ANNUAL ACCOUNTS 2015
Pon Holdings BV Contents
Profile 2
Corporate data 3
Pon worldwide 4
Report of the Supervisory Board 6
Report of the Executive Board 8 People and Sustainability 12 Corporate governance & Risk management 14
Financial Statements 2015 19 Consolidated balance sheet 20 Consolidated profit and loss account and statement of comprehensive income 22 Consolidated cash flow statement 23 Notes to the consolidated financial statements 24 Notes to the consolidated balance sheet and the consolidated profit and loss account 31 Company balance sheet 44 Company profit and loss account 46 Notes to the company financial statements 47 Notes to the company balance sheet and the company profit and loss account 48
Other information 52 Independent auditor’s report 53
Organization 54
Primary operating companies 56
Colophon 58 Profile
Our business Our headline numbers
Pon is focused on the import, logistics, marketing, distribution, Pon operates directly through its wholly or majority-owned service and maintenance of a broad range of high-quality businesses and (minority) equity participations in 32 countries. products. These products are supplied by leading manufacturers, The number of employees working for Pon in these businesses including Volkswagen, Caterpillar, MAN, MCFA, GE and Continental. is approx. 13,000 (excluding joint ventures). The majority of the Our products vary from passenger cars and commercial vehicles Pon workforce is employed in areas relating to sales and service. to material handling trucks, tyres, road construction & earthmoving In 2015 Pon generated total revenues in the amount of equipment and power generation products used primarily in the EUR 7 billion and realized a net result of EUR 141 million. shipping and offshore industries. In our bicycle business, we also supply products developed and assembled at our own facilities, under the brands of e.g. Gazelle, Our strategy Union, Focus, Cervélo and Santa Cruz. In addition, we are active We aim to be Best-in-Class. We continuously improve and in other business areas such as selling and servicing flow control develop our organization and processes to deliver on our solutions used in marine, oil & gas and processing industries. promises effectively and efficiently. Creating and delivering the best value propositions for our customers is the key to our success. We focus on growth. We aim for organic growth by Our values focusing on customer loyalty, growing our relative share of service Pon is one of the largest family-owned businesses in the and acquiring new customers in attractive segments. Besides Netherlands. Our main mission is to keep you moving. Our organic growth, we will continue making strategic acquisitions for approach is down-to-earth: we are simply dedicated to matching our business groups, as well as diversifying into new activities and our high quality products to our customers’ requirements in the selected geographies. best possible way. We do this by investing in long-term relationships with manufacturers, suppliers and customers. Our operational strategy is summarized as: Get. Keep. Grow. However, we also have a broader approach to keep you moving: • GET customers by offering superior value propositions to fulfill we keep a keen eye out for opportunities for mobility solutions their specific needs. that contribute to solving congestion and environmental issues. • KEEP customers by delivering on our promises, providing We also aim for enduring vitality of our organization by investing employees and partners with the right tools. in the competencies and health of our employees, to keep our • GROW customer loyalty to encourage their repeating business organization moving. Our goal each day is to present the best and deepen the relationship. portfolio of products and services we can to our customers based on top products from the best manufacturers. The Pon employees make the difference: they work with pride for the brands we represent and for Pon as a company.
Four values are core to us: Passion to Perform We are passionate to perform and focus on concrete achievements. Trust to Act We are empowered to act, and act in a powerful way. Act Responsibly We are responsible for our actions and the consequences they have for our stakeholders and our environment. Make it Fun We are serious about making work fun, it’s the way we do things.
2 Pon Annual Accounts 2015 Corporate data
Supervisory Board Articles of association
F. Pon, chairman The last amendment of the articles of association was effectuated K.J. Storm, vice-chairman by notarial deed of July 17, 2013. G.H. Beens J.C. ten Cate R.F. van den Bergh (as of May 2015) Registered office and commercial register J.F. Redmer (as of May 2015) Pon’s registered office is located in Leusden, the Netherlands. The company is registered in the Trade Register of the Chamber of Commerce of the Netherlands, under number 08017970. Executive Board
A.B. Smalbraak (CEO and statutory director) B. Sprong (CFO) Head office D.O. Turner Pon’s head office is situated at:
Rondebeltweg 31, 1329 BN Almere, Financial year PO Box 30052, 1303 AB Almere, the Netherlands The company’s financial year runs from January 1st Phone 0031 88 60 60 100 to December 31st. Fax 0031 88 60 60 101 Internet www.pon.com E-mail [email protected]
Corporate data 3 Pon worldwide
Greenland
Norway Denmark The Netherlands Sweden Canada United Kingdom Estonia Germany Belgium France United States Hungary Portugal Austria Spain Switzerland China Hong Kong
Taiwan Thailand Vietnam Nigeria Malaysia Philippines Singapore Papua New Guinea Brazil Indonesia
Madagascar New Caledonia Australia
4 Pon Annual Accounts 2015 Greenland
Norway Denmark The Netherlands Sweden Canada United Kingdom Estonia Germany Belgium France United States Hungary Portugal Austria Spain Switzerland China Hong Kong
Taiwan Thailand Vietnam Nigeria Malaysia Philippines Singapore Papua New Guinea Brazil Indonesia
Madagascar New Caledonia Australia
Pon worldwide 5 Report of the Supervisory Board
The Supervisory Board is proud to present the Annual Accounts Pon Holdings and Parcom Capital reached agreement on the of Pon Holdings for 2015. The Annual Accounts, as prepared by takeover of technical services provider RH Marine, following the the Executive Board, includes the audited financial statements for bankruptcy of parent company Imtech. The company will continue 2015. The unqualified opinion of the auditor has been included to operate independently and its services are complementary to on page 53 of this report. We approved the Annual Accounts Pon in a number of domains. after reviewing the financial statements with the Executive Board and the Auditor. We recommend that the shareholders adopt the To warrant future success in changing dynamics, Pon must adapt financial statements, including the dividend proposal. We also its organization to be prepared for future challenges, such as a advise the shareholders to discharge the Executive Board and changing landscape in automotive and the further emergence of the Supervisory Board, in their respective roles, for the tasks they digital channels. This implies that transformation has and will be have executed over the past financial year. the name of the game. From a strategic perspective, we are confident that we are building a futureproof business. It is satisfying to note that efforts are being translated into tangible Activities financial results. Having said that, a number of business groups The Supervisory Board supervises and monitors the management are being affected by the slowdown caused by low oil prices, and performed by the Executive Board, the company’s general affairs lower commodity prices, which is closely related to China’s and the business connected with it. The Supervisory Board also economic cooldown. advises the Executive Board. In performing its duties it is guided by the interests of the company and its business and takes into In addition to the company’s operational and financial performance, account the relevant interests of the company’s stakeholders. during its regular meetings, the Board reviewed a broad range of In 2015, the Supervisory Board discussed a variety of topics strategic issues. The main areas of interest were: with the Executive Board over the course of 10 formal meetings. • The ongoing transformation of Pon. In 2015, the focus was on In addition, the Supervisory Board was in regular contact with the Pon Equipment, Pon Power and Pon Tyre Group and we expect Executive Board. to see results from this in 2016. Closely linked to this is the consistent execution of strategic projects and new 2015 proved to be yet another remarkable year for Pon. In the remuneration policies that are linked to the successful second half of the year, two major developments demanded the execution of strategic programs. full focus of the Executive Board and the Supervisory Board: • Diversification of our business, both geographically and in the diesel emission issue at our OEM Volkswagen which sparked terms of variety of activities, which is consistent with the turbulence in the automotive markets worldwide, and the Get. Keep.Grow. strategy adopted in 2013. Relevant milestones acquisition of a minority stake in RH Marine, following the are the acquisition of Prochem, Aluca, Santa Cruz and BBB bankruptcy of parent company Imtech. In order to deal effectively Cycling and the new joint venture with Brazilian Caterpillar with these major issues, we organized a number of extra meetings Dealer Pesa. during this period. In addition, the Chairman held regular meetings with the CEO The diesel emission issue has inevitably raised doubts about the and occasionally with individual Executive Board Members. reputation of the Volkswagen brand in the market. Nonetheless, Closed sessions were also held which were not attended by the automotive business in the Netherlands hardly felt any direct the Executive Board, in order to discuss matters such as the effects of this, with Volkswagen sales exceeding expectations performance of the Executive Board and its individual Members. during this year. As of now, it is uncertain what the effect of the Furthermore, all Supervisory Board Members visited a number diesel emission issue will be on Volkswagen and its portfolio of of business units. cars in the long run. The Supervisory Board acknowledges that Pon has done everything that is within its power to make sure that stakeholders were informed properly and consistently when the news evolved, and many employees have gone the extra mile in 2015 to deal with the issue.
6 Pon Annual Accounts 2015 Committees Composition of the Supervisory Board
The Finance & Audit Committee (F&AC) met three times this year, During 2015, a number of changes came into effect in the during which meetings it paid attention to the capital structure of composition of the Supervisory Board. After the ending of his the company and the financial impact of material acquisitions. term Mr. Ben Vree retired as member of the Supervisory Board. The findings of the compliance and internal control departments We thank him for his contributions. and the findings of the external auditor were then reviewed and Mr. J. Redmer and Mr. R.F. van den Bergh have been appointed discussed with the Executive Board. Furthermore the F&AC as members of the Supervisory Board. As from May 1st 2016 reviewed the 2016 budget in terms of financial soundness. Mrs. E. Bos will be appointed as Member of the Supervisory The F&AC reported its observations to the Supervisory Board. Board. These appointments not only underpin our ambition to have sufficient diversity at the top level, but also to bring in The Remuneration Committee held three meetings in 2015 knowledge and experience in the area of digital and sustainable to discuss and decide upon recurrent remuneration items such business, which will be very valuable to Pon in the coming years. as Executive Board base salaries and incentive plans, including performance review and target setting, and monitoring of incentive plan (mid-year and year-end) scores. In conclusion The Remuneration Committee also addressed remuneration The Supervisory Board expresses its utmost appreciation for the related items relating to pensions, Senior Management dedication shown by the Executive Board and by all Pon employees remuneration policy as well as benchmarking reviews of in general for their continuous efforts to bring Pon to the next Executive Board and the Senior Management remuneration. level, and more specifically, for their work in dealing with the diesel emission affair at OEM Volkswagen. The Management Development Committee continued its ongoing review of management development, diversity and (internal) We are proud that the company also made its contribution to succession planning outcomes for senior management. This task local communities by supporting various cultural and charitable is carried out together with the Human Resources representative institutions. The Pon community combines vitality with responsible for Management Development. Besides meeting commitment, the key ingredients for a healthy future for Pon. operational management during visits, the Supervisory Board also met with management trainees. Observations were submitted to the combined Boards. Almere, April 14, 2016
Because of the strategic importance of IT in all transformational F. Pon, Chairman aspects of our business groups, an IT Committee has been K.J. Storm, Vice Chairman established during the year. The Committee reviewed the IT G.H. Beens strategy in the context of IT’s increasing strategic importance. J.C. ten Cate The committee’s initial attention has been on integration of R.F. van den Bergh business and IT strategies, on execution of the strategic plans J.F. Redmer and on the effectiveness of the recent governance and organization improvements.
Report of the Supervisory Board 7 Report of the Executive Board
Operational review with a clear and simple governance. This resulted in significant cost savings, in better brand focus and an increased flexibility. Overall With a net profit of EUR 141 million, Pon’s 2015 financial In the first half year of 2015, volumes in the automotive business performance was very strong, after a disappointing 2014. in the Netherlands were in line with the rock bottom year of 2014. The successful implementation of several restructuring programs The second half however showed a much better market sentiment, resulted in a significantly reduced cost base and a more efficient fueled by economic recovery and the plan to adjust the fiscal organization. In addition we benefitted from the recovery of some regime. As a result, Pon Passenger Cars looks back at a successful of our markets. In particular the automotive market in the year that exceeded budget in terms of turnover and profitability. Netherlands was very attractive, fueled by improved economic A number of models were very successful in 2015, fitting well
sentiment and a one-off impulse of changes to tax rules that into the brackets of the tax regime for CO2. Mainly thanks to the caused a significant pull forward in the sale of hybrids towards Passat GTE, Golf GTE and the Audi eTron range we managed to the end of the year. Although several business groups felt the reach a 30% market share in the market for hybrids in the last impact of the fall of oil prices and the low prices for commodities, year before tax changes come into effect, contributing to a further in general these businesses appeared to be rather resilient. increase of our market share in fleet leasing.
