Annual Report (ESEF) • Feb 7, 2024
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Download Source FileUntitled Annual Report 2023 Pandora A/S · Havneholmen 17-19 · 1561 Copenhagen V · Denmark · CVR no. 28505116 As the world’s largest jewellery brand, we empower people to express their stories and passions through jewellery. We offer accessible luxury, hand-finished by craftspeople from high-quality materials and available in more than 100 countries. Our range of styles provides endless opportunities for personalisation, allowing people to show who they are and what holds a special place in their hearts. As the leader in our industry, we embrace sustainable business practices to protect people and the environment for generations to come. WE GIVE A VOICE TO PEOPLE’S LOVES OUR PURPOSE Sustainability Report 2023 Pandora A/S · Havneholmen 17-19 · 1561 Copenhagen V · Denmark · CVR no. 28505116 Remuneration Report 2023 Pandora A/S · Havneholmen 17-19 · 1561 Copenhagen V · Denmark · CVR no. 28505116 53 Consolidatedfinancialstatements 95 ParentCompanyfinancialstatements 111 Managementstatement 112 Independentauditor’sreport 37 Corporategovernance 41 BoardofDirectors 43 ExecutiveLeadershipTeam 45 Shareholderinformation 48 Groupperformance 50 Groupprofitability 51 Balancesheetandcashflows 6 Ataglance 7 Lettertotheshareholders 8 Executivesummary 11 Highlights2023 14 Five-yearsummary 15 Financialguidance2024 20 Ourbusinessmodel 21 OurPhoenixstrategy 26 Industrytrends 28 People 30 Sustainability 34 Risks THE BIG PICTURE FINANCIAL REVIEW OUR BUSINESS FINANCIAL STATEMENTS CORPORATE GOVERNANCE STATEMENTS 5 19 36 47 52 110 AnnualReport Our Annual Report is our detailed annual disclosure relating to company performance, strategy, corporate governance and financial results. The report constitutes Pandora A/S' statutory report (page 29) in accordance with section 99b of Danish Financial Statements Act and forms part of the management’s review. The report is available at pandoragroup.com/investor/news-and- reports/annual-reports and at cvr.dk following approval at the Annual General Meeting. SustainabilityReport Our Sustainability Report provides detailed information on sustainability and our responsible business practices. The Sustainability Report serves as our supplementary document to the United Nations Global Compact Communication on Progress, which will be submitted later in 2024 using the new digital platform, Communication on Progress. This report constitutes Pandora A/S’ statutory report in accordance with section 99a and section 107d of the Danish Financial Statements Act and forms part of the management’s review. The report is available at pandoragroup.com/sustainability/ resources/sustainability-reports. RemunerationReport Our Remuneration Report includes full disclosure of Board and Executive Management remuneration. The report is available at pandoragroup.com/investor/ corporate-governance/remuneration-reports. Coverimage Justina Miles, American Sign Language (ASL) performer, wears the Pandora Lab-Grown Diamonds collection. CONTENTS OUR EQUITY STORY OUR UNIQUE BUSINESS MODEL The jewellery market has historically grown faster than GDP and remains highly fragmented, with global brands set to outgrow the overall market. Pandora’s jewellery is designed to empower self-expression and be culturally relevant. It is hand-finished by skilled craftspeople and meets the highest sustainability standards in the industry. Pandora’s unique business model is vertically integrated from design and crafting to direct-to-consumer channels, and the company has built unrivalled scale in manufacturing, retail distribution and brand presence. Pandora’s growth strategy, Phoenix, leverages the company’s existing infrastructure to pursue numerous untapped growth opportunities and gain higher market share across geographies and jewellery categories. With its proven financial model, Pandora expects to outgrow the market with high single-digit organic growth while achieving best-in- class profitability. Thanks to its asset-light approach, the company also expects to deliver significant free cash flow, of which the vast majority will be returned to shareholders and result in mid-to-high teens EPS growth. Pandora aims to be not only the largest, but also the most desirable jewellery brand in the accessible luxury market, making high-quality jewellery available to the many. Accelerating growth EBIT margin expansion Solid cash returns Mid-to-high teens EPS growth "Loves, Unboxed" campaign engaged global visitors As part of our holiday campaign called "Loves, Unboxed", we welcomed consumers to global immersive pop-up experiences. This is from Tower Bridge in London, where we engaged almost 10,000 visitors. A PROVEN AND SIMPLE FINANCIAL MODEL DRIVING ATTRACTIVE SHAREHOLDER RETURNS ANNUAL REPORT 2023 4 THE BIG PICTURE 6 At a glance 7 Letter to the shareholders 8 Executive summary 11 Highlights 2023 14 Five-year summary 15 Financial guidance 2024 ANNUAL REPORT 2023 THE WORLD’S LARGEST JEWELLERY BRAND million customer visits to our stores and online concept stores ~750 2,651 107 million pieces of jewellery sold, corresponding to three pieces every second 2019 2020 2021 2022 2023 employees unaided brand awareness places us in the top of our industry in key markets 31% 100% DKK billion revenue points of sale in more than 100 countries 28.1 6,700 AT A GLANCE 107 million 102 million 103 million 85 million 96 million 33,000 share of branded jewellery searches on Google 40% recycled silver and gold purchased as of December 2023 (2023 average: 97%) Named among the World’s Best Companies 2023 by TIME Magazine @PandoraJewelry @theofficialpandora Pandora-a-s @theofficialpandora @theofficialpandora pandoragroup.com Average headcount through the year. ANNUAL REPORT 2023 6 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS co-create their brand experience. With Pandora, they can compose a piece of jewellery that holds a personal emotional value to them. This forms a very strong bond with our brand. Owning this space of meaningful jewellery has been the key to our success. But like many other brands that started with an iconic product idea, we have over time broadened our reach. Today, we cover not only charms and carriers but all jewellery categories, and we have set out to transform the customer perception of what Pandora stands for. While keeping sight of our core business, we will establish Pandora as a full jewellery brand in the minds of customers. This will unlock a significantly larger addressable market. At its core, this is the goal of the Phoenix strategy: to make Pandora the largest and most desirable jewellery brand. While brand-building is top of our agenda for the coming years, we will also continue our work on the other pillars of the Phoenix strategy. We have strengthened operations in our core markets, and while we still see growth potential in these markets, we will also expand our focus to include other geographies with strong potential. We are planning a large expansion of Pandora’s store network, and we are rolling out our new store concept, Evoke 2.0 – an important enabler to better present Pandora’s full jewellery portfolio. We will continue to develop our core Pandora Moments business while extending our assortment with NEXT CHAPTER OF GROWTH LETTER TO THE SHAREHOLDERS In a year marked by war, inflation and higher interest rates, Pandora not only showed resilience but strong growth. Despite the headwinds, we upgraded our guidance three times and ended the year with 8% growth and record-breaking revenue of DKK 28.1 billion. In short, the results show that our strategy is working, and that Pandora stands stronger than ever. And based on the results for 2023, we have delivered on the targets which we set at the Capital Markets Day in 2021. Part of our strength comes from the size of our business and integration across the entire value chain. It not only gives us economies of scale, but also helps us generate insights that we can quickly disseminate throughout our business. Over the last few years, we have rebuilt our company with investments in people, a more effective operating model, digitalisation and more. A transformation which has built a platform enabling us to compound solid growth, year after year. Our most important asset is our brand. Pandora’s unique point of difference in people’s minds. Ever since Pandora first came to market, we have been on a mission to democratise jewellery. We are for the many, not the few. This has allowed millions of customers from all corners of the world to express their loves through our hand-finished and accessible jewellery. In contrast to many other jewellery companies, we invite our customers to PeterA.Ruzicka Chair of the Board of Directors AlexanderLacik President & Chief Executive Officer In 2023, Pandora exceeded expectations and delivered solid growth across geographies. Our brand continues to gain strength, and we are ready to accelerate growth in the next strategy phase, as we set out to make Pandora known as a full jewellery brand. new collections like Pandora Lab-Grown Diamonds to reach more customers. We will also continue to leverage our vast access to data as an impactful competitive advantage. We will do all this while maintaining our leadership in sustainability. We have just reached a major milestone for circular design by completing our transition to source only recycled silver and gold for all our jewellery. An accomplishment no other large jewellery brand has achieved. We are reducing carbon emissions ahead of the Paris Agreement timeline, and we are well on track towards our diversity and inclusion targets. Strong results are not only about what we achieve, but how we get there as a workplace. Our unique community of 33,000 employees constitute the core of our business and our brand. This is why we regularly ask employees for their feedback and in 2023 we achieved an employee Net Promoter Score of 60, placing us in the top 5% of the global consumer sector. Efforts that were also recognised as we were named by TIME Magazine as one of the world’s best companies measured on employee satisfaction, revenue growth and sustainability. When looking ahead, there is good reason for optimism. Our strategy is working, and we see significant opportunities for value creation. We wish to thank our employees, customers and shareholders for a great year. ANNUAL REPORT 2023 7 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS 9.0 2.7 4.1 5.8 7.4 7.8 6.4 5.9 3.9 5.8 7.0 28.1 26.5 6.7 19.0 23.4 11.9 16.7 20.3 22.8 22.8 21.9 BRAND INVESTMENTS DELIVER SOLID GROWTH As we look ahead, it is clear that the Phoenix strategy is working, and Pandora is poised for an even brighter future. At our Capital Markets Day in October 2023, we presented a roadmap to further accelerate growth. This will require scaling up investments to transform the perception of Pandora into a full jewellery brand while elevating the customer experience across all touch points. Pandora’s ambition remains to be the largest and most desirable brand in the accessible jewellery market. As part of this next chapter of Phoenix, we have set the following new financial targets: 7-9% 26-27% EXECUTIVE SUMMARY 20172016 2015 2014 2013 20212018 2019 2020 2022 2023 OUR GROWTH JOURNEY 1 DKK billion Presented on the basis of the applicable accounting standards at the time. 2019 and 2020 figures exclude Programme NOW restructuring costs. Revenue EBIT 2023 was another strong year for Pandora, showcasing our resilience to macroeconomic uncertainty and the success of the many growth initiatives under the Phoenix strategy. We delivered a record-high revenue of DKK 28.1 billion, corresponding to organic growth of 8%. This comprised of like-for-like growth of 6% and network expansion of 4%, with a drag of 2% from lower sell-in to partners. With this, Pandora exceeded the financial target announced at the Capital Markets Day in September 2021 on organic growth with an annual growth rate (CAGR) of 7.5% (versus 5-7% CAGR target for 2021-2023) and reached the financial target on EBIT margin of 25.0% (versus 25-27% target for 2023). In 2023, our growth was solid and broad-based across geographies and segments. We continued to make substantial investments in our brand, our employees and other foundational aspects of our business. These investments are consistently yielding positive results. EBITmargin,% By 2026 Organicgrowth,% CAGR 2023-2026 ANNUAL REPORT 2023 8 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS 78% Core Oursegments Share of revenue, % of total Fuel with more 22% Core Fuel with more PANDORA PRODUCT UNIVERSE Brand excellence and market penetration In 2023, investments into the brand helped Pandora build on our already leading position in the jewellery market. We improved our brand momentum with several global brand campaigns and cultural events driving greater customer engagement across all touchpoints. With a focus on raising awareness and consideration across markets, we improved our brand penetration. Unaided awareness remains leading within our industry, and brand consideration grew by 6%, solidifying Pandora's brand position. Our brand strategy is focused on elevating brand desirability to drive growth and is already gaining strong traction. For several years, Pandora has been the most searched for jewellery brand on Google. In 2023, our share of branded jewellery searches grew to 40%, and we turned out four times larger than each of our three largest competitors in terms of search volume. The successful activation of our brand strategy has been a main driver in this achievement. Our media efforts, strategically designed for always-on, and our collaborations with global brand ambassadors and influencers have not only amplified our presence but also strengthened our brand desirability and reach. This concerted effort has solidified our iconic status, resonating with diverse audiences and penetrating new cultural spheres. Growing the core while fuelling with more In 2023, we revised our design strategy and optimised our product universe to drive growth. The Core segment represents charms and carriers and now encompasses the collections Pandora Moments, Collabs and Pandora ME. In 2023, Core represented 78% of total revenue and delivered like-for-like growth of 2%. The Fuel with more segment represents modern classics and includes Pandora Timeless 1 , Pandora Signature and Pandora Lab-Grown Diamonds. In 2023, Fuel with more represented 22% of total revenue and delivered like-for- like growth of 14%. While we fuel our business with growth in new collections, the core of our brand remains solid and continues to thrive. The heartbeat of Pandora, our Pandora Moments collection, continues to grow in strength and popularity. In 2023, it grew by 2% and as such it remains an ever-evolving canvas for personal expression, resonating with customers who seek to capture and celebrate life’s precious moments through our iconic charms. The Pandora ME collection has found its place in the market as a symbol of individuality and self-expression. With a like-for-like growth rate of 12%, it underscores our ability to connect with the younger, dynamic audience, showcasing our adaptability and understanding of evolving consumer preferences. Strong performance of our collections outside Core shows that Pandora’s portfolio supports the transformation into a full jewellery brand. The Pandora Timeless collection grew by 20%, reflecting the resonance it holds with customers seeking elegance and craftsmanship. Our Pandora Lab-Grown Diamonds collection continues to gain ground. In 2023, we expanded our assortment significantly while recording a growth rate of 116%. The success of this collection not only speaks to the quality of our diamond jewellery but also to the values embedded in our brand. It is a testament to our dedication to offer more sustainable, beautiful alternatives without compromising on quality. Charms and carriers Modern classics and Pandora Lab-Grown Diamonds Collabs Pandora ME PandoraLab-GrownDiamonds PandoraSignature PandoraMoments PandoraTimeless Read more about segment and revenue in note 2.1. 1 Pandora Timeless includes the PANDORA ESSENCE collection. 