This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
GRUPOPIKOLIN, S.L. (established and incorporated in Spain pursuant to the Corporate Enterprises Act)
GRUPOPIKOLIN COMMERCIAL PAPER PROGRAMME 2016 Maximum outstanding balance 50.000.000 € BASE INFORMATIVE DOCUMENT (DOCUMENTO BASE INFORMATIVO) OF THE ADMISSION OF COMMERCIAL PAPER NOTES (PAGARÉS) ON THE ALTERNATIVE FIXED-INCOME MARKET (“MARF”)
GRUPOPIKOLIN, S.L. (“Grupo Pikolin” or the “Emisor”) a limited liability company incorporated under the laws of Spain with registered office at Zaragoza, en Carretera de Logroño Km 6,5, filed with the Commercial Register of Zaragoza al Volume 2.929, Section 47, Sheet Z-33424, and holder of Corporate Tax Code B-50966654, will apply for the admission (incorporación) of commercial paper notes (hereinafter indistinctly referred to as the “Commercial Paper” or, generically, as the “securities”) admitted (incorporado) in accordance with the provisions set out in this Base Informative Document on the Alternative Fixed-Income Market (“MARF” or the “Market”).
This Base Informative Document for the admission (incorporación) of the Commercial Paper includes the information required by Circular 1/2015 from the MARF, of 30 September, on the inclusion and exclusion of securities on the Alternative Fixed Income Market (“Circular 1/2015”).
The Commercial Paper will be represented through book entries at Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (“Iberclear”) which, together with its participating entities, will be responsible for the accounting registration.
An investment in Commercial Paper brings with it certain risks. Read section 1 of the risk factors of the Base Informative Document.
The Governing Body of the MARF has not made any kind of verification or check with regard to this Base Informative Document or with regard to the content of the documentation and information supplied by the Issuer in compliance with the foregoing Circular 1/2015.
The subscription of the Commercial Paper is targeted exclusively at professional or qualified investors pursuant to the provisions set out in article 205 of Royal Legislative Decree 4/2015, of 23 October, by which it is approved a recast text of the Securities Market Law (“RLD 4/2015”) and article 39 of Royal Decree 1310/2005, of 4 November, which partially implements Law 24/1988, of 28 July, governing the Securities Market, as regards acceptance of securities for trading on official secondary markets, public offerings for sale or subscription and the prospectus required to this end (“Royal Decree 1310/2005”). No action has been carried out in any jurisdiction to enable a public offering of the Commercial Paper or the possession or distribution of the Base Informative Document or of any other offer material in any country or jurisdiction where action is required for said purpose. This Base Informative Document for inclusion does not represent a prospectus approved and registered with the National Securities Market Commission (CNMV). The subscription of the Commercial Paper does not represent a public offering pursuant to the provisions set out in article 35 of the RLD 4/2015, which removes the obligation to approve, register and publish a prospectus at the CNMV.
MANAGER ENTITIES AND LEAD ARRANGERS Bankia Beka Finance Renta Markets PAYING AGENT Bankia REGISTERED ADVISOR PKF Attest
The date of this Base Informative Document is March, 2 2016.
1 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
IMPORTANT INFORMATION
The potential investor should not base his investment decision on information other than the information contained in this Base Informative Document. The Manager Entities accept no liability for the content of this Base Informative Document. The Manager Entities have signed a placement contract with the Issuer for placement of the Commercial Paper, but neither the Manager Entities nor any other entity has accepted any undertaking to underwrite the Commercial Paper. This is without prejudice to the Manager Entities being able to acquire part of the Commercial Paper in its own name.
NO ACTION HAS BEEN CARRIED OUT IN ANY JURISDICTION TO ENABLE A PUBLIC OFFERING OF THE COMMERCIAL PAPER OR THE POSSESSION OR DISTRIBUTION OF THE BASE INFORMATIVE DOCUMENT OR OF ANY OTHER OFFER MATERIAL IN ANY COUNTRY OR JURISDICTION WHERE ACTION IS REQUIRED FOR SAID PURPOSE. THIS DOCUMENT MUST NOT BE DIRECTLY OR INDIRECTLY DISTRIBUTED IN ANY JURISDICTION IN WHICH SUCH DISTRIBUTION REPRESENTS AN OFFER. THIS DOCUMENT IS NOT AN OFFER FOR THE SALE OF SECURITIES OR A REQUEST TO PURCHASE SECURITIES AND THERE IS NO OFFER OF SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER OR SALE IS CONSIDERED CONTRARY TO APPLICABLE LEGISLATION.
2 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
TABLE OF CONTENTS
1. Risk factors...... 4 1.1 Key information on the main risks specific of the Issuer or of its business sector 4 1.2 Basic information on the specific risks related to the Commercial Paper...... 9 2. Full name of the Issuer, its address and its corporate tax code...... 11 2.1 Issuer’s general information...... 11 2.2 Brief description of the Issuer’s activity ...... 11 3. Full name of the securities issue ...... 32 4. Persons responsible ...... 32 5. Duties of the Registered Advisor of the MARF...... 32 6. Maximum outstanding balance ...... 34 7. Description of the type and class of securities. Nominal value ...... 34 8. Legislation governing the securities...... 35 9. Representation of securities through book entries ...... 35 10. Currency of the issue...... 35 11. Order of priority ...... 35 12. Descriptions of the rights inherent to the securities and the procedure for executing these rights. Methods and deadlines for payment of the securities and handover of the same 35 13. Date of issue. Commercial Paper Programme validity ...... 36 14. Nominal interest rate. Indication of the yield and calculation method ...... 36 15. Lead arrangers, paying agent and depositary entities ...... 40 16. Redemption price and provisions concerning maturity of the securities. Date and methods of redemption...... 41 17. Valid deadline within which reimbursement of the principal may be claimed...... 41 18. Minimum and maximum issue period...... 41 19. Early settlement...... 41 20. Restrictions on the free transferability of the securities...... 41 21. Taxation of the securities ...... 41 22. Publication of the prospectus ...... 46 23. Description of the placement system and, where appropriate, subscription and admission of the issue ...... 46 24. Costs for legal, financial and auditing services and other services provided to the Issuer for the issue/admission (incorporación) ...... 47 25. Admission ...... 47 25.1 Application for admission (incorporación) of these securities into the Alternative Fixed-Income Market (MARF). Deadline for admission (incorporación)...... 47 25.2 Publication of the admission (incorporación) of the issue ...... 48 26. Liquidity agreement ...... 48 APPENDIX 1 CONSOLIDATED ANNUAL ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2013 APPENDIX 2 CONSOLIDATED ANNUAL ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 2014
3 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. BASE INFORMATIVE DOCUMENT FOR ADMISSION (INCORPORACIÓN) OF COMMERCIAL PAPER ON THE ALTERNATIVE FIXED-INCOME MARKET (“MARF”)
1. Risk factors
The following are the risks to which Grupo Pikolin is exposed, including those arising from the business areas in which it operates as well as those specifically related to its business.
The materialization of any of these risks could have a negative effect on its business, financial condition and results of operations of Grupo Pikolin, and therefore the nominal and/or interest that investors receive the Commercial Paper.
1.1 Key information on the main risks specific of the Issuer or of its business sector
The main risks specific of the Issuer or of its business sector are the following:
A. Risks associated with the business and the sector of the Issuer
- Exposure to the bedding industry
Grupo Pikolin has exclusive exposure to the bedding industry. This level of exposure to a mature market could weaken the Grupo Pikolin's competitive positioning. However, Grupo Pikolin's mapping comprises of a broad spectrum of brands, offering a full product mix within the bedding sector and covering all segments. Furthermore, the positioning obtained by the Issuer group’s brands, leaders in their core markets, are valued positively, in a sector whose performance is deemed to be ‘brand conscious’, representing the main entry barrier in the sector.
The high sensitivity to economic the cycle arising from Grupo Pikolin's business concentration was mitigated with the acquisition in 2012 of ‘Industrias Hidráulicas Pardo’, a manufacturing and selling company in the bedding industry, but exclusively aimed at hospital and geriatric segments (care beds and adapted furniture).
- Connection to the economic cycle and GDP fluctuations
The bedding industry is highly correlated to the economic cycle and the GDP growth. As a mitigating, Grupo Pikolin is geographically diversified, with the French market demonstrating to be a more stable market during the recent economic crisis. The Asian market has strong growth potential, due to the expected GDP growth in these countries for the forthcoming years.
- Grupo Pikolin obtains a significant portion of its sales from a limited number of distributors
4 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Grupo Pikolin sells its products through its own outlets, independent distributors and its own specialized chains, using a franchise system.
The risk of exposure to its main customers is different in the Iberian and French markets. In the Iberian Peninsula, the 10 principal customers represent 47% of total sales in that area (the two largest represent 24%), while in France the 10 main customers represent 65% (the two largest customers represent 46%).
This level of risk exposure, which is high in France, is closely linked to the way in which products are distributed in the bedding sector. In Spain the market is fragmented while in France it is considerably more concentrated, what is the main reason why retail sales are not channeled through franchises, as is the case in Spain and Asia. Despite the higher risk exposure in the French market, the differences in the ways of distribution in the various markets generate synergies for both parties, bearing in mind that the average payment period for customers in France is shorter than for Spanish customers.
- Volatility in the prices of key raw materials could have an effect on the operating margins of Grupo Pikolin
Grupo Pikolin's main raw materials are petroleum based and steel products. A variation in energy prices could affect the price of polyurethane foam, polyethylene foam and steel innerspring component parts.
In addition to production costs’ sensitivity, a variation in energy prices could also affect Grupo Pikolin's distribution costs. As a mitigant, the sharp decline in energy prices starting in 2014 are positively affecting Grupo Pikolin's margins.
- Grupo Pikolin's success depends upon its ability to design, manufacture and market new products that satisfy evolving market demand
Grupo Pikolin primarily designs, manufactures, commercializes mattresses and is expanding to the geriatric business through the recently acquired Industrias Hidráulicas Pardo.
Grupo Pikolin’s competitors may introduce new products and technologies that are more efficient or affordable than Grupo Pikolin’s or that render its existing or new products obsolete or uncompetitive. In addition, Grupo Pikolin may be unable to develop and manufacture new products and technologies in a timely and profitable manner, to obtain the necessary certificates or patents to achieve market acceptance, or may otherwise be unable to deliver new products and technologies.
Failure to keep up with technological advances in the market could have a material adverse effect on the ability of Grupo Pikolin to compete effectively in its industry and on its business, financial condition and results of
5 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. operations.
Notwithstanding the above, Grupo Pikolin has a good track record in the ability to continuously improve their products to offer new and enhanced consumer benefits, by strongly and continuously investing in R&D.
- Intellectual property
Grupo Pikolin may fail to adequately protect its intellectual property. Grupo Pikolin's ability to compete effectively partly depends on the maintenance and protection of its intellectual property, including the know-how required for its day-to-day operations in relation to its products and services. Grupo Pikolin holds certain trademarks and patents that enable it to protect a portion of its copyright.
Grupo Pikolin may be exposed to the risk of occurrence of: (i) a delay in obtaining the relevant approvals for trademarks, patents or other industrial property rights, (ii) failure to obtain them and (iii) the fact that even if they are approved, they are insufficient to protect the brand.
In addition, Grupo Pikolin may have to assume costs that would affect its business, financial situation and results as a result of potential claims by third parties in connection with the intellectual and industrial property rights of Grupo Pikolin, which could affect its patents or trademarks.
- Potential claims
Grupo Pikolin's activities could expose it to potentially warranty, product liability, accident or other claims and cause Grupo Pikolin to be a party to litigation.
Grupo Pikolin normally offers general limited warranties to its customers for many of its products, and so could be subject to warranty or contractual claims in the event any of its products and services not complying with contractual specifications. This type of claim could result in product recalls, customers seeking monetary damages and damage to Grupo Pikolin's reputation.
There can be no assurance that Grupo Pikolin will not have to pay penalties in the future as a result of an increase in failures attributable to Pikolin, which could have a material adverse effect on its business, financial condition and results of operations.
B. Risk relating to the Issuer
- Credit risk
Grupo Pikolin is exposed to its customers’ credit risk. However, Grupo Pikolin has a low credit risk, due to the fact that Grupo Pikolin's main clients are reputable companies with guaranteed solvency, situation that greatly
6 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. reduces the probability of default. Grupo Pikolin has hired insurance credit guarantees operations for 90% of the billed volume. At the same time, in markets such as France, where Grupo Pikolin operates, the law affects especially to this aspect, continuously ensuring compliance with the maximum period of collection.
- Market risk
Grupo Pikolin is exposed to various types of market risk in the course of its business, including the impact of variations in interest rates and exchange rate fluctuations.
. Interest rate risk
Fluctuations in interest rates may have an adverse effect on Grupo Pikolin. Part of the Group's borrowings are indexed to a variable rate, which in general is linked to market rates such as the EURIBOR. Any rise in interest rates would increase the Group 's financial expenses related to its variable rate borrowings, as well as the costs of refinancing existing Grupo Pikolin debt and the issuance of new debt.
. Foreign exchange risk
Exchange rate fluctuations may have a material adverse effect on the business, financial condition and results of operations of Grupo Pikolin. Grupo Pikolin's reporting currency is the euro. However, some contracts entered into by Grupo Pikolin are determined in other currencies or in euros but allowing the customer to pay in its local currency, using market exchange rates in effect at the time of payment, forcing Grupo Pikolin to bear any foreign exchange risk arising between the invoice date and the effective date of payment.
Approximately 9% of Grupo Pikolin's exports were generated outside of the European Union as of December 31, 2014. As a multinational group, Grupo Pikolin conducts business in a wide variety of currencies and is therefore subject to market risk for changes in foreign exchange rates. In this respect, Grupo Pikolin uses foreign exchange forward contracts to manage a portion of the exposure to the risk of the eventual net cash inflows and outflows resulting from foreign currency denominated transactions between their subsidiaries and their customers and suppliers, as well as among certain subsidiaries.
Grupo Pikolin follows a conservative interest hedging policy, having contracted low-risk hedging products considered “plain vanilla”.
- Liquidity risk
In recent years, Grupo Pikolin's has had weak liquidity levels due to (i) a loss of operating profitability resulting from the fall in business and (ii) the Grupo
7 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Pikolin’s deleveraging, which has consumed most liquid assets since 2011. Currently, in line with its old policy, Grupo Pikolin is going back to developing policies to obtain and maintain liquidity.
- Funding risk
In the event that Grupo Pikolin is unable to attract capital for its business and operations when so required, its financial situation and its results could be adversely affected. Grupo Pikolin makes regular capital investments for maintenance purposes and occasionally for the acquisition of a new line of business or to start operations in a new country.
In addition, the possibility of obtaining external financing depends on a number of factors that are beyond the control of Grupo Pikolin, such as the situation in the capital market, the availability of credit, interest rates and its business results.
The Grupo Pikolin's difficulty in obtaining additional financing when so required and in satisfactory conditions could have a significant adverse effect on its business, results and expansion plans.
- Grupo Pikolin’s interest or the interest of the controlling shareholders may differ from the interest of the holders of Commercial Paper
Grupo Pikolin’s interest or the interest of the controlling shareholders may differ from the interest of the holders of Commercial Paper
Grupo Pikolin is controlled by Mr. Alfonso Soláns who owns 98% of the share capital.
- Seasonality
Grupo Pikolin's operating results are increasingly affected by seasonality which could entail that comparisons between consecutive quarters cannot be regarded as an accurate indicator of its results.
A significant part of the growth in the Grupo Pikolin's net sales is attributable to the increase in retail sales. Sales of sleep and other products to furniture stores are subject to the seasonality typical of this sector, in which sales generally increase in the third and fourth quarters. In this respect, any event having an adverse effect on the activity, distribution and sales of Grupo Pikolin during that period of time would negatively impact its results to a greater extent than if they occurred in other quarters, in which sales do not involve such a high percentage of the Grupo Pikolin's total revenue.
- Importance of Grupo Pikolin employees
Grupo Pikolin will need to attract, recruit or retain qualified employees in the different jurisdictions in which it operates and to manage successfully the
8 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. relationship with its employees. Otherwise, its operations and ability to manage the day-to-day aspects of its business will be adversely affected.
Grupo Pikolin also believes its success depends to a significant degree on the continued contribution of its executive officers and key employees, both individually and as a group. The loss of one or more members of its management team, as they have many years of experience in its business and industry, would be difficult to replace without adversely affecting its business.
- Product liability insurance
Grupo Pikolin purchases and maintains the product liability insurance coverage it believes to be consistent with industry practice and sufficient to insure Grupo Pikolin against the immediate financial risk of successful claims based on product liability. Its ability to insure its businesses, facilities and assets is an important feature of its ability to manage risk. However, Grupo Pikolin could be unable to procure adequate insurance, or at terms which are not cost-effective that could be harmful to its results and brand image.
- Force Majeure
Accidents, natural disasters, terrorism, power loss or other catastrophes may also result in significant property damage, disruption of operations, personal injury or fatalities and reputational damage.
In the event of uninsured loss or a loss in excess of the insured limits, Grupo Pikolin could suffer damage to its reputation and/or lose all or a part of its manufacturing capacity, as well as future net turnover expected from the relevant facilities. Any material loss not fully covered by insurance could adversely affect its business, financial condition and results of operations.
C. Risk derived from Grupo Pikolin borrowings
In order to carry out its activities, Grupo Pikolin has received financing from credit institutions and the two bond issuances carried out during the fiscal year 2015.
Therefore, Grupo Pikolin is exposed to the risk of non-compliance with the obligations arising from its borrowings.
In particular, under the commitments assumed by reason of the bond issuances carried out in 2015, Grupo Pikolin is currently subject to the fulfilment of various financial covenants (including indebtedness limitation, negative pledge, dividend payments restrictions, restrictions on sales of assets and mandatory tender offers of the bonds, investments restrictions, etc.), which derive from the two information reports concerning the inclusion of long-term securities registered May 27, 2015 at the Alternative Fixed-Income Market (MARF). Grupo Pikolin regularly monitors compliance with these financial covenants in order to anticipate any risk of non-compliance and to take
9 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. corrective measures.
1.2 Basic information on the specific risks related to the Commercial Paper
The main risks of the Commercial Paper are as follows:
- Market risk
These are fixed-income securities and their market price is subject to possible fluctuations, mainly concerning the interest rate. Consequently, the Issuer cannot guarantee that the Commercial Paper will be traded at a market price that is equal to or higher than the subscription price of the same.
- Credit risk
The Commercial Paper is secured against the Issuer’s net worth. The credit risk arises from the potential inability of the counterparty to comply with the obligations set out in the contract, and involves the possible loss that a full or a partial breach of these obligations could cause.
Risk of change in the Issuer's credit rating
The Issuer's credit rating could be deteriorated as a result of an increase in borrowings or due to a deterioration in its financial ratios, which would represent a decrease in the Issuer's capacity to meet its debt commitments.
On April 30, 2015, Axesor Rating ("Axesor Rating") issued a report on the Issuer's rating based on its own methodology.
Axesor Rating's report assignes the Issuer a credit rating of BB, with a stable outlook. This rating focuses on an assessment of solvency and the associated credit risk in the medium and long term.
However, there is no guarantee that this rating by Axesor Rating will be maintained over the entire term of the issue. The credit rating could be revised upwards or downwards, suspended or even withdrawn by the rating agency.
A downward revision, suspension or withdrawal of the credit rating by the rating agency could hamper the Issuer's access to debt markets and impact its financing capacity.
Axesor Rating confirmed the BB rating with a stable outlook assigned to Grupo Pikolin under said report.
- Liquidity risk
This is the risk whereby investors are unable to find a counterparty for the securities when they want to sell the Commercial Paper prior to maturity. Even though we will apply for admission (incorporación) of Commercial
10 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Paper to be issued under the aegis of the Commercial Paper Programme to mitigate this risk, we cannot guarantee there will be active trading on the market.
In this regard, we point out that the Issuer has not signed any liquidity contract and consequently there is no entity obliged to list put and call prices. Consequently, investors may not find a counterparty for the securities.
- Risk of subordination and priority of debt-claims in insolvency situations
This is the risk of losses being incurred in the event of the Issuer becoming insolvent.
According to the seniority of debt-claims laid down in Law 22/2003 of 9 July (“Insolvency Law”), in the event of the insolvency of the Issuer, the Commercial Paper holders would be ranked behind preference creditors and on the same level as other common creditors, ahead of subordinated creditors (unless they can be classed as such under Article 92 of the Insolvency Act) and would not have any preference among themselves.
2. Full name of the Issuer, its address and its corporate tax code
2.1 Issuer’s general information
The full name of the Issuer is GRUPOPIKOLIN, S.L.
Its registered office is at Zaragoza, at Carretera de Logroño Km 6,5.
The Issuer is a limited liability company, incorporated and for an open-ended period, through a deed authorized by the notary public of Zaragoza Mr. Jesús Martínez Cortés, on April 24, 2003, under number 1.812 of his official records, and duly filed with the Commercial Register of Zaragoza in Volume 2.929, Section 47, Sheet Z-33424.
The share capital stock of Grupo Pikolin is represented by 5,803,708,000 shares with a par value of €0.01 each, meaning a nominal value of €58,037,080. The shares are fully subscribed and paid in.
Grupo Pikolin manufactures and sells high-quality mattresses, bed bases and pillows.
The Issuer's corporate tax code is B-50966654.
The Issuer's website: www.grupopikolin.com
2.2 Brief description of the Issuer’s activity
Grupo Pikolin is the second largest player in the European mattress market.
France and Spain are the main markets in which Grupo Pikolin operates. Future
11 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. growth is expected in the Asian market.
a) Milestones of the Issuer
Grupo Pikolin began as a small mattress factory in 1948, producing beds and metal bedsteads in a small location in Zaragoza, and is currently the leading manufacturer of sleep products in Spain.
The main milestones achieved along the years of history of Grupo Pikolin are as follows:
1948: Alfonso Soláns Serrano founds the business with seven workers producing beds and metal bedsteads in a small factory in Zaragoza.
1959: The company grows, and moves to larger premises. The Pikolin brand is created, with a commercial network of 18 branches.
1973: Pikolin celebrates its 25th anniversary with the inauguration of its current factory, one the largest in the world. Its commercial network grows and reaches 35 branch offices.
1985: Creation of “BEDS the largest sleep store franchise which currently has more than 170 stores in Spain and Portugal.
1995: Pikolin is awarded registered company certification (ISO 9002) by AENOR.
1999: Grupo Pikolin enters into a distribution agreement for the “SERTA” brand in the European market. SERTA is one of the most important sleep product companies in the United States.
2004: Grupo Pikolin acquires the “SEMA” brand, which is the oldest sleep product brand in Spain, created in 1939.
2006: Grupo Pikolin takes control of SMATTEX, S.A., the company that manufactures sleep products under the “Dunlopillo” and “Mediterráneo” brands in Spain and Portugal.
12 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. 2009: Grupo Pikolin completely took over COFEL, S.A.S., the largest French manufacturer of sleep products, thus strengthening its leadership position in the European Bedding market and went on to control the Bultex, Epeda and Merinos brands, French market leaders. With this milestone, Grupo Pikolin became the second leading bedding manufacturer group in Europe.
2011: In 2011 it purchases Dunlopillo Holdings B.H.D., a mattress manufacturer belonging to the SimeDarby Group headquartered in Malaysia, and with business operations in more than 15 Southeast Asian countries.
Grupo Pikolin also inaugurated the PLAZA Logistics Centre in 2011. This new logistics center is one of the largest and most modern sleep product logistics centers in Europe It occupies 32,000 m2 , and uses the most innovative and advanced technological resources available. It has 21 loading and unloading bays, and there is the option to build a railway spur. It has storage capacity of 50,000 m3 , and generates traffic of 22,000 lorries a year.
2012: Grupo Pikolin acquires Industrias Hidráulicas Pardo hus consolidating its leadership position in the hospital and geriatric sleep market. Grupo Pikolin also entered into a joint venture with the leading manufacturer in the Italian market: B&T.
2015: Grupo Pikolin started the construction of its new “state of the art” factory in Spain, with a total industrial site of 116,000 m2. Construction also begins of a new plant in France, which will start operating at full capacity in September 2016.
b) Current situation and performance of the Issuer
With revenue in excess of EUR 390 million1, Grupo Pikolin is the leader of the Spanish, French and Portuguese markets and is present across Asia and the Middle East.
Grupo Pikolin currently has 10 production facilities, eight in Europe and two in Southeast Asia, with over 2,317 employees, a portfolio of well-known trademarks that provide them with a wide range of products.
Grupo Pikolin is vertically integrated which enables it to control the manufacturing, distribution and marketing of all its products.
c) Main Shareholders
The main shareholder is Mr. Alfonso Soláns Soláns, with 98% of Grupopikolin, S.L.’s shares.
His sons, Mr. Álvaro Soláns García and Mr. Alfonso Borja Soláns García,
1 Information as of December 31, 2015. It is hereby stated that annual accounts for the fiscal year ended December 31, 2015 have not been audited nor drafted as of the date of this Base Informative Document.
13 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. hold the remaining 2%.
d) Organization Structure
Grupo Pikolin is the parent company of four subsidiaries: COFEL S.A.S., Pikolin S.L., Dunlopillo Holdings B.H.D. and Industrias Hidráulicas Pardo, S.L.
The following organization chart summarizes the Grupo Pikolin's structural organization and its main subsidiaries at the date of this Base Informative Document:
e) Corporate purpose:
In accordance with article 2 of Grupo Pikolin's Articles of Association the corporate purpose of Grupo Pikolin comprises the following activities:
a) "Acquisition, holding, use, management, operation and administration of securities issued by companies or entities of any kind.
b) Financial and property investments and to this end, the purchase, sale and pledging of all kinds of securities, whether or not traded on a stock market, for its own account, expressly excluding activities reserved for collective investment undertakings, those included in the Securities Market Law and, as appropriate, those reserved for certain entities under special laws.
c) Promotion, development and investment in other lawful companies and businesses, providing, among others, investment analysis services and services involving the search for new business opportunities of
14 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. any kind.
d) Provision of advisory, management and support services in commercial, financial, administrative, accounting and tax matters and in the organization of trading and industrial undertakings, whatever their nature.
e) Acquisition, promotion, operation, either directly or under non- finance leases, and sale of real estate.
f) Study, design and development of projects related to shopping centers and retail parks, sports and leisure parks, residential areas, hotels, community and social facilities.
g) Provision of financial services and granting of loans and credit to other companies in the same corporate or family group and which are therefore related to this company for the purposes of Article 18 of Law 27/2014 of 27 November on Corporate Income Tax, expressly excluding, in any event, all financial activities reserved for collection investment undertakings, operations covered by the Securities Market Law and, as appropriate, activities reserved for certain entities under special laws.”
f) Administrative and management bodies
Board of Directors
The administration of Grupo Pikolin is entrusted to a Board of Directors whose composition, as of the date of preparation of this Base Informative Document, is as follows:
Name Position
Mr. Alfonso Soláns Soláns Chairman
Mr. Álvaro Soláns García Vice-President
Mr. Alfonso Borja Soláns García Vice-President
Mr. Enrique Ocejo Marín Board’s Secretary
. Mr. Alfonso Soláns Soláns: Chairman of the Board of Directors
The Chairman of Grupo Pikolin is the only son of the founder Mr. Alfonso Soláns Serrano, who transformed the small factory of iron beds and a mattress in what it is today, an international Group with over 2,317 employees.
15 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. . Mr. Alfonso Borja Soláns García: Vice-President and Vocal of the Board of Directors
Mr. Alfonso Borja Soláns García, third generation of Grupo Pikolin and eldest son of Mr. Alfonso Soláns Soláns is leading the expansion in Asia from Kuala Lumpur, where he lives at the moment.
. Mr. Álvaro Soláns García: Vice-President and Vocal of the Board of Directors
Mr. Álvaro Soláns García, third generation of the Group and youngest son of Mr. Alfonso Soláns Soláns, is leading the South European operations.
Senior Management
Grupo Pikolin's senior management is structured as follows as of the date of this Base Informative Document:
. Mr. José Antonio González García: CEO of Grupo Pikolin
With a law Degree in Law by the University of Zaragoza and MBA by ESADE Business School, he joined Grupo Pikolin in 1990 as a Product Manager, developing his career within the group in different positions.
In 2005 he took the lead of the French subsidiary, COFEL S.A.S., as General Manager, and finally in 2012 he promoted to CEO of Grupo Pikolin. Currently he counts with more than 25 years of experience in the bedding sector.
. Mr. Luis Barcelona Escartín: CFO of Grupo Pikolin
With a Degree in Law by the University of Zaragoza and MBA by Fundación Universidad Empresa, he joined Grupo Pikolin in 2003 as a CFO of Grupo Pikolin and General Manager of Grupo Iberebro. He had worked over 13 years in the banking industry as Manager of Retail Banking for Spain and Portugal in Deutsche Bank. He currently counts with more than 12 years of experience in the bedding sector.
. Mr. José Maria Cerezo Porroche: Director of Administration and Financing of Grupo Pikolin
He is “perito mercantil” by Escuela Universitaria de Ciencias Empresariales de Zaragoza and holds a postgraduate of Economic and Financial Management of International Business and MBA by Escuela Europea de Negocios. He joined Grupo Pikolin in 1989 as Assistant to the Head of Economic Management, dedicating his career to the financial management of Grupo Pikolin. He currently counts with more than 26 years of experience in the bedding sector.
16 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. g) Industry and activity
(i) Industry introduction
Based on the ISPA’s 2014 Mattress Industry Report (International Sleeping Products Association), the total mattress consumption amongst the 40 major countries reached USD 24 billion in 2014.
Mattress units shipped increased by 2.8% in 2014 and the international trade of mattresses has grown significantly, reaching USD 3,6bn in 2014.
Progress in vacuum of mattresses and in transport logistics has improved the international trading of this product.
China is the leader in mattress consumption followed by the United States, Brazil, Germany, Canada and France. The following chart shows the evolution of the mattress consumption in the six largest markets for 2005-2014:
17 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
Some Central and Eastern countries, including Russia, Poland and Romania, are still small mattress consuming markets, with significant growth potential.
(ii) Mattress sector by country
France
France is the sixth largest mattress consumer in the world according to ISPA, with an expected growth for the period 2015-2019 of between 6% and 12%. The bedding market is estimated at 3.8 million mattresses and 2.3 million bed bases in 2014.
On the French market there are currently about 800 bedding specialists, mostly franchises that represent about 21% of the bedding market in France. Sales and store openings in this channel rose in 2014. It is estimated that sales throughout the specialist mattress channel will continue to grow over the coming years.
The chart below reflects a highly concentrated market in which COFEL (Pikolin France) and Cauval represent more than 50% of the market, with COFEL (Pikolin France) being the market leader with a market share of 29%.
18 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
According to ISPA, mattress sales growth will accelerate to 6.2% in 2016.
Bedding brands are a key decision factor in consumer’s decision. According to IPSOS, three of Grupo Pikolin's main brands are positioned within the top four, as can be seen in the following chart.
The following graph indicates that the French market is dominated by foam mattresses in terms of both volume and value.
Spain
The economic crisis has affected very strongly the Spanish market. Although mattress sales grew by 8.8% in 2014 (1.7 million units) they are still far behind the maximum sales achieved in 2007 (3.5 million units).
19 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Units sold (Thousands) 2014 % vs. 2013 Mattresses 1.742 8,80% Bases 1.035 8,50% Pillows 3.576 7,30% Sales € million 347,6 8,60% Source: Ipsos
The Spanish market is expected to grow by 47% in the coming years to reach 2.5 million units per year in 2018, according to Grupo Pikolin estimates.
Grupo Pikolin is one of the main competitors in Spain and Portugal with a Spanish market share of 27% in 2014, as well as in spontaneous suggested awareness, with a record “top of mind” of 47%.
Furniture shops are the principal outlet for mattress sales, followed by specialists and hypermarkets.
In Spain, mattress production was traditionally concentrated on the innerspring segment. Over the last ten years, the innerspring mattresses production decreased in comparison with production of foam mattresses. The share in production innerspring mattresses declined from 90% in 1997 to 49.1% in 2015.
The Spanish distribution system has been in constant evolution over recent
20 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. years. On the one hand, the number of mergers and acquisitions among local distributors has risen (leading to a gradual process of concentration in commercial activities) and on the other, some international retailers (especially franchise operators) have penetrated into the Spanish market through major Spanish partners. This process led to a progressive reduction in the number of operators in favour of an increase in the average market share.
Asia (China and Malaysia)
China’s mattress production capacity has been increasing very rapidly in recent years due to the fast growth of the domestic property market and the expansion of exports.
Mattress production in China has experienced double-digit growth rates in recent years, reaching 11% in 2014 (in USD). Since 2011, China has been the world's leading mattress producer.
Considering the enormous capacity of the local market, mattress consumption continued to increase in 2014 by 13% (in USD), making China the largest consumer of mattresses in the world.
Mattress production in China is highly concentrated on mattresses made up of spring and foam and of spring and latex. In this respect, 70% of the total volume produced falls into these categories.
Malaysia is ranked 24th in terms of world mattress production. Export activity among Malaysian manufacturers is relevant, representing around 61% of output.
Malaysia's population has grown in recent years and 70% of the total population live in cities. It is estimated that growth in consumption will continue in 2016 thanks to the rise in population, with the consequential increase in demand for quality mattresses. All these data seem to strong growth in the domestic market.
(iii)Industry trends
According to the World Mattress Industry (CSIL 2014), over the last decade, the most significant growth rates were registered by Asian countries, particularly China and Indonesia. Also some Central and Eastern European countries, including Russia, Poland and Romania, also recorded significant growth figures although they are still low mattress consumption markets, but with significant growth potential.
International trade in mattresses is another important variable in the industry trends, with USD 3.6 billion in 2014. The ratio of exports to production in the mattress segment in 2014 stands at around 15% (compared with 8% in 2000).
21 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
The reasons behind the growth in mattress exports are as follows:
- The opening-up of new mattress markets as well as the increasing role of emerging markets, not only in terms of production localization through mattress factories but also in terms of mattress consumption.
- Advances in vacuum packing and transport logistics have facilitated distribution in this sector, with the consequential increase in international trade in mattresses.
The top mattress exporting countries are China and Poland, followed by Denmark, Belgium and Italy.
(iv)Business units
Grupo Pikolin is a vertically integrated company that manufactures, distributes and commercializes all of its products.
Manufacturing: Grupo Pikolin manufactures all its products at 10 facilities located in Spain, France, China and Vietnam. It is currently constructing two new factories, one in Spain and one in France. The French plant, which will be located in Normandy, is expected to start full production in September and will replace the existing factory at Perriers.
Distribution: Grupo Pikolin distributes all its products through a logistics park in Zaragoza and an external company in France. It also exports from Malaysia to all of Asia and Africa.
Commercialization: Grupo Pikolin commercializes all its products through specialized sleep product outlets (owned and franchised) and through independent distributors.
(i) Manufacturing
Grupo Pikolin has 10 production facilities distributed between Europe and Asia.
22 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. . Spain: Grupo Pikolin’s headquarters is located in Zaragoza. The Issuer's group has three factories in Spain, with a total surface area of 210,000 m2.
. France: The Issuer's group has five factories in France, with a total surface area of 120,000 m2.
. Asia: The Issuer's group has two factories in Vietnam and China,
23 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. with a total surface area of 17,600 m2.
(ii) Distribution
Grupo Pikolin distributes all its products through a logistics park in Zaragoza and an external company in France. It also exports from Malaysia to all Asia and Africa.
(iii) Commercialization
Grupo Pikolin sells all its products through specialized sleep product outlets (owned and franchised) and through independent distributors:
- Grupo Pikolin has a network of specialized stores (owned and franchised) in Spain and Portugal, namely BEDS stores, the main specialized network for sleep products in Spain. BEDS is one of the largest and most important specialized sleep product operators in Spain and Portugal with 174 stores (52 of its own), behind El Corte Inglés. BEDS sells high and medium range sleep products, including mattresses, bed bases, pillows and complements.
- In France, the distribution market is heavily concentrated in a few specialists in sleep products.
- In Asia, Grupo Pikolin has a wide chain of Dunlopillo stores across five countries (Vietnam, China, Malaysia, United Arab Emirates and Singapore).
(v) Products and brands
Grupo Pikolin has a portfolio of well-known brands that provide consumers with a wide range of products. The following table has a detailed description on the different brands, market position and countries in which Grupo Pikolin operates.
24 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Brand Description World-wide brand owner Leading brand in Spain and Portugal No.1 in brand awareness (96% of suggest awareness) Strong reputation for being a high-quality luxury product Brand owner in the following countries: Angola, Bangladesh, Bahrain, Brunei, Cambodia, China, R.D. Congo, Egypt, Ghana, Hong Kong, Iran, Iraq, Japan, Jordan, Kenya, Kuwait, Laos, Lebanon, Liberia, Libya, Macau, Malaysia, Malawi, Mauritius, Myanmar, Nigeria, North Korea, Oman, Pakistan, Philippines, Portugal, Qatar, Saudi Arabia, Seychelles, Singapore, South Korea, Spain, Sri Lanka, Syria, Tanzania, Taiwan, United Arab Emirates, Uganda, Vietnam, Yemen, Zambia, Zimbabwe It does not have a distribution license for France World-wide brand owner (except Brazil) One of the most widely recognized brands in France, (No.3 in recognition, IPSOS) High-quality mattresses and complements World-wide brand owner One of the most widely recognized brands in France, (No.4 in recognition, IPSOS) Multi-technology products portfolio Brand owner in France, Italy, Portugal and Spain Leading brand in France (No. 1 in recognition, IPSOS) High-quality polyurethane mattresses (BULTEX material) World-wide brand owner Specialists in hospital beds and products for geriatric centers World-wide brand owner Historical Spanish brand, positioned in the medium-low product range
World-wide brand owner Medium-low range products for the Iberian market
World-wide brand owner Second brand in Asia for a second range products
Licensing in Morocco, Portugal and Spain High range product brand Licensing in Morocco, Portugal and Spain High range product brand
Licensing in France, Portugal and Spain Worldwide leading bedding company
25 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Grupo Pikolin manufactures all bedding product ranges incorporating all existing technologies. The group manufactures mattresses, bed bases, pillows and bedding accessories.
There are four product divisions within Grupo Pikolin:
- Mattress division: represents approximately 75% of Group’ sales. Grupo Pikolin sells three categories of mattress: springs, springs and foam, and foam and latex.
- Bed bases division: represents approximately 19% of Group’ sales. Grupo Pikolin sells slatted and upholstered bases, and bed frames.
- Hospital and geriatric division: represents approximately 2% of Group Pikolin’ sales.
- Pillow and other product division: represents approximately 4% of Group Pikolin’ sales.
Grupo Pikolin continually invests in new technologies in order to develop high quality products. Many of these technologies have been developed internally. Grupo Pikolin has also developed a number of exclusive patents which make its products more comfortable and help to distinguish them from competitors.
(vi)International expansion
From a position of leadership in the Iberian Peninsula, Grupo Pikolin decided to expand into the French market in 2001 in order to achieve a leadership position in the south of Europe. Through the acquisition of the French company COFEL S.A.S. in 2009, Grupo Pikolin became the second largest player in the European market.
As market leader in Spain, Portugal and France, Grupo Pikolin decided to expand in 2011 its operations into the Asian market through the acquisition of Dunlopillo Holdings, with headquarters in Malaysia and with commercial operations in more than 15 countries in Southeast Asia.
26 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. In 2012 Grupo Pikolin entered into a joint venture with B&T, the leading manufacturer in the Italian market.
In 2015 most of the Group's sales were generated in France (59%) and the Iberian Peninsula (32%) and increased its presence in Asia (9%). With regard to the sales distribution by product, Grupo Pikolin has a highly diversified product portfolio including four different types of mattress that represent 79% of sales in value terms and 21% of bedding accessories.
(vii) Main strengths of Grupo Pikolin
The main strengths of Grupo Pikolin are as follows:
1. Undisputed market awareness in both markets.
Grupo Pikolin leads the bedding industry in France and the Iberian Peninsula. The French market is highly concentrated: Grupo Pikolin and its main competitor (Cauval) represent 53% of this market in terms of sales. (Source: IPSOS 2013).
Grupo Pikolin is also the leader as concerns brand awareness in Spain and France (in France, brand is a key decision-making factor for customers) (Source: IPSOS 2013).
2. Vertical integration enables Grupo Pikolin to control production and prices.
Grupo Pikolin is vertically integrated which enables it to control the production, distribution and marketing of its products.
Grupo Pikolin operates with 10 factories: 5 in France, 3 in Spain and 2 in Asia, and has modern and efficient logistic platforms that have won the 2014 Pilot Award (regional level) and the 2014 CEL Award (Spanish level).
Vertical integration allows Grupo Pikolin to adapt to changes in market
27 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. conditions and economic cycles, through the implementation of efficiency and cost control measures. This also enables Grupo Pikolin to have a very good knowledge of the market, to predict cycles and consumer trends and to adapt production accordingly.
3. Geographical diversification
Grupo Pikolin is geographically diversified, with most of its sales being generated in the European market. France and Spain are the principal markets in which the Group operates, although diversification and international sales to the Asian market are gaining importance.
France is the sixth most important country on a global level in terms of mattress consumption according to ISPA and Grupo Pikolin is the leader in that market. Through geographical diversification and an increase of international sales, Grupo Pikolin has been able manage its business in periods of uncertainty and has become a more efficient and stronger player.
4. Consolidated player with more than 67 years’ experience
Grupo Pikolin the second largest bedding group in Europe. Founded in 1948, Grupo Pikolin has succeeded in consolidating its position in the European market through both acquisitions and organic growth and has become a key player in this market.
Its track record and brand awareness place Grupo Pikolin in a leading position in the French and Iberian markets and consumers identify Grupo Pikolin with a "high-quality product".
5. World mattress market with strong growth perspectives
According to ISPA (International Sleep Products Association), total mattress consumption in the 40 main markets reached USD 24 billion in 2014. China is the leader in mattress consumption followed by the United States, Brazil, Germany, Canada and France.
International trade in mattresses has grown significantly, standing at USD 3.6 billion in 2014. Initially, mattresses were manufactured to be sold in local and neighboring markets. However, advances in vacuum packing of mattresses and in transport logistics have contributed to improve international trade in this type of products.
France is the sixth largest country in terms of mattress consumption according to ISPA, with an expected growth in the market for the period 2015-2019 of between 6% and 12%. The Spanish mattress market has been severely affected during the economic crisis: sales in 2014 stood at 1.7 million mattresses, against 3.5 million in 2007. The Spanish market grew by 8.8% in 2014 and higher growth is expected in the coming years
28 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. (up to 2.5 million units in 2018).
6. Brands and exclusive patented technologies as a competitive advantage
Grupo Pikolin invested more than EUR 2.5 million in R&D in 2013 and 2014. Grupo Pikolin has continuously improved its products to offer new and stronger benefits to consumers and higher-quality products.
Grupo Pikolin has brands and patented technologies that differentiate it from its current competitors and act as a barrier to entry for new competitors.
(viii) Agreements and strategic partnerships
Grupo Pikolin has several strategic partnerships in countries in which it does not currently enjoy a consolidated position, such as the joint venture with B&T in Italy for the distribution of the Literie brand and an agreement with a local producer in Brazil that manufactures Pikolin mattresses in line with the specifications of Grupo Pikolin.
With regard to distribution agreements, Grupo Pikolin has held the rights to the Serta brand in Europe since 1999. The Serta brand is owned by Serta Simmons, the leading sleep product group in the USA.
(ix)Declaration on the absence of significant changes in the Issuer's prospects
Since the publication of the latest audited annual accounts as of and for the year ended December 31, 2014 and until the date of this Base Informative Document, there has been no material adverse change in the prospects of the Pikolin Group.
(x) Subsidiaries and associates
The Group Pikolin's subsidiaries and associates as of December 31, 2014 are as follows:
29 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Name of Company/Domicile Direct share Indirect share Activity PIKOLIN, S.L. 99,99% Manufacture and sale of mattresses, Autovía de Logroño, Km. 6,5 - Zaragoza bed bases, beds, furniture, and others CONFORDES, S.L. 99,99% Manufacture and sale of mattresses, C/ Coso, 55 - Zaragoza bed bases, beds, furniture, and others ESPAÑOLA DEL DESCANSO, S.L. (ESPADESA) 99,99% Marketing and distribution through Autovía de Logroño, Km. 6,5 - Zaragoza furniture franchises in general SEIVIRIBER, S.A. 99,93% Security and surveillance services Autovía de Logroño, Km. 6,5 - Zaragoza PIKOLIN LUSITANA, LTDA 99,19% Marketing of mattresses Zona Industrial Vila Amelia. Palmela - Lisbon (Portugal) (1) and bed bases COMPAÑÍA EUROPEA DE ARTICULOS 99,50% Marketing of items for DEL DESCANSO, S.L. (CEADESA) rest/sleep. Autovía de Logroño, Km. 6,5 - Zaragoza ESPAÇO DESCANSO UNIPESSOAL, LTDA 100,00% Marketing of mattresses and bedsteads Rodrigo de Beires, 57. Aldeia de Paio Pires (Portugal) SMATTEX, S.L. 85,01% Manufacture and sale of mattresses, P.I. Les Vinyes, parcelas 2 & 3. Miramar (Valencia) bed bases, beds, furniture, and others SAS COFEL (COMPAGNIE FINANCIERE 99,99% Holding of securities EUROPEENNE LITERIE) (1) 27 Rue du Coronel Pierre Avia, Paris (France) COPIREL SAS (COMPAGNIE PIKOLIN 99,99% Manufacture and sale of mattresses, RECTICEL LITERIE) (2) bed bases, beds, furniture, and others 27 Rue du Coronel Pierre Avia, Paris (France) ESPACIO DESCANSO SPAIN, S.L. 99,90% Marketing of products for decoration Autovía de Logroño, Km. 6,5 - Zaragoza furnishing and rest/sleep.
INDUSTRIAS HIDRÁULICAS PARDO, S.L. 100,00% Manufacture and marketing of beds, Autovía de Logroño, Km. 5.800 - Zaragoza furniture and mechanical and hydraulic accessories for health and hospital use. ASTABURUAGA HEALTHCARE, S.L.U. 100,00% Manufacture and marketing of beds, Autovía de Logroño, Km. 5.800 - Zaragoza (3) furniture and DUNLOPILLO (HOLDINGS) SDN BHD 100,00% Holding of securities SubangJaya Selangor - Malaysia DUNLOPILLO (MALAYSIA) SDN BHD 100,00% Marketing of items for sleep/rest Malaysia (4) DUNLOPILLO (SINGAPORE) PTE LTD 100,00% Marketing of items for sleep/rest Singapore (4) DUNLOPILLO (VIETNAM) LTD 100,00% Manufacture and marketing of items for Vietnam (5) sleep/rest DUNLOPILLO (SHENZHEN) LTD 100,00% Manufacture and marketing of items for Shenzhen, Province of Canton- People’s Republic of China (4) sleep/rest DUNLOPILLO (HONG KONG) LTD 100,00% Marketing of items for sleep/rest Hong Kong (4) DUNLOPILLO (MIDDLE EAST) LTD 100,00% Marketing of items for sleep/rest United Arab Emirates (4) PIKOLIN BRAZIL 100,00% Manufacture and marketing of items for Brazil sleep/rest
1) Share through PIKOLIN, S.A. 2) Share through SAS COFEL, and in turn through PIKOLIN, S.A. 3) Share through Industrias Hidraulicas Pardo, S.A. 4) Share through Dunlopillo (Holdings) Sdn Bhd. 5) Share through Dunlopillo (Singapore) Pte Ltd.
h) Financial information
30 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. (1) Main financial figures (million euros) 2013A 2014A 2015 Var 15 vs 14 Revenue 336,7 352,0 392,4 +11% EBITDA (3,1) 14,3 22,0 +54% EBITDA margin -0,92% 4,06% 5,60% +1,5% Total Equity 241,9 238,3 243,0 +2% Gross financial debt 89,5 67,1 99,5 +48% Net financial debt 54,8 45,6 72,5 +59% NFD/EBITDA - 3,19x 3,30x Working capital 46,3 24,9 45,1 +81% FCF 1,8 (6,1) 4,3 (1)Unaudited financial statements as of December 31, 2015
(i) Income statement
In recent years, the income statement of Grupo Pikolin has shown a considerable improvement. Following 2014, a year which was regarded as a turning point for Grupo Pikolin, 2015 has been the year in which its recovery has been consolidated: revenue grew by 11% and EBITDA by 54% thanks to the high degree of conversion of sales into EBITDA after reaching the point at which all costs are covered and Grupo Pikolin starts to make a profit.