2015 was also the year of the diesel emission issue at our OEM The market segments of Pon Commercial Vehicles had mixed Volkswagen. In the course of the year, the nature of the software sentiments but overall performance was very satisfactory, despite problems with cars – regarding the specifications of emission aggressive price competition. The market share for Volkswagen levels of NOx – became clear and we have done everything light commercial vehicles was somewhat under pressure. Market within our power to make sure that stakeholders were informed volume in the truck business was higher than expected, with an properly and consistently. The diesel emission issue has inevitably increase of approximately 15%. During 2015 we acquired raised doubts about the reputation of the Volkswagen brand in Aluca GmbH, a specialist in aluminum in-vehicle racking systems the global market. Nonetheless, our automotive business in The with attractive potential for growth. Pon Automotive Retail had a Netherlands hardly felt any direct effects of this, with Volkswagen very good year, with sales and profitability exceeding estimates. sales exceeding expectations during this year. As of now, it is The positive sentiment was not only reflected in the sales of cars uncertain what the effect of the diesel emission issue will be on but also in the aftersales business. Volkswagen and its portfolio of cars in the longer run. Only one legal claim has evolved since the first reports on the scandal, 2015 was a year of transformation for Pon Equipment (PE). aimed at obtaining financial compensation of the damage for car After failing to meet our budget in 2014, we implemented a owners. Also, Pon received various letters from and on behalf of comprehensive plan to improve the performance of our business individual customers in respect of the emission issue of which in full alignment with Caterpillar, including the rightsizing of our non has led to litigation. We haven’t provisioned for any claim on cost base. Economic growth in our markets was modest in 2015. our balance sheet, as we are convinced that any issues will be However, a number of large infrastructure projects in Norway, solved appropriately for customers in 2016. Denmark and the Netherlands fueled demand for construction To conclude, we are confident that we can earn back the trust equipment. from our customers by offering them the service they deserve and On the other hand it was a difficult year for mining due to the by organizing a spotless operation for recalls where necessary. decline of commodity prices. Two of our mining customers filed for bankruptcy within the past 12 months. Business groups Market dynamics have altered fundamentally in a number of our Pon Power felt the effect of low oil prices, particularly as a markets and the transformation of our business is an ongoing significant part of our business consists of supporting activities process to effectively deal with these challenging dynamics. in the oil & gas sector and related offshore business. As also the cargo market continued to be soft, suffering from low Following the disappointing year 2014, measures have been levels of global trade, we have taken cost measures to rightsize implemented at Pon Passenger Cars to reorganize the business the business
8 Pon Annual Accounts 2015 Markets for the Pon Tyre Group were slightly better as companies pressure and diversification into lower margin markets. In 2015, throughout the industry no longer dumped stocks at reduced we acquired Prochem, a company selling stainless steel pipe, prices to fulfill their appetite for cash and clear their stocks. fittings, instrumentation and specialized valving products across Australia, Singapore and Thailand. Our transformation efforts resulted in lowering cost levels through the rationalization of our footprint and inventory composition. In 2015, Pon Holdings and Parcom Capital reached agreement Turnover and profitability improved during the year. Our full service on the takeover of technical services provider Imtech Marine fitting lines for carmakers have lived up to our expectations. (rebranded in RH Marine Group), following the bankruptcy of We foresee growth in this new service area, which is underpinned parent company Imtech. RH Marine is a global maritime market by the signing of new long term contracts with car manufactures. company, operating as full- service provider and system integrator Our Axles and parts business benefitted from a strong market for of technology solutions. Its services are complementary to Pon in trailer builders and saw a record-high year. a number of domains. The company will continue to operate independently as Pon acquired a minority stake. Performance in our flow control solutions industry (PVI) was also affected by the decline in energy prices. Setpoint faced arduous market conditions in Texas and Ohio, mainly driven by a marked Financial position slowdown in shale fracking, and decided to shut down five On the back of overall better economic climate and market underperforming branch locations. Louisiana Valve Source (LVS), conditions, combined with particularly strong sales at our and A-T Controls also felt the effects of the oil & gas related automotive businesses, revenues increased with 14% at stable downturn. On the other hand W&O, active in the Marine segment, margins. Higher gross margin together with sound cost control and the Hiller Companies, active in fire protection, performed very and the (full year) effect of restructuring and turnaround well. To extend our offering to customers, we completed the measures, contribute to a recovery of the company’s operating acquisition of Electronic Monitoring, Inc. (EMI), a marine integrator result with 186% at EUR 201 million. Net financial income and of critical vessel monitoring and control systems based in expense increased with EUR 4 million to EUR 32 million. With an Louisiana. effective tax rate of 25%, and EUR 15 million of results from our minority shareholdings, the company’s net result increased to The profitability of Pon Material Handling further improved in EUR 141 million. 2015. We consider the turnaround – that started in 2013 – to We report a healthy operational cashflow of EUR 225 million, be very successful. Our organization has improved significantly following the good operating result, slightly offset by investments in terms of marketing & sales – consistently working to build in working capital. In 2015 Pon invested EUR 290 million, of a customer- facing organization – and having a strict discipline which EUR 152 million related to acquisitions and divestments, towards maintaining cost levels. Our major geographic focus leading to a negative free cashflow of EUR 65 million. areas showed significant growth of market volume. Interest bearing debt (after cash) increased with EUR 99 million to EUR 558 million, to finance our acquisitions and increased net The bicycle business consistently worked on the strengthening working capital. All in all this resulted in healthy financial of our proposition in line with our long term goals, while realizing covenants with a leverage ratio of 0.9x and an interest cover of the financial targets. The acquisition of Santa Cruz, completed in 11.1x at the end of 2015, leaving sufficient room for our strategic the summer of 2015, was an important milestone as we now growth plans. Our equity remained stable at EUR 833 million, have a strong portfolio of brands across the segments road, urban leading to a sound solvency ratio of more than 30%. and mountain use. We also acquired BBB, a Dutch company offering a broad range of components and accessories. Strategy
Our Asian business had a difficult year. Capital expenditures in our Our Get. Keep. Grow strategy has been successfully executed in markets were put on hold or cancelled, mainly as a consequence the past few years, and continues to be a good compass for the of low commodity prices. Our turnover levels are still holding up fulfillment of our ambitions. In this strategy, we are not limiting well though, while profitability has decreased as a result of price ourselves to sales and distribution functions for our principals
Report of the Executive Board 9 (OEMs), but are focusing on creating relevant solutions for our Prospects for our business groups are mixed. We expect that the customers in the best possible way, thereby offering them high cooling down of the Chinese economy will continue to put pressure added value. on commodity prices, which will be felt in a number of our business groups, more specifically PVI, Pon Asia and Pon Power. The delegated business model is essential in the successful execution of this strategy. This model is based on decentralizing We expect that market volume in the automotive business will be responsibilities to the management of business groups, while lower in the first part of 2016, as 2015 had a pull forward effect maintaining strict accountability. This is successfully enabling us caused by tax measures. More structurally, we are positive in the to realize the potential of local entrepreneurship and tailor-made light of the better economic sentiment. We expect that market market approaches, while at the same time maintaining proper volume in fleet sales and commercial vehicles will remain stable in central governance. Moreover, the increased execution power of 2016 and do not expect that the markets for commercial vehicles local management will enable them to take a more flexible and will return to the pre-crisis level of 2008 in the years to come. agile market approach. However, we are optimistic about our 2016 performance in this segment given the promising introduction of the new Crafter. Overall, we have consistently worked on five pillars of our strategy Truck business will be stable or show modest growth. execution: • Diversification of our business, both geographically and in Pon Equipment will continue the transformation in 2016. While terms of variety of activities. Relevant milestones are the we expect our markets to remain fragile for the next few years, acquisition of Prochem, Aluca, Santa Cruz and BBB and the we are focused on the existing pipeline of infrastructure new joint venture with Brazilian Caterpillar Dealer Pesa; investment to deliver additional growth. We anticipate continued • An ongoing transformation and optimization of OPEX. In 2015, pressure in the mining segment until pricing and demand recover. the focus was on Pon Equipment, Pon Power and Pon Tyre We will align with our OEM Caterpillar to adapt to their Group. We expect to see full results from this in 2016. organizational changes. • Focus on execution of strategic projects. We have put more focus on a consistent execution of strategic programs and have Pon Power has to deal with activity levels that are significantly linked this to the remuneration policies for management. lower than they used to be due to the low oil price. We are not • Optimization of IT landscapes, which is a key prerequisite for expecting any recovery in the short term in the segment, which is success in a digital business environment. being affected by the slowdown in oil & gas. We expect the cargo • Innovation, which is the key to future success of our business. market to be flat for the next few years. The underlying trends for We believe that innovation when applied well, helps strongly to Electrical Power Generation are positive and provide new accelerate the execution of strategies. That is why we really opportunities. emphasize on this topic in several ways: - organizing innovation days in cooperation with leading We are moderately optimistic about the future of the market for institutions; tires. Markets however will not fully recover, as the market reality - making innovation the central theme of regional management has changed in a structural way. We expect a continuing good meetings; market for the axles and parts segment. Our strategy involves the - incorporating innovation projects linked to strategic themes in growth of new strategic areas of e-commerce targeted at budget meetings and business reviews. consumers and integrated solutions/services targeted at car makers. These activities will reduce our dependency on price fluctuations in the tyres market. Prospects 2016
We remain focused on the cornerstones of our strategy, and Our North American flow solution business will be challenged by are confident that this will result in solid performance in the years ongoing oil-related volatility. We expect markets for downstream to come. We also plan to invest in further growth, in line with our to be more attractive than upstream, given the lower feedstock strategic objectives, and have a keen eye for acquisitions. prices for refiners and chemical processing companies. We expect
10 Pon Annual Accounts 2015 fair-to-good market dynamics in other segments, in particular marine and firefighting, that are important for us.
We expect that markets for our Material Handling business to show slight growth in 2016 and strong markets for rental business for our activities in Eastern and Middle parts of the US. In these markets, we expect to reach topline growth in 2016. Texas activities will be weaker as a consequence of the slowdown in the Oil & Gas sector.
Given the high dependency on commodity prices, we expect tough market circumstances in 2016 for our Pon Asia business. We will continue to align our operations with market dynamics but are committed not to lose sight of the strategic objectives in turbulent times. For the longer term, we are optimistic about our Asia Pacific business, as we have a strong position in various segments and a good market reputation.
In our bicycle segment, we are continuing to improve our portfolio of brands and propositions to become one of the leading players in the bicycle industry. Overall, the underlying trend is still positive as a result of the combination of a demographic shift (aging population) and a growing awareness of sustainability and health trends. In North America, the market for e-bikes is still in its infancy while the market for performance bikes is flattening out as it reaches maturity. In the more mature European market we still see significant potential in the market for e-mountainbikes.
Report of the Executive Board 11 People and Sustainability
The success of a company is dependent on the competencies, insurance that we offer our employees. In 2015, more than 3,000 the creativity, the dedication, the entrepreneurship and the vitality employees decided to join. We are convinced that the business of its employees. Pon recognizes this universal truth and offers an case for this new view on healthcare – investing rather than cost environment in which there is ample room for these crucial cutting – is solid. Another noteworthy subject is that we elements, and for their development. developed a platform to support business groups in their local Pon Fit activities, in line with the delegated business model. We nurture trust and offer the space for people to realize their ideas. We offer an environment in which our people can fully The results of our efforts are promising. We are well on the way develop their talents and skills. And we are committed to ensuring to achieving our goals with an availability rate of 96.9 % a healthy and safe working environment. Continuous investment (ambition: 97.5%) of our personnel. in all these areas is attractive from both the personal perspective of our people and from our own business perspective. That is the main rationale behind our Human Resources Strategy. Management philosophy The delegated business model is the key to our success. The delegated business model – fundamental to the success of This model is based on decentralizing responsibilities to the our organization - implies that the management of business managements of business groups, while maintaining strict groups is responsible for a large part of HR-related topics. accountability. In this way, we can realize the potential of local entrepreneurship and tailor-made market approaches, while at the same time maintaining proper central governance. Moreover, the Pon Safety increased execution power of local management enables them to Our people are our most valuable assets and therefore safety is take a more flexible and agile market approach. one of our top priorities. Our aim is to offer our people a safe Directly linked to this model is our Values Based Leadership environment at all times and this requires ongoing attention and program (VBL). This revolves around a common mindset and set focus across the business groups. Fortunately, 2015 was a year of behaviors which is quintessential for a growing company that without serious incidents in our operations. Nonetheless, is diverse in terms of geography (active in 32 countries) and management of the groups has to stay focused on improving business. VBL is based on four core values – Passion to Perform, safety practices. In 2015 we have stepped up efforts to be in Trust to Act, Act Responsibly and Make it Fun. In our delegated control of safety by improving the measurement of incidents and management model, these values are of crucial importance in near-incidents. We believe that reporting on safety contributes to realizing the potential of the local entrepreneurship in a controlled a culture where safety is a top priority and also gives us insights manner. on how to improve. It is satisfying to see that awareness on the importance of safety is high – and growing – across all groups. Compliance
Our success is based on dedication towards our customers and on Pon Fit building strong and enduring relationships. This implies that all Pon Investing in the health of our people is good, both from a personal employees must have a clear view on shared goals and on the perspective and from a business perspective. We do not see principles of how we work together, both within the group and with these investments as an overhead cost, but merely as an external relations. It goes without saying that these are closely linked investment in a more vital company with higher productivity and to the aforementioned values. better ideas. This is the main drive behind our Pon Fit program, In this respect our Code of Conduct – together with specific a set of activities to promote sports and healthy behavior among guidelines – serves as a basis for complying with laws, regulations our employees. and our principles, not as a ‘check the box’ instrument. We continue to invest in optimizing compliance processes and procedures and are In 2014, we contracted a new health insurance partner in order fully aware that proper compliance is essential in an organization to better integrate the Pon Fit philosophy into the health care with decentralized responsibilities.
12 Pon Annual Accounts 2015 Ongoing transformation Sustainability
The business landscape is evolving at a rapid pace and to ensure Sustainability is the key to our long-term success, and the nature future success, Pon must adapt its organization to be prepared of the corresponding issues varies strongly throughout our for the future challenges. This implies that transformation, business groups. Nonetheless, there is one common truth: including the therefore required long term investments, has been sustainability is now the ‘new normal’ in business and local group the name of the game in the last few years and that this management is focused on helping shape a sustainable future. transformation will be an ongoing effort in the years to come. On a central level, we stimulate and facilitate optimizing the Since the last quarter of 2014 we executed several impactful efforts in the business groups. Together with the Pon family reorganizations. From a strategic perspective, we are confident office, we contribute to sustainability through Ponooc, a venture that we have taken appropriate measures towards building a capital fund that invests only in sustainable initiatives. future-proof business.
Management development
Recognizing and mapping talent is essential in order to ensure excellent future management teams with the right capabilities. Key elements include proper performance management, talent development programs and continuous attention to our succession planning map. A large part of the responsibilities in these domains have been delegated to the business groups. At a central level, we have a worldwide Management Trainee program, in which we give talented professionals a large degree of responsibility.