2022: 80% 2022: 20% ANNUAL REPORT 2023 9 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS 2 3 4 5 1 6 7 Our markets In 2023, we delivered broad-based growth across most geographies despite overall low consumer sentiment in many markets, securing like-for-like growth of 6%. The US remains our largest market in terms of revenue, and through focus on expanding our market share and filling white space we registered healthy growth despite the market uncertainty. We saw steadily improving like- for-like growth with a notable uplift in the second half of the year, resulting in full-year like-for-like growth of 2%. The pick-up was enabled by strong brand initiatives and improved retail execution. During 2023, Pandora acquired 35 stores in the US, while adding a net of 27 concept stores. Going forward, we see ample growth opportunities in the US from building further on our market share gains and expanding our network. Our key markets in Europe delivered positive like-for-like growth of 3% in 2023, driven by a strong second half of the year. Germany delivered double-digit growth each quarter driven by our always-on media-model, driving traffic across channels and delivering like-for-like growth of 26% in 2023. In Italy and France, we saw a gradual improvement in like-for-like performance through the year. In the second half of the year, Italy began to recover from soft consumer sentiment with good broad-based momentum, producing a full year like-for-like of -3%. France grew like-for-like through increased brand penetration and media engagement, ending at 1% like-for-like. In the UK, performance was broadly stable throughout the year despite a weak consumer sentiment in the market. From the onset of 2023, we saw weak consumer sentiment in Australia, making it harder to convert the otherwise healthy traffic into a purchase, ending 2023 with -6% like-for-like. China reopened in January 2023 following a long period of COVID-19 restrictions, and in the early months of the year 2023, we saw some recovery within the market. In July, we initiated the relaunch of our brand with a focus on Shanghai. The brand relaunch is expected to take time, but we witnessed encouraging signs in Shanghai following the relaunch, and we remain committed to our long-term ambitions for China. The 2023 like-for-like growth for China was -9%. Pandora’s business outside of our key markets continues to show very strong momentum and ended 2023 with like- for-like growth of 16%. The growth was broad-based with many markets delivering double-digit results. Mexico and Spain ended 2023 with revenue of DKK 1.4 billion and DKK 1.2 billion, respectively. Financial performance In 2023, we generated a total revenue of DKK 28.1 billion, corresponding to a revenue growth of 9% in local currency. The EBIT margin ended at 25.0%, which was in line with our guidance and continues to underpin our highly attractive business model and cost structure. In 2023, Pandora distributed DKK 6.4 billion to shareholders, with DKK 1.4 billion in dividends and DKK 5.0 billion in share buybacks. The total distribution was the highest in Pandora’s history. For 2024, the Board of Directors proposes a dividend of DKK 18 per share, corresponding to DKK 1.5 billion, and a new share buyback programme of DKK 4.0 billion, running until February 2025 at the latest. The total distribution from February 2024 and the following 12 months will be DKK 5.5 billion. OUR KEY MARKETS Share of revenue 2023 2022 1 US 30% DKK 8,306m 30% DKK 7,907m 2 UK 14% DKK 3,821m 14% DKK 3,802m 3 ITALY 9% DKK 2,540m 10% DKK 2,580m 4 GERMANY 5% DKK 1,527m 5% DKK 1,307m 5 FRANCE 4% DKK 1,196m 4% DKK 1,190m 6 AUSTRALIA 4% DKK 1,120m 5% DKK 1,271m 7 CHINA 2% DKK 564m 3% DKK 737m REST OF PANDORA 32% DKK 9,062m HEREOF MEXICO 5% DKK 1,385m HEREOF SPAIN 4% 1,246m 29% DKK 7,669m 4% DKK 994m 4% 1,123m ANNUAL REPORT 2023 10 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS HIGHLIGHTS 2023 Combining craftsmanship, technology and design innovation, the new Pandora Moments Studded Chain Bracelet, launched in January 2023, offers a completely different texture and canvas for styling. The chain is designed with pyramidal and spherical studs to capture and reflect light. Our investments in product innovations, such as the Pandora Moments Studded Chain, continue to yield positive results. In 2023, the six design variations of the concept – three necklaces and three bracelets – contributed to the growth of the Pandora Moments collection, accounting for 1% in total share of business and driving 1 percentage point like-for-like growth to the company overall. The recognised World’s Best Companies list by TIME Magazine in collaboration with Statista is a comprehensive ranking of outstanding companies across global industries, assessed on employee satisfaction, revenue growth and sustainability. Pandora ranked number 21 on sustainability and was among one of eight Danish companies featured on the list. A recognition that underscores our commitment to provide an exceptional workplace, lead the way in sustainability and to rethink how jewellery is designed and produced with the planet and its people in mind. Pandora’s total rank on the list was number 263 out of 750 companies. New Pandora Moments Studded Chain Bracelet underpins growth in Pandora Moments In March, we successfully placed an aggregate principal amount of EUR 500 million sustainability-linked bond, also known as a Euro Medium Term Note. The inaugural issuance was well received by the market and since then has traded In line with bonds issued by similar companies with compar- able duration. Reflecting our commitment to responsible business practices, the new programme is linked to Pandora’s greenhouse gas emission reductions and sourcing of recycled silver and gold. The new financing source allows us to further diversify our funding structure. Obtaining solid investment grade credit ratings of Baa2 from Moody’s Investor Service and a BBB from S&P Global Ratings with a stable outlook further highlights Pandora’s strong financial profile and attractive cash generation. Pandora launches EUR 500 million sustainability-linked bond TIME Magazine names Pandora among the World’s Best Companies 2023 ANNUAL REPORT 2023 11 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Pandora as Principal Partner for The Fashion Awards 2023 Pandora was headline sponsor for the 2023 Fashion Awards, one of the most anticipated events on the global fashion calendar. Among many highlights, actress and global Pandora ambassador Pamela Anderson presented British-Ghanaian actor, director and writer Michaela Coel with the Pandora Leader of Change Award, honouring her for her acting, screenwriting and filmmaking. Michaela Coel’s body of work explores the topics of race, class and gender, while telling the authentic and complex stories of Black women and queer identities. The Fashion Awards is hosted annually by the British Fashion Council to celebrate creative excellence and support the next generation of talent. Photo of Michaela Coel by BFC. Democratising diamonds with three new Pandora Lab-Grown Diamonds collections In September, heads of state and government officials from across the world gathered for the United Nations’ General Assembly in New York to discuss progress on the Sustainable Development Goals and how the world addresses key challenges related to, for example, climate change, equality and poverty. Pandora CEO Alexander Lacik was invited to speak at an event at the United Nations' headquarters and shared learnings from Pandora’s journey to become a low-carbon, circular, inclusive, diverse and fair business. It was the first time Pandora participated at events around the United Nations’ General Assembly, and we took the opportunity to engage with many other stakeholders – including an innovative street performance collaboration with Danish designer Henrik Vibskov to showcase sustainable fashion and jewellery. Pandora speaks at the United Nations headquarters in New York City In August, we revealed the expansion of Pandora Lab- Grown Diamonds with three new collections in the campaign declaring "Diamonds for All”. Rewriting the rules of diamond jewellery, we continue our journey of democratising diamonds and celebrating their power as a vehicle for love, joy and personal expression. We partnered with unique icons and talents such as model and actress Pamela Anderson, American Sign Language performer Justina Miles, former model and Vogue Creative Director- at-Large Grace Coddington and more. Partnerships that help us redefine long-held diamond conventions, taking diamond jewellery from special occasions to something special for every day. In 2023, we continued the roll-out of Pandora Lab-Grown Diamonds to Australia, Mexico and Brazil in addition to the UK, the US and Canada where the collections were already available for consumers. In 2023, 1% of our total revenue came from Pandora Lab-Grown Diamonds. ANNUAL REPORT 2023 12 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Pandora shined bright at the Capital Markets Day in London In October, we hosted a Capital Markets Day in London to share the next chapter of our Phoenix strategy with investors, analysts and media. Our future direction and new financial targets were well received. The key message at the event was how we will drive future growth by shifting customer’s perception of Pandora from a charms company to a full jewellery brand. Read more about our journey to be perceived as a full jewellery brand on page 17. TikTok fuelled growth Impressive engagement on Instagram 1000% increase in TikTok video views in 2023, driven by viral trends, helped fuel growth. Hashtags #PandoraPromiseRing and #PandoraRing generated millions of views. +10 million followers were reached on Instagram, and 895 million impressions obtained in 2023. The computer-generated content above received 137,000 likes and more than 3,400 comments in one post alone. Influencer impact drove desirability Through our work with in- fluencers, Pandora reached 280 million potential cus- tomers in 2023. This was a 35% increase compared to 2022 and highlights the ef- fectiveness of our strategic collaborations in elevating brand desirability with an additional increase of 3% of global share of voice com- pared to our key competi- tors. Tsutsumi Hoang on the image above is an illustrator, designer and content creator based in Oslo. Undisputed leader of Google searches In 2023, our share of branded jewellery searches on Google grew to 40%. Not only does this make us more than four times larger than each of our three closest competitors, our search volume is also growing four times faster than our closest competitor. ANNUAL REPORT 2023 13 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS FIVE-YEAR SUMMARY DKK million 2023 2022 2021 2020 2019 Key financial highlights Revenue 28136 26463 23394 19009 21868 Organic growth, % 8% 7% 23% 11% 8% Like-for-like, % 1 6% 4% 20% 12% 8% Earnings before interest, tax, depreciation and amortisation (EBITDA) 9118 8716 7838 4999 6148 Operating profit (EBIT) 7039 6743 5839 2684 3829 EBIT margin, % 2 250% 255% 250% 204% 268% Net financials 805 210 461 190 1 Net profit for the period 4740 5029 4160 1938 2945 Financial ratios Revenue growth, DKK, % 6% 13% 23% 13% 4% Revenue growth, local currency, % 9% 8% 24% 11% 6% Gross margin, % 786% 763% 761% 756% 727% EBITDA margin, % 324% 329% 335% 263% 281% EBIT margin, % 250% 255% 250% 141% 175% Effective tax rate, % 240% 230% 226% 223% 231% Equity ratio, % 23% 33% 38% 37% 24% NIBD to EBITDA, x 2 11 08 04 05 11 Return on invested capital (ROIC), % 47% 48% 59% 25% 27% Cash conversion incl. lease payments, % 78% 39% 88% 183% 133% Net working capital, % of last 12 months' revenue 18% 42% 50% 76% 13% Capital expenditure, % of revenue 58% 49% 27% 26% 38% DKK million 2023 2022 2021 2020 2019 Stock ratios Total payout ratio (incl. share buyback), % 3 136% 100% 115% 65% 147% Dividend per share, proposed for the year, DKK 180 160 160 90 Dividend per share, paid, DKK 160 160 150 90 Earnings per share, basic, DKK 555 542 421 200 303 Earnings per share, diluted, DKK 551 537 417 199 301 Consolidated balance sheet Total assets 23798 22013 18542 19984 21571 Invested capital 15126 13961 9884 10540 14268 Net working capital 510 1104 1181 1447 293 Net interest-bearing debt (NIBD) 9770 6794 2882 3151 9019 Equity 5355 7167 7001 7389 5249 Consolidated statement of cash flows Cash flows from operating activities 7384 4434 6228 5975 6775 Capital expenditure, total 1624 1290 641 491 822 Capital expenditure, property, plant and equipment 1176 929 341 369 556 Free cash flows incl. lease payments 5489 2602 5137 4908 5075 Sustainability Scope 1, 2 & 3 emissions, tonnes CO equivalent 264543 341748 320620 300746 360569 Recycled silver and gold, total, % 5 97% 61% 54% 57% 60% Leadership gender ratio, female/male, % 6 3466 2971 2377 na na 3 Excluding sale of treasury shares amounting to DKK 1.8 billion in Q2 2020. 4 Within limited assurance scope. The scope 2 emissions are calculated as market-based emissions. All emissions are in metric tonnes, as aligned with the Greenhouse Gas Protocol. In 2023, we have reassessed Pandora’s calculation methodology and data based on updated knowledge. This resulted in an increase in total emissions (tonnes COe) of 63,792 in 2019 (+21%), 34,671 in 2020 (+13%), 43,170 in 2021 (+16%) and 61,378 in 2022 (+22%). 5 Within limited assurance scope. 6 The Leadership Team comprises Vice Presidents, Senior Vice Presidents, members of the Executive Leadership Team and the Board of Directors. 1 Like-for-like growth includes sell-out from all concept stores (including partner owned), owned and operated Shop in Shops and Pandora Online. Partner owned other points of sale are not included in like-for-like. The KPI includes stores which have been operating for +12 months. 2 2019 and 2020 figures exclude Programme NOW restructuring costs. ANNUAL REPORT 2023 14 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS 30.0-30.9 -0% FINANCIAL GUIDANCE 2024 Targeting another year of profitable growth The economic outlook for 2024 continues to remain uncertain. Continued inflation and still high interest rates suggest another challenging backdrop for consumers across many markets. Pandora will continue to execute on our Phoenix strategy, which has yielded consistently positive results despite the challenging backdrop over the past two years, but remains mindful of the uncertain macroeconomic environment. Therefore, the guidance for 2024 considers the external environment, Pandora’s own specific Phoenix initiatives and current trading to form an initial range. Pandora is currently targeting organic growth of 6% to 9% and an EBIT margin of around 25%. The low end of the guidance accounts for a worsening of macroeconomic conditions relative to that being witnessed today. Revenue guidance Pandora is currently expecting like-for-like growth of 3% to 5%. Continued network expansion is expected to add 3% to 4% to take the total organic growth to 6% to 9%. Finally, forward integration is expected to add around 1% revenue with revenue growth in local currency ending at 7% to 10%. The organic growth guidance can be illustrated as follows: REVENUE GUIDANCE Percentage point approximations 2023 actual revenue Like-for-like Network expansion 2024 guidance Forward integration Local currency growth Foreign exchange 2024 guided revenue 28.1 DKK billion DKK billion 3% to 4% 3% to 5% 6% to 9% 1% 7% to 10% Around 25% 6% to 9% EBIT margin Organic growth ANNUAL REPORT 2023 15 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Profitability guidance The EBIT margin guidance for 2024 is “around 25%”. The EBIT margin guidance can be illustrated as in the bridge to the right. The building blocks include a positive impact from the profitable expansion of Pandora’s store network, expected to add 40 basis points. As mentioned at the Capital Markets Day in 2023, Pandora will scale up investments to capture the current and future growth opportunities. The investments include, for example, the restaging of the brand, roll-out of the Evoke 2.0 store concept, personalisation (online as well as offline) as well as efforts to establish Pandora as the go-to destination for lab-grown diamonds. Therefore, operating leverage from positive like-for-like growth is expected to be reinvested into the Phoenix initiatives to see a small net drag of -30 basis points. In line with previous communication, the investments in the Phoenix strategy remain highly flexible with Pandora being able to adjust accordingly, depending on the growth outcomes. Finally, inflationary impacts (including salary increases) are expected to be offset through price increase and efficiencies, while the combined impact from silver prices and foreign exchange is expected to be roughly flat at -10 basis points. Investments in growth initiatives in early 2024, including restaging of the brand, will lead to temporary elevated marketing expenses, impacting mostly the Q1 EBIT margin compared to the previous year. Guidance – other parameters Pandora expects to open net 75-125 concept stores and 25-50 owned and operated other points of sales in 2024. CAPEX is expected to end between a share of 6-7% of revenue, as Pandora continues to scale up investments in the store network with the roll-out of Evoke 2.0 and network expansion, digital initiatives and crafting facilities. The effective tax rate is expected to be 24-25% as the Pillar Two tax rules, released by OECD, comes into effect in 2024. At current interest rate levels, foreign exchange rates and targeted leverage levels, Pandora expects total net financial expenses to be around DKK 950-1,000 million in 2024. Capital structure policy and cash distribution At the end of 2023, in line with expectations, Pandora’s leverage was 1.1x NIBD to EBITDA, consistent with being broadly in line with the mid-point of the capital structure policy of 0.5x-1.5x. The increased leverage of 0.3x versus 2022 reflects the decision to increase leverage from the low end of the capital structure range to around the mid-point. Pandora aims for a leverage ratio of approximately 1.2x NIBD to EBITDA by the end of 2024. In line with the usual seasonality of the business, leverage will increase through the year, peaking in Q3 2024, and then fall back by year- end. Pandora has paid out DKK 6.4 billion to shareholders in 2023, of which DKK 1.4 billion came from an ordinary dividend of DKK 16 per share and DKK 5.0 billion was distributed via share buybacks (DKK 0.4 billion related to the 2022 programme ending in early February 2023). For 2024, Pandora proposes a total cash distribution to shareholders of DKK 5.5 billion. Within this, Pandora proposes to pay a dividend of DKK 18 per share, which represents an absolute amount of DKK 1.5 billion and a new share buyback amounting to DKK 4.0 billion, which will be completed no later than 31 January 2025. PROFITABILITY GUIDANCE Percentage point approximations 2023 actual EBIT margin Network expansion Operating leverage, net of investments Foreign exchange & commodities Inflation & salary increases vs price increases & efficiencies 2024 guided EBIT margin 25.0% 0.4% -0.3% 0.0% -0.1% Around 25% FOREIGN EXCHANGE AND COMMODITY ASSUMPTIONS AND IMPLICATIONS AS OF JANUARY Average 2023 Average 2024 Financial impact 2024 Y-Y USD/DKK 689 688 THB/DKK 020 020 GBP/DKK 857 873 CNY/DKK 097 096 AUD/DKK 458 453 Silver/USD (per ounce) 227 237 Revenue (DKK million) Approx 75 EBIT (DKK million) Approx 50 EBIT margin (foreign exchange) Approx 03% EBIT margin (commodities) Approx 04% Disclaimer: the guidance contains forward-looking statements, which include estimates of financial performance and targets. These state- ments are not guarantees of future performance and involve certain risks and uncertainties. Therefore, actual future results and trends may differ materially from what is forecast in this report due to a variety of factors. Please also refer to the full disclaimer on page 94. ANNUAL REPORT 2023 16 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Drive brand desire – Unlocking brand desirability is a key factor to accelerating growth. To further position ourselves as a full jewellery brand, we have forged partnerships with top talent, participated in key industry events and dialled up our artistry and creativity across campaigns. Ashley Parks, our newly appointed global brand ambassador, made a significant impact during Copenhagen Fashion Week, representing Pandora alongside 28 global and local content creators, generating a total of 131 million impressions over owned social and creator channels. Furthermore, we served as the Principal Partner of The Fashion Awards 2023, hosted at the Royal Albert Hall in London. Finally, our “Diamonds for All” campaign has disrupted conventional norms in the diamond sector by democratising diamonds, making them accessible to more people. The Pandora Lab-Grown Diamonds campaign showcases a diverse range of cultural icons, including actress and model Pamela Anderson, photographed by Mario Sorrenti. A key component of the Phoenix strategy is to expand the appeal of the Pandora brand. This is all about broadening customer perceptions to recognise Pandora as a brand that offers a full range of jewellery. Our “Diamonds for All” campaign swept through the streets of New York City with unmatched brilliance. STORY A FULL JEWELLERY BRAND We are on a journey to redefine how consumers perceive our brand. Pandora has a longstanding history, recognised globally for charms and carriers. Our dedication to expanding our product range and reshaping our brand perception has evolved significantly over