong Plus. He is honorary consul of the Republic of Korea.
Some of the management team in DRC.
32 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
HERMAN DE CROO (1937) CHARLOTTE CROONENBERGHS (1989) Term of office ends 12-31-2018 Term of office ends 2021 Vice-president, non-executive Non-executive Honarary director since January 1, 2019 Charlotte Croonenberghs is a Master of Laws (Leuven). Herman De Croo is a minister of state. He has been a director After various traineeships (Alpro, Beiersdorf), including since 1981. His successive terms of office have been inter- four months in the political and economic section of the rupted by ministerial appointments. He is honorary mayor Belgian Embassy in Bangkok, she gained a master’s degree of Brakel, East Flanders, Belgium. Herman De Croo was in European business (MEB), graduating magna cum laude president of the House of Representatives for eight years. from ESCP Europe (Paris and London). She is currently He is chairman of CRE-AC, the Research and Expertise Center group marketing manager at L'Oréal. She is the daughter for Central Africa, chairman of the European Transport Safety of Philippe Croonenberghs. Council, founder and chairman of the Veteran Cars Museum Autoworld and chairman of the Cardiological Foundation Princess Lilian. He has been a member of the Flemish CHRISTOPHE EVERS (1960) Parliament since 2014. Term of office ends 2021 CFO, Executive Herman De Croo has a law degree from Université libre de After graduating in business engineering at Solvay Brussels Bruxelles (ULB). He taught at the University of Chicago (Law School (ULB), Christophe Evers began his career at Umicore. School), ULB (public law) and the Vrije Universiteit Brussel In 1989 he joined Cobepa, where he became CFO and joined (VUB) (Common Law and Civil Law). He is the author of a the executive committee. In 2001 he joined the executive very large number of publications. 167 scientific contribu- committee at bpost, with responsibility for Business devel- tions, including six books – two thick autobiographies – opment, real estate and all non Mail and Retail activities. and several hundred parliamentary reports. Herman De Croo From 2004 to 2010 he was a partner at Drakestar Partners, is very familiar with the Congo, having visited the country on an investment bank specialized in technology. Christophe numerous occasions. Evers is a professor at the Solvay Brussels School and author of several publications.
VINCENT BRIBOSIA (1960), representative of Chanic s.a. MICHEL GALLEZ (1958) Term of office ends 2023 Term of office ends 2021 Independent Non-executive Vincent Bribosia has an MA in Law (Université de Liège) and A graduate of the Ecole Pratique des Hautes Etudes a master’s degree in management from CEPAC (ULB). He has Commerciales in Brussels, he has a long experience in textiles also followed executive education programs at the London in Africa. He was first seconded to Kinshasa by the British School of Economics and Harvard Business School. He joined group Tootal Textiles as financial manager of CPA Zaire and, TEXAF from the Suez-Société Générale de Belgique group in 1994, he worked in the Cha group, for which he set up a where he held various positions, including chief of staff of distribution channel for textile products throughout Africa; the CEO, Gérard Mestrallet. He was secretary and member of he held various posts as financial and general manager and the Management Board of Société Générale de Belgique and sat on the board of several group companies. He was the a director of numerous companies, including Finoutremer last general manager of Congotex and is currently executive s.a., Chanic s.a. as well as several unlisted companies. He was director of United Nigerian Textiles, the largest group of also on the staff of the minister for employment (1983-86). textile factories in Nigeria. In 2000 Vincent Bribosia acquired Suez-Société Générale de Belgique group’s stake in Chanic and is now its chairman.
TEXAF ANNUAL REPORT 2018 33 REPORTS OF THE BOARD OF DIRECTORS
DANIELLE KNOTT (1968) ALBERT YUMA MULIMBI (1955) Term of office ends 2021 Term of office ends 2023 Independent Non-executive Danielle Knott was born in Kinshasa. She is a Master of Laws, Holding a master’s degree in applied economics from UCL, graduating cum laude from the Université Libre de Bruxelles, since 1983 Albert Yuma has held positions at all administra- and holds an MBA from the Ecole de Perfectionnement tive levels at UTEXAFRICA until he was appointed managing en Management. She was an attorney at law for five years, director, a post he shared with Jean-Philippe Waterschoot before joining the Carmeuse Group in the human resources until June 2015. An influential figure in the DRC, Albert Yuma department. Danielle Knott is currently heading this depart- is chairman of the Congolese Employers’ Federation (FEC), ment. Alongside this responsibility in Europe and North director of the Congolese Central Bank and chairman of its America, she is in charge of various assignments entrusted Audit Committee, as well as chairman of Gécamines. He sits to her by the CEO of Carmeuse. Danielle Knott recently on the council of the International Labour Organisation in took over the management of a new business unit created Geneva and is vice-president of the International Organisa- in Groupe Carmeuse, in addition to her human resources tion of Employers (IOE). He is a director of the Belgo-Con- responsibilities. golese Chamber of Commerce. He is a Commander of the Order of the Crown.
PASCALE TYTGAT (1960) The Board of Directors is composed of 10 directors, of which Term of office ends 2021 three are independent directors, two are executive directors Independent and eight are non-executive directors (which includes the A business engineering graduate of Solvay (1983) and independent directors). IFRS-certified from Université Catholique de Louvain (2005), Pascale Tytgat is statutory auditor (1990). She is founding The directors are appointed for a term of four years. managing partner of BST Réviseurs d’Entreprises (1991). She has sat on the qualification examination jury of the Insti- tute of Statutory Auditors of Belgium since 2006 and was a member of its Quality Control Commission for 20 years (1995- 2016). She has also accomplished many financial expertise assignments in Belgium and France.
JEAN-PHILIPPE WATERSCHOOT (1963) Term of office ends 2023 Executive, CEO (from May 9, 2017) A civil engineer who graduated from the Faculty of Applied Sciences at Université libre de Bruxelles (ICME 88), Jean- Philippe Waterschoot began his career at the TEXAF group in Lubumbashi in 1989. He held various operational posts at the UTEXAFRICA textile factory, and was its managing director up to the time when the textile branch merged with Congotex. He is director of the National Business Federa- tion of Congo, director and permanent representative of the CBL-ACP Chamber of Commerce, vice-president of the Belgo-Congolese CCBCL Chamber of Commerce, director of several non-profit and business associations in DRC and Advisor in Economic Diplomacy with the Belgian Embassy in Kinshasa. He is an Officer of the Order of Leopold.
New concession in the city.
34 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
Working of the Board Committees of the Board of Directors of Directors
The Board of Directors met five times in 2018. AUDIT COMMITTEE The Audit Committee is formed of Ms. Pascale Tytgat, The list of individual director attendance is as follows: chair, and Messrs. Philippe Croonenberghs and Dominique Moorkens. The Audit Committee met three times in 2018. ██ Vincent Bribosia 4 80% ██ Charlotte Croonenberghs 4 80% The work of the Audit Committee was focused on: ██ Philippe Croonenberghs 5 100% ██ Herman De Croo 5 100% ██ Closing the 2017 financial year; ██ Christophe Evers 5 100% ██ Information on the fair value of investment properties; ██ Michel Gallez 3 60% ██ Establishing the interim situation on June 30, 2018; ██ Danielle Knott 3 60% ██ Monitoring the special valuation rules, particularly with ██ Dominique Moorkens 5 100% regard to IAS/IFRS standards and amendments thereto; ██ Pascale Tytgat 5 100% ██ The problem of deferred taxes; ██ Jean-Philippe Waterschoot 5 100% ██ Monitoring the financial communications; ██ Albert Yuma Mulimbi 2 40% ██ Defining the APMs; ██ Transition of the position of compliance officer; Any absence of a director was for pressing reasons. ██ Monitoring internal control and risk management Their opinions on the key items on the agenda were including the risk matrix; obtained before the meeting in question. ██ Managing an internal audit on the costs of construction; ██ Updating the accounting tools and procedures; In the course of its meetings, besides the minutes of the ██ Relations with the external auditor; Audit and Remuneration and the Nomination Committee, ██ Formalities of a transaction subject to article 523 the Board dealt with: Companies Code; ██ Anticipation of 2018 closure topics. ██ Topics relating to its legal obligations, such as the preparation of financial statements, the annual report, REMUNERATION AND NOMINATION the interim report and the preparation of the General COMMITTEE (RNC) Meetings; The RNC is formed of Ms. Danielle Knott, chair, and Messrs. ██ Analysis and application in the company Vincent Bribosia* and Philippe Croonenberghs. Dominique of the IAS/IFRS rules; Moorkens chaired the RNC until May 9, 2017. He is a standing ██ Various planned investment projects; invitee. ██ Development of the Kinsuka site; ██ Management of the real estate portfolio; The work of the RNC was focused on making ██ Monitoring of CARRIGRES and I-FINANCE; recommendations on the following: ██ Improvement of the various aspects of governance; ██ Legal and physical securing of the group‘s assets in DRC; ██ Reviewing the remuneration of the CEO; ██ Strengthening the teams and ensuring their safety; ██ Setting the variable remuneration of executive ██ Monitoring and analyzing risks; management; ██ Medium-long-term budget and strategic plan; ██ Examining the appropriateness of changing the composition of the Board of Directors; All decisions were passed unanimously ██ Setting up a senior management search in a succession planning context; ██ Strengthening the teams in DRC.
(8) Vincent Bribosia, representing Chanic s.a.
TEXAF ANNUAL REPORT 2018 35 REPORTS OF THE BOARD OF DIRECTORS
Process of assessing Risk management and the Board of Directors internal control systems
The Board regularly assesses its own performance and the The Board of Directors is responsible for maintaining appro- performance of its committees and individual directors. To priate internal control and risk management systems, bearing this end, it uses the toolkit provided by Guberna, the institute in mind the working of the group and the environment of directors. In 2017 the whole Board met in Kinshasa for four in which it operates. The main goal of these systems is to days, primarily to work in more depth on its performance. ensure, with a reasonable degree of certainty, that the Board of Directors is informed in good time of advancements in the realization of the strategic, financial and operational targets of the group, that the financial and non-financial reports are Auditor reliable, that the assets of the group are protected and that the liabilities are identified and managed. Deloitte, Réviseurs d’Entreprise SCCRL, represented by Pierre-Hugues Bonnefoy (May 2016-May 2019). The Audit Committee, on behalf of the Board of Directors, monitors the risks and controls and reports its observations to the Board of Directors.
Management RISK MANAGEMENT Management identifies and analyzes the risks, which are ██ Jean-Philippe Waterschoot, CEO discussed in the Board of Directors, and their management ██ Christophe Evers, CFO is assessed by the Audit Committee. The Board of Directors ██ Hubert de Ville Goyet, finance manager, TEXAF is composed, among others, of an executive member and and compliance officer two non-executive members active in DRC. These assess the main inherent risks of the group and report to the Board.
A summary of the main risks identified is provided from page 67.
INTERNAL CONTROL The group has implemented a set of policies and proce- dures to ensure, as far as possible, the rigorous and effective management of its assets, the protection of its portfolio and the quality of information.
The consolidated subsidiaries draw up a consolidated budget every year in compliance with IFRS standards, as well as operating budgets for each legal entity, which serves as a basis of comparison for the year under review. Ir also draws up the detailed monthly accounts with new projections for the ongoing year. These accounts are analyzed by the CEO and the CFO, and commented on by the Board of Directors. The parent company receives the accounts of the subsidi- aries every month.
Disputes are monitored by the legal manager based in DRC, who makes regular reports to the Board of Directors.
There are many green spaces within the concession.
36 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
The double signature principle is applied in the group The following transactions in TEXAF shares were conducted systematically. by the following persons in 2017:
The internal control measures are constantly reviewed and ██ On July 18, Jean-Philippe Waterschoot sold 5,000 shares improved, with procedures defined and some tasks auto- for EUR 146,544 on book mated. ██ On November 16, Christophe Evers sold 3,800 shares for EUR 106,400 off book. INTERNAL AUDIT ██ On November 16, Christophe Evers sold 2,800 shares for In 2018, an external consultant was tasked with conducting EUR 84,000 off book. an internal audit of the construction costs. Various recom- ██ On November 16, S.F.A. (linked to Philippe Croonen- mendations were made, and gradually acted upon by berghs) bought 2,800 shares for EUR 84,000 off book. management. Aspects that could have an Conflicts of interest and impact on a public offer transactions by insiders There is only one class of shares and there are no restrictions on the transfer of shares or the exercise of the voting right. The Board of Directors was called upon to pronounce upon one conflict of interest in 2018 and recorded the following in No right of the company would be withdrawn and no its minutes: obligation would be introduced in the event of a change of control. “A company linked to Albert Yuma, director of Texaf SA made an offer for a developed site belonging to Carrigrès; Mr. The company no longer has any authorized capital. Yuma therefore states that, in this matter he has an interest of a financial nature contrary to that of the company. On August 23, 2018 the company declared to the FSMA (art. 74 OPA law): In the absence of Mr. Yuma, the Board examined this offer in compliance with article 523 Companies Code. It established TOTAL SHARES ISSUED 3,543,700 100% that: Holders: Société Financière Africaine 2,212,765 62.42% ██ This asset is a long way from the quarry, is not used for Middle Way Ltd 354,370 10.00% operations and does not bring in revenue. ██ A valuation report was drawn up on September 3, 2018 by an independent assessor, well established in Kinshasa Société Financière Africaine is controlled by Chagawirald SCS, and, in fact, a regular service provider of the group, which in turn is controlled by Philippe valuing it at USD 240,000. Croonenberghs. ██ A person who had a right of first refusal on this asset waived this right. Middle Way Ltd is wholly owned by Member Investments ██ This sale generates a pre-tax gain of EUR 148,000, consol- Ltd. The ultimate beneficiary of Members Investments Ltd is idated and added to the cash and cash equivalents of CCM Trust (Cayman) Ltd, a trust of the Cha family Carrigrès. in Hong Kong.
The Board then decides to sell this asset to the company linked to Mr. Yuma for USD 240,000.”
TEXAF ANNUAL REPORT 2018 37 REPORTS OF THE BOARD OF DIRECTORS
MANAGEMENT TEAM
CHRISTOPHE EVERS YOLANDE NIMY CFO Communication attaché
PAULO BARRIL HILARION MWAYESI Commercial manager of Carrigrès Operations manager of Carrigrès
JESSICA DE LAVELEYE OLIVIER PIROTTON Commercial manager of real estate Financial manager
38 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
ROGER AKALA YOANN PETIT Human resources manager Project manager
SÉBASTIEN HETUIN MONINA KIADI Construction manager General counsel
HUBERT DE VILLE OLIVIER POLET Financial manager TEXAF and Compliance Officer Technical manager of real estate
TEXAF ANNUAL REPORT 2018 39
REPORTS OF THE BOARD OF DIRECTORS
REMUNERATION AND NOMINATION COMMITTEE (RNC) REPORT
Nominations
No term of office expired on the date of the General meeting Messrs. Gallez and Yuma have waived their remuneration. of May 8, 2018. The company has taken out insurance to cover the activities In consultation with Herman De Croo, he was released from of the members of the Board of Directors as part of their his position at December 31, 2018 in compliance with the law duties. to ensure the presence of women on the board of directors of listed companies (Law of July 28, 2011). The duties of the non-executive director do not attract variable remuneration, stock option rights or an extra-legal However, Herman De Croo will continue to attend the meet- pension plan. ings of the Board as a guest at least until the initial expiration of his term of office in May 2019. However, on the proposal of the RNC, the Board of Direc- tors, in acknowledgement of the temporary discrepancy The Board decided to grant him the title of honorary director. between the (investment) decisions and the ensuing results, has decided that Philippe Croonenberghs, who is no longer an executive director (CEO) as of May 9, 2017, will continue to benefit from variable remuneration on the basis of the Non-executive directors same calculation as for the executive directors, albeit in accordance with the following graduated scale: 100% on The remuneration of the executive and non-executive the 2017 result, 75% on the 2018 result and 25% on the 2019 directors of TEXAF is reviewed on an annual basis by the result. The calculation method is explained below in the RNC before being submitted to the Board of Directors. The section on the remuneration of executive directors. The remuneration report is approved by the General Meeting. basic tranche for calculating his variable remuneration is Some proposals are the exclusive responsibility of the EUR 22,500. He continues to benefit from a company vehicle. General Meeting (see below). In 2018, Philippe Croonenberghs waived the part of the REMUNERATIONS AND OTHER BENEFITS variable remuneration relating to a gain from the sale of The remuneration rules and gross amounts of non-executive a site. directors are as follows: On the other hand, the rule that the RNC must be composed ██ A fixed part of EUR 12,000 per non-executive director of a majority of independent directors excludes the per year paid during the period in which the director was nomination of Dominique Moorkens. Bearing in mind his in office; competence in this field, the Board of Directors wanted him ██ A supplement of EUR 6,000 to the chairman, EUR 5,000 to to attend the meetings as a standing invitee and he will be the chairman of the Audit Committee and the chairman remunerated in the same way as the members of the RNC. of the RNC; ██ An attendance fee of EUR 1,000 per meeting of the Board or Committee. ██ The executive directors are not remunerated, with the exception of their executive duties.
TEXAF ANNUAL REPORT 2018 41 REPORTS OF THE BOARD OF DIRECTORS
SUMMARY OF THE REMUNERATION OF THE NON-EXECUTIVE DIRECTORS IN 2018
Fixed remuneration Attendance fee Variable Total remuneration IN EUR (gross) (gross) remuneration (gross) (gross) Chanic s.a. 12,000 5,000 - 17,000 represented by Vincent Bribosia Herman De Croo 12,000 5,000 - 17,000 Charlotte Croonenberghs 12,000 4,000 - 16,000 Philippe Croonenberghs 18,000 12,000 58,810 88,810 Michel Gallez 0 0 - 0 Danielle Knott 17,000 5,000 - 22,000 Dominique Moorkens 12,000 13,000(1) - 25,000 Pascale Tytgat 17,000 9,000 - 26,000 Albert Yuma 0 0 - 0
(1) Including three RNC attendance fees with regard to the financial year 2017
Executive directors
The remuneration policy for executive directors gives priority The executive directors are as follows: Jean-Philippe to the variable part of the remuneration over the fixed Waterschoot (CEO) and Christophe Evers (CFO) part, which has changed little over the past several years. The calculation formula for variable remuneration means Jean-Philippe Waterschoot is CEO since May 9, 2017. that it is likely to exceed one quarter of the annual remuner- ation. Furthermore, bearing in mind the regular growth in Jean-Philippe Waterschoot (CEO) lives in DRC. He is the results, the criteria for this variable remuneration are not contracted as an employee and, as well as his fixed salary, smoothed out over periods of two to three years. As a conse- he is granted the benefits generally granted in expatriate quence, in accordance with article 14 of the law of April 6, or similar contracts. His employer cost, comprising these 2010 (the corporate governance law), this variable remuner- benefits and the work performed and remunerated outside ation must be explicitly approved by the General assembly of DRC, was valued overall at EUR 340,477 in 2018. when it exceeds one quarter of the fixed remuneration. The termination benefits are calculated in accordance with The formula for calculating the variable remuneration is the applicable regulations in DRC. based on the advancement of two components of the consolidated result compared with the previous year: In 2018, the rise in the employer cost for Jean-Philippe Waterschoot was estimated at EUR 4,623. ██ recurring operating result; ██ result before tax. For the year under review, the variable remuneration of the CEO is calculated on the basis of the formula set out The total amount of the variable remuneration is calculated above, with the following parameters: on the basis of the results of these two components. ██ The average of the two components gives right to a basis The Board may decide, on the proposal of the RNC, to fixed bonus of EUR 20,000 when this component is higher eliminate the non-recurring items the managers have no than it was the year before impact on from these components. ██ and a supplementary bonus of EUR 3,000 per % improvement.
42 TEXAF ANNUAL REPORT 2018 REPORTS OF THE BOARD OF DIRECTORS
Salaried employees
In 2018, the application of the formula gives him the right to The salaried employees of Texaf SA were granted a bonus variable remuneration of EUR 120,310. for the quality of the work performed, specifically for the closing of the accounts, the equivalent of two months’ gross Christophe Evers (CFO), a self-employed director, benefits remuneration valid for fiscal year 2018, that is EUR 3,788 from annual remuneration of EUR 155,000 and a life insur- (vs. EUR 15,064 in the previous financial year). ance and an income loss insurance in the total amount of EUR 29,996. He is entitled to a termination penalty equal to one year’s remuneration.
For the year under review, his variable remuneration is calculated on the basis of the formula set out above, with the following parameters:
██ The average of the two components gives right to a basis fixed bonus of EUR 15,000 when this component is higher than it was the year before ██ and a supplementary bonus of EUR 3,000 per % improvement.
In 2018, the Nomination and Remuneration Committee also proposed granting him EUR 30,000 for an exceptional performance, consequently under these rules he was enti- tled to variable remuneration of EUR 120,232.
If an error is observed in the accounts, the rectification is charged to the next variable remuneration.
The company has not granted any shares or options to the executive directors.
The RNC is looking closely into remuneration that attracts executive directors in the long term (stock options or pension funds) in addition to the variable remuneration linked to annual performance.
SUMMARY OF THE REMUNERATION OF THE EXECUTIVE DIRECTORS IN 2018 Variable IN EUR Employer cost remuneration Pension plan Company vehicle Total In accordance CEO 340,477 120,310 Yes 460,787 with DRC law CFO 155,000 120,232 29,996 Yes 305,228
TEXAF ANNUAL REPORT 2018 43 03 Corporate social responsibility
44 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
The TEXAF group supports development projects in the DRC that are not necessarily directly connected to its corporate purpose.