Activity by geographical area 2013A 2014A 2015 (1) Var 15 vs 14 (million euros) Sales Ebitda Sales Ebitda Sales Ebitda Sales Ebitda Iberia 100,2 (17,0) 112,9 0,8 126,4 5,1 +12% +539% France 206,9 11,7 208,4 14,3 231,3 16,9 +11% +18% Asia 29,6 2,1 30,7 1,0 34,2 (0,1) +12% -110% (1)Unaudited financial statements as of December 31, 2015
Analysis of activity by geographical areas:
- Spain: growth in sales of 11.5%, highly above the market (5.5% according to GFK) and strong recovery of EBITDA (+539%) as a result of factors such as (i) greater growth of the Grupo Pikolin's own brand name against white labels, (ii) growth in the BEDs channel of its own stores and franchises and (iii) decline in prices of the main raw materials.
- France: record sales and results, with the 52% increase in sales of the Merinos brand, which is high-range in terms of both quality and margins, being particularly worthy of note.
- Asia: market with a huge growth potential for Grupo Pikolin. Despite the 12% growth in sales, EBITDA has been close to zero due to the impact of the consumer crisis in China. In this regard and to mitigate this impact, changes have been implemented at the level of business management and marketing model.
- Other: After several years monitoring the Brazilian market, 2015 has been the year in which operations have commenced in this market through the acquisition of a local distributor.
31 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
(ii) Financial structure
In recent years, Grupo Pikolin has maintained an optimal level of financial autonomy and has even managed to increase its net worth thanks to the incorporation of new companies into the consolidated group and to the policy of not paying dividends.
During fiscal year 2015, once the upward trend in the market had been consolidated, the company decided to undertake two projects to build new factories in Spain and France, which have led to an increase in borrowings of approximately EUR 30 million and a leverage ratio at the year end of 3.3x (net financial debt/EBITDA).
Also in 2015, Grupo Pikolin lengthened the average term of its financing to 6.2 years, reduced its average financing cost by more than 1% and diversified its funding sources through:
- The issuance of EUR 10 million and EUR 20 million bonds maturing in seven and ten years, respectively.
- The arrangement of a syndicated bank financing operation maturing in six years and which may be extended for an additional one year period.
(iii)Cash Flow
32 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
(1) CASH FLOW STATEMENTS (million euros) 2013A 2014A 2015 Var 15 vs 14 EBITDA (3,1) 14,3 22,0 +54% CASH FLOW FROM OPERATING ACTIVITIES 7,7 4,8 14,8 +210% CASH FLOW FROM INVESTING ACTIVITIES 19,4 (4,0) (31,9) +697% CASH FLOW FROM FINANCING ACTIVITIES (19,4) (15,9) 27,9 NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS 8,0 (15,4) 10,8 FREE CASH FLOW 1,8 (6,1) 4,3 NFD/EBITDA - 3,19x 3,30x (1)Unaudited financial statements as of December 31, 2015
Cash generated by Grupo Pikolin’s operating activities has increased substantially in 2015 (+210% compared to 2014). Free cash flow is limited (4.3 million) due to the major investment effort required by the new plants in Spain and France. Cash generation by Grupo Pikolin will enable the growth plan to be undertaken with controlled debt levels and major deleveraging is expected in coming years.
(iv)Issuer's audited consolidated annual accounts for the years ended December 31, 2013 and December 31, 2014
The Issuer's consolidated annual accounts for the year ended December 31, 2013 (Appendix 1) and December 31, 2014 (Appendix 2) are attached hereto. The Issuer's consolidated annual accounts for said years have been audited by CGM Auditores, without any qualifications or emphasis paragraphs.
3. Full name of the securities issue
GRUPOPIKOLIN Commercial Paper Programme 2016.
4. Persons responsible
Mr. Luis Barcelona Escartín on behalf of the Issuer, ereby assumes responsibility for the content of this Base Informative Document for admission (incorporación) of securities, pursuant to the authorisation given by the Issuer’s Board of Directors at its meeting held on February 24, 2016 and granted in public deed on February 25, 2016 before the notary public of Zaragoza, Mr. José María Navarro Viñuales, with number 417 of his official records.
Mr. Luis Barcelona Escartín, hereby declares that the information contained in this Base Informative Document is, to the best of his knowledge and after executing the reasonable diligence to ensure that it is as stated, compliant with the facts and does not suffer from any omission that could affect the content.
5. Duties of the Registered Advisor of the MARF
PKF Attest, Servicios Empresariales, S.L. limited liability company (sociedad de responsabilidad limitada) duly filed with the Commercial Register of Bizkaia al Volume 4205, Page 122, Sheet BI-34713, with registered office at Bilbao, Alameda de Recalde 36, 48009, and and holder of Corporate Tax Code B-
33 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. 95221271 (“PKF Attest”).
PKF Attest has been designated as Registered Advisor of the Issuer (the “Registered Advisor”). PKF Attest is an admitted registered advisor company by virtue of the boards of directors resolution of AIAF Fixed Income Market published by means of Operating Statement 14/2014 of 12 November in accordance with the provisions of paragraph two of Market Circular 3/2013 of 18 July on Registered Advisers in the Alternative Fixed Income Market.
As a consequence of such designation, PKF Attest shall enable the Issuer to comply with the obligations and responsibilities to be assumed on incorporating its issues into the multilateral trading system, MARF, acting as specialist liaison between MARF and the Issuer, and as a means to facilitate the insertion and development of the same under the new securities trading regime.
Thus, PKF Attest must provide the MARF with periodic information required by this party and the MARF, to its term, may obtain whatever information it requires from this party with regard to the actions it carries out and with its corresponding obligations. To this end, it may perform as many actions as required, where appropriate, to check the information that has been provided.
The Issuer shall have, at any moment, a designated Registered Advisor filed with the Market Registered Advisor Registry (Registro de Asesores Registrados del Mercado).
PKF Attest, as Registered Advisor of the Issuer, will provide advisory services to the Issuer (i) on the admission (incorporación) of the Commercial Paper to be issued under the aegis of the Commercial Paper Programme, (ii) on compliance with whatsoever obligations and responsibilities that correspond to the Issuer for taking part on the MARF, (iii) on compiling and presenting the financial and business information required by the same, and (iv) in order to ensure that the information complies with these regulatory requirements.
In its status as Registered Advisor, PKF Attest, in relation to the admission (incorporación) of the Commercial Paper request into MARF:
(i) has verified that the Issuer complies with the requirements of the MARF regulations for admission (incorporación) of its securities into this market; and
(ii) has assisted the Issuer in drawing up the Base Informative Document and has revised all of the information that the Issuer has given to the Market in accordance with the application for admission (incorporación) of the securities on said Market. It has also checked that the information provided complies with the regulatory requirements and does not leave out any relevant information that could lead to confusion among potential investors.
Once the Commercial Papters are admitted into the the Market, the Registered
34 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Advisor:
(i) will check the information that the Issuer prepares and send this information to the MARF on a periodic or one-off basis and will check that this information complies with the requirements concerning content and deadlines set out in the regulations;
(ii) will advise the Issuer on any events that could affect compliance with the obligations assumed by this party at including its securities on the MARF. It will also provide advice on the best way of treating these events to avoid breach of the foregoing obligations;
(iii) will report any events to the MARF that could represent a breach by the Issuer of its obligations, in case it notices any potential and relevant breach that had not been rectified following notification; and
(iv) will manage, deal with and respond to inquiries and requests for information from the MARF with regard to the Issuer's situation, progress of the activity, the level of compliance with its obligations and any other data that the Market deems relevant.
For the foregoing purposes, the Registered Advisor will perform the following actions:
(i) it will maintain regular and necessary contact with the Issuer and would analyse any exceptional situations that could arise concerning the price trend, trading volumes and other relevant circumstances surrounding the trading of the Issuer's securities;
(ii) it will sign the declarations which, in general, have been set out in the regulations, as a consequence of including the securities on the MARF, as well as with regard to the information required from companies that have securities on this Market; and
(iii) as expeditiously as possible, it will forward the communications received in response to inquiries and requests for information to the MARF.
6. Maximum outstanding balance
The maximum amount of the commercial paper programme will be a nominal of fifty million euros (€50,000,000) (the “Commercial Paper Programme”).
This amount is understood as the capped outstanding amount of all the Commercial Paper in aggregate that, at any given time, is issued pursuant to the aegis of the Commercial Paper Programme.
7. Description of the type and class of securities. Nominal value
The Commercial Paper is discounted securities that represent a debt for the Issuer,
35 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. it accrues interest and is reimbursable for its nominal value on maturity.
An ISIN code will be issued to each of Commercial Paper.
Each Commercial Paper will have a nominal value of one hundred thousand euros (€100,000), meaning that the maximum number of securities in circulation at any given time cannot exceed five hundred (500).
8. Legislation governing the securities
The Commercial Paper will be issued in accordance with Spanish legislation applicable to the Issuer or to the Commercial Paper. More specifically, the Commercial Paper will be issued in accordance with Royal Legislative Decree 1/2010 of 2 July 2010, by which it is approved a recast text of the Capital Companies Act, in accordance with its current wording, and with Royal Legislative Decree 4/2015, of 23 October, by which it is approved a recast text of the Securities Market Law, in accordance with its current wording and pursuant to those other regulations that this law implements
This Base Informative Document for the admission (incorporación) of Commercial Paper includes the information required by Circular 1/2015 from the MARF, of 30 September, on the inclusion and exclusion of securities on the Alternative Fixed Income Market.
9. Representation of securities through book entries
The Commercial Paper to be issued under the aegis of the Commercial Paper Programme will be represented by book entries, as set out in the mechanisms for trading on the MARF for which admission (incorporación) of the securities is requested. The party in charge of accounting records is Sociedad de Gestión de los Sistemas de Registro, Compensación y Liquidación de Valores, S.A.U. (Iberclear), with registered office in Madrid, Plaza de la Lealtad, 1, together with its participating entities.
10. Currency of the issue
The Commercial Paper to be issued under the aegis of the Commercial Paper Programme will be in Euros.
11. Order of priority
This issuance of Commercial Paper by Grupo Pikolin is not subject to any guarantee in rem or by third parties. The capital and interest of the Commercial Paper are secured on the Issuer's entire assets.
According to the seniority of debt-claims laid down in the Insolvency Law, in the event of the insolvency of the Issuer the Commercial Paper holders would be ranked behind preference creditors and on the same level as other common creditors, ahead of subordinated creditors (unless they can be classed as such
36 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. under Article 92 of the Insolvency Act) and would not have any preference among themselves.
12. Descriptions of the rights inherent to the securities and the procedure for executing these rights. Methods and deadlines for payment of the securities and handover of the same
The Commercial Paper to be issued under the aegis of the Commercial Paper Programme will, for the investor that acquires them, be without any present and/or future voting right over the Issuer.
The economic and financial rights of the investor associated to the acquisition and holding of the Commercial Paper will be those arising from the conditions of the interest rate, yields and redemption prices with which they are issued and which are shown in sections 13, 14, and 16.
The date of payment for the Commercial Paper to be issued under the aegis of the Commercial Paper Programme will be the same date as the issue itself, and the effective value of the Commercial Paper will be paid to the Issuer by the ManAger Entities (as defined in section 15) or by the investors, as the case may be, through the Paying Agent (as defined in section 15), (as paying agent) into the account specified by this party on each date of issue.
The Manager Entities could issue a nominative and non-negotiable certificate of acquisition. This document will provisionally substantiate the subscription of the Commercial Paper until the appropriate book entry is made, and will grant the holder the right to request the pertinent certificate of legitimation.
Similarly, the Issuer will notify the payment to MARF and to Iberclear through the corresponding certificate.
13. Date of issue. Commercial Paper Programme validity
The Commercial Paper Programme will be in force for one (1) year from the date of approval of this Base Informative Document by the Governing Body of the MARF.
As this is a continuous type of commercial paper programme, the securities may be issued, subscribed and admitted on any day during the validity period of the same. However, the Issuer reserves the right not to issue new securities when it deems such action appropriate, pursuant to the cash needs of the Issuer or because it has found more advantageous conditions of funding.
14. Nominal interest rate. Indication of the yield and calculation method
The annual nominal interest will be set in each adjudication. The Commercial Paper will be issued under the aegis of the Commercial Paper Programme at the interest rate agreed by and between the Manager Entities or the investors and the Issuer. The yield will be implicit in the nominal value of the Commercial paper, to
37 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. be reimbursed on the maturity date.
The interest at which the Manager Entities transfers the Commercial Paper to third parties will be the rate freely agreed between the interested parties.
As these are discounted securities with an implicit rate of return, the cash amount to be paid out by the investor varies in accordance with the issue interest rate and period agreed.
Thus the cash amount of the Commercial Paper may be calculated by applying the following formulas:
When securities are issued for a maximum term of 365 days:
N E = n 1 + i 365 When securities are issued for more than 365 days:
N E = (1 + i) /
Whereby:
N= nominal amount of the commercial paper
E = cash amount of the commercial paper
n = number of days of the period to maturity
i = nominal interest rate, expressed as an integer value
A table is included to help the investor, specifying the cash value tables for different rates of interest and redemption periods, and there is also a column showing the variation of the cash value of the commercial paper by increasing the period of this by 10 days.
38 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
EFFECTIVE VALUE OF A €100.000 NOTIONAL NOTE (Less than one year term) 7 DAYS 14 DAYS 30 DAYS 60 DAYS Suscription Suscription Suscription Nominal IRR/AE +10 days Suscription IRR/AER +10 days IRR/AER +10 days IRR/AER +10 days price price price rate (%) R (%) (euros) price (euros) (%) (euros) (%) (euros) (%) (euros) (euros) (euros) (euros) 0,25 99.995,21 0,25 -6,85 99.990,41 0,25 -6,85 99.979,46 0,25 -6,85 99.958,92 0,25 -6,84 0,50 99.990,41 0,50 -13,69 99.980,83 0,50 -13,69 99.958,92 0,50 -13,69 99.917,88 0,50 -13,67 0,75 99.985,62 0,75 -20,54 99.971,24 0,75 -20,53 99.938,39 0,75 -20,52 99.876,86 0,75 -20,49 1,00 99.980,83 1,00 -27,38 99.961,66 1,00 -27,37 99.917,88 1,00 -27,34 99.835,89 1,00 -27,30 1,25 99.976,03 1,26 -34,22 99.952,08 1,26 -34,20 99.897,37 1,26 -34,16 99.794,94 1,26 -34,09 1,50 99.971,24 1,51 -41,06 99.942,50 1,51 -41,03 99.876,86 1,51 -40,98 99.754,03 1,51 -40,88 1,75 99.966,45 1,77 -47,89 99.932,92 1,76 -47,86 99.856,37 1,76 -47,78 99.713,15 1,76 -47,65 2,00 99.961,66 2,02 -54,72 99.923,35 2,02 -54,68 99.835,89 2,02 -54,58 99.672,31 2,02 -54,41 2,25 99.956,87 2,28 -61,55 99.913,77 2,27 -61,50 99.815,41 2,27 -61,38 99.631,50 2,27 -61,15 2,50 99.952,08 2,53 -68,38 99.904,20 2,53 -68,32 99.794,94 2,53 -68,17 99.590,72 2,53 -67,89 2,75 99.947,29 2,79 -75,21 99.894,63 2,79 -75,13 99.774,48 2,78 -74,95 99.549,98 2,78 -74,61 3,00 99.942,50 3,04 -82,03 99.885,06 3,04 -81,94 99.754,03 3,04 -81,72 99.509,27 3,04 -81,32 3,25 99.937,71 3,30 -88,85 99.875,50 3,30 -88,74 99.733,59 3,30 -88,49 99.468,59 3,29 -88,02 3,50 99.932,92 3,56 -95,67 99.865,93 3,56 -95,54 99.713,15 3,56 -95,25 99.427,95 3,55 -94,71 3,75 99.928,13 3,82 -102,49 99.856,37 3,82 -102,34 99.692,73 3,82 -102,00 99.387,34 3,81 -101,38 4,00 99.923,35 4,08 -109,30 99.846,81 4,08 -109,13 99.672,31 4,07 -108,75 99.346,76 4,07 -108,04 4,25 99.918,56 4,34 -116,11 99.837,25 4,34 -115,92 99.651,90 4,33 -115,50 99.306,22 4,33 -114,70 4,50 99.913,77 4,60 -122,92 99.827,69 4,60 -122,71 99.631,50 4,59 -122,23 99.265,71 4,59 -121,34
39 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
EFFECTIVE VALUE OF A €100.000 NOTIONAL NOTE (Less than one year term) (Equal to one year term) (More than one year term) 90 DAYS 180 DAYS 365 DAYS 731 DAYS Suscription Suscription Suscription Suscription Nominal IRR/AER +10 days IRR/AER +10 days IRR/AER +10 days IRR/AER +10 days price price price price rate (%) (%) (euros) (%) (euros) (%) (euros) (%) (euros) (euros) (euros) (euros) (euros) 0,25 99.938,39 0,25 -6,84 99.876,86 0,25 -6,83 99.750,62 0,25 -6,81 99.501,19 0,25 -6,81 0,50 99.876,86 0,50 -13,66 99.754,03 0,50 -13,63 99.502,49 0,50 -13,56 99.006,10 0,50 -13,53 0,75 99.815,41 0,75 -20,47 99.631,50 0,75 -20,39 99.255,58 0,75 -20,24 98.514,69 0,75 -20,17 1,00 99.754,03 1,00 -27,26 99.509,27 1,00 -27,12 99.009,90 1,00 -26,85 98.026,93 1,00 -26,72 1,25 99.692,73 1,26 -34,02 99.387,34 1,25 -33,82 98.765,43 1,25 -33,39 97.542,79 1,25 -33,19 1,50 99.631,50 1,51 -40,78 99.265,71 1,51 -40,48 98.522,17 1,50 -39,87 97.062,22 1,50 -39,58 1,75 99.570,35 1,76 -47,51 99.144,37 1,76 -47,11 98.280,10 1,75 -46,29 96.585,19 1,75 -45,90 2,00 99.509,27 2,02 -54,23 99.023,33 2,01 -53,70 98.039,22 2,00 -52,64 96.111,66 2,00 -52,13 2,25 99.448,27 2,27 -60,93 98.902,59 2,26 -60,26 97.799,51 2,25 -58,93 95.641,61 2,25 -58,29 2,50 99.387,34 2,52 -67,61 98.782,14 2,52 -66,79 97.560,98 2,50 -65,15 95.175,00 2,50 -64,37 2,75 99.326,48 2,78 -74,28 98.661,98 2,77 -73,29 97.323,60 2,75 -71,31 94.711,79 2,75 -70,37 3,00 99.265,71 3,03 -80,92 98.542,12 3,02 -79,75 97.087,38 3,00 -77,41 94.251,96 3,00 -76,30 3,25 99.205,00 3,29 -87,55 98.422,54 3,28 -86,18 96.852,30 3,25 -83,45 93.795,46 3,25 -82,15 3,50 99.144,37 3,55 -94,17 98.303,26 3,53 -92,58 96.618,36 3,50 -89,43 93.342,27 3,50 -87,93 3,75 99.083,81 3,80 -100,76 98.184,26 3,79 -98,94 96.385,54 3,75 -95,35 92.892,36 3,75 -93,64 4,00 99.023,33 4,06 -107,34 98.065,56 4,04 -105,28 96.153,85 4,00 -101,21 92.445,69 4,00 -99,28 4,25 98.962,92 4,32 -113,90 97.947,14 4,30 -111,58 95.923,26 4,25 -107,02 92.002,23 4,25 -104,85 4,50 98.902,59 4,58 -120,45 97.829,00 4,55 -117,85 95.693,78 4,50 -112,77 91.561,95 4,50 -110,35
40 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Given the diversity of the issue rates that are forecast to be applied throughout the Commercial Paper Programme, we cannot predetermine the resultant return for the investor (IRR). In any case, it will be determined, for Commercial Paper up to 365 days, with the formula detailed below:
= − 1
in which:
IRR= Effective annual interest rate, expressed as an integer value
N= Nominal amount of the commercial paper
E = Cash amount at the time of subscription or acquisition
d = Number of calendar days between the date of issue (inclusive) and the date of maturity (exclusive)
IRR will be the annual interest of the commercial paper described in this section for periods of time longer than 365 days.
15. Lead arrangers, paying agent and depositary entities
The Manager Entities collaborating in the Commercial Paper Programme (“Lead Arrangers”) are as follows:
Bankia, S.A. C.I.F.: A-14010342 Domicilio: Calle Pintor Sorolla Nº8, Valencia
Beka Finance, Sociedad de Valores, S.A. C.I.F.: A-79203717 Domicilio: calle Marqués de Villamagna, nº3, 3ª planta, Madrid
Renta Markets, S.V., S.A. C.I.F.: A-06302657 Domicilio: Pza. Manuel Gomez Moreno, 2 Pta. (Edificio Alfredo Mahou), Madrid
The Issuer and the Manager Entities have executed respective placement agreements for the Commercial Paper Programme for placement of the Commercial Paper, which includes the possibility of selling to third parties
The Issuer may enter into collaborating agreements with third parties for the placement of the Commercial Paper issues which shall be reported to MARF by means of the requisite notice or statement of a relevant fact.
Bankia, S.A. will also act as paying agent (the “Paying Agent”).
The Issuer has not designated a securities depository entity. Each subscriber will designate, from among the participants in Iberclear, which entity to deposit the securities with.
41 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. 16. Redemption price and provisions concerning maturity of the securities. Date and methods of redemption
The Commercial Paper to be issued under the aegis of the Commercial Paper Programme will be redeemed for their nominal value on the date given in the document proving acquisition. Where appropriate, the corresponding withholding at source will be applicable.
As they are expected to be included for trading on the MARF, the redemption of the Commercial Paper will take place pursuant to the operating rules of the clearance system of said market. To this end, on the maturity date, the nominal amount of the Commercial Paper will be paid to the legitimate holder of the same. The delegated paying agent is Ahorro Corporación Financiera, S.V., S.A., which accepts no liability whatsoever vis-à-vis reimbursement by the Issuer of the Commercial Paper on the maturity thereof.
If reimbursement falls on a non-business day in accordance with the TARGET 2 calendar (Trans European Automated Real-Time Gross Settlement Express Transfer System), reimbursement will be deferred to the first subsequent business day unless said day falls in the following month, in which case reimbursement of the Commercial Paper will take place on the first business day immediately prior. Neither of the aforementioned cases will have any effect whatsoever on the amount to be paid.
17. Valid deadline within which reimbursement of the principal may be claimed
Pursuant to the provisions set out in article 1964 of the Civil Code, reimbursement of the nominal value of these securities will no longer be callable five (5) years after maturity thereof.
18. Minimum and maximum issue period
During the validity of this Base Informative Document Commercial Paper may be issued with a redemption period of between three (3) business days and seven hundred thirty one (731) calendar days (that is, twenty (24) four months).
19. Early settlement
The Commercial Paper will not include an early redemption option either for the Issuer (call) or for the securities´ holder (put). Notwithstanding the foregoing, Commercial Paper may be redeemed early providing that, on whatsoever grounds; they are in the legitimate possession of the Issuer.
20. Restrictions on the free transferability of the securities
In accordance with current legislation, there are no specific or general restrictions on the free transferability of the Commercial Paper to be issued.
21. Taxation of the securities
In accordance with the provisions set out in current legislation, the Commercial Paper is rated as financial assets with implicit returns. Income from the Commercial Paper is considered to be capital gains and subject to Personal
42 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Income-tax (“IRPF”), Corporate Tax (“IS”) and Non-residents Income-tax (“IRNR”). The tax is collected through interim withholdings at source, under the terms and conditions set out in the respective regulatory laws and other standards that implement said laws.
For illustrative purposes only, the applicable regulations will be:
- Law 35/2006, of 28 November, governing Personal Income-tax and partial amendment of the laws on Corporate Tax, Non-residents Income-tax and Wealth Tax (“IRPF Law”), as amended by Law 26/2014, of 27 November, as well as articles 74 et seq of Royal Decree 439/2007, of 30 March, which approves the Regulation on Personal Income-tax and modifies the Regulations on Pension Funds and Plans approved through Royal Decree 304/2004, of 20 February (“IRPF Regulation”), as amended by Royal Decree 633/2015, of 10 July.
- Law 27/2014, of 27 November, of the Corporate Tax Law (“LIS”) as well as articles 60 et seq of the Corporate Tax Regulations approved through Royal Decree 634/2015, of 10 July (“IS Regulation”).
- Royal Legislative Decree 5/2004, of 5 March, which approves the consolidated text of the Non-residents Income-tax Law (“IRNR Law”),as amended by Law 26/2014, of 27 November, and in Royal Decree 1776/2004, of 30 July, which approves the regulations of Non-residents Income Tax (“IRNR Regulation”), amended by Royal Decree 633/2015, of 10 July.
All this is without prejudice to the agreed tax regime or economic agreement in force, respectively, in the historic territories of the Basque Country or in the Regional Community of Navarre, or any other exceptional ones that could be applicable through the specific characteristics of the investor.
As a general rule, in order to dispose of or obtain reimbursement of financial assets with capital gains that are subject to a withholding at source at the time of transfer, redemption or reimbursement, prior acquisition of the same must be substantiated through a notary public or by financial institutions obliged to perform withholdings. The price of the transaction must also be certified. The financial institutions through which the payment of interest is made or which intervene in the transfer, redemption or reimbursement of securities are obliged to calculate the returns attributable to the securities holder and notify this to both the holder of the security as well as to the Tax Authorities. The Tax Authorities must also be notified of those persons taking part in the aforementioned transactions.
Ownership of these securities will likewise be subject to Wealth Tax and the Inheritance and Gift Tax on the date of accrual of said taxes, by virtue of the provisions set out in current regulations in each case.
In any case, given that this summary is not a thorough description of all tax considerations, we recommend that investors interested in acquiring the Commercial Paper to be issued check with their tax advisors or lawyers who could give them personalised advice in view of their specific circumstances. Likewise, investors and potential investors should take into consideration potential changes in legislation or its criteria of interpretation.
43 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Investors that are individuals with tax residence on Spanish territory
Personal Income-tax
In general, capital gains obtained from investments in commercial paper by individuals that are resident on Spanish territory are subject to a withholding at source, as interim payment of personal income-tax, at the current rate of 19%. The withholding carried out will be deductible from the personal income-tax amount, giving rise, where appropriate, to the tax rebates provided for in current legislation.
Furthermore, the difference between the value of subscription or acquisition of the asset and its transfer, redemption, swap or reimbursement value will be considered as an implicit capital gains return and will be added to the taxable base for the financial year in which the sale, redemption or reimbursement takes place. Tax will be paid at the rate in force at any given time, which is currently 19% up to €6,000, 21% from €6,000.01 to €50,000 euros and 23% from €50,000.01 upwards.
In order to carry out the transfer or reimbursement of the assets, the prior acquisition of the same must be certified by notaries public or financial institutions obliged to perform the withholding, as well as showing the price at which the transaction was carried out. The issuer cannot perform reimbursement when the holder fails to substantiate such status through the opportune certificate of acquisition.
In the case of returns obtained through transfer, the financial institution acting on behalf of the transferring party will be obliged to make the withholding at source.
In the case of returns obtained through reimbursement, the entity obliged to make the withholding will be the issuer or the financial institution responsible for the transaction.
Similarly, to the extent that the securities are subject to application of the tax regime set out in Additional Provision One of Law 10/2014, of 26 June, governing the legal system, supervision and solvency of credit institutions (“Law 10/2014”) the reporting regime set out in article 44 of Royal Decree 1065/2007, of 27 July, will apply pursuant to the wording given in Royal Decree 1145/2011, of 29 July.
Wealth Tax
In general, individuals with their usual place of residence in Spain are subject to Wealth Tax (“IP”). Wealth Tax was introduced through Law 19/1991, of 6 June, governing Wealth Tax (“IP Law”) and was compulsory until the introduction of Law 4/2008, of 23 December which, without derogating said tax, removed the effective obligation of paying it.
However, the Single Article of Royal Decree Law 13/2011 of 16 September and Law 16/2012 of 27 December reintroduced wealth tax for fiscal years 2011, 2012 and 2013, with securities or related rights thereon being subject to this tax in the terms of the IP Law. Law 48/2015 of 29 October - the Budget Law - for 2016 laid
44 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. down the extension of wealth tax for that year through the amendment of Royal Decree Law 13/2011.
In general, Royal Decree-Law 13/2011 raised the minimum exemption amount to 700,000 euros, without prejudice to what had already been established, where appropriate, in each Autonomous Communally, as these communities hold regulatory terms of reference and may also introduce special rules that provide for certain exemptions or allowances that will need to be checked.
Inheritance and Gift Tax
Moreover, pursuant to Law 29/1987, of 18 December, governing Inheritance and Gift Tax, individuals resident in Spain that acquire the securities or rights over these securities through inheritance, bequest or gift will be subject to the tax in accordance with state, regional and local regulations that apply depending on the usual place of residence of the acquiring party.
Investors that are entities with tax residence on Spanish territory
Corporation Tax
The profits obtained by Corporate Tax taxpayers when said profits arise from these financial assets are exempt from the obligation of making the withholding providing that the commercial paper (i) are represented by book entries and (ii) are traded on a Spanish official secondary market of securities, or on the MARF. Otherwise, the withholding at source -performed as an interim payment of Corporation Tax- will be carried out at the current rate of 19%. The interim withholding carried out will be deductible from the Corporate Tax amount payable.
The procedure to introduce the exemption described in the previous paragraph will be the one set out in the Order of 22 December 1999.
The financial institutions that take part in the transfer or reimbursement operations will be obliged to calculate the capital gains attributable to the securities holder and to notify this to both the holder as well as the Tax Authorities.
Notwithstanding the foregoing, to the extent that the securities are subject to application of the regime set out in Additional Provision One of Law 10/2014, the procedure set out in article 44 of Royal Decree 1065/2007, of 27 July, will be applicable in accordance with the wording given through Royal Decree 1145/2011, of 29 July.
Wealth Tax
Legal entities are not subject to Wealth Tax.
Inheritance and Gift Tax
Legal entities do not pay Inheritance and Gift Tax.
Investors that are not resident on Spanish territory
45 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Non-residents income-tax for investors not resident in Spain with a permanent establishment
Non-resident investors with a permanent establishment in Spain will be subject to a tax regime similar to the one described for investors that are legal entities resident in Spain.
Non-residents income-tax for investors not resident in Spain without permanent establishment
To the extent that the provisions set out in Additional Provision One of Law 10/2014 are met and that the non-resident investor without permanent establishment grants its condition, the returns of its securities will be exempt from Non-residents Income-tax (IRNR). If the aforementioned Additional Provision One is not applicable, the returns resulting from the difference between the value of redemption, transfer, and reimbursement or swap of the securities issued under the aegis of the Commercial Paper Programme and their subscription or acquisition value, obtained by investors without tax residence in Spain, these will be subject to a tax rate of 19%.
In order to apply the exemption referred to in the previous paragraph to the securities issued with a redemption of 12 or less months, it will be necessary to comply with the procedure set out in article 44 of Royal Decree 1065/2007, of 27 July, in the wording given by Royal Decree 1145/2011, of 29 July.
Wealth Tax
Without prejudice to the provisions set out in the treaties to avoid double taxation, in general those individuals that do not have a usual place of residence in Spain pursuant to the provisions set out in article 9 of the IRPF Law and who, at 31 December each year, own properties that are either situated in Spain or with executable rights over the same, are subject to Wealth Tax, without prejudice to any applicable exemptions.
Notwithstanding the above, following the judgment of the Court of Justice of the European Union of 3 September 2014 (Case C-127/12), non-resident taxpayers that are resident in a Member State of the European Union or the European Economic Area will be entitled to the application of the regulations approved by the Autonomous Region in which their most valuable assets and rights, on which the tax is imposed, are situated, because they are located, may be exercised or must be fulfilled in Spanish territory.
Inheritance and Gift Tax
Also, pursuant to Law 29/1987, of 18 December, governing Inheritance and Gift Tax, individuals non-resident in Spain that acquire the securities or rights over the securities through inheritance, bequest or gift and who are resident in a country with which Spain has a treaty to avoid double taxation vis-à-vis this tax will be subject to taxation pursuant to the provisions set out in the respective treaty. In order to apply the provisions set out in this treaty, it will be necessary to prove tax residence through the corresponding certificate validly issued by the tax authorities in the investor’s country of residence, expressly placing on record their
46 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. residence for the purposes set out in the treaty.
If a treaty to avoid double taxation is not applicable, individuals non-resident in Spain will be subject to Inheritance and Gift Tax pursuant to state laws. The tax rate will range between 0 and 81.6%.
Notwithstanding the above, the judgment of the Court of Justice of the European Union of 3 September 2014 (Case C-127/12) found that the Kingdom of Spain had breached Community law by allowing differences to be established in the tax treatment of donations and inheritances involving parties not resident in Spain. In order to eliminate cases of discrimination, the law on this tax was amended to introduce a number of rules that would allow the full equality of tax treatment in the discriminatory situations described by the Court. Accordingly, the application of the tax benefits approved by certain Autonomous Regions to residents of the European Union or the European Economic Area will be possible.
Indirect taxation in the acquisition and transfer of the securities issued
The acquisition and, where appropriate, subsequent transfer of the Commercial Paper is exempt from the Tax on Onerous Property Transfers and Documented Legal Acts (Stamp Duty) and VAT under the terms set out in article 314 of the Securities Market Act and concordant articles of the laws that regulate the aforementioned taxes.
22. Publication of the prospectus
This Base Informative Document will be published on the MARF website (www.aiaf.es).
23. Description of the placement system and, where appropriate, subscription and admission of the issue
Placement by the Lead Arrangers
The Lead Arrangers may act as intermediaries in the placement of the Commercial Paper, notwithstanding which the Lead Arrangers may subscribe Commercial Paper on their own behalf.
For these purposes, the Lead Arrangers may ask the Issuer on any working day from 10:00h to 14:00h for quotes of volume and interest rates for potential issuances of Commercial Paper in order to carry out the relevant prospection processes concerning demand among qualified investors.
The amount, interest rate, date of issuance and payment, due date and other terms for each issuance thus placed shall be determined by agreement between the Issuer and the Lead Arranger(s) concerned. The terms of these agreements will be confirmed by sending a document setting out the terms of the issue to be remitted by the Issuer to the relevant Lead Arranger.
In the event that an issuance of Commercial Paper is initially subscribed by the Lead Arrangers to be subsequently passed on to the final investors, it is stated that the price shall be freely agreed between the interested parties and might not coincide with the issue price (i.e. with the cash amount).
47 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Issue and subscription of the Commercial Paper directly by investors
It is also possible that final investors having the status of qualified investors (pursuant to the definition contained in Article 39 of Royal Decree 1310/2005 or any regulation that replaces it and in the equivalent legislation in other jurisdictions) that may subscribe the Commercial Paper directly from the Issuer, providing they comply with all current legal requirements.
In such cases, the amount, interest rate, date of issuance and payment, due date and other terms of each issuance so arranged shall be as agreed by the Issuer and the final investors concerned in each specific issuance.
24. Costs for legal, financial and auditing services and other services provided to the Issuer for the issue/admission (incorporación)
The costs for all legal, financial and audit services and other services provided to the Issuer for the issue/admission (incorporación) of the securities totals a sum of forty six thousand euros (EUR 46,000,000), excluding taxes (assuming the issue of fifty million euros under the Commercial Paper Programme), including the fees of MARF and Iberclear.
25. Admission
25.1 Application for admission (incorporación) of these securities into the Alternative Fixed-Income Market (MARF). Deadline for admission (incorporación)
The the Alternative Fixed-Income Market (MARF) will be responsible for the admission (incorporación) of the securities described in this Base Informative Document. The Issuer hereby undertakes to carry out all of the formalities required so that the Commercial Paper is listed on the aforementioned market within a deadline of seven (7) business days from the date the securities are issued under the aegis of the Commercial Paper Programme. For these purposes, we remind you that, as set out under previous headings, the issue date is the same as the payment date.
Under no circumstances will the deadline exceed the maturity of the Commercial Paper. In the event of breach of the aforementioned deadline, the reasons for the delay will be notified to MARF and will be published in a national newspaper. This is without prejudice to any possible contractual liability that may be incurred by the Issuer.
MARF has the legal structure of a multilateral trading system (SMN), under the terms set out in articles 317 et seq of the RLD 4/2015, and is an unofficial alternative market for the trading of fixed-income securities.
This Base Informative Document includes all the information required by the Circular 1/2015, and the procedures applicable to the inclusion and exclusion on the MARF set out in its own Regulations and other applicable regulations.
Neither the Governing Body of the MARF nor the National Securities Market Commission (CNMV) nor the Manager Entities have approved or carried out any kind of check or verification with regard to the content of this Base Informative
48 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. Document, of the audited annual accounts submitted by the Company and of the credit rating and issue risk report required through Circular 1/2015. The intervention of the Governing Body of the MARF does not represent a statement or recognition of the full, comprehensible and consistent nature of the information set out in the documentation provided by the Issuer.
We recommend that the investor carefully read this Base Informative Document in full prior to taking any investment decision concerning marketable securities.
The Issuer hereby expressly states that it is aware of the requirements and conditions demanded for the acceptance, permanence and exclusion of the securities on the MARF, according to current legislation and the requirements of its governing body, and hereby agrees to comply with them.
The Issuer hereby expressly places on record that it is aware of the requirements for registration and settlement on Iberclear. The settlements of transactions will be performed through Iberclear.
25.2 Publication of the admission (incorporación) of the issue
The admission (incorporación) of the issue will be reported on the MARF website (http://www.aiaf.es/esp/aspx/Portadas/HomeMARF.aspx).
26. Liquidity agreement
The Issuer has not signed any liquidity undertaking whatsoever with any entity vis-à-vis the Commercial Paper to be issued under the aegis of the Commercial Paper Programme.
On Zaragoza, March 2, 2016.
As the person responsible for the Base Informative Document:
______Don Luis Barcelona Escartín GRUPOPIKOLIN, S.L.
49 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail. ISSUER
GrupoPikolin, S.L. Carretera de Logroño Km 6,5 Zaragoza
LEAD ARRANGERS
Bankia, S.A. Calle Pintor Sorolla Nº8 Valencia
Beka Finance, Sociedad de Valores, S.A. Calle Marqués de Villamagna, nº3, 3ª planta Madrid
Renta Markets, S.V., S.A. Pza. Manuel Gomez Moreno, 2 Pta. (Edificio Alfredo Mahou) Madrid
REGISTERED ADVISOR
PKF Attest, Servicios Empresariales, S.L. Alameda de Recalde, 36 48009, Bilbao
PAYING AGENT
Bankia, S.A. Calle Pintor Sorolla Nº8 Valencia
ISSUER’S LEGAL ADVISOR
J&A Garrigues, S.L.P. Calle Hermosilla, 3 28001 Madrid
50 This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
APPENDIX 1
CONSOLIDATED ACCOUNTS OF THE ISSUER FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31 2013
APPENDIX 1.DOCX
GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2013 Euros
Report ASSETS NOTES Acc. Period 2013 Acc. Period 2012
A) NON‐CURRENT ASSETS ...... 280.233.149,35 302.721.491,87 I) Intangible assets ...... 47.584.556,57 50.483.919,47 1.‐ Consolidation Goodwill………………………………………………………..…………. 6 12.644.713,38 12.705.154,38 2.‐ Other intangible assets………………………………………………………………..…… 11 34.939.843,19 37.778.765,09 II) Tangible assets ...... 9 38.405.040,08 39.126.925,34 1.‐ Land and buildings ...... 8.932.509,17 7.821.402,62 2.‐ Technical installation and other tangible assets ...... 28.745.828,77 30.432.689,68 3.‐ Advances an tangible assets in course ...... 726.702,14 872.833,04 III) Investment property ...... 10 1.415.833,88 3.589.658,32 IV) Non‐current investments in Group companies and associates ...... 728.355,42 72.633.368,55 1.‐ Shares in application of equity method …………………………………..………… 8728.355,422.947.127,74 2.‐ Credits to companies consolidated in application of equity method .. 13 ‐ 22 0,00 69.686.240,81 V) Non‐current financial assets ...... 13 146.306.366,34 97.419.689,93 VI) Deferred tax assets ...... 16 40.283.537,72 36.142.675,52 VII) Non‐current trade debtors...... 5.509.459,34 3.325.254,74 B) CURRENT ASSETS ...... 142.739.788,41 146.231.221,84 II) Inventories ...... 14 41.836.689,20 45.618.638,22 III) Trade and other receivables ...... 76.390.667,58 80.579.353,50 1.‐ Trade receivables for sale and services ...... 67.880.647,98 73.108.220,03 2.‐ Companies in application of equity method……………...……………………… 1.504,26 5.000,87 3.‐ Current tax assets ...... 1.483.850,08 951.158,22 4.‐ Other receivables…………………………………………….…………………..…………… 7.024.665,26 6.514.974,38 IV) Current investments in Group companies and associates ...... 13‐22 0,00 1.272.461,11 1.‐ Credits to companies consolidated in application of equity method .. 0,00 1.272.461,11 V) Current financial assets ...... 2.524.061,86 4.491.151,57 VI) Current prepayment and accrued income ...... 499.830,55 790.561,82 VII) Cash and cash equivalents ...... 21.488.539,22 13.479.055,62
TOTAL ASSETS (A+B) ...... 422.972.937,76 448.952.713,71
Zaragoza, 30 March 2014 Page 1 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2013 Euros
Report EQUITY AND LIABILITIES NOTES Acc. Period 2013 Acc. Period 2012 A) EQUITY ...... 241.870.524,12 232.992.835,76 A‐1) Shareholders`equity ...... 13 242.814.668,46 233.914.313,95 I) Share capital...... 58.037.080,00 57.998.410,00 1.‐ Registered share capital………………………………………………….………………… 58.037.080,00 57.998.410,00 II) Share premium ...... 90.840.265,10 90.680.265,10 III) Reserves…………………………….………………………………………….…………………………… 102.339.709,01 93.440.872,82 VI) Profit attributed to Parent Company…………………………………………………………… (8.402.385,65) (8.205.233,97) A‐2) Valuation adjustments ...... (1.899.577,13) (2.172.270,73) I) Conversion differences……………………………………………………………...……………… (2.208.826,82) (150.902,21) II) Other valuation adjustments……………………………………………….……………………… 13 309.249,69 (2.021.368,52) A‐3) Grants, donations or gifts and legacies received 20 285.610,20 699.549,73 A‐4) External shareholders ...... 7 669.822,59 551.242,81 B) NON‐CURRENT LIABILITIES ...... 84.648.506,50 93.438.265,47 I) Long‐term provisions ...... 18 8.086.336,16 7.704.167,40 II) Non‐current payables ...... 13 76.183.737,86 78.978.974,41 2.‐ Bank borrowings ...... 58.351.394,11 45.334.402,74 4.‐ Other financial liabilities ...... 17.832.343,75 33.644.571,67 III) Non‐current payables to Group companies and associates...... 13‐22 0,00 5.987.094,02 1.‐ Liabilities with companies consolidated in application of equity meth 0,00 5.987.094,02 IV) Deferred tax liabilities ...... 256.432,48 189.169,83 V) Long‐term time period adjustements ...... 0,00 456.859,81 VI) Non‐current trade creditors...... 122.000,00 122.000,00 C) CURRENT LIABILITIES ...... 96.453.907,14 122.521.612,48 II) Short‐term provisions ...... 621.893,57 61.663,74 III) Current payables ...... 13 26.402.096,00 57.969.614,79 2.‐ Bank borrowings ...... 24.516.830,77 51.479.418,89 4.‐ Other financial liabilities ...... 1.885.265,23 6.490.195,90 V) Trade and other payables...... 69.305.234,63 64.242.169,75 1.‐ Payable to suppliers ...... 13 36.978.335,35 34.875.746,60 2.‐ Payable to suppliers ‐ Group companies and associates ...... 13‐22 177.003,82 85.281,68 3.‐ Current tax liabilities ...... 754.186,57 58.031,32 4.‐ Other accounts payable…………………………………………………………………… 31.395.708,89 29.223.110,15 VI) Short‐term time‐period adjustements ...... 124.682,94 248.164,20
TOTAL EQUITY AND LIABILITIES (A+B+C) ...... 422.972.937,76 448.952.713,71
Zaragoza, 30 March 2014 Page 2 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS AS OF DECEMBER 31st, 2013 Euros
Report NOTES Acc. Period 2013 Acc. Period 2012 A) CONTINUING OPERATIONS 1.‐ Revenue ...... 24 336.718.196,88 333.251.729,07 a) Sales ...... 333.398.007,96 328.717.653,02 b) Services ...... 3.320.188,92 4.534.076,05 2.‐ Changes in stock in progress and finished goods ...... (3.471.359,76) 584.103,56 3.‐ Work carried out by the company on property ...... 0,00 631.366,51 4.‐ Materials and other suppliers ...... (149.640.244,47) (144.758.134,74) a) Consumption of goods ...... 17 (6.199.804,47) (4.921.411,28) b) Consump. of raw materials and other consumer goods ...... 17 (143.146.691,90) (140.615.202,19) c) Works carried out by other companies ...... (1.453.344,59) (313.363,61) d) Deterioration of goods, raw materials, and other consumer goods 1.159.596,49 1.091.842,34 5.‐ Other operating income ...... 6.663.177,63 4.866.927,74 a) Non‐core and other current operating income ...... 6.532.303,03 4.698.318,30 b) Income‐related grants trasferred to profit or loss...... 130.874,60 168.609,44 6.‐ Staff costs...... (97.036.927,41) (90.114.854,52) a) Wages, salaries and similar expenses ...... (74.249.458,64) (67.124.934,00) b) Staff welfare expenses ...... 17 (22.787.468,77) (22.989.920,52) 7.‐ Other operating expenses ...... (94.167.081,45) (103.509.050,55) a) Losses, deterioration and change of provision for bad debts………… (1.301.491,85) (2.742.014,81) b) Other current operating expenses ...... (92.865.589,60) (100.767.035,74) 8.‐ Amortisation charge ...... (6.664.214,40) (6.966.864,95) 9.‐ Non financial assets grants and others ...... 23.647,41 31.104,45 11.‐ Impairment and gains on disposals of non‐current assets ...... 9‐11 (2.238.109,78) (62.971,19) a) Impairment and losses (36.264,24) (66.243,52) b) Gains and losses on disposals and other ...... (2.201.845,54) 3.272,33 14.‐ Other profit and loss………………………………………………………………..………… 17 (134.860,53) (258.539,71) A.1) PROFIT FROM OPERATIONS...... (9.917.268,50) (6.305.184,33) 15.‐ Finance income ...... 4.731.159,14 6.687.252,14 a) Of investments in equity instruments ...... 126.723,06 755.027,94 b) Of marketable securities and other financial securities ...... 4.604.436,08 5.932.224,20 16.‐ Finance costs ...... (5.715.272,42) (5.133.887,98) 17.‐ Change of fair value of financial securities ...... 282.965,02 226.878,43 a) Trading portfolio and others ...... (72.024,85) 774.244,21 b) Profit and losses of non‐current assets classified as held for sale... 354.989,87 (547.365,78) 18.‐ Exchange differences ...... 395.823,12 160.584,19 b) Other exchange differences ………………………………………………………… 395.823,12 160.584,19 19.‐ Impairment and gains or losses on disposals of financial instruments. (2.485.631,50) (2.640.688,02) a) Impairment and gains or losses on disposals of financial instrumen (1.006.913,66) (812.223,96) b) Gains or losses on disposals and other ...... (1.478.717,84) (1.828.464,06) A.2) FINANCIAL PROFIT ...... (2.790.956,64) (699.861,24) 20.‐ Participation in losses (profits) of companies consolidated in applicat 120.233,81 (3.466.866,23) A.3) PROFIT BEFORE TAX ...... (12.587.991,33) (10.471.911,80) 23.‐ Income tax ...... 16 4.195.980,87 2.149.044,52 A.4) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS ...... (8.392.010,46) (8.322.867,28) A.5) PROFIT FOR THE YEAR ...... (8.392.010,46) (8.322.867,28)
Profit attributed to Parent Company………………………………………………………… (8.402.385,65) (8.205.233,97) Profit attributed to External shareholders……………………………………………….… 10.375,19 (117.633,31)
Zaragoza, 30 March 2014 Page 3 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management Report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2013
A) CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2013
Notes Acc. Period 2013 Acc. Period 2012
A) Profit per income statement ...... (8.392.010,46) (8.322.867,28)
Income and expense recognised directly in equity:
I. Arising from revaluation of financial instruments ...... 3.253.774,68 2.596.099,98 1. Available‐for‐sale financial assets ...... 3.253.774,68 2.596.099,98
II. Arising from cash flow hedges ……………………………………………...... 0,00 0,00
III. Grants, donations or gifts and legalicies received ………………………………… 150.996,36 181.863,74
IV. Actuarial profit and losses and other adjustments ……………………………… 0,00 0,00
V. Conversion differences…………………………………….………………………………………… (2.235.594,35) 150.902,21
VII. Tax effect …………………………………………………………………...... (1.017.702,52) (690.294,45)
B) Total income and expense recognised directly in consolidated equity (I+II+III+IV+V+VI+VII) ...... 151.474,17 2.238.571,48
Transfers to profit or loss:
VIII. Arising from revaluation of financial instruments ...... (1.588.360,42) (490.017,14) 1. Available‐for‐sale financial assets ...... (1.588.360,42) (490.017,14)
X.Grants, donations or gifts and legalicies received ………………………………… 39.922,00 (40.261,73)
XIII. Tax effect …………………………………………………………………...... 451.914,24 200.110,62
C) Total transfers to profit and loss (VIII+IX+X+XI+XII+XIII) ...... (1.096.524,18) (330.168,25)
TOTAL RECOGNISED INCOME AND EXPENSE (A + B + C) ...... (9.337.060,47) (6.414.464,05)
Zaragoza, 30 March 2014 Page 4 Zaragoza,
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL CONSOLIDATED EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013
30 B) STATEMENT OF CHANGES IN TOTAL CONSOLIDATED EQUITY FOR THE YEAR ENDED 31 DECEMBER 2013 March Translation
2014 Grants, Reserves and Profit attributed donations or Valuation External
Concept Share capital Share premium prior years to Parent gifts and TOTAL adjustments shareholders of
profits (losses) Company legacies a
report received Annual GRUPOPIKOLIN,
originally In
Accounts
A. ENDING BALANCE AT 12/31/11 ………………………..………………. 57.998.410,00 90.680.265,10 93.975.830,60 634.031,94 (3.691.214,18) 557.947,72 421.018,35 240.576.289,53 the
issued event I. Adjustment due to changes in policies 2011…………………..… 0,00
of II. Adjustment for errors 2011 ………………………...…...……..…….……… (556.778,86) (556.778,86) in
a and Spanish
discrepancy,
S.L.