the years. Today, Pandora boasts several jewellery collections tailored to diverse consumer groups and spanning across all categories with the primary objective of being the largest and most desirable brand in the accessible jewellery market. Within marketing, Pandora elevates the brand experience through four focus areas: drive brand desire, build jewellery icons, be unmissable by driving always-on reach and cultural relevance and bring a creative wow effect to all customer touchpoints. ANNUAL REPORT 2023 17 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Build jewellery icons – Pandora is a jewellery brand loved by a broad range of customers. We will continue to broaden our product assortment to meet their wide range of jewellery needs. A prime example of how we enter new aesthetic spaces is the introduction of PANDORA ESSENCE, which showcases organic, fluid and natural expressions. This aesthetic space matches our brand DNA and represents 17% of the market. After a successful pilot launch in the Netherlands, PANDORA ESSENCE is set to roll out in more countries in 2024. We continue celebrating our jewellery icons in our campaigns, exemplified by the resounding success of our fully loaded Pandora Moments necklace during Copenhagen Fashion Week. Collaborating with influencers, we encouraged them to curate their unique iconic styles, leading to features in more than 13 prominent media outlets such as Vogue, Elle, Grazia, Harper’s Bazaar and Marie Claire. Be unmissable – We look to gain even more customers and increase brand awareness, a crucial element for expanding our market presence. To achieve this, we harness the power of paid and earned media, with a specific emphasis on PR, collaborations and cultural activations to drive relevance and talkability. In 2023, Pandora witnessed a record- breaking year in PR, propelled by the successful launch of our “Diamonds for All” campaign in the US, the UK and Australia. Moreover, we had multiple viral trends, including #PandoraEngraving on TikTok, where consumers recorded the engraving process at our stores, amassing over 200 million views. Wow at every step – At each stage of the consumer journey, we aim to enhance the customer experience. We are committed to delivering a world-class shopping experience, be it in our physical stores or through online channels, consistently delivering excellence in both brand interaction and shopping satisfaction. Our new store concept, Evoke 2.0, is built to foster more self-discovery, while also serving as a platform to better represent Pandora as a full jewellery brand. The fully loaded Pandora Moments look was spotted at the Copenhagen Fashion Week 2023 in between shows and at Pandora-hosted events. Enhancing the customer experience. The Evoke 2.0 store concept evolves the unique Pandora store experience. ANNUAL REPORT 2023 18 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS OUR BUSINESS 20 Our business model 21 Our Phoenix strategy 26 Industry trends 28 People 30 Sustainability 34 Risks ANNUAL REPORT 2023 b u i l t - i n c o n s u m e r t e s t i n g BUY Business activities Not applicable Material sustainability matters (abbreviated) OUR BUSINESS MODEL Wegiveavoice topeople’sloves VALUE CREATED A FULLY INTEGRATED VALUE CHAIN INNOVATIVE DESIGN RESPONSIBLE SOURCING PACKAGING & DISTRIBUTION OMNICHANNEL RETAIL PRODUCT REUSE & REPAIR HAND-FINISHED JEWELLERY STRONG MARKETING & BRAND At Pandora, our commitment is to operate as a sustainable business driving industry- leading growth and profitability, while lowering our impact on the planet and creating positive outcomes for people and communities touched by our business. With almost 95% of our jewellery produced in-house and around 80% of our revenue coming through our own direct-to- consumer channels, our fully integrated value chain enables scale advantages, speed and agility as well as a coherent brand experience. KEY RESOURCES Dedicated people, natural resources, crafting facilities and cash flows Customers & markets • ~750 million customer visits to our stores and online. • More than 107 million pieces of high-quality jewellery sold. • Presence in more than 100 countries. Employees & community • An average of 33,000 employees globally. • Social causes supported with UNICEF. Climate & environment • 96,026 tonnes CO2e reduced compared to 2019 baseline. • Sourcing 100% recycled silver and gold as of December 2023. Shareholders & society • DKK 6.4 billion in dividends and share buybacks paid back to our shareholders. • DKK 1.8 billion total corporate tax contribution. ANNUAL REPORT 2023 20 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS In 2021, we launched our Phoenix strategy, presenting a roadmap for substantial growth leveraging our core, existing assets. Centred around the pillars of Brand, Design, Markets and Personalisation, the strategy set the stage for a transformative journey. Over the past two years, we have successfully executed on this vision, overcoming various external headwinds and delivered on our financial targets set in 2021 with a 7.5% organic growth CAGR (target 5-7%) and 25.0% EBIT margin (target 25-27%). The first two years of delivering on the Phoenix strategy have fundamentally strengthened Pandora’s core. The brand has made significant strides in executing on the strategic vision, demonstrating resilience and adaptability. Consequently, we are now focused on elevating performance to the next level, as announced in October 2023, during the Capital Markets Day in London. The next chapter of Phoenix carries over the fundamental building blocks of the Phoenix strategy, with updated priorities across the four major strategic growth pillars. Furthermore, we announced new financial targets for the period 2024-2026. These targets signify a notable upgrade, reflecting Pandora’s improved operating model and a suite of initiatives to be expanded for accelerated growth. Organic growth target: We have set a new upgraded organic growth target of a 7% to 9% CAGR over 2023-2026, OUR PHOENIX STRATEGY Accelerating growth by showing consumers that we are a full jewellery brand. Our Phoenix strategy Phoenix builds on our strong foundation and is focused on the significant untapped opportunities in Pandora's core business. ANNUAL REPORT 2023 21 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS up from the previous target of 5% to 7% CAGR over 2021- 2023. The new target envisions an upgraded like-for-like CAGR of 4% to 6%, up from the previous 3% to 5%. The contribution from network expansion is targeted to be around 3% CAGR, up from 1% to 2% in the previous target, while forward integration will add an additional 1% CAGR. The enhanced growth outlook underscores Pandora’s commitment to scaling current and new initiatives, resulting in an 8-10% local currency CAGR over 2023-2026. EBIT margin target: We have set a new EBIT margin target of 26-27% by 2026, equalling 100-200 basis points of margin expansion compared to 2023. Notably, we will reach this higher margin whilst accelerating investments in current and future growth initiatives. This underscores our ability to efficiently leverage existing infrastructure to drive growth, and our best-in-class gross margin enables us to fuel the investment in our brand and people. Growth pillar 1: Brand Pandora is a globally recognised accessible luxury brand with a high level of consumer awareness, strong brand equity and a loyal customer base. Since the inception of the Phoenix strategy, we have laid strong foundations for our brand, which are starting to yield positive results. We will now significantly intensify our efforts to position ourselves as a full jewellery brand with accessible price points. The next phase will focus on elevating brand desirability with a revamped marketing strategy aimed at accelerating growth by transforming the brand perception. The refreshed strategy will drive greater penetration by strategically broadening product assortments into new and underserved categories and aesthetics. To drive ongoing relevance and brand heat, we will commence a restaging initiative in early 2024, featuring new campaigns that elevate desirability while clearly showcasing Pandora’s Our iconic snake chain meets an eye-catching array of charms for a fully loaded Pandora Moments look. ANNUAL REPORT 2023 22 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS new brand identity. These new campaigns will also centre around product icons and drive greater relevance through stronger cultural activations and collaborations. We have already embarked on this journey with new global brand ambassadors and the Pandora Lab-Grown Diamonds campaign in 2023. Pandora will also make a significant leap in elevating the in-store customer experience. By 2026, we aim to transform around 60% of Pandora’s owned and operated stores into the new Evoke 2.0 concept. While our previous store concept has been successful in driving and building out the Pandora Moments platform, Evoke 2.0 more effectively displays all of Pandora’s collections in an intuitive and engaging experience. The new store concept will be another major pillar in driving greater brand desirability and brand positioning. Growth pillar 2: Design Pandora’s jewellery is designed to empower self-expression and drive cultural relevancy and is crafted and hand- finished to the highest ethical and environmental standards. Since 2021, we have driven the core Pandora Moments platform through ongoing innovations, such as the new Pandora Moments Studded Chain, while continually expanding our offering. Strategically, our design vision remains consistent, as we will continue to drive growth within the core platform while accelerating growth in other areas. Pandora’s original charm and carrier offering, Pandora Moments, has been the cornerstone of our success over the past two decades. Today, Pandora Moments accounts for 65% of total revenue, and we continue to see ample growth opportunities by ensuring a strong pipeline of innovation behind charms and carriers. To build on this success and stimulate sequential growth, we have redefined our core product offering and added Pandora ME to Pandora Moments and Collabs under the name Core. Pandora Moments and Pandora ME share design aesthetics, and the new segments will harness collection synergies. To further expand our offering, the Pandora Timeless and Pandora Signature collections will be accompanied by a new collection: PANDORA ESSENCE. PANDORA ESSENCE is set to launch in 2024 following a successful pilot in the Netherlands in 2023, expanding our offering into the aesthetic space of organic, fluid and natural jewellery design to attract new consumers to the brand. Pandora Timeless, Pandora Signature and PANDORA ESSENCE are grouped in the new segment Fuel with more, which also encompasses Pandora Lab-Grown Diamonds. Within the Pandora Lab-Grown Diamonds collection, we took notable strides in 2023 through the expansion of our assortment with three new collections, which are now available in more than 700 stores across the US, Canada, the UK and Australia with select collections also available in Mexico and Brazil. These new collections introduced fresh design aesthetics through new cuts, original settings and everyday essential styles. Pandora targets more than DKK 1 billion in revenue from Pandora’s Lab-Grown Diamonds collection by 2026. Growth pillar 3: Markets Thanks to Pandora’s unique global presence, we see growth opportunities spanning our entire geographical footprint. With a strengthened operating model, we are now well-equipped to pursue growth opportunities in a broader range of geographical regions. Consequently, the former growth pillar of “Core markets” has accordingly been renamed “Markets”. In markets where Pandora IntroducingPANDORAESSENCE This collection signifies a fresh chapter for Pandora, characterised by a design that draws inspiration from the organic shapes found in nature. ANNUAL REPORT 2023 23 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS already has a high market share, such as the UK, Italy and Australia, Pandora expects like-for-like to grow steadily, maintaining its leading position while leveraging the full jewellery brand position to further build market share. For the less penetrated markets such as the US, Germany, France, China and markets within Rest of Pandora, Pandora expects to increase market share and sees potential for consistent, higher like-for-like growth. The white space opportunities to expand Pandora’s physical store network are vast, and we are set to accelerate our network expansion. In 2021, we identified approximately 7,000 viable locations for new Pandora stores across markets where we already have a presence with owned and operated stores. From 2024 to 2026, Pandora targets a net total of 225-275 additional concept store openings and a net total of 175-225 Pandora-owned shop-in-shop openings. Through this predictable and profitable revenue stream, Pandora expects around 3% CAGR in organic revenue contribution annually over the period 2023-2026. All new stores will be built in the new Evoke 2.0 format. Our unique operating model allows for the brand to be efficiently scaled up in new or underserved markets. We will now also take initial steps towards entering new markets or expanding into underserved regions such as South Korea, Japan and India. Growth pillar 4: Personalisation Personalisation is a key component of the Pandora brand. Leveraging customer data and enhancing the digital experience plays a pivotal role in this. With the Phoenix strategy, we have made significant advancements in transforming our retail execution and digital trans- formation. Through the new My Pandora loyalty programme, personalised marketing and customisable products, Pandora is consistently attracting new customers and fostering stronger customer relationships. Pandora will continue to roll out My Pandora, which is currently deployed in three markets and expected to be available in all major markets by 2026. Engraving services, a recent addition to Pandora’s in-store experience, have seen significant expansion and will be available across 1,450 Pandora stores by the end of 2024. We have observed an increase in like-for-like growth in stores offering engraving services. Our investments in our people, particularly our store colleagues, are paying off. Pandora’s owned and operated stores have outperformed our franchise partners in terms of like-for-like, in part due to these investments. We will now enhance our focus on one of the fundamental drivers for delivering a personalised, world-class customer experience: the store teams. Our store colleagues play a unique role, serving as a true sales force that extends beyond transaction handling. In alignment with this, we will intensify our focus on store colleagues, with a particular emphasis on store managers, given the direct correlation between store manager seniority and in-store performance. Sustainability: Leading our industry Industry leadership in sustainability is a fundamental cornerstone of our Phoenix strategy. We will lower our negative impact on the planet and create positive outcomes for people and communities touched by our business and support our long-term growth ambitions. We have set ambitious sustainability targets and wish to lead the transformation of our industry by showing that beautiful, hand-finished jewellery goes hand in hand with sustainable business practices. We are on track to reduce emission by 50% across our full value chain by 2030, as part of our ambitious science- based target. Since 2019, we have reduced our total emissions by 27%. Crafting materials are the largest contributor to our value chain emissions. We have worked with our suppliers and have already in December 2023 reached our goal of sourcing 100% recycled silver and gold, ahead of our 2025 target (2023 average: 97%). This achievement is not only key to our circularity agenda but is also central to lowering our carbon emissions. In 2021, we set a target to reach gender parity in senior leadership by 2030 (VP-level and above). Back then, 23% of senior leadership positions were held by women, but today we have reached 34%. We expect this progress to continue. Make it personal Pandora offers engraving services in more than 800 stores worldwide, with a variety of jewellery pieces that provide a blank canvas for personal expression. ANNUAL REPORT 2023 24 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Redefining the rules of diamond jewellery Pandora is on a mission to democratise diamonds. With Pandora Lab-Grown Diamonds, we break with industry tradition by bringing diamond jewellery to more people and to more wearing occasions. This year, we introduced three new lab- grown diamond collections: Nova, Era and Talisman. In addition to expanding the collections, we also made the jewellery available in more geographies. Expanding beyond the UK, the US and Canada, the collections were made available in Australia, Mexico and Brazil during the second half of 2023. Pandora Lab-Grown Diamonds are optically, chemically, thermally and physically identical to mined diamonds – except ours are created above ground. “Lab-grown diamonds are a fantastic space for us; an innovative and culture- shaping opportunity, which is rare to find in any industry. Identical to mined diamonds, lab-grown diamonds are created in a laboratory rather than excavated from a mine. Our diamonds are not only for the few, for once-in-a-life- time occasions or only for giving. They are STORY BRINGING BEAUTY, JOY AND SPARKLE TO MANY for all occasions – everyday – and they represent personal meaning to each of us,” says Mary Carmen Gasco-Buisson, Chief Marketing Officer of Pandora. Adding to the thousands of years’ old history of diamond jewellery – this next chapter of lab-created diamonds is influenced by Pandora’s creativity, which is built on values such as ethics, sustainability and identity. Pandora Lab-Grown Diamonds are meticulously grown, cut and polished to ensure exceptional quality, enhancing their brilliance and allure. Each diamond is carefully set in sterling silver or 14k white or yellow gold by skilled artisans. In addition to their visual appeal, they also come with a carbon footprint around 95% lower than its mined counterpart. If all diamonds could reach the same low footprint, this would cut six million tonnes of CO annually – the same as replacing all cars in New York City with electric vehicles. Pandora is thereby setting a new industry standard for creating beautiful, hand- finished jewellery with a reduced impact on the planet. Since August 2022, every piece in the Pandora Lab-Grown Diamonds collection is created using diamonds grown, cut and polished with 100% renewable energy, and set in jewellery crafted with 100% recycled silver or gold. “DiamondsforAll”campaign Model and actress Pamela Anderson was one of the world-class icons that helped Pandora bring the messages