In a spirit of full transparency, in 2012 the TEXAF Board of ██ The goal of COMEQUI, the third project, is to give farmers Directors proposed that the budget allocated to all projects in Kivu the means to start up sustainable development be submitted to the General Meeting. activities to increase their income and meet the needs of their family (sending their children to school and paying Every year it reports on the impacts of the group’s efforts in for health care). this area, which are not necessarily financial in nature. ██ In the fourth project, Ndako Ya Biso, the group supports In 2018 the group supported the same five projects that it the work of Jean-Pierre Godding sj. for street children in has supported for several years now. the Ngaba district of Kinshasa.
██ The goal of the first, Yema Yema, is to improve ██ Lastly, the group is the head sponsor of Kinshasa’s the quality of life of the inhabitants of Lodja and main cultural center, Espace Texaf Bilembo, which aims surroundings in Sankuru. Badly hit by successive wars to draw attention to contemporary Congolese artists and pillaging, the area suffers from high unemployment through temporary exhibitions and to hold workshops for and the accompanying ills (including malnutrition and 12-18-year-olds to teach them about their roots (Bilembo violence). The project is headed by Pierre-Albert Ngue- is a Lingala word that carries this connotation), the coun- liele and Béatrice Yseboodt, and is primarily focused on try’s agricultural resources and the challenges involved in education and training. sustainable development.
██ The second project works to improve health care in DRC, ██ TEXAF and its majority shareholder have also decided particularly the care of children with serious but curable to support the Royal Museum for Central Africa (Africa pathologies through surgery and medical treatment. Museum), which re-opened at the end of 2018 to great This project is run by CHIRPA, a NGO formed by Chaîne international success. TEXAF is donating EUR 30 k per de l’Espoir Belgique, Chaîne de l’espoir RD Congo and year for three years. The group is specifically sponsor of Espoir de Vie. an AfricaTube room, a digital platform by and for young people to present African cyberspace as a place of crea- tion and exchange without boundaries.
Run by young vloggers, the AfricaTube centre turns the spotlight on the digital Africa of today.
TEXAF ANNUAL REPORT 2018 45 CORPORATE SOCIAL RESPONSIBILITY
Comequi - 10 years of support for coffee growers www.comequi.org
“The enthusiasm never wanes,” the tone is given at Comequi, the charity recently celebrated its first 10 years. Since its formation, the Belgian non-profit organization has been providing rural inhabitants on the banks of Kivu lake with the means to start up sustainable development activities in order to increase their income and improve their quality of life. With success.
This does not affect the work of Comequi in any way. After“ This is the basis of the NGO’s activities, which is to encourage ten years, we remain convinced of the relevance of our mission,” small coffee farmers to work their land and build small says chairman Thierry Beauvois. “The projects change, some of cleaning stations in the vicinity, which they co-finance. them are reoriented, but they retain their impact on the target This is done on best practice principles in partnership population.” with local specialists and agricultural cooperatives. Thierry Beauvois explains that there are various aims. “It will reduce The same goes for the support for coffee growers. Located at the exhausting distances to be walked, speed up transport and altitude, with a warm and humid climate, the region of Kivu so improve the quality and raise the price producers receive.” in DRC has the ideal conditions for the production of high- quality arabica coffee.
Coffee cleaning station seen from below.
46 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
Other signs of improvement are noticeable at the coffee The NGO is not resting on its laurels, having announced academy. Opened in 2017, it saw increased attendance its intention to build three new classrooms at the primary in 2018. school in Kisinji. The parents will provide the labor, while Comequi will bring the technical knowhow. “Our support While coffee production is at the heart of the NGO, must be demanding concerning the participation and engage- beekeepers are not left behind. A good number of them, ment of the community to ensure the project stands on its own mostly coffee growers, follow annual training courses run two feet.” by a Comequi volunteer and experts in honey production from local charities. The goal is to boost their unproductive Another idea that is gaining ground is a plantation of apiaries and set up new ones. This has already resulted in a drumstick trees (dietary supplement) and sweet worm- significant increase in the quantity of honey produced, by a wood (which is used to fight malaria). The initiative will be factor of 10 for trained beekeepers, which have seen their integrated into the kitchen gardens and directly linked to income rise as a consequence. the local associations. A partnership is ongoing with IDAY, an international charity that builds constructive dialogue The move from subsistence farming to commercial agricul- with the local authorities. ture that is able to feed local markets has brought additional sources of financing. The consequence is the organization After the success of the library at a secondary school in of community fields and mechanization. “Thirty farmer Minerva, which is home to more than 12,000 books, a new associations and eight schools for some 40 hectares currently toy library opened in 2018. The aim is to entertain and stim- benefit from the assistance of our agronomist and a tractor for ulate children with educational and creative toys. Comequi ploughing. They pay for the fuel and the tractor driver them- has also set up eight mini-libraries at partner primary schools. selves.” Among others, the associations help vulnerable women to take control of their future together and increase their income so that they can meet the needs of their children.
A win-win partnership
Comequi also has an impact by investing in socio-pedagogic training for local people.
The creation of 1 ha kitchen gardens at the eight schools is worthy of note. At first sight, 1 ha does not seem to be much, but it is hugely symbolic and a godsend for people on the ground. It is both a source of fruit and vegetables for house- holds and school canteens, and a way for families to earn the funds they need to pay school fees. It is also a way of spreading knowledge about growing and harvesting crops.
A sorter at the coffee station.
TEXAF ANNUAL REPORT 2018 47 CORPORATE SOCIAL RESPONSIBILITY
Chirpa - More welcoming hospitals www.chirpa.org
For Bob Lubamba, the manager of Chirpa in the Democratic Republic of Congo, “the synergies between the various partner hospitals have been strengthened in 2018.” A rewarding partnership that was followed by structural work at various Congolese clinics. The shared goal was improving the treatment of children with pathologies that require special care.
The founding principles of Chirpa must also be remembered. “For several years, the Ngaliema Clinic has hosted regular For more than 10 years, the NGO CHIRPA (Chirurgie Pédi- work meetings of the DR Congo hospital platform, which has atrique en Afrique) has been helping Congolese pediatri- 30 members. These meetings are a chance to share trainings cians save children with heart or urological deformities. and best practice in care management and quality,” says Bob Lubamba, of the NGO, one of the founder members. A hundred children travelled abroad for surgery with the help of Chaine de l’Espoir-Belgique. A hundred children In 2018 Chirpa partnered with several NGOs, including benefited from palliative or reparatory surgery in Congo, ULB-Coopération, to provide financing to member hospitals through international missions in association with Congolese for specific projects aimed at improving the treatment of doctors. children with pathologies that require special care.
Everyone hopes that such surgery can be done locally by Congolese surgeons from now on. With that in mind, CHIRPA is also working on transferring skills between the Belgian and Congolese teams, as well as support for a new pediatric surgery and palliative care pavilion at the Ngaliema Clinic in Kinshasa, which is funded by the Congolese government and the former First Lady.
More than a hundred children have been operated on in DRC.
48 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
The synergies and partnerships between “advanced” hospitals such the Ngaliema Clinic and “less advanced” hospitals in pediatric care enable the spread of expertise and training that benefits a growing number of children. Four pediatric projects benefited from this funding in 2018.
At the Kalembelembe national pediatric hospital in Kinshasa, work has been done in the neonatal department, after a fire in 2017 drastically reduced capacity. “The depart- ment’s electrical power system was made secure, the facilities renovated and part of the damaged furniture replaced,” says Bob Lubamba.
Across the provinces
The Ngaliema Clinic has benefited from support to start work on separating Box III of the neonatal department, which will reduce the risk of infection among the especially vulnerable patients housed there. The project has also been supported by the Clinic’s risk prevention and management unit, whose manager did a period of work experience in Belgium.
At Bominenge General Hospital in Equator province, major changes have been made to ensure that children are treated in a sanitary area in a decent pediatric depart- ment. As the Chirpa managers explains: “Their pediatric department was housed in an old kitchen, so the sanitary conditions were extremely poor and there was a high risk of infection.” Work has been done on the shell, the roof and the wall and floor coverings.
Last but not least, in December 2018 the Mbuji-Mayi Pediatric Clinic in Kasaï launched a classroom-based and practical training program for its pediatric staff and ten doctors from other health training courses in the area for the screening and treatment of infant heart malformations. Most of the activities will be held in 2019.
TEXAF ANNUAL REPORT 2018 49 CORPORATE SOCIAL RESPONSIBILITY
TEXAF BILEMBO - 365 days at Texaf Bilembo www.texaf-bilembo.org
Dynamism, creativity and education In June, the nomadic artist Eliane Candido invited visitors on were the daily drivers at Texaf Bilembo voyages in an intimate exhibition. His brushwork expresses the emotions experienced on her various journeys. in 2018. The contemporary art and cultural center in the Utexafrica Sharing is also the theme of the series of canvases of compound continues to set its “Génération Wewa”, including the illustrations proposed in July referring to the daily life of the Wewa, the motorbike own agenda with a diverse mix of taxis that have clogged up the arteries of the Congolese never-before seen activities. A look capital. at last year’s standout events with This was followed by Dolino’s exhibition in September. He co-founder Chantal Tombu. is one of the leading lights of Brazilian modernism and his talent was recognized on the occasion of the 196th anniver- sary of the country’s independance. The first will be the exhibition “Les derniers bois de Belges”. The celebrated Congolese sculptor Hassan Tshamala, In November the center also hosted the series work of whose adze, gouge and chisel have infused the almost Babanzanga. “The hyper-realism artist tirelessly sculpts the face century-old trees that line the main avenues of Kinshasa of his daughter and wife in light and shadow with very lively, with life again. The general public love the way these trees contrasting accessories.” stumps have been transformed into works of art. Dancing, painting and theater punctuated the daily life of Five other exhibitions, all of them attractive, have been just Texaf Bilembo in April. Not least the impressive festival of as successful. It all started with “Libres Pensées” by Francis dance, which honored several Congolese choreographers, Mampuya, a major name on the Kinshasa art scene, which including Jacques Bana Yanga and the Sadi dance company. ran between April and May 2018. “Francis Mampuya is a Not forgetting the private viewing, "Regard/Tasty Bites", of powerful architect of peace, construction and reconstruction, the drawings and paintings of two French artists, Amandine who has forged a plastic vocabulary with a strong identity.” and Colombe. And the stage piece by Attacha Machini,
50 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
Children from the compound at the Bana Congo meeting.
Visiting with Chantal Tombu. The Kin’Art Studio is home to a Congolese artist collective.
inspired by Alain Huart’s novel “Kivu l’espoir”, which tells the The aim was to celebrate the partnership between Belgium touching story of a child soldier and the young woman who and Congo in various fields: the business world, the envi- he saved from gang-rape. “An astonishing piece of realism ronment, sustainable development, culture, education and and topicality that won the hearts of an audience made up of Belgian cooperation. The various gatherings and conferences students and professionals.” were attended by 800 people.
Totally new, sometimes even unusual, activities were The NGO Bana Congo had quite an emotional impact on the launched. One of them was "Bo Bazar", a new type of market attendees. These talented youngsters, aged 8-17, traveled that was set up at Texaf Bilembo in May 2018, where the from the remote community of Nioki in Mai-Ndombe exhibitors offered everything imaginable. province for the first time to take the stage in Kinshasa. After enjoying their performance, the audience watched a film A Belgo-Congolese week showing the experience of these children, as malnutrition patients at Nioki hospital and victims of social discrimination, The first annual young talents competition was held a month before meeting Tânia Trindade. The artist shared her musical later with the support of CFAO. It was open to Congolese knowledge with them and helped them develop their artists younger than 30 in various disciplines. As well as self-confidence through singing. promising a $2500 prize to the winner, the competition was a perfect opportunity for budding artists to showcase their Before ringing in the New Year, the Café des Artistes hosted talent. Michèle Van Vlaesselaer’s “Vitrail – Rencontre sous le ficus”, a book signing session by the author Barly Baruti and the “Another of the year’s major events was the first edition of Belgian humorist Kash. Week in Kinshasa, organized by the Belgo-Congolese-Luxem- bourg Chamber of Commerce and held at Texaf Bilembo in October 2018.”
TEXAF ANNUAL REPORT 2018 51 CORPORATE SOCIAL RESPONSIBILITY
Pierre-Albert Ngueliele speaks with students at ISC Lodja.
Sankuru Yema-Yema - An Haute École in Lodja
Pierre-Albert Nguelele is positive about the achievements of Yema Yema, the non-profit organization he runs, in 2018. Based in Sankuru, Yema Yema promotes the independence of the region’s inhabitants, particularly through training. One of the biggest achievements was the opening of a commercial school in association with the local government.
The students in Lodja, Sankuru are now able to follow It was a bold gamble, given the location of this town in higher education courses in accounting, marketing, human Sankuru, the former province of Kassaï Oriental. Lodja is resource management and executive secretaryship. The new in the sticks in the middle of the DRC. It is not exactly easily “Haute École de commerce” offers a range of courses to help accessible. And the living conditions of the local population students build a better future for themselves. are not made easier by issues affecting the availability of electrical power and drinking water. That said, Pierre-Albert Yema Yema plays a central role in the project alongside the and Béatrice Nguelele refuse to be deterred, using the needs local authorities. “It’s a big advancement,” says Pierre-Albert of inhabitants as a roadmap. Nguelele, who is unable to hide his delight when mentioning the 90 graduates. He hopes their journey will serve as a Bad luck, good heart model for others. “We don’t want to break any records, we just want to give people a sense of responsibility and awareness,” There was a clear need for education, which has led to work he adds. starting on the construction of a nursery and primary school. “Petit d’Homme”. More and more children are enrolling in There is a clear reference to this in the name of the NGO, this school. In 2018 there were 180 on the roll. As for their Yema Yema, which means “bit by bit”. He set up Yema Yema older brothers and sisters, the population has fallen, as 12 years ago with his wife Béatrice. “After our studies we had 140 students are enrolled at the “Pierre et Béa” lycée. This a shared desire to help the people of the DRC, starting in Lodja, is due to many parents moving to the town of Lusambo where I come from.” for work.
52 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
But what about the mothers? Mums are not forgotten, In 2018 Yema Yema could also pride itself on growing its as a special training course has been set up just for own cacao. This has already given him ideas about making them, and paradoxically, it’s where the chatter is loudest. his own biscuits, which we look forward to trying. Pierre-Albert has fun imitating their jubilation at every word correctly pronounced on this literacy course. It shows that all 2018 was also a satisfying year in terms of health, with achievements are equally savored at Yema Yema. Twenty-five the opening of the “diabetes center”. It’s a place where of the 30 mothers have earned a certificate. the disease is demystified. “We talk about all the problems faced by diabetics, day-to-day difficulties, how to adopt the Farming, another sector supported by the association, right diet, based on the knowledge of a dietician.” has again been taken up by the inhabitants of this agricultural region, after having been given up out of It has to be said that whenever Yema Yema tries to a sense of shame. contribute, whatever the topic, the inhabitants never fail to be enthusiastic. That’s who Pierre-Albert Nguelele credits “We have always worked the land with Béatrice to show people with the achievements in 2018. that it can help feed them. We started by growing napa cabbage, which earned us a capital of sixty dollars, the equivalent of two months’ wages here, and we invested it in rabbit breeding, which continues to this day,” he explains. He also recalls “the working relationship with Texaf, one of our loyal partners, to restart the growing of rice and rubber.”
Pierre-Albert and Béatrice on a visit to the village.
TEXAF ANNUAL REPORT 2018 53 CORPORATE SOCIAL RESPONSIBILITY
Ndako Ya Biso - The golden shoes of Ngaba www.streetchildrenofkinshasa.com
They don’t need boots with studs: they play on sand not grass. The boys of Ndako Ya Biso have plenty of opportunities to play football. And while the facilities are minimal, there is plenty of enthusiasm to make up for that. “You have to let them find their children’s spirits,” says Jean-Pierre Godding sj., who heads the charity. Since 2004 he has been working hard to give these youngsters back their self- confidence ahead of a family reunion, based on recreational activities and learning.
Ndako Ya Biso (Our House in Lingala), an initiative of the Chemin Neuf Community, has undoubtedly helped a large number of street children over the past 15 years. Fifty or some children continue to use the various reception centers close the Ngaba roundabout, a popular municipality of Kinshasa. The alarming situation of street children demands an explanation.
“Most of these children find themselves on the street because there is no food at home. They thought they could go out and beg or sell water. But they never went home. To be honest, no one misses them,” Brother Jean-Pierre Godding sj. laments. “Others have quite simply been driven out of their home, deemed to be wizards responsible for all the ills in the household.”
About forty people and voluntary assistants try to give them back their self-confidence at Ndako Ya Biso. The staff Activities to banish thoughts of the street violence. members - social educators, psychologists, legal experts and nurses - put together plans to achieve this.
They start by meeting the basic needs of the newcomers. The reception centers offer various services, including a dormitory, a refectory where meals are served every day and bathroom facilities. They also provide medical care, remedial schooling and even literacy classes.
The charity also runs recreational activities and fun learning sessions. This gives the children the chance to rediscover their innocence. Including football sessions when the boys show off their hot-shot skills. The girls are able to express their creativity in sewing bees. There are also trips outside to discover the natural richness of the DRC.
54 TEXAF ANNUAL REPORT 2018 CORPORATE SOCIAL RESPONSIBILITY
“We try to increase the number of these activities, because we In 2018, 614 children reunited with their family over notice that they enable the children to loosen up and tell us the past three years were taking classes in about fifty about how they felt when they were abandoned to their lot.” different schools. They are split between 378 boys and The stories that come out of them are often unbearable, 236 girls, with 409 of them attending primary school and but they are necessary to bring families back together. 205 secondary school.
This tallies with the charity’s philosophy, which is to return One hundred ninety-five children were enrolled in vocational the children to the bosom of their (extended) family. “If they training in 2018, 109 of them aged over 18 and 86 aged 15-18. are rejected, one hopes there is an uncle or an aunt they can Forty-four occupational insertion kits were handed out. rely on.” In 2018, 256 children were reunited with their family, compared with 209 in 2016. While the results are encour- We also note that the number of microcredits given to aging, they are preceded by a long process that is never the guardians of reunified children in 2018, not including easy. First the children need to learn to trust again, they are one-off grants, was 231, compared with 228 in 2017, which interviewed, investigations are made and, after mediation, corresponds to almost 20 per month, with an average grant families are reunited. of $57. Forty rental guarantees were also granted to families in 2018 to help them find a better place to live (compared Hope in figures with 42 in 2016 and 26 in 2017), which corresponds to more than three per month. The next step is to give the families the tools they need to get themselves back on track and escape extreme poverty. “Each family reunification is a battle and a source of hope. While it has little in the way of financial resources, the charity A pathway to peace and the future for both the child and works hard to keep an eye on children after they return the family,” says Brother Godding sj. to their family, to ensure they continue to go to school or college, depending on their age. The figures given by Jean- Pierre Godding sj. are a source of hope.
TEXAF ANNUAL REPORT 2018 55 04 Annual accounts
56 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
IFRS consolidated financial statements at December 31, 2018
Consolidated balance sheet p. 58 Consolidated income statement p. 59 Consolidated statement of comprehensive income p. 60 Consolidated statement of changes in equity p. 60 Consolidated statement of cash flows p. 62 Notes to the consolidated financial statements p. 64
1. General information p. 64 2. Consolidation scope p. 66 3. Risk management p. 67 4. Significant estimates and accounting judgments p. 70 5. Segment information p. 71 6. Property, plant and equipment p. 75 7. Investment property p. 77 8. Intangible fixed assets p. 81 9. Stakes in associated enterprises p. 81 10. Other non-current financial assets p. 81 11. Current assets p. 82 12. Share capital p. 83 13. Bank loans and other financial liabilities p. 84 14. Net financial debt p. 85 15. Provisions for other liabilities p. 85 16. Pension liabilities and similar benefits p. 85 17. Deferred taxes p. 86 18. Suppliers and other current creditors p. 88 19. Financial instruments p. 88 20. Revenue from ordinary activities p. 90 21. Employee costs p. 91 22. Depreciation allocation p. 91 23. Impairments p. 91 24. Other operating charges p. 92 25. Other operating income p. 92 26. Non-recurring items p. 93 27. Financial expenses p. 93 28. Income tax p. 93 29. Result per share p. 94 30. Dividend per share p. 94 31. Cash from operations p. 95 32. Litigation and potential liabilities p. 95 33. Commitments p. 95 34. Transactions with affiliated parties p. 96 35. Remuneration of principal managers p. 96 36. Remuneration of the auditor p. 97 37. Events after the reporting period p. 97 38. Shareholding structure p. 97
Summary of the principal accounting policies p. 98 Report of the auditor p. 107
TEXAF ANNUAL REPORT 2018 57 ANNUAL ACCOUNTS
CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet
IN EUR k Note 2016 2017 2018
ASSETS Non-current assets
Property, plant and equipment 6 13,728 9,955 9,658
Investment property 7 93,867 99,100 102,347
Intangibles 8 41 23 15
Other non-current financial assets 10 230 47 217
107,866 109,125 112,236 Current assets
Assets held for sale 11 1,179 - -
Stocks 11 4,905 4,769 4,948
Clients and other debtors 11 1,114 1,469 692
Tax assets 11 1,518 919 807
Cash and cash equivalents 11 3,911 3,674 5,564
Other current assets 11 529 298 285
13,156 11,129 12,296
TOTAL ASSETS 121,022 120,254 124,531
EQUITY Parent's shareholders equity
Share capital 12 21,508 21,508 21,508 Reserves 56,278 58,338 68,361 77,786 79,846 89,870 Minority interests 313 321 344
TOTAL EQUITY 78,099 80,167 90,213
LIABILITIES Non-current liabilities
Bank loans 13 6,766 6,588 4,268 Post-employment benefits liabilities 16 602 746 791
Deferred tax liabilities 17 21,756 19,810 13,999 Other non-current liabilities 3,116 3,572 4,368
32,240 30,716 23,426 Current liabilities
Liabilities linked to assets held for sale 11 337 - -
Bank loans 13 2,152 2,239 3,009
Suppliers and other current creditors 18 3,809 3,297 3,651 Other current liabilities 4,385 3,835 4,232 10,683 9,371 10,892 TOTAL LIABILITIES 42,923 40,087 34,318 TOTAL LIABILITIES AND EQUITY 121,022 120,254 124,531
The notes constitute an integral part of the consolidated financial statements.