Compensation and Benefits
Our reward philosophy and strategy is to create an inspiring environment and to provide a complete remuneration package, reflecting our company’s core values. We work from the basis of our core business, with a spirit of enterprise, and always mindful of the importance of delivering profitable results based on long- term, successful relationships. A new remuneration scheme for management has been implemented which is based on pay for performance, based on indicators in the domain of strategy execution and compliance.
People 13 Corporate governance & Risk management
Structure Supervisory Board
Pon Holdings B.V. is a privately owned company, which falls under The Board supervises the execution of the strategy agreed with the large company regime within the meaning of Book 2, section the Executive Board and the general progress, results and return 263, of the Netherlands Civil Code, as a result of which the legal on capital of the operations of Pon and its affiliated companies. provisions on the operating of the Supervisory Board of sections It provides oral or written advice to the Executive Board and to 2:268 to 274 of the Netherlands Civil Code apply to the company. the General Meeting of Shareholders when requested or when The company’s authorized capital consists of B ordinary shares it deems such to be necessary. In fulfilling their duties, the and D and E cumulative preference shares without voting rights. Supervisory Board members act in accordance with the interests No shares are publicly traded or listed. The majority of the share of the company and its affiliated companies in evaluating the capital is represented by the holder of the B shares. company’s structure and financing policy. The Supervisory Board may request, and will receive from the Governance Executive Board, any information it deems necessary for the In its approach to the management and decision-making model proper execution of its duties and responsibilities. All resolutions for the company the Supervisory Board and the Executive Board are adopted by majority vote. In the case of a tied vote the account for the fact that the company’s shares are held by only chairman’s vote decides. one family, which may warrant certain differences, for example, with publicly listed companies. Nevertheless, the Supervisory The Supervisory Board consists of at least three (natural) persons, Board and Executive Board take into consideration relevant one of which is appointed as Chairman. The Supervisory Board external developments in the area of good corporate governance, members are appointed by the General Meeting of Shareholders such as the Dutch Corporate Governance Code, in assessing and, in accordance with the regime applicable at the time of where necessary, adapting the company’s management and appointment. Supervisory Board members are appointed for a decision-making model. By reason of its heritage, nature and term of four years. After each term, a Supervisory Board member values, which assign prime importance to continuity and the can be re-elected. parallel interests of shareholders, employees, customers, In 2015 the Supervisory Board consisted of principals (OEMs), ancillary suppliers and related parties, Pon has Mrs. F. Pon (chairman), Mr. K.J. Storm (vice-chairman), traditionally maintained a management and decision-making model Mr. G.H. Beens, Mr. J.C. ten Cate, Mr. R.F. van den Bergh and that respects the interests of all of the above stakeholders. Mr. J.F. Redmer. There are four Supervisory Board Committees: In its operations, Pon is organized by means of a ‘delegated business model’: a group of relatively decentralized, entrepreneurial Finance & Audit Committee operations with a large measure of autonomous, local decision- The F&AC is charged with the task of supervising and promoting making power, within the confines of an agreed frame of activities. the integrity of the company’s financial reporting and of the More than 80 operating companies report to nine business groups. internal control systems established by the Executive Board. The The operating companies which form those groups all have Committee also evaluates the financial audit process, compliance comparable market/product dimensions. The business groups are audit process and the functioning of external audit and risk the company’s primary strategic planning entities. management procedures. Finally, the Committee regularly reviews the company’s financing policy and financing structure. The General Meeting of Shareholders Committee has its own charter and meets with the CEO and CFO The ordinary General Meeting of Shareholders is held annually of Pon Holdings B.V. regularly. At least once a year, the meeting is within six months from the end of the financial year. Extraordinary attended by the external auditor. Members of this Committee are Meetings of Shareholders are convened by the Executive Board Mr. J.C. ten Cate (chairman), Mr. K.J. Storm and Mrs. F. Pon. and the Supervisory Board as and when required, subject to all legal and statutory requirements. Resolutions are adopted by Remuneration Committee an absolute majority of votes, unless the law or the articles of This Committee advises the Supervisory Board on the remuneration association prescribe a qualified majority. of the members of the Executive Board and Senior Management. The Committee consists of Mr. K.J. Storm (chairman), Mrs. F. Pon and Mr. G.H. Beens.
14 Pon Annual Accounts 2015 Management Development Committee Internal control systems This Committee has the task of advising the Supervisory Board The internal control systems rely primarily on the organizational in matters concerning human resources. It meets with the CEO structure of the company. This structure reflects the forementioned on a regular basis. The Committee consists of Mrs. F. Pon and ‘delegated business model’ of the Pon organization. Mr. R.F. van den Bergh. Within this structure, management is responsible for monitoring IT Committee the optimization of the drafting and operation of internal control Because of the strategic importance of IT in all transformational systems as an integral part of their corporate governance duties. aspects of our business groups, an IT Committee has been Formal delegation of authorities (Bill of Authorities) is in place. established during the year. The Committee consists of The company adheres to a system of regular budgetary cycles Mr. R.F. van den Bergh and Mr. J.F. Redmer. and related monthly internal reports, based on standard procedures and guidelines. The financial reports are evaluated according to the lines of the organizational structure. The results Executive Board are compared with formally approved budgets and the forecasts The Executive Board is entrusted with the management and for the remainder of the year are discussed within the combined representation of the company. The Board is responsible for Boards at least three times a year. Each quarter, control strategy, policies, achieving agreed targets, ensuring sufficient compliance letters are signed by all Managing Directors and financing and results progress. This includes risk management Controllers and cascaded up through the organizational structure. and the maintenance of the business operations control systems. All Executive Board members are appointed by the Supervisory Board. The Executive Board currently consists of the following External auditors members: A.B. Smalbraak (CEO), B. Sprong (CFO) and D.O. Turner. Audits within Pon are carried out by external auditors who Mr. A.B. Smalbraak is the statutory director of Pon Holdings B.V. perform ‘full scope’ audits for all business groups. The audits focus on the financial reporting. Additionally, a number of audit The Supervisory Board sets the remuneration awarded to the areas are agreed from year to year. Executive Board as recommended by the Remuneration Committee. Generally, its remuneration policy is aimed at attracting and retaining the quality of people for the professional Compliance management of a company operating in an international Pon has adopted a Code of Conduct, which stipulates behavioral environment with commercial, distribution, production, service aspects. In addition to interpersonal aspects, including behavior and rental activities, and for management to achieve optimal in the work environment, the code includes business rules on how performance under dynamic market conditions. A significant to deal with customers and suppliers and a reference to the policy portion of the total remuneration is related to the annual results. framework. The Executive Board sees to it that these rules of conduct are introduced and that employees are aware of them. The Senior Executives of the business groups and Managing Works Council Directors of the companies and business units are responsible The CEO and CFO meet with the Works Councils of the Dutch for ensuring that these rules of conduct are applied and complied operating companies once a year. During this annual meeting with. Infringements of these rules of conduct can lead to the progress of business operations in the previous year and disciplinary procedures. the current year is evaluated and discussed. The meeting also The Pon compliance organization includes a Compliance provides an opportunity to discuss corporate matters in the area Committee (which advises and supports the Executive Board and of employee participation and consultation. monitors compliance initiatives), Local Compliance Officers (that advise on, support and monitor compliance within their operating company), the Pon Ethics Helpline (a whistleblower facility), and a Compliance Audit Department (that monitors the implementation of the Pon compliance policy framework and provides an overview of the key compliance risk areas at all operating companies).
Corporate governance & Risk management 15 Findings from the compliance audits are discussed with management satisfaction is one of the main key performance indicators for the following the organizational structure. Compliance incidents can be long-term health of our business. Therefore, the strength of our reported to the Compliance organization or the Pon ethics helpline. principals, the availability of products (stock) and the level of customer satisfaction achieved are key in terms of evaluating the risks posed to our competitive position in the market. Market risks
Concentration of business Automotive tax risks Pon’s income is derived from the sale of cars, commercial vehicles, The automotive industry in the Netherlands is impacted by a high tyres, bicycles, material handling trucks, equipment and power variety of tax levies both on the purchase and the use of cars. systems and flow control products, as well as from the supply of Changes in these tax arrangements can influence the demand of parts, repair services and maintenance related to these products. cars significantly. Income from product sales activities is particularly sensitive to economic growth, whereas income from service-related activities is less susceptible, especially if carried out under long-term Operational risks contracts. In 2015, the distribution of revenue between sales Principals (new, used and lease/rental) and services (including maintenance, Working for and closely with our principals (the OEMs) is a vital parts and accessories) was roughly 70%/30%; for gross margin pillar of our corporate strategy. Our OEMs supply the products this was around 50%/50%. Income earned from services and and most of the spare parts, while Pon performs an array of maintenance is often directly related to the installed base of import, logistic, distribution and after-sales tasks. Pon is equipment in operation. A structural change in the size of this responsible for managing a network of local sales and service installed base will feed through into proceeds of such services points, whether owned or independent. Only by consistently with a time lag varying between 12 to 24 months. On the cost performing these tasks successfully, will we be able to safeguard side, the possibilities for cost reduction in the short term are our import and distribution contracts in the long-term. For our limited. Any significant structural cost reduction can only occur ability to retain our market position and achieve growth in sales as a result of reducing headcount and marketing expenditure. and profitability, we are largely dependent on the development Geographically, Pon’s sales are primarily generated in Europe, and delivery of new, innovative, technically advanced products and with around 65% in the Netherlands and 20% in the rest of models at competitive prices by our OEMs, as well as their Europe. The remaining 15% of sales is predominantly generated financial position and perceived reputation. in the US, Asia (Singapore) and also in Australia. Manufacturing Competitive position For the bicycle business Pon is involved in manufacturing, product In products and services, Pon generally occupies a market share development and assembly. Operational risks relate to innovation, of between 10 and 25 percent in the geographic and product product development in relation to market demand and quality sectors it serves. Pon aims to retain a ‘top three’ position in the assurance. Furthermore, cost-efficient assembly and the timeliness market as it has been proven that this secures a satisfying level of Pon’s supply chain are key to its ability to be competitive. of profitability. This position is mainly pursued by collaborating Falling short of these conditions may jeopardize the profitability with manufacturing principals (OEMs) who produce quality of these activities. products under top brand names. Within the bicycle group Pon carries out the OEM role itself and Pon Asia focuses primarily on services. Within this context, reliability, leading-edge technology, Financial risks productivity, durability in use, environmental friendliness and ‘total Trade financing cost of ownership’ are the most important elements. Growth is Pon strives to ensure that the trade of its equipment in the pursued both organically and by means of acquisitions and is distribution chain to customers and/or end users is financed often based on maintaining and increasing the installed product through independent financing service organizations, operating base. This position enables Pon to optimize the added value of its strictly separately and adhering to their own governance and risk after-sales, service and maintenance activities. Customer policies. Pon pursues this aim, insofar as possible, either through
16 Pon Annual Accounts 2015 strategic alliances with its principals’ financial services companies terms of the credit facilities. For this purpose, Pon uses interest (including the joint venture VWPFS) or through financial derivative instruments. The market value of these instruments institutions such as commercial banks. The ability to access moves generally on changes in the interest rates. the competence and funding capacity of a financial services organization for trade financing is essential as it enables the Currency exposure company to perform its distribution role in a profitable manner The currency exposure for transactions carried out by Pon’s and at an acceptable risk level. operations is in principle fully hedged. An exception is the bicycle group, where for hedging foreign currency purchases a definition Credit risk of economic exposure is used. The risk that another party cannot meet its contractual In relation to translation exposure, a policy is in place to minimize commitments, resulting in a situation in which Pon will have to the currency exposure on the value of our foreign investments, absorb a financial loss, is limited due to the very large number protecting its value in euro terms. of customers. Generally, no individual outstanding receivable will exceed 1% of annual revenue, although loss of business may Liquidity occur. Pon reduces its credit risk by contracting solvent Pon aims to have ample liquidity in place resulting from a counterparties, whilst agreeing on maximum exposure positions combination of a subordinated junior loan facility of EUR 120 and/or prepayments. million, a syndicated senior credit facility of EUR 800 million, automotive supply chain financing agreement provided by VWPFS Rental and lease operations (DFM), a working capital credit facility for our German activities Pon may be exposed to residual value risk, whether Pon endeavors and a number of smaller (un)committed bilateral credit facilities. to deploy long-term rental and leasing operations through strategic alliances with principals’ financial services entities and specific Covenants cooperation agreements with financial institutions or by means of As a requirement of the syndicated unsecured subordinated the company’s own funds. The management of this residual value facility of EUR 120 million and the syndicated unsecured senior risk is a key competence of the group’s operating companies. credit facility of EUR 800 million, Pon must adhere to certain Our operations generally engage or contract parties which are financial covenants. The most important elements of which are well-qualified for trading used equipment or finding short-term the leverage ratio and the interest cover ratio. The company rental solutions. maintained healthy financial covenants ratios in 2015, well within agreed thresholds. Automotive dealer network For the purpose of financing its automotive supply chain, Pon holds a strategic minority share in a joint venture, Volkswagen Almere, April 14, 2016 Pon Financial Services B.V. (VWPFS). This joint venture operates independently to offer a range of financial services (like floor plans for dealers and leasing activities) to the automotive supply chain in the Netherlands. It is in Pon’s interest that VWPFS Executive Board ensures that sufficient funds are available to finance the A.B. Smalbraak (CEO) automotive dealers in the network, including stock in the supply B. Sprong (CFO) chain. D.O. Turner