of the “Diamonds for All” campaign across. ANNUAL REPORT 2023 25 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS INDUSTRY TRENDS RESPONDING TO A CHANGING WORLD As a global company, Pandora is influenced by the ever-changing dynamics in world economics and culture. Four major trends hold particular relevance to our Phoenix growth strategy. TREND 1: MACROECONOMIC UNCERTAINTY The past few years have been characterised by a highly uncertain macroeconomic outlook. Rising interest rates and inflation have generally resulted in widespread pressure on consumers across many markets. Pandora’s response Despite the broader macroeconomic uncertainty, Pandora continued to execute relentlessly on our Phoenix strategy whilst leveraging our strong brand and unique business model. In 2023, we continued to invest into the brand, and we saw brand consideration increase across many markets, while maintaining our industry-leading unaided brand awareness. We successfully managed to bring more consumers to the brand. Pandora continues to benefit from a position as one of the leading gifting brands globally, which has allowed for consistently strong performances over gifting periods such as Mother’s Day and Christmas. During the period of uncertainty, we have also managed to consistently generate solid profitability, backed by our strong starting point of structurally high gross margins. The asset-light nature of the business meant that Pandora continued to return cash back to shareholders, including our highest ever total shareholder distribution in 2023 of DKK 6.4 billion. TREND 2: DIGITAL ACCELERATION AND AI The integration of physical and digital realms is continually expanding. Nearly 5 billion people – almost two thirds of the world’s population – are now social media users, spending an average of 2.5 hours per day in the digital, social sphere 1 . The digital development is accelerating, and artificial intelligence only adds to this acceleration with its potential to reshape creativity and efficiency and transform the operational landscape for many businesses. Pandora’s response Pandora is transforming customers’ shopping experiences through the use of technology and data at scale. Since 2020, we have embraced AI and machine learning, particularly in customer segmentation and marketing. Pandora is exploring opportunities in several AI areas including generative AI – the ability of artificial intelligence to generate text, images or other media. Our current focus is on accelerating predictive analytics and AI, as well as establishing foundations for data ethics and AI safety. In 2023, we also incorporated CGI (computer-generated imagery) into our digital strategy with exciting content from Copenhagen Fashion Week and our “Loves, Unboxed” campaign. This helped elevate our digital presence and captivated audiences across our social media channels. As a vertically integrated business with strong tech and data foundations, and strategic partnerships with global tech leaders, we are strongly positioned to adopt and benefit from these technologies. Captivating jewellery collections and storytelling At our recently opened Evoke 2.0 store on Oxford Street in London, every detail is crafted to create a space where customers can connect with the brand on a whole new level. 1 Statista, 2023. ANNUAL REPORT 2023 26 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS PartnershipwithUNICEF Pandora for UNICEF has helped more than 1.2 million children around the world and supports children and young people, especially girls, with educational programmes. Moore Global, 2022. McKinsey, 2020. McKinsey, 2023. TREND 3: GROWING THE BUSINESS, SUSTAINABLY The heightened urgency of the climate crisis has amplified stakeholder demand for brands to champion social and environmental causes. Research shows that companies emphasising sustainability work have experienced a notable 9.1% increase in profits - and a diverse and inclusive workplace not only enhances profitability but also attracts and retains great talent. Pandora’s response A foundational part of our Phoenix strategy is to become a low-carbon, circular, inclusive, diverse and fair business. In 2023, we made strong progress on our targets. We are continuously evolving our Responsible Sourcing Programme to ensure that we work with suppliers that share our sustainability ambitions, and in our audit programme, we actively engage with suppliers to enhance their capabilities in responsible business practices. Our sustainability targets are also firmly reflected in our incentive programmes for senior leadership and in all of Pandora’s financing agreements. Partnering to drive change is a key component. Through our long-standing partnership with UNICEF, we help provide learning opportunities to children and young people. And we share our experience on human rights and low-carbon initiatives with members of the Watch & Jewellery Initiative 2030 for mutual learning. TREND 4: NEW NOTIONS OF WORK AND EMPLOYMENT In recent years, traditional concepts of work and employment have undergone a significant transformation. Today, many employees pursue a blend of elements that extend beyond salary with an emphasis on work- life balance, professional development and a sense of purpose. For instance, in Europe, 35% of job departures can be traced back to unsustainable performance expectations 3 . Organisations must adapt by tailoring their employee value propositions to remain a workplace of choice. Pandora’s response We are proud to record very high employee engagement, and as part of the Phoenix strategy, we focus on improved employee retention and a next-level employee experience. Our new initiatives count enhanced leadership programmes, e-learning, digitalisation of all people systems, and a retail workforce management system which will help streamline daily tasks to support leaders and employees. As a destination for world-class talent, we continue to invest in the long-term wellbeing of our employees and to support new ways of working with flexible work policies. ANNUAL REPORT 2023 27 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS A workplace as diverse and inclusive as our jewellery Pandora is a global organisation with 33,000 employees, representing more than 130 nationalities and spanning professional disciplines like crafting, distribution, retail and office. We believe that inclusion, diversity and fairness are core tenets of a responsible growing business and are key in our strategic priorities and business performance. POWERED BY OUR PEOPLE PEOPLE Strong business results start with our people and a healthy workplace – not only what we achieve, but how we get there. We regularly ask Pandora people to rate their experience and provide feedback to measure employee engagement and get a rating of Pandora’s efforts to create and maintain a diverse and inclusive work environment. In the most recent survey in October 2023, we achieved record results. The employee Net Promoter Score (eNPS) reached a record-high of 60, placing us in the top 5% of Workday Peakon’s benchmark in the consumer sector globally. Pandora’s overall average inclusiveness score was 8.7 on a scale from 1 to 10 – a slight improvement from 8.6 in 2022, placing us in the top 25% of the consumer sector. Based on the survey, leaders and teams review the results, including comments, and pinpoint areas for improvement and identify action plans for both the short and long term. Effective and engaged leaders Leaders play an essential role in developing employees and in helping them thrive. In 2023, we continued our global leadership development programme, RISE, to better guide and inspire our leaders to develop, coach and enable performance for teams. At the end of this year, 1,379 leaders had completed the course and provided exceptional feedback. When the programme Shifting customer perception of Pandora to a full jewellery brand is driven by our strongest advocates: our talented people. As we continue executing on the Phoenix strategy, we reinforce this strength by improving employee retention and creating a next-level employee experience. Our core values We Dream, We Dare, We Care and We Deliver. ANNUAL REPORT 2023 28 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS succession planning and more related to critical people processes. With these updates, we have a wider utilisation of data through enhanced analytics capabilities. Looking into 2024, a new workforce management system will be rolled out to retail colleagues in key markets. This system will help make daily managerial tasks simpler and faster and is a part of an ecosystem of programmes designed to better support our retail colleagues and improve employee retainment. The system will enable retail colleagues to spend most of their time where it matters most – face-to-face with customers. The workforce management system will also collect data to improve the daily work lives of all colleagues. Attracting prime talent Under our employer brand, Craft the Incredible, Pandora has attracted highly skilled talent from leading brands and across other industries. In 2023, we attracted around 900 office colleagues and hired more than 3,500 retail colleagues for our peak trading period in the fourth quarter. In September, Pandora was honoured to be featured on TIME Magazine's World’s Best Companies list for 2023. The list was published by TIME Magazine in collaboration with Statista and represents a compilation of outstanding companies across industries that were assessed on three criteria: employee satisfaction, revenue growth and sustainability. The global recognition underlines Pandora’s steadfast commitment to building a great workplace, a healthy business and lead the industry within sustainability. Everything we do is made possible by our 33,000 employees that each play a big part in giving a voice to people’s loves. concludes, nearly 4,000 leaders will have completed the course. Additionally, more than 350 top leaders receive continuous talent training to ensure strong leadership growth and secure succession. In our 2023 survey, employees scored Leadership Effectiveness at 8.4 on a scale from 1 to 10, a slight increase compared to 8.3 in 2022. Working towards gender parity Pandora also made significant headway with the diversity and inclusion target. Our targets 1 for balanced gender representation in leadership are to achieve 33% women in senior leadership by 2025 and reach gender parity no later than 2030. In 2023, women in senior leadership increased to 34%, achieved ahead of schedule and marking an increase from 29% in 2022. We are committed to eliminating discrimination in executive recruitment and actively encouraging individuals of all genders, with a specific focus on empowering women to explore managerial roles. People systems to match our potential Creating a next-level employee experience also means we need the digital infrastructure to best support employees and leaders in their daily work, personal development, goal setting and more. In 2022, Pandora launched a new digital full-year process. The system allows for flexible, integrated and collaborative work on performance goals, personal development, 1 For these targets, we define senior leadership as positions at Vice President level and above, including the Board of Directors. GENDER DISTRIBUTION IN MANAGEMENT Board of Directors 2022 2023 Members of Board of Directors, number 7 7 Underrepresented gender in Board of Directors, % 43% 43% Target, % 40% Fulfilment year 2027 Leadership Team in Pandora A/S 1 Members of Leadership Team Pandora A/S, number 13 15 Underrepresented gender in Leadership Team Pandora A/S, % 23% 20% Target, % 40% Fulfilment year 2027 It is important to Pandora to offer an inclusive and diverse working environment, enabling diverse and creative thinking and ensuring equitable opportunities for all employees to realise their potential. Our Board of Directors, comprised of 7 members, has achieved an equal gender distribution of 43%. In 2023, the underrepresented gender was male, in 2022 female. In our Leadership Team in Pandora A/S, comprised of 13 members, we have not achieved an equal gender distribution (23%), as the representation of the underrepresented gender has not changed in 2023. In both 2023 and 2022, the underrepresented gender was female. We recognise there is more to do before we can reach our target of 40% in 2027. Whilst we have made progress, we have identified a need to increase the level of awareness across our leadership population. We have developed a programme of activities that has been deployed throughout 2023, and will continue in 2024, that includes senior leadership training on unconscious bias targeted at Executive Management and the Senior Leadership Team. We have also included unconscious bias training for all people leaders who engage in the process of hiring to ensure we can raise awareness and educate people leaders in their responsibility. Pandora is continually investing in developing our internal senior leadership talent. We have implemented succession plans for our Executive Management members and have taken a balanced approach in developing senior female leaders as part of their ongoing development plans. 1 The Leadership Team in Pandora A/S includes members of the Executive Management (first level) and persons with managerial responsibility who report directly to the members of the first level (second level). ANNUAL REPORT 2023 29 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS SUSTAINABILITY SUSTAINABILITY AS A CATA LYST FOR GROWTH Our commitment to sustainability remains a cornerstone of our Phoenix business strategy. In 2023, we continued to steer our business towards long-term growth, minimise our environmental footprint and generate meaningful benefits for the individuals and communities we serve. Sustainability is embedded across Pandora, from design, sourcing and crafting to how we bring our jewellery to customers and extending product life through light repair services in many of our owned and operated stores. This is Leading the jewellery industry on sustainability, Pandora is on track to reduce carbon emissions by 50% across our full value chain by 2030. We have shifted to sourcing 100% recycled silver and gold as of December 2023, well ahead of our 2025 target. We further ended 2023 at 34% women in leadership, up from 29% in 2022. Precious metals Precious metals can be recycled forever without any loss of quality. Silver and gold, originally mined centuries ago, are just as good as new. Low-carbon business Circular innovation Inclusive, diverse and fair culture OUR STRATEGIC PRIORITIES ANNUAL REPORT 2023 30 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS not just a choice; it is our obligation as a global brand, and it is one of the keys to our company’s resilience. In 2023, we advanced on our ambitious sustainability targets to become a low-carbon, circular, diverse, inclusive and environmentally conscious business, addressing additional environmental topics, for example biodiversity. Reaching our climate target will not be a linear journey, and we expect an increase in our 2024 emissions (compared to 2023), notably as a result of the Vietnam crafting facility construction, retail network expansion, store refurbishments, increased supplier-specific data and overall growth. Discover more about our sustainability targets and progress on the following page or explore our analysis of biodiversity on page 21 in our Sustainability Report 2023. Our work on sustainability also has us focused on adhering to the growing body of international sustainability regulation, most notably the EU Corporate Sustainability Reporting Directive (CSRD). We have developed our initial double materiality assessment a year in advance of CSRD requirements. We further solidified our sustainability data reporting and governance to meet CSRD requirements. Our actions in 2023 include engaging with key functions across the organisation, forming a CSRD Task Force to ensure progress towards the first reporting in the full- year 2024 report and we included it as a key topic in sustainability governance bodies. At Pandora, strong financial performance and sustainability go hand in hand. Therefore, our financing is linked to our circularity and low-carbon targets. In 2023, we secured our third sustainability-linked financing instrument, and all company financing is now tied to sustainability performance. An EUR 500 million sustainability-linked bond was issued with final payment linked to performance on greenhouse gas emission reductions and the sourcing of recycled silver and gold. In 2023, we also launched a share buyback programme with a fee structure that includes a discount for Pandora. A portion of the discount is earmarked to accelerate our low-carbon strategy by investing in renewable energy and in energy efficiency projects at our crafting facilities in Thailand. Read more on page 14 in our Sustainability Report 2023. Our efforts on sustainability were again recognised by rating agencies, and for the second year in a row, Pandora received an 'A' score for transparency and performance on climate change by CDP. In addition, Pandora earned a spot at TIME Magazine’s World's Best Companies list, ranking 21 st out of 750 companies for our sustainability ambitions and actions. Pandora is one of eight Danish companies featured on the prestigious list and the sole Danish company in its category (Apparel, Footwear & Sporting Goods). SustainabilityReport2023 Read more about Pandora's reporting to the Task Force on Climate-Related Financial Disclosures and EU taxonomy disclosures in our Sustainability Report 2023. Skilledcraftspeople More than 12,200 skilled craftspeople work at our crafting facilities in Thailand. Here a photo from our facility in Lamphun near Chiang Mai in Northern Thailand. ANNUAL REPORT 2023 31 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS OUR SUSTAINABILITY TARGETS OUR NEXT STEPS BY 2030 Reduce total greenhouse gas emissions by 50% from a 2019 baseline (Scopes 1, 2 and 3) by: • Reducing emissions in own operations by at least 90% to become carbon neutral (Scopes 1 and 2 market-based). • Reducing value chain emissions by 42% (Scope 3). BY 2040 Achieve net-zero emissions. SCOPES 1 & 2 In 2024, we plan to finalise the geographical roll-out of our renewable energy scale-up via the purchase of Renewable Energy Certificates. We will continue to explore new opportunities to source renewable energy to cover our retail volumes and support new energy projects in Thailand. SCOPE 3 We will continue to focus on key impact areas, such as low-impact materials and services and transport- related reductions, along with scaled supplier engagement activities. In 2024, we will continue our purchase of 100% recycled silver and gold and phase out leftover stock of non-recycled sources. We have achieved our inclusion score target, so our focus will be on