58 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
Consolidated income statement Year closed on December 31
IN EUR k Note 2016 2017 2018
Revenue from ordinary activities 20 18,392 18,208 18,869 Operating charges (14,308) (16,291) (12,252) Raw materials and consumables (1,155) (972) (1,266) Changes in inventory (194) (151) 171 Personnel 21 (3,466) (3,430) (2,839) Depreciation allocation 22 (2,787) (3,018) (2,943) Impairments 23 (1,018) (3,328) 557 Other operating charges 24 (5,688) (5,392) (5,931) Other operating income 25 2,095 1,493 1,423 Capital gain on non-current assets 26 3 - 660 Operating result 6,182 3,410 8,699
Financial expenses 27 (767) (1,190) (438) Financial income 13 - - Result before tax 5,428 2,220 8,261
Current taxes 28 (73) 75 (1,140) Result before deferred taxes 5,355 2,295 7,121
Deferred taxes 16 101 2,255 5,811 Net result for the year 5,456 4,550 12,932
Allocated to Shareholders of the parent company 5,454 4,542 12,909 Minority interests 2 8 23 5,456 4,550 12,932 Result per share: result allocated to shareholders of the parent company (in euro per share based on the weighted 29 average number of shares) – basis 1.54 1.28 3.64 – diluted 1.54 1.28 3.64
The notes constitute an integral part of the consolidated financial statements. The presentation of the income statement has been adjusted slightly compared with previous years to ensure consistency in the presentation of the operating result and isolate the deferred taxes.
TEXAF ANNUAL REPORT 2018 59 ANNUAL ACCOUNTS
Consolidated statement of comprehensive income Year closed on December 31
EN K EUR Note 2016 2017 2018
Result for the financial year 5,456 4,550 12,932 Changes (after tax) to revaluation reserves of intangible assets 117 - - Actuarial changes (after tax) to post-employment liabilities (16) (52) - Comprehensive income 5,557 4,498 12,932
Allocated to: Shareholders of the parent company 5,549 4,490 12,909 Minority interests 8 8 23 5,557 4,498 12,932
The notes constitute an integral part of the consolidated financial statements.
Consolidated statement of changes in equity
To shareholders of the parent company Minority IN EUR k Conso- Total equity Share Issue Revaluation Translation interests lidated capital premiums reserves differences reserves Balance at December 31, 2015 21,508 - 48,238 4,470 57 314 74,587
Income for the financial year 2016 - - 5,454 - - 2 5,456 Other items of the comprehensive - - (16) 111 - 6 101 income Changes to consolidation scope - - 1 3 - (10) (6) Distributed dividend - - (2,039) - - - (2,039) Balance at December 31, 2016 21,508 - 51,638 4,584 57 312 78,099
Income for the financial year 2017 - - 4,542 - - 8 4,550 Other items of the comprehensive - - (52) - (1) 1 (52) income Distributed dividend - - (2,430) - - - (2,430) Balance at December 31, 2017 21,508 - 53,698 4,584 56 321 80,167
Income for the financial year 2018 - - 12,909 - - 23 12,932 Other items of the comprehensive ------income Distributed dividend - - (2,886) - - - (2,886) Balance at December 31, 2018 21,508 - 63,721 4,584 56 344 90,213
The notes constitute an integral part of the consolidated financial statements.
60 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
Changes 2016 Changes 2017 There was a positive change to the revaluation reserves of There was a negative actuarial change net of tax to post-em- EUR 114 k, while there was a negative actuarial change to ployment liabilities of EUR 52 k (gross EUR 80 k, tax EUR 28 k) the post-employment liabilities of EUR 16 k (notes 16 and 17). (notes 16 and 17). This amount is included in the comprehen- These amounts are included in the comprehensive result. sive income.
Minor changes to reserves and minority interests result from The distributed dividend of EUR 2,430 k concerns the result a small increase in the stake in LA COTONNIERE. for the financial year 2016.
The distributed dividend of EUR 2,039 k concerns the result Changes 2018 for the financial year 2015. The distributed dividend of EUR 2,886 k concerns the result for the financial year 2017.
Pool and restaurant.
TEXAF ANNUAL REPORT 2018 61 ANNUAL ACCOUNTS
Consolidated statement of cash flows Year closed on December 31
EN K EUR Note 2016 2017 2018
Cash and cash equivalents and bank overdrafts at opening 5,461 3,911 3,674
Cash flow from operating activities Cash from operations 30 9,871 9,219 13,310 Interest paid 26 (331) (588) (428) Interest received 12 - - Income tax 27 (886) 75 (1,140) 8,666 8,706 11,742
Cash flow from investment activities Acquisition of intangible assets (15) (1) 0 Acquisition of property, plant and equipment and 6 et 7 (7,426) (6,609) (6,011) investment property Income from the disposal of property, plant and equipment 6 et 7 93 6 764 and investment property Reduction in loans granted to third parties 190 190 0 Reduction (increase) in other financial assets 9 (7) (169) (7,149) (6,421) (5,416)
Cash flow from financing activities Dividends to shareholders of the parent company 29 (2,039) (2,430) (2,886) Increase in loans 13 1,724 2,300 396 Repayment of loans 13 (1,252) (2,392) (1,946) Changes to short-term bank loans 13 (1,500) - - (3,067) (2,522) (4,436)
(Reduction)/increase in cash and cash equivalents (1,550) (237) 1,890 and bank overdrafts
Cash and cash equivalents and bank overdrafts at closing 3,911 3,674 5,564
Of which TEXAF SA 1,919 1,841 745
The notes constitute an integral part of the consolidated financial statements.
62 TEXAF ANNUAL REPORT 2018
ANNUAL ACCOUNTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
TEXAF is a public company registered and domiciled in Specifically: Belgium. Its registered office is at Avenue Louise 130A, 1050 Brussels. ██ The loan instruments held within an economic model the aim of which is to collect the contractual cash flows TEXAF was formed on August 14, 1925. and for which the contractual cash flows correspond exclusively to the repayment of the principal and the TEXAF is an investment company listed on Euronext with interest payments on the principal remaining due are industrial, financial and real estate interests in the Democratic subsequently measured at amortized cost. Republic of Congo. ██ The loan instruments held within an economic model the aim of which is to both collect the contractual cash flows The consolidated balance sheets and income statements and sell the loan instruments, the contractual conditions were adopted by the Board of Directors on February of which give rise to contractual cash flows corre- 25, 2019 and the IFRS accounts (including the appendices) sponding exclusively to the repayment of the principal were adopted by the Board of Directors on March 26, 2019. and the interest payments on the principal remaining They are expressed in EUR k. due, are subsequently measured at fair value through the other items of the comprehensive income. When the measurement of certain assets or liabilities has ██ All other investments in loan instruments and equity required the use of estimates or assumptions, management instruments are measured subsequently at fair value has always only used the cautious assumptions in order to through the income statement. protect against the risks related to the economic, social and regulatory environment inherent to the Democratic Republic Contrary to the above, the Group may make the following of Congo (DRC) where all of the group’s operating activities irrevocable decision or designation at the time of the initial are located. recognition of a financial asset:
These financial statements have been prepared on the basis ██ The Group may make the irrevocable decision to present of the IFRS, as adopted by the European Union for the prepa- in the other items of the comprehensive income the ration of consolidated accounts in 2018. subsequent variations of the fair value of an investment in equity securities that is not held for transaction purposes The accounting policies used are in continuity with those and is not a compensation recognized by a buyer in a used to prepare the financial statements on December 31, grouping of companies. 2017, except for the application of the new IFRS 9 and 15 ██ The Group may irrevocably designate as being meas- standards. ured at the fair value through the income statement an investment in loan securities that fulfils the measurement IFRS 9 – Financial instruments (effective 01.01.2018) contains conditions at amortized cost or at fair value based on stipulations relating to the classification and measurement other items of the comprehensive income if this enables of financial assets and liabilities, the amortization of financial an accounting inconsistency to be eliminated or substan- assets and the accounting for general hedge. IFRS 9 replaces tially reduced. the main part of IAS 39 – Financial instruments: Recognition and measurement. Application of IFRS 9 has no material In the course of the financial year under review, the Group impact on the consolidated financial statements of Texaf (see did not designate investments in loan instruments that also Note 11). fulfil the measurement conditions at amortized cost or at fair value through the other items of the comprehensive All recognized financial assets within the scope of IFRS 9 income as being measured at fair value through the income must subsequently be measured at amortized cost or fair statement. value, depending on the economic model it follows for the management of financial assets and depending on the characteristics of the contractual cash-flows of the financial assets.
64 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
When an investment in loan securities measured at fair value ██ Amendments to IAS 40 Reallocation to investment through the other items of the comprehensive income property is derecognized, the combined profit or loss previously ██ Amendments to IFRS 2 Classification and Measurement recognized in the other items of the comprehensive income of Share-based Payment Transactions is reclassified from equity to the net result as a reclassifica- ██ Amendments to IFRS 4 Application of IFRS 9 Financial tion adjustment. When an investment in equity securities instruments with IFRS 4 Insurance Contracts designated as having been measured at fair value through ██ Annual improvements to IFRS, 2014-2016 cycle: other items of the comprehensive income is derecognized, Amendments to IFRS 1, IFRS 12 and IAS 28 the combined profit or loss previously recognized in ██ IFRIC 22 Foreign Currency Transactions and Advance the other items of the comprehensive result is transferred to Consideration the undistributed result. ██ IFRS 9 Financial instruments and related amendments ██ IFRS 15 Revenue from Contracts with Customers The loan instruments that are subsequently measured at amortized cost or fair value through the other items of the The following new standards, amendments to the standards comprehensive income are amortized. and interpretations have been published and adopted by the European Union but are not yet compulsory for financial In 2018 the Group took a stake in a venture capital years beginning on or after January 1, 2018. The TEXAF fund. This stake and any others of the same nature are Group did not adopt them early, but analyzed the impact recognized at fair value through the other items of on the consolidated financial statements of the Group. the comprehensive result. From 2019, IFRS 16 Leases will replace IAS 17. This standard IFRS 15 Revenue from Contracts with Customers also came sets out how the rental contracts must be recognized and into force on 01.01.2018. IFRS 15 establishes a single complete presented in the financial statements. The only significant model for the recognition of revenue from ordinary activities change when the standard becomes effective concerns the from contracts with clients. It has no material impact on renting of its office in Brussels. Under the new standard the the consolidated financial statements of Texaf, as its rental Group will recognize a rental contract in assets and liabilities contracts are not within the scope of the standard and repre- at a discount value of EUR 184 k. In substance, IFRS 16 mirrors sent the main source of revenue for Texaf. The principles of the accounting requirements of IAS 17 with regard to lessors. IFRS 15 nevertheless apply to any non-rental components As a consequence, a lessor will continue to classify rental in the rental contracts or in separate agreements, such as contracts as simple rental contracts or rental and financing maintenance services payable by the tenant. Bearing in mind contracts and to recognize these two types of rental contract that these non-rental components are relatively limited and differently. mainly represent services recognized gradually under both IFRS 15 and IAS 18, Texaf confirms that IFRS 15 has no material ██ Amendments to IAS 1 and IAS 8 Change to the definition impact in this respect. of the term “significant” (applicable to annual periods beginning on or after January 1, 2020, but not yet Furthermore, the application of IFRS 15 on the Quarry endorsed in the EU) business has no impact on the consolidated accounts of ██ Amendments to IAS 19 Plan amendment, curtailment or Texaf, as the sale of these goods is recognized at the time settlement (applicable to annual periods beginning on or of delivery. after January 1, 2019, but not yet endorsed in the EU) ██ Amendments to IAS 28 Long term interests in Associates The following new standards, amendments to the stand- and Joint Ventures (applicable for annual periods begin- ards and interpretations are compulsorily applicable for ning on or after 1 January 2019) the first time in the financial year beginning on or after ██ Amendments to IFRS 3 (applicable to annual periods January 1, 2018, but the changes are not significant or beginning on or after January 1, 2020, but not yet relevant to the TEXAF Group: endorsed in the EU) ██ Amendments to IFRS 9 Prepayment Features with Negative Compensation (applicable to annual periods beginning on or after January 1, 2019)
TEXAF ANNUAL REPORT 2018 65 ANNUAL ACCOUNTS
██ Amendments to IFRS 10 and IAS 28 Sale or Contribution The TEXAF Group does not plan to early adopt the standards, of Assets between an Investor and its Associate or Joint amendments to standards and interpretations that will be Venture (the effective date has been deferred indefinitely, compulsory from 2019. and therefore the endorsement in the EU has been postponed) The Group assesses the impact of the above standards, inter- ██ Amendments to the references of the financial informa- pretations and amendments on a continual basis. tion conceptual framework in IFRS (applicable to annual periods beginning on or after January 1, 2020, but not yet endorsed in the EU) ██ Annual improvements to IFRS, 2015-2017 cycle (applicable 2. Consolidation scope to annual periods beginning on or after January 1, 2019, but not yet endorsed in the EU) On December 31, 2018 the Group is made up of TEXAF SA ██ IFRIC 23 Uncertainty over Income Tax Treatments (appli- and a set of subsidiaries and associates, totaling nine entities cable for annual periods beginning on or after 1 January registered in Belgium or the Democratic Republic of Congo 2019) (DRC). ██ IFRS 14 Regulatory Deferral Accounts (applicable to annual periods beginning on or after January 1, 2016, but As of today, as well as the parent company TEXAF SA, eight not yet endorsed in the EU) companies are fully consolidated. ██ IFRS 16 Leases (applicable to annual periods beginning on or after January 1, 2019) CONGOTEX (in liquidation) is still recognized proportionally. ██ IFRS 17 Insurance Contracts (applicable to annual periods beginning on or after January 1, 2021, but not yet endorsed in the EU)
% net % net % net Functional financial stake financial stake financial stake Company City activity currency at December 31, at December 31, at December 31, 2016 2017 2018
1. FULLY CONSOLIDATED COMPANIES Anagest Brussels Holding EUR 98.90% 98.90% 98.90%
Carriaf in liquidation Brussels Holding EUR 99.99% 99.99% 99.99%
Carrigrès Kinshasa Sandstone quarries EUR 99.99% 99.99% 99.99%
Cotex Kinshasa Real estate EUR 98.90% 98.90% 98.90%
Estagrico Kinshasa Real estate EUR 100.00% 100.00% 100.00%
Immotex Kinshasa Real estate EUR 99.76% 99.76% 99.76%
La Cotonnière Kinshasa Real estate EUR 94.44% 94.46% 94.46%
Utexafrica Kinshasa Real estate EUR 99.59% 99.59% 99.59%
2. PROPORTIONALLY CONSOLIDATED COMPANIES Congotex in liquidation Kinshasa Textile USD 43.61% 43.61% 43.61%
66 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
3. Risk management 3.2.2. Risks relating to the quarry activity 3.2.2.1. Power cuts 3.1. COUNTRY RISK The quarry activity is highly dependent on the supply of The assets of the company are located in DRC, a region power by the Société Nationale d’Electricité. There are lacking in governance, so the particular environment of frequent power cuts. Furthermore, there are major fluctu- the country entails risks that can have an impact on the ations in voltage on the network. This leads to production profitability and viability of the activities of the Group. These stoppages and damage to equipment out of proportion risks are, among other things, related to the development of with the duration of these cuts. the political situation, the creation of new laws, tax policies and changes to government policy or the renegotiation 3.2.2.2. Breakdowns and accidents of existing concessions or operating rights Accounts were Quarrying is conducted with expensive specialist equipment. drawn up cautiously, based on the assumption of stability in In all countries it is subject to the risk of relatively frequent the social-economic and regulatory environment. accidents or breakdowns. The operating conditions at our quarry mean it is more susceptible than others to break- 3.2. OPERATING RISKS downs and accidents, particularly the instability of the power supply and the abrasiveness of the stone. Furthermore, 3.2.1. Risks relating to the real estate activity the time needed to transport spare parts and the shortage 3.2.1.1. Rental vacancies of qualified staff mean that repairs take longer and are more The real estate of the Group has historically enjoyed an expensive than in most other countries. occupancy rate close to 100%. However, this rate could fall due to saturation of the market, delays in bringing new 3.2.2.3. Social risks buildings onto the market or serious political unrest. The quarry activity is highly dependent on its workers and managers. The Group endeavors to maintain a peaceful 3.2.1.2. Defaulting tenants social climate and dialogue with the social partners, but The Group looks to rent to tenants of good standing, the risks of strikes and work stoppages cannot be ruled out. but is exposed to the risk of non-payment or late payment by its tenants. 3.2.2.4. Regulatory risk The quarry’s operating license must be renewed at regular 3.2.1.3. Pressure on prices intervals. There is a risk that the renewal conditions imposed The Group expresses its rents in euros and always charges by the authorities will change in the future. VAT on its rents. On the other hand, its competitors express their rents in US dollars and do not always fully charge 3.2.3. Risks related to investments in the digital sector VAT. This could put downward pressure on the rents of the 3.2.3.1. Risk of start-ups Group, particularly residential rents, on which VAT cannot At the end of 2018 the Group decided to invest in young be claimed back. African companies in the new technologies sector and/or in the support of these young companies. This venture capital 3.2.1.4. Delay or budget overruns for newbuilds is by definition exposed to higher risks as a high proportion The Group has a policy of regularly investing in new builds of these companies do not achieve their goals or disappear or extensive renovations. Delays and/or budget overruns on altogether. In this respect, the Group decided to recognize these projects can have a negative effect on the profitability these stakes at fair value through the the other items of the of the Group and profit growth. comprehensive result.
3.2.1.5. Accidents 3.2.3.2. Learning curve The Group insures its real estate in accordance with While the Group surrounds itself with experienced skilled Congolese law at the Société Nationale d’Assurances, which people to achieve these investments, the field of venture is not generally able to pay out compensation for accidents. capital is young in Africa and the environment may be So, with the exception of one building insured by an tougher for young companies than it is in Europe or the international company, the Group is basically its own insurer. United States.
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3.3. DEPENDENCY RISKS private interests are very great and the Group is faced with these situations. Although the Group is in a completely clear 3.3.1. Key persons legal position in all of these cases, it cannot be excluded that The Group has a small number of senior managers and so it will be temporarily or even permanently dispossessed of is exposed to a risk of unavailability of one or other of these some sites. senior managers. This risk is exacerbated by the fact that the recruitment pool for expatriate and local staff is very small in 3.4.3. Legal risks the Democratic Republic of Congo. The Group is a party in many legal actions, virtually all of them related to attempted dispossession as described in 3.3.2. Contractors point b above. The risks the Group faces in this respect are The Group is dependent on contractors for various services increased by attempts at collusion by opposing parties with that are critical to its activity, including construction, studies some government officials or magistrates. and drawings, equipment servicing and IT services. In the event of a failure of one of these contractors, the replace- 3.4.4. Tax and regulatory risks ment possibilities are more limited in the Democratic The Congolese tax framework is highly complex, with more Republic of Congo than in European countries. than 400 listed taxes. Furthermore, the regulatory framework is changing fast, generally in the direction of modernization. 3.3.3. Clients As a consequence, the administrations concerned do not The Group sells or rents standard real estate and quarry always apply laws in a transparent and consistent way at all products, so it is relatively easy to replace a client. However, times or for all companies. Tax or regulatory measures are the real estate activity is dependent on international bodies, sometimes not adopted or published in full accordance with Western embassies and development agencies that do not the constitution or the law, which creates a gray area in their depend on the local economy but may decide to with- application. The Group may therefore find itself in disagree- draw from the country if international relations deteriorate. ment with the public administration and the resolution of Furthermore, the quarry historically generates 30-40% such disagreement is uncertain. of its turnover from road builders, which are very few in number and generally depend on international donations 3.4.5. Transfer risks or financing. There have been very few orders over the past The Group’s capacity to transfer cash from DRC to the parent four years. company depends on the foreign exchange regulation.