Interest rate exposure Exposure to interest rate risks is defined as the level of interest paid for by the company due to alterations in the market rate of interest and the credit profile of the company. To make future interest payments predictable, the floating interest rates are partly swapped to fix rates over a defined period, independent from the
Corporate governance & Risk management 17 18 Pon Annual Accounts 2015 Financial Statements 2015 Consolidated balance sheet (before profit appropriation) as at 31 December 2015 (x EUR 1,000) Notes 31-12-2015 31-12-2014
ASSETS
FIXED ASSETS
Intangible fixed assets 1 Software 62,888 63,910 Brands and patents 54,399 48,518 Distribution rights 4,020 4,497 Development costs 10,395 8,449 131,702 125,374
Tangible fixed assets 2 Land and buildings 244,525 238,323 Equipment and installations 101,378 90,110 Lease and rental objects 238,777 206,455 Means of transport 12,326 13,159 Assets under construction 16,279 9,843 613,285 557,890
Financial fixed assets 3 Participating interests and joint ventures 139,226 135,120 Other participations 35,518 24,946 Financing accounts receivable 5,204 6,380 Deferred tax assets 62,345 47,339 Other receivables 54,052 63,467 296,345 277,252
CURRENT ASSETS
Inventory 4 1,038,035 951,808
Work in progress 5 31,698 35,192
Receivables 6 Accounts receivable 518,842 472,147 Receivables from participating interests and joint ventures 14,183 9,586 Financing accounts receivable 3,378 3,676 Taxes and social security contributions 9,831 11,448 Other receivables and accrued income 152,897 139,333 699,131 636,190
Cash and cash equivalents 7 65,677 120,487
TOTAL 2,875,873 2,704,193
20 Pon Annual Accounts 2015 Notes 31-12-2015 31-12-2014
EQUITY AND LIABILITIES
GROUP EQUITY 8 Shareholders’ equity 833,218 833,725 Third party share 1,948 827 835,166 834,552
PROVISIONS 9 Pensions 11,906 11,019 Deferred taxes 44,021 65,044 Other 150,610 132,693 206,537 208,756
LONG TERM LIABILITIES 10 Debts to credit institutions 238,455 231,464 Subordinated debt 120,000 120,000 Debts to participating interests and joint ventures 854 2,670 Other debt 3,164 5,122 362,473 359,256
CURRENT LIABILITIES 11 Debts to credit institutions 22,552 973 Debts to participating interests and joint ventures 177,461 100,819 Trade creditors 361,547 461,137 Taxes and social security contributions 393,544 302,260 Liabilities related to pensions 2,852 3,991 Other liabilities and deferred income 513,741 432,449 1,471,697 1,301,629
TOTAL 2,875,873 2,704,193
Financial Statements 2015 21 Consolidated profit and loss account and statement of comprehensive income for 2015 (x EUR 1,000) Notes 2015 2014
Revenue 15 6,816,456 5,958,602 Third party costs 16 5,284,275 4,600,353
Net revenue (revenue less third party costs) 1,532,181 1,358,249
Other income 17 15,910 3,117
Wages and salaries 18 663,259 615,660 Social security charges 18 91,851 87,003 Pension charges 18 45,279 45,836 Depreciation, amortization and impairment 20 69,261 70,094 Other operating expenses 21 477,743 472,698
Total operating expenses 1,347,393 1,291,291
Operating result [EBIT] 200,698 70,075
Financial income and expense 22 (32,383) (28,080)
Result from ordinary activities before taxation 168,315 41,995
Tax on result from ordinary activities 23 (42,100) (5,553) Share in results of participating interests 15,142 13,995
Result from ordinary activities after taxation 141,357 50,437
Third party interests (293) (114)
NET RESULT 141,064 50,323
Exchange rate and translation differences foreign subsidiaries 119 5,335 Goodwill (119,350) (26,826)
Other comprehensive income (119,231) (21,491)
TOTAL COMPREHENSIVE INCOME 21,833 28,832
22 Pon Annual Accounts 2015 Consolidated cash flow statement (according to indirect method) for 2015 (x EUR 1,000) 2015 2014
Cash flow from operational activities Operating result [EBIT] 200,698 70,075
Adjustments for: - result sale subsidiaries 58 2,855 - amortization and impairment of intangible fixed assets 30,868 34,742 - depreciation and impairment of tangible fixed assets 89,920 92,847 - movements in inventories and work in progress (49,113) (7,967) - movements in other short term receivables (33,899) (25,632) - movements in provisions 7,928 41,541 - movements in trade creditors and other current liabilities 23,622 24,116 69,384 162,502 Cash flow from business operations 270,082 232,577
Interest paid (44,691) (33,849) Interest received 11,674 11,079 Dividends received 9,414 8,607 Income tax paid (21,603) (8,272) Cash flow from operational activities 224,876 210,142
Cash flow from investing activities Investment in (in)tangible fixed assets (198,835) (172,339) Divestment of (in)tangible fixed assets 60,652 42,685 Acquisition of subsidiaries, participating interests and othe r participations (155,857) (50,424) Disposal of subsidiaries, participating interests and other participations 3,409 14 Investments in other financial fixed assets (11,051) (16,272) Disposal of other financial fixed assets 11,510 6,700 Cash flow from investing activities (290,172) (189,636)
FREE CASH FLOW (65,296) 20,506
Cash flow from financing activities Repayments of debt (27,193) (87,208) Proceeds from borrowings 59,438 127,000 Dividend paid (22,126) (30,699)
Cash flow from financing activities 10,119 9,093
Net cash flow (55,177) 29,599
Cash and cash equivalents as at 1st January 120,487 86,073 Net cash flow (55,177) 29,599 Exchange rate differences 367 4,815 Cash and cash equivalents as at 31st December 65,677 120,487
Financial Statements 2015 23 Notes to the Consolidated Financial Statements
General Accounting principles
Principle business activities General
Pon Holdings B.V., with its statutory seat in Leusden, the Unless stated otherwise, assets and liabilities are shown at Netherlands, is a private company with limited liability under nominal value. Dutch Law. The company is an international trading, service An asset is disclosed in the balance sheet when it is probable and manufacturing company segmented in passenger cars, that the expected future economic benefits that are attributable commercial vehicles, tyres and the material handling trucks to the asset will flow to the entity and the cost of the asset can market as well as the market for power systems and construction be measured reliably. A liability is recognized in the balance sheet equipment. In addition, Pon is active in the production and selling when it is expected to result in an outflow from the entity of of bicycles and in the market of selling and servicing flow control resources embodying economic benefits and the amount of the solutions. obligation can be measured with sufficient reliability. The business activities consist of offering the assembled products, the product range of its principals and the relating Income is recognized in the profit and loss account when an rental, leasing, after sales and service through its own sales and increase in future economic potential related to an increase in an service organization or by a distribution network managed by the asset or a decrease of a liability has arisen, the size of which can company. be measured reliably. Expenses are recognized when a decrease in the economic potential related to a decrease in an asset or an increase of a liability has arisen, the size of which can be Basis of preparation measured with sufficient reliability. The financial statements have been prepared on the basis of If a transaction results in a transfer of future economic benefits going concern, in accordance with Title 9 of Book 2 of the and / or when all risks relating to assets or liabilities transfer to Netherlands Civil Code and the firm pronouncements in the a third party, the asset or liability is no longer included in the Guidelines for Annual Reporting in the Netherlands as issued by balance sheet. Assets and liabilities are not included in the the Dutch Accounting Standards Board. All amounts included in balance sheet if economic benefits are not probable and/or the financial statements are presented in Euros, unless indicated cannot be measured with sufficient reliability. otherwise. Revenue and expenses are allocated to the period to which The financial information of the company is included in the they relate. Revenues are recognized when the company has consolidated financial statements. For this reason, in accordance transferred the significant risks and rewards of ownership of the with Section 402, Book 2 of the Netherlands Civil Code, the goods to the buyer. single profit and loss account of the company exclusively states the share in the result after taxation of companies in which The financial statements are presented in Euros, the company’s participating interests are held and the general result after functional currency. All financial information in Euros has been taxation. rounded to the nearest hundred thousand.
The balance sheet is prepared before profit appropriation. Dividends payable to preference shareholders, if adequate freely Estimates distributable reserves are available, are recorded as a liability and The preparation of the financial statements requires management presented as a separate negative item within shareholders’ equity. to form opinions and to make estimates and assumptions which influence the application of principles and the reported values of assets and liabilities and of income and expenditure. The actual results may differ from these estimates. The estimates and the underlying assumptions are regularly assessed. Revisions of estimates are recognized in the period in which the estimate is revised and in future periods for which the revision has consequences.
24 Pon Annual Accounts 2015 Consolidation principles sold, the respective amount is transferred from the reserve for Financial information relating to group companies/subsidiaries is translation difference to other reserves. included in the consolidated financial statements of Pon Holdings B.V. The assets and liabilities and the results of these companies Hedging of the net investment in foreign operations are fully consolidated. Third party shares in the group equity and Exchange rate differences arising on translation of a foreign in the group result are stated separately. The financial statements currency liability accounted for as a hedge of a net investment in of subsidiaries are included in the consolidated financial a foreign activity are taken directly to shareholders’ equity, in the statements from the date that control commences until the date reserve for translation differences, insofar as the hedge is that control ceases. The consolidated financial information has effective. The non-effective part is taken to the profit and loss been prepared using uniform accounting policies for comparable account as expenditure. transactions and other events in similar circumstances. All significant intercompany transactions, balances and unrealized gains on transactions are eliminated in the consolidation. For a Financial instruments summary of the consolidated group companies, please refer to General the list ‘Primary operating companies’. Group companies exclusively Financial instruments include investments in shares and bonds, acquired and held for sale are exempted from consolidation. trade and other receivables, cash items, loans and other financing commitments, trade and other payables and derivatives. A list of subsidiaries is filed at the Chamber of Commerce. In accordance with section 379(5), in part 9, Book 2 of the Financial instruments, including derivatives separated from their Netherlands Civil Code, this list is not included in the financial host contracts, are initially recognized at fair value. If instruments statements. are not measured at fair value through profit and loss, then any directly attributable transaction costs are included in the initial measurement. Financial instruments embedded in contracts that Principles for the translation of foreign currency are not accounted for separately from the host contract are Transactions in foreign currencies recognized in accordance with the host contract. Transactions denominated in foreign currency are translated into the relevant functional currency of the group companies at the After initial recognition, financial instruments are valued in the exchange rate applying on the transaction date. Monetary assets manner described below. and liabilities denominated in foreign currency are translated at the balance sheet date into to the functional currency at the Loans granted and other receivables exchange rate applying on that date. Non-monetary assets and Loans granted and other receivables are carried at (amortized) liabilities in foreign currency that are stated at historical cost are cost, less impairment losses. translated into Euros at the applicable exchange rate applying on the transaction date. Translation gains and losses are taken to the Investments in equity instruments profit and loss account as expenditure. Investments in shares are stated after their initial recognition at the lower of cost or market value. Dividends are recorded in the Foreign operations profit and loss account at the time when they are declared. The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated Long-term and current liabilities and other financial into Euros at the applicable exchange rate applying on the commitments balance sheet date. Income and expenses of foreign operations Long-term and current liabilities and other financial commitments are translated into Euros at the exchange rate applying on the are stated after their initial recognition at amortized cost on the transaction date. basis of the effective interest rate method. Translation gains and losses are taken to a reserve for the Redemption payments regarding long-term liabilities that are due translation difference. If a foreign operation is fully or partially next year, are presented under current liabilities.
Financial Statements 2015 25 Derivatives Development costs are capitalized insofar as incurred in respect Derivatives are carried after their initial recognition at the lower of potentially profitable projects and are stated at cost. These of cost or market value, except if the cost model for hedge costs mainly comprise the cost of direct labour. Upon termination accounting is applied. Costprice hedge accounting is applied to of the development phase, the capitalized costs are written down hedge interest and currency risk. over their expected useful life, which is 3 to 5 years. Depreciation takes place on a straight-line basis. If the cost model for hedge accounting is applied, then no revaluation of the derivative instrument takes place, as long as The costs of research and other development costs are charged the derivative hedges the specific risk of a future transaction to the result in the period during which they are incurred. that is expected to take place. As soon as the expected future transaction leads to recognition in the profit and loss account, A legal reserve is formed for the capitalized development costs then the profit or loss that is associated with the derivative is that have not yet been depreciated. recognized in the profit and loss account. If the hedged position of an expected future transaction leads to the recognition in the balance sheet of a non-financial asset or a non-financial liability, Goodwill then the cost of the asset is adjusted by the hedge results that Goodwill represents the excess of the cost of the acquisition over have not yet been recognized in the profit and loss account. the company’s interest in the fair value of net assets acquired and is recognized directly in equity in accordance with BW2, titel 9. If forward exchange contracts are concluded to hedge monetary assets and liabilities in foreign currencies, costprice hedge accounting is applied. This is done to ensure that the gains or Tangible fixed assets losses arising from the translation of the monetary items recognized With the exception of the lease objects, tangible fixed assets are in the profit and loss account are offset by the changes in the valued at cost less depreciation according to the straight-line value of forward exchange contracts arising from the difference method based on estimated useful life, which is: 25 to 40 years between their forward and spot rates as at reporting date. The for buildings, 5 to 15 years for renovations, 3 to 15 years for difference between the spot rate agreed at the inception of the furniture, fixtures and equipment, and 3 to 5 years for vehicles. forward exchange contract and the forward rate is amortized via the profit and loss account over the term of the contract. Land, tangible fixed assets in production and prepayments on tangible fixed assets are not depreciated. Assets available for sale are stated at the lower of their carrying amount and net realizable value. Balance sheet
Lease objects are depreciated on a straight line basis. The Intangible fixed assets depreciation term is equal to the duration of the contract. When Software is capitalized at cost, less amortization according to the valuing the lease objects, possible risks with respect to residual straight-line method on the basis of the estimated useful life of values are taken into account. 3 to 7 years. If the book value of an asset exceeds the recoverable amount, Brands and patents acquired in a business combination and an impairment is charged to the result. recognized separately from goodwill are initially recognized at their fair value as at the acquisition date and are depreciated on a straight-line basis over their expected economic life, which Financial fixed assets is between 5 to 10 years. Group companies A group company is an entity controlled, directly or indirectly, Distribution rights which are acquired are initially recognized by Pon Holdings B.V. Group companies, generally accompanying at cost and are depreciated on a straight-line basis over their a shareholding of 50% or more of the voting rights, are fully expected economic life, which is between 5 to 10 years. consolidated.