B. ADJUSTED BALANCE AT 01/01/12 …………………..…………...…… 57.998.410,00 90.680.265,10 93.419.051,74 634.031,94 (3.691.214,18) 557.947,72 421.018,35 240.019.510,67 Management
and
AND
I. Total income and expense recognised (**) …………...………………… (8.205.233,97) 1.518.943,45 141.602,01 130.224,46 (6.414.464,05) prepared the
SUBSIDIARIES Spanish III. Other changes in consolidated equity……………………….……………. 21.821,08 (634.031,94) (612.210,86) in
accordance
2.‐ Dividends from subsidiaries to parent company…….. 0,00 ‐ Report 3.‐ Distribution of profit ………………...…………………………….. 634.031,94 (634.031,94) 0,00 language 4.‐ Other changes in equity ………………...………………………….. (612.210,86) (612.210,86)
consolidated version with
COMPANIES
C. ENDING BALANCE AT 12/31/12…………………………….……………… 57.998.410,00 90.680.265,10 93.440.872,82 (8.205.233,97) (2.172.270,73) 699.549,73 551.242,81 232.992.835,76 the
prevails.
audit II. Adjustment for errors 2012 ……………………………………...………..… 0,00
regulations
D. ADJUSTED BALANCE AT 01/01/13 ………………………….…..……… 57.998.410,00 90.680.265,10 93.440.872,82 (8.205.233,97) (2.172.270,73) 699.549,73 551.242,81 232.992.835,76 2013
I. Total income and expense recognised (**) …………………… (8.402.385,65) (859.006,96) (80.873,05) 5.205,19 (9.337.060,47) in
force
II. Transactions with equity holders or owners ……………………….…… 38.670,00 160.000,00 (1.770,00) 0,00 0,00 0,00 0,00 196.900,00 in
1.‐ Capital increases (+) ………………...……………………..……… 38.670,00 160.000,00 (1.770,00) 0,00 0,00 0,00 0,00 196.900,00 Spain.
III. Other changes in consolidated equity……………………….……………. 8.900.606,19 8.205.233,97 1.131.700,56 (333.066,48) 113.374,59 18.017.848,83 3.‐ Distribution of profit ………………...…………………………….. (8.205.233,97) 8.205.233,97 0,00 4.‐ Other changes in equity ………………...………………………….. (1.788.109,11) (1.788.109,11) Page
5 E. ENDING BALANCE AT 12/31/13……………………………...……….…… 58.037.080,00 90.840.265,10 102.339.709,01 (8.402.385,65) (1.899.577,13) 285.610,20 669.822,59 241.870.524,12
(**) The profit of the stament of recognised income and expense includes the profit attributed to Parent Company and the profit attributed to External shareholders. GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management Report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
NORMAL CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
Notes Acc. Period 2013 Acc. Period 2012 A) CASH FLOWS FROM OPERATING ACTIVITIES……………………………...………………….. 7.684.365,59 (21.258.076,17)
1. Profit for the year before tax...... (12.587.991,33) (10.471.911,80)
2. Adjustements for:...... 12.049.786,11 11.894.834,89 a) Depreciation and amortisation charge (+)...... 6.664.214,40 6.966.864,95 b) Impairment losses (+/‐)...... 602.588,50 (190.256,22) c) Changes in provisions (+/‐)...... 942.398,59 4.265.664,34 d) Grants (‐)...... (23.647,71) (31.104,45) e) Losses on derecognition and disposal of non‐current assets (+/‐)...... 2.201.845,54 (3.272,33) f) Losses on derecognition and disposal of financial instruments (+/‐)...... 1.123.727,97 581.668,89 g) Finance income (‐)...... (4.731.159,14) (6.580.317,83) h) Finance costs (+)...... 5.715.272,42 5.133.887,98 i) Exchange differences (+)...... (395.823,12) (160.584,19) j) Change of fair value of financial securities(+/‐)...... 72.024,85 (774.244,21) k) Other income and expenses (‐/+)...... (1.422,38) (780.338,27) l) Participation in losses (profits) of companies consolidated in application of equ (120.233,81) 3.466.866,23
3. Changes in working capital...... 9.637.846,84 (23.439.789,68) a) Inventories (+/‐)...... 4.093.336,17 (6.421.828,95) b) Trade and other receivables (+/‐)...... (3.681.472,61) (9.466.552,32) d) Trade and other payables (+/‐)...... 7.408.086,93 (8.457.368,35) e) Other current liabilities (+/‐)...... 2.325.910,93 96.507,39 f) Other non‐current assets and liabilities (+/‐)...... (508.014,58) 809.452,55
4. Other cash flows from operating activities...... (1.415.276,03) 758.790,42 a) Interest paid (‐)...... (5.522.067,20) (5.164.698,75) b) Dividens received (+)………………………………………………………………………………………… 126.723,06 755.027,94 c) Interest received (+)...... 4.119.872,61 5.857.390,20 d) Income tax recovered (paid) (+/‐)...... 235.343,11 (50.876,02) e) Other payments (collections) (+/‐)...... (375.147,61) (638.052,95)
5. Cash flows from operating activities (1+2+3+4)...... 7.684.365,59 (21.258.076,17)
B) CASH FLOWS FROM INVESTING ACTIVITIES ………………………………………….…………… 19.362.164,81 (6.669.933,55)
6. Payments due to investments (‐)...... (30.084.046,19) (38.110.684,64) a) Group companies and associates...... (18.649.682,96) (15.130.040,43) b) Intangible assets...... 0,00 (7.631.628,89) c) Tangible assets...... (8.157.090,78) (7.578.791,25) d) Investment property...... 0,00 (72.400,32) e) Other financial assets...... (3.277.272,45) (7.256.686,44) g) Other assets...... 0,00 (441.137,31)
7. Proceeds from disposal (+)...... 49.446.211,00 31.440.751,09 b) Intangible assets...... 2.262.123,76 1.484.656,64 c) Tangible assets...... 0,00 1.837.715,72 d) Investment property...... 0,00 100.596,87 e) Other financial assets...... 47.184.087,24 28.017.781,86 g) Other assets......
8. Cash flows from investing activities (7+6)...... 19.362.164,81 (6.669.933,55)
Zaragoza, 30 March 2014 Page 6 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management Report consolidated 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
NORMAL CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2013
Notes Acc. Period 2013 Acc. Period 2012
C) CASH FLOWS FROM FINANCING ACTIVITIES ……………………………………………………… (19.432.869,92) 20.932.223,61
9. Proceeds and payments relating to equity instruments...... 0,00 218.460,86 e) Grants, donations or gifts and legacies received (+)...... 0,00 218.460,86 10. Proceeds and payments relating to financial liability instruments...... (19.632.892,44) 20.713.762,75 a) Issue of...... 8.215.644,55 34.006.966,11 2. Bank borrowings (+)...... 851.677,10 21.609.874,85 3. Payables to Group companies and associates (+)...... 0,00 4.564.917,65 4. Others (+)...... 7.363.967,45 7.832.173,61 b) Repayment of...... (27.848.536,99) (13.293.203,36) 2. Bank borrowings (‐)...... (12.566.435,98) (5.735.569,66) 3. Others (‐)...... (15.282.101,01) (7.557.633,70) 12. Cash flows from financing activities (9+10+11)...... (19.432.869,92) 20.932.223,61
D) EFECT OF FOREIGN EXCHANGE RATE CHANGES ...... 395.823,12 160.584,19
E) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (5+8+12+D)……….. 8.009.483,60 (6.835.201,92) Cash and cash equivalents at beginnig of year...... 13.479.055,62 20.314.257,54 Cash and cash equivalents at end of year...... 21.488.539,22 13.479.055,62
Zaragoza, 30 March 2014 Page 7 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
CONSOLIDATED REPORT FOR FINANCIAL YEAR 2013
NOTA 1 COMPANIES OF THE GROUP
1.1 Parent company
GRUPOPIKOLIN, SL, was incorporated on April 24, 2003. The company's registered office is located in Zaragoza, Autovía de Logroño, Km. 6.5 km, its tax identification code is B50966654, and it is filed at the Zaragoza Mercantile Registry Volume 2929, folio 47, sheet No. Z‐33 424, entry 1, dated 14 May, 2003.
The corporate purpose of GRUPOPIKOLIN, SL and SUBSIDIARY COMPANIES is to perform the following business activities: The manufacture, marketing, purchase and sale of mattresses, spring mattresses, beds and pillows, whatever their components or raw materials; The acquisition, promotion, operation and disposal of property; The acquisition, possession, use, management, and administration of securities; The investment in assets and finances; The promotion, development and participation in other companies and legal trading businesses.
The group conducts its operations in the territories where the participated companies operate, mainly in the domestic market and in those countries where non‐Spanish participated companies operate, which are mentioned in the scope of consolidation included in this note.
All the companies within the scope close their individual annual accounts on 31 December 2013, with the exception of Dunlopillo Holdings Sdn. Bhd. (Malaysia), and its subsidiaries, which close their accounts on 30 June 2013, and form a GROUP of Companies, according to article 42 of the Spanish Commercial Code, by direct and indirect control of the parent company in the companies included in the consolidation.
GRUPOPIKOLIN, S.L., based on agreement taken by its General Meeting of Shareholders, on 7 November 2013, was partially spun off, without dissolution, and segregates part of its Capital, forming an economic, autonomous and independent unit, in the form of 310 shares in GrupoEbrosol, S.L.U., which are awarded to the newly created Company, Nuevo GrupoEbrosol, S.L., which represents a change in the scope of consolidation with respect to the previous financial year, as reported in Note. 5.
These consolidated annual accounts are prepared based on the global integration method, in the case of GRUPOPIKOLIN, S.L. as the parent company and its subsidiaries, owned directly or indirectly by it, as well as based on the equity method in the case of participated multi‐group and associated companies.
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1.2 Subsidiaries.
The subsidiaries included in the consolidation are identified below:
Indirect Indirect Carrying Name of Company / Domicile share share value Activity PIKOLIN, S.L. 99.99% 127,575,647 Manufacture and sale of mattresses, Autovía de Logroño, Km. 6,5 ‐ Zaragoza bed bases, beds, furniture, and others CONFORDES, S.L. 99.99% 4,278,426 Manufacture and sale of mattresses, C/ Coso, 55 – Zaragoza bed bases, beds, furniture, and others ESPAÑOLA DEL DESCANSO, S.L. (ESPADESA) 99.99% 890,066 Marketing and distribution through Autovía de Logroño, Km. 6,5 ‐ Zaragoza furniture franchises in general SEIVIRIBER, S.A. 99.93% 95,168 Security and surveillance services Autovía de Logroño, Km. 6,5 ‐ Zaragoza PIKOLIN LUSITANA, LTDA 99.19% 855,377 Marketing of mattresses Zona Industrial Vila Amelia. Palmela ‐ Lisbon (Portugal) (1) and bed bases COMPAÑÍA EUROPEA DE ARTICULOS 99.50% 4,013,671 Marketing of items for DEL DESCANSO, S.L. (CEADESA) rest/sleep. Autovía de Logroño, Km. 6,5 ‐ Zaragoza ESPAÇO DESCANSO UNIPESSOAL, LTDA 100.00% 150,000 Marketing of mattresses and bedsteads Rodrigo de Beires, 57. Aldeia de Paio Pires (Portugal) SMATTEX, S.L. 85.01% 5,502,417 Manufacture and sale of mattresses, P.I. Les Vinyes, parcelas 2 & 3. Miramar (Valencia) bed bases, beds, furniture, and others SAS COFEL (COMPAGNIE FINANCIERE 99.99% 66,432,584 Holding of securities EUROPEENNE LITERIE) (1) 27 Rue du Coronel Pierre Avia, Paris (France) COPIREL SAS (COMPAGNIE PIKOLIN 99.99% 48,197,404 Manufacture and sale of mattresses, RECTICEL LITERIE) (2) bed bases, beds, furniture, and others 27 Rue du Coronel Pierre Avia, Paris (France) ESPACIO DESCANSO SPAIN, S.L. 99.90% 9,990 Marketing of products for decoration Autovía de Logroño, Km. 6,5 ‐ Zaragoza furnishing and rest/sleep. Manufacture and marketing of beds, INDUSTRIAS HIDRÁULICAS PARDO, S.L. 100.00% 755 furniture and mechanical and hydraulic accessories for Autovía de Logroño, Km. 5.800 ‐ Zaragoza health and hospital use. Marketing of beds, furniture and ASTABURUAGA HEALTHCARE, S.L.U. 100.00% 3,600 accessories for Autovía de Logroño, Km. 5.800 ‐ Zaragoza (3) health and hospital use DUNLOPILLO (HOLDINGS) SDN BHD 100.00% 17,602,204 Holding of securities SubangJaya Selangor ‐ Malaysia DUNLOPILLO (MALAYSIA) SDN BHD 100.00% Marketing of items for sleep/rest Malaysia (4) DUNLOPILLO (SINGAPORE) PTE LTD 100.00% Marketing of items for sleep/rest Singapore (4) Manufacture and marketing of items for DUNLOPILLO (VIETNAM) LTD 100.00% sleep/rest Vietnam (5) Manufacture and marketing of items for DUNLOPILLO (SHENZHEN) LTD 100.00% sleep/rest Shenzhen, Province of Canton‐ People’s Republic of China (4) DUNLOPILLO (HONG KONG) LTD 100.00% Marketing of items for sleep/rest Hong Kong (4) ______Zaragoza, 30 March 2014 Page 9 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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DUNLOPILLO (MIDDLE EAST) LTD 100.00% Marketing of items for sleep/rest United Arab Emirates (4) 1) Share through PIKOLIN, S.A. 2) Share through SAS COFEL, and in turn through PIKOLIN, S.A. 3) Share through Industrias Hidraulicas Pardo, S.A. 4) Share through Dunlopillo (Holdings) Sdn Bhd. 5) Share through Dunlopillo (Singapore) Pte Ltd.
All the companies within the scope close their annual accounts on 31 December 2013, with the exception of Dunlopillo Holdings Sdn. Bhd, which closes its accounts on 30 June 2013, which is why the interim financial statements closed on 31 December have been integrated, and they have been included in the consolidation, applying the global integration method. The assumption that determines the configuration of these companies as subsidiaries is the provision of the majority of voting rights.
These consolidated annual accounts and individual annual accounts of the 2013 financial year of Pikolin, S.A., Confordes, S.A., Española del Descanso, S.A., Compañía Europea de Artículos del Descanso , S.A., Ibernex Ingeniería, S.L. and Smattex, S.A., have been audited by CGM Auditores; those of Pikolin Lusitana, Ltda. have been audited by L. Graça R. Carvalho & M. Borges, Sroc Ldad. (Portugal); those of S.A.S. COPIREL, S.A.S. COFEL and the consolidated accounts of the COFEL Group by Laurent Nadjar & Associés (France) and Deloitte & Associés (France) as co‐auditors of the French sub‐Group, and the consolidated accounts of Dunlopillo (Holdings) Sdn Bhd, which have been audited by PricewaterhouseCoopers (Malaysia).
1 January 2008 has been considered as the date of first consolidation, with the exception of those companies that entered the scope in the 2009 financial year, in which case 1 January 2009 has been considered. In the case of the two companies acquired in the 2012 financial year, the date of first consolidation was 10 January 2012 for Dunlopillo (Holdings) Sdn Bhd, and 4 October 2012 for Industrias Hidráulicas Pardo, S.A.
NOTA 2 ASSOCIATED AND MULTI‐GROUP COMPANIES.
The multi‐group and associated companies included in the consolidation are listed below:
Indirect Indirect Carrying Company / Domicile share share value Activity SPACIO REPOS, S.L. 50.00% 2,000,000 € Manufacture and marketing of Gregorio Marañón 9 ‐ Madrid (1) textile products 1) Share through PIKOLIN, S.A.
The multi‐group company has been included in the consolidation by the equity method due to the fact that it is understood that the annual accounts adequately show the fair view of the Group situation, as the valuation of the items is concentrated in the balance sheet, and profit and loss account items of companies accounted for by the equity method, standardising the criterion applied for all companies, be they multi‐group or associated, over which the Group has no effective control.
The assumption that determines the configuration of companies as multi‐group, is the existence of
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agreements that permit the right of veto in corporate decisions.
The joint management with the group is carried out for the Sociedad Spacio Repos, S.L. with Madritex, S.L.
The company has been included in the consolidation by the equity method and closes its annual accounts on 31 December 2013.
The annual accounts are presented in accordance with Article 42 of the Spanish Commercial Code, and rules 13 and 15 for the preparation of third‐party annual accounts of the Spanish Chart of Accounts, with regard to the relations of partnership or association between companies. The parent company, GRUPOPIKOLIN S.L, whose registered office is in Zaragoza, must prepare consolidated annual accounts and file them in the Mercantile Registry of Zaragoza. The 2012 consolidated annual accounts of the Group that the Parent Company and its subsidiaries form part of, were approved by the shareholders of GRUPOPIKOLIN, S.L. at the meeting held on 29 June 2013.
The Group operates with Euros as its functional currency.
NOTA 3 BASIS OF PRESENTATION OF THE CONSOLIDATED ANNUAL ACCOUNTS.
3.1 Fair view:
The consolidated annual accounts, comprised of consolidated balance sheet, consolidated profit and loss account, consolidated statement of changes in total equity, consolidated statement of cash flow and consolidated report, have been prepared based on the accounting records of the Parent company and on those of each one of the companies included in the consolidated group. These consolidated annual accounts are presented in accordance with the regulatory framework for financial reporting that applies to it, and in particular with the accounting principles and criteria contained therein, in order to show the fair view of the equity, of the financial situation and of the results of the group, as well as the veracity of the flows incorporated into the consolidated cash flow statement.
For the purpose of these consolidated annual accounts, the regulatory framework applied is established in:
a) Royal Decree 1159/2010, 17 September, which approves the Rules for the Formulation of Consolidated Annual Accounts, amending the Spanish General Chart of Accounts.
b) Spanish Commercial Code and other mercantile legislation.
c) General Chart of Accounts and its sectoral adaptations.
d) Rules of compulsory compliance approved by the Institute of Accounting and Accounts Audits in the development of the General Chart of Accounts and its supplementary rules.
e) All other Spanish accounting regulations that might be applicable.
There are no exceptional reasons why accounting provisions have not been applied in order to show the fair view.
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consolidated annual accounts, are awaiting approval by the respective General Meetings of Partners and Shareholders, and it is thought that they shall be approved without any substantial modification.
3.2 Critical issues relating to the measurement and estimation of uncertainty.
The Group has prepared its financial statements under the principle of a “going concern” (Empresa en Funcionamiento). As a result, there is no significant risk that may entail considerable changes in the value of assets or liabilities during the following year.
During the preparation of the enclosed consolidated annual accounts, estimates made by the Directors of the Parent company were used in order to quantify some of the assets, liabilities, revenues, expenses and commitments reported herein. Basically, these estimates refer to:
- Useful life of tangible assets, investment property and intangible assets (see NOTES 9, 10 and 11).
- Measurement of the impairment of goodwill (See NOTE 6).
- Calculations of impairment losses of non‐current assets (see NOTES 9, 10 and 11 ).
- Calculations of fair value of certain financial instruments (see NOTE 13).
- Calculations of provisions and tax credits (see NOTE 16).
Although these estimates were made based on the best available information at the time these annual accounts were prepared, regarding the events analysed, it is possible that new events may occur in the future that will make it necessary to change them in coming financial years. This would be done prospectively, recognising the effects of the change in estimate in the respective future profit and loss accounts.
3.3 Grouping of Items.
Some items in the consolidated balance sheet, consolidated profit and loss account, consolidated statement of changes in equity, and in the consolidated statement of cash flow, are presented in an aggregated way in order to be understood more easily. However, when significant, disaggregated information has been included in the relative note of this report of the annual accounts.
3.4 Information comparison.
The information presented in these annual consolidated accounts for the financial year is not comparable with the respect to the previous year, as a result of the segregation produced this year (see Note 1), as a result of which the Company GrupoEbrosol, S.L. and its subsidiaries are not included in the scope of consolidation, as reported in Note 5 of this report.
3.5 Classification of current and non‐current items.
The maximum period of one year as from the date of these consolidated annual accounts has been considered to classify current items.
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3.6 Changes in accounting criteria and errors.
As a result of the proceedings carried out by the tax authorities (see Note 16), a change in accounting estimation has been generated during this financial year of 2013, due to value change adjustment of the tax assets of a company of the group.
In the 2012 financial year, an error was recognised due to activated expenses that belonged to the previous year, amounting to 0.5 million Euros, which meant recognising a credit and a charge against equity.
NOTA 4 RECOGNITION AND MEASUREMENT
The main recognition and measurement rules used to prepare the consolidated annual accounts include:
4.1 Consistency.
4.1.1 Consistency in timing.
The enclosed consolidated annual accounts have been established on the same date and in the same period as the annual accounts of the company forced to consolidate.
All the group companies close their financial year on the same date as the consolidated annual accounts, with the exception of one company and its subsidiaries, which close their financial year on 30 June each year, so they are included in these consolidated annual accounts via interim accounts referring to the same date and period the consolidated accounts refer to.
In the previous financial year, and in the case of the company that joined the group in this period, the profit and loss account, the statement of changes in equity and the state of individual cashflows of the aforementioned company, included in the consolidation of financial year 2012, referred solely to the part of the period when this company joined the group.
4.1.2 Consistency in values.
The assets and liabilities, income and expenses, and other items of the annual accounts of the group companies, are measured based on uniform methods, and in agreement with the measurement principles and standards established in the Code of Commerce, rewritten text of the Capital Company Act and General Chart of Accounts, and other legislation that is specifically applicable.
In the case of foreign companies included in the scope of consolidation, they prepare their annual accounts and other records according to the relative accounting standards, based on the legislation in force in the country of origin. Insofar as these accounting and measurement criteria differ to those adapted by the group in the drawing up of their consolidated annual accounts, these have been adjusted in order to present the consolidated annual accounts in agreement with the uniform measurement principles.
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4.1.3 Consistency in terms of internal transactions.
When, in the annual accounts of the group companies, the amounts of the items derived from internal transactions do not coincide, or there are items awaiting recognition, the appropriate adjustments are made to carry out the relative eliminations.
4.1.4 Consistency to carry out the aggregation.
The necessary reclassifications are carried out in the annual accounts structure of one group company in order for this to coincide with the structure of the consolidated annual accounts.
4.2 Consolidation goodwill and negative consolidation difference.
The first consolidation difference is calculated as the difference between the carrying value of the share in the capital of subsidiaries and the proportional value of the consolidated shareholders’ equity of these companies on the date of first consolidation.
The positive consolidation difference corresponding to the surplus between investment cost and the theoretic carrying value, in years prior to 2008, and the fair value of assets and of liabilities for acquisitions after 1 January 2008, attributable to the participated company on the date of incorporation into the Group, is directly attributed, when possible, to the assets of the subsidiary, not exceeding the market value thereof. When it cannot be assigned to assets, it is considered as consolidation goodwill, and consequently the relative impairment test has to be carried out annually.
The consolidation goodwill as at 31 December 2013 and 2012 (see Note 6), corresponds to the subsidiaries and to the multi‐group, which are described in Notes 1 and 2 of this report.
If the difference is negative, a re‐assessment of the measurement of assets, liabilities and contingent liabilities acquired is carried out. If the negative difference continues to exist after this, it is recorded as a profit in the income statement. With reference to companies acquired in the previous period (see note 5), the fair values of their assets and liabilities were re‐assessed and adapted, where fitting, as at the date of first consolidation. The negative consolidation differences, in periods prior to 2008, have been recorded as reserves.
4.3 Reserves in consolidated companies.
This section includes non‐distributed results and after deducting the amortised goodwill, generated by the subsidiaries between the date of first consolidation and the beginning of the period presented.
4.4 Minority interests.
The value of the minority shareholders’ participation in equity and in the year’s results of the subsidiaries is presented, together, in the section “Minority interests” of the liabilities of the consolidated balance sheet and its breakdown in Note 7 of this report.
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4.5 Balances and transactions between companies included in the scope of consolidation.
Eliminations of reciprocal receivables and payables, reciprocal income and expenses, and results from internal transactions have been carried out in accordance with Royal Decree 1159/2010, 17 September, in this regard.
4.6 Intangible Fixed Assets (see NOTE 11).
Intangible fixed assets are initially recognised at cost, whether this is the acquisition price or the production cost, including, where appropriate, any additional costs incurred until they can be commissioned.
After initial recognition, intangible fixed assets are measured at cost, less the accumulated depreciation and, where appropriate, the accumulated amount of recorded impairment losses.
Each intangible fixed asset is analysed to determine whether its working life is finite or indefinite. There are no intangible fixed assets with indefinite working lives.
Maintenance or repair costs that do not improve the use or do not extend the working life of assets will be recognised in the profit or loss account at the time they occur.
a) Research and development
As a general criterion, the group records the research and development expenses as expenses of the year when they are carried out.
However, in certain cases, the group chooses to activate them as intangible fixed assets, from the time when the following conditions are fulfilled:
− When they are specifically personalised for projects, and their cost is clearly established for them to be clearly distributed in time.
− When there are founded reasons for the technical success and economic‐commercial profitability of the project or projects in question.
When there are reasonable doubts about the technical success or economic‐commercial profitability of certain projects, the amounts recorded in the assets are directly allocated to losses of the period.
The projects are measured at acquisition or production price, according to the straight‐line depreciation method, within five years at the most, charged to the result of the period.
b) Software.
Third‐party software is recognised in accordance with the acquisition cost.
Computer programs that satisfy the recognition criterion are activated at their acquisition or production cost.
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Maintenance costs of software applications are allocated to profit or loss of the year when they are incurred.
c) Industrial property.
The remaining intangible fixed assets corresponding to activated costs, are associated with the procurement of patents, licences, trademarks and the development of new products, with respect to which there are well‐founded reasons to expect a satisfactory economic and commercial return on investment.
4.7 Tangible Fixed Assets (see NOTE 9).
They are measured at cost, either at acquisition price or production cost, increased, where applicable, by upgrades performed in accordance with the different legal provisions. The last of these corresponded to the upgrade carried out on 31 December 1996, including additional costs incurred until ready for commissioning, and decreased by the amount of accumulated depreciation and impairment losses experienced.
Indirect taxes levied on tangible assets are only included in the acquisition price or production cost, when they cannot be directly recovered from the Treasury.
Costs of expansion, modernisation or improvements, leading to an increase in productivity, capacity or efficiency , or a lengthening of the working life of the assets, are accounted for at a higher cost thereof. Maintenance or repair costs that do not improve the use or do not extend the working life of assets will be recognised in the profit or loss account at the time they occur.
Included as a higher value of the tangible assets is the initial estimate of the current value of the obligations assumed, derived from dismantling or derecognition and other obligations associated with this asset, such as the costs of restoring the site on which they are located, whenever such obligations give rise to the recognition of provisions.
Work carried out by the Group on its own property, plant and equipment is reflected in accordance with the cost price of raw materials and other consumables, the costs directly attributable to such assets, and a reasonable proportion of the indirect costs.
The directors of the Parent Company consider that the carrying value of the assets does not exceed their recoverable value.
Depreciations are established in a systematic and rational manner depending on the working life of the assets and on their residual value, based on the depreciation that they usually suffer due to their operation, use and enjoyment, also considering that technical or commercial obsolescence could affect them. Where appropriate, when the Group companies obtain additional information of a technical nature, about the working life of the different fixed assets, the periods of the different elements are adapted, in agreement with their use in the activity and according to their characteristics. This change represents a change in estimation of the book depreciation with impact on the period. During this period, it has amounted to nine hundred and sixty‐seven thousand Euros.
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An impairment loss of an item of a tangible asset is recorded when its carrying value exceeds its recoverable value, defined as the higher of its fair value less costs to sell and its value in use.
Additionally, the following special rules on fixed assets are applied:
4.7.1 Land and natural resources:
Preparation costs, such as closures, earthworks, sewage and drainage works, demolition of buildings are included in the acquisition cost when necessary to be able to carry out new works, as well as costs for inspection and drawing up plans when carried out prior to their acquisition, and, where appropriate, the initial estimate of the current value of these obligations derived from the cost of restoring the land.
4.7.2 Utensils and tools:
Utensils and tools incorporated into mechanical elements are measured and amortised in accordance with the same rules that apply to the latter.
In general, those that do not form part of a machine and whose estimated period of use is less than one year, are recorded as expense for the financial year. When the period of use exceeds one year, they are recorded as fixed assets at the time of purchase, and are normalised when the year ends, according to the physical inventory carried out, with a reasonable decrease for demerit.
4.7.3 Assets under construction and advances:
These include all payments on account incurred for the purchase of fixed assets before their actual delivery or before they are made ready for their intended use.
4.8 Investment property (see NOTE 10).
The Group classifies as investment property, land and buildings held either to earn rentals or for capital depreciation at the disposal date, as a result of the increases that may occur in the future in their respective market prices.
To measure the investment property, the following criteria are used for property, plant and equipment:
- Vacant land is measured at its acquisition price plus the preparation costs.
- Buildings are measured at their acquisition price or production cost, including those facilities and items that have a permanent nature by the rates inherent to the construction and project management fees.
4.9 Leases and other operations of similar nature (See NOTE 12):
Lease means any agreement whereby the lessor conveys to the lessee the right to use an asset for a certain period of time, in exchange for a lump sum of money or a series of payments or instalments, irrespective of whether the lessor may be obliged to provide services connected with the operation or maintenance of the asset. ______Zaragoza, 30 March 2014 Page 17 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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Operating lease is the one that grants the lessee the right to use an asset for a period of time, in exchange for a lump sum or a series of payments, but it is not recognised as a financial lease.
Leases are classified as financial leases whenever the terms thereof show that the risks and benefits inherent to ownership of the asset under contract are substantially transferred to the lessee. All other leases are classified as operating leases.
In operating leases, ownership of the leased asset and substantially all the risks and benefits that fall on the good leased, remain with the lessor.
The revenues and expenses, corresponding to the Group or the Company that acts as lessor and lessee, resulting from operating lease agreements, will be considered, respectively, as revenues and expense for the year in which they are accrued, and are attributed to the profit and loss account.
4.10 Financial Instruments (see NOTE 13).
In the chapter on financial instruments, the Group has recognised those contracts that give rise to a financial asset in a company and, simultaneously, to a financial liability or an equity instrument in another company. For the purpose of these annual consolidated accounts, the financial instruments are considered therefore as follows:
a) Financial assets
- Cash and cash equivalents:
- Trade accounts receivables: Customers and sundry debtors:
- Third party receivables: such as loans and financial appropriations granted, including those that arise from the sales of non‐current assets.
‐ Debt securities from other acquired companies: such as bonds, debentures and promissory notes.
- Equity instruments from other acquired companies: shares, participations in collective investment institutions and other equity instruments.
- Derivatives with favourable appraisal for the company: including futures, options, financial swaps and sale of foreign currency , and
- Other financial assets: Such as deposits with credit institutions, advances and loans to personnel, security deposits and guarantees.
b) Financial liabilities:
- Trade accounts payable: suppliers and sundry creditors.
- Debts with credit institutions:
- Derivatives with unfavourable appraisal for the company: including futures, options, financial swaps and sale of foreign currency.
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- Other financial liabilities: debts with third parties, such as loans and financial appropriations received from people or companies that are not credit institutions, including those that arise from the purchase of non‐current assets, security deposits and guarantees received.
c) Own equity instruments: all the financial instruments that are included within shareholders’ equity, such as ordinary shares issued of the parent company.
4.10.1 Current and non‐current financial investments.
‐ Loans and receivables: Trade accounts receivable and other non‐trade receivables are included in this category: receivables for the disposal of investments, interests receivable, advances to staff and securities established.
They are initially measured at fair value which, unless there is evidence to the contrary, will be the price of the transaction, which will be equal to the fair value of the consideration given plus any transaction costs that might be directly attributable to them.
Notwithstanding the above, trade accounts receivable with maturity date of over one year and without any contractual interest rate, as well as securities whose sum is expected to be received in the short term, are measured at face value when the effect of not adjusting the cash flows is not significant.
Subsequent measurement of these assets is carried out at amortised cost and the interests accrued are recognised in the profit and loss account, applying the effective interest method. However, assets whose maturity date is less than one year, which in agreement with that mentioned above, are measured initially at their face value, continue to be measured at this amount, unless there has been impairment.
At year‐end, the necessary value adjustments are made if there is objective and reasonable evidence that the value of an asset has become impaired. This evidence is generally obtained due to the continued delay in recoveries or the knowledge of the possible insolvency of the debtor.
Impairment losses, as well as their reversal when the amount of this loss decreases, are recognised as an expenditure or revenue, respectively, in the profit and loss account.
‐ Investments held to maturity. Those debt securities with fixed maturity date, fixed or ascertainable payments, which are negotiated in an active market and that the Group intends and has the capacity to keep until their maturity are included in this category.
They are initially recognised at the value of the consideration given plus any directly attributable transaction costs. These investments are measured later at their amortised cost and the interests accrued in the period are calculated by applying the effective interest method.
Impairment losses are recognised in the profit and loss account, and calculation in accordance with the difference between their carrying value and the current value at close of the financial year of the future cash flows that are estimated are going to be generated, deducted at the effective interest rate calculated at the time of their initial recognition.
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‐ Other financial assets at fair value with changes in the profit and loss account.
These refer to hybrid financial assets. They are initially measured at their fair value, which, unless there is evidence to the contrary, is the transaction price, which will be equal to the fair value of the consideration given. The transaction costs that are directly attributable to it are recognised in the profit and loss account of the financial year.
Subsequent measurement is carried out at fair value, not deducting the transaction costs that might have been incurred in their disposal. Any changes that occur in the fair value are allocated to the profit and loss account in accordance with the pending life until their maturity.
‐ Available‐for‐sale financial assets: these include all other investments that do not fall within the previous categories. In the majority of the cases, they correspond to financial investments in capital, with an investment of less than 20%.
They are initially measured at fair value which, unless there is evidence to the contrary, will be the price of the transaction, which will be equal to the fair value of the consideration given plus any transaction costs that might be directly attributable to them.
Subsequent measurement is carried out at fair value, not deducting the transaction costs that might have been incurred in their disposal. Any changes that occur in the fair value are directly recognised in the equity, until the financial asset is derecognised from the Balance sheet or is impaired, at which time the sum, thus recognised, is allocated to the profit and loss account.
At year‐end, at least, the necessary value adjustments are made so long as there is objective evidence that the value of an available‐for‐sale financial asset has become impaired as a result of one or more events that have occurred after their initial recognition, and that they cause the lack of recoverability of the carrying value of the asset, evidenced by a prolonged or significant decrease of its fair value.
Impairment loss of the value of these financial assets is calculated as the difference between their cost or amortised cost, less, where appropriate, any impairment loss previously recognised in the profit and loss account and the fair value at the time when the measurement is made.
Losses brought forward and recognised in the equity due to a decrease of the fair value, are recognised in the profit and loss account so long as there is objective evidence of impairment in the value of the asset.
If the fair value should increase in subsequent financial years, the adjustment recognised in previous financial years will revert with payment into the profit and loss account of such financial year. However, if the fair value corresponding to an equity instrument should increase, the adjustment recognised in previous financial years does not revert with payment to the profit and loss account, recognising the increase in fair value directly against equity.
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4.10.2 Cash and cash equivalents.
This section of the enclosed balance sheet includes cash on hand and in banks, demand deposits and other short‐term investments that are highly liquid in nature, which are quickly realisable in cash and that have no risk of changes in value.
4.10.3 Other aspects related to financial assets.
Interests and dividends from financial assets accrued after the moment of acquisition, are recognised as revenue in the profit and loss account, in agreement with the effective interest method for interests and at the time when the right to receive it is declared, for dividends.
The amount of the explicit interests accrued and not matured at the time, as well as the amount of the dividends agreed at the time of acquisition are independently recognised in the initial measurement of the financial assets, in agreement with their maturity. Explicit interests are understood as those interests that are obtained from applying the contractual interest rate of the financial instrument.
Financial assets are derecognised when the rights derived from them expire, or their ownership has been transferred, once the Company has got rid of the significant risks and benefits inherent to its property.
4.10.4 Financial liabilities:
‐ Debits and items payable: These are trade and non‐trade accounts payable. They are initially measured at their fair value, except for trade accounts payable with maturity of over one year and that have no contractual interest, which will be measured at their face value when the effect of not adjusting the cash flows is not significant.
Financial liabilities are measured later at their amortised cost. However, the accounts payable that, in agreement with the above, are initially measured at their face value, continue being measured at this amount.
Accrued interests are recognised in the profit and loss account, applying the effective interest method.
Debts with third parties are classified as current and non‐current depending on whether their current maturity is payable in less or more than one year from the date of the Balance sheet. Financial liabilities are derecognised when the relative obligations have extinguished.
4.10.5 Guarantees delivered and received.
They are measured at their fair value. The difference between the fair value and the amount paid out is allocated to profit and loss account during the period when the service is provided.
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4.11 Inventories (see NOTE 14).
The inventories are measured at the lower of their acquisition price, production cost or net realisable value. The weighted average price method is applied for their measurement. Trade discounts, rebates obtained, other similar items and interests incorporated into the face value of the payables are deducted when determining the acquisition price.
Production cost includes the costs of direct materials and, where appropriate, the direct manpower costs and the factory overhead costs.
The net realisable value represents the sale price estimation after deducting the costs estimated to finish the product, and the costs that will be incurred in the marketing, sale and distribution processes.
When the net realisable value of the inventories is less than their acquisition price or production costs, the relative value adjustments are made, recognising them as an expense in the profit and loss account.
These adjustments are subject to reversal if the circumstances that caused the value adjustment of the inventories disappear, in which case they are recognised as revenue in the profit and loss account.
In the case of raw material and other consumables during the production process, no value adjustment is made when it is expected that the finished products they are incorporated into, will be sold above cost. When the value adjustment is carried out, the replacement cost is taken as reference.
The measurement of obsolete, faulty or slow‐moving products, has been reduced to their possible realisation value, recognising the adjustment made in the profit and loss account of the financial year.
4.12 Transactions in foreign currency (see NOTE 15).
The conversion to functional currency of the balances in foreign currency is carried out by applying the exchange rate in force at the time the relative transaction is carried out, measuring it at year‐end in agreement with the exchange rate in force at that time.
Any exchange differences that occur as a result of the measurement at year‐end of receivables and payables in foreign currency are allocated directly to the profit and loss account.
4.13 Income Tax (see NOTE 16).
Income tax expenditure is determined by the amount of the current and deferred tax expenditure. Current tax expenditure is determined by applying the rate in force to the taxable profit, and deducting the result thus obtained from the amount of the general credits and deductions and applied in the financial year.
Deferred tax assets and liabilities come from the temporary differences defined as the amounts that are foreseen to be payable or recoverable in the future and that derive from the difference between the carrying value of the assets and liabilities and their tax base. These sums are recognised by
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applying the taxation at which they are expected to be recovered or paid to the temporary difference.
Deferred tax assets arise, also, as a result of the tax losses available for carryforward and of the receivables for tax deductions generated and not applied.
The relative deferred tax liability is recognised for all the taxable temporary differences, unless the temporary difference is derived from the initial recognition of goodwill or from the initial recognition (except in the case of a business combination) of other assets and liabilities in a transaction, which, at the time of execution, affects neither accounting profit nor taxable profit. .
On their part, the deferred tax assets, identified with deductible temporary differences, are only recognised in the event that it is considered likely that the Group is going to have sufficient tax profits in the future, against which they can be made effective and they do not originate from the initial recognition (except in the case of a business combination) of other assets and liabilities in a transaction that affects neither the accounting profit nor the taxable profit. All the other deferred tax assets (tax losses and deductions available for carryforward) are only recognised in the event that it is likely that the Group is going to have sufficient tax profits in the future against which to make them effective.
On the occasion of each accounting close, the deferred taxes recognised (both assets and liabilities) are reviewed in order to verify that they are still applicable, performing the necessary adjustments to them, in agreement with the results of the analyses performed.
Deferred tax expenditure or revenue corresponds to the recognition and cancellation of deferred liabilities and assets, as well as, where appropriate, due to the recognition and allocation to the profit and loss account of the revenue directly allocated to the equity, which may result from recording those deductions and other tax advantages that have the economic nature of a subsidy, or deductions for goodwill.
4.14 Provisions and contingencies (see NOTE 18)
They are provisioned based on the estimation of the costs to be incurred by the Group to face up to certain obligations and claims that might be derived from its activity.
4.15 Transactions between related parties (see NOTE 22).
Transactions between related parties, regardless of the degree of association, are recorded in agreement with the general rules, at the initial moment at their fair value. If the price agreed in a transaction differs from its fair value, the difference is recognised in agreement with the economic reality of the transaction.
4.16 Income and Expenditure (see NOTE 17).
The income and expenditure are allocated in agreement with the criterion of accrual regardless of the moment when the monetary or financial flow derived from them occurs.
However, the Group only records the gains realised at year end, whilst the foreseeable risks and potential losses, including possible losses, are recorded as soon as they are known.
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Income for sale of goods or services is recognised at the fair value of the consideration received or to be received, derived from them. Prompt payment, volume or other types of discounts, as well as interest added to the nominal amount of the consideration, are recognised as a reduction therein. However, the Group includes the interests added to the commercial loans with due date not exceeding one year, which do not have a contractual interest rate, when the effect of not adjusting the cash flows is not significant.
Discounts granted to customers are recognised at the time when it is likely that the conditions that determine their granting are going to be satisfied, as a reduction of the sales income.
Payments on account of future sales are measured at the received value, except in the cases when these advance payments are non‐current and the effect of their adjustment is significant, when they appear at the adjustment value at year end.
4.17 Environmental assets and liabilities (see NOTE 19).
The costs incurred, where appropriate, in systems, equipment and facilities whose purpose is to minimise the environmental impact on the development of the activity, and/or protect and improve the environment, are recognised as investments in fixed assets.
All the other expenses related to the environment, other than the above, are considered as expenditure of the financial year. To calculate possible environmental provisions that might arise, these are provided for in agreement with the best estimation of their accrual at the moment they are recorded, and in the event that the insurance policies do not cover the damage caused.
The Directors of the Parent Company confirm that the Company has no responsibilities, expenses, assets or provisions and contingencies of an environmental nature that might be significant in connection with the equity, financial situation and results thereof.
4.18 Criteria used to recognise and measure staff costs.
Except in the case of justified cause, the companies are obliged to pay their employees compensation when they cease in their services. In view of the lack of any foreseeable need for abnormal terminations, and given that employees who retire or resign do not receive compensation payments, when severance payments arise they are charged to expenses when the related decision is made and notified.