3.4. POLITICAL, LEGAL 3.5. FINANCIAL RISKS AND REGULATORY RISKS 3.5.1. Exchange risks 3.4.1. Risk relating to changes to economic policy The Group works on a daily basis with three currencies The Democratic Republic of Congo currently has institutions - euros, dollars and Congolese francs - but the euro is born of the electoral process and receives a great deal of aid its functional currency. It is therefore exposed to certain from international bodies. Its economic policy is based on exchange risks in its transactions. The Congolese economy the market economy and private property. However, abrupt is dollarized to a very great degree, so prices and salaries in political change or even serious political unrest cannot be Congolese francs are quickly changed to maintain their value excluded and these could have a big negative impact on in dollars and payments are interchangeable between the the activities or even the assets of the Group. two currencies.
3.4.2. Property risks 94% of rents are expressed in euros; the rest in dollars. The two activities of the Group, real estate and quarrying, The sale prices of sandstone are in Congolese francs or are directly related to the control of land. All land in the dollars. On the other hand, 62% of cash operating expenses Democratic Republic of Congo belongs to the state and of the Group are in dollars or Congolese francs. The Group is is made available under a regime of renewable 25-year therefore exposed to the risk that the dollar will rise against concessions. Up until now, this renewal has always been the euro. A change in the exchange rate between the inexpensive and granted without complication. On the other Congolese franc and the dollar would be quickly offset by hand, the risks of sites being illegally occupied and stolen by the adjustment of prices.
68 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
Almost 80% of investment costs are expressed in dollars. The ██ Result before tax: EUR -12,330 per percentage point fall of Group is therefore exposed to an increase in its investment the Congolese franc costs if the dollar rises against the euro. ██ Result after tax and equity: EUR -7,995 per percentage point fall of the Congolese franc On the liabilities side of its balance sheet the Group has a large sum in deferred tax (EUR 12,066 k) on its real estate These sensitivities are linear and symmetrical. They are based assets in DRC (see note 17). The tax value of these assets is in on the balance sheet situation on December 31, 2018, which Congolese francs, but this tax value is revalued every year by is expected to change in the course of future financial years a decree of the finance minister. This tax revaluation coeffi- depending on VAT returns. Specifically, on the publication cient follows the domestic inflation rate in DRC and therefore date of this report this risk has been eliminated with the does not necessarily closely follow the fluctuation in the repayment of a large VAT claim. exchange rate between the Congolese franc and the euro. This could generate differences in deferred tax provisions, as The sensitivity of deferred taxes to a EUR/CDF exchange rate was the case in 2017. fluctuation is supposed to be offset by the tax revaluation coefficient. Congolese taxes are recognized in Congolese francs. As a result of these investments, the Group generally has a 3.5.2. Interest risks positive VAT balance and so has a claim against the state in All bank loans are in euros at a fixed rate. On the other hand, Congolese francs. The exchange value in euros of this claim cash and cash equivalents are held in euros but invested decreases proportionally to the depreciation of the Congo- at variable rates. This investment remuneration rate is lese franc against the euro. On December 31, 2018, this claim currently zero. was measured at EUR 1,233 k and the Group recognized an exchange loss of EUR 520 k on this claim during the financial The impact of a 100-base point rise in EUR interest rates years 2016 and 2017 (see note 26). This claim has since would be EUR + 55,600 on an annual basis on the result been repaid. before tax and cash flows and EUR + 36,200 on the result after tax and equity. This impact is linear and only applies to The sensitivity to a euro/dollar exchange rate fluctuation is the short term. therefore as follows: 3.5.3. Liquidity risks ██ Income before tax: EUR -36,360 per percentage point The policy of the Group is to maintain a relatively large of dollar rise amount of liquidity in euros at European banks at all times. ██ Investment cost: EUR - 48,100 per percentage point of dollar rise Furthermore, the repayments of its bank loans are aligned ██ Cash flow: EUR -86,460 per percentage point of dollar rise to the cash flows from the projects they finance. However, ██ Result after tax and equity: EUR -23,600 per percentage there is a liquidity risk if these projects are delayed or if the point of dollar rise occupancy rate is lower than projected.
These sensitivities are linear and symmetrical. They concern The spread in maturity of these loans is stated in note 13. only the financial year in which the fluctuation occurs. They therefore only apply to short-term fluctuations. Among other The Group relies on the availability of bank and other credit things, they are based on the following assumptions: for its new investments. If this is not available, the amounts invested and the profit growth rate will be reduced. ██ The prices in CDF are adjusted when the USD/CDF rate changes. 3.5.4. Credit risks ██ The price structures are not elastic. The credit risk mainly comes from the exposure to clients. ██ The supply and financing sources remain the same. The risk related to unpaid rent is limited, due to the rent guarantees obtained (payment of three months’ rent into Furthermore, the specific sensitivity of a EUR/CDF exchange the lessor’s bank account) and the fact that clients pay rate fluctuation on the tax assets is: in advance.
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Nevertheless, some Congolese public clients and clients 4.1. INCOME TAX with political connections can be hard to evict in the The Group is liable for tax on its income in the DRC and event of non-payment. The Group has made the decision Belgium. The determination of the provision, at the interna- to recognize the revenue of clients that systematically tional level, entails a judgment to some degree. In the regular have problems paying rent only on the basis of payments context of the activities, the final determination of the tax actually made. In 2018, this rule was found not to apply (vs. expense is uncertain for some transactions and estimates. non-recognition of EUR 14 k in 2017 and EUR 117 k in 2016). The Group recognizes a liability for anticipated tax adjust- ments based on additional tax it expects to be demanded. The quarry most often makes cash sales, but has also If the due amount is different from the amount initially encountered problems with clients who pay on credit. recognized, the difference is charged as a tax expense to the income and as provisions during the period during Furthermore, old historic debts, completely impaired, which the amount is determined. Note 28 reconciles and are the subject of specific monitoring. comments on the recognized taxes with the tax rate of the parent company. The net value of client receivables at the end of 2018 was EUR 396 k, including EUR 259 in receivables more 4.2. DEPRECIATION OF ASSETS than 120 days due, some of which are covered by rental Property, plant and equipment and other non-current assets guarantees or corresponding debts. The age balance of are subjected to a depreciation test every time an event or client debts is stated in note 11. a change of circumstances indicates that the recoverable value of the asset is lower than its book value For the real The allocations to write-downs (net of reversals) on client estate activity, the measurement is based on the value of the debts has changed as follows: land and the rental yields. For Carrigrès, the measurement is based on the discounting of future cash flows. These calcula- EUR 192 k in 2016, a reversal of (EUR 11 k) in 2017, EUR 208 k tions require the use of estimates on the size of the deposit, in 2018. the future cash flow it will generate and the discount rate. In 2017 they led to an exceptional depreciation on the deposit. The measurement of these assets, together with a sensitivity analysis of the calculation assumptions, is detailed in notes 6 4. Significant estimates and 7.
and accounting 4.3. PROVISION FOR POST-EMPLOYMENT judgments LIABILITIES In the absence of a capital market and life assurance policies The estimates and judgments used by the Group when in DRC, the estimates of actuarial parameters are much more preparing its financial statements are continuously updated uncertain than they are in more developed economies. and are based on historical information as well as other In 2017 the Group funded a critical analysis of its calculations factors, including the anticipation of future events deemed by an external expert, which led to a change of life table. reasonable in view of the circumstances. The calculation assumptions and sensitivity analyses are presented in note 16. In this context, by definition the resulting accounting estimates rarely correspond exactly to the actual results. 4.4. CLIENT DEBTOR PROVISIONS The estimates and assumptions for which there is a major The Group sets up provisions for its client debtors that are in risk that a significant adjustment in the book value of assets arrears on a case-by-case basis. It assesses the capacity and and liabilities will be needed during the following period are willingness of each of these clients to fulfil its obligations. analyzed below. The analysis of this risk and the impact of the new IFRS 9 are presented in note 11.
70 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
5. Segment information
The operating segments constitute the only level of In accordance with IFRS 8, segment information is derived segment information for TEXAF, as the risks and profitability from the internal organization of the Group and is similar of each entity are strongly linked to the particular economic to the segments that were used in the previous financial environment in which it does business. statements, except for the holding segment, which has been considered as a separate segment for the first time These segments are real estate, quarries and, since 2017, the since 2017. The data by operating segment follows the same holding segment, which was until then included in the real accounting rules as those used for the consolidated financial estate segment. This segmentation complies with the one statements, as summarized and described in the notes to used by management and the Board of Directors. the financial statements. This information is identical to the information presented to the CEO, who has been identified The geographic segment is limited to the Democratic as the “chief operating decision maker”, within the meaning Republic of Congo, where all the Group’s operations of IFRS 8, to make decisions on resources to be allocated and are located. assessments to be conducted on the performance of the segments.
5.1. SEGMENT INCOME STATEMENT
Intercompany 2018 RESULTS (IN EUR k) Holding Real estate Quarries eliminations Consolidated Revenue from ordinary activities - 17,305 1,612 (48) 18,869 Other operating income - 1,368 55 - 1,423 Operating charges (1,208) (9,165) (1,928) 48 (12,253) of which payroll expenses (158) (2,100) (581) - (2,839) of which depreciations - (2,747) (196) - (2,943) of which impairments - 582 (25) - 557 Result on disposal of non-current assets - 508 152 - 660 Operating result (1,208) 10,016 (109) 0 8,699
Financial result 624 (1,419) 357 - (438) Result before tax on the result (584) 8,597 248 0 8,261
Current taxes 233 (1,373) - - (1,140) Result before deferred taxes (351) 7,223 248 0 7,121
Deferred taxes (222) 5,946 87 - 5,811 Result for the financial year (573) 13,169 335 0 12,932
The presentation of the income statement has been The main other operating charges of the holding are the adjusted slightly compared with previous years to ensure remuneration of the executive and non-executive direc- consistency in the presentation of the operating result and tors of EUR 630 k in 2018 (EUR 324 k in 2017) and various isolate the deferred taxes. fees (including audit, lawyers and stock market listing) of EUR 156 k (EUR 131 k in 2017). The intercompany eliminations concern the rents and service The concentration of clients per segment is described provisions of UTEXAFRICA to CARRIGRES. in note 19.
By way of comparison, the results by activity segment for the financial years 2017 and 2016 are presented below.
TEXAF ANNUAL REPORT 2018 71 ANNUAL ACCOUNTS
Intercompany 2017 RESULTS (IN EUR k) Holding Real estate Quarries eliminations Consolidated Revenue from ordinary activities 0 16,730 1,584 (106) 18,208 Other operating income - 1,399 94 - 1,493 Operating charges (992) (9,273) (6,132) 106 (16,291) of which payroll expenses (152) (2,223) (1,055) - (3,430) of which depreciations (91) (2,623) (303) - (3,017) of which impairments (50) 47 (3,325) - (3,328) Result on disposal of non-current assets - 0 - - - Operating result (992) 8,856 (4,454) 0 3,410
Financial result 697 (2,235) 348 (1,190) Result before tax on the result (295) 6,621 (4,106) 0 2,220
Current taxes - (77) 152 - 75 Result before deferred taxes (295) 6,544 (3,954) 0 2,295
Deferred taxes (204) 1,267 1,192 - 2,255 Result for the financial year (499) 7,811 (2,762) 0 4,550
Intercompany 2016 RESULTS (IN EUR k) Holding Real estate Quarries eliminations Consolidated Revenue from ordinary activities 5 15,268 3,266 (147) 18,392 Other operating income 50 1,936 109 0 2,095 Operating charges (2,073) (9,081) (3,301) 147 (14,308) of which payroll expenses (160) (2,213) (1,093) - (3,466) of which depreciations (95) (2,292) (400) - (2,787) of which impairments (813) (125) (80) - (1,018) Result on disposal of non-current assets - - - - 0 Operating result (2,018) 8,123 74 0 6,179
Financial result 586 (1,729) 392 0 (751) Result before tax on the result (1,432) 6,394 466 0 5,428
Current taxes 204 (403) 126 - (73) Result before deferred taxes (1,228) 5,991 592 0 5,355
Deferred taxes (204) 283 22 - 101 Result for the financial year (1,432) 6,274 614 0 5,456
72 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
5.2. SEGMENT ASSET AND LIABILITIES
SEGMENT ASSETS AND LIABILITIES Holding Real estate Quarries Intercompany Consolidated AT DECEMBER 31, 2018 (IN EUR k) eliminations Property, plant and equipment 374 2,154 7,130 - 9,658 Intangibles - 15 - - 15 Investment property - 102,347 - - 102,347 Other segment assets 20,823 2,415 13,648 (24,376) 12,511 Total assets 21,197 106,932 20,778 (24,376) 124,531 Bank loans - 4,268 - - 4,268 Deferred taxes 2,168 9,863 1,968 - 13,999 Other segment liabilities 1,246 38,621 559 (24,376) 16,051 Total liabilities (excluding equity) 3,414 52,752 2,527 (24,376) 34,318
Acquisitions of assets - 5,995 16 - 6,011
The balance sheet split between the Holding sector and the Real estate sector has been refined compared with previous presentations.
██ The other segment assets mainly comprise intercompany receivables, stocks, client debts and cash flows from operating activities. ██ Segment liabilities comprise intercompany payables, suppliers and other liabilities from operating activities. ██ Acquisitions of assets comprises the acquisitions of property, plant and equipment (note 6) and investment properties (note 7). ██ Eliminations relate to a loan by CARRIGRES to UTEXAF- RICA and by TEXAF to UTEXAFRICA.
In comparison, the table below details the segment assets and liabilities at December 31, 2017 and 2016, as well as the acquisitions of assets in the financial year ended on this date.
TEXAF ANNUAL REPORT 2018 73 ANNUAL ACCOUNTS
SEGMENT ASSETS AND LIABILITIES Holding Real estate Quarries Intercompany Consolidated AT DECEMBER 31, 2017 (IN EUR k) eliminations Property, plant and equipment 452 2,194 7,309 - 9,955 Intangibles - 23 - - 23 Investment property - 99,043 56 - 99,099 Other segment assets 21,112 3,811 13,061 (26,807) 11,177 Total assets 21,564 105,071 20,426 (26,807) 120,254 Bank loans - 6,588 - - 6,588 Deferred taxes 1,427 16,328 2,055 - 19,810 Other segment liabilities 470 41,038 455 (26,807) 15,156 Total liabilities (excluding equity) 1,897 63,954 2,510 (26,807) 41,554
Acquisitions of assets - 6,609 - - 6,609
SEGMENT ASSETS AND LIABILITIES Holding Real estate Quarries Intercompany Consolidated AT DECEMBER 31, 2016 (IN EUR k) eliminations Property, plant and equipment 542 2,214 10,972 - 13,728 Intangibles - 41 - - 41 Investment property - 93,811 56 - 93,867 Other segment assets 21,476 6,788 13,593 (28,471) 13,386 Total assets 22,018 102,854 24,621 (28,471) 121,022 Bank loans - 6,766 - - 6,766 Deferred taxes 1,631 16,871 3,254 - 21,756 Other segment liabilities 591 41,603 678 (28,471) 14,401 Total liabilities (excluding equity) 2,222 65,240 3,932 (28,471) 42,923
Acquisitions of assets - 7,368 73 - 7,441
TEXAF office in DRC.
74 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
6. Property, plant and equipment
Impro- Technical Other Layouts vements Land and systems, property, Vehicles and acces- made to Total (IN EUR k) buildings equipment plant and sories rented and tools equipment properties At December 31, 2015 Cost 17,243 6,457 474 1,986 693 3 26,856 Combined amortization (4,067) (5,805) (324) (1,691) (139) - (12,026) Net carrying amount 13,176 652 150 295 554 3 14,830 CHANGES IN THE FINANCIAL YEAR 2016 Acquisitions 268 150 167 585 First consolidation (net) ------Disposals (89) - - - - - (89) Reallocations (932) - - - - - (932) Depreciation allocation (196) (296) (45) (113) (69) - (719) Value adjustment (1) 53 - - - - - 53 Changes in the period (896) (146) (45) 54 (69) - (1,102) At December 31, 2016 Cost (1) 15,049 6,518 474 2,150 693 3 24,887 Combined amortization (1) (2,769) (6,012) (369) (1,801) (208) (11,159) Net carrying amount 12,280 506 105 349 485 3 13,728 CHANGES IN THE FINANCIAL YEAR 2017 Acquisitions - 50 - 152 - - 202 First consolidation (net) ------Disposals - - - (5) - - (5) Reallocations - - - 5 - - 5 Depreciation allocation (111) (281) (40) (114) (69) - (615) Value adjustment (3,360) - - - - - (3,360) Changes in the period (3,471) (231) (40) 38 (69) - (3,773) At December 31, 2017 Cost 15,049 6,564 474 2,181 693 3 24,964 Combined amortization (6,240) (6,289) (409) (1,794) (277) - (15,009) Net carrying amount 8,809 275 65 387 416 3 9,955
CHANGES IN THE FINANCIAL YEAR 2018 Acquisitions 10 18 6 154 - - 188 Disposals/Withdrawals ------Reallocation ------Reallocation of assets held for sale 20 - - - - - 20 Depreciation allocation (131) (153) (29) (123) (69) - (505) Value adjustment ------Changes in the period (101) (135) (23) 31 (69) - (297) At December 31, 2018 Cost 15,079 6,582 459 2,335 693 3 25,151 Combined amortization and depreciation (6,371) (6,442) (417) (1,917) (346) - (15,493) Net carrying amount 8,708 140 42 418 347 3 9,658
(1) In 2016 the Group changed how it follows land and buildings from a synthetic approach by real estate property to an analytical approach by property or property part. This has led, on the one hand, to the recognition of a positive value adjustment of EUR 53 k and, on the other hand, to the splitting up of the gross value and the combined depreciation of some old buildings, which increases both the cost and the combined depreciation of the buildings at the end of 2016 without affecting their net value.
TEXAF ANNUAL REPORT 2018 75 ANNUAL ACCOUNTS
Land and buildings includes EUR 5,947 k (net of EUR 5,588 An impairment test was conducted on the book value of the k depreciation) relating to the CARRIGRES deposit, which deposit, which was EUR 5,947 k on December 31, 2018. This underwent an exceptional depreciation of EUR 3,360 k at test is based on the assumptions about future free cash flows June 30, 2017. generated by the exploitation and about a discount rate. For future cash flows, a scenario has been developed based on The deposit reserves of CARRIGRES were estimated at 20 the very gradual recovery of the market. The discount rate million tons at December 31, 2009 when 100% of CARRIGRES of 14% was derived from the parameters for the DRC and shares were acquired. They were estimated again at 25 the building materials estimated by professor A. Damodaran million tons in 2013. Over the four financial years 2014 to (http://pages.stern.nyu.edu/~adamodar/New_Home_Page/ 2018, the quarry produced 1.25 million tons of sandstone. home.htm). Bearing in mind the deterioration of the results These reserves were estimated by means of geological and of CARRIGRES, this test has led to the recognition, in 2017, engineering data, which enable the quantity that could of an exceptional depreciation of EUR 3,360 k. However, be exploited to be determined with reasonable certainty. this test is highly sensitive to the choice of assumptions, This process entails subjective judgments, which make the as shown in the sensitivity table below, which contains the assessment of reserves an exercise that is subject to revision, two main assumptions: the discount rate and the medium- as it is not absolutely precise. The Group exploits its existing to long-term annual cash flow (assumed to be constant in deposit, but does not explore new deposits. As explained in nominal terms over the life of the deposit). The valuation note 31, part of the quarry is illegally occupied by squat- model and assumptions are unchanged compared with ters, which could prevent the development of the quarry’s those used at December 2017, except for the 2019 cash flows, exploitation in the longer term. However, this part is not for which the new budget was used. included in the estimate of the reserves.
Since the financial year 2016, the deposit has been depreci- ated proportionate to the production.
HISTORICAL FREE CASH FLOWS (IN EUR k)
2010 2011 2012 2013 2014 2015 2016 2017 2018
1,973 2,427 2,317 3,028 (436) 962 392 (269) 157
SENSITIVITY ANALYSIS OF THE FAIR VALUE OF THE DEPOSIT (IN EUR k)
Free cash flow in( EUR k per year)
0 500 1,000 1,500 2,000 2,500
12% (153) 4,009 8,171 12,333 16,495 20,657 Discount rate 14% (154) 3,416 6,986 10,556 14,126 17,696 16% (155) 2,970 6,095 9,219 12,344 15,468
These values are comparable to the net book value of the deposit, which was EUR 5,947 k on December 31, 2018.