26 Pon Annual Accounts 2015 Joint ventures amount is assessed for the cash-generating unit to which the A joint venture is a contractual agreement whereby Pon and one asset belongs. When the carrying amount of an asset or cash- or more third parties undertake an economic activity that is subject generating unit exceeds its recoverable amount, an impairment to joint control. Joint ventures are stated at net asset value. loss is recognized for the difference between the carrying amount and the recoverable amount. Participating interests A participating interest is an entity, including an unincorporated entity such as a partnership, which is neither a group company Inventory nor an interest in a joint venture and over whose commercial and Raw materials and consumables are stated at the lower of either financial policy decisions Pon Holdings B.V. has the power to historical cost or net realizable value in accordance with the first- exert significant influence. Participating interests are stated at net in, first-out (FIFO) principle. asset value. Participating interests acquired are initially measured Net realizable value is determined through the valuation of at the fair value of the identifiable assets and liabilities upon individual inventory items. acquisition. Any subsequent valuation is based on the accounting policies that apply to these financial statements, taking into Semi-finished and finished goods are stated at production cost or account the initial valuation. lower net realizable value. Production costs include direct material consumption, direct labour and machine costs, plus all other costs Other participations that can be attributed directly to production. The net realizable Other participations are other investments that have a long-term value is based on the expected selling price, less completion and nature where no significant influence is exercised on business selling expenses. and operating policy by Pon Holdings B.V. These investments are stated at the lower of (acquisition) cost or realizable value. Goods available for sale are stated at cost. Costs includes the purchase price and expenditures incurred in acquiring the Acquisitions and disposals of group companies inventories and bringing them to their existing location and Identifiable assets acquired and liabilities assumed in a business condition. combination are recognized in the consolidated financial statements as from their acquisition date. The acquisition price consists of the cash consideration, or equivalent, agreed for Work in progress acquiring the company plus any directly attributable expenses. Included in the valuation of projects in progress are the costs If the acquisition price exceeds the net amount of the fair value which directly relate to the specific project, the costs which are of the identifiable assets and liabilities, the excess is deducted attributable to contract activity in general and can be allocated from equity as goodwill. to the project, as well as other costs chargeable to the customer Retrospective changes to the fair value of the identifiable assets under the terms of the project. Revenues, costs and profit taking and liabilities are accounted for if these appear up to one in respect of the projects in progress are recognized with respect financial year after the acquisition date. to the activity performed to complete the project as at balance Entities continue to be consolidated until they are sold; they are sheet date (percentage of completion method), on the basis of deconsolidated from the date that control ceases. the project costs incurred up until the balance sheet date in proportion to the estimated total project costs. Expenses related to project costs which will lead to activities to be performed after Impairment the balance sheet date are recognized as assets if it is probable Tangible and intangible fixed assets are assessed at each that they will lead to revenue in a subsequent period. Expected reporting date whether there is any indication of an impairment. losses on projects in progress are immediately recognized as an If any such indication exists, the recoverable amount of the asset expense in the profit and loss account. is estimated. The recoverable amount is the higher of value in use and net realizable value. If it is not possible to assess the recoverable amount for an individual asset, the recoverable
Financial Statements 2015 27 Accounts receivables and, no later than on the preparation date of the financial Accounts receivables are recognized initially at the fair value of statements, a valid expectation of implementation of the plan has the receivable and subsequently measured at amortized cost. been raised for those persons that will be affected by the restructuring.
Cash and cash equivalents Deferred tax assets and liabilities, arising from temporary Cash and cash equivalents include cash in hand, bank balances differences between the nominal values of assets and liabilities and deposits held at call with maturities of less than 12 months. and the fiscal valuation of assets, liabilities as well as resulting Bank overdrafts are shown within borrowings in current liabilities from tax loss carry-forwards, are calculated using the tax rates on the balance sheet. expected to apply when they are realized or settled. Deferred tax assets are recognized if it is probable that they will be realized. Deferred tax assets and liabilities for which a legally enforceable Third party share right to offset exists and within the same consolidated tax group Third party shares in group equity are stated at the amount of are presented net in the consolidated balance sheets. the net interest in the group companies concerned.
Where the group company in question has an equity deficit, the Long term liabilities negative value and any other losses are not allocated to the Long term liabilities are accounted for at amortized cost on the minority interest, unless the minority interest holders have a basis of the effective interest rate method. constructive obligation, and are able, to clear the losses. As soon as the group company manages to post an equity surplus, profits are allocated to the minority interest. Profit and loss account
Revenue recognition
Provisions Revenues are recognized when services are rendered, goods are Provisions are recognized for legally enforceable or constructive delivered or work is completed. Revenue is measured at the fair obligations existing at the balance sheet date, the settlement of value of the consideration of received amounts or receivable which is probable to require an outflow of resources whose extent amounts. can be reliably estimated. Provisions are measured on the basis of the best estimate of the amounts required to settle the Amounts received in advance are recorded as accrued liabilities obligations at the balance sheet date. Unless indicated otherwise, until services are rendered to customers, goods are delivered or provisions are stated at the nominal value of the expenditure work is completed, using the percentage of completion method, expected to be required to settle the obligations. based on services provided.
A provision for maintenance is recognized for expected Sale of goods and Services maintenance costs of buildings and equipment based on a long- Revenues of delivered goods and services are recognized when: term maintenance program. • the company has transferred to the buyer all significant risks and rewards of ownership of the goods; The provision for warranties relates to the estimated costs of • the company retains neither continuing managerial involvement replacing delivered products. A provision for warranties is to the degree usually associated with ownership nor effective recognized when the underlying products or services are sold. control of the goods sold; The provision is based on historical warranty data and a weighing • the amounts of revenue are measured reliably; of all possible outcomes against their associated probabilities. • it is probable that the economic benefits associated with the transaction will flow to the company; and, A provision for restructuring costs is established if a detailed • the costs to be incurred in respect of the transaction can be restructuring plan has been formalised at the balance sheet date measured reliably.
28 Pon Annual Accounts 2015 Projects in progress date, a liability is recognized. If the contributions already paid As soon as the outcome of a construction contract can be exceed the payable contributions as at balance sheet date, estimated reliably, project revenue and project costs associated a receivable is recognized to account for any repayment by the with the project are recognized as revenue and expenses fund or settlement with contributions payable in future. respectively in proportion to the amount of work performed as at balance sheet date. Revenue from projects includes the In addition, a provision is included as at balance sheet date for contractually agreed upon revenue plus any revenue from existing additional commitments to the fund and the employees, variations in project work, claims and reimbursements, insofar provided that it is likely that there will be an outflow of funds for as and to the extent that it is probable that these revenues will the settlement of the commitments and it is possible to reliably be realized and can be reliably determined. estimate the amount of the commitments. The existence or non- existence of additional commitments is assessed on the basis of The extent to which work has been completed in respect of a the administration agreement concluded with the fund, the project is determined by comparing the project costs incurred pension agreement with the staff and other (explicit or implicit) until the balance sheet date to the total project costs. If the result commitments to staff. The liability is stated at the best estimate of a project cannot be reliably estimated, project revenue should of the present value of the anticipated costs of settling the only be recognized up to the amount of project costs incurred commitments as at balance sheet date. likely to be recovered. Expected losses on projects are immediately recognized in the profit and loss account. For any surplus at the pension fund as at balance sheet date, a receivable is recognized if the company has the power to withdraw this surplus, if it is likely that the surplus will flow to Revenue the company and if the receivable can be reliably determined. Revenue represents the revenues from the delivery of goods and services to third parties less discounts, credit notes and taxes Foreign pension plans levied on sales. Accumulated experience is used to estimate and Pension plans that are comparable in design and functioning to the provide for the discounts and returns. Included in revenue is Dutch pension system, having a strict segregation of the responsibilities interest income from financing activities. Registration tax on of the parties involved and risk sharing between the said parties passenger cars (BPM) is not included. (company, fund and members) are recognized and measured in accordance with Dutch pension plans (see previous section).
Third party costs For foreign pension plans that are not comparable in design and Third party costs equals production costs or the purchase price functioning to the Dutch pension system, a best estimate is made (of revenue) plus the additional costs of freight and insurance, of the commitment as at balance sheet date. This commitment less deduction for discounts and bonuses relating to these should then be stated on the basis of an actuarial valuation purchases. For services rendered and goods sold these cost principle generally accepted in the Netherlands. includes the interest expenses on the funds raised for financing activities and depreciation on leased and rental assets. Expected losses on construction contracts are recognized immediately in Interest income and expense the profit and loss account as an expense. Interest income and expense are recognized on a time- proportioned basis in the profit and loss account by applying the effective interest method. Pensions
Dutch pension plans Interest income comprises interest income on borrowing, foreign The main principle is that the pension charge to be recognized for currency gains and gains resulting from hedging activities. the reporting period should be equal to the pension contributions Interest expenses comprise interest expense on borrowings, payable to the pension fund over the period. Insofar as the foreign currency losses, impairment losses recognized on financial payable contributions have not yet been paid as at balance sheet assets and losses arising on hedging activities.
Financial Statements 2015 29 Corporate income tax
Corporate income tax expenses comprise current and deferred tax. Corporate income tax expenses are recognized in the profit and loss account except to the extent that it relates to items recognized directly in equity.
Current tax is the expected tax payable on the taxable income for the year, using tax rates (substantially) enacted, based on rules established by the tax authorities as at balance sheet date and any adjustments to the tax payable in respect of previous years.
Deferred tax is provided for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for taxation purposes and loss carry forward. Deferred tax assets are recognized to the extent that it is probable that these are recoverable. Deferred tax assets and liabilities are stated at nominal value, using tax rates (substantially) enacted.
Share in result of participating interests
Where significant influence is exercised over the business and financial policy of a company, the group’s share of the company’s results is included in the consolidated profit and loss account. Minority interest results are determined on the basis of the accounting principles applicable to Pon Holdings B.V.
If no significant influence is exercised over the business and financial policy, only dividend income is accounted for within the group’s results. Dividend income is recognized in the period in which it is declared.
Cash flow statement
The cash flow statements have been prepared using the indirect method. Cash flows in foreign currencies have been translated at average exchange rates. Exchange rate differences affecting cash items are shown separately in the cash flow statements. Receipts and payments with respect to taxation on profits are included in the cash flow from operating activities. Interest income and expenses are included in cash flows from operating activities.
30 Pon Annual Accounts 2015 Notes to the consolidated balance sheet and the consolidated profit and loss account
Balance sheet | Assets
FIXED ASSETS
1. Intangible fixed assets The movements during the year can be specified as follows:
Brands and Distribution Development x EUR 1,000 Software patents rights costs Total
Historical cost Balance as at 1 January 2015 167,755 79,983 4,776 12,294 264,808 Investments 17,082 - - 4,825 21,908 Acquisitions / Disposals 958 14,048 - 289 15,294 Divestments (1,574) - - - (1,574) Exchange rate differences 509 1,153 - - 1,662
Balance as at 31 December 2015 184,730 95,184 4,776 17,408 302,098
Accumulated amortization Balance as at 1 January 2015 103,845 31,465 279 3,845 139,434 Amortization for the year 18,583 9,133 477 2,982 31,175 Acquisitions / Disposals 584 158 - 186 928 Impairment - - - - - Divestments (1,623) - - - (1,623) Exchange rate differences 453 29 - - 482
Balance as at 31 December 2015 121,842 40,785 756 7,013 170,396
Book value Balance as at 1 January 2015 63,910 48,518 4,497 8,449 125,374
Balance as at 31 December 2015 62,888 54,399 4,020 10,395 131,702
Brands and patents relate to the acquired bicycle brands and patents. Distribution rights relates to the acquired rights of expanded mining equipment distribution and support. The capitalized development costs relates to development cost at our bicycle manufacturers.
Financial Statements 2015 31 2. Tangible fixed assets The movements during the year can be specified as follows:
Equipment Lease and Land and and rental Means of Assets under x EUR 1,000 buildings installations objects transport construction Total
Historical cost Balance as at 1 January 2015 365,907 297,803 359,616 43,734 9,843 1,076,903 Investments 26,486 27,378 100,814 3,941 17,388 176,007 Acquisitions / Disposals 2,504 7,162 (5.061) 756 - 5,361 Transfer 6,638 3,947 - - (10,585) - Divestments (24,721) (17,179) (104,902) (7,787) (542) (155,131) Exchange rate differences 2,990 4,754 31,094 3,539 175 42,552
Balance as at 31 December 2015 379,804 323,865 381,561 44,183 16,279 1,145,692
Accumulated depreciation Balance as at 1 January 2015 127,584 207,693 153,161 30,575 519,013 Depreciation for the year 12,258 27,146 43,647 5,242 88,293 Impairment - 1,610 18 - 1,628 Acquisitions / Disposals 852 (1,235) (1,532) 488 (1,427) Divestments (6,653) (16,069) (64,108) (6,929) (93,759) Exchange rate differences 1,238 3,342 11,598 2,481 18,659
Balance as at 31 December 2015 135,279 222,487 142,784 31,857 532,407
Book value Balance as at 1 January 2015 238,323 90,110 206,455 13,159 9,843 557,890
Balance as at 31 December 2015 244,525 101,378 238,777 12,326 16,279 613,285
On 4 objects, included under land and buildings, collateral up to an amount of EUR 6.2 million has been issued in the form of a mortgage (2014: EUR 4.6 million).