maintaining and improving our score. We plan to integrate a learning module into the recruitment process to highlight the responsibility of all hiring managers in taking a fair and balanced approach during hiring decisions. We will deliver inclusive training to the Executive Leadership Team and VP-level and above, with a focus on raising awareness of our responsibility as leaders to create an inclusive environment for colleagues. We will be reviewing inclusion within our recruitment process and succession planning to ensure a sustainable approach towards achieving gender parity. It has proven challenging to obtain the data we need while complying with data collection restrictions. We will continue to refine our approach in 2024 and aim to have it available for the next year. BY 2025 Purchase 100% recycled silver and gold in the crafting of our jewellery. BY 2030 Achieve full gender parity 1 . BY 2025 • Reach 1/3 women in leadership. • Create an inclusive workplace and increase the share of underrepresented groups. • 30% of our brand ambassadors in our global communication to come from underrepresented groups. • 30% of our branding content budget to be spent with suppliers owned by women or other underrepresented groups. LOW-CARBON BUSINESS CIRCULAR INNOVATION INCLUSIVE, DIVERSE AND FAIR CULTURE In 2023, we transitioned all our recycled silver and gold suppliers to certified sources. As of December 2023, we are only purchasing recycled silver and gold – both in our own crafting, and in components, and the average for the year ended at 97%. SCOPES , & (%) RECYCLED SILVER AND GOLD (%) SCOPE (%) INCLUSION WOMEN IN LEADERSHIP We decreased our total emissions by 27% compared to our 2019 baseline. In 2023, we reduced Scopes 1 and 2 emissions by 56% versus 2022 and 86% versus baseline. This was achieved primarily by continued sourcing of 100% renewable energy for our crafting facilities in Thailand. We also continued the roll-out of Renewable Energy Certificates for other owned and operated activities. In 2023, we reduced Scope 3 emissions by 21% versus 2022 and 15% compared to baseline. Key drivers include the shift to 100% recycled silver and gold, lower crafting material volumes and more supplier-specific data. Reaching our climate target will not be a linear journey, and we expect an increase in our 2024 emissions compared to 2023, notably as a result of the Vietnam crafting facility construction, retail network expansion, store refurbishments, increased supplier-specific data and overall growth. SCOPES & (%) 2019 2030: -50% 2023: -86% 2019 2025: -90% 2023: 97% 2019 2025: 100% 2023: -15% 2019 2030: -42% 1 Gender parity in leadership refers to an equal number (50/50) of men and women in leadership positions from VP-level and above (including the Board of Directors) with a +/- 5 percentage points variation. PROGRESS AND STATUS Achieved progress against target Yet to be achieved We achieved an inclusion score of 87% in our latest engagement survey, and will work to maintain this score in the coming years and in line with our 2025 target. We ended 2023 with 34% women in leadership positions, up from 29% in 2022. This means we have achieved our interim 2025 target of 33% women in leadership ahead of schedule. We will continue our work with succession plans and promotion processes to reach full gender parity by 2030. 2023: -27% December 2023: 100% 2022: 86% 2022: 29% 2023: 87% 2023: 34% 2025: 85% 2025: 33% 2030: 50% ANNUAL REPORT 2023 32 Silver and gold are the most used precious metals in our jewellery and therefore the most impactful place to initiate our circularity journey. Over the past years, we have worked with our suppliers to gradually substitute all newly mined silver and gold with recycled sources. In December 2023, we completed our shift to source 100% recycled silver and gold for all of our jewellery, which was well ahead of our 2025 target. The average sourced in 2023 was 97%. Silver and gold are used in a wide range of industrial applications, including electronics, medical equipment and chemical production. The metals can be recycled forever without losing their quality, and the sustainability benefits are significant. The carbon emissions for recycled silver are one third compared to mined silver, while recycling of gold emits approximately 600 times less carbon than mining new gold, according to life cycle assessments. Mining can also result in erosion, loss of biodiversity and the contamination of soil, groundwater and surface water by the chemicals emitted STORY 100% RECYCLED SILVER AND GOLD from mining processes. By sourcing recycled instead of newly-mined silver and gold, Pandora avoids around 58,000 tonnes of CO per year. This is similar to the emissions from the annual electricity use of 11,000 homes or driving 6,000 cars around the world. “The need for sustainable business practices is only becoming more important, and companies must do their part in response to the climate crisis and the depletion of natural resources. Through this very important shift, Pandora is showing the way forward towards a more sustainable jewellery industry,” says Alexander Lacik, President & CEO. Today, less than 20% of the world’s silver supply comes from recycled sources. The refiners we use source their silver and gold from industrial waste, manufacturing scraps, old jewellery or silverware and other materials. All the silver and gold used in crafting our jewellery comes from certified and responsible refiners according to the Responsible Jewellery Council Chain of Custody (RJC-COC) standard. Allowing time for the depletion of existing inventory, we expect that all production will run entirely on recycled silver and gold from the second half of 2024. Ahead of our plan, we now source only recycled silver and gold. The following sources were used to calculate the difference in carbon footprint between recycled and mined sources: mined and recycled silver (GaBi database 2019), mined gold (World Gold Council, 2018), and recycled gold (C. Hafner, 2019). ANNUAL REPORT 2023 33 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS MANAGING RISKS Our approach to risk management Pandora proactively manages risk to support continued growth of our business and to protect our people, assets and reputation. As a global brand with a fully integrated value chain, some of the key risks facing Pandora are brand and product relevance and supply chain disruptions. Through our enterprise risk management programme, we actively work to identify, monitor and reduce risk to an acceptable risk level. We continuously monitor inherent risks that could impact our daily operations, as well as strategic risks that may impact Pandora’s competitive positioning, value creation and strategy. We see well-functioning risk management processes as key to maintaining and building Pandora’s position as the world’s largest jewellery brand. RISKS At Pandora, we carefully identify, assess and manage potential risks to the company on an ongoing basis. PANDORA RISK MATRIX IMPACT LIKELIHOOD Brand and collections Macroeconomic conditions Talent retention and succession Supply chain disruptions Commodity prices and foreign exchange rates Cyberattacks and breakdown ofIT Pandora’s Chief Financial Officer heads up the company’s Risk Management Board, which consists of senior management representatives from across our value chain. All areas of our business report their most significant risks to Global Risk & Insurance, along with assessments of those risks and an overview of implemented mitigations and action plans. To read more about our enterprise risk management efforts, see pandoragroup.com/investor/ corporate-governance/risk-management. Our key risks The Board of Directors reviews and discusses key risks that could threaten our business model or the future performance, solvency or liquidity of Pandora. In the following section, the key risk groups and our mitigating activities are described. It should be noted that the key risks do not represent all the risks associated with our business. Other risks not presently identified, or ones currently deemed to be less material, may also have an adverse effect on our business. BoardofDirectors Executive LeadershipTeam RiskManagement Board GlobalRisk &Insurance Organisation Review and challenge of risks HIGH HIGH LOW ANNUAL REPORT 2023 34 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS AREA RISK DESCRIPTION IMPACT MITIGATION Brand and collections There is a risk that we are unable to maintain and elevate our brand’s desirability and relevance and further that we fail to deliver consumer-centric jewellery concepts and innovate new collections. Failing to stay relevant and desirable as a brand and failing to provide relevant product offerings may lead to a decline in traffic into the stores and online and adversely impact our revenue and profitability. • Create consumer-centric innovation, fuelled by consumer insights and rigorous testing • Build brand awareness and desirability through competitive media investments, fashion events, PR, social etc. • Strengthen capabilities within data analytics and technology • Deliver 360-degree brand experience across all consumer touchpoints online and offline • Roll out new store concept • Continue monitoring trademarks and patents and fighting infringements. Macroeconomic conditions There is a risk that adverse macroeconomic conditions, for example inflation and increased interest rates, impact consumers’ ability and willingness to buy jewellery. As an accessible jewellery brand, a decline in consumer confidence and lower disposable income for consumers may adversely impact our revenue and profitability. • Adjusted commercial tactics and cost control • Geographical diversification of revenue streams • Continuous monitoring of consumer behaviour and trends. Commodity prices and foreign exchange rates There is a risk of increased prices for silver and gold. Further, Pandora generates significant revenue and incurs costs in multiple foreign currencies, leading to currency exposure. In particular a stronger THB (higher production costs) or a weaker USD and GBP (lower revenue) versus DKK may adversely impact our revenue and profitability. • Hedging 70% of forecasted 12-month cash flow via FX forwards • Hedging at least 70% of silver and gold consumption the next 12 months • Ongoing review of sales prices. Supply chain disruptions There is a risk of disruptive events such as fire, extreme weather, pandemics, political conflicts, armed interstate conflicts, cyberattacks, terror or other hazards materially disrupting our crafting and distribution facilities or key suppliers’ sites. Pandora operates a fully integrated value chain with all crafting facilities based in Thailand and primary distribution centres located in Germany, Thailand, the UK and the US. Disruption, physical damage and interruption may adversely impact our revenue and profitability temporarily. • Continued loss prevention reviews and improvements • Business continuity planning • Insurance for insurable events • Geographical diversification and expansion of crafting capacity • Dual sourcing when feasible • Optimised B2B and B2C distribution capacity. Talent retention and succession There is a risk that we are unable to attract and retain highly talented and capable people. Critical capability gaps to drive growth and sustainable performance may adversely impact our revenue and profitability. • Employer branding • Enhance employer value proposition to manage long-term talent development and employee attrition • Continuous monitoring of employee Net Promotor and Leadership Effectiveness Scores. Cyberattacks and breakdown of IT There is a risk of disruption to critical IT systems, caused by for example large-scale ransomware attacks, cloud outages and cyberwar. Breach of data confidentiality or business interruption may adversely impact our revenue and profitability temporarily. • Company-wide information security programme • Crisis management and IT disaster recovery • Business continuity planning • Enterprise resource planning system (ERP) upgrade. Addressingsustainabilityrisks Management of material sustainability risks is an integrated part of Pandora's Enterprise Risk Management process. Managing sustainability risks is important for building a resilient business. Pandora prepares for the risks of changing weather patterns, rising sea levels and other climate impacts, in addition to social risks, stemming from our operations. Read more about our Task Force on Climate-Related Financial Disclosures and sustainability risk management in our Sustainability Report 2023. ANNUAL REPORT 2023 35 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS CORPORATE GOVERNANCE 37 Corporategovernance 41 Board of Directors 43 ExecutiveLeadershipTeam 45 Shareholderinformation ANNUAL REPORT 2023 OUR GOVERNANCE STRUCTURE The Board supervises Executive Management’s work and is responsible for Pandora’s general and strategic direction. CORPORATE GOVERNANCE Pandora has established a corporate governance framework that emphasises accountability and transparency, thereby promoting responsible business practices and laying a solid foundation for sustained long-term value creation. these committees are appointed from within the Board. The committees’ terms of reference are available at pandoragroup.com/investor/corporate-governance/ governance-documents. Members of Executive Management are appointed by the Board. Executive Management is responsible for the day-to-day management and for the execution of Pandora’s strategy. In addition, Pandora has an Executive Leadership Team. The team members are responsible for the day-to-day operations of their respective business areas, including sustainability and serve as a part of Pandora’s overall leadership. Board of Directors Composition The Board is currently comprised of seven members, all of whom are elected at the Annual General Meeting for a one-year term. In accordance with the Danish Recommendations on Corporate Governance, all Board members are regarded as independent, except for Christian Frigast, who, due to his more than 12-year tenure on the Board, no longer maintains the independence status. The composition of the Board is intended to ensure relevant and complementary competencies and diversity. This approach is instrumental in supporting Pandora’s strategic goals and vision, while ensuring well- considered and judicious decision-making. Leadership structure The corporate authority is divided between the Board of Directors (the Board) and Executive Management. The Board outlines the overall vision, strategy and objectives of Pandora’s business activities and supervises the performance of Executive Management. In addition, the Board is responsible for embedding sustainability in Pandora’s purpose, strategy and objectives. This includes reviewing sustainability performance and reporting, as well as monitoring and overseeing progress related to our sustainability strategy. The Board has established Audit, Remuneration and Nomination Committees, and members and chairs of Annual General Meeting Board of Directors Executive Management Executive Leadership Team Sustainability Board ANNUAL REPORT 2023 37 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Board evaluation Each year, the Board conducts a board review focusing on the effectiveness and skills of the Board. The ideal mix of skills and experience required of Board members includes: • Board experience • Executive management • Sectoral experience • Digitalisation • Sustainability • Retail • Marketing and brand • Finance An external assessment of the Board’s skills and effectiveness is conducted every three years to ensure objectivity and benchmarking. In 2023, an external Board effectiveness review was conducted across seven areas: purpose and strategy, Board agenda and meetings (including committees), talent and culture, Board composition, Board members’ contributions, Chair's effectiveness, and reporting/risk management. An external organisation was chosen to carry out this assessment using digital surveys, director interviews and presentations of results. The results of the external board effectiveness review held in 2023 identified that the Board continues to be well-established and well- functioning, utilising strengths in diversity, transparency and a distinct performance culture. The Board continues to increase its strong dynamics, openness and effectiveness in collaboration with the committees and Executive Management. Board activities in 2023 The Board held nine meetings in 2023. Its primary focus was to navigate Pandora carefully through uncertain macro-economic and socio-political environments and to review and approve the next chapter of the Phoenix strategy, which was announced at Pandora’s Capital Markets Day in October 2023. Furthermore, the Board has overseen the integration of sustainability into relevant processes in Pandora, ensuring alignment with our strategic priorities. Audit Committee The Audit Committee currently has four members, all of whom have been appointed for a one-year term. The Audit Committee’s responsibilities include assisting the Board in monitoring the effectiveness of the internal control and risk management systems, as well as reviewing Pandora’s financial and sustainability reporting and audit/assurance processes. The Audit Committee conducts its work in accordance with its Terms of Reference. In 2023, the Audit Committee met six times. Its main activities were to: • Review key accounting principles, significant accounting estimates, key financial risks and compliance with tax regulations; • Monitor the external financial and sustainability reporting process; • Monitor the effectiveness of Pandora’s internal control and risk management systems, including internal audit; • Monitor the external auditors and their independence; • Monitor the effectiveness of the sustainability data process; • Review Pandora’s whistleblowing reporting system and whistleblowing cases; • Review Pandora’s treasury policy; • Review Pandora’s tax policy. Independent auditor Pandora’s independent auditors are appointed for a one-year term at the Annual General Meeting following a proposal from the Board, based on a recommendation from the Audit Committee. The framework for the auditors’ responsibilities, including their remuneration, audit and non-audit services, is agreed annually between the Board and the auditors following the recommendation of the Audit Committee. AUDIT COMMITTEE Committee meetings attended Lilian Fossum Biner Heine Dalsgaard Birgitta Stymne Göransson Catherine Spindler Jan Zijderveld 1 Chair Meeting attended Meeting not attended Not a member at the time BOARD MEMBERS Board meetings attended Peter A. Ruzicka 1 Christian Frigast 2 Heine Dalsgaard Lilian Fossum Biner Birgitta Stymne Göransson Marianne Kirkegaard Catherine Spindler Jan Zijderveld 1 Chair 2 Deputy Chair Meeting attended Meeting not