4.19 Grants, donations and bequests (see NOTE 20).
Non‐refundable capital grants are measured by the amount granted, and are initially recognised as income directly allocated to equity and are allocated to results in proportion to the depreciation experienced during the period by the assets financed by these grants, unless they are non‐depreciable assets, in which case they will be allocated to the result of the year when their disposal or the derecognition from inventory took place. At the time of their recognition, the tax effect at the current rate in the financial year, is recognised as a liability for taxable temporary differences, and is allocated each year in proportion to the amount of the subsidy transferred to the result of the financial year.
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When the grants are assigned to finance specific expenses, they will be allocated as income in the year when the expenses they are financing are accrued.
4.20 Conversion of financial statements into foreign currency.
The conversion of financial statements of companies with functional currencies other than the Euro, is carried out as follows:
Assets and liabilities are converted to Euros, applying the Exchange rate in force at year end.
Items comprising the equity of these companies are converted to Euros at the historical exchange rate.
Income and expenses are converted to Euros at the applicable exchange rate on the date when they were recorded, using average exchange rates in those circumstances where the application of this simplifying criterion does not generate significant differences.
The difference expressed when applying these exchange rates is included in the consolidated equity within the section “Conversion differences”.
NOTA 5 BUSINESS COMBINATIONS.
In this financial year of 2013, as a result of the segregation of the company GrupoEbrosol, S.L., of GrupoPikolin, S..L., the following subsidiaries and associated companies are no longer included in the scope of consolidation:
Direct Indirect Carrying value COMPANIES OF THE GROUP share share 2012 Activity GRUPOEBROSOL, S.L. 100.00% 3,100 Acquisition, holding and management of Autovía de Logroño, Km. 6,5 ‐ Zaragoza securities. EBROSOL INVERSIONES, S.L. 100.00% 3,100 Acquisition, holding and management of Autovía de Logroño, Km. 6,5 ‐ Zaragoza (1) securities. PRAINTER MEDIA S.L. 87.00% 443,620 Management and development of products Avda. de Brasil nº 17 ‐ Madrid (2) for advertising IBERNEX INGENIERIA S.L 90.00% 549,100 Study, development, production and marketing Autovía de Logroño, Km. 6,5 ‐ Zaragoza (2) of computer systems and electronic components. Development, construction, management and CONDOR ENERGÍA EÓLICA, S.L. 100.00% 26,101 marketing of electrical, thermal and mechanical energy Autovía de Logroño, Km. 6,5 ‐ Zaragoza (2) facilities. (1) Share through GRUPOEBROSOL, S.L. 2) Share through EBROSOL INVERSIONES, S.L.
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Direct Indirect Carrying value ASSOCIATED COMPANIES share share 2012 Activity ALMAEBRO, S.L. 50.00% 4,501,656 Property development Autovía de Logroño, Km. 6,5 ‐ Zaragoza (1) EDEREBRO, S.L. 50.00% 580,569 Construction, Leasing and Autovía de Logroño, Km. 6,5 ‐ Zaragoza (2) property exploitation 345 PLAZA ESPAÑA, S.A. 50.00% 8,003,010 Sale‐purchase, leasing of Autovía de Logroño, Km. 6,5 ‐ Zaragoza (2) country and town estates. MONASTERIO DE BOLTAÑA, S.L. 50.00% 6,815,940 Lodgings, restaurant and catering, leisure C/ Afueras s/n ‐ Boltaña (1) and hotel & catering trade in general PRADOS DE ARA, S.L. 50.00% 1,241,966 Lodgings, restaurant and catering, leisure AvdaOrdesa 61 ‐ Ordesa (1) and hotel & catering trade in general IBERDUAR, S.L. 50.00% 2,550,382 Property development Madre Vedruna, 2 ‐ Zaragoza (1) PANGAEA BIOTECH, S.L. 35.07% 2,500,000 Provision of medical services and C/ Sabino Arana 5‐9 ‐ Barcelona (1) predictive diagnosis, as well as work involving research and development of pharmaceutical Products. EL TIRO DE MURCIA, S.L. 30.00% 4,907,015 Construction and exploitation of C/ Concha Espina, 63 ‐ Madrid (1) shopping centre 1) Share through EBROSOL INVERSIONES, S.L. (2) Share through GRUPOEBROSOL, S.L.
The assets, liabilities, equity and results of the companies in financial year 2012, corresponding to the companies that no longer form part of the group in this period, are broken down below:
Assets at close of Equity at close of Liabilities at close Result at close of financial year financial year of financial year financial year COMPANIES OF THE GROUP 2012 2012 2012 2012
GRUPOEBROSOL, S.L. 16,396,838.94 16,382,189.18 14,649.76 112,102.61 EBROSOL INVERSIONES, S.L. 53,581,068.10 1,140,838.78 52,440,229.32 79,496.90 PRAINTER MEDIA S.L. 1,073,904.00 (501,450.01) 1,575,354.01 (476,311.63) IBERNEX INGENIERIA S.L 2,206,064.72 (40,271.43) 2,246,336.15 50,861.78 CONDOR ENERGÍA EÓLICA, S.L. 177,208.50 176,651.13 557.37 (944.45)
Total 73,435,084.26 17,157,957.65 56,277,126.61 (234,794.79)
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Assets at close of Equity at close of Liabilities at close of Result at close of ASSOCIATED COMPANIES financial year 2012 financial year 2012 financial year 2012 financial year 2012
ALMAEBRO, S.L. 60,934,582.84 (3,263,123.19) 64,197,706.03 (2,081,405.42) EDEREBRO, S.L. 4,598,780.29 (1,587,062.06) 6,185,842.35 (291,749.31) 345 PLAZA ESPAÑA, S.A. 14,808,410.95 (3,349,896.96) 18,158,307.91 (375,449.28) MONASTERIO DE BOLTAÑA, S.L. 25,015,039.15 343,638.61 24,671,400.54 (906,789.53) PRADOS DE ARA, S.L. 1,688,765.66 782,495.13 906,270.53 (25,899.97) IBERDUAR, S.L. 11,908,984.31 (1,645,001.78) 13,553,986.09 (292,561.70) PANGAEA BIOTECH, S.A. 5,895,448.33 1,140,418.37 4,755,029.96 (594,290.09) EL TIRO DE MURCIA, S.L. 140,683,679.62 (3,923,391.26) 144,607,070.88 (3,983,872.07)
Total 265,533,691.15 (11,501,923.14) 277,035,614.29 (8,552,017.37)
NOTA 6 GOODWILL.
6.1 Composition of the consolidation goodwill balance at year‐end.
Consolidation goodwill Year 2013 Year 2012 Compañía Europea de Artículos del Descanso, S.L 1,012,736.63 1,012,736.63 Smattex, S.L. 1,270,280.20 1,270,280.20 COFEL GROUP, consolidated 10,361,696.55 10,422,137.55
Total 12,644,713.38 12,705,154.38
6.2 Movement of the Consolidation Goodwill:
Breakdown of balances and movements of the financial year:
CONCEPTS Year 2013 Opening gross balance at 31.12.12 13,316,263.38
Closing gross balance at 31.12.13 13,316,263.38
Impairments at 31.12.12 (611,109.00) Provisions for the year (60,441.00)
Total impairments at 31.12.13 (671,550.00) Closing net balances as at 31.12.13 12,644,713.38
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Breakdown of balances and movements of the previous financial year:
GROSS AMOUNT Year 2012 Opening gross balance at 31.12.11 13,316,263.38
Closing gross balance at 31.12.12 13,316,263.38 Impairments at 31.12.11 (407,426.00) Provisions for the year (203,683.00)
Total impairments at 31.12.12 (611,109.00) Closing net balances as at 31.12.12 12,705,154.38
The amount of the impairment of the year corresponds to the consolidation Goodwill of the Sub‐ group, COFEL, due to the consolidation of the companies, COFEL and COPIREL. None of the other Goodwills, included, as underlined by the consolidation of the Sub‐group, COFEL, in the PIKOLIN Group, have undergone any impairment in the year.
The Group has performed the relative “impairment test” of the Goodwill, and has not made any other adjustment to the goodwill generated by the different business combinations, with the exception of that mentioned above, because no impairment has been detected therein following the analysis of the different cash generating units.
NOTA 7 MINORITY INTERESTS.
7.1 Movements in minority interests during the year:
Minority State of movement in minority interests interests Opening balance, 2012 421,018.35 Additions for the year 228,038.45 Disposals for the year (97,813.99)
Closing balance, 2012 551,242.81 Opening balance, 2013 551,242.81 Additions for the year 14,255.00 Disposals for the year (9,049.81) Modification of the scope of consolidation 113,374.59
Closing balance, 2013 669,822.59
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7.2 Breakdown of balances of minority interests:
The composition of the minority interests of the group at year‐end is:
Minority interests In capital and In Losses In value In capital COMPANIES Reserves and gains adjustments grants Total Pikolin, SA 14,026.44 (56.10) (35.26) 28.59 13,963.67 Confordes, SA 147.17 (15.23) 131.94 Espadesa 2.19 (28.49) (26.30) Seiviriber 194.63 8.56 203.19 Ceadesa 13,511.98 564.75 14,076.73 Smattex, S.A. 609,479.47 13,690.24 623,169.71 Pikolin Lusitana, LTDA 19,928.03 (1,112.17) 18,815.86 Espacio Descanso Spain (335.86) (176.35) (512.21)
Total 656,954.05 12,875.21 (35.26) 28.59 669,822.59
The composition of the minority interests of the group at the end of the previous year:
Minority interests In capital and In Losses In value In capital COMPANIES Reserves and gains adjustments grants Total Pikolin, SA 16,393.40 (966.95) (76.74) 24.96 15,374.67 Confordes, SA 155.28 (8.12) 147.16 Espadesa 57.86 (55.66) 2.20 Seiviriber 183.14 71.55 254.69 Ceadesa 13,291.50 220.49 13,511.99 Smattex, S.A. 629,084.22 (19,604.76) 609,479.46 Pikolin Lusitana, LTDA 27,884.92 (2,037.69) 25,847.23 Prainter Media (18,104.20) (95,262.33) (113,366.53) IbernexIngenieria (41.61) 10.17 23.38 (8.06)
Total 668,904.51 (117,633.30) (76.74) 48.34 551,242.81
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NOTA 8 HOLDINGS IN COMPANIES CONSOLIDATED BY THE EQUITY METHOD
8.1 Movements in shares in Companies consolidated by the equity method in the year:
The movements in shares in Companies consolidated by the equity method in the year:
Modification Balance at of scope Balance at Companies that apply equity method 31/12/12 Increases Decreases of consolidation 31/12/13 Monasterio de Boltaña 171,819.28 (171,819.28) 0.00 Spacio Repos, S.L. 608,121.62 120,233.80 728,355.42 Prados de Ara, S.L. 713,570.44 (713,570.44) 0.00 PangeaBiotech, S.L. 1,453,616.41 (1,453,616.41) 0.00
Total 2,947,127.74 0.00 120,233.80 (2,339,006.12) 728,355.42
The movements in shares in Companies consolidated by the equity method in the previous year:
Balance at Balance at Companies that apply equity method 31/12/11 Increases Decreases 31/12/12 Monasterio de Boltaña 782,565.55 (610,746.27) 171,819.28 Spacio Repos, S.L. 685,455.75 (77,334.13) 608,121.62 Prados de Ara, S.L. 726,520.42 (12,949.98) 713,570.44 PangeaBiotech 1,658,895.99 (205,279.58) 1,453,616.41
Total 3,853,437.70 0.00 (906,309.96) 2,947,127.74
8.2 Financial information of companies consolidated by equity method:
Year 2013 Ordinary Result Companies that apply equity method Assets Liabilities results of the year Spacio Repos, S.L. 2,015,575.77 1,274,218.95 6,223,342.54 240,467.61
Total 2,015,575.77 1,274,218.95 6,223,342.54 240,467.61
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Year 2012
Ordinary Result Companies that apply equity method Assets Liabilities results of the year Almaebro, S.L. 60,934,582.84 64,197,706.03 0.00 (2,081,405.42) Ederebro, S.L. 4,598,780.29 6,185,842.35 27,000.00 (291,749.31) 345 Plaza España, S.A. 14,808,410.95 18,158,307.91 0.00 (375,449.28) Monasterio de Boltaña, S.L. 25,015,039.15 24,671,400.54 4,493,106.41 (906,789.53) Spacio Repos, S.L. 3,381,059.58 2,880,170.37 3,722,704.80 (152,659.83) Prados de Ara, S.L. 1,688,765.66 906,270.53 0.00 (25,899.97) Iberduar, S.L. 11,908,984.31 13,553,986.09 0.00 (292,561.70) PangaeaBiotech, S.A. 5,895,448.33 4,755,029.96 3,350,000.00 (594,290.09) El Tiro de Murcia, S.L. 140,683,679.62 144,607,070.88 1,311,171.67 (3,983,872.07)
Total 268,914,750.73 279,915,784.66 12,903,982.88 (8,704,677.20)
8.3 Result of the year of the companies consolidated by equity method, which corresponds to the parent company:
Result recognised in P&L Companies that apply equity method Year 2013 Year 2012 Almaebro, S.L. 0.00 (1,040,702.71) Ederebro, S.L. 0.00 (145,874.66) 345 Plaza España, S.A. 0.00 (187,724.64) Monasterio de Boltaña, S.L. 0.00 (453,394.76) Spacio Repos, S.L. (120,233.81) (76,329.92) Prados de Ara, S.L. 0.00 (12,949.99) Iberduar, S.L. 0.00 (146,280.85) PangaeaBiotech, S.A. 0.00 (208,447.07) El Tiro de Murcia, S.L. 0.00 (1,195,161.62)
Total (120,233.81) (3,466,866.23)
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NOTA 9 PROPERTY, PLANT AND EQUIPMENT.
9.1 Breakdown of balances and movements:
Fixed assets Technical facil. under State of movements in property, plant and Land and & other tang. construction equipment Buildings fixed assets and advances TOTAL Opening gross balance, 2012 21,631,470.53 119,517,668.41 1,184,566.06 142,333,705.00 Additions for the year 337,776.80 4,037,090.29 1,583,160.85 5,958,027.94 Disposals for the year (792,177.00) (954,881.29) (717,092.59) (2,464,150.88) Other movements (728,104.53) 1,970,080.05 (1,177,801.28) 64,174.24 Incorporation to the group 910,797.33 8,904,838.99 9,815,636.32 Closing gross balance, 2012 21,359,763.13 133,474,796.45 872,833.04 155,707,392.62 Opening gross balance, 2013 21,359,763.13 133,474,796.45 872,833.04 155,707,392.62 Additions for the year 2,067,732.61 3,276,436.20 744,816.14 6,088,984.95 Disposals for the year 0.00 (4,980,502.97) (298,194.04) (5,278,697.01) Transfers to/from other items 0.00 551,591.01 (592,753.00) (41,161.99) Scope modification (394,891.74) (394,891.74) Closing gross balance, 2013 23,427,495.75 131,927,428.95 726,702.14 156,081,626.84 Accumulated amortisation, opening balance 2012 (13,529,561.61) (90,689,675.16) (104,219,236.77) Provisions for the year (702,539.52) (5,438,300.25) (6,140,839.77) Increases due to transfers 571,220.62 36,017.00 607,237.62 Decreases due to releases, disposals or transfers 122,520.00 678,396.42 800,916.42 Incorporation to the group 0.00 (7,628,544.79) (7,628,544.79) Accumulated amortisation, closing balance 2012 (13,538,360.51) (103,042,106.77) 0.00 (116,580,467.28) Accumulated amortisation, opening balance 2013 (13,538,360.51) (103,042,106.77) (116,580,467.28) Provisions for the year (956,626.06) (5,064,471.95) (6,021,098.01) Decreases due to releases, disposals or transfers 4,665,243.47 4,665,243.47 Scope modification 259,735.07 259,735.07 Accumulated amortisation, closing balance 2013 (14,494,986.57) (103,181,600.18) 0.00 (117,676,586.76)
Closing net balance, 2013 8,932,509.17 28,745,828.77 726,702.14 38,405,040.08
The most relevant additions of the year correspond mainly to installations in factories, machinery, technical facilities and machinery in assembly, due to renewal of obsolete elements divested during the year, and the incorporation of the tangible assets of the companies incorporated into the group during the period (see note 5).
Disposals of the financial year correspond to disposals in machinery, transport elements, data processing equipment and furniture, either because they are obsolete elements or are fully depreciated.
In addition to the disposals mentioned in the above paragraph, in financial year 2013 a company of the group has performed a machinery sale operation whereby it disposed of 2.2 million Euros of machinery. In 2014, this operation has not come to fruition, whereby in financial year 2013 the result of ______Zaragoza, 30 March 2014 Page 32 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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the operation was cancelled against the short‐term provisions account amounting to 574,001.75 Euros (see Note 18). This provision will be applied in 2014 against the credit for disposal of fixed assets, not generating any result in 2013 or in 2014.
The machinery indicated in the previous paragraph does not appear in the Balance sheet as at 31 December 2013. During the first months of 2014, all the machinery was returned to the Company, and was sold to another subcontractor.
Transfers made in financial year 2013 of fixed assets under construction correspond to technical facilities and machinery, due to activation following assembly.
It was not considered necessary to perform any impairment losses on fixed assets.
9.2 Depreciation of property, plant and equipment:
The depreciation of the property, plant and equipment is carried out under the straight‐line method from the moment when they are ready for commissioning, during their estimated working life, in agreement with the following working life years:
Description Working life years Buildings 10‐50 Technical installations 5 to 18 Machinery 3 to 18 Tooling 3.33 to 8 Other facilities 5 to 15.38 Furniture 4 to 20 Data processing equipment 3 to 8 Transport elements 4 to 12 Other plant, property and 5 equipment
With respect to second‐hand goods acquired, the Group applies double the coefficients mentioned, in agreement with the legal regulation. In addition, certain elements are depreciated at a higher coefficient than that indicated, in agreement with the number of shifts during which they are used.
9.3 Fully depreciated elements included in the closing balances:
Elements Year 2013 Year 2012 Other elements 80,396,644.37 76,969,384.34
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9.4 The amount shown in the section of the balance sheet as land and buildings is broken down as follows: Breakdown Year 2013 Year 2012 Lands 2,523,498.30 2,692,060.00 Buildings 20,735,435.74 19,938,544.05 Accum. Deprec. of Buildings (14,326,424.87) (14,809,201.43)
Total 8,932,509.17 7,821,402.62
9.5 Profit/Loss derived from the disposal of tangible fixed assets:
Concept Year 2013 Year 2012 Losses from tangible fixed assets (2.253.946,61) (93.862,82) Profits from tangible fixed assets 52.101,07 268.344,08
Total (2.201.845,54) 174.481,26
9.6 Items of property, plant and equipment of the Group related to investments outside the Spanish territory:
The fixed assets whose rights may be exercised outside the Spanish territory are the property, plant and equipment of the companies located in member states of the European Union and Asia, listed in note 1.2., and which are broken down below:
Year 2013 Year 2012 Accounting Accumulated Accounting Accumulated balance depreciation balance depreciation Land and Constructions 23,258,934.04 (14,326,424.87) 22,630,604.05 (14,809,201.43) Technical facilities and other fixed assets 36,011,974.00 (26,849,502.67) 35,940,003.42 (26,026,093.74) Assets under construction and advances 726,702.14 0.00 336,104.04 0.00 Total 59,997,610.18 (41,175,927.54) 58,906,711.51 (40,835,295.17)
9.7 Capital grants obtained in this year and in previous years for investments in property, plant and equipment (see note 20):
Assets financed Year 2013 Year 2012 Technical facilities and other prop, plant & equip 105.808,34 105.808,34
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9.8 Other circumstances referring to property, plant and equipment:
The Group policy is to formalise insurance policies to cover possible risks from the different elements of its tangible fixed assets. Each year, or when the circumstances require this, the Group Management and the management of each one of the companies’ reviews the hedgings and hedged risks and they agree upon the amounts that reasonably must be covered for the following year. The Group has signed different insurance policies in agreement with the characteristics of the fixed assets of each Company, insuring both the building and the content. NOTA 10 INVESTMENT PROPERTIES.
10.1 Breakdown of balances and movements:
State of movements in investment properties Lands Buildings Total Opening gross balance, 2012 2,477,977.53 1,661,279.84 4,139,257.37 Additions for the year 72,400.32 72,400.32 Disposals for the year (107,448.15) (107,448.15) Closing gross balance, 2012 2,477,977.53 1,626,232.01 4,104,209.54 Opening gross balance, 2013 2,477,977.53 1,626,232.01 4,104,209.54 Transfers to/from other items 173,202.28 (173,202.28) 0.00 Other movements (2,155,654.53) (2,155,654.53) Closing gross balance, 2013 495,525.28 1,453,029.73 1,948,555.01 Accumulated amortisation, opening balance 2012 (502,945.34) (502,945.34) Provisions for the year (18,457.16) (18,457.16) Decreases due to releases, disposals or transfers 6,851.28 6,851.28 Accumulated amortisation, closing balance 2012 0.00 (514,551.22) (514,551.22) Accumulated amortisation, opening balance 2013 0.00 (514,551.22) (514,551.22) Provisions for the year 0.00 (18,169.91) (18,169.91) Accumulated amortisation, closing balance 2013 0.00 (532,721.13) (532,721.13)
Closing net balance, 2013 495,525.28 920,308.60 1,415,833.88
The goods assigned to the procurement of revenues other than their use in the activity are classified as investment property. They correspond to properties leased to third parties.
Income from property investments in 2013 amounted to 47,857.43 Euros; in 2012 they amounted to 50,942.01 Euros (See note 12). There has been expenditure for the operation of investment property in financial year 2013 amounting to 7,150.80 Euros; there were no expenses in the previous period.
Investments in buildings are depreciated under the straight‐line method based on an estimated useful life of between 34 and 68 years.
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10.2 Fully depreciated items included in the closing balances of investment property amount to:
Elements Year 2013 Year 2012 Buildings 229,558.47 225,919.08
10.3 Broken down value of the goods classified as property investments:
Year 2013 Year 2012 Real estate: ‐ Value of the land 495.525.28 2.477.977.53 ‐ Value of the building 1.453.029.73 1.626.232.01 ‐ Accumulated depreciation of buildings (532.721,13) (514.551.22)
Total 1.415.833.88 3.589.658.32
NOTA 11 INTANGIBLE FIXED ASSETS.
11.1 Breakdown of balances and movements:
Other intangible fixed State of movements in intangible fixed assets Industrial property Software assets Total
Opening gross balance, 2012 53,741,494.37 8,444,691.84 3,928,285.70 66,114,471.91 Additions for the year 825,709.82 556,326.20 2,416,068.81 3,798,104.83 Disposals for the year 0.00 (6,369.50) (1,649,759.00) (1,656,128.50) Transfers 0.00 44,532.04 0.00 44,532.04 Other movements 0.00 805.62 532,567.17 533,372.79 Incorporation to the group 3,345,600.87 1,277,118.78 3,810,000.00 8,432,719.65 Closing gross balance, 2012 57,912,805.06 10,317,104.98 9,037,162.68 77,267,072.72
Opening gross balance, 2013 57,912,805.06 10,317,104.98 9,037,162.68 77,267,072.72 Additions for the year 59,185.00 340,658.33 905,568.06 1,305,411.39 Disposals for the year 0.00 (195,724.34) (1,687,612.14) (1,883,336.48) Other movements (917,725.10) 0.00 0.00 (917,725.10) Scope modification (576,565.26) (154,088.35) 0.00 (730,653.61) Closing gross balance, 2013 56,477,699.70 10,307,950.62 8,255,118.60 75,040,768.92
Accumulated amortisation, opening balance 2012 (30,965,884.77) (6,336,638.38) (318,500.28) (37,621,023.43) Provisions for the year (21,336.35) (657,325.87) (1,247.02) (679,909.24) Decreases due to releases, disposals or transfers 0.00 (4,772.59) 0.00 (4,772.59) Incorporation to the group (56,360.95) (1,126,241.42) 0.00 (1,182,602.37) Accumulated amortisation, closing balance 2012 (31,043,582.07) (8,124,978.26) (319,747.30) (39,488,307.63)
Accumulated amortisation, opening balance 2013 (31,043,582.07) (8,124,978.26) (319,747.30) (39,488,307.63) Provisions for the year (91,854.77) (587,040.09) (102,367.70) (781,262.56) Decreases due to releases, disposals or transfers 0.00 384.54 0.00 384.54 Scope modification 25,128.94 14,485.47 128,645.51 168,259.92 Accumulated amortisation, closing balance 2013 (31,110,307.90) (8,697,148.34) (293,469.49) (40,100,925.73)
Closing net balance, 2013 25,367,391.80 1,610,802.28 7,961,649.11 34,939,843.19 ______Zaragoza, 30 March 2014 Page 36 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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The effect of the exchange rate in the valuation of the industrial property of the Dunlopillo Holdings Subgroup is included in other industrial property movements.
The most significant movements of the year correspond to investments and disposals in software and other intangible assets.
Movements due to scope modification contemplate disposals due to the spin‐off that has occurred during this period (see Note 1).
The provisions are mainly for software.
Goodwill amounting to 0.5 million Euros has been activated in financial year 2012 in other intangible fixed assets. This goodwill has been generated in the acquisition transactions by companies of the group, of all the constitutive elements of several trading establishments (Bed’s Shops), made up of their facilities, stock, portfolios and contracts in force, including the leasing contracts of premises and with personnel.
The Group has not made any value adjustment of intangible fixed assets.
11.2 Amortisation of intangible fixed assets:
Third‐party software is amortised under the straight‐line method between three and six years.
Computer programs that satisfy the recognition criteria, are amortised under the straight‐line method in a three to six‐year period as from the entry into operation of each application.
Patents, licenses, trademarks and other are amortised under the straight‐line method between six and ten years, their estimated working life.
The development costs are amortised under the straight‐line method between four and five years.
11.3 Fully amortised elements included in the closing balances of intangible fixed assets:
Elements Year 2013 Year 2012
Research and development expenses 35,000.00 35,000.00 Patents, licences, trademarks and other. 34,312,763.19 30,450,971.20 Goodwill 14,211,805.81 383,334.94 Software 5,903,365.52 5,518,475.96
Total 54,462,934.52 36,387,782.10
11.4 Proceeds from sale of intangible fixed assets.
The proceeds from the sale of intangible fixed assets in financial year 2012 represented losses of 171 thousand Euros; there have been no proceeds for the sale of intangibles this financial year 2013.
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11.5 Research and development expenditure:
The amount of expenditure for research and development, and technological innovation activities, carried out by two companies of the Group, has amounted to a total of 2.05 million Euros in 2013, and 2.36 million Euros in the previous year. No amount has been capitalised in this financial year of 2013; 473.4 thousand Euros were capitalised in the previous financial year of 2012, amount that corresponded to one of the spun‐off companies this period (see Note 1).
11.6 Items with indefinite working life:
Elements Year 2013 Year 2012
Concessions 3,344,377.45 4,262,102.55 Patents, licences, trademarks and other. 20,000.00 20,000.00 Other intangible fixed assets 3,810,000.00
Total 7,174,377.45 4,282,102.55
11.7 Items of intangible fixed assets of the Group related to investments outside the Spanish territory:
The fixed assets whose rights may be exercised outside the Spanish territory are the property, plant and equipment of the companies located in member states of the European Union and Asia, listed in note 1.2., and which are broken down below:
Year 2013 Year 2012 Accounting Accumulated Accounting Accumulated balance depreciation balance depreciation Administrative franchise 52,300,890.19 (30,249,174.58) 52,300,890.19 (31,169,829.46) Patents, licences, trademarks and 2,364,377.45 (20,601.05) 3,262,102.55 other. Goodwill 14,211,805.81 (14,211,805.81) 14,211,805.81 (14,211,805.81) Software 2,615,963.16 (1,729,613.07) 2,650,448.61 (549,822.48) Assets in construction 1,384,434.83 2,259,726.07
Total 72,877,471.44 (46,211,194.51) 74,746,943.39 (45,936,039.26)
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11.8 Goodwill:
Accum. Acquisition impairment Carrying value Date Acquisition mode Year 2013 Year 2013 date mode Espadesa 1,832,897.04 0.00 1,832,897.04 2011‐2012 Purchase Smattex 392,830.61 0.00 392,830.61 2007 Merger Pardo Subgroup 3,966,343.21 0.00 3,966,343.21 2012 Purchase Cofel Subgroup 14,211,805.81 (14,211,805.81) 0.00 2009 Purchase
Total 20,403,876.67 (14,211,805.81) 6,192,070.86
Accum. Acquisition impairment Carrying value Date Acquisition mode Year 2012 Year 2012 date mode Espadesa 1,832,897.04 0.00 1,832,897.04 2011‐2012 Purchase Smattex 392,830.61 0.00 392,830.61 2007 Merger Pardo Subgroup 3,966,343.21 0.00 3,966,343.21 2012 Purchase Cofel Subgroup 14,211,805.81 (14,211,805.81) 0.00 2009 Purchase
Total 20,403,876.67 (14,211,805.81) 6,192,070.86
NOTA 12 LEASES AND OTHER TRANSACTIONS OF SIMILAR NATURE
12.1 Operating leases.
The information of operating leases where the Group operates as a lessor is given below:
Concept Year 2013 Year 2012 Amount of future minimum payments for non‐cancellable operating leases: Up to one year 47,857.43 50,942.01
Contracts for the rental of property to third parties have an annual tacit renewal.
The information of operating leases where the Group operates as a lessee is given below:
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Concept Year 2013 Year 2012 Amount of future minimum payments for non‐cancellable operating leases, of which: Up to one year 4,048,418,52 4,544,182.66 Between one and five years 263,081.44 769,237.05 More than five years 199,095.28 1,176,665.53 Total amount of future minimum payments expected to be received, at year end, for non‐cancellable operating sub‐leases. 24,000.00 24,000.00 Minimum lease payments recognised as expenditure in the period 10,037,354.60 9,643,631.18 Sub‐lease payments recognised as income of the period. 24,000.00 24,000.00
The following agreements are worthy of mention with respect to the operating lease contracts:
‐ Contracts for the rental of properties with an associated company have annual tacit renewal, whose rent is increased annually by the CPI (Consumer Price Index), without any purchase option in these contracts.
‐ No restrictions are imposed, resulting from operating leasing contracts such as those referring to distribution of dividends, additional borrowings or new leasing contracts.
In financial year 2014, one company of the Group has planned to move its facilities and change its registered offices, but remaining in Zaragoza. For this reason, a provision for the amount of the penalization described above has been registered at close of 2013 (see NOTE 18).
NOTA 13 FINANCIAL INSTRUMENTS.
13.1 Information on the significance of financial instruments in the financial situation and results of the company.
a) Financial assets and financial liabilities categories:
The carrying value of each category of financial assets and financial liabilities set out in rule nine on recognition and measurement, is broken down according to the following structure:
a.1) Financial assets different from equity investments in Group, multi‐group and associated companies
The information of non‐current Group financial assets, classified by categories, at year‐end is as follows:
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Year 2013 Debt Credits, Shares securities derivatives Categories and others Total Investments held to maturity 2,085,588.12 2,085,588.12 Loans and items receivable 141,142,857.65 141,142,857.65 Available‐for‐sale assets 8,587,379.91 8,587,379.91 ‐ At fair value 8,587,379.91 8,587,379.91
Total 8,587,379.91 2,085,588.12 141,142,857.65 151,815,825.68
Year 2012 Debt Credits, Shares securities derivatives Categories and others Total Assets at fair value with changes in P&L 1,533,549.00 1,533,549.00 ‐ Held for trading 1,533,549.00 1,533,549.00 Investments held to maturity 14,543,865.48 14,543,865.48 Loans and items receivable 121,193,737.69 121,193,737.69 Available‐for‐sale assets 33,160,033.31 33,160,033.31 ‐ At fair value 33,160,033.31 33,160,033.31
Total 33,160,033.31 14,543,865.48 122,727,286.69 170,431,185.48
Available‐for‐sale assets at fair value correspond to investments in shares, securities portfolios and investment funds. No one‐off sales of these funds or portfolios have been made during the year, but they have been considered in this category as the purpose is not to sell them but to hold them for a long period.
Investments held to maturity correspond to bonds, notes and debt securities with a maturity exceeding one year.
Loans and receivables correspond to credits formalised with related parties and with third parties with long‐term maturity, long‐term deposits, and long‐term guarantees.
The information of the current Group financial assets, classified by categories, at year‐end is as follows:
Year 2013 Debt Credits, securities derivatives Categories and others Total Investments held to maturity 141,284.58 141,284.58 Loans and items receivable 75,975,709.67 75,975,709.67
Total 141,284.58 75,975,709.67 76,116,994.25
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Year 2012 Debt Credits, securities derivatives Categories and others Total Assets at fair value with changes in P&L 0.00 2,019,083.27 2,019,083.27 ‐ Held for trading 2,019,083.27 2,019,083.27 Investments held to maturity 2,310,838.71 2,310,838.71 Loans and items receivable 79,097,175.05 79,097,175.05
Total 2,310,838.71 81,116,258.32 83,427,097.03
Loans and receivables include loans to debtors, customers, third‐party loans maturing in the short term, deposits due within one year, short‐term deposits and guarantees and other receivables, excluding the outstanding balances with Treasury.
a.2) Financial liabilities.
The non‐current Group financial liabilities, classified by categories, at year‐end are as follows:
Year 2013 Bank borrowings Derivatives Categories and others Total Debts and items payable 58,351,394.11 17,033,468.89 75,384,863.00
Total 58,351,394.11 17,033,468.89 75,384,863.00
Year 2012 Bank borrowings Derivatives Categories , and others Total Debts and items payable 45,334,402.74 39,631,665.69 84,966,068.43
Total 45,334,402.74 39,631,665.69 84,966,068.43
Debts and items payables classified as debts with credit institutions correspond to debts with banks with long‐term maturity, as a result of borrowings received, by the relative party, in the long‐ term.
Debits and items payables classified in “Others” correspond to borrowings received from public organisations to develop certain technical projects carried out by the company, long‐term guarantees received and long‐term bills payable.
One of the companies that forms part of the Group has received a participating loan from a financial entity amounting to 3,500,000 Euros and with maturity in 2022. This loan may be converted, whatever its amount, and on the request of the bank, into a share in the capital of the company amounting to 25%, regardless of the value that the company may have, in the event that the Company
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defaults on two consecutive payments and that, on the date of maturity, it is not up to date in the payment.
The current Group financial liabilities, classified by categories, at year‐end are as follows:
Year 2013 Bank borrowings Derivatives Categories and others Total Debts and items payable 24,516,830.77 55,067,594.39 79,584,425.16
Total 24,516,830.77 55,067,594.39 79,584,425.16
Year 2012 Bank borrowings Derivatives Categories and others Total Debits and items payable 51,479,418.89 53,180,901.77 104,660,320.66 Hedging derivatives 24,544.55 24,544.55
Total 51,479,418.89 53,205,446.32 104,684,865.21
Debits and items payables classified as debts with credit institutions, correspond to debts with banks with short‐term maturities, as a result of loans, credits, debts for bill discounting, interest accruals/deferral, by the relative party, in the short ‐term.
Debits and items payables classified as "Others" correspond to trade payables to suppliers and creditors, suppliers consolidated by the equity method, confirming operations, current accounts with related parties, suppliers of fixed assets, loans received from public agencies for the development of certain technical projects carried out by the company. The rest are remunerations awaiting payment and other payables, excluding balances with the public administrations.
b) Financial assets at fair value with changes in the profit and loss account. Year 2013 Year 2012 Assets at fair Assets at fair value with value with changes in P&L changes in P&L Change of fair value in the year 31,167.92 774,244.21 Change of cumulative fair value since designation (1,646,199.81) (1,677,367.73)
Hybrid and structured financial products have matured and have been disposed of during this period.
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d) Classification by maturities.
The classifications by maturity of the Group’s financial assets, of the amounts that mature during each one of the following years at year‐end and until their final maturity, are broken down in the following table: Maturity in years Concepts 2014 2015 2016 2017 2018 Others Total l/t
Financial investments 2,524,061.86 1,523,000.00 75,306.85 134,581,576.88 10,126,482.61 146,306,366.34 Non‐current trade payables 1,612,312.46 993,606.31 309,533.03 34,112.29 2,559,895.25 5,509,459.34 Advances to suppliers 900.00 0.00 Trade and other receivables 73,592,032.39 0.00 Customer receivables for sales and services 67,880,647.98 0.00 Companies consol. as per equity method 1,504.26 0.00 Other receivables 5,709,880.15 0.00
Total 76,116,994.25 3,135,312.46 993,606.31 384,839.88 13,4615,689.17 12,686,377.86 151,815,825.68
The classifications by maturity of the Group’s financial liabilities, of the amounts that mature during each one of the following years at year‐end and until their final maturity, are broken down in the following table:
Maturity in years Concepts 2014 2015 2016 2017 2018 Others Total l/t
Debts 26,402,096.00 10,484,054.17 13,572,534.84 12,888,209.76 7,148,360.76 31,186,203.84 75,279,363.37 Bank borrowings 24,516,830.77 9,925,620.44 13,039,319.98 10,529,229.03 4,781,145.93 20,076,078.73 58,351,394.11 Other financial liabilities 1,885,265.23 558,433.73 533,214.86 2,358,980.73 2,367,214.83 11,110,125.11 16,927,969.26 Non‐current trade creditors 105,499.63 105,499.63 Trade and other payables 53,182,329.16 0.00 0.00 0.00 0.00 0.00 0.00 Suppliers 36,978,335.35 0.00 Suppliers, companies consolidated by the equity method 177,003.82 0.00 Other creditors 16,026,989.99 0.00
Total 79,584,425.16 10,589,553.80 13,572,534.84 12,888,209.76 7,148,360.76 31,186,203.84 75,384,863.00
As at 31 December 2013, the Group had guarantees before different banking entities amounting to 18.4 million Euros. Likewise, one company of the group, incorporated into it during the period, has a security bond formalised for 2 million Euros.
At the close of the financial year, the company has acquired a mortgage guarantee with respect to an associated company. This loan amounted, at year‐end, to 14.49 million Euros. Furthermore, the parent company of the Group acts as surety for several loans formalised by companies of the Group, one of them being mentioned above, and others, which at close of the financial year amount to 3.17 million Euros, as well as of a credit line amounting to 2.98 million Euros, of which another company of
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the Group also acts as surety.
In turn, a company of the Group acts as surety for different loans, one formalised by the parent company of the Group and the others by two mortgage loans formalised by an associated company of the Group. The value of these loans at close of financial year amounts to 46.44 million Euros.
d) Assets pledged as security.
The Group has pledged the shares of one company of the Group as guarantee for debt with financial entities. This debt financed the purchase of these shares by another company of the Group. The duration of the guarantee is parallel to the loan that it is associated with.
As at 31 December 2013, there is a term deposit amounting to 19,999.67 Euros, which acts as security for a line of guarantees.
e) Assets accepted as security:
The company has drawn up debt renegotiation contracts, amounting, at year end, to 5.5 million Euro, having drawn up in some cases, securities on these contracts, such as the pledges for social shares in a debtor company, whose debt at year‐end amounts to 1.83 million Euros.
f) Value adjustments for impairment generated by credit risk.
Classes of financial assets Credits, derivatives and others Long term Short term Impairment loss at 31.12.11 9,221,512.30 Value adjustment for impairment 2,427,558.59 Incorporation to the Group 1,301,632.09 Impairment loss at 31.12.12 0.00 12,950,702.98 Value adjustment for impairment 0.00 868,652.41 Reversal of impairment 0.00 (217,753.71) Outflows and depletions (444,714.42) 0.00 Transfers and other variations 66,768.40 (3,998,550.58)
Impairment loss at 31.12.13 (377,946.02) 9,603,051.10
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13.2 Information related to the profit and loss account and equity.
Net profits or losses from the different categories of financial assets defined in rule nine on recognition and measurement, and financial income calculated by the effective interest rate method, are broken down in the following table: Financial income by application of the effective interest rate Net profits and losses method. Year 2013 Year 2012 Year 2013 Year 2012 Assets at fair value with changes in profits and losses: and losses: (72,024.85) 745,777.09 0.00 0.00 Others (72,024.85) 745,777.09 Investments held to maturity (2,035,917.08) (2,145,142.44) 1,120,027.53 1,677,206.25 Loans and items receivable 730,704.84 758,785.82 1,430,978.59 3,389,297.82 Available‐for‐sale assets: 1,638,952.72 (143,740.30) 0.00 0.00 At fair value 1,638,952.72 (143,740.30)
Total 261,715.63 (784,319.83) 2,551,006.12 5,066,504.07
The income recorded in loans and receivables by applying the effective interest rate correspond to the interests generated by the loans granted to associated parties and third parties, and the interests generated by in term deposits.
The net earnings recorded in loans and receivables correspond mainly to profitability for cash surplus.
The net losses recorded in the category of assets at fair value with changes in profits and losses, correspond to results obtained from the sales of futures and derivatives.
The net earnings recorded in the category of available‐for‐sale assets correspond to net profits obtained from the sales of investment funds and to dividends received for these funds.
The amount of the impairment losses of class of financial assets is given in the following table: Impairment losses Year 2013 Debt securities (562,199.24)
Total (562,199.24)
In this financial year, the value adjustment corresponds to the impairment of long‐term investments held to maturity, whose income for coupons amounts to 73 thousand Euros, whilst in the previous year the impairment corresponded to available‐for‐sale assets corresponding to investments in shares.
Customers’ credit impairment is reported in section 13.1.g) of this note.
Net earnings or losses from the different categories of financial liabilities defined in rule nine on recognition and measurement, and financial expenses calculated by the effective interest rate method, ______Zaragoza, 30 March 2014 Page 46 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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are broken down in the following table:
Financial expenditure applying the effective interest rate Net earnings and losses method Year 2013 Year 2012 Year 2013 Year 2012
Debts and items payable (1,024,858.74) (282,151.62) (4,656,417.01) (4,851,736.36)
Total (1,024,858.74) (282,151.62) (4,656,417.01) (4,851,736.36)
The financial expenses by applying the effective interest rate method correspond to the debts owed by the company to financial entities for loans and credits, as well as financial expenses for bill discounting costs. Those included as net income correspond to other financial expenses.
13.3 Other information.
a) Fair value.
The carrying value of the financial instruments is an acceptable approximation of its fair value.
The fair value of equity instruments classified in the category of available‐for‐sale financial assets has been determined according to the quoted prices in active markets at year end.
The fair value of hybrid financial products and structured financial products recognised in the category of assets at fair value with changes in losses and earnings, has been determined according to the measurement at year‐end offered by financial entities which are issuers of these products, which have matured or have been disposed of this year.
b) The limits of the discount lines and credit facilities at year end are as follows:
Credit Institutions Limit granted Drawn Available Total discount lines 49,149,868.00 11,838,814.22 37,311,053.78 Total credit facilities with credit institutions 4,500,000.00 4,484,078.82 15,921.18
13.4 Information about the nature and risk level arising from financial instruments.
The Group's risk policies are established by the Financial Management of the Group, establishing a series of procedures and controls that enable it to identify and manage risks arising from financial instruments.
Dealing in financial instruments exposes the Group to credit, market and liquidity risks.
Credit risk: produced by the possible loss caused by the breach of contractual obligations of the counterparties of the Group, that is, by the possibility of not recovering financial assets for the amount recognised and within the time established.
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To manage credit risk, the Commercial and Financial Departments of the Group assess the credit limits for each customer. Overdue accounts are followed up promptly and claimed by the Group Finance Department and, if necessary, by the Group Legal Department.
Moreover, the Group maintains its cash in financial entities with high credit rating.
Market risks occur due to the possible loss caused by changes in the fair value or in future cash flows of a financial instrument, due to changes in market prices. Market risk includes interest rate risk, exchange rate risk and other price risks.
The interest rate risk affects the Group insofar as the available bill discounting facilities are subject to the evolution of interest rates.
The exchange rate risk does not affect the Group, as the relative exchange insurances have been contracted in each case.
The price risk affects the Group because it belongs to a highly competitive price sector. However, all transactions are promptly analysed and monitored so as to achieve the best possible margins.
The liquidity risk arises from the possibility of the Group not being able to have access to liquid funds, or access them in sufficient quantity and at an adequate cost, to meet its payment obligations at all times. The objective of the Group is to maintain the necessary free cash, to which end the minimum liquidity levels, which must be maintained at all times, are established and watched over. As indicated above, the Group has contracted discount lines with different, multi‐annual projection, financial entities, which have a broad available margin.
13.5 Shareholders’ equity
The share capital of the parent company is represented and divided into 5,803,708 shares with a par value of 10 Euros each one, which are totally subscribed and paid up.
During this financial year, the parent company has increased capital by 40,000 Euros, according to agreement taken by the General Meeting of Shareholders on 6 May 2013, issuing 4,000 shares of 10 Euros par value each one, which are totally subscribed and paid up. Likewise, and as a result of the partial spin‐off without dissolution, part of its equity has been segregated (see Note 1), representing a decrease in capital of 1,330 Euros.
Share Premium: The share premium is of free distribution by the General Meeting of Shareholders of the parent Company.
Availability of reserves:
Legal Reserve: it has been set up in previous years and its intended purpose is as provided in Article 274 of the Rewritten Text of the Spanish Companies Act. According to the above, 10% of the company profits should be earmarked for the constitution of a reserve fund that will reach one fifth of the capital. This reserve may be used to cover, if applicable, the debit balance of profit and loss accounts, and must be replaced when its amount drops below the level indicated above, and whenever there are no other available and sufficient reserves for this purpose. It is assigned, at year end,
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according to the limit set by law.
Reserve for goodwill: pursuant to the Capital Companies Act, in the application of the result of each financial year, an unavailable reserve must be provided as a result of the goodwill that appears in the assets of the balance sheet. A figure of the profit that represents at least five per percent of the amount of this goodwill will be earmarked for this purpose.
Distributable reserves: These are unrestricted reserves at the disposal of the General Meeting of Shareholders of the parent Company.
In 2013 and 2012, neither the parent company nor any of the Companies comprising the Group has done business with own shares.