76 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
7. Investment property
Assets under Other investment Land Total (IN EUR k) construction property At December 31, 2015 Cost 46,457 5,203 48,249 99,909 Combined amortization and depreciation - - (12,029) (12,029) Net carrying amount 46,457 5,203 36,220 87,880 CHANGES IN THE FINANCIAL YEAR 2016 Acquisitions - 5,927 914 6,841 Remeasurement (via other items of the comprehensive result) 117 - - 117 Reallocation * 743 (9,999) 10,188 932 Reallocation to assets held for sale - - - 0 Depreciation allocation - - (2,051) (2,051) Value adjustment (1) (40) - 188 148 Changes in the period 820 (4,072) 9,239 5,987 At December 31, 2016 Cost (1) 47,277 1,131 73,604 122,012 Combined amortization and depreciation (1) - (28,145) (28,145) Net carrying amount 47,277 1,131 45,459 93,867 CHANGES IN THE FINANCIAL YEAR 2017 Acquisitions 185 6,145 77 6,407 Remeasurement (via other items of the comprehensive result) - - - 0 Reallocation * 38 (345) 338 31 Reallocation of assets held for sale 1,179 - - 1,179 Depreciation allocation - - (2,384) (2,384) Value adjustment - - - 0 HISTORICAL FREE CASH FLOWS (IN EUR k) Changes in the period 1,402 5,800 (1,969) 5,233 At December 31, 2017 2010 2011 2012 2013 2014 2015 2016 2017 2018 Cost 48,679 6,931 72,819 128,429 1,973 2,427 2,317 3,028 (436) 962 392 (269) 157 Combined amortization and depreciation - - (29,329) (29,329) Net carrying amount 48,679 6,931 43,490 99,100 CHANGES IN THE FINANCIAL YEAR 2018 Acquisitions - 160 5,663 5,823 Disposals/Withdrawals (67) - (38) (105) Reallocation * (19) (4,925) 4,924 (20) Reallocation of assets held for sale - - - 0 Depreciation allocation - - (2,429) (2,429) Value adjustment - - (22) (22) Changes in the period (86) (4,765) 8,098 3,247 At December 31, 2018 Cost 48,593 2,166 82,597 133,356 Combined amortization and depreciation - - (31,009) (31,009) Net carrying amount 48,593 2,166 51,588 102,347
* the net change of these lines is the reallocation from or to property, plant and equipment (1) In 2016 the Group changed how it follows land and buildings from a synthetic approach by real estate property to an analytical approach by property or property part. This has led, on the one hand, to the recognition of a positive value adjustment of EUR 148 k and, on the other hand, to the splitting up of the gross value and the combined depreciation of pre-2005 buildings, which increases both the cost and the combined depreciation of the buildings at the end of 2016 without affecting their net value.
TEXAF ANNUAL REPORT 2018 77 ANNUAL ACCOUNTS
The Group recognizes its investment property at historical Knight Frank currently sees a slowing down of demand for cost less depreciation, but gives an estimate of the fair value office space due to the political unrest and the absence in this note. It depreciates it on a straight line basis over 20 of high-quality buildings. For security reasons, the major years, maintaining a residual value of 20% As an exception to companies are concentrated in the Gombe district. The this rule, the residual value of the buildings on the Kinsuka group’s office space is rented at competitive rates compared site and the former COTEX warehouses, which an interna- to those stated in the Knight Frank report. tional force has vacated, are depreciated over ten and four years respectively. The residential and office properties of the TEXAF group in Kinshasa are located alongside the in-demand neigh- All the investment property is located in the Democratic bourhood of Gombe, on the site of UTEXAFRICA, which is Republic of Congo. The sites in DRC are concessions granted unanimously considered to be very well protected. by the state for renewable 25-year terms. These concessions come up for renewal between 2020 and 2041. Renewal is KINSHASA PRIME RENTS AND YIELDS inexpensive. The Group has no assets held on lease. (SOURCE: KNIGHT FRANK LLP, JANUARY 2018) Prime rents: In 2018 the investment property generated rental revenue USD/m2/month Prime yields of EUR 17,268 k and direct costs (mainly maintenance and Offices 25 12% repair) of EUR 973 k. Retail 25 12%
On December 31, 2018, the sites and property were pledged Industrial 15 15% for EUR 1,712 k (see note 13). Residential: USD 10,000/month 12% 4-bedroom executive house - prime location FAIR VALUE The Group has undeveloped sites in downtown Kinshasa and in outlying Kinsuka, as well as in some provinces of DRC, VALUATION OF UNDEVELOPED LAND and developed sites held for rent. The land price is difficult to document. In 2013 TEXAF sold a site adjacent to the UTEXAFRICA compound on the basis It is hard to determine the fair value of the property in of USD 566/m2 (EUR 436/m²), with due consideration for DRC and the current measurement is in level 3 of the IFRS the prohibition to build more than two stories. TEXAF has hierarchy of fair values. No property statistics or transaction not completed freely negotiated transactions since then; reports exist. The majority of transactions are conducted on a 10,634 m2 site has been expropriated for USD 5.4 m, but the informal market. Neither is there a public capital market part of this site could not be built on. In 2014 the Belgian to determine the long-term interest rate. The fair value is State put up the site adjoining Petit-Point for sale at a price estimated by the Board of Directors as best as possible based of EUR 842/m2 (USD 1,100/m2). Transactions in the munici- on the factual information available and not on the basis of a pality of Gombe, close to the compound, were completed at real estate assessment as provided for by IAS 40, article 75, as USD 1.000/m². this does not exist in DRC. The company obtained an independent local assessment However, in January 2018, Knight Frank, a London-based at the beginning of 2018, valuing the COTEX sites at USD real estate expert that operates in 59 countries and employs 1,012/m2. This value was accepted by the banks to guarantee 14,000 people, released the “Knight Frank Africa Report their financing. 2017/18”, an analysis of the property market in Africa. Page 20 of this report is dedicated to DRC, particularly the real estate In 2017 a real estate operator made an offer for a site of market in Kinshasa. The Group relies among other things on several thousand square meters close to UTEXAFRICA at the estimates of this report to estimate the fair value of its a price higher than USD 1,000/m2. investment property. The Board of Directors cautiously maintained the price of For residential properties, Knight Frank writes about a strong USD 800/m2 used in the 2017 annual report, rounded off to increase in the neighbourhoods considered safe in Kinshasa EUR 650/m2 as a reasonable fair value for downtown sites. (like Gombe), stressing that the supply is limited in these neighbourhoods. The rent level stated is $10,000 for a high- quality four-bedroom home.
(1) IAS 40 Art 75: “ the extent to which the fair value of investment property (as measured or disclosed in the financial statements) is based on a valuation by an independent valuer who holds a recognised and relevant professional qualification and has recent experience in the location and category of the investment property being valued. If there has been no such valuation, that fact shall be disclosed. ”)
78 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
There is great uncertainty about the sites in Kinsuka on the VALUATION OF DEVELOPED AREAS outskirts of the city and the Board has retained EUR 35/m2 Each building is allocated a condition co-efficient from 1 as the fair value, in spite of a real estate boom in this part (New or completely renovated) to 4 (Run-down). The fair of Kinshasa. value of the investment properties in the table below is estimated on the basis of their yield value, by dividing the The subsidiaries LA COTONNIERE and ESTAGRICO hold 302 contractual rents by the yield rate of 12% published by ha of land in the provinces (South Kivu, Sankuru, Maniema, Knight Frank for category 1 and 2 buildings or based on the Tanganyika, Lomami and Kasaï Oriental) on which some market value of EUR 650/m2 or EUR 35/m2 respectively only buildings have been constructed, mainly warehouses that for categories 3 and 4. The category 3 and 4 developed sites were used when the Group had cotton plantations. The are not used optimally within the meaning of IFRS 13-93 (i) Board retains a symbolic value of EUR 1.2 M for this item. and the existing buildings will gradually be replaced by Historically, LA COTONNIERE also holds land for which the new buildings (category 1), which ought to get a much documentation is incomplete and that are not valued in the higher yield. accounts. However, it should be noted that the regions of Maniema and South Kivu, where TEXAF has properties, are experiencing much faster economic growth than the rest of the country. The Board will revise this value when regional tensions come to an end.
CONCLUSIONS
SITE INVENTORIES (ha)
Downtown Kinshasa Kinsuka Province Total
UNDEVELOPED LAND Undeveloped land in downtown Kinshasa 8.9 - - 8.9 Undevelopable land in downtown Kinshasa 12.5 - - 12.5 Undeveloped land in Kinsuka - 100.1 - 100.1 Undeveloped land in the province - - 305.9 305.9 Total undeveloped land 21.5 100.1 305.9 427.4 (net of roads) Roads 3.7 0.6 - 4.3
DEVELOPED LAND Land with new or totally renovated buildings 16.8 - - 16.8 (category 1 development) Land with old buildings in good state 4.1 - - 4.1 (category 2 development) Land with buildings that require renovation 10.5 0.1 - 10.6 (category 3 development) Land with buildings in poor state 3.9 3.2 - 7.1 (category 4 development) Total developed land 35.3 3.4 0.0 38.6 General total 60.5 104.1 305.9 470.4
TEXAF ANNUAL REPORT 2018 79 ANNUAL ACCOUNTS
CONCLUSIONS
FAIR VALUE (EUR M)
Rent Yield land value Equivalent Total (EUR m) Yield rate value (€/m2 land value value (EUR m) ) (EUR m) (EUR m)
UNDEVELOPED LAND Undeveloped land in downtown Kinshasa - - - 650.0 64.1 64.1 Undevelopable land in downtown Kinshasa - - - - 1.6 1.6 Undeveloped land in Kinsuka - - - 35.0 35.0 35.0 Undeveloped land in the province - - - - 1.2 1.2 Total undeveloped land - - - - 101.9 101.9 (net of roads) Roads ------DEVELOPED LAND Land with new or totally renovated buildings 13.3 12% 111.0 NA - 111.0 (category 1 development) Land with old buildings in good state 2.1 12% 17.3 NA - 17.3 (category 2 development) Land with buildings that require renovation 2.0 NA - - 68.1 68.1 (category 3 development) Land with buildings in poor state 1.0 NA - - 26.2 26.2 (category 4 development) Total developed land 18.4 - 128.2 - 94.4 222.6 General total - - - - 196.2 324.5
Based on these assumptions, which are unchanged These values must be compared with a net book value of compared with 2017, the gross fair value of investment prop- EUR 102 m (or EUR 90 m after deduction of deferred taxes) (see erty on December 31, 2018 is EUR 325 m (EUR 246 m after note 17). deduction of deferred tax). The main changes compared with the previous year are a reduction in downtown sites Among other things, this table shows that 41% of developed after the aforementioned expropriation, an increase in land in downtown Kinshasa, categories 3 and 4, generate only provincial sites after the administrative formalities were 16% of rental revenue. So these sites are currently not being completed for a site in Maniema and the increase in value of managed optimally and constitute a strategic land reserve for developed land following investments in the financial year. the Group in the same way as the undeveloped land.
Another way to segment the developed areas containing VALUE IN MILLIONS OF EUR OF DEVELOPED LAND investment property is based on their use:
12 Residential SENSITIVITY 29 Offices The estimate of fair value, which is EUR 325 m, varies as follows, Warehouse based on the two main parameters - the required yield and Businesses Other the value per square meter in downtown Kinshasa. The latter is 5 more significant.
ESTIMATED VALUE (EUR M)
TOTAL: EUR 223 M Value of the land in m2 in the city centre 54 Yield rate € 450 € 650 € 850 10% 296 350 404 133 12% 271 325 378 14% 252 306 360
80 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
8. Intangibles 9. Stakes in associated
This is accounting and management software acquired enterprises in 2012 and 2015 and partly depreciated. The share of the Group in the losses of CONGOTEX has not been recognized since 2006, as this company is in liquidation and the Group has no commitments besides its investment. The Group share in the losses of CONGOTEX not recognized at December 31, 2018 is EUR 3,000 k. CONGOTEX has been in liquidation since 2007.
10. Other non-current financial assets
(IN EUR k) Shares Loans Total At December 31, 2015 Gross value 813 1,156 1,969 Combined impairments - (727) (727) Net carrying amount 813 429 1,242 CHANGES 2015 i-Finance write-down (813) - (813) Various - (199) (199) At December 31, 2016 Gross value 813 957 1,770 Combined impairments (813) (727) (1,540) Net carrying amount - 230 230
CHANGES 2017 Various - (183) (183) At December 31, 2017 Gross value 813 774 1,587 Combined impairments (813) (727) (1,540) Net carrying amount - 47 47
CHANGES 2018 New investments 170 - 170 Various - - - At December 31, 2018 Gross value 983 774 1,757 Combined impairments (813) (727) (1,540) Net carrying amount 170 47 217
██ The net value of the shares (EUR 170 k) corresponds to the ██ The fair value of the other non-current financial assets at released part of the investment in the Partech Africa fund. December 31, 2018, December 31, 2017 and December 31, The investment in i-Finance, in which TEXAF has a 10% 2016 is close to their net book value on these dates. stake (EUR 813 k) was written off in full in 2016. ██ Loans include an amount of EUR 727 k loaned to CONGOTEX when it was put into liquidation. This amount has been written off in full. The remaining loan at December 31, 2018 is made up of security deposits.
TEXAF ANNUAL REPORT 2018 81 ANNUAL ACCOUNTS
11. Current assets
(IN EUR k) 2016 2017 2018
ASSETS HELD FOR SALE Property available for sale (gross value) 1,179 0 0 Net value 1,179 0 0
STOCKS Spare parts - Gross value 3,147 2,931 2,985 Spare parts - Impairment (195) (142) (172) Finished products - Gross value 2,124 2,162 2,306 Finished products - Impairment (226) (226) (226) Other stocks - Gross value 55 44 55 Other stocks – Impairment - - - Net value 4,905 4,769 4,948
CLIENTS Clients – Gross value 1,332 1,649 1,345 Clients – Impairments (770) (741) (949) Net value 562 908 396
TAX ASSETS 1,518 919 807
OTHER DEBTORS Other debtors – Gross value 627 687 476 Other debtors – Impairment (75) (126) (180) Net value 552 561 296
CASH AND CASH EQUIVALENTS Cash at bank - - - Bank balances 3,911 3,674 5,564 Short-term accounts - - - Net value 3,911 3,674 5,564
OTHER CURRENT ASSETS Charges to be carried forward 349 74 87 Income acquired 180 224 198 Net value 529 298 285
82 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
██ Assets held for sale concern 13,000 m² of land in Kinshasa. ██ The net value of the client receivables is very low The corresponding deferred tax was recognized in liabil- compared with turnover (2%), because, in real estate, ities. In 2017, these assets were included in investment tenants pay in advance and, in the quarry, many clients pay properties and the corresponding liabilities in a deferred at the time of collection. In addition, the Group liabilities tax provision. include advance rent from clients of EUR 1.621 k. The net ██ Spare part stocks are held by CARRIGRES and UTEXAFRICA. value of the clients includes EUR 259 k in receivables more The stocks of finished products and work in progress only than 120 days due, some of which is covered by rental concern CARRIGRES. guarantees or corresponding debts. ██ The client debts are spread as follows according to ██ As the Group personally knows each of its clients, of which their age: there are only around 200, and as they are all of very different sizes and characteristics, a statistical analysis of Gross Impair- Net non-payments to determine the parameters for making (IN EUR k) value ment value provisions for debts overdue for more than 120 days would 0 - 60 days 17 - 17 be neither relevant nor significant. The Group examines 60 - 120 days 119 - 119 each of its debts individually with the debtor to determine > 120 days 1,208 (949) 259 the risk and any provision. The increase in impairments on Total 1,345 (949) 396 clients in 2016 is due to the set up of a provision for debts of clients in the Congolese public sector. ██ Tax assets comprise VAT receivables of EUR 713 k, net of Client recei- % Clients of (IN EUR k) vables turnover write-down following devaluation of the Congolese franc At December 31, 2015 1,538 (see note 3.5.a). Most of this amount was repaid after the balance sheet date. Impairments (573) ██ The fair value of clients, other debtors and other current Net value 965 4.9% assets at December 31, 2018, December 31, 2017 and Increase of provisions (273) December 31, 2016 is close to their net book value on Decrease of provisions 76 these dates. ██ The impairments are recognized in “impairment” on the At December 31, 2016 1,332 income statement. Since the financial year 2016 the rents Impairments (770) payable by debtors that systematically have problems Net value 562 3.1% paying are only recognized when they are effectively Increase of provisions (18) collected and so do no longer generate impairments. Decrease of provisions 47 At December 31, 2017 1,649 12. Share capital Impairments (741) Net value 908 5.0% ORDINARY SHARES IN CIRCULATION Increase of provisions (223) Number of shares at December 31, 2015 3,543,700 Decrease of provisions 14 Changes in the financial year 2016 - At December 31, 2018 1,345 Number of shares at December 31, 2016 3,543,700 Impairments (949) Changes in the financial year 2017 - Net value 396 2.1% Number of shares at December 31, 2017 3,543,700
██ With regard to the amortization of financial assets meas- Changes in the financial year 2018 - ured at amortized cost, including commercial receivables, Number of shares at December 31, 2018 3,543,700 the initial application of the expected credit loss model under IFRS 9 leads to the accelerated recognition of credit The shares are issued without designation of nominal value. losses compared with the incurred loss model under IAS No change was recognized in 2016, 2017 or 2018. 39. Being given, on the one hand, the quality of the tenants and, on the other, the low credit risk associated with commercial receivables (established on the basis of the analysis of historical credit losses). The expected loss model under IFRS 9 has no material impact for the Texaf Group.
TEXAF ANNUAL REPORT 2018 83 ANNUAL ACCOUNTS
13. Bank loans and other financial liabilities
Monetary Non-monetary (IN EUR k) 2016 2017 2018 changes changes NON-CURRENT
Guarantees and deposits received 3,116 3,572 4,368 796 0 Bank loans 6,766 6,588 4,268 (2,320) 0 9,882 10,160 8,636 (1,524) 0
CURRENT Bank loans 2,152 2,239 3,009 770 0 Total borrowings and other financial liabilities 12,034 12,399 11,645 (754) 0
BY DUE DATE Less than one year 2,152 2,239 3,009 770 0 One-five years 9,882 10,160 8,636 (1,524) 0 12,034 12,399 11,645 (754) 0
BY CURRENCY Euro 12,034 12,399 11,645 (754) 0
██ In 2012 TEXAF agreed a EUR 1,870 k loan with a Belgian ██ In 2016 UTEXAFRICA agreed a EUR 2,500 k loan with a bank at a rate of 4.30%, repayable in 16 quarterly instal- Congolese bank at a rate of 7%, repayable in 48 quarterly ments beginning in August 2013. This loan was paid back instalments beginning in December 2017. in full in the course of 2017. ██ In 2018 UTEXAFRICA agreed a EUR 2,500 k loan with ██ In 2014 UTEXAFRICA agreed a EUR 1,400 k loan with a a Congolese bank at a rate of 8,50%, repayable in Congolese bank at a rate of 8.96%, repayable in 57 quar- 60 quarterly instalments beginning in August 2019. terly instalments beginning in June 2015. Only EUR 1000 k of this loan was taken up. ██ In 2014 UTEXAFRICA agreed a EUR 1,500 k loan with a ██ The security deposits received concern rental guarantees Congolese bank at a rate of 9.5%, repaid in full in 2016. deposited by clients and performance bonds deducted ██ In 2014 UTEXAFRICA agreed a EUR 2,500 k loan with a from the invoices of building contractors. Congolese bank at a rate of 8.6%, repayable in 50 quar- ██ The fair value of the guarantees received cannot be deter- terly instalments beginning in January 2016. mined with precision, as the contracts are open ended. ██ At the end of 2015 IMMOTEX agreed a EUR 2,940 k loan The fair value of the current and non-current bank loans is with a Congolese bank at a rate of 8.50%, repayable in 54 close to their book value, as the impact of the conversion quarterly instalments beginning in October 2016. to current value is negligible. ██ In 2016 IMMOTEX agreed a EUR 2,600 k loan with a Congolese bank at a rate of 7%, repayable in 48 quarterly instalments beginning in October 2016.
84 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
14. Net financial debt
The net financial debt is the difference between the inter- est-bearing debts and cash investments.
(IN EUR k) Note 2016 2017 2018
Bank debt 13 8,918 8,827 7,277 Payable to Imbakin 33 472 409 399 Cash investments 11 (3,911) (3,674) (5,564) Net financial debt 5,479 5,562 2,112
15. Provisions for other liabilities
(IN EUR k)
At December 31, 2015 814 Increase of provisions - Reversal of unused amounts (814) At December 31, 2016 - Increase of provisions - Reversal of unused amounts - At December 31, 2017 - Increase of provisions - Reversal of unused amounts - At December 31, 2018 -
These old provisions covering the risks of expenses have all been reversed.
16. Pension liabilities and similar benefits
In the Democratic Republic of Congo, the employees receive an allowance when they retire, based on the number of years in employment and the level of remuneration, similar to when they are let go.
2016 2017 2018
LIABILITIES RECORDED ON THE BALANCE SHEET UNDER: Post-employment pension and medical payments 602 746 791
CHANGES IN THE FINANCIAL YEAR: Credited to the income statement 49 64 45 Change of actuarial assumptions debited in equity 25 80 74 144 45
Discounted value of unfunded liabilities 602 746 791
TEXAF ANNUAL REPORT 2018 85 ANNUAL ACCOUNTS
(IN EUR k) 2016 2017 2018
Cost of services rendered 49 64 45 Net actuarial loss recognized during the financial year 25 80 0 Losses linked to the reduction of pension plans - - - Total amount included in the costs relating to employee benefits 74 144 45
THE MAIN ACTUARIAL ASSUMPTIONS 2016 2017 2018 USED ARE AS FOLLOWS: Discount rate 5.5% 3.0% 3.1% Future rate of salary raises 1.5% 3.5% 3.5% Inflation rate 2.0% - -
The provision for this allowance is calculated using the This provision is not financed by an investment portfolio. projected credit unit method. The calculation is done in The sensitivity of this EUR 791 k provision to the actuarial USD, although the payment is made in Congolese francs assumptions is stated in the table below: (CDF). On the one hand, there is no long-term interest rate in CDF and, on the other, the Group endeavors to maintain Provision for post-employment liabilities (in EUR k) the purchasing power of their employees in USD even if the CDF is devalued. The discount rate used is the 30-year
rate of US treasury bonds and the rate at which salaries rise NOMINAL RATE OF SALARY RAISES corresponds to the historical Group average in USD. (This IN USD DISCOUNT RATE IN USD latter rate replaces the long-term inflation rate in USD and the actual growth rate, which were previously used.) The life 2% 3% 4% 5% table was changed in 2017 on the advice of an external 2% 771 857 959 1080 consultant. The life table for the Democratic Republic of 3% 698 770 855 955 Congo published by the World Health Organization was 4% 636 698 769 853 previously used. Now, use of the table published by the Inter-African Conference on Insurance Markets (www. 5% 584 637 697 768 cima-afrique.org),) is mandatory for insurance companies in the French-speaking countries of West Africa.