attended Not a member at the time Meetings in 2023 Board of Directors 9 Audit Committee Remuneration Committee Nomination Committee 6 6 4 ANNUAL REPORT 2023 38 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Remuneration Committee The Remuneration Committee currently has three members, each appointed for a one-year term. The Remuneration Committee assists the Board in ensuring Pandora’s remuneration policies strike a balance that aligns with the interests of Pandora’s shareholders while providing rewarding and motivating remuneration for Executive Management and senior employees. In 2023, the Remuneration Committee met six times. Detailed information on the Committee’s key activities can be found in the Remuneration Report, accessible at our website: pandoragroup.com/investor/corporate- governance/remuneration-reports. Nomination Committee The Nomination Committee currently has four members, each appointed for a one-year term. The Nomination Committee works according to its Terms of Reference and its main responsibilities are assessment and evaluation of the Board and Executive Management, including performance, skills and experience, and nomination of candidates to the Board and Executive Management. Further, the committee monitors talent and succession policy and ensures compliance when making Board, Executive Management and Executive Leadership Team appointments. Finally, it deals with succession planning for Executive Management positions and reviews and monitors diversity policies to ensure compliance. In 2023, the Nomination Committee met four times and had a few additional ad hoc exchanges relating to the Board assessment. Its main activities were to: • Prepare and conduct the Board assessment in accordance with the Danish Corporate Governance Recommendations; • Review cultural enablers that have driven colleague engagement, including Pandora’s Employee Value Proposition and leadership development; • Assess performance of Executive Management and the cooperation between the Board and Executive Management; • Review succession planning for Executive Management roles. Sustainability integration and governance Sustainability is deeply engrained in Pandora’s strategic direction and how we conduct our business and is governed at the highest level by the Board. The responsibility for the execution of the sustainability strategy is delegated to Pandora’s Sustainability Board. The Sustainability Board holds the responsibility for formulating the strategy and integrating sustainability into business decisions within their respective functions. It reports to the Executive Leadership Team and is chaired by Pandora’s Chief HR Officer and consists of 11 senior leaders, including five from the Executive Leadership Team. Additional information The Corporate Governance Statement for 2023, cf. section 107b of the Danish Financial Statements Act, is available at our website: pandoragroup.com/investor/ corporate-governance/governance-statement. Pandora A/S' statutory report in accordance with section 99a and section 107d of the Danish Financial Statements Act, is available in our Sustainability Report 2023 at our website pandoragroup.com/sustainability/resources/ sustainability-reports. Pandora’s Global Data Ethics Policy, cf. section 99d of the Danish Financial Statements Act is available at our website pandoragroup.com/investor/corporate-governance/ data-ethics, and is built on our care and respect for NOMINATION COMMITTEE Committee meetings attended Christian Frigast 1 Birgitta Stymne Göransson Marianne Kirkegaard Peter A. Ruzicka 1 Chair Meeting attended Meeting not attended REMUNERATION COMMITTEE Committee meetings attended Peter A. Ruzicka 1 Christian Frigast Jan Zijderveld 1 Chair Meeting attended Meeting not attended See Pandora's Remuneration Report 2023 See Pandora's Corporate Governance Statement See Pandora's Sustainability Report 2023 See Pandora's Global Data Ethics Policy ANNUAL REPORT 2023 39 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS consumer and employee privacy. We apply equality and equity in our processing of data, we respect the person behind the data, and we focus on sustainable data practices. We also recognise the importance of Artificial Intelligence Safety. In 2023, we introduced our Global AI Standard through a series of initiatives and presented an overview of generative AI risks to our Executive Leadership Team. As a company, Pandora is committed to conducting business in full compliance with the principles for the safe use of AI as set out in the AI Safety Standard and will continue to promote and create awareness of these principles in 2024. Internal control and risk management systems in relation to the financial reporting process The Board and Executive Management are responsible for Pandora’s internal control and risk management systems in relation to the financial reporting process. Control environment The Group’s internal control framework identifies key processes, inherent risks and control procedures to reduce and mitigate financial risks and ensure reliable financial reporting. The Audit Committee assists the Board in supervising the financial reporting process and monitoring the effectiveness of the internal control and risk management systems. Executive Management is responsible for maintaining and strengthening the overall control environment, identifying weaknesses and ensuring necessary steps are taken to mitigate financial risks through standardisation and process optimisation. A central Internal Audit and Compliance Controlling (IACC) function has been established to help Pandora accomplish its objectives by bringing a systematic and disciplined approach to evaluating and improving the effectiveness of internal control, compliance and governance processes. The head of the IACC function reports to Pandora’s Senior Vice President Corporate Finance with a dotted reporting line to the Audit Committee Chair. Risk assessment The Board and Executive Management assess risks on an ongoing basis, including risks related to the financial reporting and sustainability and assess measures to manage, reduce or eliminate identified risks. The IACC function assists Executive Management and the Audit Committee in identifying and monitoring financial risks in the financial reporting process. The Audit Committee reviews selected high-risk areas on a frequent basis, including significant accounting estimates and material changes to accounting policies. Pandora’s Risk & Insurance function facilitates identification and monitoring of material risks and validates measurements taken to reduce the risks to an acceptable level. Control activities The financial information reported by Pandora A/S and its subsidiaries follows a formalised and structured process and is controlled by local controllers with local market knowledge as well as the controlling function within Pandora Global Business Services and Corporate Finance. The Group controlling function is continuously trained in new accounting and reporting requirements and monitors compliance with relevant legislation on an ongoing basis. The financial reporting process is dependent on the Group’s IT systems. Any weaknesses in system controls and related risks to the financial reporting are mitigated by manual controls. Each entity and Global Business Services assess their control environment through a self-assessment of the effectiveness of the implemented controls. The IACC function evaluates the effectiveness of the Group’s control environment on an ongoing basis and reports its findings to the Audit Committee. Monitoring Pandora’s internal control procedures and risk management systems, including the whistleblowing function, are continuously monitored, tested and documented. The Audit Committee monitors internal control and the risk management process to ensure that identified risks are mitigated. In addition to monitoring of procedures and systems, financial risks are reviewed through audits performed by the IACC function. Information and communication Group entities are assigned dedicated controllers within Corporate Finance to ensure a direct line of communication. The Corporate Finance function reports to the Chief Financial Officer. In addition, the IACC function is present at all Audit Committee meetings and provides regular status updates on the control environment. Furthermore, the head of IACC has regular meetings with the Chief Financial Officer and meetings with the Audit Committee without the presence of the Leadership Team. This set-up ensures transparency, and that communication is shared with the Audit Committee on a timely basis. The Board has adopted an Investor Relations Policy that requires all communication to stakeholders, including financial reporting, to be conducted adequately, timely and openly – both internally and externally – and to be conducted factually and truthfully and in compliance with laws and applicable regulations. The Audit Committee assists the Board in supervising the financial reporting as well as the sustainability data validation process. ANNUAL REPORT 2023 40 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Lilian FossumBiner Marianne Kirkegaard Peter A. Ruzicka Christian Frigast BirgittaStymne Göransson Catherine Spindler Jan Zijderveld BOARD OF DIRECTORS ANNUAL REPORT 2023 41 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS The Board members’ full CVs are available at pandoragroup.com. PeterA.Ruzicka Chair Yearofbirth: 1964 Membersince: 2019 Professional position: Non-executive Board member. Non-executive functions: Chair of Royal Unibrew A/S and member of the boards of Axfood AB, Aspelin Ramm Gruppen AS and AKA AS. Skills and experience: Vast operational experience with strategy execution and transformation as well as retail and brand optimisation at executive level. Furthermore, Peter A. Ruzicka contributes with experience from other board positions and insight into capital markets. ChristianFrigast Deputy Chair Yearofbirth: 1951 Membersince:2010 Non-executive functions: Chair of Axcel Management A/S, Axcelfuture, Aktive Ejere (Active Owners Denmark), Bestyrelsesforeningen (Board Leadership Society of Denmark), Frigast A/S, Danmarks Skibskredit Holding A/S and a member of the board of its subsidiary. Deputy Chair of PostNord and Axcel Advisory Board and a member of the boards in Danmarks Eksport- og Investeringsfond (EIFO), Nissens A/S, Nordsøfonden and CBS Executive Fonden. Skills and experience: Experience within areas such as general management, capital markets, consumer sales and retail execution. LilianFossum Biner Yearofbirth: 1962 Membersince:2023 Professional position: Non-executive Board member. Non-executive functions: Board member in Carlsberg A/S, Alfa Laval AB, Scania AB and Röko AB. Skills and experience: In-depth experience from retail and consumer goods companies, operational experience from strategy, finance and human resources. Furthermore, Lilian Fossum Biner contributes with 20 years of track record from mid and large-cap non-executive board positions in several large corporations in listed and private environment. BirgittaStymne Göransson Yearofbirth:1957 Membersince: 2016 Professional position: Non-executive Board member. Non-executive functions: Chair of Industrifonden and Min Doktor AB and member of the boards of Asker AB, Elekta AB, Bure Equity AB and RVRC Holding AB. Skills and experience: Experience within areas such as consumer goods, retail execution, IT, digital, financial insights and capital markets. Marianne Kirkegaard Yearofbirth:1968 Membersince:2020 Professional position: Executive Chairman in Baker & Baker UK Ltd. Non-executive functions: Member of the boards of Faerch Group, Salling Group A/S, BioMar A/S and AKK AB. Skills and experience: In-depth international insight into the consumer market, experience advancing the social sustain- ability agenda and experience of the complete value chain within large corporate multinationals. Catherine Spindler Yearofbirth: 1977 Membersince: 2020 Professional position: Deputy Chief Executive Officer of Lacoste. Non-executive functions: None. Skills and experience: Experience within international brand strategy, digital transformation and vast experience in beauty and cosmetics, high-growth pureplay digital environments and lifestyle apparel retail. Jan Zijderveld Yearofbirth: 1964 Membersince: 2021 Professional position: Non-executive Board member. Non-executive functions: Member of the boards of Ahold Delhaize N.V. and Symrise AG and senior advisor to a number of private equity firms. Skills and experience: International consumer market insight, extensive experience advancing environmental and social sustainability, and exposure to the full value chain. BOARD OF DIRECTORS ANNUAL REPORT 2023 42 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Stephen Fairchild Massimo Basei Alexander Lacik Anders Boyer MaryCarmen Gasco-Buisson Jeerasage Puranasamriddhi David Walmsley Byron Clayton EXECUTIVE LEADERSHIP TEAM ANNUAL REPORT 2023 43 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS The Executive Leadership Team members’ full CVs are available at pandoragroup.com. Alexander Lacik President&ChiefExecutiveOfficer(CEO) Yearofbirth: 1965 Membersince: 2019 RegisteredExecutiveManagement. Alexander Lacik has more than 30 years’ experience from large global consumer goods companies. Before joining Pandora, he was Chief Executive Officer of Britax Ltd., a British manufacturer of childcare products. He has also held Chief Executive Officer and senior management positions at Kasthall Golv & Mattor, Procter & Gamble and Reckitt Benckiser, where he held a number of positions, including Head of Reckitt Benckiser North America. He has a Bachelor’s degree in Business Administration from the University of Växjö, Sweden. Anders Boyer ExecutiveVicePresident&ChiefFinancialOfficer(CFO) Yearofbirth: 1970 Membersince:2018 RegisteredExecutiveManagement. Anders Boyer has more than 20 years’ experience in finance, business management and turnarounds. Prior to joining Pandora, Anders held positions as Chief Financial Officer at Hempel A/S and GN Store Nord A/S, and Finance Director and subsequently Regional Director of ISS. Anders started his career at A.P. Møller – Mærsk A/S, where he worked for ten years. He has an MSc in Finance and Accounting from Copenhagen Business School, Denmark. Stephen Fairchild Chief Product Officer Member since: 2011 MaryCarmen Gasco-Buisson Chief Marketing Officer Member since: 2022 Massimo Basei Chief of Retail Operations Member since: 2023 Jeerasage Puranasamriddhi Chief Supply Officer Member since: 2020 Byron Clayton Chief Human Resources Officer Member since: 2023 David Walmsley Chief Digital & Technology Officer Member since: 2019 THE EXECUTIVE LEADERSHIP TEAM ANNUAL REPORT 2023 44 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS SHAREHOLDER INFORMATION Jan Feb Mar May Jun Jul Aug Sep Oct Nov DecApr 600 200 800 1,000 400 SHARE PRICE DEVELOPMENT DKK In 2023, reflecting good momentum on many strategic initiatives, the Pandora share price increased by 91% and ended the year with a closing price of DKK 933. Throughout the year, DKK 6.4 billion has been returned to the shareholders through cash distribution, totalling 7.7% of the market capitalisation as of 31 December 2023. The liquidity in the Pandora share remains strong with a free float of 100% of total shares outstanding and around 62 million shares traded in 2023, corresponding to 70% of shares outstanding. In addition to being listed on the Nasdaq Copenhagen stock exchange, Pandora has a sponsored level 1 American Depository Receipt (ADR) programme. The ADRs are traded in the US over-the-counter under the symbol PANDY. Further information regarding the ADR programme can be found on our website: pandoragroup.com/ investor/share-information/adr-share-information. Capital structure and cash allocation Pandora’s capital structure serves to ensure that we have sufficient financial flexibility to pursue strategic goals and preserve a stable financial structure based on a strong balance sheet. Pandora’s capital structure policy is to maintain NIBD to EBITDA between 0.5x and 1.5x. At the end of 2023, our leverage ratio was 1.1x NIBD to EBITDA and in the middle of the capital structure policy range. The increased leverage of 0.3x versus 2022 reflects our decision to increase cash distributions to the shareholders to move leverage to the middle of the capital structure policy range. Proposed cash distributions Pandora continues to be highly cash-generative and will therefore continue to distribute significant cash to shareholders. For 2024, the Board of Directors proposes a dividend of DKK 18 per share, corresponding to an absolute amount of DKK 1.5 billion, and a new share buyback programme of DKK 4.0 billion. The total cash distribution proposal over 12 months from February 2024 will amount to DKK 5.5 billion. Due to the phasing of share buyback programmes, the total cash return is expected to reach DKK 5.6 billion in the calendar year 2024. Subject to the authority vested in them by the shareholders at the most recent Annual General Meeting, the Board of Directors has the authority to initiate one or more share buyback programmes. ANNUAL DISTRIBUTIONS DKK billion FY 2024 Proposed FY 2023 Actual FY 2022 Actual FY 2021 Actual FY 2020 Actual Dividend (ordinary + interim) 15 14 15 15 08 Nominal dividend per share, DKK 180 160 160 150 90 Share buyback programme 41 1 50 36 33 Total cash return 56 64 51 48 08 1 Includes DKK 0.4 billion from already announced share buyback running until February 2024 and DKK 3.7 billion of new share buyback in the calendar year 2024. ANNUAL REPORT 2023 45 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Review of 2023 share buyback and dividends In 2023, Pandora paid out an ordinary dividend of DKK 16 per share. The total amount paid was around DKK 1.4 billion. In addition, a DKK 5.0 billion share buyback programme was launched in February 2023 and com- pleted in full by 2 February 2024. Shareholders As of 31 December 2023, BlackRock, Inc. is the only shareholder with more than 10% of the total share capital of the company. As of 31 December 2023, the geographical split of Institutional Investors was (% of share capital held by institutions): • UK 29% • US 28% • Denmark 14% As of 31 December 2023, Pandora’s Board of Directors and Executive Management held a total of 89,539 and 359,242 Pandora shares respectively, corresponding to 0.50% of the total share capital. This is an increase from 2022, where the Board of Directors and Executive Management held a total of 95,616 and 280,098 shares respectively, corresponding to 0.39% of the total share capital. Investor Relations Executive Management is responsible for the Investor Relations function, which is responsible for ensuring compliance with Pandora’s Investor Relations Policy. Investor Relations reports to the Chief Financial Officer. The purpose of Pandora’s