The movements of items included in shareholders’ equity of the consolidated balance sheet, are:
Balance at Modification Balance at Concept 31/12/12 Increases Decreases scope 31/12/13 Share capital 57,998,410.00 40,000.00 (1,330.00) 58,037,080.00 Share premium 90,680,265.10 160,000.00 90,840,265.10 Reserves 93,440,872.82 15,393,703.83 (20,269,972.81) 13,775,105.17 102,339,709.01 Other reserves of the parent company 76,155,153.26 1,585,734.35 (1,086,773.50) 76,654,114.11 ‐ Distributable reserves of the parent company 68,500,337.96 1,585,734.35 (67,837.52) 70,018,234.79 ‐ Non‐distributable reserves of the parent company 7,654,815.30 (176.00) 7,654,639.30 ‐ Results previous years 0.00 (1,018,759.98) (1,018,759.98) * Reserves in consolidated companies 46,886,821.36 13,807,969.48 (19,106,869.39) (14,832,771.16) 26,755,150.29 * Reserves in companies in application of equity (29,601,101.80 method ) (76,329.92) 28,607,876.33 (1,069,555.39) Profit/loss of year attributed to parent company (8,205,233.97) 8,205,233.97 (8,402,385.65) (8,402,385.65)
233,914,313.9 Total 5 23,798,937.80 (28,673,688.46) 13,775,105.17 242,814,668.46
The movements in the previous year were:
Balance at Balance at 31/12/11 Increases Decreases 31/12/12 Share capital 57,998,410.00 57,998,410.00 Share premium 90,680,265.10 90,680,265.10 Reserves 93,975,830.60 13,472,022.22 (14,006,980.01) 93,440,872.82 Other reserves of the parent company 75,682,145.59 473,007.67 0.00 76,155,153.26 ‐ Distributable reserves of the parent company 68,116,087.83 384,250.13 68,500,337.96 ‐ Non‐distributable reserves of the parent company 7,566,057.76 88,757.54 7,654,815.30 * Reserves in consolidated companies 44,683,964.50 12,996,929.49 (10,794,072.64) 46,886,821.36 * Reserves in companies in application of equity method (26,390,279.49) 2,085.06 (3,212,907.37) (29,601,101.80) Profit/loss of year attributed to parent company 634,031.94 (8,205,233.97) (634,031.94) (8,205,233.97)
Total 243,288,537.64 5,266,788.25 (14,641,011.95) 233,914,313.95
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13.6 Other value change adjustments
The value change adjustments included in the consolidated balance sheet as at 31 December 2013 are broken down below:
Parent Consolidated Companies Year 2013 company companies Equity method Total Available‐for‐sale financial assets 241,758.59 (352,540.76) (110,782.17) Hedging transactions 0.00 Other value change adjustments 420,031.86 420,031.86
Total 661,790.45 (352,540.76) 0.00 309,249.69
The value change adjustments as at 31.12.12 are broken down below:
Parent Consolidated Companies Year 2012 company companies Equity method Total
Available‐for‐sale financial assets (542,383.63) (24,542.10) 94.79 (566,830.94) Hedging transactions (742,774.10) (1,131,795.35) (1,874,569.44) Other value change adjustments 420,031.86 420,031.86
Total (122,351.77) (767,316.19) (1,131,700.56) (2,021,368.52)
NOTA 14 INVENTORY
This section, as at 31 December 2013, is broken down below:
Impairment Description Gross amount losses Total Merchandise 8,751,659.60 (115,365.35) 8,636,294.25 Raw materials and other procurements 14,433,280.23 (2,480,049.70) 11,953,230.53 Work in progress 2,237,012.99 (64,141.17) 2,172,871.82 Finished products 20,253,810.67 (1,180,418.07) 19,073,392.60 Advance to suppliers 900.00 900.00
45,676,663.49 (3,839,974.29) 41,836,689.20
This section, as at 31 December 2012 is broken down as follows:
Impairment Description Gross amount losses Total Merchandise 8,161,948.14 (88,169.02) 8,073,779.12 Raw materials and other procurements 13,903,055.15 (2,624,957.09) 11,278,098.06 Work in progress 1,969,429.31 (17,258.46) 1,952,170.85 Finished products 24,228,352.65 (1,017,239.03) 23,211,113.62 Advance to suppliers 1,103,476.57 1,103,476.57
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As at 31 December 2013, as at the end of the previous financial year, there are firm orders for raw materials that cannot be quantified because they are blanket orders with our material suppliers that are placed when required by the production processes. There are no limitations on the free availability of inventory due to guarantees, pledges, bonds or other similar reasons.
During financial year 2013, impairment losses have been assigned for the goods inventory, raw material and other procurements caused by low turnover and obsolescence, amounting to 31.4 thousand Euros, with an impairment reversal of 1,191 thousand Euros. Regarding the impairment of the inventory of finished goods, impairment losses amounting to 230.9 thousand Euros have been recorded, and a reversal amounting to 485.2 thousand Euros.
The Company has contracted insurance policies that guarantee the recoverability of the net book value of the inventories both of raw material and of finished product.
NOTA 15 FOREIGN CURRENCY
The global amount of the assets and liabilities denominated in foreign currency, including a breakdown of the most significant assets and liabilities classified by currencies, is given in the table below for the years 2013 and 2012, respectively:
Year 2013 Classification by currencies USD GBP CHF MYR Total A) NON‐CURRENT ASSETS 75,306.85 0.00 63,109.27 63,109.27 201,525.40 2. Long‐term financial investments 75,306.85 0.00 63,109.27 63,109.27 201,525.40 a) Equity instruments 0.00 0.00 63,109.27 63,109.27 126,218.55 c) Debt securities 75,306.85 0.00 0.00 0.00 75,306.85 B) CURRENT ASSETS 52,030.67 0.00 0.00 0.00 52,030.67 4. Short‐term financial investments 52,030.67 0.00 0.00 0.00 52,030.67 c) Debt securities 52,030.67 0.00 0.00 0.00 52,030.67 C) NON‐CURRENT LIABILITIES 0.00 0.00 0.00 2,398,442.73 2,398,442.73 2. Long‐term investments in group and associated companies 0.00 0.00 0.00 2,398,442.73 2,398,442.73 D) CURRENT LIABILITIES 4,932.90 1,099.44 0.00 0.00 6,032.34 4. Trade and other payables 4,932.90 1,099.44 0.00 0.00 6,032.34
Year 2012 Classification by currencies USD GBP SEK CHF RMB Total
A) NON‐CURRENT ASSETS 1,948,277.67 84,588.75 39,836.74 0.00 0.00 2,072,703.16 2. Long‐term financial investments 1,948,277.67 84,588.75 39,836.74 0.00 0.00 2,072,703.16 a) Equity instruments 1,948,277.67 84,588.75 39,836.74 0.00 0.00 2,072,703.16
B) CURRENT ASSETS 93,218.91 142,007.73 0.00 101,170.92 2,871.34 339,268.90 3. Short ‐term investments in group and associated companies 69,864.55 114,997.23 0.00 101,043.30 0.00 285,905.08 a) Equity instruments 69,864.55 114,997.23 0.00 101,043.30 0.00 285,905.08
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5. Cash and cash equivalents 23,354.36 27,010.50 0.00 127.62 2,871.34 53,363.82
D) CURRENT LIABILITIES 724.74 0.00 0.00 0.00 0.00 724.74 4. Trade and other payables 724.74 0.00 0.00 0.00 0.00 724.74
The amounts corresponding to purchases, sales and services received and rendered, denominated in foreign currency, are as follows, for the years 2013 and 2012:
Year 2013 Classification by currencies USD GBP SEK CHF RMB Total E) RESULTS 1,443,897.46 0.00 0.00 0.00 0.00 1,443,897.46 1. Purchases 1,443,897.46 0.00 0.00 0.00 0.00 1,443,897.46
Year 2012 Classification by currencies USD GBP SEK CHF RMB Total E) RESULTS 2,297,221.69 0.00 0.00 0.00 0.00 2,297,221.69 1. Purchases 2,297,221.69 0.00 0.00 0.00 0.00 2,297,221.69
The amount of the exchange differences recognised in the result of the year by classes of financial instruments, is broken down in the following table:
Year 2013 Year 2012 Outstandin Concept Settled Outstanding Settled g A) NON‐CURRENT ASSETS 79,163.33 0.00 115,964.62 0.00 2. Long‐term financial investments 79,163.33 0.00 115,964.62 0.00 a) Equity instruments 79,163.33 0.00 115,964.62
B) CURRENT ASSETS 16,900.19 0.00 (288.62) 0.00 5. Cash and cash equivalents 16,900.19 0.00 (288.62)
D) CURRENT LIABILITIES 339,715.72 0.00 60,531.43 0.00 3. Short‐term investments in group and associated companies 375,587.91 0.00 4. Trade and other payables (35,872.19) 0.00 60,531.43
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The conversion differences recorded in the equity of the 2013 and 2012 balance sheet arise as a result of the conversion to Euros of the interim financial statement as at 31 December of each financial year of Dunlopillo Group (expressed in Malaysian currency ‐ Ringgit Malaysia ‐). The movement of this account in the year is expressed below: Amount as at Amount as at Concept 31/12/12 Additions Discharges 31/12/13 Conversion differences 150,902.21 (2,359,729.03) (2,208,826.82)
The Dunlopillo Group operates in countries where it is present (see note 1), in the following currencies: Vietnamese Don, Chinese Renminbi, Hong Kong Dollar, Singapore Dollar, United States Dollar, Europe Dollar and United Kingdom Pound.
NOTA 16 TAX SITUATION
The Group of Companies as such, does not file consolidated tax returns, as each company individually presents its relative income tax statements, except for the Pardo Subgroup which pays its taxes in Spain, and for the COFEL Group, which files in France as a tax group in agreement with the regulation in force in this country. The parent company pays this tax in the general regime as an individual company, at 30%, which is the applicable tax rate for the 2012 accounting year, as for all the companies of the scope that are taxed in Spain. In the case of companies resident in France, their rate of taxation is 33.3% and for those resident in Portugal and Malaysia, 25%.
As at 31 December 2013 and 31 December 2012, the Group held the following balances with Public Administrations:
DEBIT BALANCES CREDIT BALANCES Concept Year 2013 Year 2012 Year 2013 Year 2012 Value Added Tax 1,216,703.47 3,015,203.71 2,325,718.03 3,056,403.20 Income Tax 326,194.85 611,569.19 Social Security organisations 9,760.25 1,047,209.99 1,199,596.67 Company tax and others 1,581,931.72 994,381.76 59,363.34 Other public entities 6,777,104.27 6,909,923.01 Total 2,798,635.19 4,019,345.72 10,476,227.14 11,836,855.41
The Company Tax for each financial year is calculated based on the accounting result, obtained by applying generally accepted accounting principles, which do not necessarily coincide with taxable income, defined as the taxable base of this tax. However, some of the Group companies not resident in Spain, in accordance with their respective tax laws, calculate the Company Tax in agreement with parameters, such as turnover, capital and added value.
Although each company pays the Company Tax individually, for information purposes, the reconciliation of the reported profits before tax corresponding to the years 2013 and 2012 is presented, with the consolidated tax base:
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Reconciliation of reported income and taxable income at the end of the 2013:
Profit and Loss Account Balance of income and expenditure of year (8,392,010.46) Increases Decreases Net effect Consolidation adjustments 13,965,500.54 13,965,500.54 Company Tax 3,392,263.95 (7,588,244.82) (4,195,980.87) Permanent differences 1,485,090.09 (1,387,584.33) 97,505.76 Temporary differences: 0.00 (1,014,520.64) (1,014,520.64) ‐ with origin in year 0.00 (143,520.73) (143,520.73) ‐ with origin in previous years 0.00 (870,999.91) (870,999.91) Set‐off for tax loss carryforwards (5,696,374.71)
Tax base of the scope of consolidation (5,235,880.38)
Reconciliation of reported income and taxable income at the end of the 2012:
Income and expenses Profit and Loss Account directly recognised in equity Total Consolidated profit/loss for the year (8,322,867.28) (8,322,867.28) Increases Decreases Increases Decreases Consolidation adjustments (1,484,451.18) (1,484,451.18) Company Tax 3,461,917.37 (5,876,553.58) (2,414,636.21) Permanent and temporary differences 1,723,630.64 (4,268,773.86) 0.00 (556,778.86) (3,101,922.08) Set‐off for tax loss carryforwards (5,300,480.07) (5,300,480.07)
Tax base of the scope of consolidation (20,624,356.82)
Deferred company tax assets and liabilities:
The difference between the tax burden allocated to the financial year and to preceding years and the tax burden already paid or payable for those years is recorded in the accounts, “Deferred Income Tax Assets” or “Deferred Income Tax Liabilities”, as appropriate. These deferred amounts have been calculated by applying the nominal tax rate in force to the relative amounts. The breakdown for 2013 and 2012 is as follows:
DEFERRED TAX ASSETS DEFERRED TAX LIABILITIES Concept 2013 2012 2013 2012 Assets from deductible temporary differences 740,167.82 32,921.58 Rights. deductions and allowances awaiting application 5,177,103.19 7,355,584.13 Credits for loss carryforwards 34,366,266.71 28,754,169.81 Liabilities from taxable temporary differences 256,432.48 189,169.83
Total 40,283,537.72 36,142,675.52 256,432.48 189,169.83
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The breakdown of the amount and year of generation. as well as of the last year of its application. for Credits for loss carryforwards activated in the assets of the consolidated balance sheet is as follows:
Amount at NEGATIVE TAXABLE BASES Year when start Additions of Discharges of Last year Amount AWAITING SET‐OFF generated of year year year applicable activated Tax credit for tax‐loss carryforwards E.U. 2001‐2013 28,356,783.00 6,153,551.95 (5,480,833.00) Indefinite 9,675,533.00 Tax credit for tax‐loss carryfowards 2008 0.00 505.41 0.00 2026 151.62 Tax credit for tax‐loss carryfowards 2009 3,231,122.12 26.15 (17,527.14) 2027 1,080,486.67 Tax credit for tax‐loss carryfowards 2010 7,789,825.62 67,716.19 (382,874.37) 2028 2,491,556.78 Tax credit for tax‐loss carryfowards 2011 27,622,127.64 22,585.03 (119,261.67) 2029 8,565,426.38 Tax credit for tax‐loss carryfowards 2012 17,670,444.79 1,182,234.87 0.00 2030 5,875,943.46 Tax credit for tax‐loss carryfowards 2013 0.00 21,669,921.41 0.00 2031 6,677,168.79 Total 84,670,303.17 29,096,541.01 (6,000,496.18) 34,366,266.71
(*) According to Royal Decree Law 9/2011, 19 August, the set‐off period for tax‐loss carryforwards was extended from 15 to 18 years. The extension is applicable to taxable bases that are awaiting set‐off at the start of the first taxable period, which starts on 1 January 2012.
The amount and application time for deductible temporary differences, tax losses and other tax credits, including those capitalised in the balance sheets and those that have not been recorded in the relative deferred tax asset in the balance sheet, have been described in the individual Annual Accounts of the companies that form part of the scope of consolidation.
The breakdown of income tax in the 2013 and 2012 financial years is as follows:
Concept Year 2013 Year 2012 Current income tax of the year (1,533,921.46) (1,742,143.87) Deferred income tax of the year 6,012,802.80 4,156,780.08 Negative differences in tax burden, previous year 542,322.45 (334,647.00) Positive differences in tax burden, previous year (825,222.92) 69,055.31
Total 4,195,980.87 2,149,044.52
Permanent and temporary positive differences are non‐deductible concepts in the determination of the tax base, such as adjustments made to the payable quota in company tax statement of the year 2012, to non‐deductable financial expenses pursuant to article 20 of the L.I.S. (Company Tax Law), due to the provision for fixed assets amortisation of the year, which is non‐ deductible, pursuant to Law 16/2012, 27 December, and other concepts.
Permanent and temporary negative differences arise mainly as a result of deductible concepts in the determination of the taxable base and which are not recorded for accounting purposes and also due to adjustments made to the payable quota in the company tax statement of the year 2012.
Temporary differences are those derived from the different measurements for accounting and tax purposes of certain assets, liabilities and equity instruments of the company.
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Deductions:
Although the companies of the Group have not yet submitted the Company Tax statement for the year 2013, the main application of deductions in the income tax calculation of the year amounted to 0.15 thousand Euros.
The breakdown of the deductions awaiting application by the Group at year end is as follows:
Amount Year when at start Additions of Discharges of Amount DEDUCTION AWAITING generated of year year year APPLICATION activated Deductions awaiting application 2006 86,549.21 0.00 0.00 86,549.21 Deductions awaiting application 2007 140,963.85 0.00 0.00 140,963.85 Deductions awaiting application 2008 960,997.58 0.00 (7,082.64) 953,914.94 Deductions awaiting application 2009 589,034.76 0.00 0.00 589,034.76 Deductions awaiting application 2010 618,036.26 0.00 (7,085.70) 610,950.56 Deductions awaiting application 2011 601,303.05 2,562.13 0.00 603,865.18 Deductions awaiting application 2012 499,223.91 41,778.20 0.00 541,002.11 Deductions awaiting application 2013 0.00 943,167.58 0.00 943,167.58 Deductions awaiting application E.U. 2013 0.00 1,056,940.00 0.00 707,655.00 Total 3,496,108.62 2,044,447.91 (14,168.34) 5,177,103.19
Pursuant to article 42 of the Rewritten Text of the Company Tax, it is recorded in the individual annual accounts of the Group companies that they have benefited from the deduction for reinvestment of extraordinary profits, listing the amounts of the income received and the dates of reinvestment.
There are no other significant circumstances relating to other taxes.
There are no other tax contingencies or post‐balance sheet events that represent a change in tax regulation that affect the tax assets and liabilities recorded.
As a result of proceedings carried out by the tax administration (AEAT) in a company of the Group for the company tax of the financial years 2009 to 2010, for the Value Added Tax from June 2009 to December 2010, the group has cancelled 4,057,498.36 Euros of rights for deduction of double taxation of dividends of years 2009 and 2010, activating, for this same amount, credits for losses carried forward, which, in turn, have been reduced by 1,739,224.97, due to differences in criteria between the Company and the administration. Activated R&D&IT tax deductions amounting to 104,362.21 Euros have also been reduced (See Note 2).
As established by the legislation in force, the taxes cannot be considered as definitely paid until the statements have been inspected by the tax authorities or the four‐year limitation period has elapsed. The tax returns of GRUPOPIKOLIN, SL and its SUBSIDIARIES for all the taxes filed are open to inspection for all years that are not statute‐barred. The Directors of the Parent company consider that the aforementioned settlements of taxes have been carried out correctly, so that, even in the event of any discrepancies in the interpretation of the current regulations due to the tax treatment awarded to
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the transactions, the resulting liabilities, if any, would have no significant effect on the consolidated annual accounts.
NOTA 17 INCOME AND EXPENDITURE
17.1 Breakdown of consumptions in purchases and inventory changes:
Concept Year 2013 Year 2012 Purchases, net of returns and any discount: (143,827,157.50) (139,874,551.94) ‐ national (16,644,305.84) (21,694,208.70) ‐ intra‐community acquisitions (67,882,297.12) (91,346,253.68) ‐ imports (59,300,554.54) (26,834,089.56) Inventory change of raw materials and other consumables 680,465.60 (740,650.25)
Total Consumption of raw materials and other consumables (143,146,691.90) (140,615,202.19)
Concept Year 2013 Year 2012 Purchases, net of returns and any discount: (6,290,292.60) (5,213,956.33) ‐ national (5,028,399.05) (3,707,927.19) ‐ intra‐community acquisitions (1,010,141.30) (1,416,351.00) ‐ imports (251,752.25) (89,678.14) Inventory change of goods 90,488.13 292,545.05
Total Consumption of goods (6,199,804.47) (4,921,411.28)
17.2 Breakdown of the employee welfare expenses item:
Concept Year 2013 Year 2012 Social security payable by company (22,484,612.71) (22,721,127.70) Other social expenditure (302,856.06) (268,792.82)
Total Employee welfare expenses (22,787,468.77) (22,989,920.52)
17.3 Other information:
On 11 February 2011, Pikolin, S.A. requested authorisation to suspend employment contracts between 21 February 2011 and 20 February 2013. Following that date, and in financial years 2011 and 2012, complementary resolutions were passed, and in addition, on 6 June 2012 the Company was authorised once again to extend the number of suspension days. During this financial year, on 18 February 2013, a document was presented to the Subdirectorate of Labour of Zaragoza, pursuant to article 12 and Additional Provision Two of Royal Decree 1483/2012. It was agreed in this document to implement a measure to terminate employment contracts and implement a temporary Downsizing Plan of 165 days over a three‐year period, that is, from 25 February 2013 to 25 February 2016.
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17.4 The results arising from outside the company’s normal activity, included in the item “Other results”
Concept Year 2013 Year 2012 Results arising from outside the company’s normal activity, included in “Other results” (134,860.53) (258,539.71) Exceptional expenses (340,322.44) (932,923.92) Exceptional income 205,461.91 674,384.21
NOTA 18 PROVISIONS FOR RISKS AND EXPENSES
The analysis of the movement of each item on the balance sheet during this financial year is given below:
BALANCES BALANCES Concept 31/12/2012 INCREASES REDUCTIONS 31.12.13 Long‐term provisions
Provision for other responsibilities 1,158,093.20 894,787.00 (895,311.04) 1,157,569.16 Provisions for restructuring 6,546,074.20 577,692.80 (195,000.00) 6,928,767.00 Short‐term provisions 0.00 Other provisions 61,663.74 621,893.57 (61,663.74) 621,893.57 Total 7,765,831.14 2,094,373.37 (1,151,974.78) 8,708,229.73
The section on provision for other responsibilities mainly corresponds to provisions for taxes and other responsibilities, whilst the provisions for restructuring are due to the amount of the rights acquired by workers of one company of the Group, whose registered offices are located in a member country of the European Union (see NOTE 1.2). The actuarial hypotheses used to calculate these long‐ term payments to staff have been: discount rate of 3%, expected salary increase rate: 2% and a financial rate of return: 3.50%.
The balance recorded in the “short‐term provisions” section of the balance sheet as at 31 December 2013, is comprised mainly of two provisions recorded in the financial year. On the one hand, a provision of 48,000 Euros for the penalisation stipulated in a rental contract (see Note 12). On the other, a provision of 574,001.75 Euros related to the retrocession of a machinery sale transaction (see Note 9).
NOTA 19 INFORMATION ABOUT THE ENVIRONMENT
The balance sheet includes environmental assets. The Group has been complying with the applicable environmental regulation and deems that there are no environmental liabilities that might represent significant contingencies.
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The breakdown of the net carrying value of environmental assets included in the group balance sheet as tangible assets, corresponding to a technical facility whose aim is to control discharge pollution, is as follows at year end:
Concept Year 2013 Year 2012 Carrying value 113,917.18 113,917.18 Accumulated depreciation (98,345.84) (83,011.86)
Total 15,571.34 30,905.32
Three companies that form part of the Group and pursuant to the purpose of law 11/97, 24 April, on container and container waste, implemented according to directive 62/1994, manage the recycling of their waste with the company, Ecoembalajes España, S.A. (Ecoembes). The amount paid to this company to manage the containers and packaging of the Company, has amounted to 90 thousand Euros in 2013 and 95 thousand Euros in 2012.
One company of the Cofel subgroup manages the recycling of its packaging in France, having paid out the sum of 294 thousand Euros in 2013 and 332 thousand Euros in the previous year.
NOTA 20 GRANTS, DONATIONS AND BEQUESTS.
In previous financial years, some companies of the Group received:
- 23 thousand Euros from the Government of Aragon for an investment in the improvement of the energy efficiency of the air‐conditioning in the factory, which was allocated to results in agreement with the amortisation of the investment, amounting to 105,808.34 Euros (see note 9).
- 200 thousand Euros from the Official Credit Institute, through a financial entity that subsidises interests for a loan with that same entity, to results during the loan repayment period.
- 210 thousand Euros from the Centre for Industrial Technology Development, for the quantity that one company of the group is not obliged to return, corresponding to the last repayment instalment of the loan contract.
The subsidies reflected in the section of the profit and loss account “Operating grants incorporated into the profit/loss of the financial year”, mainly correspond to the sum accrued as a result of the financing by Public Organisations of different courses.
The Company has been complying with the legal requirements demanded to obtain and maintain these grants.
The amount of the grants, donations and bequests received that appear in the balance sheet, as well as those allocated in the profit and loss account are broken down in the following table:
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Concept Year 2013 Year 2012 Recorded in the equity of the balance sheet 285,610.20 699,549.73 Allocated in the income statement 178,169.42 199,713.89 Long‐term debts convertible into grants 0.00 268,291.31
The analysis of the movement of the content of the equity and liabilities item of the balance sheet “grants, donations and bequests”, indicating the starting and closing balance, as well as the increases and reductions is broken down in the table below:
Concept Year 2013 Year 2012 Balance at start of year 699,549.73 557,947.72 (+) Received in the year 81,497.97 218,460.86 (‐) Changes of scope PE (See Note 5) (333,066.48) (94,470.62) (‐) Grants transferred to results of the year (23,647.41) (31,104.45) (‐) Consolidation adjustments (193,056.09) 62,279.09 (+/‐) Other movements 54,332.48 (13,562.87) Balance at year end 285,610.20 699,549.73
Long‐term debts convertible into grants 0.00 268,291.31
The balance at year‐end includes the sum of grants belonging to Interests of external shareholders (see note 7).
NOTA 21 POST‐BALANCE SHEET EVENTS
Following the year close and before the date these annual accounts were drawn up, no other post‐balance event of a significant nature has occurred, which might reveal circumstances that could require a change in any aspect included therein, or affect the application of the “going concern” principle of the Group.
NOTA 22 RELATED PARTY TRANSACTIONS
The following companies are considered as related parties for the purpose of these consolidated annual accounts: the Companies that form part of the Iberebro Group and of the New Ebrosol Group, whose shareholders are common to those of the Pikolin Group, which are indicated in the report of the Grupoiberebro, S.L. Annual Account and of the scope of Nuevo Grupo Ebrosol, S.L.
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22.1 The information about the Company’s related party transactions is included in the table below:
Associated Other related Related party transactions in the 2013 financial year companies parties
Sales of current assets 10,867.94 4,151.80 Purchases of current assets 774,596.64 Purchases of non‐current assets 15,038.83 Provision of services 30,049.83 304,330.44 Receipt of services 3,512,780.29 Interest income 1,610,391.48 Interest expenses 4,064.19
Transactions at market price of the financial year are:
Key staff of the management of the company or of Associated the parent Other related Related party transactions in the 2012 financial year companies company parties
Sales of current assets 10,407.29 Purchases of current assets 51,543.22 Provision of services 95,823.64 180,930.65 Receipt of services 35,549.44 4,206,741.49 *Accrued in the year 55,064.92 *Accrued in previous years 115,057.90 Interest income accrued but not received 3,227,550.75 Interest expenses paid 830,643.09
Sales of current assets consist of mattresses, bed bases and other leisure‐related articles, as well as their transport.
The services provided reflect the impact of miscellaneous expenses and administration services.
The services received by the group refer mainly to real estate leases.
The interest income corresponds to the interests accrued by long‐term loans to companies that apply the equity method and to other related parties.
The interest expenses correspond to cash pooling with three companies of the Iberebro Group.
There are different financial investments that act as guarantee for liabilities of group and related companies (see note 13.1).
The Company carries out different commercial transactions with group companies, which fall within the guidelines set by the group, and in agreement with the national tax regulation that governs this type of transactions. The Board of Directors considers that they operate within market margins, as
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these are in line with those resulting from other transactions of the same characteristics with unrelated parties.
22.2 Balances with related parties at year end: Related party transactions in the financial year Associated Other related 2013 companies parties A) NON‐CURRENT ASSETS 10,149,008.97 33,124,983.83 IV. Long‐term investments in group and associated companies 10,149,008.97 0.00 2. Credits to companies consolidated by the equity method 10,149,008.97 V. Long‐term financial investments 33,124,983.83 B) CURRENT ASSETS 0.00 124,290.48 V. Short‐term financial investments 0.00 124,290.48 C) NON‐CURRENT LIABILITIES 0.00 58,082,154.85 II. Long‐term debts 0.00 58,082,154.85 4. Other financial liabilities 58,082,154.85 D) CURRENT LIABILITIES 0.00 1,131.74 III. Short‐term debts 0.00 356.92 4. Other financial liabilities 356.92 V. Trade and other payables 0.00 774.82 1. Suppliers 774.82
Balances with related parties for the previous financial year are: Balances with related parties in the financial year Associated Other related 2012 companies parties A) NON‐CURRENT ASSETS 69,686,240.81 35,581,157.70 IV. Long‐term investments in group and associated companies 69,686,240.81 0.00 2. Credits to companies consolidated by the equity method 69,686,240.81 V. Long‐term financial investments 35,581,157.70 B) CURRENT ASSETS 1,277,461.98 10,509.54 III. Trade and other receivables 5,000.87 10,509.54 1. Customer receivables for sales and services 10,509.54 2. Customers, companies consolidated by the equity method 5,000.87 IV. Short ‐term investments in group and associated companies 1,272,461.11 0.00 1. Credits to companies consolidated by the equity method 1,272,461.11 C) NON‐CURRENT LIABILITIES 5,987,094.05 27,531,625.03 II. Long‐term debts 0.00 27,531,625.03 4. Other financial liabilities 27,531,625.03 III. Long‐term investments in group and associated companies 5,987,094.05 0.00 1. Debts with companies consolidated by the equity method 5,987,094.05 D) CURRENT LIABILITIES 85,281.68 (554,514.17) III. Short‐term debts 0.00 (423,541.33) 4. Other financial liabilities (423,541.33) V. Trade and other payables 85,281.68 (130,972.84) 1. Suppliers (130,972.84) 2. Suppliers, companies consolidated by the equity method 85,281.68
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22.3 Payments to the Board of Directors and senior management accrued in the financial year:
Year 2013 Year 2012
Salaries, allowances and other remunerations 634,914.17 565,417.99
The members of the Board of Directors develop the senior management tasks in the Group.
22.4 Loyalty obligations:
With respect to the loyalty obligations established in article 229 of the Consolidated Text of the Company Law, the directors or persons linked to them from the parent company, GRUPOPILOLIN, S.L. do not hold shares in the capital or hold posts or functions in Companies outside the consolidation scope, with the same, similar or complementary type of activity that constitutes the corporate purpose of this Entity. Nor do they carry out – on their own account or for third parties – this type of activity, with the exception of:
Parent Post Share %
Grupo Ebrosol S.L. Director 100% Ebrobaza, S.L. Director 100% Ebrosol Inversiones S.L. Director 100% Nuevo Descanso, S.L. Director 100% GrupoIberebro, S.L. Director 96% Nuevo Grupoebrosol S.L. Director 100%
NOTA 23 OTHER INFORMATION
23.1 Breakdown of the average number of employees in the Group during the financial year and by categories:
PROFESSIONAL CATEGORIES Year 2013 Year 2012 Senior management 23 20 Other executive staff 12 9 Scientific and intellectual, and support technicians and professionals (graduates) 252 280 Administrative staff 475 462 Commercial reps, sales people and similar 213 208 Other qualified staff (intermediate qualifications) 77 93 Unskilled workers 1263 1425 Average employment total 2,315 2,497
Impact of the ERE (Downsizing) (*) (52) (205) Impact of the partial retirements (**) (58) (82) Total net average employment 2,205 2,210 ______Zaragoza, 30 March 2014 Page 63 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
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(*) Impact on the average number of employees, calculated bearing in mind the working days when the company employees have been affected by the ERE in force (see note 17.3).
(**) Impact on the average number of employees pursuant to Law 27/2011, 1 August. These workers correspond to partial retirements with bridging contracts, and the people who cover the bridging contracts are already included in average personnel in the relative category.
23.2 Gender distribution at year end of the personnel from the Group and Board Members:
MALE FEMALE TOTAL Year Year Year PROFESSIONAL CATEGORIES 2013 Year 2012 2013 Year 2012 Year 2013 2012 Board members: * who carry out senior management tasks 24 5 4 1 28 6 * who do not carry out senior management tasks 7 7 Senior management, not board members 40 17 18 58 17 Other executive staff 9 3 2 2 11 5 Scientific and intellectual, and support technicians and professionals (graduates) 139 177 73 86 212 263 Administrative staff 247 234 236 235 483 469 Commercial reps, sales people and similar 100 99 97 100 197 199 Other qualified staff (intermediate qualifications) 52 68 28 31 80 99 Unskilled workers 1.033 1163 225 239 1258 1402
Total personnel at year‐end 1,651 1,766 683 694 2,334 2,460
23.3 Average number of people employed during the course of the year with 33% disability or more.
PROFESSIONAL CATEGORIES Year 2013 Year 2012 Unskilled workers 19 19
Total personnel at year‐end 19 19
23.4 The remunerations accrued by the auditors of the Group in the financial year, both for the audit of the individual and consolidated annual accounts, and other services amount to:
Concept Year 2013 Year 2012 Fees charged for accounts audit 94,278.00 105,729.00 Other fees for services provided 8,331.00 5,771.00
Total 102,609.00 111,500.00
The fees related to the account auditing services provided by other different auditors to the main auditor, have amounted to 248 thousand Euros in 2013 (270 thousand Euros in 2012).
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NOTA 24 SEGMENTED INFORMATION
The assignment and allocation criteria used for each one of the segments is the activity carried out.
The criterion followed to establish the inter‐segment transfer prices is in accordance with market prices.
24.1 Turnover by geographic markets:
Turnover Description of the geographical market Year 2013 Year 2012 National 88,051,485.45 79,204,670.00 Rest of European Union 215,639,999.97 213,392,240.82 Rest of world 33,026,711.46 40,654,818.25
Total 336,718,196.88 333,251,729.07
24.2 Information about the segmented financial statements (in thousands of Euros):
EXPRESSED IN THOUSANDS OF EUROS Segments Production and Security and marketing of surveillance Financial Inter‐segment Concepts Rest/sleep prod. services services eliminations Total Net sum of the turnover 336,718.20 0.00 0.00 0.00 336,718.20 Sales 333,398.01 0.00 0.00 0.00 333,398.01 ‐ External customers 365,452.48 0.00 0.00 0.00 365,452.48 ‐ Intersegments (32,054.48) 0.00 0.00 0.00 (32,054.48) Provision of services 3,320.19 0.00 0.00 0.00 3,320.19 ‐ External customers 3,983.76 700.18 0.00 0.00 4,683.93 ‐ Intersegments (663.57) (700.18) 0.00 0.00 (1,363.74) Procurements (182,464.65) 0.00 0.00 32,824.40 (149,640.24) Staff costs (95,695.57) (649.24) (761.62) 69.51 (97,036.93) Depreciation of property, plant and equipment (6,662.63) (0.64) (0.94) 0.00 (6,664.21) Losses, impairments and change of provisions (178.16) 0.00 0.00 0.00 (178.16) ‐ Current (141.90) 0.00 0.00 0.00 (141.90) ‐ Non‐current (36.26) (36.26) OPERATING RESULT (14,399.99) 11.41 (831.09) 5,302.40 (9,917.27) Finance income 15,706.75 5.65 5,603.70 (16,584.94) 4,731.16 Finance costs (5,034.21) (0.28) (3,192.02) 2,511.24 (5,715.27) EARNINGS BEFORE TAXES (4,024.10) 16.78 70.40 (8,771.30) (12,708.23) Assets of the segment 470,652.77 426.07 277,198.54 (325,304.44) 422,972.94 Liabilities of the segment 234,716.88 135.77 52,209.29 (105,959.53) 181,102.41 Net cash flows of the activities: ‐ Transaction (12,698.41) 0.00 0.00 20,382.77 7,684.37 ‐ Investment 1,346.38 0.00 0.00 18,015.78 19,362.16 ‐ Financing 18,719.99 0.00 0.00 (38,152.86) (19,432.87)
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Information about the segmented financial statements of the previous financial year (in thousands of Euros):
EXPRESSED IN THOUSANDS OF EUROS Segments Data Production and Security and processing marketing of surveillance Financial and Advertising Renewable Inter‐segment Concepts Rest/sleep prod. services services electronics products energies eliminations Total Net sum of the turnover 361,481.82 769.42 0.00 850.78 684.97 0.00 (30,535.27) 333,251.73 Sales 356,113.62 0.00 0.00 793.01 357.51 0.00 (28,546.49) 328,717.65 ‐ External customers 327,569.83 0.00 0.00 793.01 354.81 0.00 0.00 328,717.65 ‐ Intersegments 28,543.79 0.00 0.00 0.00 2.70 0.00 (28,546.49) 0.00 Provision of services 5,368.20 769.42 0.00 57.77 327.46 0.00 (1,988.78) 4,534.08 ‐ External customers 4,151.50 0.00 0.00 55.12 327.46 0.00 0.00 4,534.08 ‐ Intersegments 1,216.71 769.42 0.00 2.65 0.00 0.00 (1,988.78) 0.00
Procurements (173,688.95) 0.00 0.00 (486.12) (234.93) 0.00 29,651.87 (144,758.13) Staff costs (87,974.02) (593.82) (528.05) (641.73) (377.23) 0.00 0.00 (90,114.85) Depreciation of property, plant and equipment (6,885.32) (0.67) (0.96) (64.10) (15.82) 0.00 0.00 (6,966.86) Losses, impairments and change of provisions (2,742.01) 0.00 0.00 0.00 0.00 0.00 0.00 (2,742.01) ‐ Current (2,742.01) 0.00 0.00 0.00 0.00 0.00 0.00 (2,742.01)
OPERATING RESULT (4,408.19) 137.32 (1,005.18) (91.41) (663.66) (6.30) (267.77) (6,305.18)
Finance income 3,994.28 8.71 6,565.42 16.33 15.22 4.71 (3,917.42) 6,687.25 Finance costs (4,113.07) 0.00 (5,107.56) (47.65) (31.96) 0.00 4,166.35 (5,133.89)
RESULT OF DISCONTINUED OPERATIONS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
EARNINGS BEFORE TAXES (4,878.92) 146.04 (1,447.61) (123.72) (680.40) (1.59) (18.84) (7,005.05)
Assets of the segment 438,584.79 552.15 349,216.42 2,206.06 1,073.90 177.21 (344,841.24) 446,969.30 Liabilities of the segment 197,604.31 188.30 108,154.38 2,246.34 1,575.35 0.56 (95,821.05) 213,948.19
Net cash flows of the activities: ‐ Operating (21,258.08) 0.00 0.00 0.00 0.00 0.00 0.00 (21,258.08) ‐ Investment (6,669.93) 0.00 0.00 0.00 0.00 0.00 0.00 (6,669.93) ‐ Financing 21,092.81 0.00 0.00 0.00 0.00 0.00 0.00 21,092.81
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In the event of a discrepancy, the Spanish-language version prevails. ______
NOTA 25 INFORMATION ABOUT GREENHOUSE GAS EMISSION ALLOWANCES.
At year‐end, the Group has no greenhouse gas emission allowances in the validity period of the National Allocation Plan and its annual distribution, so no valuation amount for these allowances has been reflected in its consolidated Balance sheet. No expenses or income for this concept have been recorded in the profit and loss account, either. Likewise, the Group has not received any grants for emission allowances and there are no contingencies relating to sanctions or temporary measures, under the terms established in Law 1/2005, 9 March, which governs the greenhouse gas emission allowances trading scheme.
NOTA 26 INFORMATION ABOUT BELATED PAYMENTS MADE TO SUPPLIERS.
This note includes information about the belated payment made to suppliers, established in additional provision three, “Reporting Obligation” of Law 15/2010, 5 July”, pursuant to Resolution, 29 December 2010, of the Account Auditing and Accounting Institute, about information to be incorporated into the annual accounts report in connection with belated payments to suppliers in trading operations.
This third year of application of the aforementioned Resolution includes all the information related to financial years 2013 and 2012. However, noteworthy is the fact that, in agreement with the calendar foreseen in transitory Provision two of Law 15/2010, the maximum time intervals permitted for years 2013 and 2012, are 60 and 75 days, respectively. The table includes the consistency with the same criteria applied in the group, for payment to suppliers of the companies located outside Spanish territory:
Payments made and pending at balance sheet end date Year 2013 Year 2012 Amount % Amount % Within the maximum legal time interval 212,626,039.51 76% 277,478,466.56 88% Others 67,433,738.18 24% 37,229,160.10 12% Total payment of the year 280,059,777.69 100% 314,707,626.66 100% Average weighted time interval of exceeded payments 24 days 20 days Belated payments that, at end date, exceed the maximum legal time interval 948,792.23 5,703,519.52
______Zaragoza, 30 March 2014 Page 67 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
CONSOLIDATED MANAGEMENT REPORT FOR 2013
1.‐ Evolution of Business and Situation of the Group:
The aforementioned turnover amounts to 336.72 million Euros in this financial year, compared with the 333.25 million Euros of the previous year, representing an increase of 1%. This increase in turnover is due to the increase in the Group activity, reduced in the part of turnover corresponding to the companies that have left the scope this year. On the other hand, in all the other group companies, the evolution is in keeping with the current situation of the global economy, having carried out a series of very important adjustments and cuts in its expenditure items for four consecutive years, in order to adapt its commercial, distribution and administration structure to the new activity figures, and to prepare the Group to cope with the current crisis in the best possible manner. The situation of the Spanish economy has mainly had an impact on the result of the national companies, which has meant that the operating result has decreased with respect to the previous year, going from 6.31 million Euros in losses to 9.9 million Euros in losses, mainly caused by the impact of an ERE (Downsizing Plan) in one of the companies of the Group.
The decisive support of our shareholders, making a significant contribution to the Group with own resources, together with the support of the main financial entities, is permitting the financing of the investments required to be present in the different locations both in Spain and abroad, which are considered strategic for the Group, and to be able to maintain our supply capacity and adapt it, if necessary, to the expected demand.
This evolution of the turnover, together with other indicators that we set out below, explains the progress and situation of the Group at the end of financial year 2013.
With total assets of 422.97 million Euros, of which 66.25% are non‐current Group assets, whose most significant item are the non‐current financial investments, which represent 34.59% of the total assets; the remainder corresponds to current assets, whose two most significant items are the debit balance, which represents 18.06% of total assets and the inventory balance that amounts to 9.89% of total assets.
With respect to the Group liabilities, we can see that the Equity represents 241 million Euros, representing 57.18% of the total liabilities. The remainder is distributed between non‐current liabilities that represent 20.01% of the total liabilities, and current liabilities, with 22.80%.
The following indicators help support the comments that we have made on the progress and situation of the Group throughout this Report:
- Short‐term solvency: this indicates the company's capacity to meet its short‐term liabilities, and it is calculated by dividing current assets by current liabilities. With a value of 1.48 at year end, and given that a fair value for this indicator would be between 1 and 1.5, we can see that our short‐term solvency is adequate.
- Total Solvency or Guarantee: with a value of 2.34, obtained as a ratio between Total Assets and Total Liabilities, it shows that the company has sufficient capacity to respond to its creditors for
______Zaragoza, 30 March 2014 Page 68 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
all debts.
- Long‐term Indebtedness: This indicates the proportion of long‐term debts with respect to own resources; with a value of 0.35, and given that the lower this ratio, the greater the long‐term indebtedness capacity, this tells us that we have still more debt capacity and that in general we preserve a good financial equilibrium.
- Long‐term financial equilibrium: this is obtained by the ratio between Equity and non‐current assets, and with a value of 0.86, it tells us that the Equity finances all of the fixed assets.
- Return on Equity: calculated as the ratio between the final result and the average Equity of the year, with a value of ‐3.47% it measures the return on equity obtained by the shareholders, measured over the book value of the Group.
As to economic forecasts handled by the Group for the coming year 2014, together with the strong support of the shareholders, the adjustments made during this year and the policy undertaken in terms of cost containment, we believe this will allow us to maintain our sales targets, customer service and activity diversification, and reasonably overcome the crisis period of our economy.
The Group will continue to maintain the necessary investment level that will guarantee its position in the market and provide an optimal customer service.
However, the Group will continue the process of adjustment and spending restraint, allowing for a gradual improvement in profitability rates, from current levels.
2.‐ Main risks and uncertainties:
The Group has no risks or uncertainties that might question its continuity, in line with everything said in the first paragraph of this report. Market conditions, however, are forcing the Group to make all those adjustments considered necessary to adapt its supply to its demand without compromising the service that it renders to its clients.
Likewise, we do not have any significant litigations that might represent losses for the Group. The only litigations we have are related to customer credit risks, which are properly secured or impaired where appropriate in the year
3.‐ Social Management of the Group:
Over the last three financial years, the Group has adopted a series of measures aimed at optimising its staff, to adapt it to the current situation of economic crisis. The personnel policy over the last few financial years has been parallel to the activity of the Group companies, so it will continue with this personnel policy, in order to optimise its human resources to the full, in agreement with their real needs for each period.
Occupational absenteeism levels, above all due to sickness or accident leave, have been maintained at very low levels, and no serious or very serious accident has occurred to date.
______Zaragoza, 30 March 2014 Page 69 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report of financial year 2013 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
The environmental policy meets all the requirements demanded by the applicable law at all times.
In line with our policy to improve administrative and production processes, as well as full compliance with current legislation, the annual audits of the consolidated and individual annual accounts of the Group companies, as required, have been conducted, framed within the provisions of the Rewritten Text of the Account Auditing Law (RDL 1/2011, July 1).
4.‐ Research and Development Activities:
Despite the current crisis, investment in Research, Development and Innovation has remained at the levels of recent years.
The Group is convinced that the new products and technology that will enable it to maintain its leadership position in the sector will only be possible through investment in R&D&I.
The amount spent, in the year, on research, development and technological innovation activities has amounted to a sum of 2.05 million Euros, of which no amount has been activated during the year as intangible fixed assets.
5.‐ Acquisitions of own equity instruments:
Neither the Parent nor Subsidiary companies, members of the Group, hold own shares in portfolio. At the same time, no sales transactions, or any other type of transaction with their shares have been carried out in the 2013 financial year.
6.‐ Post‐Balance Sheet Events:
No internal or external event that has occurred after the year‐end date has special relevance for the Group, nor does any event significantly affect the economic, financial and equity situation that appears in the annual accounts closed as at 31 December 2013.
______Zaragoza, 30 March 2014 Page 70
This is an English version for informative purposes only of a document drafted in Spanish. In the event of discrepancy, the Spanish version shall prevail.