17. Deferred taxes
The deferred tax assets and liabilities are offset when there is No offsetting between distinct legal entities has been a legally enforceable right to offset the assets and liabilities applied. The table below shows the amounts after offsetting, of due tax and the deferred tax assets and liabilities concern where applicable. tax on the result deducted by the same tax authority.
(IN EUR k) 2016 2017 2018
Deferred tax liabilities recoverable in more than 12 months 21,756 19,810 13,999 Deferred tax assets reallocated to liabilities recoverable in less than 12 months - - - 21,756 19,810 13,999
86 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
The gross change to deferred taxes is shown below:
(EN K EUR)
At December 31, 2015 21,866 Deferred taxes on actuarial changes reallocated to equity (9) Other tax charged to the income statement under “Deferred taxes” (101) At December 31, 2016 21,756 Deferred taxes on actuarial changes reallocated to equity (28) Deferred taxes reallocated from assets available for sale 337 Other tax charged to the income statement under “Deferred taxes” (2,255) At December 31, 2017 19,810 Deferred taxes on actuarial changes reallocated to equity - Other tax charged to the income statement under “Deferred taxes” (5,811) At December 31, 2018 13,999
The change to deferred tax assets and liabilities during the financial year, excluding offsetting within the same legal jurisdiction, is detailed below:
Undistributed (Net) revalua- reserves and DEFERRED TAX LIABILITIES tion of land and Other Total other untaxed buildings reserves At December 31, 2015 20,109 1,835 206 22,150 Debited (credited) to the income statement 2016 72 (204) 48 (84) At December 31, 2016 20,181 1,631 254 22,066 Reallocation to liabilities available for sale 337 - - 337 Debited (credited) to the income statement 2017 (2,077) (204) 48 (2,233) At December 31, 2017 18,441 1,427 302 20,170 Transfer from one item to another 163 - (262) (99) Debited (credited) to the income statement 2018 (6,536) 741 (40) (5,835) At December 31, 2018 12,068 2,168 0 14,236
Post-employ- DEFERRED TAX ASSET: Tax losses Other Total ment benefits At December 31, 2015 - (185) (99) (284) Recognized in other items of the comprehensive result - (9) - (9) Credited to the income statement 2016 - (17) 0 (17) At December 31, 2016 - (211) (99) (310) Recognized in other items of the comprehensive result - (28) - (28) Credited to the income statement 2017 (22) 0 (22) At December 31, 2017 - (261) (99) (360) Transfer from one item to another - - 99 99 Credited to the income statement 2018 - 24 - 24 At December 31, 2018 - (237) 0 (237)
TEXAF ANNUAL REPORT 2018 87 ANNUAL ACCOUNTS
The deferred tax liabilities mostly consist of provision for claim it holds against Utexafrica. Up to December 31, 2017, tax on a possible future gain on the real estate assets of this provision was presented after deduction of a tax asset of the Group in DRC in the event of disposal (EUR 12,068 k). Texaf; this tax asset had been reversed in the first half of 2018 The tax value is set in Congolese francs (CDF), but is revalued every year on the basis of a coefficient set by the finance The Group does not recognize deferred tax liabilities on minister to take account of inflation. In 2017 this provision undistributed profit by the subsidiaries for the part of was reduced, on the one hand, by EUR 1,176 k following the profit that it decides not to distribute in the foreseeable the exceptional depreciation of the sandstone deposit and, future (EUR 2,229 k of passive tax latency at December 31, on the other hand, by EUR 1,000 k to adjust to the revised 2018). Likewise, the Group does not recognize deferred tax tax value in Congolese francs. In 2018 this provision was liabilities on the untaxed reserves, because the Group does reduced, on the one hand, by EUR 4,139 k to adjust to the not expect to distribute these reserves in the foreseeable revised tax value in Congolese francs and, on the other hand, future (EUR 1,866 k at December 31, 2018). by EUR 2,397 k to reflect the reduced tax rate on profit in DRC from 35% to 30%. This provision may be increased in the Furthermore, the deferred tax assets not recognized on future if the EUR/CDF exchange rate and the tax remeasure- the balance sheet are EUR 233 k. These tax assets come from ment revaluation diverge. losses carried forward in DRC. There is no longer any time limit on their recognition. Their likelihood of realization is For the rest (EUR 2,168 k), the deferred tax liabilities comprise considered unpredictable. a provision for future tax in Belgium on reversals of write- downs that Texaf S.A will have to make on the historical
18. Suppliers and other current creditors
(IN EUR k) 2016 2017 2018
Suppliers 1,041 1,475 1,311 VAT and other tax to be paid 2,023 1,100 1,707 Employee pay, social contributions and similar 109 151 13 Other creditors 636 571 620 3,809 3,297 3,651
19. Financial instruments
In 2018 the Group adopted IFRS 9 Financial Instruments (as been removed from the accounts at January 1, 2018. amended in July 2014) and substantial amendments of other The comparable amounts linked to these instruments that related IFRS ahead of the date on which they take effect. were not removed from the accounts at January 1, 2018 IFRS 9 introduces new requirements for 1) the classifica- have not be reformulated. tion and measurement of financial assets and financial liabilities, 2) the write-down on financial assets and 3) the The management of the Group has reviewed and meas- accounting for general hedge. These new requirements and ured the financial assets and existing financial liabilities at their impact on the consolidated financial statements of the January 1, 2018, based on the facts and circumstances that Group are set out below. existed on this date and has concluded that the initial appli- cation of IFRS 9 has the following impacts on the classifica- The Group applied IFRS 9 in advance with the transitional tion and measurement of these assets and liabilities. stipulations provided for in IFRS 9. The date of initial appli- cation, that is the date on which the Group measured its ██ The financial assets classified as “Loans and receivables” financial assets and existing financial liabilities with regard under IAS 39, such as non-current liabilities, commercial to IFRS 9, is January 1, 2018. As a consequence, the Group receivables, cash and cash equivalents are classified and applied the requirements of IFRS 9 to the instruments measured at amortized cost under IFRS 9. that had not been removed from the accounts at January 1, 2018 and did not apply them to those that had already
88 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
██ Financial assets, such as stakes in unlisted companies, the guarantees issued in compliance with the expected loss classified as “Available-for-sale financial assets”, such as model (rather than the “most likely consequence” under IAS the other financial assets (shares) under IAS 39 are desig- 37). Expected credit losses at January 1, 2018 were EUR 741 k, nated as being measured at fair value through the other identical to those under IAS 39. They all relate to commercial items of the comprehensive income. receivables.
With regard to write-down on financial assets, IFRS 9 The classification and measurement of the financial liabilities requires the use of an expected credit loss model rather of the Group have not been changed by the requirements than an incurred loss model under IAS 39. The scope of the of IFRS 9. financial instruments subject to impairment was changed by IFRS 9; specifically, the Group measures write-down on
December 31
Designated Financial at fair value assets or through liabilities Qualification FINANCIAL INSTRUMENTS the other Fair value Category measured of fair value items of the at amor- comprehen- tized cost sive income FINANCIAL ASSETS Share-based participations 169 169 Level 2 Financial assets at fair value through the other items of the comprehensive income Foreign currency derivative Cash flow hedging financial instruments Other derivative financial instruments Cash flow hedging Loans to affiliated companies Financial assets at amortized cost Security deposits 47 47 Level 2 Financial assets at amortized cost Term deposits Financial assets at amortized cost Other receivables at amortized cost 1,388 1,388 Level 2 Financial assets at amortized cost Other financial assets Non-current commercial receivables Financial assets at amortized cost Current commercial receivables 396 396 Level 2 Financial assets at amortized cost Cash and cash equivalents 5,564 5,564 Level 2 Financial assets at amortized cost Total 169 7,395 7,564 FINANCIAL LIABILITIES Bank loans 7,277 7,277 Level 2 Financial liabilities at amortized cost Bank overdrafts Financial liabilities at amortized cost Leasing liabilities Financial liabilities at amortized cost Other financial liabilities 10,941 10,941 Level 2 Financial liabilities at amortized cost Other financial liabilities Foreign currency derivative financial Cash flow hedging instruments Other derivative financial Cash flow hedging instruments Commercial liabilities 1,311 1,311 Level 2 Financial liabilities at amortized cost Liabilities to related parties Financial liabilities at amortized cost Total 19,528 19,528
TEXAF ANNUAL REPORT 2018 89 ANNUAL ACCOUNTS
Financial instruments that, after initial recognition, The level 3 measurements of fair value are based on are measured at fair value on the balance sheet, can be valuation techniques that include data relating to the assets presented at one of three levels (1-3), each corresponding or liabilities that are not based on observable market data to their observability: (non-observable data).
The level 1 measurements of fair value are based on the Level 1: Texaf does not currently hold any financial (unadjusted) prices quoted on markets for identical assets instruments that meet the definition of level 1 or liabilities. Level 2: All other assets and liabilities held by Texaf are level 2. The level 2 measurements of fair value are based on data other than the quoted prices referred to in level 1 observed Level 3: Texaf does not currently hold any financial for the asset or liability in question, either directly (prices) or instruments that meet the definition of level 3 indirectly (data derived from prices).
20. Revenue from ordinary activities
(IN EUR k) 2016 2017 2018
Sales of goods 3,294 1,573 1,601 Provision of service 5 0 0 Rents 15,093 16,635 17,268 18,392 18,208 18,869
20.1. QUARRIES PROPORTION OF TENANCY AGREEMENTS IN VALUE ██ The sale of goods concerns the turnover of CARRIGRES, (AT 12-31-2017) which is in strong decline due to the absence of road-re- Diplomatic clause (one month’s notice in some cases) 32.7% lated projects, few private investments and competition Open ended (three months’ notice) 45.1% from informal quarries. ██ CARRIGRES has two clients that each accounts for more Open ended (six months’ notice) 18.5% than 10% of its tonnage sold. The five biggest clients Fixed term without diplomatic clause 3.7% account for 51% of deliveries and the ten biggest for 65%. (one to five years)
20.2. REAL ESTATE ██ One client accounts for 10% or more of segmented turn- ██ The rents come from the renting of residential buildings, over. The five biggest clients account for 36% of turnover offices and warehouses in Kinshasa. and the ten biggest for 48% of turnover. ██ The majority of tenancy agreements are open-ended ██ The annual rental value of the rented properties is with three-months’ notice for residential tenancy EUR 18.4 m, which is higher than the 2018 turnover agreements and six months’ notice for business tenancy because the Bois Nobles homes were not available until agreements. Furthermore, many clients benefit from a the end of the year. diplomatic clause allowing them to vacate the property without compensation with one month’s notice if their country or international body closes its mission in DRC. There are some fixed-term contracts that are set to expire within one to five years.
90 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
21. Payroll expenses
(IN EUR k) 2016 2017 2018
Wages, salaries and social benefits 3,666 3,495 3,088 Capitalized charges (249) (129) (294) Pension costs (defined benefit plan) 49 64 45 3,466 3,430 2,839
The employee costs in 2017 include EUR 200 k in restruc- turing costs at CARRIGRES (see note 25), which covers the termination benefits of employees who left the company by mutual agreement.
22. Depreciation allocation
The amortization allocation concerns intangible assets (EUR 8 k), property, plant and equipment (EUR 505 k) and investment property (EUR 2,429 k) (see notes 6 and 7).
23. Impairments
In 2017, impairments mainly consisted of an exceptional In 2018 a write-down was also applied to the receivable from depreciation of the CARRIGRES deposit (see note 6) of i-Finance of EUR 48 k. EUR 3,360 k (see note 25), so the value of the deposit has changed as follows: Write-downs, net of reversals, on commercial receivables of EUR 186 k were also recognized, with write-downs, net of Value at December 31, 2016 EUR 9,432 k reversals, on stocks of EUR 21 k. Depreciation based on production EUR (56) k In addition, a write-down on another receivable of EUR 870 k Exceptional depreciation EUR (3,360) k was reversed due to the payment for the expropriation of a Value at December 31, 2017 EUR 6,016 k UTEXAFRICA site. Depreciation based on production EUR (69) k Value at December 31, 2018 EUR 5,947 k
TEXAF ANNUAL REPORT 2018 91 ANNUAL ACCOUNTS
24. Other operating charges
(IN EUR k) 2016 2017 2018 Rental expenses 46 65 69 Maintenance and repairs (subcontracted) 607 652 668 Fuel and lubricants 26 19 22 Water 172 172 179 Electricity 626 606 650 Office supplies 66 53 52 Communication costs 116 89 89 Third party fees and remuneration 1,503 1,461 1,610 Transport costs (rebilled) 0 76 28 Insurance 73 70 53 Travel costs 160 163 147 Advertising and representation costs 155 168 200 Directors 558 310 632 Tax (other than income tax) 1,130 1,134 1,134 Various 450 354 398 5,688 5,392 5,931
Fifty-five percent of fees are legal and security costs, which Taxes include Congolese tax on the rental revenue of TEXAF are essential for the protection of the property of the Group. s.a. of EUR 825 k in 2018. This tax is levied on gross revenue rather than the resulting profit.
25. Other operating income
(IN EUR k) 2016 2017 2018 Restaurant - pool house 314 363 395 Rebilling water, power 759 687 647 Various 1,022 443 382 2,095 1,493 1,423
Other income includes revenue from sandstone transport, air-conditioning equipment maintenance, fees for assessment of state of rented properties and sales of decommissioned equipment.
92 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
26. Non-recurring operating items
██ The non-recurring operating items are income or ██ For the financial year ended on December 31, 2017, expenses related to the operating activity of the Group the non-recurring expenditure consisted of the excep- that are uncommon, that is to say, they do not occur tional depreciation of the sandstone deposit (EUR 3,360 k) every year. Since 2017, these are limited to 1. gains or (see notes 6 and 22), the restructuring costs at CARRIGRES losses on disposal of non-current assets, 2. allocations to (EUR 200 k) (see note 20) and a write-down on the (or reversals of) write-downs on non-current assets and 3. i-Finance loan (EUR 50 k) (see note 22). costs relating to major restructuring, purchase or disposal of an activity (such as redundancy costs, plant closure and ██ For the financial year ended on December 31, 2018, commissions paid to third parties to acquire or dispose of the non-recurring income consisted of the profit an activity) generated by the indemnity for expropriation actually collected by UTEXAFRICA (EUR 1,378 k, including EUR 870 ██ For the financial year ended on December 31, 2016, the k reversal of the write-down on receivable and EUR 508 k non-recurring items consisted of value adjustments on gain on property, plant and equipment) and the gain by stock (EUR 13 k), value adjustments on claims (EUR -192 k), CARRIGRES on the sale of a non-operating property (EUR a write down on i-Finance (EUR -813 k), a value adjust- 152 k). ment on fixed assets (EUR 193 k) and reversals of various provisions (EUR 50 k).
27. Financial expenses
(IN EUR k) 2016 2017 2018 Interest expense 738 703 624 Capitalized interest expenses (407) (115) (195) Foreign exchange losses 328 595 (2) Other financial charges 108 7 12 767 1,190 438
Financial expenses include in 2017 exchange losses of EUR 592 k, primarily on VAT credits in Congolese francs.
28. Income tax
(in EUR k) 2016 2017 2018 Current taxes (73) 75 (1,140) Deferred taxes (note 16) 101 2,255 5,811 28 2,330 4,671
Current taxes in 2017 comprised a reversal of a provi- 4,139 k to adjust to the revised tax value in Congolese francs sion of EUR 1,065 k, which fully offset the tax expense of and, on the other hand, by EUR 2,397 k to reflect the reduced the financial year. tax rate on profit in DRC from 35% to 30%. On the other hand, the deferred Belgian taxes were revalued by EUR 741 k, Deferred taxes in 2017 comprised a reduction in the following, among other things, the elimination of a tax asset provision for deferred taxes on the deposit, following its that the Board deemed no longer to exist. impairment, of EUR 1,176 k and a decrease of EUR 1,000 k in the provision for deferred taxes on the buildings to bring The connection between the tax rate applicable to the them in line with their tax value in Congolese francs. In parent company and the actual tax rate is as follows: 2018, deferred taxes were reduced, on the one hand, by EUR
TEXAF ANNUAL REPORT 2018 93 ANNUAL ACCOUNTS
(in EUR k) 2016 2017 2018 Tax expense based on the tax rate applicable to the parent company (1,845) (755) (2,478) Result before tax 5,428 2,220 8,261 Applicable tax rate 33.99% 33.99% 30.00%
Reconciliation items 251 1,500 585 Impact of the rates in other jurisdictions (45) (4) (337) Change in tax rate 0 0 (44) Impact of deductible notional interest 71 13 0 Impact of non-taxable revenue 746 1,196 944 Impact of non-deductible expenses (498) (515) (65) Impact of used tax losses 61 84 155 Impact of tax liabilities not recognized during the financial year (29) (217) (155) Impact of tax liabilities recognized during the financial year 0 1,000 0 Other (55) (57) 87
Tax expense based on the effective tax rate (1,594) 745 (1,893) Result before tax 5,428 2,220 8,261 Effective tax rate 29.37% (33.58%) 22.92% Adjustments to tax due in previous years 1,622 1,585 974 Adjustments to deferred taxes - - 5,590 TOTAL TAXES 28 2,330 4,671
The non-taxable revenue mainly comprises the rental In 2018, deferred taxes were reduced, on the one hand, by revenue of TEXAF s.a., which is subject to a special tax on EUR 4,139 k to adjust to the revised tax value in Congolese rental revenue (see note 24). francs and, on the other hand, by EUR 2,397 k to reflect the reduced tax rate on profit in DRC from 35% to 30%. Various The tax liabilities recognized during the financial year fell by other changes, including the credit note for a Belgian tax EUR 1,000 k in 2017 following an adjustment of deferred asset that no longer has a reason to exist, lead to an increase taxes in line with the remeasured tax value (see note 17). of EUR 946 k.
29. Result per share (in EUR k) 2016 2017 2018 Net profit to shareholders of 5,454 4,542 12,909 The basic result per share is calculated by dividing the parent company (in EUR ‘000) the net profit allocated to shareholders of the parent Weighted average number of 3,543,700 3,543,700 3,543,700 company by the weighted average number of ordinary ordinary shares in circulation shares in circulation in the course of the financial year, Basic result per share excluding share buy-backs. 1.54 1.28 3.64 (EUR per share)
30. Dividend per share
The net dividend of EUR 0.68 (gross EUR 0.9714) per share The dividend proposed for the financial year 2017 (a total of proposed to the General Meeting of May 14, 2018 for the EUR 2,886 k) was approved by the General Meeting of May 8, financial year closed on December 31, 2018, representing a 2018 and paid in 2018. This dividend was therefore no longer total distribution of EUR 3,442, is not recognized in liabilities part of equity at December 31, 2018. in the financial statements at December 31, 2018. Under IFRS, dividend is not recognized as a liability.
94 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
31. Cash from operations
(in EUR k) Note 2016 2017 2018 Result of the period 5,456 4,550 12,932 Adjustments: Tax 27 (28) (2,330) (4,671) Amortization of intangible assets 17 19 8 Depreciation of property, plant and equipment 7 719 615 505 Depreciation of investment property 8 2,051 2,384 2,429 Adjustment of depreciation of investment property 8 (201) - 22 Loss / (profit) on disposal of non-current assets (3) - (660) Net changes to provisions for other liabilities 15 - - - Net changes to liabilities resulting from post-employment benefits 16 49 63 45 Impairments of assets through the income statement 25 1,018 3,328 (578) Interest expense 26 331 588 428 Interest income (12) - - Unrealized exchange losses / (profits) 139 - - Changes to working capital (excluding changes to consolidation scope and translation differences): Inventory 1,666 152 (208) Clients and other debtors (252) 447 1,511 Rent guarantees received (148) 190 478 Suppliers and other creditors (931) (787) 1,069 CASH FROM OPERATIONS 9,871 9,219 13,310
32. Litigation and 33. Commitments contingencies ██ CONGOTEX was put into liquidation in 2007. IMMOTEX agreed to a USD 1 m loan to facilitate the liquidator’s work ██ Part of the CARRIGRES site is illegally occupied by in settling certain priorities, such as the social liabilities. squatters, which could prevent the development of the This loan is completely covered by a provision. The TEXAF quarry’s exploitation in the longer term. The company is Group is not obliged to contribute financially over and doing everything within its power to eject these illegal above the shareholder efforts it has made to this date. occupants. This part of the deposit is not valued in ██ Some TEXAF real estate (net book value EUR 1,712 k) is the accounts. provided as collateral to Congolese banks to cover five ██ IMMOTEX is a party to various legal actions to protect its loans, initially totaling EUR 11,940 k (see note 13 above). site in Kinsuka (104 ha) from attempts at illegal appropria- ██ The company has committed to granting one of the tion of all or some of the site by third parties. executive directors remuneration based on a share option ██ TEXAF is also party to several legal actions to fight plan, the details of which still need to be fully agreed. attempts to illegally appropriate its site at “Petit pont”. ██ TEXAF has undertaken to subscribe to the PARTECH ██ UTEXAFRICA is confronted with attempts to build on the AFRICA fund for an amount of EUR 830 k, which has not land liable to flooding between its compound and the yet been called in. river. To protect itself, in 2017 it was granted a 25-year ██ The Democratic Republic of Congo has undertaken to rental contract covering this area by the state. compensate UTEXAFRICA an outstanding amount of ██ The Group has won all the above cases in the courts of USD 3.7 m for an expropriation. Kinshasa and expects these court decisions to be applied.