32 Pon Annual Accounts 2015 3. Financial fixed assets The movements during the year can be specified as follows:
Participating interests Financing and joint Other accounts Deferred Other x EUR 1,000 ventures participations receivables tax assets receivables Total
Balance as at 1 January 2015 135,120 24,946 6,380 47,339 63,467 277,252 Investments / Acquistions 5,343 5,009 - - - 10,352 Divestments / Disposals (957) (165) - - - (1,122) Results 14,599 543 - - - 15,142 Dividends (8,886) (528) - - - (9,414) Financing / Repayments - - (1,872) - (9,324) (11,196) Exchange rate differences (945) 76 696 - (91) (264) Other movements (5,048) 5,637 - 15,006 - 15,595
As at 31 December 2015 139,226 35,518 5,204 62,345 54,052 296,345
Receivables Financing accounts receivables mainly relate to financial lease receivables. Other receivables mainly relate to issued vendor loans with fixed interest rates. Of the other receivables, EUR 20.0 million is expected to be repaid in the next year.
Deferred tax assets The deferred tax assets relate to the recognized unused tax loss carry-forwards of EUR 18.4 million and deductible temporary differences of EUR 43.9 million. It is expected that the majority of the deferred tax assets will be offset after one year. The balance of unrecognised deductible tax losses and deductible temporary differences amounts to EUR 13.1 million.
Other participations Other participations mainly relate to some investments in entities for strategic reasons and a 12% interest in Reesink N.V.
The recognized and non-recognized financial instruments are disclosed in note 12.
4. Inventory Inventory can be specified as follows:
x EUR 1,000 31-12-2015 31-12-2014
Finished products and goods for resale 979,533 914,657 Raw materials 105,779 75,596 Prepayments 3,133 8,430 1,088,445 998,683 Provision for obsolete inventories (50,410) (46,875)
1,038,035 951,808
Financial Statements 2015 33 5. Work in progress Work in progress can be specified as follows:
x EUR 1,000 31-12-2015 31-12-2014
Work in progress 95,129 80,952 Advanced payments (63,431) (45,760)
31,698 35,192
6. Receivables Other receivables and accrued income Other receivables mainly consist of EUR 53.8 million (2014: EUR 47.1 million) to be charged to our manufacturers (OEMs), EUR 58.0 million (2014: EUR 56.6 million) advance payments and EUR 7.6 million (2014: EUR 7.3 million) turnover to be invoiced. Receivables are expected to be settled within one year.
Taxes and social security contributions The current income tax receivable amounts to EUR 1.1 million (2014: EUR 0.4 million).
7. Cash and cash equivalents This concerns (petty) cash and bank balances, as well as deposits. Cash at banks are freely available.
x EUR 1,000 31-12-2015 31-12-2014
Cash at banks 65,632 116,628 Deposits 1,085 368 Cash in transit (1,040) 3,491
65,677 120,487
34 Pon Annual Accounts 2015 Balance sheet | Equity and liabilities
8. Group equity For a breakdown of group equity, reference is made to the notes on the company financial statements on page 50.
9. Provisions The movements during the year can be specified as follows:
Deferred x EUR 1,000 Pensions taxes Other Total
Balance as at 1 January 2015 11,019 65,044 132,693 208,756 Additions 640 6,080 77,973 84,693 Deductions - (26,772) (60,507) (87,279) Exchange rate differences 247 (331) 451 367
Balance as at 31 December 2015 11,906 44,021 150,610 206,537
Of the total amount of the provisions, approximately EUR 59.1 million qualifies as short term (2014: EUR 58.2 million).
Pensions The pension plan in Sweden is not comparable to the Dutch pension system. In accordance with RJ 271 a best estimate is made of the commitment based on an actuarial valuation principle generally accepted in the Netherlands as at balance sheet date.
The main actuarial assumptions used are: - Discount rate: 3.7% (2014: 5.8%) - Life expectancy according to local country specific circumstances.
Deferred taxes The provision for deferred taxes of EUR 44 million (2014: EUR 65 million) mainly relates to temporary differences between financial accounting and valuation for tax reporting and has primarily a long-term nature. Main differences are in the carrying amount of real estate and lease & rental assets, and as a consequence of accelerated depreciation facilities.
Financial Statements 2015 35 Other provisions The other provisions can be specified as follows:
Product x EUR 1,000 warranties Maintenance Restructuring Other Total
Balance as at 1 January 2015 53,238 16,035 16,740 46,680 132,693 Additions 26,819 4,143 5,403 41,608 77,973 Deductions (25,575) (2,119) (12,403) (20,410) (60,507) Exchange rate differences (653) - 20 1,084 451
Balance as at 31 December 2015 53,829 18,059 9,760 68,962 150,610
The provision for warranties relates to liabilities that arise as a result of some sold products not complying with contract quality conditions. The provision is based on estimates made on historical warranty data associated with similar products and services. The provision for maintenance expenses is recognized for major maintenance on our premises and is of a long-term nature. The provision for restructuring pertains to some restructuring plans that were formalised in 2015. The provision covers the estimated costs for outplacement and redundancy. Other provisions include provisions for purchase commitments, earn outs, legal cases and other.
10. Long term liabilities Debts to credit institutions Pon has extended its unsecured committed Syndicated Senior Credit Facility amounting to EUR 800 million plus an accordion feature of EUR 200 million with one year now maturing October 2020. The Syndicated Facility is divided in a EUR 200 million term loan and a EUR 600 million revolving credit facility (RCF of which EUR 25 million is replaced in multi-currency ancilliaries). Interest payable is based on a floating rate (LIBOR/EURIBOR) plus a predefined margin. At year-end EUR 230 million of debt (2014: EUR 230 million) and EUR 12 million of guarantees (2014: EUR 7 million) are drawn under the facility. The financial covenants of the Syndicated Facility includes a Net Debt to EBITDA-ratio and an Interest Coverage-ratio.
Additional bilateral financing exists through a separate working capital credit facility of total EUR 50 million with Commerzbank and NordLB of which EUR nil million (2014: EUR nil million) is used at year-end. The interest payable of this facility is floating based on Eonia plus a margin. Besides both bilaterals, Pon has an uncommitted cashpool facility of EUR 50 million.
In addition to the above, several (un)committed credit lines with various banks exist for a total of EUR 44 million (2014: EUR 21 million), all related to (Inter)national Cash-Pool activities. Pon also uses a multi-currency notional Cash-Pool in which various balances in foreign currencies exist without any credit facility. Interest payable is a floating rate plus a margin.
Subordinated debt Since 2014, Pon also has a syndicated, unsecured subordinated bullet loan of EUR 120 million with an accordion of EUR 80 million. The loan has a maturity of eight and a half years and has a fixed interest rate. As financial covenant related to this Syndicated Junior Facility a Net Debt to EBITDA-ratio is defined, which is equal to that of the Syndicated Senior Credit Facility.
Debts to participating interests and joint ventures Debts to participating interests and joint ventures mainly represent the funding of car floor plans and car dealers, which are routinely financed by Dealer Financierings Maatschappij N.V. (DFM), a wholly owned subsidiary of Volkswagen Pon Financial Services B.V., which is a joint venture between Pon Holdings B.V. (40%) and Volkswagen Financial Services AG (60%). The related inventories and receivables of the dealer operations are pledged as security. The interest rates of the floor plan and dealer financing are based on Euribor/IRS plus a margin.
36 Pon Annual Accounts 2015 11. Current liabilities Other liabilities and deferred income mainly consist of invoices to be received EUR 76.1 million (2014: EUR 57.1 million), turnover invoiced in advance EUR 48.9 million (2014: EUR 55.6 million), premiums and discounts payable EUR 123.5 million (2014: EUR 84.8 million) and holiday accruals EUR 33.9 million (2014: EUR 35.2 million). The current income tax payable amounts EUR 30.2 million (2014: EUR 9.1 million).
12. Financial Instruments During the normal course of business, the company uses various financial instruments that expose the company to market and/or credit risks. These relate to financial instruments that are included on the balance sheet and derivative financial instruments. Derivative financial instruments are merely used for hedging related transaction and translation risks. All derivatives are unsecured and free of any margin call obligations.
Interest rate risk The interest rate risk is the risk of fluctuations in short and long term interest rates in the market rate of interest. The policy is focused on minimizing this interest rate risk to which activities are exposed by fluctuations in the rate of interest. The company uses interest rate swaps to reduce this interest rate risk and has a policy to hedge its floating risk between 0% and 75% of its interest payable on the average debt. To make future interest payments predictable, the floating interest rates are partly swapped to fix rates over a defined period, independent from the terms of the credit facilities. Foreign exchange swaps are used for interest and liquidity optimization.
Currency risk The currency risk for Pon largely concerns positions in US Dollars, Norwegian Kroner, Swedish Kroner, Danish Kroner, Canadian Dollars, Singapore Dollars and Australian Dollars. These positions are largely hedged, based on the company’s translation risk hedging policy.
Also the company is exposed to currency risks related to future transactions, mainly in US Dollars and Japanese Yen at our Bicycle group. The company hedges its main fx transaction risks based on an internal policy and accordingly enters into forward currency contracts.
Credit risk The credit risk is the risk that another party cannot meet its contractual commitments, as a result of which the company will have to absorb a financial loss. The company reduces the credit risk by debtor insurance programs and by contracting solvent counterparties with individually determined credit limits. The maximum credit risk related to all receivables is equal to their carrying value as stated in the balance sheet. There is no specific concentration of credit risk. The credit risk that the company runs using financial instruments amounts at most to the market value of the contract.
Hedging In line with the hedging policy with regard to the floating interest rate risk, the company has entered into interest rate swap agreements with maximum maturity of five years to hedge and at notional amounts of USD 200 million (2014: USD 252 million), SEK 500 million (2014: SEK 500 million) and NOK 330 million (2014: NOK 330 million). These contracts adjust the floating rate nature of the underlying financing agreements and financial positions into fixed rates. Fixed interest rates payable vary from 0.4% to 2.8%. The estimated fair value of the interest rate swaps amounts to EUR 8.1 million negative (2014: EUR 8.3 million negative).
To hedge its net investments in foreign currencies the company has entered into currency swap agreements to sell USD 380 million (2014: USD 422 million), SEK 480 million (2014: SEK 560 million), NOK 350 million (2014: NOK 432 million), DKK 210 million (2014: DKK 285 million), SGD 0 million (2014: SGD 11 million) and AUD 25 million (2014: AUD 25 million). The estimated fair value of these instruments amounts to EUR 5.7 million negative. All of the currency swap agreements mature within one year after balance sheet date.
Financial Statements 2015 37 Furthermore, the company entered into currency forward agreements to buy USD 129 million (2014: USD 66.2 million), JPY 3,477 million (2014: 1,608 million) and EUR 30 million for NOK, SEK, GBP and other currencies (2014: EUR 33 million) to hedge future transactions in these currencies. The related fair value of these forward contracts amounts to approximately EUR 1.6 million positive (2014: EUR 2.0 million positive). All of the currency forward agreements mature within 18 months after balance sheet date.
Fair value The fair value of the company’s derivative financial instruments is stated above. The fair value of most of the other financial instruments stated on the balance sheet, including receivables, cash and cash equivalents and current liabilities, is approximately equal to their carrying amount.
13. Off balance sheet commitments The company leases land & buildings, means of transportation and office equipment in the ordinary course of its business. Total lease and rental commitments amount to EUR 435.2 million (2014: EUR 444.9 million) of which EUR 71.5 million (2014: EUR 70.6 million) is due within one year, while EUR 183.0 million (2014: EUR 192.6 million) is due after more than five years. Other off balance sheet commitments and guarantees issued by the company amount to EUR 33.1 million (2014: EUR 26.2 million).
In the ordinary course of our automotive business, the company has issued guarantees to its joint venture VWPFS. The company entered into a guarantee agreement in relation to the revolving facility (EUR 35 million) and guarantee agreement (EUR 54 million) of RH Marine Group BV, both maturing June 30, 2016. Furthermore, the company has issued some regular guarantees and indemnities related to its recent disposals.
The company is involved in a limited number of legal procedures. Management is of the opinion that the outcome of these procedures will have no material impact on the company’s financial position and result. Volkswagen AG has announced a recall for all cars affected by the diesel emission issue in Europe at the expense of Volkswagen AG. Therefore the impact on the financial position and result of the company will be limited.
14. Acquisitions and Disposals During the year the company has acquired several entities for a total consideration of EUR 177 million (including earn-out). The company sold several entities for a total consideration of EUR 4 million.
The following (group) companies have been acquired in this financial year: • 100% of Augusta Benelux B.V., The Netherlands as per 6th of March 2015. The company, operating under the brand name BBB Cycling, is active in the development and sale of bike parts, accessories and clothing for sports cyclists. • 100% of Prochem Group Holdings Pty Ltd, Australia as per 1st of July 2015. The company is operating as stockist and supplier of stainless steel and alloy piping products, mechanical instrumentation products and valves to the Australian and Asian market. • 100% of Santa Cruz Bicycles LLC, USA as per 2nd of July 2015. The company is active in design and sales of premium mountain bikes for both men and women. • Together with our partner Parcom Capital, we acquired RH Marine Group B.V. as per 21st of October 2015 (formerly known as Imtech Marine Group B.V.). We are holding a 49% share. RH Marine Group B.V. is active in the global maritime market, operating as a full-service provider and system integrator of tailor-made innovative and sustainable technology solutions. • 100% of Aluca GmbH, Germany as per 12th of November 2015. The company produces in-vehicle racking systems out of aluminium. • 100% of Engine Monitor Inc, USA as per 31st of December 2015. The company is specialized in engineering and manufacturing of critical vessel monitoring and control systems.
The following disposals were realized in 2015: • 60% of Porsche Centrum Amsterdam B.V. was sold on 18th of February 2015. • 100% of Kamsteeg Autogroep B.V. was sold on 10th of July 2015.