investor relations activities is to ensure that relevant, accurate and timely information is made available to the capital markets to serve as a basis for regular trading and a fair pricing of the share. Prior to planned release of any quarterly financial reports, Pandora does not comment on matters related to financial results or expectations. In addition, members of the Board of Directors and Executive Management are only allowed to trade shares in a four-week trading window following the announcement of interim and annual reports. Pandora will ensure that the company is perceived as visible, accessible, reliable and professional by the capital markets and that Pandora is regarded among the best relative to peers. This will be achieved by complying with the rules and legislation for listed companies on Nasdaq OMX as well as Pandora’s internal policies. Company website The Pandora Group website, pandoragroup.com, provides comprehensive information about our company, our activities, share performance and shareholders. Additionally, all company announcements, including interim and annual reports, as well as investor presentations, webcasts and conference call transcripts are made available on the website in due time. Furthermore, the website contains a financial and event calendar showing events and actions related to investors. A comprehensive list of the 23 analysts covering the Pandora share is maintained, including names, institutions and contact details. Financial calendar 2024 07 Feb Annual Report 2023 07 Feb Sustainability Report 2023 07 Feb Remuneration Report 2023 14 Mar Annual General Meeting 02 May Interim Report Q1 2024 13 Aug Interim Report Q2 2024 06 Nov Interim Report Q3 2024 Share information Exchange Nasdaq Copenhagen Trading symbol PNDORA Identification number/ISIN DK0060252690 Number of shares 89,000,000 of DKK 1, each with one vote Share classes 1 GICS 25203010 Sector Apparel, Accessories & Luxury Goods Segment Large ADR information ADR trading symbol PANDY Programme type Sponsored level 1 programme (J.P. Morgan) Ratio (ADR:ORD) 4 ADRs : 1 ordinary share (4:1) ADR ISIN US 698 341 2031 1 BlackRock, Inc., Wilmington, Delaware, US. 2 Company announcement no. 824 from 9 November 2023 stated an incorrect shareholding for Anders Boyer, Chief Financial Officer, of 131,771 shares. The correct shareholding of 133,486 shares has been used in the calculation. ANNUAL REPORT 2023 46 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS FINANCIAL REVIEW 48 Groupperformance 50 Groupprofitability 51 Balancesheetandcashflows ANNUAL REPORT 2023 REVENUE BY SEGMENTS DKK million 2022 Like-for-like Growth in local currency Share of revenue FY 2023 Share of revenue FY 20222023 Core 21951 21156 2% 6% 78% 80% - Moments 18369 17727 2% 6% 65% 67% - Collabs 2681 2614 1% 4% 10% 10% - ME 900 815 12% 13% 3% 3% Fuel with more 6186 5308 14% 19% 22% 20% - Timeless 2 4792 3847 20% 27% 17% 15% - Signature 1129 1248 11% 7% 4% 5% - Pandora Lab-Grown Diamonds 265 213 116% 30% 1% 1% Total revenue 28136 26463 6% 9% 100% 100% 1 Pandora has updated its collection structure by moving the Pandora ME collection and other products from the Fuel with more segment to the Core segment. The comparative figures for 2022 were restated accordingly by moving revenue of DKK 1,964 million from Fuel with more into Core. 2 Pandora Timeless includes revenue from the PANDORA ESSENCE collection in the amount of DKK 5 million. growth of 14%. Pandora Timeless, celebrated for its elegance and craftsmanship, experienced noteworthy like-for-like growth at 20%, once again demonstrating that Pandora’s portfolio supports the transformation into a full jewellery brand. GROUP PERFORMANCE Within the Fuel with more segment, our dedicated focus on Pandora Lab-Grown Diamonds further fuelled our brand's momentum. During the year, we significantly expanded the Pandora Lab-Grown Diamond assortment with a new range including fresh design aesthetics with new cuts, original settings and everyday essential styles. In 2023, Pandora demonstrated strong performance, highlighting resilience amid macroeconomic challenges and the success of growth initiatives under the Phoenix strategy. We achieved a record-high revenue of DKK 28.1 billion, corresponding to organic growth of 8%. This comprised of like-for-like growth of 6% and network expansion of 4%, with a drag of 2% from, for example, lower sell-in to partners. With that, we exceeded the latest updated financial guidance in the Q3 2023 interim financial report on organic growth and delivered on the EBIT margin guidance. The reason for exceeding the guidance on organic growth was continued brand momentum driving strong performance across the key trading events of Black Friday and Christmas. Compared to the outlook from the Capital Markets Day in 2021, we delivered on our financial targets with a 7.5% organic growth CAGR (target 5-7%) and 25.0% EBIT margin (target 25-27%). The solid growth in 2023 spanned broadly across geo- graphies and segments, emphasising the effectiveness of strategic investments in brand development, workforce and foundational elements. Core demonstrating resiliency Demonstrating resilience, the Core segment achieved a like-for-like growth of 2%. Notably, the enduring popularity of Pandora Moments, growing like-for-like by 2%, reinforces its status as a dynamic canvas for personal expression, capturing and celebrating life's precious moments. Fuel with more Fuel with more, the segment featuring modern classics such as Pandora Timeless, Pandora Signature and Pandora Lab-Grown Diamonds, constituted 22% of total revenue. This segment excelled with substantial like-for-like REVENUE BY CHANNEL DKK million 2022 Organic growth Growth in local currency Share of revenue FY 2023 Share of revenue FY 20222023 Pandora-owned 1 retail 22034 19115 15% 18% 78% 72% - of which concept stores 14415 12150 17% 22% 51% 46% - of which online stores 5892 5612 7% 7% 21% 21% - of which other points of sale 1727 1353 25% 26% 6% 5% Wholesale 5369 6628 13% 17% 19% 25% - of which concept stores 2672 3508 14% 21% 9% 13% - of which other points of sale 2697 3120 12% 12% 10% 12% Third-party distribution 734 721 10% 4% 3% 3% Total revenue 28136 26463 8% 9% 100% 100% 1 Pandora does not own any of the premises (Land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises. ANNUAL REPORT 2023 48 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS STORE NETWORK Number of points of sale 2022 Growth2023 Concept stores 2651 2542 109 - of which Pandora-owned 2 1869 1653 216 - of which franchise-owned 463 588 125 - of which third-party distribution 319 301 18 Other points of sale 4035 3985 50 1 Pandora does not own any of the premises (land and buildings) where stores are operated. Pandora exclusively operates stores from leased premises. This was supported by an exciting new “Diamonds for All” campaign which generated notable interest, not only for the collection but also the wider Pandora brand. Pandora Lab-Grown Diamonds generated total revenue of DKK 265 million, constituting the first step on our journey towards generating more than DKK 1 billion revenue from the collection by 2026. Broad-based geographical growth Pandora achieved widespread growth across geographies, demonstrating good momentum despite generally low consumer sentiment in many markets. The US, our largest market, showed an acceleration in growth throughout the year, driven by strategic brand initiatives and improved retail execution, resulting in a full-year like-for-like growth of 2%. Network expansion in the US, including forward integration, came on top of this to drive a solid 8% total revenue growth. The key European markets also delivered positive like-for-like growth collectively, with Germany leading with double-digit growth through deeper brand penetration, ending the year at 26% like-for-like. Italy and France experienced gradual improvements, while the UK maintained stable performance throughout the year. In Australia, weak consumer sentiment impacted like-for-like growth, ending the year at -6%. In July 2023, we initiated a focused brand relaunch in Shanghai, which has shown encouraging signs. Establishing a strong brand in China will be a journey, but Pandora remains committed to the largest jewellery market in the world and will continue to take learnings forward to rebuild the brand step by step. The like-for-like for the year was -9%. Pandora's business outside the seven key markets exhibited strong momentum, concluding 2023 with strong like-for- like growth of 16%. The growth was broad-based with numerous markets achieving double-digit like-for-like growth. Mexico and Spain, the largest markets within Rest of Pandora, generated revenues of DKK 1.4 billion and DKK 1.2 billion, respectively, with solid growth through the year. The performance in Rest of Pandora underscores the vast growth potential for Pandora given that the global market share is only 1.3% in a very fragmented jewellery market. Store network development In 2023, we expanded our global presence by opening a net 109 concept stores and 114 Pandora-owned shop- in-shops, concentrating efforts in the underpenetrated regions of the US and Latin America. This move aligns with our ambition to significantly enhance our footprint in these vital regions. Looking ahead, Pandora is poised to continue our network expansion initiatives by capitalising on the vast white space opportunities globally. Moreover, in 2023, Pandora acquired 54 concept stores, of which 35 are in the US. Converting partner stores to Pandora-owned retail not only fosters brand consistency but also strengthens customer relationships. The perfor- mance trend further emphasises the value of forward integration, as Pandora-owned stores outperformed partner stores with a notable 9 percentage points delta in like-for-like growth in 2023. This strategic move positions Pandora for continued success as it navigates the evolving landscape of global retail. REVENUE BY KEY MARKET DKK million 2022 Like-for-like Organic growth Share of revenue FY 2023 Share of revenue FY 20222023 US 8306 7907 2% 5% 30% 30% China 564 737 9% 18% 2% 3% UK 3821 3802 1% 2% 14% 14% Italy 2540 2580 3% 2% 9% 10% Australia 1120 1271 6% 6% 4% 5% France 1196 1190 1% 0% 4% 4% Germany 1527 1307 26% 17% 5% 5% Total key markets 19075 18795 1% 2% 68% 71% Rest of Pandora 9062 7669 16% 21% 32% 29% Total revenue 28136 26463 6% 8% 100% 100% ANNUAL REPORT 2023 49 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Pandora delivered solid profitability in 2023, benefitting from our unique, vertically integrated model - and despite significant investments into the Phoenix strategy and the inflationary environment. The gross margin reached 78.6%, up 2.3% compared to 2022 and was the highest in Pandora's history, driven by continued support from channel mix, efficiencies and a successful pricing strategy. The Core segment generated a gross margin of 77.8%, while Fuel with more generated a gross margin of 81.6% compared to 75.5% and 79.6% in 2022, respectively. The OPEX ratio increased by 2.8 percentage points compared to 2022, as we continue to invest in strategic initiatives to accelerate growth. The increase was mainly driven by the expansion of our profitable owned and operated store network, significantly contributing to a 19% increase in sales and distribution expenses in constant foreign exchange rates. Marketing expenses increased by 5% in constant foreign exchange rates and constituted 13.7% of revenue compared to 14.1% in 2022, within the targeted range of 13-15%. Administrative expenses have increased by 13% in constant foreign exchange rates, primarily driven by Phoenix investments into digital and technology. The EBIT margin came in at 25.0%, roughly in line with the 25.5% last year. The change versus 2022 is mainly driven by the development in foreign exchange rates and commodities and the underlying margin is unchanged. COST OF SALES AND GROSS PROFIT DKK million 2022 Growth in constant FX Share of revenue 2023 Share of revenue 20222023 Revenue 28136 26463 9% 1000% 1000% Cost of sales 6012 6273 4% 214% 237% Gross profit 22125 20190 13% 786% 763% OPERATING EXPENSES DKK million 2022 Growth in constant FX Share of revenue 2023 Share of revenue 20222023 Sales and distribution expenses 8858 7602 19% 315% 287% Marketing expenses 3849 3720 5% 137% 141% Administrative expenses 2379 2125 13% 85% 80% Total operating expenses 15086 13448 14% 536% 508% EBIT DKK million 2022 EBIT margin EBIT margin 2023 Operating profit (EBIT) 7039 6743 250% 255% Net financial items ended at a cost of DKK 805 million compared to DKK 210 million in 2022. The development was driven by higher interest rates on borrowings and leases, as well as foreign exchange rate adjustments, which had a material positive impact in 2022, but represented a small drag this year. Total tax expenses amounted to DKK 1.5 billion, corres- ponding to an effective tax rate of 24.0%. This is an increase in the effective tax rate of 100 basis points compared to 2022, mainly driven by non-deductible costs and a higher share of profits subject to taxation in jurisdictions with tax rates exceeding the statutory corporate tax rate in Denmark of 22%. Net profit came in at DKK 4.7 billion compared to DKK 5.0 billion in 2022, with a significant negative impact from foreign exchange rates, as net profit exceeded 2022 in constant rates. Pandora increased the earnings per share by 2% compared to 2022, ending 2023 with a record-high earnings per share of DKK 55. GROUP PROFITABILITY 2022: 25.5% 2022: 76.3% 25.0% 78.6% EBIT margin Gross margin ANNUAL REPORT 2023 50 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Continued strong free cash flow generation Net working capital ended at only 1.8% of revenue in 2023 compared to 4.2% in 2022. The decrease was partly due to slightly lower inventory in absolute value against a revenue that was DKK 1.7 billion higher than 2022, combined with an optimisation of other receivables. The cash conversion was strong in 2023, ending the year at 78% (2022: 39%), on a free cash flow base of DKK 5.5 billion (2022: 2.6 billion). The increase compared to the full-year 2022 is helped by the slight reduction of inventories as well as payables and receivables management. Pandora increased CAPEX from 5% to 6% of revenue in 2022 and 2023, respectively, equivalent to a year-over-year increase of DKK 334 million, bringing CAPEX to a total of DKK 1.6 billion. This is mainly driven by the expansion of Pandora's physical store network, refurbishment of existing stores as well as investments into digital and technology and the ongoing construction of the production facility in Vietnam. ROIC remains high at 47%, slightly down from 48% in 2022. This development was partly due to the development in foreign exchange rates, combined with higher invested capital. The increase in invested capital was driven by higher right-of-use assets from new store openings and lease renegotiations. On a run-rate basis, the investments made in new concept stores are ROIC accretive and support Pandora's execution of the second chapter of the Phoenix growth strategy. Balance sheet Non-current assets increased by DKK 1.5 billion to DKK 15.8 billion at the end of 2023, driven by the network expansion increasing the right-of-use-assets as well as tangible assets and a higher CAPEX spend related to store refurbishments. At the end of 2023, net interest-bearing debt amounted to DKK 9.8 billion, up from DKK 6.8 billion in 2022. This corresponds to a leverage of 1.1x by the end of 2023, NET WORKING CAPITAL Share of preceding 12 months' revenue 2022 2021 2020 20192023 Inventories 148% 159% 128% 103% 98% Trade receivables 48% 48% 43% 46% 75% Trade payables 114% 118% 140% 169% 142% Other net working capital elements 64% 47% 82% 56% 45% Total 18% 42% 50% 76% 13% up from 0.8x by the end of 2022, which is roughly at the midpoint of the capital structure policy range of 0.5x to 1.5x. The increase in net interest-bearing debt was driven by our decision to increase leverage to around the mid-point of the capital structure policy. This resulted in significant cash returns to shareholders in 2023 through a combination of the largest share buyback in the history of Pandora and dividends. At the end of 2023, equity in Pandora amounted to DKK 5.4 billion, down by DKK 1.8 billion compared to 2022. The decrease was driven by profit for the year offset by payout of DKK 6.4 billion to the company's shareholders in 2023. We paid out DKK 1.4 billion in ordinary dividend and bought back own shares for a total of DKK 5.0 billion. BALANCE SHEET AND CASH FLOWS Cash conversion ROIC 78% 47% 2022: 39% 2022: 48% ANNUAL REPORT 2023 51 FINANCIAL STATEMENTS THE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS FINANCIAL STATEMENTS 53 Consolidated financial statements 95 Parent Company financial statements ANNUAL REPORT 2023 PRIMARY FINANCIAL STATEMEMENTS Consolidated statement of comprehensive income 54 Consolidated balance sheet 55 Consolidated statement of changes in equity 56 Consolidated statement of cash flows 57 CONSOLIDATED FINANCIAL STATEMENTS Notes The notes are grouped into five sections related to key figures. The notes contain the relevant financial information as well as a description of accounting policies, judgements and estimates applied for the topics of the individual notes. BASIS OF PREPARATION 1.1 General accounting policies 59 1.2 New accounting policies and disclosures 60 1.3 Management’s judgements and estimates under IFRS 61 RESULTS FOR THE YEAR 2.1 Segment and revenue information 63 2.2 Staff costs 65 2.3 Share-based payments 66 2.4 Taxation 68 INVESTED CAPITAL AND WORKING CAPITAL ITEMS 3.1 Intangible assets 73 3.2 Property, plant and equipment 76 3.3 Leases 77 3.4 Business combinations 78 3.5 Inventories 80 3.6 Trade receivables 80 3.7 Provisions 81 3.8 Contract assets and liabilities 81 3.9 Trade payables 82 CAPITAL STRUCTURE AND NET FINANCIALS 4.1 Share capital 84 4.2 Earnings per share and dividend 84 4.3 Liabilities from financing activities 85 4.4 Financial risks 86 4.5 Derivative financial instruments 89 4.6 Net financials 90 4.7 Other non-cash adjustments 90 OTHER DISCLOSURES 5.1 Contingent assets and liabilities 92 5.2 Related parties 92 5.3 Fees to independent auditor 92 5.4 Events occurring after the reporting period 92 5.5 Companies in the Pandora Group 93 5.6 Financial definitions 94 SECTION 1 SECTION 2 SECTION 3 SECTION 4 SECTION 5 ANNUAL REPORT 2023 53 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER CONSOLIDATED INCOME STATEMENT DKK million Notes 2023 2022 Revenue 2.1 28,136 26,463 Cost of sales 2.2, 3.1, 3.2 -6,012 -6,273 Gross profit 22,125 20,190 Sales, distribution and marketing expenses 2.2, 3.1, 3.2 -12,707 -11,322 Administrative expenses 2.2, 3.1, 3.2 -2,379 -2,125 Operating profit 2.1 7,039 6,743 Finance income 4.6 251 412 Finance costs 4.6 -1,056 -622 Profit before tax 6,234 6,533 Income tax expense 2.4 -1,494 -1,504 