TEXAF ANNUAL REPORT 2018 95 ANNUAL ACCOUNTS
34. Transactions with affiliated parties
S.F.A, which is the main shareholder of TEXAF S.A., rents The Group regularly buys goods and services from offices and car parks to TEXAF S.A. in Brussels for EUR 64 k Chanimétal (EUR 221 k in 2018), a company co-controlled per year. by Chanic, director.
TEXAF keeps the accounts of SFA and Chagawirald, compa- Imbakin Holding, a company controlled by SFA, has a nies that it controls, in lieu of a debt of EUR 300 k dating receivable of EUR 399 k from TEXAF. from 2002. In 2018 CARRIGRES sold a freestanding house to a company The lawyers office De Croo - Desguin, linked to Herman De linked to Albert Yuma, director, for EUR 209 k. Croo, director, charges consulting fees of EUR 20 k per year to TEXAF S.A. The directors received the following remunerations in 2018:
Variable Fixed remuneration Attendance fee Total remuneration remuneration (gross) (gross) (gross) (gross) Chanic s.a. 12,000 5,000 - 17,000 represented by Vincent Bribosia Herman De Croo 12,000 5,000 - 17,000 Charlotte Croonenberghs 12,000 4,000 - 16,000 Philippe Croonenberghs 18,000 12,000 58,810 88,810 Michel Gallez 0 0 - 0 Danielle Knott 17,000 5,000 - 22,000 Dominique Moorkens 12,000 13,000 - 25,000 Pascale Tytgat 17,000 9,000 - 26,000 Albert Yuma 0 0 - 0
35. Remuneration of principal managers
The remunerations and other short-term benefits granted to the main directors were EUR 766 k in 2018 (EUR 521 k in 2017), split as follows:
Variable Employer cost remuneration Pension plan Company vehicle Total In accordance CEO 340,477 120,310 Yes 460,787 with DRC law CFO 155,000 120,232 29,996 Yes 305,228
96 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
36. Remuneration 38. Structure de l’actionnariat of the auditor (total des titres émis : 3.543.700 - depuis le 13 mai 2014) ██ Fees relative to the duties of the auditor exercised for the Group in 2018: EUR 47 k. ██ On May 13, 2014 TEXAF published the following infor- ██ Fees relative to the duties of the auditor and the persons mation following the capital increase decided by the with which the auditor is connected (in 2018): EUR 47 k Extraordinary General Meeting of May 13, 2014:
Number of shares in circulation 3,543,700 Total number of voting rights 3,543,700 37. Events after the Total capital EUR 21,508,160.84 reporting period Holders of voting rights: Nil Société Financière Africaine 2,206,760 62.27% Middle Way Ltd 354,370 10.00%
Société Financière Africaine is controlled by Chagawirald SCS, which in turn is controlled by Philippe Croonenberghs.
Middle Way Ltd is wholly owned by Member Investments Ltd. The ultimate beneficiary of Member Investments Ltd is CCM Trust (Cayman) Ltd, a trust of the Cha family.
██ On August 23, 2018 TEXAF communicated information regarding article 74 of the TOB law to the FSMA.
Shareholders: Société Financière Africaine holds 62.42% 2,212,765 shares or Middle Way Ltd holds 354,370 shares or 10.00% Total shares issued 3,543,700
██ Sales transactions on TEXAF shares executed by persons initiated during the financial year 2018:
── On July 18, Jean-Philippe Waterschoot sold 5,000 shares for EUR 146,544 on the stock exchange ── On November 16, Christophe Evers sold 3,800 shares for EUR 106,400 off book. ── On November 16, Christophe Evers sold 2,800 shares for EUR 84,000 off book. ── On November 16, S.F.A. (linked to Philippe Croonen- berghs) bought 2,800 shares for EUR 84,000 off book.
TEXAF ANNUAL REPORT 2018 97 ANNUAL ACCOUNTS
SUMMARY OF THE PRINCIPAL ACCOUNTING POLICIES
The main accounting policies applied when preparing The subsidiaries are consolidated in full. This means that the the consolidated financial statements are set out below. separate financial statements of the subsidiary are combined Unless stated otherwise, these policies have been applied line by line with those of the parent company of the Group, in a permanent way to all financial years presented. adding the similar items of assets, liabilities, expenses and income. The following steps are taken to ensure that the consolidated financial statements present the financial information of the Group in the same way as a single 1. Accounting policies company: of the Group ██ the book value of the parent’s stake in its subsidiary and the share of the parent in the equity of the subsidiary are The statutory accounts of the entities included in the consol- eliminated, producing a net contribution of the subsidiary idation are prepared in accordance with the local accounting in the consolidated reserves of the Group; rules. They are then processed again if necessary to comply ██ the minority interests (that is stakes that are not held with the accounting policies described below, when this has by the parent, either directly or indirectly through the a significant impact on the consolidated accounts. subsidiary) in the net result of the subsidiary are identified and subtracted from the result of the Group; ██ the minority interests in the net assets of the subsid- iary are identified and presented in the consolidated 2. Consolidation principles balance sheet separate from the liabilities and equity of the parent. The consolidated financial statements comprise the financial statements of TEXAF S.A., its subsidiaries and the share of The intra-group balances and transactions and the unreal- the Group in the equity and results of joint ventures and ized losses or profits that result from them are eliminated associated enterprises in the consolidation. If necessary, the accounting policies of the subsidiaries are adapted to ensure the preparation of 2.1. STAKES IN SUBSIDIARIES consolidated financial statements on the basis of uniform Subsidiaries are entities controlled by the TEXAF Group. accounting policies. “Control” exists when TEXAF holds the power (>50% of voting rights) to direct the financial and operating policy of An investor has control over an entity in which the invest- a company to gain advantages from these activities. ment is made when this investor has the effective rights to run the relevant activities, that is the activities with a The stakes in subsidiaries are consolidated on the date major impact on the performance of the entity in which control is transferred to the Group and consolidation ends the investment is made. on the date the Group surrenders control. The investor controls an issuing entity if and only if all At the moment of acquisition, the assets and liabilities of a the following criteria are met: subsidiary are valued their fair value on this date. Any surplus (deficit) of the acquisition cost compared with the fair value ██ The investor holds the power over the issuing entity of the net asset acquired is recognized in accordance with (see paragraphs 10 to 14); the principles stated in point 3 below. ██ The investor is exposed to or has a right to variable returns by virtue of the investor’s links to the issuing entity (see paragraphs 15 and 16); ██ The investor is able to exercise the control over the issuing entity to influence the amount of the returns that it receives (see paragraphs 17 and 18) (IFRS 10.7).
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3. Business combination
2.2. STAKES IN JOINT VENTURES 3.1. GOODWILL The entities that are jointly controlled, that is entities Goodwill represents the surplus of the purchase cost of the that the Group controls jointly by means of a contrac- grouping of companies compared with the share the fair tual agreement with one or more other companies, are value of the identifiable assets and liabilities of a subsidiary, consolidated by the equity method. an associated company or a joint venture on the date of acquisition. It therefore represents the part of the price paid According to this method, the stakes held in the joint by the acquirer for the future economic benefits from the ventures are first recorded at the acquisition price, assets that cannot be identified individually and recognized then adjusted to take account of the share of the Group separately. Goodwill is also recognized for associated enter- in the losses or profits of the company beginning on prises and joint ventures. the acquisition date. These stakes and the share of the Group in the result for the financial year are presented in After initial recognition, goodwill is subjected to an annual the balance sheet and the income statement respectively impairment test or more frequently if events or changes of as stakes in the companies consolidated by the equity circumstances suggest that there might be a loss of value. method and as a share in the result of the companies To do so, the goodwill is allocated to operating companies, consolidated by the equity method. which correspond to cash-generating units, and, more particularly, the lowest level at which the goodwill is If the share of the Group in the losses of joint ventures monitored for the needs of internal management. exceeds the net book value of the stake, the net book value is reduced to zero. The losses beyond this amount 3.2. NEGATIVE GOODWILL are not recognized, with the exception of the amount of Negative goodwill represents the surplus of the share the commitments of the Group toward its joint ventures. acquired in the fair value of the identifiable assets and liabil- ities of an acquired subsidiary, an associated company or a 2.3. STAKES IN ASSOCIATED ENTERPRISES joint venture compared with the cost of the grouping of the Associated enterprises that TEXAF does not control solely or companies, on the date of acquisition. jointly but on whose financial and operating decisions it is able to exert a significant influence (which is generally the Negative goodwill is recognized immediately in the income case when the company holds between 20% and 50% of and is not subsequently reversed. the voting rights) are recognized by the equity method.
According to this method, the stakes held in the associated enterprises are first recorded at the acquisition price, then adjusted to take account of the share of the Group in the losses or profits of the company beginning on the acqui- sition date. These stakes and the share of the Group in the result for the financial year are presented in the balance sheet and the income statement respectively as stakes in the companies consolidated by the equity method and as a share in the result of the companies consolidated by the equity method.
If the share of the Group in the losses of associated enterprises exceeds the net book value of the stake, the net book value is reduced to zero. The losses beyond this amount are not recognized, with the exception of the amount of the commitments of the Group toward its associated enterprises.
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4. Currency conversion
4.1. FUNCTIONAL CURRENCY AND The income statement is converted at the average monthly PRESENTATION CURRENCY rate (which is the average over the year of the rates at the The items included in the separate financial statements of end of every month for the relevant currencies. The differ- each entity of the Group (parent, subsidiaries, associated ences resulting from the use of the average monthly rate for enterprises or joint ventures) are valued using the reference the income statement and the closing rate for the balance currency in the economic environment in which the entity sheet are recognized in “accumulated translation differences” operates (functional currency). In this context, the choice of equity. of functional currency is based on the relative importance of each transactional currency in the items on the income statement representative of the operating activities of the entity. If this choice is not clearly evident, the management 5. Property, plant uses its judgment to determine the functional currency that faithfully represents the economic effects of underlying and equipment transactions, events and conditions. 5.1. INVESTMENT PROPERTY The consolidated financial statements of TEXAF are Land and buildings, corresponding to the definition of presented in euros, the functional currency of the parent investment property, which is land or a building held to company TEXAF S.A. benefit from rent and/or to put capital to work and not occupied by the Group, are valued by means of the historical 4.2. RECOGNITION OF TRANSACTIONS cost method less the combined depreciations and any IN FOREIGN CURRENCIES impairments. Upon initial entry in the books a transaction in foreign currency must be recognized in the functional currency of The fair value of investment property at the date of transition the entity, applying the exchange rate on the transaction to IFRS has been assessed, property by property, based on date to the foreign currency amount. the required yield for these properties and the land value.
For practical reasons, an approximation of the day rate can Concerning the depreciation of investment property, land be used (monthly average) if a large number of transactions is not depreciated. The share representing the value of have been conducted and the exchange rate does not vary construction is depreciated on the basis of its useful life for in a significant way. If an approximation is used, it is applied the company, that is 5-20 years depending on the condition to all transactions completed in a foreign currency in the co-efficient attributed by the management. However, a course of the financial year. With this in mind, there is cause residual value must be taken into account for each building to use an average rate for current transactions and a histor- beyond which depreciation is no longer continued. This ical rate for non-current transactions. is the presumed disposal value of the asset at the end of its useful life. This residual value is estimated at a fixed 4.3. CONVERSION PRINCIPLES percentage of the historical cost, which is 20%. As an The balance sheet of foreign entities (none of which use exception, the residual value of some COTEX and IMMOTEX the functional currency of a hyperinflationary economy) buildings that are to be demolished in due course is also is converted to euros on the basis of the exchange rate at depreciated over 4-10 years, depending on how long they the end of the period (closing price), with the exception of are expected to be kept. equity, which is kept at its historical rate. The differences resulting from the use of the historical rate for equity and the closing rate for the rest of the balance sheet are recognized in “accumulated translation differences” of equity.
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5.2. PROPERTY, PLANT AND EQUIPMENT
5.2.1. Other land and buildings Improvements made to rented properties and other prop- Land and buildings held by the Group but not corre- erty, plant and equipment are fully depreciated. Acquisitions sponding to the definition of investment property are valued in this category of assets will be depreciation over their by means of the historical cost method less the combined useful life. depreciations and any impairments.
The constructions are depreciated over a term of 5-20 years depending on the condition co-efficient attributed by the 6. Rental contracts management, with a residual value of 20%. Rent from simple rental contracts is recognized in expenses Property, plant and equipment under construction are on a straight line basis over the term of the relevant rental not depreciated. contract.
5.2.2. Sandstone deposit (quarries) The deposits are valued by means of the historical cost method less the accumulated depreciations and any impair- 7. Costs of borrowing ments and are depreciated proportionate to the production compared with the estimated reserves. The costs of borrowing directly attributable to the acquisi- tion, construction or production of qualified assets (assets The Group only exploits one deposit and does not explore necessitating a long period of preparation before they can additional deposits and consequently does not apply IFRS 6 be used or sold) are added to the cost of these assets until for the recognition of exploration costs. they are ready for their expected use or sale. The income gained from the temporary investment of specific borrowed 5.2.3. Other property, plant and equipment funds for the qualified assets are deducted from these assets. Property, plant and equipment are recognized at their histor- ical cost less accumulated depreciations and any impair- All the other costs of borrowing are recorded in the net profit ments. The depreciations are calculated using the straight or loss of the ongoing financial year in which they are stated. line method over the expected useful life of the assets in question and with due consideration for any residual value.
The depreciation of property, plant and equipment only begins when they are ready for their expected use.
The profit or loss resulting from the disposal and decommis- sioning of an asset corresponds to the difference between the income from the sale and the book value of the asset. This difference is recognized on the income statement.
Technical systems, machines and tools are depreciated over their useful life of 4-10 years.
Vehicles are depreciated over their useful life of 4-5 years.
Layouts and accessories are depreciated over their useful life of 3-10 years.
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8. Financial assets 9. Impairment of assets
The financial assets are classified in one of the following Property, plant and equipment and other non-current assets four categories: are subjected to a impairment test every time an event or a change of circumstances indicates that the recoverable ██ Financial assets at fair value through the income value of the asset is lower than its book value The recover- statement; able value is the higher of the fair value of an asset less the ██ Loans and receivables; sale costs and its return value. An impairment is recognized ██ Investments held until maturity; at the amount at which the book value exceeds its recover- ██ Assets held for sale able value.
The valuation and recognition principles are defined For the needs of impairment tests, the assets are grouped category by category. at the lowest level of asset grouping that generates largely independent cash inflows (cash-generating units). The All the recognized financial assets are then measured in their impairments of long-term assets or liabilities are immediately totality either at amortized cost or fair value, depending on recognized as an expense under non-recurring items. If the their classification: loss is no longer justified in subsequent periods, due to the recovery of the fair value or the return value, the impairment The financial assets that fulfil the following conditions is reversed. The reversal of an impairment is immediately are measured at amortized cost: recognized as income under non-recurring items. Write- downs and reversals of write-downs are non-recurring items. ██ The financial asset is held with a view to obtaining contractual cash flows. ██ The contractual terms of the financial asset generate, on specific dates, cash flows that are exclusively repay- 10. Inventory ments of the principle and interest on the remaining due balance. The stocks are measured at the lower of cost (raw materials) or cost price (work in progress and finished products) and The expected loss model is applied for the amortization net realizable value. Cost includes the direct raw materials; of these assets. This model demands the recognition of cost price includes the direct raw materials, direct labor and expected losses and changes to these expected losses at general costs incurred to get the stocks to the place they every closing date. All aforementioned financial assets are need to be in the condition they need to be. The realizable subjected to an amortization analysis. For losses on client value is the estimated sale price less the estimated costs receivables without significant interest component, the needed to make the product saleable, including marketing Group applies the simplified method authorized by IFRS 9, and distribution costs. The value of stocks is determined by which the expected loss is recognized over the life of the by the application of the weighted average price method. asset. As the Group has a limited number of clients, and it When the circumstances justifying the impairment of stocks knows them personally, each receivable is examined individ- ceases to exist, the amount of the impairment is reversed. ually with the debtor to determine the risk of non-payment.
Furthermore, since the financial year 2016 the rents payable by debtors that systematically have problems paying are only recognized when they are effectively collected.
Bank deposits are maintained at their nominal value if there is no indication that the bank is in difficulty.
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11. Cash and cash 13. Share capital and equivalents retained earnings
Cash and cash equivalent comprise the cash in hand and Retained earnings can only be distributed if they exceed the deposit accounts that have a maturity of three months or amount invested in treasury shares. less from the date of acquisition. Overdrafts are reclassified as debts. The dividends of the parent company payable to the ordi- nary shares are only recognized as debt after their appropria- The Group holds redeemable bills, promissory notes, tion by the General Meeting. debentures and short-term loans to associated companies and loans to other parties within an economic model the aim of which is to collect the contractual cash flows that correspond exclusively to the repayment of the principal 14. Provisions and the interest payments on the principal remaining due. All these financial assets are therefore classified at Provisions are recognized when the following three condi- amortized cost. tions are met:
██ on the closing date, the entity has a current liability (legal or implicit) resulting from a past event; 12. Assets and liabilities ██ it is likely that an outflow of resources representing held for sale economic benefits will be needed to fulfil the liability; ██ the amount of the liability can be reliably estimated.
Under IFRS 5, assets or group of assets held for sale, other The amount recognized as a provision is the best estimate than usual disposals, are presented on a separate line in the of the expense needed to fulfil the current liability on the balance sheet under assets or liabilities and are measured at closing date. The estimates are based on the judgment of the lower of the carrying amount and fair value less costs to the management, supplemented with experience of similar sell. transactions. If needed, management may get the advice of independent experts. Events after the closing date are also Non-current assets presented in the balance sheet as held taken into account. for sale are no longer depreciated from the date of this pres- entation. An asset will be classified as an asset held for sale only if the sale is highly likely within one year, if the asset is available for immediate sale in its current condition and if an asset sale plan has been undertaken by the management.
An abandoned activity is a component of the activity of the Group that represents a main and distinct line of activity or geographic region.
An activity is considered to be abandoned when the criteria for classification as activity to be sold have been satisfied or the Group has sold the activity. The activities sold are presented on a single line in the income statement comprising the sale result after tax.
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15. Employee benefits
Employee benefits are split into four categories: In the event of a defined benefit plan, the liability to be recognized in the financial year must be calculated using the ██ short-term benefits: salaries, social security contributions, projected unit credit actuarial method. Under this method, sickness leave, paid leave, profit-sharing and bonus over the liability is equivalent to the present value of the benefits 12 months, as well as non-monetary benefits such as acquired on the basis of past years of service and, if appli- housing and company car; cable, the projected salaries. ██ post-employment benefits: payments upon retirement and contributions to post-employment medical costs; The application of the method requires a precise inventory ██ other long-term benefits: benefits in kind related to years of the benefits granted and the granting conditions as well of service milestones; as the use of the following actuarial data: ██ termination benefits. ██ Likelihood of reaching the retirement age; 15.1. SHORT-TERM BENEFITS ██ Discount rate; ██ The cost of short-term benefits must be recognized ██ Nominal growth rate of salaries. during the financial year in which the member of staff has provided services that give right to these benefits. The Group has not created a legal entity to finance the ██ These are short-term benefits so no discounting will liabilities provided for in the defined benefit plan, so all be applied. the liabilities relating to past services are recognized in the balance sheet. 15.2. POST-EMPLOYMENT BENEFITS Post-employment benefits must be listed and classified in From January 1, 2013, TEXAF applies the amended version one of the following two categories, depending on their of IAS 19, particularly: definition: ██ Actuarial losses and gains (changes to assumptions ██ Defined contribution plans: post-employment benefit or experience) are recognized in“other items of the schemes by virtue of which the company pays defined comprehensive result”; contributions to a separate entity (a fund) and has ██ The new changes to schemes must be recognized no legal or implicit obligation to pay supplementary in full in the income statement. contributions if the fund does not have enough assets to service all the benefits corresponding to the services The actuarial gains and losses result in changes to actuarial provided by the employees during the financial year and assumptions and the actual situation as observed. subsequent financial years. In this case, the actuarial risk and the investment risk is borne by the employees. For defined benefit plans, the charge recognized in the ██ Defined benefit plans: post-employment benefit schemes operating result includes the cost of services provided in that are not defined contribution plans. the course of the financial year, as well as the effects of any change, reduction or liquidation of the scheme. In the event of a defined contribution plan, the contributions to the plan are recognized during the financial year in which In DRC the regulations and the collective labor agreements the employee provides the services that give right to these impose the grant of a single fixed payment upon retirement, benefits. Only the amount paid during the financial year which corresponds to a defined benefit plan. Furthermore, must be recognized as a cost. If the amount paid exceeds some employees benefit from a defined contribution plan. the amount due, the surplus must be recognized in assets (charge to be carried forward) insofar as such an advance results in the reduction of future payments or reimburse- ment. Conversely, a liability must be recognized in liabilities if the amount due is higher than the amount paid.