38 Pon Annual Accounts 2015 Consolidated profit and loss account
15. Revenue Revenue can be segmented as follows:
x EUR 1,000 2015 2014
Passenger Cars 2,470,224 1,986,080 Commercial Vehicles / Retail 1,184,215 1,109,547 Tyres 599,142 560,261 Equipment 694,977 644,305 Power 633,643 645,112 Valves 455,451 368,791 Material Handling 376,127 318,424 Bicycle 547,086 450,790 Pon Asia 188,206 157,125 Eliminations & other (332,615) (281,833)
6,816,456 5,958,602 The breakdown of revenue by geographical region is as follows: Benelux 4,462,150 3,910,460 United States of America 852,863 681,647 Nordic countries 756,754 729,242 Other Europe 574,550 502,828 Asia & Australia 188,011 153,844 Africa 11,223 15,947 Eliminations & other (29,095) (35,366)
6,816,456 5,958,602
Revenue does not include purchase tax on passenger cars (BPM) sold in the Netherlands. This purchase tax on the relevant revenue amounts to EUR 342 million (2014: EUR 274 million). Eliminations & other relates to Intragroup sales and revenues accounted for in entities not included in any group.
Financial Statements 2015 39 16. Third party costs Third party costs can be specified as follows:
x EUR 1,000 2015 2014
Goods and services 5,231,013 4,539,618 Depreciation related to lease and rental objects 50,103 57,011 Interest on financing activities related to lease and rental objects 3,159 3,724
5,284,275 4,600,353
17. Other income Other income can be specified as follows:
x EUR 1,000 2015 2014
Result sale subsidiaries (58) (2,855) Other operating income 15,968 5,972
15,910 3,117
Result sale subsidiaries includes the results from divestments structured in the form of asset deals. Other operating income consists mainly of commission income and result from sale of real estate.
18. Employee benefits Can be specified as follows:
Direct Indirect 2015 2014 x EUR 1,000 personnel costs personnel costs Total Total
Wages and salaries 253,616 409,643 663,259 615,660 Social security charges 35,122 56,729 91,851 87,003 Pension charges 17,314 27,965 45,279 45,836 Other employee benefits 18,631 30,092 48,723 49,944
324,683 524,429 849,112 798,443
40 Pon Annual Accounts 2015 Pension charges Most of the employees of Pon in the Netherlands have a pension scheme which is administered by Stichting Pensioenfonds Pon. During 2015, a new pension scheme came into effect. The scheme is a Collective Defined Contribution scheme (CDC), a conditionally (indexed) average-salary scheme.
For active members, deferred members and pensioners, entitlements and rights that have been granted are only indexed (adjusted in line with inflation) if and to the extent that the pension fund has sufficient resources and has decided accordingly. Stichting Pensioenfonds Pon has a positive coverage ratio (dekkingsgraad).
Additionally, some employees in the Netherlands are part of an industry pension fund. Employees in other countries have pension schemes which in most cases are Defined Contribution schemes. These foreign schemes are structured and operate comparable to the Dutch pension system, except for one scheme in Sweden. This Swedish scheme is therefore accounted based on actuarial valuation principles (refer also to note 9, Pension provisions).
Pension charges in the Profit and loss account included regular contributions of EUR 20.7 million (2014: EUR 21.9 million) payable to the Pon pension fund for 2015.
19. Number of employees The number of employees, expressed in full time equivalents (FTEs), can be specified as follows:
2015 2014
Passenger Cars 533 603 Commercial Vehicles / Retail 1,743 1,746 Tyres 738 684 Equipment 1,268 1,346 Power 1,601 1,787 Valves 1,429 1,480 Material Handling 1,475 1,465 Bicycle 1,405 1,205 Pon Asia 1,093 1,022 Other 767 790
12,052 12,128
Of the total number of employees 7,006 are employed outside the Netherlands (2014: 6,796).
Financial Statements 2015 41 20. Depreciation, amortization and impairment Can be specified as follows:
x EUR 1,000 2015 2014
Depreciation, amortization and impairment of intangible fixed assets 30,861 34,742 Depreciation and impairment of tangible fixed assets 89,927 92,847 Book losses and (gains) on disposals (excluding land and buildings) (1,424) (484) 119,364 127,105 Less: allocated to cost of sales (50,103) (57,011)
69,261 70,094
21. Other operating expenses
x EUR 1,000 2015 2014
Marketing and sales promotion 88,867 81,905 Premises 83,386 77,049 Logistic costs 39,984 47,734 Travel costs 50,688 50,597 Guarantee/coulance 12,056 16,580 Other 202,762 198,833
477,743 472,698
Other expenses consist mainly of supplies EUR 23.4 million (2014: EUR 24.4 million), lease costs EUR 11.6 million (2014: EUR 10.6 million), ICT EUR 46.2 million (2014: EUR 37.4 million), consultants EUR 22.6 million (2014: EUR 19.6 million), other personnel costs EUR 30.1 million (2014: EUR 49.9 million), restructuring costs EUR 11.3 million (2014: EUR 27.2 million) and insurance costs EUR 12.7 million (2014: EUR 15.9 million).
22. Financial income and expense
x EUR 1,000 2015 2014
Interest income 12,280 8,670 Interest expense (33,499) (28,911) Financing cost (5,949) (6,343) Currency exchange results (5,215) (1,496)
(32,383) (28,080)
42 Pon Annual Accounts 2015 23. Taxes The effective tax rate of 25.0% (2014: 13.2%) is lower than the tax rate of 25.6% (2014: 26.1%) based on the average nominal tax rates in the different countries the group operates in. This is mainly due to existing tax facilities for intra group financing reduced by the effect of non-deductible costs and losses carried forward, which are unlikely to be realized, and local taxes (US). The income tax charge consists of EUR 39.9 million (2014: 19.9 million) current tax and EUR 2.2 million (2014: 14.3 million negative) deferred tax.
24. Related party transactions Transactions with related parties occur when a relationship exists between the company, its participating interest and their directors and key management personnel. There were no transactions with related parties that were not entered into on a commercial basis. In its normal course of business, the company buys and sells goods and services from and to various related parties in which the company has an interest of 50% or less. Generally, these transactions are conducted on a commercial basis under comparable conditions that apply to transactions with third parties.
Financial Statements 2015 43 Company balance sheet (before profit appropriation) as at 31 December 2015 (x EUR 1,000) Notes 31-12-2015 31-12-2014
ASSETS
FIXED ASSETS
Intangible fixed assets 25 Software 131 53 131 53
Tangible fixed assets 26 Land and buildings 827 1,092 Fixtures and equipment 1,767 1,727 2,594 2,819
Financial fixed assets 27 Investments in group companies 956,768 1,098,367 Receivables from group companies 12,789 6,133 Participating interests and joint ventures 100,602 104,022 Other participations 20,654 10,654 1,090,813 1,219,176
CURRENT ASSETS
Receivables from group companies 44,968 26,188 Other receivables and accrued income 14,271 14,379 59,239 40,567
Cash and cash equivalents 182,083 209,487
TOTAL 1,334,860 1,472,102
44 Pon Annual Accounts 2015 Notes 31-12-2015 31-12-2014
EQUITY AND LIABILITIES
SHAREHOLDERS’ EQUITY 28 Share capital 200 200 Share premium 152,892 152,892 Legal reserve 70,790 65,539 Translation reserve (15,057) (15,177) Other reserve 487,607 592,010 Unappropriated result 136,786 38,261 833,218 833,725
PROVISIONS 29 Deferred taxes 16,571 20,783 Other 12,301 10,261 28,872 31,044
LONG TERM DEBT Subordinated debt 30 120,000 120,000 Debt to group companies 194,088 194,088 Debts to credit institutions 30 - - 314,088 314,088
CURRENT LIABILITIES Debts to participating interests 30 - - Trade creditors 3,273 2,747 Debts to group companies 109.095 256,778 Taxes and social security contributions 22,308 13,327 Liabilities related to pensions 697 982 Other liabilities and deferred income 23,309 19,411 158.682 293,245
TOTAL 1,334,860 1,472,102
Financial Statements 2015 45 Company profit and loss account for 2015 (x EUR 1,000) Notes 2015 2014
Share of results from participating interests 171,991 90,296 Other results (30,927) (39,973)
NET RESULT 141,064 50,323
46 Pon Annual Accounts 2015 Notes to the Company Financial Statements
General
The Company financial statements are part of the financial statements of the group. For the company profit and loss account the exemption pursuant to Section 2:402 of the Netherlands Civil Code has been used. Insofar as no further explanation is provided of items in the company balance sheet and the company profit and loss account, please refer to the notes to the consolidated balance sheet and profit and loss account. Where necessary, the comparable figures have been reclassified in order to enable comparability.
Accounting policies
The principles for the valuation of assets and liabilities and the determination of the result are the same as those applied to the consolidated profit and loss account, with the exception of the accounting for the share of results from participating interests.
Share of results from participating interests
This item concerns the company’s share of the profit or loss of these participating interests. Insofar as gains or losses on transactions involving the transfer of assets and liabilities between the company and its participating interests or between participating interests themselves can be considered unrealized, they have not been recognized.
Financial Statements 2015 47 Notes to the company balance sheet and the company profit and loss account
Balance sheet | Assets
FIXED ASSETS
25. Intangible fixed assets The movement during the year can be specified as follows:
x EUR 1,000 Software Total
Historical cost Balance as at 1 January 2015 1,806 1,806 Investments 128 128 Disposals - - Balance as at 31 December 2015 1,934 1,934
Accumulated depreciation Balance as at 1 January 2015 1,753 1,753 Depreciation for the year 50 50 Disposals - - Balance as at 31 December 2015 1,803 1,803
Book value Balance as at 1 January 2015 53 53
Balance as at 31 December 2015 131 131
48 Pon Annual Accounts 2015 26. Tangible fixed assets The movement during the year can be specified as follows:
Land and Fixtures and x EUR 1,000 buildings equipment Total
Historical cost Balance as at 1 January 2015 2,333 4,510 6,843 Investments - 179 179 Disposals - - - Balance as at 31 December 2015 2,333 4,689 7,022
Accumulated depreciation Balance as at 1 January 2015 1,241 2,783 4,024 Depreciation 265 139 404 Disposals - - - Balance as at 31 December 2015 1,506 2,922 4,428
Book value Balance as at 1 January 2015 1,092 1,727 2,819
Balance as at 31 December 2015 827 1,767 2,594
27. Financial fixed assets The movement during the year can be specified as follows:
Participating Investments Receivables interests in group from group and joint Other x EUR 1,000 companies companies ventures participations Total
Balance as at 1 January 2015 1,098,367 6,133 104,022 10,654 1,219,176 Results 161,067 - 10,924 - 171,991 Dividends (183,098) - (8,406) - (191,504) Financing - 7,018 - - 7,018 Investments 414 - - 5,000 5,414 Exchange rate differences (1,468) (362) 19 - (1,811) Other movements (118,514) - (5,957) 5,000 (119,471)
Balance as at 31 December 2015 956,768 12,789 100,602 20,654 1,090,813
As at the balance sheet date, the investments in group companies includes a provision for investments with a negative net asset value up to an amount of EUR 5.7 million (2014: EUR 4.8 million). Other movements mainly relate to accounting for goodwill.
Financial Statements 2015 49 Balance sheet | Equity and liabilities
28. Shareholders’ equity
Share Share Legal Translation Other Unappropriated x EUR 1,000 Capital premium reserve reserve reserve result Total
Balance as at 1 January 2015 200 152,892 65,539 (15,177) 592,010 38,261 833,725 Result for the year - - - - - 141,064 141,064 Appropriation to reserves - - - - 38,261 (38,261) - Dividend - - - - (18,063) (4,278) (22,341) Other movements - - 5,251 - (5,251) - - Translation differences - - - 120 - - 120 Goodwill acquisitions - - - - (119,350) - (119,350)
Balance as at 31 December 2015 200 152,892 70,790 (15,057) 487,607 136,786 833,218
Share capital The total issued share capital amounts to EUR 199,663.20 spread over 836 ordinary shares B, 20 D series cumulative preference shares without voting rights and 24 E series cumulative preference shares without voting rights, each share having a nominal value of EUR 226.89. The cumulative preference shares were, upon first issuance, initially recognized as shareholders’ equity. In accordance with RJ 290 (Financial instruments), the company applies the exemption guidance to maintain the initial valuation and recognition of the cumulative preference shares as shareholders’ equity. The cumulative preferent shareholders are entitled to a fixed dividend percentage.
Share premium The share premium relates to the cumulative preference shares issued in 2003 and 2006 less cost relating to the issuance of the shares and in 2013 the B series shareholder has paid a share premium of EUR 100 million. The share premium reserve is freely distributable.
Legal reserve The legally required reserve concerns the results of the group companies and other participating interests, insofar as the payment of these could not be achieved without any restrictions. Also in accordance with applicable legal provisions, a legal reserve of EUR 10 million (2014: EUR 8 million) is formed for capitalized development costs.
29. Provisions The provision for deferred taxes mainly relates to temporary differences within the fiscal unity of Pon Holdings B.V. and primarily has a long-term nature.
30. Debts Debts to credit institutions Pon has extended its unsecured committed Syndicated Senior Credit Facility amounting to EUR 800 million plus an accordion feature of EUR 200 million with one year now maturing October 2020. The Syndicated Facility is divided in a EUR 200 million term loan and a EUR 600 million revolving credit facility (RCF) of which EUR 15 million is replaced in multi-currency ancilliaries. Interest payable is based on a floating rate (LIBOR/EURIBOR) plus a predefined margin. The financial covenants of the Syndicated Facility includes a Net Debt to EBITDA-ratio and an Interest Coverage-ratio.
50 Pon Annual Accounts 2015 Additional bilateral financing exists through a separate working capital credit facility of total EUR 50 million with Commerzbank and NordLB of which EUR nil million (2014: EUR nil million) is used at year-end. The interest payable of this facility is floating based on Eonia plus a margin. Besides both bilaterals, Pon has an uncommitted cashpool facility of EUR 50 million.
Subordinated debt Since 2014, Pon also has a syndicated, unsecured subordinated bullet loan of EUR 120 million with an accordion of EUR 80 million. The loan has a maturity of eight and a half years and has a fixed interest rate. As financial covenant related to this Syndicated Junior Facility a Net Debt to EBITDA-ratio is defined, which is equal to that of the Syndicated Senior Credit Facility.