APPENDIX 2
CONSOLIDATED ACCOUNTS OF THE ISSUER FOR THE FINANCIAL YEAR ENDED ON DECEMBER 31 2014
APPENDIX 2.DOCX
GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2014 Euros
Report ASSETS NOTES Acc. Period 2014 Acc. Period 2013
A) NON‐CURRENT ASSETS ...... 269,922,691.61 280,233,149.35 I) Intangible assets ...... 49,269,118.74 47,584,556.57 1.‐ Consolidation Goodwill………………………………………………………..…………. 6 12,402,950.38 12,644,713.38 2.‐ Other intangible assets………………………………………………………………..…… 11 36,866,168.36 34,939,843.19 II) Tangible assets ...... 9 40,699,847.93 38,405,040.08 1.‐ Land and buildings ...... 7,287,829.13 8,932,509.17 2.‐ Technical installation and other tangible assets ...... 28,958,677.80 28,745,828.77 3.‐ Advances an tangible assets in course ...... 4,453,341.00 726,702.14 III) Investment property ...... 10 1,075,561.99 1,415,833.88 IV) Non‐current investments in Group companies and associates ...... 1,083,729.69 728,355.42 1.‐ Shares in application of equity method …………………………………..………… 8 1,083,729.69 728,355.42 V) Non‐current financial assets ...... 13 135,823,225.41 146,306,366.34 VI) Deferred tax assets ...... 16 37,962,254.12 40,283,537.72 VII) Non‐current trade debtors...... 4,008,953.73 5,509,459.34 B) CURRENT ASSETS ...... 134,751,994.53 142,739,788.41 II) Inventories ...... 14 40,666,074.12 41,836,689.20 III) Trade and other receivables ...... 81,584,292.67 76,390,667.58 1.‐ Trade receivables for sale and services ...... 73,126,169.66 67,880,647.98 2.‐ Companies in application of equity method……………...……………………… 0.00 1,504.26 3.‐ Current tax assets ...... 231,075.00 1,483,850.08 4.‐ Other receivables…………………………………………….…………………..…………… 8,227,048.01 7,024,665.26 V) Current financial assets ...... 5,804,569.71 2,524,061.86 VI) Current prepayment and accrued income ...... 578,259.26 499,830.55 VII) Cash and cash equivalents ...... 6,118,798.77 21,488,539.22
TOTAL ASSETS (A+B) ...... 404,674,686.14 422,972,937.76
Zaragoza, 31 March 2015 Page 1 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED BALANCE SHEETS AT 31 DECEMBER 2014 Euros
Report EQUITY AND LIABILITIES NOTES Acc. Period 2014 Acc. Period 2013 A) EQUITY ...... 238,299,011.18 241,870,524.12 A‐1) Shareholders`equity ...... 13 239,258,714.44 242,814,668.46 I) Share capital...... 58,037,080.00 58,037,080.00 1.‐ Registered share capital………………………………………………….………………… 58,037,080.00 58,037,080.00 II) Share premium ...... 90,840,265.10 90,840,265.10 III) Reserves…………………………….………………………………………….…………………………… 92,755,010.23 102,339,709.01 VI) Profit attributed to Parent Company…………………………………………………………… (2,373,640.89) (8,402,385.65) A‐2) Valuation adjustments ...... (2,033,765.39) (1,899,577.13) I) Conversion differences……………………………………………………………...……………… (2,158,803.05) (2,208,826.82) II) Other valuation adjustments……………………………………………….……………………… 13 125,037.66 309,249.69 A‐3) Grants, donations or gifts and legacies received 20 407,742.56 285,610.20 A‐4) External shareholders ...... 7 666,319.57 669,822.59 B) NON‐CURRENT LIABILITIES ...... 56,499,141.92 84,648,506.50 I) Long‐term provisions ...... 18 8,629,078.71 8,086,336.16 II) Non‐current payables ...... 13 47,541,337.75 76,183,737.86 2.‐ Bank borrowings ...... 30,866,615.86 58,351,394.11 4.‐ Other financial liabilities ...... 16,674,721.89 17,832,343.75 IV) Deferred tax liabilities ...... 328,725.46 256,432.48 VI) Non‐current trade creditors...... 0.00 122,000.00 C) CURRENT LIABILITIES ...... 109,876,533.04 96,453,907.14 II) Short‐term provisions ...... 0.00 621,893.57 III) Current payables ...... 13 38,965,853.39 26,402,096.00 2.‐ Bank borrowings ...... 37,505,083.31 24,516,830.77 4.‐ Other financial liabilities ...... 1,460,770.08 1,885,265.23 V) Trade and other payables...... 70,888,721.49 69,305,234.63 1.‐ Payable to suppliers ...... 13 37,783,034.31 36,978,335.35 2.‐ Payable to suppliers ‐ Group companies and associates ...... 13‐22 0.00 177,003.82 3.‐ Current tax liabilities ...... 9,679.40 754,186.57 4.‐ Other accounts payable…………………………………………………………………… 33,096,007.78 31,395,708.89 VI) Short‐term time‐period adjustements ...... 21,958.16 124,682.94
TOTAL EQUITY AND LIABILITIES (A+B+C) ...... 404,674,686.14 422,972,937.76
Zaragoza, 31 March 2015 Page 2 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management report consolidated 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED PROFIT AND LOSS ACCOUNTS AS OF DECEMBER 31st, 2014 Euros
Report NOTES Acc. Period 2014 Acc. Period 2013 A) CONTINUING OPERATIONS 1.‐ Revenue ...... 24 351,994,810.17 336,718,196.88 a) Sales ...... 351,100,239.24 333,398,007.96 b) Services ...... 894,570.93 3,320,188.92 2.‐ Changes in stock in progress and finished goods ...... 352,247.57 (3,471,359.76) 3.‐ Work carried out by the company on property ...... 283,444.00 0.00 4.‐ Materials and other suppliers ...... (158,753,717.12) (149,640,244.47) a) Consumption of goods ...... 17 (14,027,660.97) (6,199,804.47) b) Consump. of raw materials and other consumer goods ...... 17 (140,339,296.19) (143,146,691.90) c) Works carried out by other companies ...... (3,451,952.55) (1,453,344.59) d) Deterioration of goods, raw materials, and other consumer goods (934,807.41) 1,159,596.49 5.‐ Other operating income ...... 6,112,922.40 6,663,177.63 a) Non‐core and other current operating income ...... 6,003,173.15 6,532,303.03 b) Income‐related grants trasferred to profit or loss...... 109,749.25 130,874.60 6.‐ Staff costs...... (89,229,762.04) (97,036,927.41) a) Wages, salaries and similar expenses ...... (66,403,374.57) (74,249,458.64) b) Staff welfare expenses ...... 17 (22,826,387.47) (22,787,468.77) 7.‐ Other operating expenses ...... (98,955,772.58) (94,167,081.45) a) Losses, deterioration and change of provision for bad debts………… (1,121,731.50) (1,301,491.85) b) Other current operating expenses ...... (97,834,041.08) (92,865,589.60) 8.‐ Amortisation charge ...... (7,267,248.46) (6,664,214.40) 9.‐ Non financial assets grants and others ...... 142,481.96 23,647.41 11.‐ Impairment and gains on disposals of non‐current assets ...... 9‐11 312,850.83 (2,238,109.78) a) Impairment and losses 0.00 (36,264.24) b) Gains and losses on disposals and other ...... 312,850.83 (2,201,845.54) 14.‐ Other profit and loss………………………………………………………………..………… 17 (26,353.88) (134,860.53) A.1) PROFIT FROM OPERATIONS...... 4,965,902.85 (9,917,268.50) 15.‐ Finance income ...... 2,912,332.05 4,731,159.14 a) Of investments in equity instruments ...... 466,983.58 126,723.06 b) Of marketable securities and other financial securities ...... 2,445,348.47 4,604,436.08 16.‐ Finance costs ...... (6,245,252.63) (5,715,272.42) 17.‐ Change of fair value of financial securities ...... (38,416.29) 282,965.02 a) Trading portfolio and others ...... 0.00 (72,024.85) b) Profit and losses of non‐current assets classified as held for sale... (38,416.29) 354,989.87 18.‐ Exchange differences ...... (221,125.20) 395,823.12 b) Other exchange differences ………………………………………………………… (221,125.20) 395,823.12 19.‐ Impairment and gains or losses on disposals of financial instruments. 216,926.14 (2,485,631.50) a) Impairment and gains or losses on disposals of financial instrumen 15,686,536.55 (1,006,913.66) b) Gains or losses on disposals and other ...... (15,469,610.41) (1,478,717.84) A.2) FINANCIAL PROFIT ...... (3,375,535.93) (2,790,956.64) 20.‐ Participation in losses (profits) of companies consolidated in applicat 103,729.69 120,233.81 A.3) PROFIT BEFORE TAX ...... 1,694,096.61 (12,587,991.33) 23.‐ Income tax ...... 16 (4,051,174.60) 4,195,980.87 A.4) PROFIT FOR THE YEAR FROM CONTINUING OPERATIONS ...... (2,357,077.99) (8,392,010.46) A.5) PROFIT FOR THE YEAR ...... (2,357,077.99) (8,392,010.46)
Profit attributed to Parent Company………………………………………………………… (2,373,640.89) (8,402,385.65) Profit attributed to External shareholders……………………………………………….… 16,562.90 10,375.19
Zaragoza, 31 March 2015 Page 3 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management Report consolidated 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2014
A) CONSOLIDATED STATEMENTS OF RECOGNISED INCOME AND EXPENSE FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Acc. Period 2014 Acc. Period 2013
A) Profit per income statement ...... (2,357,077.99) (8,392,010.46)
Income and expense recognised directly in equity:
I. Arising from revaluation of financial instruments ...... 389,086.29 3,253,774.68 1. Available‐for‐sale financial assets ...... 389,086.29 3,253,774.68
III. Grants, donations or gifts and legalicies received ………………………………… 66,061.63 150,996.36
V. Conversion differences…………………………………….………………………………………… 227,693.51 (2,235,594.35)
VII. Tax effect …………………………………………………………………...... (150,793.91) (1,017,702.52)
B) Total income and expense recognised directly in consolidated equity (I+II+III+IV+V+VI+VII) ...... 532,047.52 151,474.17
Transfers to profit or loss:
VIII. Arising from revaluation of financial instruments ...... (73,901.58) (1,588,360.42) 1. Available‐for‐sale financial assets ...... (73,901.58) (1,588,360.42)
X.Grants, donations or gifts and legalicies received ………………………………… (141,571.68) 39,922.00
XIII. Tax effect …………………………………………………………………...... 71,335.78 451,914.24
C) Total transfers to profit and loss (VIII+IX+X+XI+XII+XIII) ...... (144,137.48) (1,096,524.18)
TOTAL RECOGNISED INCOME AND EXPENSE (A + B + C) ...... (1,969,167.95) (9,337,060.47)
Zaragoza, 31 March 2015 Page 4 Zaragoza,
CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL CONSOLIDATED EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014
31 B) STATEMENT OF CHANGES IN TOTAL CONSOLIDATED EQUITY FOR THE YEAR ENDED 31 DECEMBER 2014 March Translation
2015 Grants, Reserves and Profit attributed donations or
Valuation External of
Concept Share capital Share premium prior years profits to Parent gifts and TOTAL a
report
adjustments shareholders Annual (losses) Company legacies GRUPOPIKOLIN,
received originally In
Accounts
the
A. ENDING BALANCE AT 12/31/12 ………………………..………………. 57,998,410.00 90,680,265.10 93,440,872.82 (8,205,233.97) (2,172,270.73) 699,549.73 551,242.81 232,992,835.76 issued event
of B. ADJUSTED BALANCE AT 01/01/13 …………………..…………...…… 57,998,410.00 90,680,265.10 93,440,872.82 (8,205,233.97) (2,172,270.73) 699,549.73 551,242.81 232,992,835.76 in
a and Spanish
discrepancy,
S.L.
I. Total income and expense recognised (**) …………...………………… (8,402,385.65) (859,006.96) (80,873.05) 5,205.19 (9,337,060.47) Management and
AND
II. Transactions with equity holders or owners ……………………….…… 38,670.00 160,000.00 (1,770.00) 0.00 0.00 0.00 0.00 196,900.00 prepared the
1.‐ Capital increases (+) ………………………..…...………………… 38,670.00 160,000.00 (1,770.00) 196,900.00 SUBSIDIARIES ‐ Spanish in
accordance
III. Other changes in consolidated equity……………………….……………. 8,900,606.19 8,205,233.97 1,131,700.56 (333,066.48) 113,374.59 18,017,848.83 Report 1.‐ Changes in scope of consolidation (*)………………...…………… 17,308,214.92 1,131,700.56 (333,066.48) 113,374.59 18,220,223.59 language 2.‐ Dividends from subsidiaries to parent company…….. 1,585,734.35 1,585,734.35
consolidated version 3.‐ Distribution of profit ………………...…………………………….. (8,205,233.97) 8,205,233.97 0.00 with
COMPANIES
4.‐ Other changes in equity ………………...………………………….. (1,788,109.11) (1,788,109.11) the
prevails.
audit C. ENDING BALANCE AT 12/31/13…………………………….……………… 58,037,080.00 90,840,265.10 102,339,709.01 (8,402,385.65) (1,899,577.13) 285,610.20 669,822.59 241,870,524.12
regulations
D. ADJUSTED BALANCE AT 01/01/14 ………………………….…..……… 58,037,080.00 90,840,265.10 102,339,709.01 (8,402,385.65) (1,899,577.13) 285,610.20 669,822.59 241,870,524.12 2014
I. Total income and expense recognised (**) …………………… (2,373,640.89) 285,843.60 122,132.36 (3,503.02) (1,969,167.95) in
force
III. Other changes in consolidated equity……………………….……………. (9,584,698.77) 8,402,385.65 (420,031.86) (1,602,344.98) in
2.‐ Dividends from subsidiaries to parent company…….. 1,012,239.68 1,012,239.68 Spain. 3.‐ Distribution of profit ………………...…………………………….. (8,402,385.65) 8,402,385.65 0.00 4.‐ Other changes in equity ………………...………………………….. (2,194,552.80) (420,031.86) (2,614,584.66) Page
5 E. ENDING BALANCE AT 12/31/14……………………………...……….…… 58,037,080.00 90,840,265.10 92,755,010.24 (2,373,640.89) (2,033,765.39) 407,742.56 666,319.57 238,299,011.19
(*) Changes in scope of consolidation due to changes in method of consolidation applicated. (see note 2 of report) and external shareholders. (**) The profit of the stament of recognised income and expense includes the profit attributed to Parent Company and the profit attributed to External shareholders. GRUPOPIKOLIN, S.L. AND SUBSIDIARIES COMPANIES Annual Accounts and Management Report consolidated 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in force in Spain. In the event of a discrepancy, the Spanish-language version prevails.
NORMAL CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Acc. Period 2014 Acc. Period 2013 A) CASH FLOWS FROM OPERATING ACTIVITIES……………………………...………………….. 4,776,067.01 7,684,365.59
1. Profit for the year before tax...... 1,694,096.61 (12,587,991.33)
2. Adjustements for:...... 11,777,665.80 12,049,786.11 a) Depreciation and amortisation charge (+)...... 7,267,248.46 6,664,214.40 b) Impairment losses (+/‐)...... 2,056,538.91 602,588.50 c) Changes in provisions (+/‐)...... (79,151.02) 942,398.59 d) Grants (‐)...... (142,481.96) (23,647.71) e) Losses on derecognition and disposal of non‐current assets (+/‐)...... (312,850.83) 2,201,845.54 f) Losses on derecognition and disposal of financial instruments (+/‐)...... (178,509.85) 1,123,727.97 g) Finance income (‐)...... (2,912,332.05) (4,731,159.14) h) Finance costs (+)...... 6,245,252.63 5,715,272.42 i) Exchange differences (+)...... 221,125.20 (395,823.12) j) Change of fair value of financial securities(+/‐)...... 0.00 72,024.85 k) Other income and expenses (‐/+)...... (283,444.00) (1,422.38) l) Participation in losses (profits) of companies consolidated in application of equ (103,729.69) (120,233.81)
3. Changes in working capital...... (5,076,577.55) 9,637,846.84 a) Inventories (+/‐)...... 588,055.24 4,093,336.17 b) Trade and other receivables (+/‐)...... (7,568,131.67) (3,681,472.61) d) Trade and other payables (+/‐)...... 2,298,285.87 7,408,086.93 e) Other current liabilities (+/‐)...... 29,708.16 2,325,910.93 f) Other non‐current assets and liabilities (+/‐)...... (424,495.15) (508,014.58)
4. Other cash flows from operating activities...... (3,619,117.85) (1,415,276.03) a) Interest paid (‐)...... (6,427,828.21) (5,522,067.20) b) Dividens received (+)………………………………………………………………………………………… 466,983.58 126,723.06 c) Interest received (+)...... 2,389,759.97 4,119,872.61 d) Income tax recovered (paid) (+/‐)...... 508,267.91 235,343.11 e) Other payments (collections) (+/‐)...... (556,301.10) (375,147.61)
5. Cash flows from operating activities (1+2+3+4)...... 4,776,067.01 7,684,365.59
B) CASH FLOWS FROM INVESTING ACTIVITIES ………………………………………….…………… (4,002,126.97) 19,362,164.81
6. Payments due to investments (‐)...... (12,682,348.02) (30,084,046.19) a) Group companies and associates...... (355,374.27) (18,649,682.96) b) Intangible assets...... (4,226,600.04) 0.00 c) Tangible assets...... (8,100,373.71) (8,157,090.78) e) Other financial assets...... 0.00 (3,277,272.45)
7. Proceeds from disposal (+)...... 8,680,221.05 49,446,211.00 b) Intangible assets...... 1,389,867.48 2,262,123.76 c) Tangible assets...... 87,720.49 0.00 e) Other financial assets...... 7,202,633.08 47,184,087.24 8. Cash flows from investing activities (7+6)...... (4,002,126.97) 19,362,164.81
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NORMAL CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2014
Notes Acc. Period 2014 Acc. Period 2013
C) CASH FLOWS FROM FINANCING ACTIVITIES ……………………………………………………… (15,922,555.29) (19,432,869.92)
9. Proceeds and payments relating to equity instruments...... 122,132.36 0.00 e) Grants, donations or gifts and legacies received (+)...... 122,132.36 0.00 10. Proceeds and payments relating to financial liability instruments...... (16,044,687.65) (19,632,892.44) a) Issue of...... 0.00 8,215,644.55 2. Bank borrowings (+)...... 0.00 851,677.10 3. Payables to Group companies and associates (+)...... 0.00 0.00 4. Others (+)...... 0.00 7,363,967.45 b) Repayment of...... (16,044,687.65) (27,848,536.99) 2. Bank borrowings (‐)...... (14,496,525.71) (12,566,435.98) 3. Others (‐)...... (1,548,161.94) (15,282,101.01) 12. Cash flows from financing activities (9+10+11)...... (15,922,555.29) (19,432,869.92)
D) EFECT OF FOREIGN EXCHANGE RATE CHANGES ...... (221,125.20) 395,823.12
E) NET INCREASE/DECREASE IN CASH AND CASH EQUIVALENTS (5+8+12+D)……….. (15,369,740.45) 8,009,483.60 Cash and cash equivalents at beginnig of year...... 21,488,539.22 13,479,055.62 Cash and cash equivalents at end of year...... 6,118,798.77 21,488,539.22
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CONSOLIDATED REPORT FOR FINANCIAL YEAR 2014
NOTA 1 COMPANIES OF THE GROUP
1.1 Parent company.
GRUPOPIKOLIN, S.L. was incorporated on 24 April 2003. Its corporate address 6.5, its tax identification code is B50966654, and it is filed at the Zaragoza mercantile Registry, Volume 2929, sheet 47, page no. Z‐33424, entry 1, dated 14 May 2003.
The corporate purpose of GRUPOPIKOLIN, SL and SUBSIDIARY COMPANIES is to perform the following business activities: The manufacture, marketing, purchase and sale of mattresses, spring mattresses, beds and pillows, whatever their components or raw materials; The acquisition, promotion, operation and disposal of property; The acquisition, possession, use, managemennt, and administration of securities; The investment in assets and fiinances; The promotion, development and participation in other companies and legal trading businesses.
The group conducts its operations in the territories where the participated companies operate, mainly in the domestic market and in those countries where non‐Spanish participated companies operate, which are mentioned in the scope of conssolidation included in this note.
All the companies within the scoppe close their individual annual accounts on 31 December 2014, with the exception of Dunlopillo Holdings Sdn. Bhd. (Malaysia), and its subsidiaries, which close their accounts on 30.06.14, and form a Group of Companies, according to article 42 off the Spanish Commercial Code, by direct and indirect control of the parent company in the commpanies included in the consolidation.
GRUPOPIKOLIN, S.L., based on agreement taken by its General Meeting of Shareholders, on 7 November 2013, was partially spun off, without dissolution, and segregated part of its Capital, forming an economic, autonomous and independent unit, in the form of 310 shares in GrupoEbrosol, S.L.U., which were awarded to the newly created Company, Nuevo GrupoEbrosol, S.L., informing of this in Note 5 of this report..
These consolidated annual accounnts are prepared based on the global inttegration method, in the case of GRUPOPIKOLIN, S.L. as the parent company and its subsidiaries, owned directly or indirectly by it, as well as based on the equity method in the case of participated multi‐group and associated companies.
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1.2 Subsidiaries.
The subsidiaries included in the consolidation are identified below:
Indirect Indirect Carrying Name of Company / Domicile share share value Activity PIKOLIN, S.L. 99.99% 127,575,647 Manufacture and sale of mattresses, Autovía de Logroño, Km. 6.5 ‐ Zaragoza bed bases, beds, furniture, and others CONFORDES, S.L. 99.99% 4,278,426 Manufacture and sale of mattresses, C/ Coso, 55 – Zaragoza bed bases, beds, furniture, and others ESPAÑOLA DEL DESCANSO, S.L. (ESPADESA) 99.99% 890,066 Marketing annd distribution through Autovía de Logroño, Km. 6.5 ‐ Zaragoza furniture fraanchises in general SEIVIRIBER, S.A. 99.93% 95,168 Security andd surveillance services Autovía de Logroño, Km. 6.5 ‐ Zaragoza PIKOLIN LUSITANA, LTDA 99.19% 855,377 Marketing off mattresses Zona Industrial Vila Amelia. Palmela ‐ Lisbon (Portugal) (1) and bed basees PIKOLIN BRASIL COMÉRCIO, LTDA 97.54% 0 Marketing off mattresses Valinhos, Estado de Sao Paolo. Rua Irio Giardelli, 47 (6) and bed basees COMPAÑÍA EUROPEA DE ARTICULOS 99.50% 4,013,671 Marketing off items for DEL DESCANSO, S.L. (CEADESA) rest/sleep. Autovía de Logroño, Km. 6.5 ‐ Zaragoza ESPAÇO DESCANSO, LTDA 99.00% 148,500 Marketing off mattresses and bedsteads Rodrigo de Beiress, 57. Aldeia de Paio Pires (Portugal) SMATTEX, S.L. 85.01% 5,502,417 Manufacture and sale of mattresses, P.I. Les Vinyes, parcelas 2 & 3. Miramar (Valencia) bed bases, beds, furniture, and others SAS COFEL (COMPAGNIE FINANCIERE 99.99% 66,432,584 Holding of securities EUROPEENNE LITERIE) (1) 27 Rue du Coronel Pierre Avia, Paris (France) COPIREL SAS (COMPAGNIE PIKOLIN 99.99% 48,197,404 Manufacture and sale of mattresses, RECTICEL LITERIE) (2) bed bases, beds, furniture, and others 27 Rue du Coronel Pierre Avia, Paris (France) ESPACIO DESCANSO SPAIN, S.L. 99.90% 9,990 Marketing off products for decoration Autovía de Logroño, Km. 6.5 ‐ Zaragoza furnishing and rest/sleep. Manufacture and marketing of beds, INDUSTRIAS HIDRÁULICAS PARDO, S.L. 100.000% 755 furniture and mechanical and hydraulic accessories for Autovía de Logroño, Km. 5.800 ‐ Zaragoza health and hospital use. Marketing off beds, furniture and ASTABURUAGA HEALTHCARE, S.L.U. 100.00% 3,600 accessories ffor Autovía de Logroño, Km. 5.800 ‐ Zaragoza (3) health and hospital use DUNLOPILLO (HOLDINGS) SDN BHD 100.000% 17,602,204 Holding of securities SubangJaya Selangor ‐ Malaysia DUNLOPILLO (MALAYSIA) SDN BHD 100.00% Marketing off items for sleep/rest Malaysia (4) DUNLOPILLO (SINGAPORE) PTE LTD 100.00% Marketing off items for sleep/rest Singapore (4) Manufacture and marketing of items for DUNLOPILLO (VIETNAM) LTD 100.00% sleep/rest Vietnam (5) Manufacture and marketing of items for DUNLOPILLO (SHENZHEN) LTD 100.00% sleep/rest Shenzhen, Province of Canton‐ People’s Republic of (4) ______Zaragoza, 31 March 2014 Página 9 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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China DUNLOPILLO (HONG KONG) LTD 100.00% Marketing off items for sleep/rest Hong Kong (4) DUNLOPILLO (MIDDLE EAST) LTD 100.00% Marketing off items for sleep/rest United Arab Emirates (4) 1) Share through PIKOLIN, S.A. 2) Share through SAS COFEL, and in turn through PIKOLIN, S.A. 3) Share through Industrias Hidraulicas Pardo, S.A. 4) Share through Dunlopillo (Holdings) Sdn Bhd. 5) Share through Dunlopillo (Singapore) Pte Ltd. 6) Share through Pikolin Lusitana Ltda
All the companies within the scope close their annual accounts on 31 December 2014, with the exception of Dunlopillo Holdings Sdn. Bhd, which closes its accounts on 30.06.14, which is why the interim financial statements closed on 31 December have been integrated, and they have been included in the consolidation, applying the global integrattion method. The assumption that deteermines the configuration of these companies as subsidiaries is the provision of the majority of voting rights.
These consolidated annual accounts and individual annual accounts of the 2014 financial year of Pikkolin, S.A., Confordes, S.A., Española del Descanso, S.A., Compañía Europea dee Artículos del Descanso , S.A., Ibernex Ingeniería, S.L. and Smattex, S.A., have been audited by CGM Auditores, S.L.; those of Pikolin Lusitana, Ltda. have been audited by L. Graça R. Carvalho & M. Borges, Sroc LLda. (Portugal); those of S.A.S. COPIREL, S.A.S. COFEL and the consolidated accounts of the COFEL Grooup by Laurent Nadjar & Associés (France) and Deloitte & Associés (France) as co‐auditors of the French sub‐Group, and the consolidated accounts of Dunlopillo Holdings Sdn Bhd, which have been audited by PricewaterhouseCoopers (Malaysia).
1 January 2008 has been considered as the date of first consolidation, witth the exception of those companies that entered the scope in the 2009 financial year, in which case 1 January 2009 has been considered. In the case of the two companies acquired in the 2012 financial year, the date of first consolidation was 10 January 2012 for Dunlopillo Holdings Sdn. Bhd., 4 October 2012 for Industrias Hidraulicas Pardo, S.A. and 27 October 2014 for Pikolin Brasil Comercio, Ltda., which was the date of its incorporation.
NOTA 2 ASSOCIATED AND MULTI‐GROUP COMPANIES.
The multi‐group and associated companies included in the consolidation arre listed below:
Inndirect Indirect Carrying Company / Domicile share share value Activity SPACIO REPOS, S.L. 50.00% 2,000,000 € Manufacture and marketing of Gregorio Marañón 9 ‐ Madrid (1) textile products 1) Share through PIKOLIN, S.A.
The multi‐group company has been included in the consolidation by the equity method due to the fact that it is understood that the annual accounts adequately show the fair view of the Group situation, as the valuation of the items is concentrated in the balance sheet, and profit and loss account items of
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companies accounted for by the equity method, standardising the criterion applied for all companies, be they multi‐group or associated, over which the Group has no effective control.
The assumption that determines the configuration of companies as multi‐group, is the existence of agreements that permit the right of veto in corporate decisions.
The joint management with the ggroup is carried out for the Sociedad Spacio Repos, S.L. with Madritex, S.L.
The company has been included in the consolidation by the equity methhod and closes its annual accounts on 31 December 2014.
The annual accounts are presented in accordance with Article 42 of the Spanish Commercial Code, and rules 13 and 15 for the preparation of third‐party annual accounts of the Spanish Chart of Accounts, with regard to the relations of partnership or association between companiees. The parent company, GRUPOPIKOLIN S.L, whose registered office is in Zaragoza, must prepare consolidated annual accounts and file them in the Mercantile Registry of Zaragoza. The 2013 consolidated annuual accounts of the Group that the Parent Company and its subsidiaries form part of, were approved by the shareholders of GRUPOPIKOLIN, S.L. at the meeting held on 30 June 2014.
The Group operates with Euros as its functional currency.
NOTA 3 BASIS OF PRESENTATION OF THE CONSOLIDATED ANNUAL ACCOUNTS.
3.1 Fair view:
The consolidated annual accounts, comprised of consolidated balance sheet, consolidated profit and loss account, consolidated statement of changes in total equity, consolidated statement of cash flow and consolidated report, have been prepared based on the accounting records of the Parent company and on those of each one of the companies included in the consolidated group. Thhese consolidated annual accounts are presented in accordance with the regulatory framework for financiial reporting that applies too it, and in particular with the accounting principles and criteria contained therein, in order to show the fair view of the equity, of the financial situation and of the results of the group, aas well as the veracity of the flows incorporated into the consolidated cash flow statement.
For the purpose of these consolidated annual accounts, the regulatorry framework applied is established in:
a) Royal Decree 1159/2010, 17 Sepptember, which approves the Rules for the Formulation of Consolidated Annual Accounts, amending the Spanish General Chart of Accounts.
b) Spanish Commercial Code and other mercantile legislation.
c) General Chart of Accounts and its sectoral adaptations.
d) Rules of compulsory compliance approved by the Institute of Accounting and Accounts Audits in the development of the General Chart of Accounts and its supplementary rrules.
e) All other Spanish accounting regulations that might be applicable.
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There are no exceptional reasons why accounting provisions have not been applied in order to show the fair view.
The individual annual accounts of GRUPOPIKOLIN, S.L. and of its Subsidiaries, as well as these consolidated annual accounts, are awaiting approval by the respective General Meetings of Partners and Shareholders, and it is thought that they shall be approved without any substantial modification.
3.2 Critical issues relating to the measurement and estimation of uncertainty.
The Group has prepared its financial statements under the principle of a “going concern” (Empresa en Funcionamiento). As a result, there is no significant risk that may entail considerable changes in the value of assets or liabilities during the following year.
During the preparation of the enclosed consolidated annual accounts, estimates made by the Directors of the Parent company were used in order to quantify some of the assets, liabilities, revenues, expenses and commitments reported herein. Basically, these estimates refer to:
- Useful life of tangible assets, investmeent property and intangible assets (see NOTES 9, 10 and 11).
- Measurement of the impairment of goodwill (See NOTE 6).
- Calculations of impairment losses of non‐current assets (see NOTES 9, 10 and 111 ).
- Calculations of fair value of certain financial instruments (see NOTE 13).
- Calculations of provisions and tax creddits (see NOTE 16).
Although these estimates were made based on the best available information at the time these annual accounts were prepared, regarding the events analysed, it is possible that new events may occur in the future that will make it necessary to change them in coming financial years. This would be done prospectively, recognising the effects of the change in estimate in the respectivve future profit and loss accounts.
3.3 Grouping of Items.
Some items in the consolidated balance sheet, consolidated profit and looss account, consolidated statement of changes in equity, and in the consolidated statement of cash flow, are presented in an aggregated way in order to be understood more easily. However, when siignificant, disaggregated information has been included in the relative note of this report of the annual accounts.
3.4 Classification of current and non‐current items.
The maximum period of one year as from the date of these consolidated annual accounts has been considered to classify current items.
3.5 Changes in accounting criteria and errors.
An error has been registered against equity in the financial due to an impaairment loss on property of a company of the Group (see Note 14).
As a result of the proceedings carried out by the tax authorities), a change in accounting estimation ______Zaragoza, 31 March 2014 Página 12 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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was generated in financial year 2013, due to value change adjustment of the tax assets of a company of the group.
NOTA 4 RECOGNITION AND MEASUREMENT
The main recognition and measureement rules used to prepare the consolidated annual accounts include:
4.1 Consistency.
4.1.1 Consistency in timing.
The enclosed consolidated annuall accounts have been established on the same date and in the same period as the annual accounts of the company forced to consolidate.
All the group companies close their financial year on the same date as the consolidated annual accounts, with the exception of one commpany and its subsidiaries, which close ttheir financial year on 30 June each year, so they are included in these consolidated annual accounts via interim accounts referring too the same date and period the consolidated accounts refer to.
4.1.2 Consistency in values.
The assets and liabilities, income and expenses, and other items of thee annual accounts of the group companies, are measured based on uniform methods, and in agreementt with the measurement principles and standards established in the Code of Commerce, rewritten text of the Capital Company Act and General Chart of Accounts, and other legislation that is specifically applicable..
In the case of foreign companies included in the scope of consolidation, thhey prepare their annual accounts and other records according to the relative accounting standards, bassed on the legislation in force in the country of origin. Insofar as these accounting and measurementt criteria differ to those adapted by the group in the drawing up of their consolidated annual accounts, thhese have been adjusted in order to present the consolidated annual accounts in agreement with the uniform measurement principles.
4.1.3 Consistency in terms of internal transactions.
When, in the annual accounts of the group companies, the amounts off the items derived from internal transactions do not coincide, or there are items awaiting recoggnition, the appropriate adjustments are made to carry out the relative eliminations.
4.1.4 Consistency to carry out the aggregation.
The necessary reclassifications arre carried out in the annual accounts structure of one group company in order for this to coincide withh the structure of the consolidated annual accounts.
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4.2 Consolidation goodwill and negative consolidation difference.
The first consolidation difference is calculated as the difference between the carrying value of the share in the capital of subsidiaries and the proportional value of the consolidated shareholders’ equity of these companies on the date of first consolidation.
The positive consolidation difference corresponding to the surplus between investment cost and the theoretic carrying value, in years prior to 2008, and the fair value of assets and of liabilities for acquisitions after 1 January 2008, attributable to the participated company on tthe date of incorporation into the Group, is directly attributed, when possible, to the assets of the subsidiary, not exceeding the market value thereof. When it cannot be assigned to assets, it is considered as connsolidation goodwill, and consequently the relative impairment test has to be carried out annually.
The consolidation goodwill as at 31 December 2014 and 2013 (see Note 6), corresponds to the subsidiaries and to the multi‐group, which are described in Notes 1 and 2 of this reeport.
If the difference is negative, a re‐assessment of the measurement of assets, liabilities and contingent liabilities acquired is carried out. If the negative difference continues to exist after this, it is recorded as a profit in the income statement. With reference to companies acquired in the previous period (see Note 5), the fair values of their assets and liabilities were re‐assesssed and adapted, where fitting, as at the date of first consolidation. The negative consolidation differennces, in periods prior to 2008, have been recorded as reserves.
4.3 Reserves in consolidated companiees.
This section includes non‐distributed results and after deducting the amorttised goodwill, generated by the subsidiaries between the date of first consolidation and the beginning of the period presented.
4.4 Minority interests.
The value of the minority shareholders’ participation in equity and in tthe year’s results of the subsidiaries is presented, together, in the section “Minority interests” of the liabiilities of the consolidated balance sheet and its breakdown in Note 7 of this report.
4.5 Balances and transactions betweeen companies included in the scope of consolidation.
Eliminations of reciprocal receivabbles and payables, reciprocal income and expenses, and results from internal transactions have been caarried out in accordance with Royal DDecree 1159/2010, 17 September, in this regard.
4.6 Intangible Fixed Assets (see NOTE 11).
Intangible fixed assets are initially recognised at cost, whether this is the aacquisition price or the production cost, including, where appropriate, any additional costs incurred until they can be commissioned.
After initial recognition, intangiblle fixed assets are measured at cost, less the accumulated
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depreciation and, where appropriate, the accumulated amount of recorded impaiirment losses.
Each intangible fixed asset is analysed to determine whether its working liffe is finite or indefinite. There are no intangible fixed assets with inndefinite working lives.
Maintenance or repair costs that do not improve the use or do not extend the working life of assets will be recognised in the profit or loss account at the time they occur.
a) Research and development
As a general criterion, the group records the research and development expenses as expenses of the year when they are carried out.
However, in certain cases, the group chooses to activate them as intangible fixed assets, from the time when the following conditions are fulfilled:
− When they are specifically personalised for projects, and their cost is clearly established for them to be clearly distributed in time.
− When there are founded reasons for the technical success and economicc‐commercial profitability of the project or projects in question.
When there are reasonable doubts about the technical success or economic‐commercial profitability of certain projects, the amounts recorded in the assets are directly allocated to losses of the period.
The projects are measured at acquisition or production price, according to the straight‐line depreciation method, within five years at the most, charged to the result of the period.
b) Software.
Third‐party software is recognised in accordance with the acquisition cost.
Computer programs that satisfy tthe recognition criterion are activated at their acquisition or production cost.
Maintenance costs of software applications are allocated to profit or loss of the year when they are incurred.
c) Industrial property.
The remaining intangible fixed asssets corresponding to activated costs, are associated with the procurement of patents, licences, trademarks and the development of new prroducts, with respect to which there are well‐founded reasons to expect a satisfactory economic and commercial return on investment.
4.7 Tangible Fixed Assets (see NOTE 9)).
They are measured at cost, eithher at acquisition price or production cost, increased, where applicable, by upgrades performed in accordance with the different legal provisions. The last of these corresponded to the upgrade carried out on 31 December 1996, including additiional costs incurred until ______Zaragoza, 31 March 2014 Página 15 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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ready for commissioning, and decreased by the amount of accumulated depreciation and impairment losses experienced.
Indirect taxes levied on tangible asssets are only included in the acquisition price or production cost, when they cannot be directly recovered from the Treasury.
Costs of expansion, modernisation or improvements, leading to an increase in productivity, capacity or efficiency , or a lengthening of the working life of the assets, are accounted for at a higher cost thereof. Maintenance or repair costs that do not improve the use or do not extend the working life of assets will be recognised in the profit or loss account at the time they occur.
Included as a higher value of the tangible assets is the initial estimate of the current value of the obligations assumed, derived from dismantling or derecognition and other obligattions associated with this asset, such as the costs of restoring the site on which they are located, whenever such obligations give rise to the recognition of provisions.
Work carried out by the Group on its own property, plant and equipment is reflected in accordance with the cost price of raw materials and other consumables, the costs directly atttributable to such assets, and a reasonable proportion of the indirect costs.
The directors of the Parent Companny consider that the carrying value of thhe assets does not exceed their recoverable value.
Depreciations are established in a systematic and rational manner depending on the working life of the assets and on their residual value, based on the depreciation that they ussually suffer due to their operation, use and enjoyment, also considering that technical or commercial obsolescence could affect them. Where appropriate, when the Grouup companies obtain additional informattion of a technical nature, about the working life of the different fixed assets, the periods of the different elements are adapted, in agreement with their use in the activity aand according to their characteristics. This change represents a change in estimation of the book depreciation with impact on the period. During the previous period, it amounted to nine hundred and sixty‐seveen thousand Euros.
An impairment loss of an item of a tangible asset is recorded when its caarrying value exceeds its recoverable value, defined as the higher of its fair value less costs to sell and its value in use.
Additionally, the following special rules on fixed assets are applied:
4.7.1 Land and natural resources:
Preparation costs, such as closures, earthworks, sewage and drainage works, demolition of buildings are included in the acquisition cost when necessary to be able to carry out new works, as well as costs for inspection and drawing up plans when carried out prior to their acquisition, and, where appropriate, the initial estimate of the current value of these obligations derived from the cost of restoring the land.
4.7.2 Utensils and tools:
Utensils and tools incorporated into mechanical elements are meassured and amortised in accordance with the same rules that apply to the latter. ______Zaragoza, 31 March 2014 Página 16 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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In general, those that do not form ppart of a machine and whose estimated period of use is less than one year, are recorded as expense for the financial year. When the period of use exceeds one year, they are recorded as fixed assets at the time of purchase, and are normalised when the year ends, according to the physical inventory carried out, with a rreasonable decrease for demerit.
4.7.3 Assets under construction and advances:
These include all payments on account incurred for the purchase of fixed assets before their actual delivery or before they are made ready for their intended use.
4.8 Investment property (see NOTE 10).
The Group classifies as investment property, land and buildiings held either to earn rentals or for capital depreciation at the disposal date, as a result of the increases that may occcur in the future in their respective market prices.
To measure the investment property, the following criteria are used for property, plant and equipment:
- Vacant land is measured at its acquisition price plus the preparation costs.
- Buildings are measured at their acquisition price or production cost, including those facilities and items that have a permanent nature by the rates inherent to the construction and project management fees.
4.9 Leases and other operations of similar nature (See NOTE 12):
Lease means any agreement whereby the lessor conveys to the lessee the right to use an asset for a certain period of time, in exchange for a lump sum of money or a series of payments or instalments, irrespective of whether the lessor may be obliged to provide services connected with the operation or maintenance of the asset.
Operating lease is the one that grants the lessee the right to use an asseett for a period of time, in exchange for a lump sum or a series of payments, but it is not recognised as a financial lease.
Leases are classified as financial leases whenever the terms thereof show that the risks and benefits inherent to ownership of the asset under contract are substantially transferred to the lessee. All other leases are classified as operating leases.
In operating leases, ownership of the leased asset and substantially all the risks and benefits that fall on the good leased, remain with the lessor.
The revenues and expenses, corresponding to the Group that acts as lesssor and lessee, resulting from operating lease agreements, will be considered, respectively, as revenues and expense for the year in which they are accrued, and are attributed to the profit and loss account.
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4.10 Financial Instruments (see NOTE 13).
In the chapter on financial instruments, the Group has recognised those contracts that give rise to a financial asset in a company and, simultaneously, to a financial liability or an equity instrument in another company. For the purpose of these annual consolidated accounts, the ffinancial instruments are considered therefore as follows:
a) Financial assets
- Cash and cash equivalents:
- Trade accounts receivables: Customers and sundry debtors:
- Third party receivables: such as loans and financial appropriations grantted, including those that arise from the sales of non‐currentt assets.
‐ Debt securities from other acquired companies: such as bonds, debentures and promissory notes.
- Equity instruments from other acquired companies: shares, participations in collective investment institutions and other equity instruuments.
- Derivatives with favourable appraisal for the company: including futures, options, financial swaps and sale of foreign currency , and
- Other financial assets: Such as deposits with credit institutions, advancess and loans to personnel, security deposits and guarantees.
b) Financial liabilities:
- Trade accounts payable: suppliers and sundry creditors.
- Debts with credit institutions:
- Derivatives with unfavourable appraisal for the company: including fuutures, options, financial swaps and sale of foreign currency.
- Other financial liabilities: debts with third parties, such as loans and financial appropriations received from people or companies that are not credit institutions, including those that arise from the purchase of non‐current assets, security deposits and guarantees received.
c) Own equity instruments: all the financial instruments that are included within shareholders’ equity, such as ordinary shares issued of the parent company.
4.10.1 Current and non‐current financial investments.
‐ Loans and receivables: Trade accounts receivable and other non‐trade reeceivables are included in this category: receivables for the disposal of investments, interests receivable, advances to staff and securities established.
They are initially measured at fair value which, unless there is evidence to the contrary, will ______Zaragoza, 31 March 2014 Página 18 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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be the price of the transaction, whhich will be equal to the fair value of the consideration given plus any transaction costs that might be directly attributable to them.
Notwithstanding the above, trade accounts receivable with maturiity date of over one year and without any contractual inteerest rate, as well as securities whose sum is expected to be received in the short term, are measured at face value when the effect of not adjusting the cash flows is not significant.
Subsequent measurement of these assets is carried out at amortised cost and the interests accrued are recognised in the profit and loss account, applying the efffective interest method. However, assets whose maturityy date is less than one year, which iin agreement with that mentioned above, are measured initially at their face value, continue to be measured at this amount, unless there has been impairment.
At year‐end, the necessary value adjustments are made if there is objective and reasonable evidence that the value of an asseet has become impaired. This evidence is generally obtained due to the continued delay in recoveries or the knowledge of the possible insolvency of the debtor.
Impairment losses, as well as their reversal when the amount off this loss decreases, are recognised as an expenditure or revvenue, respectively, in the profit and loss account.
‐ Investments held to maturity. Those debt securities with fixed maturity date, fixed or ascertainable payments, which are negotiated in an active market and that the Group intends and has the capacity to keep until their maturity are included in this category.
They are initially recognised at the value of the consideration given plus any directly attributable transaction costs. These investments are measured later at ttheir amortised cost and the interests accrued in the period are calculated by applying the effective interest method.
Impairment losses are recognised in the profit and loss account, and calculation in accordance with the difference beetween their carrying value and the currrent value at close of the financial year of the future cash flows that are estimated are going to be generated, deducted at the effective interest rate calculated at the time of their initial recognition..
‐ Other financial assets at fair value with changes in the profit and loss account.
These refer to hybrid financial assets. They are initially measured at their fair value, which, unless there is evidence to the contrary, is the transaction price, which will be equal to the fair value of the consideration given. The transaction costs that are directtly attributable to it are recognised in the profit and loss acccount of the financial year.
Subsequent measurement iis carried out at fair value, not deductiing the transaction costs that might have been incurred in their disposal. Any changes that occur in the fair value are allocated to the profit and loss account in accordance with the pending life until their maturity.
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‐ Available‐for‐sale financial assets: these include all other investments that do not fall within the previous categories. In the majority of the cases, they correspond to financial investments in capital, with an investment of less than 20%.
They are initially measured at fair value which, unless there is evidence to the contrary, will be the price of the transaction, whhich will be equal to the fair value of the consideration given plus any transaction costs that might be directly attributable to them.
Subsequent measurement iis carried out at fair value, not deductiing the transaction costs that might have been incurred in their disposal. Any changes that occur in tthe fair value are directly recognised in the equity, until the financial asset is derecognised from the Balance sheet or is impaired, at which time the sum, thus recognised, is allocated to the profitt and loss account.
At year‐end, at least, the neecessary value adjustments are made so long as there is objective evidence that the value of an available‐for‐sale financial asset has becomme impaired as a result of one or more events that have occurred after their initial recognition, and that they cause the lack of recoverability of the carrying value of the asset, evidenced by a prolonged or significant decrease of its fair value.
Impairment loss of the value of these financial assets is calculated as the difference between their cost or amortised cost, less, where appropriate, any impairment loss previously recognised in the profit and loss acccount and the fair value at the time when the measurement is made.
Losses brought forward and recognised in the equity due to a decrease of the fair value, are recognised in the profit and loss account so long as there is objective evidence of impairment in the value of the asset.
If the fair value should increase in subsequent financial years, the adjustment recognised in previous financial years will revertt with payment into the profit and loss aaccount of such financial year. However, if the fair value corresponding to an equity instrumeent should increase, the adjustment recognised in previous financial years does not revert with payment to the profit and loss account, recognising the increase in fair value directly against equity.
4.10.2 Cash and cash equivalents.
This section of the enclosed balannce sheet includes cash on hand and in banks, demand deposits and other short‐term investments that are highly liquid in nature, which are quickly realisable in cash and that have no risk of changes in value.
4.10.3 Other aspects related to financial assets.
Interests and dividends from financial assets accrued after the moment of acquisition, are recognised as revenue in the profit and loss account, in agreement with the effective interest method for interests and at the time when the right to receive it is declared, for dividends.
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The amount of the explicit interestts accrued and not matured at the time, as well as the amount of the dividends agreed at the time of acquisition are independently recognised in the initial measurement of the financial assets, in agreement with their maturity. Expliciit interests are understood as those interests that are obtained from applying the contractual interest rate of the financial instrument.
Financial assets are derecognised when the rights derived from them expire, or their ownership has been transferred, once the Company has got rid of the significant risks and benefits inherent to its property.
4.10.4 Financial liabilities:
‐ Debits and items payable: These are trade and non‐trade accounts payable. They are initially measured at their fair value, except for trade accounts payable with maturity of over one year and that have no contractual interest, which will be measured at their face value when the effect of not adjusting the cash flows is not signiificant.
Financial liabilities are measured later at their amortised cost. However, the accounts payable that, in agreement with the above, are initially measured at their face value, continue being measured at this amount.
Accrued interests are recognised in the profit and loss accountt, applying the effective interest method.
Debts with third parties are classified as current and non‐currentt depending on whether their current maturity is payable in less or more than one year from the daate of the Balance sheet. Financial liabilities are derecognised when the relative obligations have exttinguished.
4.10.5 Guarantees delivered and receeived.
They are measured at their fair value. The difference between the fair vallue and the amount paid out is allocated to profit and loss account during the period when the service is prrovided.
4.11 Inventories (see NOTE 14).
The inventories are measured att the lower of their acquisition price, production cost or net realisable value. The weighted average price method is applied for their measurrement. Trade discounts, rebates obtained, other similar items and interests incorporated into the face value of the payables are deducted when determining the acquisition price.
Production cost includes the costs of direct materials and, where appropriate, the direct manpower costs and the factory overhead costs.
The net realisable value represents the sale price estimation after deducting the costs estimated to finish the product, and the costs that will bbe incurred in the marketing, sale and diistribution processes.
When the net realisable value of the inventories is less than their acquisition price or production costs, the relative value adjustments are made, recognising them as an expensse in the profit and loss account. ______Zaragoza, 31 March 2014 Página 21 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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These adjustments are subject to reversal if the circumstances that caused the value adjustment of the inventories disappear, in which case they are recognised as revenue in the profit and loss account.