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16. Financial liabilities
15.3. OTHER LONG-TERM BENEFITS The financial liabilities are classed in one of the following two These are benefits in kind related to years of service mile- categories: stones granted by the companies of the TEXAF Group to their employees. ██ financial liabilities at fair value through the income statement; These benefits are recognized as a charge when they ██ other financial liabilities. are granted. The valuation and recognition principles are defined 15.4. TERMINATION BENEFITS category by category. These are benefits payable in relation to: 16.1. FINANCIAL LIABILITIES AT FAIR VALUE ██ the end of the employment contract before the regular THROUGH THE INCOME STATEMENT retirement age; These are financial liabilities which upon their initial recogni- ██ an offer made to encourage voluntary departure. tion were designated as being valued at their fair value with changes to this fair value recognized in the income state- The cost of these benefits is recognized in the income ment or financial liabilities held for a speculative purpose. statement when the entity that employs the person under consideration takes action to terminate the contract of In this category, the financial liabilities are valued and recog- employment and/or grants a payment as part of an offer nized at their fair value and the changes to fair value are made to encourage voluntary departure. recognized in the income statement.
The fair value is the amount for which a liability can be agreed between well informed consenting parties acting in normal conditions of competition.
16.2. OTHER FINANCIAL LIABILITIES These are financial liabilities that do not fulfil the definition of the preceding category.
Upon their initial recognition, the other financial liabilities are measured at their fair value. They are then measured and recognized at cost amortized on the basis of the effective interest rate method.
Bois Nobles district. Musiciens district.
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17. Deferred taxes 18. Income recognition
Generally, deferred tax assets and liabilities are recognized on ██ Income is recognized when it is likely that it will be the timing differences existing between the tax base of the earned and the amount of this income can be reliably assets and liabilities and their accounting value in the finan- assessed. In particular, since the financial year 2016 the cial statements. They are then adjusted to take account of rents payable by debtors that systematically have prob- the changes to tax rates expected to apply when the timing lems paying are only recognized when they are effec- difference is reversed. tively collected. ██ The sale of property is recognized when the significant The deferred tax assets and liabilities are offset when they inherent risks and advantages of owning the property are relate to taxes levied by the same tax authority on the same transferred to the buyer. legal entity and the Group has a legally enforceable right to ██ Rental income from simple rental contracts is recognized settle its current tax assets and liabilities on a net basis. No on a straight line basis over the term of the relevant rental offsetting between distinct legal entities has been applied. contract. ██ IFRS 15 Revenue from Contracts with Customers also 17.1. DEFERRED TAX LIABILITY came into force on 01.01.2018. IFRS 15 establishes a single A deferred tax liability is recognized for all taxable timing complete model for the recognition of revenue from differences, except where the deferred tax liability is ordinary activities from contracts with clients. It has no generated: material impact on the consolidated financial statements of Texaf, as these rental contracts are not within the ██ due to the initial recognition of goodwill scope of the standard and represent the main source ██ due to the initial recognition of an asset or a liability in a of revenue for Texaf. The principles of IFRS 15 neverthe- transaction that is not a business combination and does less apply to any non-rental components in the rental not affect the accounting result or the tax result on the contracts or in separate agreements, such as maintenance transaction date. services payable by the tenant. Bearing in mind that these non-rental components are relatively limited and mainly 17.2. DEFERRED TAX ASSET represent services recognized gradually under both IFRS A deferred tax asset is recognized for all deductible timing 15 and IAS 18, Texaf confirms that IFRS 15 has no material differences insofar as it is likely that a taxable profit will be impact in this respect. available to which these deductible timing differences can ██ Furthermore, the application of IFRS 15 on the Quarry be charged. Nevertheless, no deferred tax asset is recognized business has no impact on the consolidated accounts of for deductible timing differences coming from the initial Texaf, as the sale of these goods is recognized at the time recognition of an asset or a liability in a transaction that is not of delivery. a business combination and does not affect the accounting ██ The income from interest is recognized in the year this result or the tax result on the transaction date. interest occurs, calculated on the basis of the principal due and according to the applicable interest rate. Furthermore, a deferred tax asset is recognized for the carry- ██ Share dividends are recognized when the right of the forward of unused tax losses and unused tax credits insofar shareholder to receive the payment is established. as it is likely that the entity will have future taxable profits to which these unused tax losses and credits can be charged. 19. Use of estimates
The preparation of the consolidated financial statements of TEXAF in accordance with IFRS has led the Group to use estimates and make assumptions that could have an impact on the amounts of the assets and liabilities presented, the information to be provided on any assets and liabilities on the closing dates as well as the amounts presented in expenses and income. The actual results may be different from these estimates.
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AUDITOR’S REPORT TO THE GENERAL MEETING OF TEXAF SA FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31, 2018.
In the context of the statutory audit of the consolidated report. We have complied with all ethical requirements financial statements of Texaf SA ("the company") and its relevant to the statutory audit of consolidated financial subsidiaries (jointly "the group"), we hereby submit our stat- statements in Belgium, including those regarding independ- utory audit report. This report includes our report on the ence. consolidated financial statements and the other legal and regulatory requirements. These parts should be considered We have obtained from the board of directors and the as integral to the report. company's officials the explanations and information neces- sary for performing our audit. We were appointed in our capacity as statutory auditor by the shareholders' meeting of 10 May 2016, in accordance We believe that the audit evidence obtained is sufficient and with the proposal of the board of directors issued upon appropriate to provide a basis for our opinion . recommendation of the audit committee. Our mandate will expire on the date of the shareholders' meeting deliber- Emphases of matter ating on the financial statements for the year ending 31 Without modifying the unqualified opinion expressed December 2018. We have performed the statutory audit above, we draw your attention to the note 6 of the consol- of the consolidated financial statements of Texaf SA for 3 idated financial statements, which describes the analysis consecutive periods. made on the valuation of the sandstone quarry that the group owns near Kinshasa in the Democratie Republic of REPORT ON THE CONSOLIDATED FINANCIAL Congo. Following a deep review of the impairment test STATEMENTS model and the forecasts, an exceptional amortization of 3,36 million EUR was recognized in the consolidated financial Unqualified opinion statements for the year ended 31 December 2017. As of 31 We have audited the consolidated financial statements of the December 2018, management has updated the impairment group, which comprise the consolidated balance sheet as at test, which has confirmed the net book value of 6 million 31 December 2018, the consolidated profit and loss account, EUR presented in the accounts. This test is very sensitive to the consolidated statement of changes in equity and the changes in the variables used, which, in the current environ- consolidated statement of cash flow for the year then ended, ment in the Democratie Republic of Congo, are difficult to as well as the summary of significant accounting policies assess, particularly in terms of future revenue and which in and other explanatory notes. The consolidated statement different scenarios could lead to an additional impairment. of financial position shows total assets of 124 531 (000) EUR and the consolidated statement of comprehensive income We also draw attention to the note 7 of the consolidated shows a profit for the year then ended of 12 932 (000) EUR. financial statements, which includes an estimate of the fair value of the investment properties portfolio. This assess- In our opinion, the consolidated financial statements give ment is based on the judgment of the Board of Directors a true and fair view of the group's net equity and financial taking into account the lack of liquidity and transparency of position as of 31 December 2018 and of its consolidated the real estate market in the Democratie Republic of Congo results and its consolidated cash flow for the year then and the virtual absence of comparable transactions. ended, in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union and with Finally, we draw attention to the note 1 of the consolidated the legal and regulatory requirements applicable in Belgium. financial statements, which states that the Group's assets are mainly located in the Democratie Republic of Congo. The Basis for the unqualified opinion economie and regulatory environment of this country has We conducted our audit in accordance with International been regularly affected by socio-political unrest. Therefore, Standards on Auditing (ISA), as applicable in Belgium . In it is very difficult to predict its medium-term evolution. addition, we have applied the International Standards on However, the consolidated financial statements presented Auditing approved by the IAASB applicable to the current have been prepared in the context of stabilization of the financial year, but not yet approved at national level. Our local economie and regulatory environment. responsibilities under those standards are further described in the "Responsibilities of the statutory auditor for the audit of the consolidated financial statements" section of our
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Responsibilities of the board of directors for the opinion. The risk of not detecting a material misstatement preparation of the consolidated financial statements resulting from fraud is higher than for one resulting from The board of directors is responsible for the preparation and an error, as fraud may involve collusion, forgery, inten- fair presentation of the consolidated financial statements in tional omissions, misrepresentations, or the override of accordance with International Financial Reporting Standards internal control; (IFRS) as adopted by the European Union and with the legal ██ obtain an understanding of internal control relevant to and regulatory requirements applicable in Belgium and for the audit in order to design audit procedures that are such internal control as the board of directors determines is appropriate in the circumstances, but not for the purpose necessary to enable the preparation of consolidated finan- of expressing an opinion on the effectiveness of the cial statements that are free from material misstatement, group's internal control; whether due to fraud or error. ██ evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and In preparing the consolidated financial statements, the related disclosures made by the board of directors; board of directors is responsible for assessing the group's ██ conclude on the appropriateness of management's use of ability to continue as a going concern, disclosing, as appli- the going concern basis of accounting and, based on the cable, matters to be considered for going concern and using audit evidence obtained, whether a material uncertainty the going concern basis of accounting unless the board of exists related to events or conditions that may cast directors either intends to liquidate the group or to cease significant doubt on the group's ability to continue as operations, or has no other realistic alternative but to do so. a going concern. If we conclude that a material uncer- tainty exists, we are required to draw attention in our Responsibilities of the statutory auditor for the audit of statutory auditor's report to the related disclosures the consolidated financial statements in the consolidated financial statements or, if such Our objectives are to obtain reasonable assurance about disclosures are inadequate, to modify our opinion. Our whether the consolidated financial statements as a whole conclusions are based on the audit evidence obtained are free from material misstatement, whether due to fraud up to the date of our statutory auditor's report. However, or error, and to issue a statutory auditor's report that future events or conditions may cause the group to cease includes our opinion. Reasonable assurance is a high level of to continue as a going concern; assurance, but is not a guarantee that an audit conducted in ██ evaluate the overall presentation, structure and content accordance with ISA will always detect a material misstate- of the consolidated financial statements, and whether the ment when it exists. consolidated financial statements represent the under- lying transactions and events in a manner that achieves Misstatements can arise from fraud or error and are consid- fair presentation. ered material if, individually or in the aggregate, they could ██ obtain sufficient appropriate audit evidence regarding the reasonably be expected to influence the economie decisions financial information of the entities and business activities of users taken on the basis of these consolidated financial within the group to express an opinion on the consoli- statements. dated financial statements. We are responsible for the direction, supervision and performance of the group During the performance of our audit, we comply with the audit. We remain solely responsible for our audit opinion. legal, regulatory and normative framework as applicable to the audit of consolidated financial statements in Belgium. We communicate with the audit committee regarding, amongst other matters, the planned scope and timing of As part of an audit in accordance with ISA, we exercise the audit and significant audit findings, including any signif- professional judgment and maintain professional skepticism icant deficiencies in internal control that we identify during throughout the audit. We also: our audit.
██ identify and assess the risks of material misstatement We also provide the audit committee with a statement of the consolidated financial statements, whether due that we have complied with relevant ethical requirements to fraud or error, design and perform audit procedures regarding independence, and we communicate with them responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
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about all relationships and other matters that may reason- Statements regarding independence ably be thought to bear on our independence, and where ██ Our audit firm and our network have not performed applicable, related safeguards. any prohibited services and our audit firm has remained independent from the group during the performance of From the matters communicated to the audit committee, our mandate. we determine those matters that were of most significance ██ The fees for the additional non-audit services compat- in the audit of the consolidated financial statements of the ible with the statutory audit, as defined in article 134 of current period and are therefore the key audit matters. We the Companies Code, have been properly disclosed and describe these matters in our report unless law or regulation disaggregated in the notes to the consolidated financial precludes any public disclosure about the matter. statements.
OTHER LEGAL AND REGULATORY Other statements REQUIREMENTS This report is consistent with our additional report to the audit committee referred to in article 11 of Regulation (EU) Responsibilities of the board of directors No 537/2014. The board of directors is responsible for the preparation and the content of the directors' report on the consolidated financial statements.
Responsibilities of the statutory auditor As part of our mandate and in accordance with the Belgian standard complementary (revised in 2018) to the Interna- tional Standards on Auditing (ISA) as applicable in Belgium, our responsibility is to verify, in all material respects, the director's report on the consolidated financial statements, as well as to report on these matters.
Aspects regarding the directors' report on the consoli- dated financial statements In our opinion, after performing the specific procedures on the directors' report on the consolidated financial state- ments, this report is consistent with the consolidated finan- cial statements for that same year and has been established in accordance with the requirements of article 119 of the Companies Code.
In the context of our statutory audit of the consolidated financial statements we are also responsible to consider, in particular based on information that we became aware Zaventem, April 10, 2019 of during the audit, if the directors' report on the consoli- dated financial statements is free of material misstatement, The statutory auditor either by information that is incorrectly stated or otherwise misleading. In the context of the procedures performed, we Deloitte Bedrijfsrevisoren/Réviseurs d'Entreprises CVBA/SCRL are not aware of such material misstatement. Represented by Pierre-Hugues Bonnefoy
TEXAF ANNUAL REPORT 2018 109 ANNUAL ACCOUNTS
DIRECTORS’ REPORT OF TEXAF S.A.
The 2018 accounts have been prepared on the basis of the Remuneration report legal and regulatory stipulations in Belgium. The annual financial statements present a profit of EUR 2,560 k on The remuneration report in this annual report is an integral December 31, 2018. The development of the activities of part of the management report. the company and its subsidiaries was described in the above report on the consolidated financial statements.
The vast majority of the assets of TEXAF S.A. are located in Abridged annual accounts the Democratic Republic of Congo, which is a country with failing governance, and are therefore subject to a particular The annual financial statements of TEXAF S.A. are presented political and environmental risk. in an abridged table below in EUR ‘000.
In accordance with Belgium’s Companies Code, the annual accounts of TEXAF S.A. and the auditor’s report are Statement of corporate submitted to the National Bank of Belgium.
governance These documents are also available on request at the main office of the company. On April 10, 2019 the Auditor The corporate governance statement in this 2018 annual expressed an unchanged opinion on the annual financial report is an integral part of the management report. statements of TEXAF S.A. with a paragraph of observation concerning the risks inherent to the presence of the group’s key assets in the DRC and this country’s economic and regulatory environment.
(in EUR k) 2016 2017 2018
ASSETS Non-current assets 55,544 54,750 54,053 Current assets 4,443 5,124 5,642 59,987 59,874 59,695
LIABILITIES Equity 53,365 54,249 56,809 Liabilities 6,622 5,625 2,886 59,987 59,874 59,695
INCOME STATEMENT Revenue 3,622 3,713 3,754 Expenses (2,505) (2,395) (2,552) Professional profit 1,117 1,318 1,202 Financial result 736 638 595 Profit from ordinary activities 1,853 1,956 1,797 Non-recurring results (1,294) 766 751 Profit for the financial year before tax 559 2,722 2,549 Tax on the result (12) 1,048 11 PROFIT FOR THE FINANCIAL YEAR TO BE APPROPRIATED 547 3,770 2,560
110 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
Comments on the result In the absence of Mr. Yuma, the Board examined this offer in compliance with article 523 Companies Code. It established Revenue comprises the recurring property rentals of that: EUR 3,754 k, which are stable compared with 2017. ██ This asset is a long way from the quarry, is not used for The operating expenses increased by 6.5%. operations and does not bring in revenue. ██ A valuation report was drawn up on September 3, 2018 The financial result mainly concerns the interest on UTEX- by an independent assessor, well established in Kinshasa AFRICA debts (EUR 0.7 m) and a write-down on the debt of and, in fact, a regular service provider of the group, i-Finance (EUR 54 k) from 2018. valuing it at USD 240,000. ██ A person who had a right of first refusal on this asset NON-RECURRING RESULTS waived this right. In 2016 TEXAF wrote down the stakes in La Cotonnière ██ This sale generates a pre-tax gain of EUR 148,000, (EUR 1.2 m) and i-Finance (EUR 0.8 m). consolidated and added to the cash and cash equivalents of Carrigrès. Furthermore, the Board decided to reverse the write- down on the UTEXAFRICA debt of EUR 0.8 m (unchanged The Board then decides to sell this asset to the company compared with 2017 and 2018). The gross amount of this linked to Mr. Yuma for USD 240,000. receivable is EUR 19.9 m at December 31, 2018.
Other information required Events after the reporting by article 96 of Belgium’s period Companies Code:
On the date of writing of this report, no notable events ██ There have been no research and development activities. have occurred. ██ The Board of Directors states that neither the company nor the direct subsidiary nor another other person acting in his or her own name on behalf of the company or a direct subsidiary has acquired shares or certificates of the Prospects for 2019 company. ██ No decision has been made by the Board of Directors of TEXAF SA with regard to the authorized capital in the course of the financial year to increase the capital or issue convertible The prospects for 2019 depend on how the economic and bonds or subscription rights. political situation develops in DRC. ██ The company does not have any branches. ██ The Board of Directors confirms that the company is not Rents are expected to remain stable in 2019. exposed to credit liquidity or cash risk for the assessment of its financial assets. ██ The Audit Committee is made up of at least one director who fulfils the criteria of independence and competence Conflicting interests stated in article 526 of Belgium’s Companies Code. ██ The assessment rules are the same as those used the The Board of Directors was called upon to pronounce upon previousyear. one conflict of interest in 2018 and recorded the following in its minutes:
A company linked to Albert Yuma, director of Texaf SA made an offer for a developed site belonging to Carrigrès; Mr. Yuma therefore states that, in this matter he has an interest of a financial nature contrary to that of the company.
TEXAF ANNUAL REPORT 2018 111 ANNUAL ACCOUNTS
Appropriation of the result
Confident of the positive development of the TEXAF activities in DRC, the Board proposes a 19% increase in the dividend per share and the distribution of EUR 3,442,451 or EUR 0.68 net per share from May 17, 2019 upon presenta- tion of coupon no. 8 at the main offices and branches of Belfius bank.
PROFIT APPROPRIATION PROPOSAL Profit for the financial year EUR 2,559,952 Profit carried forward EUR 23,008,705 Profit to be appropriated EUR 25,568,657 Return on capital EUR (3,442,451) Employee profit sharing 2017 EUR (15,064) Balance carried forward EUR 22,111,141
Agenda financier
Friday Tuesday Friday Friday 10 14 17 06 May 2019 May 2019 May 2019 September 2019 Quarterly (11am): Annual Dividend Publication of press release General Meeting payment half-yearly results
Friday Friday Tuesday End of 08 February 10 12 November 2019 2020 April 2020 May 2020 Quarterly Publication of 2019 Publication of the 2019 (11am): Annual press release annual results annual report General Meeting
112 TEXAF ANNUAL REPORT 2018 ANNUAL ACCOUNTS
Walkers, joggers and some cyclists move freely around the concession.
Definitions of alternative performance indicators:
██ EBIT: operating result ██ Financial debt: interest-bearing debt (even if the effective ██ EBITDA: operating result in which allocations for tax rate applied is zero, with due consideration for the depreciation are reintegrated market rates); the calculation is given in appendix 14 ██ Non-recurring: income or expenses that are not expected ██ Net financial debt: financial debt from which all short- to be repeated in each accounting year, such as: term or on demand deposits at bank and short term cash ── Gain or loss on disposals of non-current assets investments have been deducted ── Allocations to (or reversals of) write-downs on ██ Occupation rate: total rent billed over the period versus non-current assets total billable rent ── Costs relating to major restructuring, purchase or ██ Expected rental revenue: total annual rent of a building disposal of an activity (such as redundancy costs, with a 100% occupancy rate. plant closure and commissions paid to third parties to acquire or dispose of an activity)
Specifically, the operating result and the recurring EBITDA are reconciliated as follows:
(in EUR k) Note 2018
Operating result 8,699
Non-recurring items 26 (1,530) Recurring operating result 7,168 Depreciation allocation 6 et 7 2,943 Recurring EBITDA 10,111
TEXAF ANNUAL REPORT 2018 113 TEXAF, S.A. Registered office: Avenue Louise 130a, Box 6 B-1050 BRUSSELS
Congolese subsidiaries: 372 Avenue Colonel Mondjiba Ngaliema – Kinshasa, DR Congo
Tel: +32(0)2 639 20 00 [email protected]
Design: www.astrix.be Photographs: Imaginair, Alain Huart, Welike, Amy Godiva et D.R.
This report is available online in English, en français en in het Nederlands. www.texaf.be
114 TEXAF ANNUAL REPORT 2018 Congo
Fleuve Congo
Sankuru Sud-Kivu Maniéma LA COTONNIÈRE ESTAGRICO
Lomami Tanganyika
Kinshasa
Boulevard du 30 Juin Fleuve Congo
KINSUKA CARRIGRÈS UTEXAFRICA
TEXAF ANNUAL REPORT 2018 www.texaf.be