Debt to group companies Debt to group companies consists of a loan from Geveke NV amounting to EUR 36.7 million and a loan from Pon Finance International AG amounting to EUR 157.4 million. The latter being an allocation of the Syndicated Facility. The term of this loan is equal to the Syndicated Facility, the interest payable is equal to the Syndicated Facility plus a predefined margin.
31. Audit fees With reference to Section 2:382a(1) and (2) of the Netherlands Civil Code, a fee of EUR 1.6 million (2014: EUR 1.5 million) for the financial year audit has been charged by KPMG Accountants N.V. to the company and its subsidiaries.
32. Off balance sheet assets and liabilities The company has issued advance payment and performance guarantees for operations of group companies, amounting to EUR 15.0 million.
The company has stated its liability for the majority of the domestic group companies in accordance with section 403(1F), in Part 9, Book 2 of the Netherlands Civil Code. The company is also fully liable for all local balances in the group’s Cash pool.
Together with nearly all of its Dutch subsidiaries, the company forms a tax entity for corporate income tax and value-added tax. The standard conditions stipulate that each of the companies is liable for the tax payable by all companies belonging to the tax group. Each of the companies recognizes the portion of corporate income tax that the relevant company would owe as an independent tax payer, taking into account the tax facilities applicable to the company.
The company entered into a guarantee agreement in relation to the revolving facility (EUR 35 million) and guarantee agreement (EUR 54 million) of RH Marine Group BV, both maturing June 30, 2016.
33. Remuneration of the Boards As the company has only one statutory director, persuant to article 2:383 of the Netherlands Civil Code, the company is not obliged to state the remuneration of this director. The remuneration of the Supervisory Board members, which was charged in the financial year to the company amounted to EUR 351,333 (2014: EUR 310,000). No loans, prepayments and guarantees have been granted to the company’s Supervisory Board members.
Almere, April 14, 2016
The Executive Board The Supervisory Board A.B. Smalbraak (CEO), sole Statutory Director F. Pon, chairman B. Sprong (CFO) K.J. Storm, vice chairman D.O. Turner G.H. Beens J.C. ten Cate R.F. van den Bergh J.F. Redmer
Financial Statements 2015 51 Other information
Auditor’s report
The auditor’s report is set forth on the following page.
Proposed distribution to the shareholders
Pursuant to article 30.9 of the articles of association of Pon Holdings B.V., dividend shall first be declared on the cumulative preference shares (series D and E). The remainder of the profit shall be available for distribution to the Reserve Account B, which account exclusively benefits the holder of series B (ordinary) shares.
In compliance with the articles 30.9 to 30.13 inclusive of the articles of association of Pon Holdings B.V. the management board of Pon Holdings B.V. will submit a proposal to the 2015 annual general meeting of shareholders to declare a distribution in cash of EUR 28.2 million (2014: EUR 10.1 million) to the holders of ordinary shares B. Next to this, dividend for an amount of EUR 4.3 million will be paid to the holders of the cumulative preference shares D and E. It is proposed to add the remaining balance of the profit to the ‘other reserves’.
Subsequent events
On February 8 2016, Royal Reesink N.V. and River Acquisition B.V. announced conditional agreement on an intended recommended full cash public offer on the shares of Royal Reesink, in which Pon Holdings has a major share. Pon Holdings will vote in favour of shareholder resolutions relating to the offer.
52 Pon Annual Accounts 2015 Independent auditor’s report
To: the General Meeting of Shareholders of Pon Holdings B.V. presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness Report on the financial statements of the Company’s internal control. An audit also includes We have audited the accompanying financial statements 2015 of evaluating the appropriateness of accounting policies used Pon Holdings B.V., Leusden, as set out on pages 20 to 51, which and the reasonableness of accounting estimates made by the comprise the consolidated and company balance sheet as at Executive Board, as well as evaluating the overall presentation 31 December 2015, the consolidated profit and loss account and of the financial statements. statement of comprehensive income and the company profit and loss account for the year then ended and the notes, comprising We believe that the audit evidence we have obtained is sufficient a summary of the accounting policies and other explanatory and appropriate to provide a basis for our audit opinion. information.
Executive Board’s responsibility Opinion
The Executive Board is responsible for the preparation and fair In our opinion, the financial statements give a true and fair view presentation of these financial statements and for the preparation of the financial position of Pon Holdings B.V. as at 31 December of the Report of the Executive Board, both in accordance with 2015 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, Part 9 of Book 2 of the Netherlands Civil Code. the Executive Board is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due Report on other legal and regulatory requirements to fraud or error. Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil Code, we have no deficiencies to report as a result of our examination whether the Report of the Auditor’s responsibility Executive Board, to the extent we can assess, has been prepared Our responsibility is to express an opinion on these financial in accordance with Part 9 of Book 2 of this Code, and whether statements based on our audit. We conducted our audit in the information as required under Section 2:392 sub 1 at b – h accordance with Dutch law, including the Dutch Standards on has been annexed. Further, we report that the Report of the Auditing. This requires that we comply with ethical requirements Executive Board, to the extent we can assess, is consistent with and plan and perform the audit to obtain reasonable assurance the financial statements as required by Section 2:391 sub 4 of about whether the financial statements are free from material the Netherlands Civil Code. misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, Amstelveen, 14 April 2016 including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. KPMG Accountants N.V. In making those risk assessments, the auditor considers internal J. van Delden RA control relevant to the Company’s preparation and fair
Financial Statements 2015 53 Organization
Supervisory Board Executive Board
F. Pon, chairman [1970] A.B. Smalbraak [1967] Nationality : Dutch Position : Chief Executive Officer and sole Statutory Appointed in : 2006 Director Current term : until December 2018 Nationality : Dutch Appointed in : 2010 K.J. Storm, vice-chairman [1942] Responsible for : Strategy and M&A leadership, Nationality : Dutch Shareholder relations, Corporate Services, Appointed in : 2002 Human Resources Current term : until February 2018 B. Sprong [1966] G.H. Beens [1959] Position : Chief Financial Officer Nationality : Dutch Nationality : Dutch Appointed in : 2009 Appointed in : 2013 Current term : until June 2017 Responsible for : Control & Reporting, Corporate Finance, Bank Relations, Audit, Legal, Real Estate, J.C. ten Cate [1946] M&A, ICT, Tax, Risk & Insurance Nationality : Dutch Appointed in : 2009 D.O. Turner [1964] Current term : until December 2017 Position : Member of Executive Board Nationality : U.S. R.F. van den Bergh [1950] Appointed in : 2010 Nationality : Dutch Board responsibility Appointed in : 2015 for Business Groups : PVI, Pon Material Handling Current term : until May 2019
J.F. Redmer [1967] Nationality : German Appointed in : 2015 Current term : until May 2019
54 Pon Annual Accounts 2015 Senior Vice Presidents
W.F.O. Trip : Pon Passenger Cars E.J. van Eijkelenburg : Pon Commercial Vehicles and Pon Automotive Retail J.F. Bouman : Pon Tyre Group H.M. Mets : Pon Equipment P.P.J.D. van Alem : Pon Power J. Guidry : PVI A.S. Landgraf : Pon Bicycle B.L. Sim : Pon Asia M.B.M. de Groen : Finance Automotive H.H.M. Bakker : Strategy and Business Development T.D. van Dijk : CIO M. Traupe : Mergers and Acquisitions
With the position of Senior Vice President of Pon Material Handling being vacant, the responsible board member D.O. Turner is temporarily also acting in the capacity as Senior Vice President.
Organization 55 Primary operating companies
Pon Passenger Cars / Pon Commercial Vehicles Pon Equipment
Netherlands Netherlands ⠛ Pon’s Automobielhandel B.V., Leusden ⠛ Pon Equipment B.V., Amsterdam ⠛ Pon Luxury Cars B.V., Leusden ⠛ Verachtert Nederland B.V., ’s-Hertogenbosch ⠛ MAN truck & bus B.V., Vianen ⠛ SITECH Nederland B.V., Someren ⠛ MAN Nederland Dealer B.V., Vianen ⠛ ModiForce B.V., Leusden Denmark ⠛ DRV Groep B.V., Hoogeveen ⠛ Pon Equipment A/S, Brønby ⠛ Porsche Centrum Twente B.V., Almelo ⠛ Sitech Denmark A/S, Horsens
Germany Norway ⠛ Aluca GmbH, Rosengarten (acquired 12 November 2015) ⠛ Pon Equipment AS, Oslo ⠛ Sitech Norway AS, Oslo
Sweden Pon Automotive Retail ⠛ Pon Equipment AB, Göteborg ⠛ Sitech Sverige AB, Örebro Netherlands ⠛ A-Point B.V., Amsterdam Pon Power ⠛ Auto Hoogenboom B.V., Rotterdam ⠛ Pon Dealer B.V., Amersfoort Netherlands ⠛ Pon Power B.V., Papendrecht Pon Tyre Group ⠛ Pon Power Oil & Gas B.V., Papendrecht ⠛ Topec B.V., Papendrecht Netherlands ⠛ Fischcon Trading & Engineering B.V., Vianen ⠛ Continental Banden Groep B.V., Barneveld ⠛ MAN Rollo B.V., ’s-Gravenhage ⠛ SAF Benelux B.V., Barneveld ⠛ Machinefabriek Bolier B.V., Dordrecht ⠛ Euro-Tyre B.V., Venlo ⠛ Dieselpower Holland B.V., Moerdijk ⠛ Tyrenet BGN B.V., Reek ⠛ EMC, Europe Marine Control B.V, Arnhem ⠛ Bakker Sliedrecht Electro Industrie B.V., Sliedrecht Great Britain ⠛ I.M.S. Ltd., Loughborough Denmark ⠛ Pon Power A/S, Esbjerg Germany ⠛ Reifen Gundlach GmbH, Raubach Norway ⠛ Goodwheel GmbH, Soest ⠛ Pon Power AS, Oslo
Hungary Sweden ⠛ PTG Europe Automotive Solutions and Services Kft, Budapest ⠛ Pon Power AB, Göteborg ⠛ Elektromatik Power Generation AB, Göteborg Austria ⠛ PTG Automotive Solutions and Services GmbH, Graz Estonia ⠛ Baltic Marine Contractors OÜ, Talinn Sweden ⠛ Amring Amerikanska Ringdepoten AB, Göteborg France ⠛ Moteurs-Marine-Méditerranée SAS, Marseille
56 Pon Annual Accounts 2015 PVI Pon Asia
United States Singapore ⠛ A-T Controls, Inc., Cincinnati ⠛ SWTS Pte Ltd, Singapore ⠛ W&O Supply Inc., Jacksonville ⠛ Exion Asia Pte Ltd, Singapore ⠛ Setpoint Integrated Solutions, Inc., Baton Rouge ⠛ JM Pang & Seah Pte Ltd, Singapore ⠛ The Hiller Companies Inc., Delaware ⠛ CSI Oil & Gas Pte Ltd, Singapore (80%) ⠛ Louisiana Valve Source LLC, Youngsville ⠛ Encord Private Limited, Singapore ⠛ Engine Monitor Inc., St. Rose Malaysia ⠛ Encord Sdn Bhd, Kuala Lumpur Pon Material Handling
China United States ⠛ Exion Asia (Huizhou) Co. Ltd, Huizhou ⠛ Equipment Depot Illinois, Inc., Carol Stream ⠛ Equipment Depot Kentucky, Inc., Evansville Australia ⠛ Equipment Depot Texas, Ltd., Waco ⠛ Callidus Process Solutions Pty Ltd, Balcatta ⠛ Equipment Depot Ohio, Inc., Cincinnati ⠛ AVFI Pty Ltd, Victoria ⠛ Equipment Depot Pennsylvania, Inc., Mechanicsburg ⠛ Prochem Pipeline Products Pty Ltd, Perth (acquired 1 July 2015)
Pon Bicycle Group Other
Netherlands ⠛ Koninklijke Gazelle N.V., Dieren Netherlands ⠛ Union B.V., Almere ⠛ Pon Logistics B.V., Leusden ⠛ Augusta Benelux B.V. (BBB), Leiden (acquired 6 March 2015)
Germany Joint Ventures & Minority Interests ⠛ Derby Cycle Werke GmbH, Cloppenburg ⠛ Volkswagen Pon Financial Services B.V. (40%), Amersfoort Canada ⠛ VVS Verzekerings-Service N.V. (40%), Amsterdam ⠛ Cervélo Cycles Inc., Toronto ⠛ Autobedrijf van den Udenhout B.V. (30%), ’s-Hertogenbosch ⠛ Auto Muntstad B.V. (42%), Utrecht United States ⠛ Wealer B.V. (30%), Heerlen ⠛ Santa Cruz Bicycles LLC, Santa Cruz (acquired 2 July 2015) ⠛ Century Holding B.V. (30%), Groningen ⠛ Collect Car B.V. (40%), Rotterdam China ⠛ Woup Holding B.V. (25%), Leusden ⠛ Pon Bicycle Company Ltd., Shenzhen ⠛ Porsche Centrum Amsterdam (40%), Amsterdam ⠛ Phu Thai Marine Pte Ltd (40%), Vietnam ⠛ Energyst B.V. (25%), Breda ⠛ RH Marine Group B.V. (49%), Rotterdam (acquired 21 October 2015)
Primary operating companies 57 Colophon
Text Nart Wielaard, Haarlem Pon Holdings B.V., Almere
Art-direction and graphic design Borghouts Design B.V., Haarlem
Printing DDPP Document Partners, Wormerveer
Pon Holdings B.V. Rondebeltweg 31 1329 BN Almere P.O. Box 30052 1303 AB Almere The Netherlands Telephone +31 88 60 60 100 Fax +31 88 60 60 101 www.pon.com
58 Pon Annual Accounts 2015 www.pon.com