In the case of raw material and other consumables during the production process, no value adjustment is made when it is expected that the finished products they are incorporated into, will be sold above cost. When the value adjustment is carried out, the replacement cost is taken as reference.
The measurement of obsolete, fauulty or slow‐moving products, has been rreduced to their possible realisation value, recognising the adjustmeent made in the profit and loss account oof the financial year.
4.12 Transactions in foreign currency (see NOTE 15).
The conversion to functional currency of the balances in foreign currency iis carried out by applying the exchange rate in force at the time the relative transaction is carried out, measuring it at year‐end in agreement with the exchange rate in force at that time.
Any exchange differences that occur as a result of the measurement at year‐end of receivables and payables in foreign currency are allocaated directly to the profit and loss account.
4.13 Income Tax (see NOTE 16).
Income tax expenditure is deteermined by the amount of the current and deferred tax expenditure. Current tax expenditure is determined by applying the rate in forcce to the taxable profit, and deducting the result thus obtained from the amount of the general creditts and deductions and applied in the financial year.
Deferred tax assets and liabilities come from the temporary differences defined as the amounts that are foreseen to be payable or reccoverable in the future and that derive from the difference between the carrying value of the assets and liabilities and their tax base. These sums are recognised by applying the taxation at which they are expected to be recovered or paid to the temporary difference.
Deferred tax assets arise, also, as a result of the tax losses available for caarryforward and of the receivables for tax deductions generated and not applied.
The relative deferred tax liability is recognised for all the taxable temporrary differences, unless the temporary difference is derived from the initial recognition of goodwwill or from the initial recognition (except in the case of a business combination) of other assets and liabbilities in a transaction, which, at the time of execution, affects neither accounting profit nor taxable profiit.
On their part, the deferred tax assets, identified with deductible temporary differences, are only recognised in the event that it is considered likely that the Group is going to havee sufficient tax profits in the future, against which they can be made effective and they do not originate from the initial recognition (except in the case of a business combination) of other assets and liabilities in a transaction that affects neither the accounting profit nor the taxable profit. All the other deferred tax assets (tax losses and deductions available for carryforward) are only recognised in the event that it is likely that the Group is going to have sufficient tax profits in the future against which to make them effective.
On the occasion of each accounnting close, the deferred taxes recognnised (both assets and ______Zaragoza, 31 March 2014 Página 22 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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liabilities) are reviewed in order to verify that they are still applicable, perfforming the necessary adjustments to them, in agreement with the results of the analyses performed.
Deferred tax expenditure or revenue corresponds to the recognition and cancellation of deferred liabilities and assets, as well as, where appropriate, due to the recognition and allocation to the profit and loss account of the revenue directly allocated to the equity, which may resullt from recording those deductions and other tax advantages that have the economic nature of a subssidy, or deductions for goodwill.
4.14 Provisions and contingencies (see NOTE 18)
They are provisioned based on the estimation of the costs to be incurred by the Group to face up too certain obligations and claims that might be derived from its activity.
4.15 Transactions between related parties (see NOTE 22).
Transactions between related partties, regardless of the degree of assocciation, are recorded in agreement with the general rules, at the initial moment at their fair value. Iff the price agreed in a transaction differs from its fair value, the difference is recognised in agreement with the economic reality of the transaction.
4.16 Income and Expenditure (see NOTE 17).
The income and expenditure are allocated in agreement with the criterion of accrual regardless of the moment when the monetary or financial flow derived from them occurs.
However, the Group only records the gains realised at year end, whilst the foreseeable risks and potential losses, including possible losses, are recorded as soon as they are known.
Income for sale of goods or services is recognised at the fair value of the consideration received or to be received, derived from them. Prompt payment, volume or other types oof discounts, as well as interest added to the nominal amount of the consideration, are recognised as a reduction therein. However, the Group includes the interests added to the commercial loans with due date not exceeding one year, which do not have a contractual interest rate, when the effect of not adjusting the cash flows is not significant.
Discounts granted to customers are recognised at the time when it is likkely that the conditions that determine their granting are going to be satisfied, as a reduction of the sales income.
Payments on account of future sales are measured at the received value, except in the cases when these advance payments are non‐current and the effect of their adjustment is significant, when they appear at the adjustment value at year end.
4.17 Environmental assets and liabilities (see NOTE 19).
The costs incurred, where appropriate, in systems, equipment and facilitiees whose purpose is to minimise the environmental impact on the development of the activity, and/or protect and improve the
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environment, are recognised as investments in fixed assets.
All the other expenses related to the environment, other than the above, are considered as expenditure of the financial year. To calculate possible environmental provisions that might arise, these are provided for in agreement with the best estimation of their accrual at the moment they are recorded, and in the event that the insuraance policies do not cover the damage caused.
The Directors of the Parent Commpany confirm that the Company has no responsibilities, expenses, assets or provisions and contingencies of an environmental nature thatt might be significant in connection with the equity, financial situaation and results thereof.
4.18 Criteria used to recognise and measure staff costs.
Except in the case of justified cause, the companies are obliged to pay their employees compensation when they cease in their services. In view of the lack of anyy foreseeable need for abnormal terminations, and given that employees who retire or resign do not receive compensation payments, when severance payments arise they are charged to expenses when the related decision is made and notified.
4.19 Grants, donations and bequests (ssee NOTE 20).
Non‐refundable capital grants are measured by the amount granted, and are initially recognised as income directly allocated to equity annd are allocated to results in proportion to the depreciation experienced during the period by the assets financed by these grants, unless they are non‐depreciable assets, in which case they will be allocated to the result of the year whenn their disposal or the derecognition from inventory took place. At the time of their recognition, the tax effect at the current rate in the financial year, is recognised as a liability for taxable temporary differrences, and is allocated each year in proportion to the amount of tthe subsidy transferred to the result of tthe financial year.
When the grants are assigned to finance specific expenses, they will be allocated as income in the year when the expenses they are financing are accrued.
4.220 Conversion of financial statements into foreign currency.
The conversion of financial statements of companies with functional currrencies other than the Euro, is carried out as follows:
Assets and liabilities are converted to Euros, applying the Exchange rate in force at year end.
Items comprising the equity of these companies are converted to Euros at the historical exchange rate.
Income and expenses are converted to Euros at the applicable exchange rate on the date when they were recorded, using average exchange rates in those circumstances where the application of this simplifying criterion does not generate significant differences.
The difference expressed when applying these exchange rates is includeed in the consolidated equity within the section “Conversion diffeerences”. ______Zaragoza, 31 March 2014 Página 24 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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NOTA 5 BUSINESS COMBINATIONS.
During this financial year of 2014, ‐ on 27 October 2014, date when it was incorporated ‐, the company, Pikolin Brasil Comércio, Ltda., entered into the scope of consolidation in order to consolidate and extend its presence in the international market. The fair value of the consiideration has consisted in the commitment of cash transfers, which corresponds to the carrying amount of the shares that, at year‐end, are awaiting disbursement. (See NOTE 1).
In 2013, as a result of the segregattion of the company, GrupoEbrosol, S.L. from GrupoPikolin, S.L. the following subsidiaries and associated companies abandoned the scope of consolidation, and therefore, at year‐end, they were no longer included in the consolidated annual accounts of the Group:
Direct Indirect Carrying value COMPANIES OF THE GROUP share share 2012 Activity GRUPOEBROOSOL, S.L. 100.00% 3,100 Acquisition, holding and management of Autovía de Logroño, Km. 6.5 ‐ Zaragoza securities. EBROSOL INVERSIONES, S.L. 100.00% 3,100 Acquisition, holding and management of Autovía de Logroño, Km. 6.5 ‐ Zaragoza (1) securities. PRAINTER MEDIA S.L. 87.00% 443,620 Managementt and development of products Avda. de Brasil nº 17 ‐ Madrid (2) for advertising IBERNEX INGENIERIA S.L 90.00% 549,100 Study, development, production and marketing Autovía de Logroño, Km. 6.5 ‐ Zaragoza (2) of computer systems and electronic components. Developmentt, construction, management and CONDOR ENERGÍA EÓLICA, S.L. 100.00% 26,101 marketing off Autovía de Logroño, Km. 6.5 ‐ Zaragoza (2) electricity, thermal and mechanical plants. (1) Share through GRUPOEBROSOL, S.L. 2) Share through EBROSOL INVERSIONES, S.L.
Direct Indirect Carrying value ASSOCIATED COMPANIES share share 2012 Activity ALMAEBRO, S.L. 50.00% 4,501,656 Property development Autovía de Logroño, Km. 6.5 ‐ Zaragoza (1) EDEREBRO, S.L. 50.00% 580,569 Constructionn, Leasing and Autovía de Logroño, Km. 6.5 ‐ Zaragoza (2) property exploitation 345 PLAZA ESPAÑA, S.A. 50.00% 8,003,010 Sale‐purchasse, leasing of Autovía de Logroño, Km. 6.5 ‐ Zaragoza (2) country and ttown estates. MONASTERIO DE BOLTAÑA, S.L. 50.00% 6,815,940 Lodgings, resstaurant and catering, leisure C/ Afueras s/n ‐ Boltaña (1) and hotel & ccatering trade in general PRADOS DE ARA, S.L. 50.00% 1,241,966 Lodgings, resstaurant and catering, leisure AvdaOrdesa 61 ‐ Ordesa (1) and hotel & ccatering trade in general IBERDUAR, S.L. 50.00% 2,550,382 Property development Madre Vedruna, 2 ‐ Zaragoza (1) PANGAEA BIOTECH, S.L. 35.07% 2,500,000 Provision of mmedical services and predictive diagnosis, as well as research and C/ Sabino Arana 5‐9 ‐ Barcelona (1) developmentt work on pharmaceutical products. EL TIRO DE MURCIA, S.L. 30.00% 4,907,015 Constructionn and exploitation of C/ Concha Espina, 63 ‐ Madrid (1) shopping centre 1) Share through EBROSOL INVERSIONES, S.L. (2) Share through GRUPOEBROSOL, S.L.
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The financial information corresponding to companies segregated from the Grouup in 2013, corresponds to 2012, the last date when they were included in the scope. This information appeaars for information and comparison purposes in the consolidated annual accounts of the previous financial year, in order to inform of the effect of this segregation. Thus, in this financial year of 2014, the figures of both years are already comparative as they correspond to the same scope of consolidation.
NOTA 6 CONSOLIDATION GOODWILL.
6.1 Composition of the consolidation goodwill balance at year‐end.
Consolidation goodwill Year 2014 Year 2013 Compañía Europea de Artículos del Descanso, S.A 1,012,736.63 1,012,736.63 Smattex, S.A. 1,270,280.20 1,270,280.20 COFEL GROUP, consolidated 10,119,933.55 10,361,696.55
Total 12,402,950.38 12,644,7133.38
6.2 Movement of the Consolidation Gooodwill:
Breakdown of balances and movements of the financial year:
CONCEPTS Year 2014
Opening gross balance at 31.12.13 13,316,263.38 Closing gross balance at 31.12.14 13,316,263.38
Impairments at 31.12.13 (671,550.00) Provisions for the year (241,763.00) Total impairments at 31.12.14 (913,313.00) Closing net balances as at 31.12.14 12,402,950.38
Breakdown of balances and movements of the previous financial year:
CONCEPTS Year 2013
Closing gross balance at 31.12.12 13,316,263.38 Closing gross balance at 31.12.13 13,316,263.38
Impairments at 31.12.12 (611,109.00) Provisions for the year (60,441.00) Total impairments at 31.12.13 (671,550.00) Closing net balances as at 31.12.13 12,644,713.38
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The amount of the impairment of the year corresponds to the consolidattion Goodwill of the Sub‐ group, COFEL, due to the consolidation of the companies, COFEL and COPIRREL. None of the other Goodwills, included, as underlined by the consolidation of the Sub‐group, COFEEL, in the PIKOLIN Group, have undergone any impairment in the year.
The Group has performed the relative “impairment test” of the Goodwill, and has not made any other adjustment to the goodwill generateed by the different business combinatioons, with the exception of that mentioned above, because no impairment has been detected therein following the analysis of the different cash generating units.
NOTA 7 MINORITY INTERESTS.
7.1 Movements in minority interests during the year:
State of movement in minority interests Minority interests
Opening balance, 2013 551,242.81 Additions for the year 14,255.00 Disposals for the year (9,049.81)
Closing balance, 2013 669,822.59
Opening balance, 2014 669,822.59 Additions for the year 13,281.38 Disposals for the year (16,784.41)
Closing balance, 2014 666,319.57
7.2 Breakdown of balances of minority interests:
The composition of the minority interests of the group at year‐end is:
Minority interests In capital and In Losses In value In capital COMPANIES Reserves and gains adjustments grants Total Pikolin, SA 2,806.48 215.96 (3.16) 4.48 3,023.76 Confordes, SA 47.51 0.76 48.27 Esspadesa (36.07) (0.69) (36.76) Seiviriber 194.64 22.01 216.65 Ceadesa 14,076.30 237.53 14,313.83 Smattex, S.A. 621,465.73 13,478.39 634,944.12 Pikolin Lusitana, LTDA 10,802.84 2,564.70 13,367.54 Esspacio Descanso Spain (512.21) 54.44 (457.77) Industrias hidráulicas Pardo, S.L. (240.00) (1.62) 10.31 (231.31) Ataburuaga Healthcare, S.L.U (1.33) 6.21 4.88 COFEL Group, consolidated 851.41 146.55 997.96 Pikolin Brasil comércio, LTDA 160.64 (32.24) 128.40
Tootal 649,615.94 16,692.00 (3.16) 14.79 666,319.57 ______Zaragoza, 31 March 2014 Página 27 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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The composition of the minority interests of the group at the end of the prrevious year:
Minority interests In capital and In Losses In value In capitall COMPANIES Reserves and gains adjustments grants Total Pikolin, SA 14,026.44 (56.10) (35.26) 28.59 13,963.67 Confordes, SA 147.17 (15.23) 131.94 Esspadesa 2.19 (28.49) (26.30) Seiviriber 194.63 8.56 203.19 Ceadesa 13,511.98 564.75 14,076.73 Smattex, S.A. 609,479.47 13,690.24 623,169.71 Pikolin Lusitana, LTDA 19,928.03 (1,112.17) 18,815.86 Esspacio Descanso Spain (335.86) (176.35) (512.21)
Tootal 656,954.05 12,875.21 (35.26) 28.59 669,822.59
NOTA 8 HOLDINGS IN COMPANIES CONSOLIDATED BY THE EQUITY METHOOD
8.1 Movements in shares in Companies consolidated by the equity method in the year:
The movements in shares in Companies consolidated by the equity method in the year:
Balance at Balance at Companies that apply equity method 31/12/13 Increases Decreases 31/12/14 Spacio Repos, S.L. 728.355,42 355.374,27 1.083.729,69
Total 7288.355,42 355.374,27 0,00 1.083.729,69
The movements in shares in Companies consolidated by the equity method in the previous year:
Modification Balance at of scope Balance at Companies that apply equity method 31/12/12 Increases Decreases off consolidation 31/12/13 Monasterio de Boltaña, S.L. 171,819.28 (171,819.28) 0.00 Spacio Repos, S.L. 608,121.62 120,233.80 728,355.42 Prados de Ara, S.L. 713,570.44 (713,570.44) 0.00 Pangea Biotech, S.L. 1,453,616.41 (1,453,616.41) 0.00
Tootal 2,947,127.74 120,233.80 (2,339,006.12) 728,355.42
8.2 Financial information of companies consolidated by equity method:
Year 2014 Ordinary Result Companies that apply equity method Assets Liabilities results of the year Spacio Repos, S.L. 2,977,376.58 2,169,917.19 6,262,200.82 207,459.38
Total 2,977,376.58 2,169,917.19 6,262,200.82 207,459.38
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Year 2013 Ordinary Result Companies that apply equity method Assets Liabilities results of the year Spacio Repos, S.L. 2,015,575.77 1,274,218.95 6,223,342.544 240,467.61
Tootal 2,015,575.77 1,274,218.95 6,223,342.544 240,467.61
8.3 Result of the year of the companiies consolidated by equity method, which corresponds to the parent company:
Result recognised in P&L Companies that apply equity method Year 2014 Year 2013
Spacio Repos, S.L. 103,729.69 120,233.81
Tootal 103,729.69 120,233.81
NOTA 9 PROPERTY, PLANT AND EQUIPMENT.
9.1 Breakdown of balances and movements: Technical facil & Fixed assets under Land and other tang fixed construction and State of movements in property, plant and equipment Buildings assets advances TOTAL
Opening gross balance, 2013 21,191,201.43 133,474,796.45 872,833.04 155,538,830.92 Additions for the year 2,067,732.61 3,276,436.20 744,816.14 6,088,984.95 Disposals for the year 0.00 (4,980,502.97) (298,194.04) (5,278,697.01) Transfers to/from other items 0.00 551,591.01 (592,753.00) (41,161.99) Incorporation to the group (394,891.74) 0.00 (394,891.74) Closing grooss balance, 2013 23,258,934.04 131,927,428.95 726,702.14 155,913,065.13 Opening gross balance, 2014 23,258,934.04 131,927,428.95 726,702.14 155,913,065.13 Additions for the year 299,392.71 3,669,962.18 4,453,341.82 8,422,696.71 Disposals for the year 0.00 (2,667,743.66) 0.00 (2,667,743.66) Transfers to/from other items (658,494.63) 1,385,198.59 (726,702.96) 1.00 Closing grooss balance, 2014 22,899,832.12 134,314,846.06 4,453,341.00 161,668,019.18
Accumulated depreciation, opening balance 2013 (13,369,798.81) (103,042,106.77) 0.00 (116,411,905.58) Provisions for the year (956,626.06) (5,064,471.95) 0.00 (6,021,098.01) Decreases due to releases, disposals or transfers 4,665,243.47 0.00 4,665,243.47 Scope modification 259,735.07 0.00 259,735.07 Accumulated depreciation, closing balance 2013 (14,326,424.87) (103,181,600.18) 0.00 (117,508,025.05) Accumulated depreciation, opening balance 2014 (14,326,424.87) (103,181,600.18) 0.00 (117,508,025.05) Provisions for the year (1,285,578.12) (4,754,591.25) 0.00 (6,040,169.37) Increases due to acquisitions or transfers 0.00 93,701.38 0.00 93,701.38 Decreases due to releases, disposals or transfers 0.00 2,486,321.79 0.00 2,486,321.79 Accumulated depreciation, closing balance 2014 (15,612,002.99) (105,356,168.26) 0.00 (120,968,171.25) Closing net balance, 2014 7,287,829.13 28,958,677.80 4,453,341.00 40,699,847.93
The most relevant additions of the year correspond mainly to installations, machinery, technical
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facilities, tooling and machinery in assembly, due to renewal of obsolete elements divested during the year.
Disposals of the financial year correspond mainly to technical faciliities, machinery, data processing equipment and transport elements, the majority of which are fully depreciated, which are no longer used and are obsolete.
In addition to the above, in financiial year 2013, a company of the group carried out a machinery sale transaction, recording a profit of 574,,001.75 Euros. In 2014, this operation diid not come to fruition, whereby in financial year 2013 the result of the operation was cancelled against the short‐term provisions account amounting to 574,001.75 Euros. This provision has been appllied in 2014 against the creedit for disposal of fixed assets, not generating any result in 2013 or in 2014.
The machinery indicated in the previous paragraph does not appear in the Balance sheet as at 31 December 2013. During the first months of 2014, all the machinery was returneed to the Company, and was sold to another subcontractor, obtaining a profit of 396,300.50 Euros.
Transfers made in financial year 2014 of fixed assets under construction correspond to technical facilities and machinery, due to activation following assembly.
It was not considered necessary to perform any impairment losses on fixed assets.
9.2 Depreciation of property, plant and equipment:
The depreciation of the property, plant and equipment is carried out uunder the straight‐line method from the moment when they are ready for commissioning, during their estimated working life, in agreement with the following working life years:
Desccription Working life years Buildings 10‐50 Technical installatioons 5 to 20 Machinery 3 to 18 Tooling 3.33 to 8 Other facilities 5 to 20 Furniture 4 to 20 Data processing equipment 3 to 8 Transport elementts 4 to 12 Other plant, propeerty and equipment 5
With respect to second‐hand goods acquired, the Group applies double the coefficients mentioned, in agreement with the legal regulation. In addition, certain elementts are depreciated at a higher coefficient than that indicated, in agreement with the number of shifts during which they are used.
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9.3 Fully depreciated elements included in the closing balances:
Elements Year 2014 Year 2013 Buildings 0.00 0.00 Other elements 78,966,810.58 80,396,644.37
Total 78,966,810.58 80,396,644.37
9.4 The amount shown in the section of the balance sheet as land and buildiings is broken down as follows:
Breakdown Year 2014 Year 2013 Lands 1,781,262.67 2,523,498.30 Buildings 21,118,569.45 20,735,435.74 Accum. Deprec. Buildings (15,612,,002.99) (14,326,424.87)
Total 7,287,829.13 8,932,509.17
9.5 Profit/Loss derived from the disposal of tangible fixed assets:
Concept Year 2014 Year 2013 Losses from tangible fixed assets (115,459.23) (2,253,946.61) Profits from tangible fixed assets 428,310.06 52,101.07
Total 312,850.83 (2,201,845.54)
9.6 Items of property, plant and eqquipment of the Group related to investments outside the Spanish territory:
The fixed assets whose rights may be exercised outside the Spanish terrritory are the property, plant and equipment of the companies located in member states of the Europeaan Union, Latin America and Asia, listed in note 1.2., and which are broken down below:
Year 2014 Year 2013 Accounting Accumulated Accounting Accumulated balance depreciation ballance depreciation Land and Constructions 22,816,091.70 (15,612,002.99) 23,2558,934.04 (14,326,424.87) Technical facilities and other prop, plant & equip 39,530,559.65 (28,662,367.86) 36,0111,974.00 (26,849,502.67) Assets under construction and advances 4,453,340.71 7226,702.14 0.00 Total 66,799,992.06 (44,274,370.85) 59,997,610.18 (41,175,927.54)
9.7 Capital grants obtained in this yeaar and in previous years for investments in property, plant and equipment (see note 20):
Assets financed Year 2014 Year 20113 Technical facilities and other prop, plant & equip 105,808.34 105,808..34
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9.8 Other circumstances referring to property, plant and equipment:
The Group policy is to formalise insurance policies to cover possible risks from the different elements of its tangible fixed assets. Each year, or when the circumstances require this, the Group Management and the management of each one of the companies’ reviews the hedgings and hedged risks and they agree upon the amounts that reasonably must be covered for the following year. The Group has signed different insurance policies in agreement with the characteristics of tthe fixed assets of each Company, insuring both the building and the content.
NOTA 10 INVESTMENT PROPERTIES.
10.1 Breakdown of balances and movements:
Sttate of movements in investment properties Lands Buildinngs Total Opening gross balance, 2013 2,477,977.53 1,626,232.01 4,104,209.54 Trransfers to/from other items 173,202.28 (173,,202.28) 0.00 Other movements (2,155,654.53) (2,155,654.53) Closing gross balance, 2013 495,525.28 1,453,029.73 1,948,555.01 Opening gross balance, 2014 495,525.28 1,453,029.73 1,948,555.01 Trransfers to/from other items (322,,323.00) (322,323.00) Closing gross balance, 2014 495,525.28 1,130,706.73 1,626,232.01 Accumulated depreciation, opening balance 2013 (514,,551.22) (514,551.22) Provisions for the year (18,,169.91) (18,169.91) Increases due to transfers 0.00 0.00 Accumulated depreciation, closing balance 20013 0.00 (532,,721.13) (532,721.13) Accumulated depreciation, opening balance 2014 0.00 (532,,721.13) (532,721.13) Provisions for the year (17,948.89) (17,948.89) Accumulated depreciation, closing balance 20014 0.00 (550,,670.02) (550,670.02)
Closing net balance, 2014 495,525.28 580,036.71 1,075,561.99
The goods assigned to the procurement of revenues other than their use in the activity are classified as investment property. They correspond to properties leased to third parties.
Income from property investments in 2014 has amounted to 7,558.06 Eurroos, whilst in 2013, they amounted to 47,857.43 Euros (See noote 12). There has been expenditure for the operation of investment property in financial year 2013 amounting to 9,075.44 Euros; in tthe previous year they amounted to 7,150.80 Euros.
Investments in buildings are depreciated under the straight‐line method based on an estimated useful life of between 34 and 68 years.
10.2 Fully depreciated items included in the closing balances of investment prooperty amount to:
Elements Year 2014 Year 2013 Buildings 2400,804.40 229,558.47
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10.3 Broken down value of the goods classified as property investments:
Year 2014 Year 2013 Real estate: ‐ Value of the land 173,202.28 495,5255.28 ‐ Value of the building 1,453,029.73 1,453,0299.73 ‐ Accumulated depreciation of buildinngs (550,670.02) (532,721.13)
Total 1,075,561.99 1,415,8333.88
NOTA 11 INTANGIBLE FIXED ASSETS.
11.1 Breakdown of balances and movements:
Industrial Other intangible State of movements in intangible fixed assetts property Software fixed assets Total Opening gross balance, 2013 57,912,805.06 10,317,104.98 9,037,162.68 77,302,072.72 Additions for the year 59,185.00 340,658.33 905,568.06 1,305,411.39 Disposals for the year 0.00 (195,724.34) (1,687,612.14) (1,883,336.48) Other movements (917,725.10) 0.00 (917,725.10) Scope modification (576,565.26) (154,088.35) (730,653.61) Closing gross balance, 2013 56,477,699.70 10,307,950.62 8,255,118.60 75,075,768.92 Opening gross balance, 2014 56,477,699.70 10,307,950.62 8,255,118.60 75,075,768.92 Additions for the year 15,000.00 501,375.69 2,986,016.18 3,502,391.87 Disposals for the year (35,000.00) (941,117.44) (1,386,974.68) (2,363,092.12) Other movements 724,208.17 724,208.17 Closing gross balance, 2014 57,181,907.87 9,868,208.87 9,854,160.10 76,939,276.84 Accumulated deprec., opening balance 2013 (31,043,582.07) (8,124,978.26) (319,747.30) (39,523,307.63) Provisions for the year (91,854.77) (587,040.09) (102,367.70) (781,262.56) Decreases due to releases, disposals or transfers 0.00 384.54 0.00 384.54 Scope modification 25,128.94 14,485.47 128,645.51 168,259.92 Accumulated depreciation, closing balance 2013 (31,110,307.90) (8,697,148.34) (293,469.49) (40,135,925.73) Accumulated deprec., opening balance 2014 (31,110,307.90) (8,697,148.34) (293,469.49) (40,135,925.73) Provisions for the year (134,136.23) (775,024.14) (1,247.02) (910,407.39) Decreases due to releases, disposals or transfers 35,000.00 938,224.64 973,224.64 Accumulated depreciation, closing balance 2014 (31,209,444.13) (8,533,947.84) (294,716.51) (40,073,108.48)
Closing net balance, 2014 25,972,463.74 1,334,261.03 9,559,443.59 36,866,168.36
The effect of the exchange rate in the valuation of the industrial property of the Dunlopillo Holdings Subgroup is included in other industrial property movements.
The most significant movements of the year correspond to investments and disposals in software and other intangible asset, which are curreent software.
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Movements due to scope modification contemplate disposals due to the spin‐off that occurred in 2013 (see Note 1).
The provisions are mainly for software.
The Group has not made any valuee adjustment of intangible fixed assets.
11.2 Amortisation of intangible fixed assets:
Third‐party software is amortised under the straight‐line method between three and six years.
Computer programs that satisfy the recognition criteria, are amortised under the straight‐line method in a three to six‐year period as from the entry into operation of each appllication.
Patents, licenses, trademarks and other are amortised under the straight‐‐line method between six and ten years, their estimated working life.
11.3 Fully amortised elements included in the closing balances of intangible fixed assets:
Elements Year 2014 Year 2013 Research and development expenses 0.00 35,000.00 Patents, licences, trademarks and other. 34,868,511.93 34,312,763.119 Goodwill 13,720,411.81 14,211,805.81 Software 6,041,846.13 5,903,365.52
Total 54,630,769.87 54,462,934.52
11.4 Proceeds from sale of intangible fiixed assets.
There have been no proceeds for the sale of intangible fixed assets this ffinancial year of 2014, as occurred in 2013.
11.5 Research and development expendditure:
The amount of expenditure for research and development, and technologgical innovation activities, carried out by two companies of the Group, has amounted to a total of 1.9 millioon Euros in 2014 and 2.05 million Euros in the previous year. No amount has been capitalised in 2014 nor in 2013.
11.6 Items with indefinite working life:
Elements Year 2014 Year 2013 Patents, licences, trademarks and other. 3,854,242.92 3,364,377.45 Other intangible fixed assets 3,810,000.00 3,810,000.00
Total 7,664,242.92 7,174,377.45
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11.7 Items of intangible fixed assets of the Group related to investments outside the Spanish territory:
The fixed assets whose rights may be exercised outside the Spanish terrritory are the property, plant and equipment of the companies located in member states of the European Union, Latin America and Asia, listed in note 1.2., and which are broken down below:
Year 2014 Year 2013 Accounting Accumulated Accounting Accumulated balance depreciation balance depreciation Administrative franchise 52,300,890.19 (30,251,975.71) 52,300,,890.19 (30,249,174.58) Patents, licences, trademarks and 3,130,555.84 (7,075.55) 2,364,,377.45 (20,601.05) other. Goodwill 13,720,411.81 (13,720,411.81) 14,211,,805.81 (14,211,805.81) Software 2,258,801.03 (1,830,707.13) 2,615,,963.16 (1,729,613.07) Assets in construction 2,891,727.62 1,384,,434.83
Total 74,302,386.49 (45,810,170.20) 72,877,,471.44 (46,211,194.51)
11.8 Goodwill:
Accum. Acquisition impairment Carrying value Date Acquisition mode Yeear 2014 Year 2014 date mode Espadesa 1,832,897.04 0.00 1,832,897.04 2011‐2012 Purchase Smattex 392,830.61 0.00 392,830.61 2007 Merger Pardo Subgroup 3,810,000.00 0.00 3,810,000.00 2012 Purchase Cofel Subgroup 13,720,411.55 (13,720,411.55) 0.00 2009 Purchase
TOTAL 19,756,139.20 (13,720,411.55) 6,035,727.65
Accum. Acquisition impairment Carrying value Date Acquisition mode Year 2013 Year 2013 date mode Esspadesa 1,832,897.04 0.00 1,832,897.04 2011‐2012 Purchase Smattex 392,830.61 0.00 392,830.61 2007 Merger Pardo Subgroup 3,966,343.21 0.00 3,966,343.21 2012 Purchase Cofel Subgroup 14,211,805.81 (14,211,805.81) 0.00 2009 Purchase
Tootal 20,403,876.67 (14,2211,805.81) 6,192,070.86
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NOTE 12 LEASES AND OTHER TRANSACTIONS OF SIMILAR NATURE
12.1 Operating leases.
The information of operating leases where the Group operates as a lessor iis given below: Year 2014 Yearr 2013 Amount of future minimum payments for non‐cancellable operating leases: Up to one year 132,912.60 47,857.43 Between one and five years 72,000.00 More than five years 4,645,354.60
Contracts for the rental of property to third parties have an annual tacit rennewal.
The information of operating leases where the Group operates as a lessee is given below:
Year 2014 Year 2013 Amount of future minimum payments for non‐cancellable operating leases, of which: Up to one year 3,572,569.39 4,048,418.52 Between one and five years 1,880,136.18 263,081.44 More than five years 57,965,668.88 199,095.28 Total amount of future minimum payments expected to be received, at year end, for non‐cancellable operating sub‐leases. 24,000.00 24,000.00 Minimum lease payments recognised as expenditure in the period 11,265,231.51 10,037,354.60 Contingent charges recognised as expenses of the period 0.00 0.00 Sub‐lease payments recognised as income of the period. 24,000.00 24,000.00
The following agreements are worthy of mention with respect to the operating lease contracts:
‐ Contracts for the rental of properties with an associated company have annual tacit renewal, whose rent is increased annually by the CPI (Consumer Price Index), withhout any purchase option in these contracts.
‐ No restrictions are imposed, resulting from operating leasing contractts such as those referring to distribution of dividends, additional borrowings or new leasing contracts.
‐ On 21 December 2013 a company of the Group drew up a new lease agreement in Poligono de Centrovia, in agreement with the following characteristics: Compulsoryy agreement period of 7 years, renewable for 4 years, which must be satisfied in full, and for anothher 4 years, when it may be cancelled at any time, no insstalments for the first 12 months and a discount of 50% the instalment during the next 30 montths.
‐ On 26 December 2014, the Group formalised leasing contracts with a third party on different properties where the group companies, other associated parties and tthird‐parties outside the group develop their activity under aan operating sub‐lease.
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NOTA 13 FINANCIAL INSTRUMENTS.
13.1 Information on the significance of financial instruments in the financial situation and results of the company.
a) Financial assets and financial liabilities categories:
The carrying value of each category of financial assets and financial liabilitiies set out in rule nine on recognition and measurement, is broken down according to the following structurre:
a.1) Financial assets different from equity investments in Group, mullti‐group and associated companies
The information of non‐current Group financial assets, classified by categories, at year‐end is as follows: Year 2014 Debt Credits, Credits, securities derrivatives Derivatives Categories and others and others Total Investments held to maturity 0.00 772,913.68 0.00 772,913.68 Loans and items receivable 0.00 0.00 131,4493,300.79 131,493,300.79 Available‐for‐sale assets 7,565,964.83 0.00 0.00 7,565,964.83 ‐ At fair value 6,899,706.36 0.00 0.00 6,899,706.36 ‐ Measured at cost 666,258.47 0.00 0.00 666,258.47
Total 7,565,964.83 772,913.68 131,493,300.79 139,832,179.30
Year 2013 Debt Credits, Credits, securities derivatives Derivatives Categories and others and others Total Inveestments held to maturity 2,085,588.12 2,085,588.12 Loans and items receivable 141,,142,857.65 141,142,857.65 Available‐for‐sale assets 8,587,379.91 8,587,379.91 ‐ At fair value 8,587,379.91 8,587,379.91
Total 8,587,379.91 2,085,588.12 141,,142,857.65 151,815,825.68
Available‐for‐sale assets at fair value correspond to investments in shares, securities portfolios and investment funds. No one‐off sales of these funds or portfolios have been made during the year, but they have been considered in this category as the purpose is not to sell them but to hold them for a long period.
Investments held to maturity correspond to bonds, notes and debt secuurities with a maturity exceeding one year.
Loans and receivables correspond to credits formalised with related partiees and with third parties
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with long‐term maturity, long‐term deposits, and long‐term guarantees.
The information of the current Grooup financial assets, classified by categgories, at year‐end is as follows: Year 2014 Debt Creddits, securities derivaatives Derivatives and others and others Total Investments held to maturity 4,959,130.99 16,264.05 4,975,395.04 Loans and items receivable 0.00 80,793,330.67 80,793,330.67
Total 4,959,130.99 80,809,594.72 85,768,725.71
Year 2013 Debt Credits, securities derivatives Derivatives and others and others Total Investments held to maturity 141,284.58 141,284.58 Loans and items receivable 75,975,709.67 75,975,709.67
Tootal 141,284.58 75,975,709.67 76,116,994.25
Loans and receivables include loans to debtors, customers, third‐party loans maturing in the short term, deposits, bonds and notes due within one year, short‐term deposits and guarantees and other receivables, excluding the outstanding balances with public administrationss.
a.2) Financial liabilities.
The non‐current Group financial liabilities, classified by categories, at year‐‐end are as follows:
Year 2014 Debts with Bank borrowings Derivatives Categories and others Total Debts and items payable 30,866,615.86 16,243,278.98 477,109,894.84
TOTAL 30,866,615.86 16,243,278.98 477,109,894.84
Year 2013 Debts with Bank borrowiings Derivatives Categories and others TTotal Debts and items payable 58,351,394.11 17,033,468.89 75,384,863.00
Total 58,351,394.11 17,033,468.89 75,384,863.00
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Debts and items payables classified as debts with credit institutions corrrespond to debts with banks with long‐term maturity, as a result of borrowings received, by the relattive party, in the long‐ term.
Debits and items payables classified in “Others” correspond to borrowings received from public organisations to develop certain technical projects carried out by the company,, long‐term guarantees received and long‐term bills payable.
One of the companies that forms part of the Group has received a parrticipating loan from a financial entity amounting to 3,500,000 Euros and with maturity in 2022. This loan may be converted, whatever its amount, and on the request of the bank, into a share in the caapital of the company amounting to 25%, regardless of the value that the company may have, in the event that the Company defaults on two consecutive payments and that, on the date of maturity, it is not up to date in the payment.
The current Group financial liabilities, classified by categories, at year‐end aare as follows:
Year 2014 Debts with Bank borrowings Derivatives Categories and others Total
Debts and items payable 37,504,933.31 54,942,036.09 92,446,,969.40
TOTAL 37,504,933.31 54,942,036.09 92,446,,969.40
Year 2013 Debts with Bank borrowings Derivatives Categories and others Total Debts and items payable 24,516,830.77 55,067,594.39 79,584,425.16
Total 24,516,830.77 55,067,594.39 79,584,425.16
Debits and items payables classified as debts with credit institutions, corrrespond to debts with banks with short‐term maturities, as a result of loans, credits, debts for billl discounting, interest accruals/deferral, by the relative party, in the short ‐term.
Debits and items payables classified as "Others" correspond to trade payables to suppliers and creeditors, suppliers consolidated by the eequity method, confirming operations, current accounts with related parties, suppliers of fixed assets, loans received from public agencies for the development of certain technical projects carried out by the company. The rest are remunerations awaiting payment and other payables, excluding balances with the public administrations.
b) Financial assets at fair value with changes in the profit and loss account.
In financial year 2014, there are no financial assets measured at fair value with changes in the profit and loss account, as they were divested the precious year. The variation of the fair value and the cumulative variation since its designationn the previous year amounted to 31,167.92 and (1,646,199.81) Euros, respectively. ______Zaragoza, 31 March 2014 Página 39 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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c) Classification by maturities.
The classifications by maturity of the Group’s financial assets, of the amounts that mature during each one of the following years at year‐end and until their final maturity, arre broken down in the following table: Maturity in years Concepts 2015 2016 2017 2018 2019 Others Total l/t
Financial investments 5,804,569.71 210,925.56 75,306.85 126,059,388.90 0.00 9,477,604.26 135,823,225.57 Non‐current trade payables 1,130,389.79 676,734.88 476,334.30 41,597.49 1,683,897.27 4,008,953.73 Trade and other receivables 79,964,156.00 0.00 0.00 0.00 0.00 0.00 0.00 Customer receivables for sales and services 73,126,130.01 0.00 Other receivables 6,838,025.99 0.00
Total 85,768,725.71 1,341,315.35 752,041.73 126,535,723.20 41,597.49 11,161,501.53 139,832,179.30
The classifications by maturity of the Group’s financial liabilities, of the amounts that mature during each one of the following years at year‐end and until their final maturity, are broken down in the following table:
Maturity in years Concepts 2015 2016 2017 2018 2019 Others Total l/t
Debts 38,965,703.39 10,691,846.77 10,472,015.90 4,793,338.21 4,909,610.39 16,243,083.57 47,109,894.84 Bank borrowings 37,504,933.31 10,146,270.91 8,113,035.16 2,426,123.38 2,462,997.03 7,718,189.38 30,866,615.86 Other financial liabilities 1,460,770.08 545,575.86 2,358,980.74 2,367,214.83 2,446,613.36 8,524,894.20 16,243,278.98 Trade and other payables 53,481,266.01 0.00 0.00 0.00 0.00 0.00 0.00 Suppliers 37,783,034.31 0.00 Suppliers, companies consolidated by the equity method 0.00 Other creditors 15,698,231.70 0.00
TOTAL 92,446,969.40 10,691,846.77 10,472,015.90 4,793,338.21 4,909,610.39 16,243,083.57 47,109,894.84
As at 31 December 2014, the Group had guarantees before different banking entities amounting too 15.27 million Euros. Likewise, different companies of the group have formaliseed security bonds for 3 million Euros.
The parent company of the Group acts as surety for loans formalised by companies of the Group, which at year‐end, amount to 2.89 million Euros (see Note 22).
In turn, one of the companies of the Group acts as surety for different looans, one formalised by the parent company of the Group and the other by a mortgage loans formaalised by an associated company of the Group. The value of these loans at close of financial year amountts to 40.9 million Euros (See Note 22).
______Zaragoza, 31 March 2014 Página 40 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
d) Assets pledged as security.
The Group has pledged the shares of one company of the Group as guarantee for debt with financial entities. This debt financed the purchase of these shares by another company of the Group. The duration of the guarantee is parallel to the loan that it is associated with.
As at 31 December 2013 and 2014, there is a term deposit amounting to 119,999.67 Euros, which acts as security for a line of guarantees, for that same amount.
e) Assets accepted as security:
One of the companies has drawn up debt renegotiation contracts, amountting at year‐end to 2.55 million Euros, guaranteed by pledges for social shares of one of the debtor commpanies, as well as by mortgages.
f) Value adjustments for impairmeent generated by credit risk.
Classes of financial assets Credits, derivatives and others Short term Impairment loss at 31.12.12 12,950,702.98 Value adjustment for impairment 868,652.41 Reversal of impairment (217,753.71) Transfers and other variations (3,998,550.58) Impairment loss at 31.12.13 9,603,051.10 Value adjustment for impairment 1,537,258.46 Reversal of impairment (261,975.35) Transfers and other variations (37,275.59)
Impairment loss at 31.12.14 10,841,058.62
In the previous year there was a long‐term deterioration of a loan amounting to 444 thousand Euros, which was allocated in full to losses, as it was wound up during this financial year.
The criteria used to calculate the value adjustments of the trade receivables are described in note 4 of section 10.1.
13.2 Information related to the profit and loss account and equity.
Net profits or losses from the different categories of financial assets defined in rule nine on recognition and measurement, and financial income calculated by the effective interest rate method, are broken down in the following table:
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In the event of a discrepancy, the Spanish-language version prevails. ______
Financial income applying Net earnings and losses the effecttive interest rate method
Year 2014 Year 2013 Year 20014 Year 2013
Assets at fair value with changes in profit and losses: 0.00 (72,024.85) 0.00 0.00 Others 0.00 (72,024.85) Investments held to maturity 216,926.14 (2,035,917.08) 332,039.68 1,120,027.53 Loans and items receivable 364,490.34 730,704.84 1,748,818.45 1,430,978.59 Available‐for‐sale assets: 428,567.29 1,638,952.72 0.00 0.00 At fair value 428,567.29 1,638,952.72 0.00
Total 1,009,983.77 261,715.63 2,080,858.13 2,551,006.12
The income recorded by applying the effective interest rate in loans and receivables and investments held to maturity, correspond to the interests generated by credits granted to associated parties and third parties, bonds and notes, and deposits.
The net earnings recorded in loans and receivables correspond mainly to other income, whilst the earnings relating to investments held to maturity as the result of a reversal of an impairment and due to results of disposals of the latter.
The net earnings recorded in the ccategory of available‐for‐sale assets corrrespond to net profits obtained from the sales of shares, portfoolios and investment funds and to dividends received for these funds.
The amount of the impairment losses of class of financial assets is given in the following table:
Impairment losses Year 2014 Year 2013 Equity instruments 15,209,536.55 Debt securities 477,000.00 (562,199.24)
Total 15,686,536.55 (562,199.24)
Customers’ credit impairment is reported in section 13.1.f) of this note.
Section 19 of the Consolidated Profit and Loss Account includes the liquidation, on 24 January 2014, of the company, Epeda Werke, derecognising its financial investment and itts relative impairment.
Net earnings or losses from the different categories of financial liabilities defined in rule nine on recognition and measurement, and financial expenses calculated by the effective interest rate method, are broken down in the following table:
______Zaragoza, 31 March 2014 Página 42 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
Financial expenditure applying Net earnings and losses the effective interest rate method Year 2014 Year 2013 Year 2014 Year 2013 Debts and items payable (642,582.71) (1,024,858.74) (5,823,795.112) (4,656,417.01)
Total (642,582.71) (1,024,858.74) (5,823,795.112) (4,656,417.01)
The financial expenses by applying the effective interest rate method correspond to the debts owed by the company to financial entitiees for loans and credits, as well as financial expenses for bill discounting costs. Those included as net income correspond to other financial expenses.
13.3 Other information.
a) Fair value.
The carrying value of the financial instruments is an acceptable approximattion of its fair value.
The fair value of equity instruments classified in the category of available‐ffor‐sale financial assets has been determined according to the quoted prices in active markets at year end.
b) The limits of the discount lines and credit facilities at year end are as follows:
Credit Institutions Limit granted Drawn Available
Total discount lines 43,448,650.00 13,792,419.47 29,,656,230.53 Total credit facilities 6,000,000.00 5,691,969.11 308,030.89
13.4 Information about the nature and risk level arising from financial instruments.
The Group's risk policies are established by the Financial Management of tthe Group, establishing a series of procedures and controls that enable it to identify and manage risks arising from financial instruments.
Dealing in financial instruments exposes the Group to credit, market and liqquidity risks.
Credit risk: produced by the possible loss caused by the breach of contractual obligations of the counterparties of the Group, that is, by the possibility of not recovering financiall assets for the amount recognised and within the time establisheed.
To manage credit risk, the Commercial and Financial Departments of the Group assess the credit limits for each customer. Overdue accounnts are followed up promptly and claimed by the Group Finance Department and, if necessary, by the Group Legal Department.
Moreover, the Group maintains its cash in financial entities with high crediit rating.
Market risks occur due to the possible loss caused by changes in the fair value or in future cash flows of a financial instrument, due to chhanges in market prices. Market risk inclludes interest rate risk, exchange rate risk and other price risks.
The interest rate risk affects the Group insofar as the available bill disscounting facilities are ______Zaragoza, 31 March 2014 Página 43 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
subject to the evolution of interest rates.
The exchange rate risk does not affect the Group, as the relative exchange insurances have been contracted in each case.
The price risk affects the Group because it belongs to a highly competitive price sector. However, all transactions are promptly analysed and monitored so as to achieve the best possible margins.
The liquidity risk arises from the possibility of the Group not being able tto have access to liquid funds, or access them in sufficient quantity and at an adequate cost, to meet its payment obligations at all times. The objective of the Group is to maintain the necessary free cash, to which end the minimum liquidity levels, which must be maintained at all times, are established and watched over. As indicated above, the Group has contracted discount lines with different, multi‐annual projecction, financial entities, which have a broad available margin.
13.5 Shareholders’ equity
The share capital of the parent company is represented and divided into 5,803,708 shares with a par value of 10 Euros each one, which are totally subscribed and paid up.
During financial year 2013, the parent company increased capital by 40,000 Euros, according to agreement taken by the General Meeting of Shareholders on 6 May 2013, issuuing 4,000 shares of 10 Euros par value each one, which are totally subscribed and paid up. Likewise, and as a result of the partial spin‐off without dissolution carried out in 2013, part of its equity has been segregated (see Note 1), which represented a decrease in capital of 1,330 Euros.
Share Premium: The share premium is of free distribution by the General Meeting of Shareholders of the parent Company.
Avvailability of reserves:
Legal Reserve: it has been set up in previous years and its intended purrpose is as provided in Article 274 of the Rewritten Text of the Spanish Companies Act. According to tthe above, 10% of the company profits should be earmarked for the constitution of a reserve fund thatt will reach one fifth of the capital. This reserve may be used to cover, if applicable, the debit balance of profit and loss accounts, and must be replaced when its amount drops below the level indicated above, and whenever there are no other available and sufficient reserves for this purpose. It is assigned, at year end, according to the limit set by law.
Reserve for goodwill: pursuant to the Capital Companies Act, in the appllication of the result of each financial year, an unavailable reservve must be provided as a result of the gooodwill that appears in the assets of the balance sheet. A figure of the profit that represents at least ffive per percent of the amount of this goodwill will be earmarked for this purpose.
Distributable reserves: These are unrestricted reserves at the disposal of tthe General Meeting of Shareholders of the parent Company.
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In the event of a discrepancy, the Spanish-language version prevails. ______
In 2014 and 2013, neither the parent company nor any of the Companies comprising the Group has done business with own shares.
The movements of items included iin shareholders’ equity of the consolidatted balance sheet, are:
Balance at Balance at 31/122/13 Increases Decreases Transfers 31/12/14
Share capital 58,037,080.00 58,037,080.00 Share premium 90,840,265.10 90,840,265.10 Reserves 102,339,709.01 4,727,939.27 (14,732,669.91) 420,031.86 92,755,010.23 Other resserves of the parent company 76,654,114.11 1,059,158.74 (1,353,186.53) 420,031.86 76,780,118.18 ‐ Distributable reserves of the parent company 70,018,234.79 1,012,239.68 (1,353,186.53) 420,031.86 70,097,319.80 ‐ Non‐distributable reserves of the parent company 7,654,639.30 46,919.06 7,701,558.36 ‐ Results of previous years (1,018,759.98) (1,018,759.98) * Reserves in consolidated companies 26,755,150.29 3,548,546.73 (13,379,483.38) 16,924,213.64 * Reserves in companies in application of equity method (1,069,555.39) 120,233.80 (949,321.59) Profit/loss of year attributed to parent company (8,402,385.65) 8,402,385.65 (2,373,640.89) (2,373,640.89)
Total 242,814,668.46 13,130,324.92 (17,106,310.80) 420,031.86 239,258,714.44
The movements in the previous year were:
Balance at Modification Balance at Concept 31/12/12 Increases Decreases scope 31/12/13 Share capital 57,998,410.00 40,000.00 (1,330.00)) 58,037,080.00 Share premium 90,680,265.10 160,000.00 90,840,265.10 Reserves 93,440,872.82 15,393,703.83 (20,269,972.81)) 13,775,105.17 102,339,709.01 Other resserves of the parent company 76,155,153.26 1,585,734.35 (1,086,773.500)) 76,654,114.11 ‐ Distributable reserves of the parent company 68,500,337.96 1,585,734.35 (67,837.52) 70,018,234.79 ‐Non‐distributable reserves of the parent company 7,654,815.30 (176.00) 7,654,639.30 ‐ Results previous years 0.00 (1,018,759.98) (1,018,759.98) * Reserves in consolidated companies 46,886,821.36 13,807,969.48 (19,106,869.399)) (14,832,771.16) 26,755,150.29 * Reserves in companies in application of equity method (29,601,1001.80) (76,329.92)) 28,607,876.33 (1,069,555.39) Profit/loss of year attributed to parent company (8,205,233.97) 8,205,233.97 (8,402,385.65)) (8,402,385.65)
Total 233,914,313.95 23,798,937.80 (28,673,688.46)) 13,775,105.17 242,814,668.46
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In the event of a discrepancy, the Spanish-language version prevails. ______
13.6 Other value change adjustments
The value change adjustments included in the consolidated balance sheet as at 31 December 2014 are broken down below:
Parent Associated Year 2014 company companies Total
Available‐for‐sale financial assets 291,175.08 (166,137.42) 125,037.66
Total 291,175.08 (166,137.42) 125,037.66
The value change adjustments as at 31 December 2013 are broken down below:
Parent Associated Year 2013 company companiess Total Available‐for‐sale financial assets 241,758.59 (352,540..76) (110,782.17) Hedging transactions 0.00 Other value change adjustments 420,031.86 420,031.86
Total 661,790.45 (352,540..76) 309,249.69
NOTA 14 INVENTORY
This section, as at 31 December 2014, is broken down below: Impairmentt Description Gross amount losses Total Merchandise 9,329,453.53 (2,612,946.04) 6,716,507.49 Raw materials and other procurements 13,424,346.95 (454,111.97) 12,970,234.98 Work in progress 1,885,559.82 0.00 1,885,559.82 Finished products 20,433,989.04 (2,303,079.10) 18,130,909.94 Advance to suppliers 962,861.72 962,861.72
46,036,211.06 (5,370,137.11) 40,666,073.95
This section, as at 31 December 2013, is broken down below:
Impairment Description Gross amount losses Total Merchandise 8,751,659.60 (115,365.35) 8,636,294.25 Raw materials and other procurements 14,433,280.23 (2,480,049.70) 11,953,230.53 Work in progress 2,237,012.99 (64,141.17) 2,172,871.82 Finished products 20,253,810.67 (1,180,418.07) 19,073,392.60 Advance to suppliers 900.00 900.00
45,676,663.49 (3,839,974.29) 41,836,689.20 ______Zaragoza, 31 March 2014 Página 46 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
As at 31 December 2014, as at the end of the previous financial year, there are firm orders for raw materials that cannot be quantified beecause they are blanket orders with ourr material suppliers that are placed when required by the production processes. There are no limitations on the free availability of inventory due to guarantees, pledges, bonds or other similar reasons.
During financial year 2014, impairment losses have been assigned for the goods inventory, raw material and other procurements caused by low turnover and obsolescence, amounting to 934,81 thousand Euros. In turn, an impairment loss has been registered in one of the companies of the Group amounting to 1.05 million Euros against equity.
The Company has contracted insurance policies that guarantee the recoveerability of the net book value of the inventories both of raw material and of finished product.
NOTA 15 FOREIGN CURRENCY
The global amount of the assets and liabilities denominated in foreign currency, including a breakdown of the most significant assets and liabilities classified by currencies, is given in the table below for the years 2014 and 2013, respecctively:
Year 2014 Classiification by currrencies USD GBP CHF RMB Total A) NON‐CURRENT ASSETS 0.00 27,745.53 49,913.94 0.00 77,659.47 2. Long‐term financial investments 0.00 27,745.53 49,913.94 0.00 77,659.47 a) Equity instruments 0.00 27,745.53 49,913.94 0.00 77,659.47 B) CURRENT ASSETS 20,435.19 637.21 0.00 2,871.34 23,943.74 5. Cash and cash equivalents 20,435.19 637.21 0.00 2,871.34 23,943.74 D) CURRENT LIABILITIES 70,137.99 (1,453.08) 0.00 0.00 68,684.91 4. Trade and other payables 70,137.99 (1,453.08) 0.00 0.00 68,684.91
Year 2013 Classification by currencies USD GBP CHF MYR Total A) NON‐CURRENT ASSETS 75,306.85 0.00 63,109.27 63,109.27 201,525.40 2. Long‐term financial investments 75,306.85 0.00 63,109.27 63,109.27 201,525.40 a) Equity instruments 0.00 0.00 63,109.27 63,109.27 126,218.55 c) Debt securities 75,306.85 0.00 0.00 0.00 75,306.85 B) CURRENT ASSETS 52,030.67 0.00 0.00 0.00 52,030.67 4. Short‐term financial investments 52,030.67 0.00 0.00 0.00 52,030.67 c) Debt securities 52,030.67 0.00 0.00 0.00 52,030.67 C) NON‐CURRENT LIABILITIES 0.00 0.00 0.00 2,398,442.73 2,398,442.73 Long‐term investments in group and associated companies 0.00 0.00 0.00 2,398,442.73 2,398,442.73 D) CURRENT LIABILITIES 4,932.90 1,099.44 0.00 0.00 6,032.34 4. Trade and other payables 4,932.90 1,099.44 0.00 0.00 6,032.34
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In the event of a discrepancy, the Spanish-language version prevails. ______
The amounts corresponding too purchases, sales and services received and rendered, denominated in foreign currency, are as follows, for the years 2014 and 2013:
YYear 2014 Classification by currencies USD GBP Total E) RESULTS 916,044.25 19,138.02 935,182.27 1. Purchases 916,044.25 19,138.02 935,182.27
YYear 2013 Classification by currencies USD Total E) RESULTS 1,443,897.46 1,443,897.46 1. Purchases 1,443,897.46 1,443,897.46
The amount of the exchange differences recognised in the result of the year by classes of financial instruments, is broken down in the followwing table:
Year 2014 Yearr 2013 Settled SSettled A) NON‐CURRENT ASSETS (198.62) 79,163.33 2. Long‐term financial investments (198.62) 79,163.33 a) Equity instruments (198.62) 79,163.33 B) CURRENT ASSETS 8,963.52 16,900.19 5. Cash and cash equivalents 8,963.52 16,900.19 D) CURRENT LIABILITIES (91,852.62) 339,715.72 2. Short‐term debts (104,470.26) 0.00 e) Other financial liabilities (104,470.26) Short‐term investments in group and associated companies 0.00 375,587.91 4. Trade and other payables 12,617.64 (35,872.19)
The conversion differences recorded in the equity of the 2014 and 2013 balance sheet arise as a result of the conversion to Euros of the interim financial statement as at 31 December of each financial year of Dunlopillo Group (expressed in Malaysian currency ‐ Ringgit Malaysia ‐). The movement of this account in the year is expressed below:
Amount as at Amount as at 31/12/2013 Additions Discharges 31/12/2014 Conversion differences (2,208,826.82) 50,023.777 (2,158,803.05)
Amount as at Amount as at Concept 31/12/12 Additions Discharges 31/12/13 Conversion differences 150,,902.21 (2,359,729.03) (2,208,826.82)
______Zaragoza, 31 March 2014 Página 48 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
The Dunlopillo Group operates in countries where it is present (see note 1), in the following currencies: Vietnamese Don, Chinese Renminbi, Hong Kong Dollar, Singapore Dollar, United States Dollar, Europe Dollar and United Kingdomm Pound.
NOTA 16 TAX SITUATION
The Group of Companies as such, does not file consolidated tax returns, as each company individually presents its relative income tax statements, except for the Pardo Subgroup which pays its taxes in Spain, and for the COFEL Group, which files in France as a tax group in agreement with the regulation in force in this country. The parent company pays this tax in the general regime as an individual company, at 30%, which is the applicable tax rate for the 2014 accounting year, as for all the companies of the scope that are taxed in Spain. In the case of companies residentt in France, their rate of taxation is 33.3% and for those resident in Portugal and Malaysia, 25%.
As at 31 December 2014 and 31 December 2013, the Group held the following balances with Public Administrations:
DEBIT BALANCES CREDIT BALANCES Concept Year 2014 Year 2013 Year 2014 Year 2013 Value Added Tax 5,943,851.73 1,216,703.47 1,868,110.72 2,325,718.03 Income Tax 979,820.40 326,194.85 Social Security organisations 1,022,083.88 1,047,209.99 Company tax and others 1,581,931.72 69089.67 Other public entities 231,075.00 7,229,718.97 6,777,104.27 Total 6,174,926.73 2,798,635.19 11,168,823.64 10,476,227.14
The Company Tax for each financial year is calculated based on the accounting result, obtained by applying generally accepted accounting principles, which do not necessarily coincide with taxable income, defined as the taxable base of thhis tax. However, some of the Group companies not resident in Spain, in accordance with their respective tax laws, calculate the Company Tax in agreement with parameters, such as turnover, capital and added value.
Although each company pays the Company Tax individually, for inforrmation purposes, the reconciliation of the reported profits before tax corresponding to the years 2014 and 2013 is presented, with the consolidated tax base:
______Zaragoza, 31 March 2014 Página 49 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
Reconciliation of reported income and taaxable income at the end of the 2014:
Income and expenses directly Profit and Loss Account Total recognised in equity Balance of income and expenditure of (2,357,077.99) (1,571,940.02) (3,929,018.01) year Increasess Decreases Increases Decreases Consolidation adjustments 12,979,188.40 12,979,188.40 Company Tax 4,368,083.56 (7,021,734.61) (2,653,651.05) Permanent differences 2,751,257.45 (15,339,974.37) 1,366,223.47 (11,222,493.45) Temporary differences: 1,345,628.91 (5,585,748.66) (4,240,119.75) ‐ with origin in year 1,345,628..91 (3,663,562.00) (2,317,933.09) ‐ with origin in previous years (1,922,186.66) (1,922,186.66) Taxable base offset (6,013,842.35) (6,013,842.35)
Taxable base (tax result) (15,079,936.22)
Permanent and temporary positive differences are non‐deductible concepptts in the determination of the tax base, such as adjustments made to the payable quota in company tax statement of the year 2013, to non‐deductable financial expenses pursuant to article 20 of the L.I.S. (Company Tax Law), due too the provision for fixed assets amortisation of the year, which is non‐deductible, pursuant to Law 16/2012, 27 December, and other concepts.
Permanent and temporary negativve differences arise mainly as a result of deductible concepts in the determination of the taxable base and which are not recorded for accountingg purposes and also due too adjustments made to the payable quota in the company tax statement of the year 2013.
Temporary differences are those derived from the different measurements for accounting and tax purposes of certain assets, liabilities and equity instruments of the company.
The permanent differences that affect the equity refer to impairment losses on property of a company of the Group that are not tax‐deductible.
Reconciliation of reported income and taaxable income at the end of the 2013:
Profit and Losss Account Balance of income and expenditure of year (8,392,010.46) Increases Decreasess Net effect Consolidation adjustments 13,965,500.54 13,965,500.54 Company Tax 3,392,263.95 (7,588,244..82) (4,195,980.87) Permanent differences 1,485,090.09 (1,387,584..33) 97,505.76 Teemporary differences: 0.00 (1,014,520..64) (1,014,520.64) ‐ with origin in year 0.00 (143,520..73) (143,520.73) ‐ with origin in previous years 0.00 (870,999..91) (870,999.91) Set‐off for tax loss carryforwards (5,696,374.71)
Taax base of the scope of consolidation (5,235,880.38) ______Zaragoza, 31 March 2014 Página 50 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
Deferred company tax assets and liabilitiees:
The difference between the tax burden allocated to the financial year and to preceding years and the tax burden already paid or payable for those years is recorded in the accounts, “Deferred Income Tax Assets” or “Deferred Income Tax Liabilities”, as appropriate. These deferred amounts have been calculated by applying the nominal tax rate in force to the relative amounts. The breakdown for 2014 and 2013 is as follows:
DEFERRED TAX ASSETS DEFERRED TAX LIABILITIES
Concept 2014 2013 2014 2013 Assets from deductible temporary differencees 772,347.03 740,167.82 Rights. deductions and allowances awaiting 6,141,747.81 5,177,103.19 application Credits for loss carryforwards 31,048,159.28 34,366,266.71 Liabilities from taxable temporary differences 328,725.46 256,432.48
Total 37,962,254.12 40,283,537.72 328,725.46 256,432.48
In agreement with measurement principle 13 of the General Chart of Accounts, the current and deferred tax assets and liabilities will be measured by the amounts expected to be paid to or recuperated from the tax authorities, in agreemennt with the applicable or approved rregulation and awaiting publication at year‐end date. At this year‐end, the companies of the group located in Spain have adapted their tax assets that appear in the balance sheet to the new tax rate of 25%, which has represented an adjustment of 4.33 million Euros, less the deductible temporary differences and loss carryforwards. The contra‐entry for this adjustment has been recorded in the profit and loss account as negative adjustment in taxation of profits.
The breakdown of the amount aand year of generation, as well as of the last year of its application. for Credits for loss carryforwards activated in the assets of the consollidated balance sheet is as follows:
NEGATIVE TAXABLE BASES Year when Amount at start Additions ofo Discharges of Last year Amount AWAITING SET‐OFF generated year year year applicable activated Tax credit for tax‐loss carryforwards E.U. 2001‐2014 29,029,501.95 1,749,289.95 ‐5,836,1288.48 Indefinite 8,172,141.19 Tax credit for tax‐loss carryfowards 2008 505.41 ‐5055.41 2026 0 Tax credit for tax‐loss carryfowards 2009 3,601,622.24 ‐266.15 2027 900,405.56 Tax credit for tax‐loss carryfowards 2010 8,225,850.80 70,740.84 ‐1677.86 2028 2,056,462.70 Tax credit for tax‐loss carryfowards 2011 28,638,991.61 ‐142,7177.18 2029 7,159,747.90 Tax credit for tax‐loss carryfowards 2012 20,361,747.56 ‐180,7499.82 2030 5,090,436.89 Tax credit for tax‐loss carryfowards 2013 20,942,144.32 90,674.40 2031 5,235,536.08 Tax credit for tax‐loss carryfowards 2014 0.00 2032 2,433,428.96 Total 110,800,363.88 1,910,705.19 ‐6,160,2944.90 31,048,159.28
(*) Pursuant to the Rewritten Text of the Company Tax Law, approved by Royall ‐ legislative – Decree 9/2011, the negative tax bases of a financial year can be offset for tax purposes by profit from the next
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eighteen financial years. With the entry into force of Law 27/2014, of 27 November, on Company Tax, for tax periods starting on 1 January 2015, the treatment of the offset of negattive bases regulated in article 26 Law 27/2014 is substantially modified, highlighting the applicability of these tax bases in a future with no time limit.
The amount and application time for deductible temporary differences, taax losses and other tax creedits, including those capitalised in the balance sheets and those that have not been recorded in the relative deferred tax asset in the balance sheet, have been described in the individual Annual Accounts of the companies that form part of the scope of consolidation.
The breakdown of income tax in the 2014 and 2013 financial years is as folllows:
Concept Year 2014 Year 22013 Current income tax of the year 1,409,830.59 (1,533,921.46) Deferred income tax of the year (1,011,323.92) 6,012,,802.80 Negative differences in tax burden, previous year (4,799,783.23) 542,,322.45 Positive differences in tax burden, previous year 350,101.96 (825,2222.92)
Total (4,051,174.60) 4,195,,980.87
Deductions:
Although the companies of the Group have not yet submitted the Company Tax statement for the year 2014, no deductions have been applied in the calculation of the income tax. The breakdown of the deductions awaiting application by the Group at year end is as follows:
Disposals Year when Amount at Additions for Activated DEDDUCTION AWAITING APPLICATION ffor the generated start of year the year amount year Deductions awaiting application 2006 86,549.21 86,549.21 Deductions awaiting application 2007 140,963.85 140,963.85 Deductions awaiting application 2008 960,997.58 960,997.58 Deductions awaiting application 2009 589,034.76 589,034.76 Deductions awaiting application 2010 610,950.56 610,950.56 Deductions awaiting application 2011 603,865.54 603,865.54 Deductions awaiting application 2012 536,953.20 536,953.20 Deductions awaiting application 2013 989,829.18 (44,530.56) 985,298.62 Deductions awaiting application 2014 0 570,194.50 570,194.50 Deductions awaiting application E.U. 2013 1,056,940.00 1,056,940.00 Total 5,576,083.88 570,194.50 (4,530.56) 6,141,747.82
Pursuant to article 42 of the Rewrritten Text of the Company Tax, it is recorded in the individual annual accounts of the Group companies that they have benefited from the deduction for reinvestment of extraordinary profits, listing the amounnts of the income received and the datess of reinvestment.
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There are no other significant circuumstances relating to other taxes.
There are no other tax contingenciies or post‐balance sheet events that reppresent a change in tax regulation that affect the tax assets and liabilities recorded.
In the previous financial year, as a result of proceedings carried out by the tax administration (AEAT) in a company of the Group for the company tax of the financial years 2009 to 2010, for the Value Added Tax from June 2009 to December 2010, the group cancelled 4,057,4988.36 Euros of rights for deduction of double taxation of dividends of years 2009 and 2010, activating, for this same amount, creedits for losses carried forward, which, in turn, were reduced by 1,739,224.97, due to differences in criteria between the company of the group and the administration. Activated R&D&IT tax deductions amounting to 104,362.21 Euros were also reduced by 104,362.21 Euros. (See Note 2).
As established by the legislation in force, the taxes cannot be considered as definitely paid until the statements have been inspected by the tax authorities or the four‐yearr limitation period has elapsed. The tax returns of GRUPOPIKOLLIN, SL and its SUBSIDIARIES for all the ttaxes filed are open to inspection for all years that are not statute‐barred. The Directors of the Parent ccompany consider that the aforementioned settlements of taxes have been carried out correctly, so that, even in the event of any discrepancies in the interpretation of the current regulations due to the taxx treatment awarded to the transactions, the resulting liabilities, if any, would have no significant effecct on the consolidated annual accounts.
NOTA 17 INCOME AND EXPENDITURE
17.1 Breakdown of consumptions in purchases and inventory changes:
Concept Year 2014 Year 2013
Purchases, net of returns and any discount: (140,054,432.72) (143,827,157.50) ‐ national (87,435,137.41) (16,644,305.84) ‐ intra‐community acquisitions (13,652,489.28) (67,882,297.12) ‐ imports (38,966,806.03) (59,300,554.54) Inventory change of raw materials and other consumables (284,863.47) 680,465.60
Total Consumption of raw materials and other consumables (140,339,296.19) (143,146,691.90)
Concept Year 2014 Year 2013
Purchases, net of returns and any disscount: (14,586,047.08) (6,290,292.60) ‐ national (13,885,021.74) (5,028,399.05) ‐ intra‐community acquisitions (524,374.43) (1,010,141.30) ‐ imports (176,650.91) (251,752.25) Inventory change of goods 558,386.11 90,488.13
Total Consumption of goods (14,027,660.97) (6,199,804.47)
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17.2 Breakdown of the employee welfare expenses item:
Concept Year 2014 Year 2013 Social security payable by company (22,704,596.88) (22,484,612.71) Other social expenditure (121,790.59) (302,856.06)
Total Employee welfare expenses (22,826,387.47) (22,787,468.77)
17.3 Other information:
On 11 February 2011, a company of the Group requested authorisation to suspend employment contracts between 21 February 2011 and 20 February 2013. Following that date, and in financial years 2011 and 2012, complementary resolutions were passed, and in addition, on 6 June 2012 the Company was authorised once again to extend the number of suspension dayys. During the previous financial year, on 18 February 2013, a document was presented to the Subdirectorate of Labour of Zaragoza, pursuant to article 12 and Additional Provision Two of Royal Decree 1483/2012. It was agreed in this document to implement a measure to terminate employment contracts and implement a temporary Downsizing Plan of 165 days over a three‐year period, that is, from 25 February 2013 to 25 February 2016.
17.4 The results arising from outside the company’s normal activity, includeed in the item “Other results”
Concept Year 2014 Year 2013
Results arising from outside the companyy’s normal activity, included in “Other results” (26,353.88) (134,860.53) Exceptional expenses (26,353.88) (340,322.44) Exceptional income 205,461.91 (26,353.88) (134,860.53)
NOTA 18 PROVISIONS FOR RISKS AND EXPENSES
The analysis of the movement of each item on the balance sheet during thhis financial year is given below: BALANCES BALANCES 31.12.13 INCREASES REDUCCTIONS 31.12.14 Long‐term provisions Provision for other responsibilities 1,157,569.16 518,000.00 (6499,744.45) 1,025,824.71 Long term provisions for payments to staff 6,928,767.00 814,000.00 (1399,513.00) 7,603,254.00 Short‐term provisions 0.00 Other provisions 621,893.57 (621,893.57) 0.00 Total 8,708,229.73 1,332,000.00 (1,4111,151.02) 8,629,078.71
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The section on provision for other responsibilities mainly corresponds to provisions for taxes and other responsibilities, such as disputes and warranties to customers, whilst the provisions for long‐term payments to staff are due for the amouunt of the rights acquired by workers of one company of the Group, whose registered offices are located in a member country of the European Union (see NOTE 1.2). The main actuarial hypotheses used to caalculate these long‐term payments to staff have been: discount rate of 2.5%, expected salary increase rate: 2% and an inflation rate: 2%, as well as staff rotation, retirement age, years’ tenure, type of retirement (this is estimated to be voluntarryy).
The balance recorded in the secction “short‐term provisions” of the baalance sheet as at 31 December 2013, was mainly comprised of two provisions recorded in that yearr and which have been applied in 2014. On the one hand, a provision of 48 thousand Euros for the penalisation stipulated in a rental agreement, a provision of 574 thousand Euros related to the retrocession of a machinery sale transaction (see Note 9).
NOTA 19 INFORMATION ABOUT THE ENVIRONMENT
The balance sheet includes environmental assets. The Group has been complying with the applicable environmental regulation and deems that there are no environmenttal liabilities that might represent significant contingencies.
The breakdown of the net carrying value of environmental assets includeed in the group balance sheet as tangible assets, corresponding to a technical facility whose aim is to conttrol discharge pollution, is as follows at year end:
Year 2014 Year 2013 Carrying value 113,917.18 113,917.18 Accumulated depreciatiion (95,679.44) (89,345.65)
Total 18,237.74 24,571.53
Three companies that form part off the Group and pursuant to the purpose of law 11/97, 24 April, on container and container waste, implemented according to directive 62/1994, manage the recycling of their waste with the company, Ecoembalajes España, S.A. (Ecoembes). The amount paid to this company too manage the containers and packaging of the Company, has amounted to 93 tthousand Euros in 2014 and 90 thousand Euros in 2013.
One company of the Cofel subgrouup manages the recycling of its packaging in France, having paid out the sum of 291 thousand Euros in 20114 and 294 thousand Euros in the previous year.
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NOTA 20 GRANTS, DONATIONS AND BEQUESTS.
In previous financial years, some companies of the Group received:
- 23 thousand Euros from the Government of Aragon for an investment in the improvement of the energy efficiency of the air‐conditioning in the factory, which was allocated to results in agreement with the amortisation of the investment, amounting to 105,,808.34 Euros (see note 9).
- 200 thousand Euros from the Official Credit Institute, through a financial entity that subsidises interests for a loan with that same entity, to results during the loan reppayment period.
- 210 thousand Euros from the Centre for Industrial Technology Development, for the quantity that one company of the group is not obliged to return, corresponding to the last repayment instalment of the loan contract.
The subsidies reflected in the section of the profit and loss account “Operating grants incorporated into the profit/loss of the financial year”, mainly correspond to the sum accrued as a result of the financing by Public Organisations of different courses.
The Company has been complying with the legal requirements demanded to obtain and maintain these grants.
The amount of the grants, donations and bequests received that appear in the balance sheet, as well as those allocated in the profit and loss account are broken down in the followwing table:
Year 2014 Year 2013 Recorded in the equity of the balance sheet 407,742.56 285,610.20 Allocated in the income statement 254,851.13 178,169.42
The analysis of the movement of the content of the equity and liabilities item of the balance sheet “grants, donations and bequests”, indicating the starting and closing balance, as well as the increases and reductions is broken down in the table below:
Year 2014 Year 2013
Balance at start of year 285,610.20 699,549.73 (+) Received in the year 81,497.97 (‐) Changes of scope PE (See Note 5) (333,066.48) (‐) Grants transferred to results of the year (120,557.65) (23,647.41) (‐) Consolidation adjustments 221,208.21 (193,056.09) (+/‐) Other movements 21,481.80 54,332.48 Balance at year end 407,742.56 285,610.20
The balance at year‐end includees the sum of grants belonging to Interests of external shareholders (see note 7).
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NOTA 21 POST‐BALANCE SHEET EVENTS
Following the year close and before the date these annual accounts weere drawn up, no other post‐balance event of a significant naturre has occurred, which might reveal cirrcumstances that could require a change in any aspect includeed therein, or affect the application of the “going concern” principle of the Group.
NOTA 22 RELATED PARTY TRANSACTIONNS
The following companies are conssidered as related parties for the purpoose of these consolidated annual accounts: the Companies that form part of the Iberebro Group and of the New Ebrosol Group, whose shareholders are common to those of the Pikolin Group, which are indicaated in the report of the Grupoiberebro, S.L. Annual Account and of the scope of Nuevo Grupo Ebrosol, S.L.
22.1 The information about the Compaany’s related party transactions is included in the table below:
Other Associated related Related party transactions in the 2014 financial year companies parties Sales of current assets 7,516.60 Purchases of current assets 986,589.43 44,108.00 Provision of services 40,373.90 302,582.41 Receipt of services 3,,105,420.77 Interest income 728,640.59 Interest expenses 4,459.60
Transactions at market price of the financial year are:
Associated Other related Related party transactions in the 2013 financial year companies parties Sales of current assets 10,867.94 4,151.80 Purchases of current assets 774,596.64 Purchases of non‐current assets 15,038.83 Provision of services 30,049.83 3304,330.44 Receipt of services 3,5512,780.29 Interest income 1,6610,391.48 Interest expenses 4,064.19
Sales of current assets consist of mattresses, bed bases and other leisure‐‐related articles, as well as their transport.
The services provided reflect the impact of miscellaneous expenses and addministration services.
The services received by the group refer mainly to real estate leases.
The interest income corresponds to the interests accrued by long‐term loans to companies that apply the equity method and to other related parties. ______Zaragoza, 31 March 2014 Página 57 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
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The interest expenses correspond to cash pooling with three companies off the Iberebro Group.
There are different financial investtments that act as guarantee for liabilities of group and related companies (see note 13.1).
The Company carries out different commercial transactions with group companies, which fall within the guidelines set by the group, and in agreement with the national tax rregulation that governs this type of transactions. The Board of Directors considers that they operate witthin market margins, as these are in line with those resulting from other transactions of the same charactteristics with unrelated parties.
22.2 Balances with related parties at year end:
Balances with related parties in the financial year Associated Other related 2014 companies parties A) NON‐CURRENT ASSETS 0.00 114,740,281.77 V. Long‐term financial investmentts 114,740,281.77
B) CURRENT ASSETS 23,495.79 136,576.87 III. Trade and other receivables 23,495.79 74,159.94 1. Customer receivables for sales and services 4,985.23 4. Other receivables 18,510.56 74,159.94 V. Short‐term financial investmentts 0.00 62,416.93
D) CURRENT LIABILITIES 154,873.03 528,704.68 III. Short‐term debts 0.00 415,810.53 4. Other financial liabilities 415,810.53 V. Trade and other payables 154,873.03 112,894.15 1. Suppliers 154,873.03 52,792.94 4. Other creditors 60,101.21
Balances with related parties for the previous financial year are:
Balances with related parties in the finnancial year Associated Other related 2013 companies parties
A) NON‐CURRENT ASSETS 0.00 124,187,527.64 V. Long‐term financial investments 124,187,527.64 B) CURRENT ASSETS 1,504.26 182,601.29 III. Trade and other receivables 1,504.26 0.00 2. Customers, companies consolidated by the equity method 1,504.26 V. Short‐term financial investments 0.00 182,601.29 D) CURRENT LIABILITIES 177,003.82 322,358.45 III. Short‐term debts 0.00 322,358.45 4. Other financial liabilities 322,358.45 V. Trade and other payables 177,003.82 0.00 2. Suppliers, companies consolidated by the equity method 177,003.82
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22.3 Payments to the Board of Directors and senior management accrued in the financial year:
Year 2014 Year 2013 Salaries, allowances and other remunerations 630,498 634,914
The members of the Board of Directors develop the senior management tasks in the Group.
22.4 Situations of conflicts of interest of the directors:
Within the obligation to avoid situations of conflict with the interest of thee Parent Company, during the financial year, the directors who have held posts on the Board of Directors and the people associated with them, have complied with the obligations foreseen in article 228 of the rewrritten text of the Spanish Companies Act and they have abstainedd from incurring in the cases of conflictt of interest foreseen in article 229 of this standard.
NOTA 23 OTHER INFORMATION
23.1 Breakdown of the average number of employees in the Group during the financial year and by categories:
PROFESSIONAL CATEGORIES Year 2014 Year 20013
Senior management 3 3 Other executive staff 37 32 Scientific and intellectual, and support technicians and professionals (graduates) 223 252 Administrative staff 488 475 Commercial reps, sales people and simiilar 222 213 Other qualified staff (intermediate quallifications) 78 77 Unskilled workers 1277 1263
Average employment total 2,328 2,3115
Impact of the ERE (Downsizing) (*)) (19) (52) Impact of the partial retirements (***) (52) (588) Total net average employment 2,257 2,205
(*) Impact on the average numbeer of employees, calculated bearing in mind the working days when the company employees havve been affected by the ERE in force (see note 17.3).
(**) Impact on the average number of employees pursuant to Law 27//2011, 1 August. These workers correspond to partial retirements with bridging contracts, and the people who cover the bridging contracts are already included in average personnel iin the relative category.
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23.2 Gender distribution at year end of the personnel from the Group and Board Members:
MALE FEMALE TOTAL Year Year Year Year PROFESSIONAL CATEGORIES YYear 2014 2013 2014 Year 20013 2014 2013 Board members: * who carry out senior management tasks 3 3 3 3 * who do not carry out senior management tasks Senior management, not board members Other executive staff 32 31 10 10 42 41 Scientific and intellectual, and support technicians and professionals (graduates) 165 185 57 87 223 272 Administrative staff 265 247 218 236 483 483 Commercial reps, sales people and similar 124 100 84 97 208 197 Other qualified staff (intermediate qualifications) 54 52 28 28 82 80 Unskilled workers 977 1033 288 225 1265 1258
Total perrsonnel at year‐end 1,620 1,651 687 683 2,307 2,334
23.3 Average number of people employed during the course of the year with 33% disability or more.
PROFESSIONAL CATEGORIES Year 2014 Yearr 2013 Unskilled workers 16 119
Total personnel at year‐end 16 119
23.4 The remunerations accrued by the auditors of the Group in the financial year, both for the audit of the individual and consolidated annual accounts, and other serviices amount to:
Concept Year 2014 Year 2013 Fees charged for accounts audit 94,278.00 94,278.00 Other fees for services providded 7,103.00 8,331.00
Total 101,381.00 102,609.00
The fees related to the account auditing services provided by other differrent auditors to the main auditor, have amounted to 279 thousand Euros in 2014 (248 thousand Euros in 2013).
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NOTA 24 SEGMENTED INFORMATION
The assignment and allocation criteria used for each one of the segments is the activity carried out.
The criterion followed to establishh the inter‐segment transfer prices is in accordance with market prices.
24.1 Turnover by geographic markets:
Turnover Description of the geographiccal market Year 2014 Year 2013
National 92,578,431.66 88,0551,485.45 Rest of European Union 217,902,125.12 215,6339,999.97 Rest of world 41,514,253.39 33,0226,711.46
Total 351,994,810.17 336,7118,196.88
24.2 Information about the segmented financial statements of the financial year (in thousands of Euros):
EXPRESSED IN THOUSANDS OF EUROS 2014 Segments
Production and Security and Inter‐ marketing of surveillance Finanncial segment Concepts Rest/sleep products services servicces eliminations Total Net sum of the turnover 386,593.01 691.38 0.00 (35,289.58) 351,994.81 Sales 384,918.69 0.00 0.00 (33,818.45) 351,100.24 ‐ External customers 351,100.24 0.00 0.00 0.00 351,100.24 ‐ Intersegments 33,818.45 0.00 0.00 (33,818.45) 0.00 Provision of services 1,674.32 691.38 0.00 (1,471.13) 894.57 ‐ External customers 894.57 0.00 0.00 0.00 894.57 ‐ Intersegments 779.75 691.38 0.00 (1,471.13) 0.00 Procurements (193,739.90) 0.00 0.00 34,986.18 (158,753.72) Staff costs (87,763.42) (645.45) (8200.89) 0.00 (89,229.76) Depreciation of property, plant and equipment (7,265.34) (0.66) ((11.24) 0.00 (7,267.25) OPERATING RESULT 5,483.90 6.13 (5200.51) (3.62) 4,965.90 Finance income 13,743.14 5.43 2,269.89 (13,106.14) 2,912.33 Finance costs (5,222.07) (0.06) (1,0466.34) 23.22 (6,245.25) EARNINGS BEFORE TAXES 14,174.62 11.50 383.44 (12,875.46) 1,694.09 Assets of the segment 454,393.50 406.48 283,879.38 (334,004.68) 404,674.68 Liabilities of the segment 216,898.79 97.03 58,317.56 (108,937.70) 166,375.67 Net cash flows of the activities: ‐ Transaction (2,369.61) 0.00 0.00 7,145.67 4,776.07 ‐ Investment 14,164.58 0.00 0.00 (18,166.70) (4,002.13) ‐ Financing (22,487.80) 0.00 0.00 6,565.25 (15,922.56)
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Information about the segmented financial statements of the previoous financial year (in thousands of Euros):
EXPRESSED IN THOUSANDS OF EUROS 2013 Segments
Production and Security and Inter‐ marketing of surveillance Financcial segment Concepts Rest/sleep products services servicces eliminations Total NNet sum of the turnover 336,718.20 0.00 0.00 0.00 336,718.20 Sales 333,398.01 0.00 0.00 0.00 333,398.01 ‐ External customers 365,452.48 0.00 0.00 0.00 365,452.48 ‐ Intersegments (32,054.48) 0.00 0.00 0.00 (32,054.48) PProvision of services 3,320.19 0.00 0.00 0.00 3,320.19 ‐ External customers 3,983.76 700.18 0.00 0.00 4,683.93 ‐ Intersegments (663.57) (700.18) 0.00 0.00 (1,363.74) PProcurements (182,464.65) 0.00 0.00 32,824.40 (149,640.24) Staff costs (95,695.57) (649.24) (761.62) 69.51 (97,036.93) DDepreciation of property, plant and equipment (6,662.63) (0.64) (0.94) 0.00 (6,664.21) LLosses, impairments and change of provisions (178.16) 0.00 0.00 0.00 (178.16) ‐ Current (141.90) 0.00 0.00 0.00 (141.90) ‐ Non‐current (36.26) (36.26) OPERATING RESULT (14,399.99) 11.41 (831.09) 5,302.40 (9,917.27) FFinance income 15,706.75 5.65 5,603.70 (16,584.94) 4,731.16 FFinance costs (5,034.21) (0.28) (3,192.02) 2,511.24 (5,715.27) EEARNINGS BEFORE TAXES (4,024.10) 16.78 70.40 (8,771.30) (12,708.23) Assets of the segment 470,652.77 426.07 277,198.54 (325,304.44) 422,972.94 LLiabilities of the segment 234,716.88 135.77 52,209.29 (105,959.53) 181,102.41 NNet cash flows of the activities: ‐ Transaction (12,698.41) 0.00 0.00 20,382.77 7,684.37 ‐ Investment 1,346.38 0.00 0.00 18,015.78 19,362.16 ‐ Financing 18,719.99 0.00 0.00 (38,152.86) (19,432.87)
NOTA 25 INFORMATION ABOUT GREENHOUSE GAS EMISSION ALLOWANCES.
At year‐end, the Group has no greenhouse gas emission allowances in the validity period of the National Allocation Plan and its annual distribution, so no valuation amount forr these allowances has been reflected in its consolidated Balance sheet. No expenses or income for thhis concept have been recorded in the profit and loss account, either. Likewise, the Group has not reeceived any grants for emission allowances and there are no contingencies relating to sanctions or temporary measures, under the terms established in Law 1/2005, 9 March, which governs the greenhouse gaas emission allowances trading scheme.
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NOTA 26 INFORMATION ABOUT BELATED PAYMENTS MADE TO SUPPLIERS.
This note includes information about the belated payment made to suppliers, established in additional provision three, “Reporting Obligation” of Law 15/2010, 5 July”, pursuant to Resolution, 29 December 2010, of the Account Auditing and Accounting Institute, about information to be incorporated into the annual accounts report in connection with belated payments to suppliers in trading operations.
Pursuant to the aforementioned Resolution, all the information related tto financial years 2014 and 2013 is included. However, noteworthy is the fact that, in agreement with the calendar foreseen in transitory Provision two of Law 15/2010, the maximum time interval permitted for years 2014 and 2013, is 60 days. The table includes the consistency with the same criteria applied in the group, for payment to suppliers of the companies located outside Spanish territory:
Payments made and pending at balance ssheet end date Year 2014 Year 2013 Amount % Amoount % Within the maximum legal time interval 221,958,881.08 73% 212,626,039.51 76% Others 82,460,957.44 27% 67,433,738.18 24% Total payment of the year 304,419,838.52 100% 2880,059,777.69 100% Average weighted time interval of exceeded payments 24 days 24 days Belated payments that, at end date, exceed the maximum legal time interval 5,206,014.17 948,792.23
______Zaragoza, 31 March 2014 Página 63 GRUPOPIKOLIN, S.L. AND SUBSIDIARIES Consolidated Annual Accounts and Management Report off financial year 2014 Translation of a report originally issued in Spanish and prepared in accordance with the audit regulations in forcr e in Spain.
In the event of a discrepancy, the Spanish-language version prevails. ______
CONSOLIDATED MANAGEMENT REPORT FOR 2014
1.‐ Evolution of Business and Situation of the Group:
The turnover amounts to 352 milliion Euros in this financial year, compared with the 337 million Euros of the previous year, representing an increase of 4.5%. This increase in turnover is due to the increase in the Group activity, in line with the Management forecasts. On the other hand, in all the other group companies, the evolution is in keeping with the current situation of the global economy, having carried out a series of very important adjustments and cuts in its expenditure items for five consecutive years, in order to adapt its commercial, distribution and administration structure to the new activity figures, and to prepare the Group to cope with the current crisiis that it is undergoing in the best possible manner. There are some signs inn the consumption and employment figures that point towards a possible end of the crisis in the short run. The improvement in the last financial year of the Spanish economy, together with the contribution of our investments abroad, and the factt there during this year there was no longer an impact of an ERE (downsizing plan) on the Group accouunt, has meant that the operating result has increased considerably with respect to the previous year, going from 9.9 million Euros in losses to 4.9 million Euros in profits.
The decisive support of our shareholders, making a significant contributtion to the Group with own resources, together with the support of the main financial entities, is permitting the financing of the investments required to be present in the different locations both in Spain and abroad, which are considered strategic for the Group, and to be able to maintain our supply capacity and adapt it, if necessary, to the expected demand.
This evolution of the turnover, togeether with other indicators that we set out below, explains the progress and situation of the Group at the end of financial year 2014.
With total assets of 404.7 million Euros, of which 66.7% are non‐currennt Group assets, whose most significant item are the non‐current financial investments, which represent 33.5% of the total assets; the remainder corresponds to cuurrent assets, whose two most significaant items are the debit balance, which represents 20.16% of total assets and the inventory balance that amounts to 10% of tootal assets.
With respect to the Group liabilities, we can see that the Equity represents 238 million Euros, representing 58.89% of the total liabilities. The remainder is distributed between non‐current liabilities that represent 13.96% of the total liabilities, and current liabilities, with 27.15%.
The following indicators help support the comments that we have made on the progress and situation of the Group throughout this Report:
- Short‐term solvency: this indicates the company's capacity to meet its short‐term liabilities, and it is calculated by dividing current assets by current liabilities. With a value of 1.23 at year end, and given that a fair value for this indicator would be between 1 and 1.55, we can see that our short‐term solvency is adequate.
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In the event of a discrepancy, the Spanish-language version prevails. ______
- Total Solvency or Guarantee: with a value of 2.43, obtained as a ratio bettween Total Assets and Total Liabilities, it shows that the company has sufficient capacity to resppond to its creditors for all debts.
- Long‐term Indebtedness: This indiicates the proportion of long‐term debtts with respect to own resources; with a value of 0.24, and given that the lower this ratio, the greater the long‐term indebtedness capacity, this tells us that we have still more debt capacity and that in general we preserve a good financial equilibrium.
- Long‐term financial equilibrium: obtained by the ratio between Equity and non‐current assets, with a value of 0.88, it tells us that the Equity finances all of the fixed assets and quite a significant part of the rest of non‐current assets..
- Return on Equity: calculated as the ratio between the final result and the average Equity of the year, with a value of ‐0.99% it measures the return on equity obtained by the shareholders, measured over the book value of the Group.
However, the final result that affects this return on equity, has been significantly reduced this year due to an adjustment of 4.3 million Euros against profit and losses in the section on income tax, as a result of the change in tax rates of the company tax for ffinancial year 2015 and following, which has meant that, from a profit before tax of 1.7 million Euros, the group has finally got 2.3 million Euros in losses. This is a one‐off event of the financial year and is not attributable to the Group activity.
As to economic forecasts handled by the Group for the coming year 2015, together with the strong support of the shareholders, the adjustments made during this year and the policy undertaken in terms of cost containment, we believe this will allow us to maintain our sales tarrgets, customer service and activity diversification, and reasonably overcome the crisis period of our economy.
The Group will continue to maintain the necessary investment level tthat will guarantee its position in the market and provide an optimal customer service, as well as prepare the Group to relaunch the activity.
However, the Group will continue the process of adjustment and spending restraint, allowing for a gradual improvement in profitability rates, from current levels. Average supplier payment period
The Group has an average payment period to its suppliers of 84 days, which is over the maximum period of 60 days established in the defauult regulation. To this end, the Group is implementing measures aimed at redressing this situation, focused on a more efficient management off its financial resources that will allow it to obtain greater liquidity to cope with the payments to all its suppliers, in agreement with the default regulation.
2.‐ Main risks and uncertainties:
The Group has no risks or uncertainties that might question its continuity,, in line with everything said in the first paragraph of this report. Market conditions, however, are forcing the Group to make all
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In the event of a discrepancy, the Spanish-language version prevails. ______
those adjustments considered necessary to adapt its supply to its demand without compromising the service that it renders to its clients.
Likewise, we do not have any significant litigations that might represent lossses for the Group. The only litigations we have are related to customer credit risks, which are properly secured or impaired where appropriate in the year
3.‐ Social Management of the Group:
Over the last three financial years, the Group has adopted a series of measures aimed at optimising its staff, to adapt it to the current situation of economic crisis. The peersonnel policy over the last few financial years has been parallel to the activity of the Group companies, so it will continue with this personnel policy, in order to optimise its human resources to the full, in agrreement with their real needs for each period.
Occupational absenteeism levels,, above all due to sickness or accideent leave, have been maintained at very low levels, and no serious or very serious accident has occurreed to date.
The environmental policy meets aall the requirements demanded by the applicable law at all times.
In line with our policy to improve administrative and production proccesses, as well as full compliance with current legislation, the annual audits of the consolidated and individual annual accounts of the Group companies, as required, have been conducted, framed within the provisions of the Rewritten Text of the Account Auditing Law (RDL 1/2011, July 1).
4.‐ Research and Development Activities:
Despite the current crisis, investment in Research, Development and Innoovation has remained at the levels of recent years.
The Group is convinced that the new products and technology that will enable it to maintain its leadership position in the sector will only bbe possible through investment in R&D&I.
The amount spent, in the year, on research, development and technological innovation activities has amounted to a sum of 1.9 million Euros, of which no amount has been activated during the year as intangible fixed assets.
5.‐ Acquisitions of own equity instruments:
Neither the Parent nor Subsidiarry companies, members of the Group, hold own shares in portfolio. At the same time, no sales transactions, or any other type of transacction with their shares have been carried out in the 2014 financial year.
6.‐ Post‐Balance Sheet Events:
No internal or external event that has occurred after the year‐end date has special relevance for the Group, nor does any event significaantly affect the economic, financial and equity situation that appears in the annual accounts closed as at 31 December 2014. ______Zaragoza, 31 March 2014 Página 66