Net profit for the year 4,740 5,029 Earnings per share, basic (DKK) 4.2 55.5 54.2 Earnings per share, diluted (DKK) 4.2 55.1 53.7 CONSOLIDATED INCOME STATEMENT DKK million Notes 2023 2022 Net profit for the year 4,740 5,029 Other comprehensive income: Items that have been or may be reclassified to profit/loss for the year Exchange rate adjustments of investments in subsidiaries -149 -196 Commodity hedging instruments: - Realised in cost of sales 3 -1 - Realised in net financials -9 46 - Realised in inventories -97 241 - Fair value adjustments -47 -39 Foreign exchange hedging instruments: - Realised in net financials 103 110 - Fair value adjustments -151 -61 Tax on other comprehensive income 2.4 39 23 Items that have been or may be reclassified to profit/loss for the year, net of tax -308 123 Items not to be reclassified to profit/loss for the year Actuarial gain/loss on defined benefit plans, net of tax 2.2 -9 12 Items not to be reclassified to profit/loss for the year, net of tax -9 12 Other comprehensive income, net of tax -317 135 Total comprehensive income for the year 4,423 5,164 ANNUAL REPORT 2023 54 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ASSETS DKK million Notes 2023 2022 Goodwill 4,914 4,822 Brand 1,057 1,057 Distribution 1,039 1,047 Other intangible assets 790 642 Total intangible assets 3.1 7,801 7,568 Property, plant and equipment 3.2 2,746 2,226 Right-of-use assets 3.3 3,779 2,978 Deferred tax assets 2.4 1,260 1,261 Other financial assets 215 249 Total non-current assets 15,800 14,282 Inventories 3.5 4,166 4,211 Trade receivables 3.6 1,342 1,262 Right-of-return assets 3.8 55 54 Derivative financial instruments 4.4, 4.5 87 231 Income tax receivable 2.4 103 155 Other receivables 849 1,024 Cash 1,397 794 Total current assets 7,998 7,731 Total assets 23,798 22,013 EQUITY AND LIABILITIES DKK million Notes 2023 2022 Share capital 4.1 89 96 Treasury shares 4.1 -4,353 -3,320 Reserves 610 918 Dividend proposed 1,480 1,430 Retained earnings 7,530 8,044 Total equity 5,355 7,167 Provisions 3.7 408 363 Loans and borrowings 4.3, 4.4 9,737 3,130 Deferred tax liabilities 2.4 164 172 Other payables 80 - Total non-current liabilities 10,389 3,665 Provisions 3.7 23 21 Refund liabilities 3.8 721 628 Contract liabilities 3.8 185 136 Loans and borrowings 4.3, 4.4 1,430 4,458 Derivative financial instruments 4.4, 4.5 128 74 Trade payables 3.9, 4.4 3,211 3,131 Income tax payable 2.4 583 1,068 Other payables 4.4 1,773 1,666 Total current liabilities 8,053 11,181 Total liabilities 18,443 14,846 Total equity and liabilities 23,798 22,013 CONSOLIDATED BALANCE SHEET AT 31 DECEMBER ANNUAL REPORT 2023 55 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW DKK million Notes Share capital Treasury shares Translation reserve Hedging reserve Dividend proposed Retained earnings Total equity 2023 Equity at 1 January 96 -3,320 797 121 1,430 8,044 7,167 Net profit for the year - - - - - 4,740 4,740 Other comprehensive income, net of tax - - -154 -154 - -9 -317 Total comprehensive income for the year - - -154 -154 - 4,731 4,423 Share-based payments 2.2, 2.3 - 278 - - - -103 175 Purchase of treasury shares 4.1 - -4,998 - - - - -4,998 Cancellation of treasury shares 4.1 -7 3,687 - - - -3,680 - Dividend paid 4.2 - - - - -1,412 - -1,412 Dividend proposed 4.2 - - - - 1,462 -1,462 - Equity at 31 December 89 -4,353 642 -33 1,480 7,530 5,355 2022 Equity at 1 January 100 -3,416 905 -110 1,516 8,007 7,001 Net profit for the year - - - - - 5,029 5,029 Other comprehensive income, net of tax - - -108 231 - 12 135 Total comprehensive income for the year - - -108 231 - 5,041 5,164 Share-based payments 2.2, 2.3 - 199 - - - -95 104 Purchase of treasury shares 4.1 - -3,588 - - - - -3,588 Cancellation of treasury shares 4.1 -5 3,486 - - - -3,481 - Dividend paid 4.2 - - - - -1,516 2 -1,514 Dividend proposed 4.2 - - - - 1,430 -1,430 - Equity at 31 December 96 -3,320 797 121 1,430 8,044 7,167 The Board of Directors will propose at the Annual General Meeting that an ordinary dividend of DKK 18 per share, corresponding to DKK 1.5 billion (2022: DKK 16 per share, corresponding to DKK 1.4 billion), be distributed for 2023. In 2023, Pandora continued the share-buyback programmes, which resulted in repurchases of 7,693,692 treasury shares, corresponding to DKK 5.0 billion (2022: 6,595,620 treasury shares, corresponding to DKK 3.6 billion). For further shareholder information on dividend payments, see page 45. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER ANNUAL REPORT 2023 56 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW DKK million Notes 2023 2022 Operating profit 7,039 6,743 Depreciation and amortisation 2,079 1,973 Share-based payments 2.3 105 87 Change in inventories 210 -1,012 Change in receivables 56 -531 Change in payables and other liabilities 446 -559 Other non-cash adjustments 4.7 -55 -18 Finance income received 19 7 Finance costs paid -683 -466 Income tax paid 2.4 -1,832 -1,790 Cash flows from operating activities, net 7,384 4,434 Acquisition of subsidiaries and activities, net of cash acquired 3.4 -349 -562 Purchase of intangible assets -359 -353 Purchase of property, plant and equipment -1,129 -838 Change in other assets 37 -36 Proceeds from sale of property, plant and equipment - 5 Cash flows from investing activities, net -1,800 -1,785 Dividend paid 4.2 -1,412 -1,514 Purchase of treasury shares -5,022 -3,527 Proceeds from loans and borrowings 4.3 5,927 4,994 Repayment of loans and borrowings 4.3 -3,321 -1,985 Repayment of lease liabilities 4.3 -1,107 -1,068 Cash flows from financing activities, net -4,935 -3,100 Net increase/decrease in cash 649 -452 DKK million Notes 2023 2022 Cash and cash equivalents at 1 January 595 1,043 Exchange gains/losses on cash and cash equivalents -61 4 Net increase/decrease in cash 649 -452 Cash and cash equivalents at 31 December 1,183 595 Cash balances 1,397 794 Overdrafts -214 -199 Cash and cash equivalents at 31 December 1,183 595 Cash flows from operating activities, net 7,384 4,434 - Finance income received -19 -7 - Finance costs paid 683 466 Cash flows from investing activities, net -1,800 -1,785 - Acquisition of subsidiaries and activities, net of cash acquired 349 562 Repayment of lease liabilities -1,107 -1,068 Free cash flows incl. lease payments 5,489 2,602 Unutilised committed credit facilities 4.4 4,472 6,693 The above cannot be derived directly from the income statement and the balance sheet. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER ACCOUNTING POLICIES Cash flows from operating activities are presented using the indirect method. Cash flows in currencies other than the functional currency are translated at the average exchange rates for the month in question, unless these differ significantly from the rates at the transaction dates. ANNUAL REPORT 2023 57 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW BASIS OF PREPARATION SECTION 1 This section introduces Pandora’s accounting policies and significant accounting estimates and judgements. A more detailed description of accounting policies and significant estimates and judgements related to specific reported amounts is presented in the respective notes. The purpose is to provide transparency on the disclosed amounts and to describe the relevant accounting policy, significant estimates and numerical disclosure for each note. ANNUAL REPORT 2023 58 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 1.1 GENERAL ACCOUNTING POLICIES Pandora A/S is a public limited company with its registered office in Denmark. The Annual Report for the period 1 January to 31 December 2023 comprises the consolidated financial statements of Pandora A/S and its subsidiaries (the Group) as well as separate financial statements for the Parent Company, Pandora A/S. The financial statements have been prepared in accordance with IFRS® Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act for class D companies. The consolidated financial statements have been prepared on a historical cost basis, except for derivative financial instruments, which have been measured at fair value. The Annual Report is presented in Danish kroner (DKK), and all amounts are in millions unless otherwise stated. Due to rounding, numbers presented throughout this report may not add up precisely to the totals, and percentages may not precisely reflect the absolute figures. Apart from changes due to the implementation of new or amended standards and interpretations as described in note 1.2 New accounting policies and disclosures, accounting policies are unchanged from last year. iXBRL reporting Pandora A/S has filed the Annual Report 2023 in the European Single Electronic Format (ESEF), XHTML, which can be displayed in a standard browser. The consolidated financial statements are tagged using eXtensible Business Reporting Language (iXBRL), which complies with the ESEF taxonomy included in the ESEF Regulation. The Annual Report submitted to the Danish Financial Supervisory Authority consists of the XHTML document together with certain technical files, all included in a zip file named PAND-2023-12-31-en.zip. Alternative performance measures Pandora presents financial measures in the Annual Report that are not defined according to IFRS. Pandora believes that these non-GAAP measures provide valuable information to investors and Pandora’s management when evaluating performance. Since other companies may calculate these differently from Pandora, they may not be comparable to the measures used by other companies. These financial measures should therefore not be considered to be a replacement for measures defined under IFRS. For definitions of the performance measures used by Pandora, see note 5.6 Financial definitions. ACCOUNTING POLICIES The general accounting policies applied in the Annual Report as a whole are described below. The accounting policies related to specific line items are described in the notes to which they relate. The description of accounting policies in the notes forms part of the general description of Pandora’s accounting policies. NOTES 2.1 Segment and revenue information 2.2 Staff costs 2.3 Share-based payments 2.4 Taxation 3.1 Intangible assets 3.2 Property, plant and equipment 3.3 Leases 3.4 Business combinations 3.5 Inventories 3.6 Trade receivables 3.7 Provisions 3.8 Contract assets and liabilities 4.2 Earnings per share and dividend 4.3 Liabilities from financing activities 4.5 Derivative financial instruments 4.6 Net financials Consolidated financial statements The consolidated financial statements comprise the financial statements of the Parent Company and its subsidiaries. Subsidiaries are fully consoli dated from the date of acquisition, being the date on which Pandora obtains control, until the date that such control ceases. All intercompany balances, income and expenses, unrealised gains and losses and dividends resulting from intercompany transactions are eliminated in full. Functional and presentation currency The consolidated financial statements are presented in DKK, which is also the functional currency of the Parent Company. Each subsidiary determines its own functional currency, and items recognised in the financial statements of each entity are measured using that functional currency. Transactions and balances Transactions in foreign currencies are initially recognised in the Group entities at their respective functional currency rates prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency spot rate of exchange prevailing at the reporting date. All adjustments are recognised in the income statement. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value is determined. Foreign exchange rate adjustments arising on monetary items which are considered part of the net investment in foreign entities are recognised in other comprehensive income. ANNUAL REPORT 2023 59 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Group companies with a functional currency other than DKK The assets and liabilities of foreign subsidiaries are translated into DKK at the rate of exchange prevailing at the reporting date, and their income statements are translated at the exchange rates prevailing at the dates of the transactions. Exchange rate adjustments arising on translation are recognised in other comprehensive income. On disposal of a foreign subsidiary, the component of other comprehensive income relating to that particular foreign operation is recognised in the income statement. Consolidated income statement The consolidated income statement is presented based on costs classified by function. Cost of sales comprises direct and indirect expenses incurred to generate revenue for the year, comprising raw materials, consumables, production staff, depreciation, amortisation and impairment losses in respect of production equipment. Sales, distribution and marketing expenses comprise expenses related to the distribution of goods sold and sales campaigns, including packaging materials, brochures, wages and salaries and other expenses related to sales and distribution staff as well as depreciation, amortisation and impairment losses in respect of distribution equipment and stores. Administrative expenses comprise expenses incurred in the year to manage Pandora, including expenses related to administrative staff and depreciation, amortisation and impairment losses in respect of assets used in the administration. The allocation of amortisation and impairment losses from intangible assets is presented in note 3.1 and the allocation of depreciation and impairment losses from property, plant and equipment in note 3.2. NOTE . GENERAL ACCOUNTING POLICIES CONTINUED NOTE 1.2 NEW ACCOUNTING POLICIES AND DISCLOSURES Implementation of new or amended standards and interpretations Pandora has adopted all new or amended standards (IFRS) and interpretations (IFRIC) as adopted by the EU and which are effective for the financial year 1 January to 31 December 2023. The implementation of these new or amended standards and interpretations had no material impact on the consolidated financial statements for the year. The new standards that are not yet effective are not expected to have any material impact on Pandora. International tax reform – Pillar Two model rules The Group has adopted the amendments applied to income taxes arising from tax law enacted or substantively enacted to implement the Pillar Two model rules published by the Organisation for Economic Co- operation and Development (OECD), including tax law that implements qualified domestic minimum top-up taxes described in those rules. The amendments introduce a temporary exception to the accounting requirements for deferred taxes in International Accounting Standard (IAS) 12, so that an entity would neither recognise nor disclose information about deferred tax assets and liabilities related to Pillar Two income taxes. The effect of the amendment and its impact on financial statements are presented in note 2.4 Taxation. ANNUAL REPORT 2023 60 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTES 2.1 Segment and revenue information 2.4 Taxation 3.5 Inventories 3.8 Contract assets and liabilities 5.1 Contingent assets and liabilities NOTE 1.3 MANAGEMENT’S JUDGEMENTS AND ESTIMATES UNDER IFRS SIGNIFICANT ACCOUNTING ESTIMATES In preparing the consolidated financial statements, management makes various judgements, accounting estimates and assumptions that form the basis of the presentation, recognition and measurement of Pandora’s assets and liabilities. Determining the carrying amounts of some assets and liabilities requires judgement, estimates and assumptions concerning future events. Judgements, estimates and assumptions are based on historical experience and other factors, which management assesses to be reasonable, but which by their nature involve uncertainty and unpredictability. These assumptions may have to be revised, and unexpected events or circumstances may occur. Pandora is subject to risks and uncertainties that may lead to actual results differing from these estimates, both positively and negatively. Climate change As a global business, Pandora is exposed to risks associated with climate change comprising both transitional risks and physical risks. The transition from a linear economy to a circular economy entails a range of transitional risks to Pandora, such as the demand for more sustainable products and packaging and further legal requirements with focus on Environmental, Social and Governance (ESG) for the supply chain. Beginning 1 January 2024, Pandora will be subject to the reporting requirements under the CSRD, which will require additional disclosures to be integrated into the Annual Report and subject to limited assurance. In preparing the consolidated financial statements for 2023, management has considered the impact of climate change, particularly in the context of the Group’s sustainability targets, to the extent possible. Pandora’s targets to reduce its greenhouse gas emissions by 50% by 2030 and achieve net zero emissions by 2040 as well as to only use recycled silver and gold in its jewellery by 2025 are included in the Group’s financial forecasts. Sustainability-related investments as well as costs of sourcing only recycled silver and gold and using sustainable lab-grown diamonds in our jewellery, as well as other potential impact of climate change (such as costs to source renewable energy), have been considered in the budget and forecast applied as basis for impairment testing of goodwill (see note 3.1 Intangible assets). The potential consequences on the value and useful life of production facilities becoming outdated in the sustainability transformation was also assessed as having no financial impact. Our investments related to expansion of production facilities are aligned with our sustainability agenda in this respect. While sustainability is an embedded part of Pandora’s business model, by including sustainability targets in our incentive programmes for senior leadership (see note 2.3 Share-based payments) and in all of Pandora’s financing agreements (see note 4.4 Financial risks), management does not consider sustainability targets or climate change to have a material impact on the accounting estimates and judgements prepared by management in relation to the 2023 consolidated and Parent Company financial statements. This is consistent with the assessment that climate change is not expected to have a significant impact on the Group’s future cash flows or going concern assessment. Macroeconomic uncertainty The macroeconomic uncertainty caused by the Russian invasion of Ukraine, the Israel- Hamas war (including the continuation and escalation thereof) and the high inflation rates continue to affect the global economy. Pandora continues to assess the value of intangible assets and property, plant and equipment, and internal forecasts have considered the ongoing impacts on income and expenses from the inflationary pressure and higher interest rates. Changes in selling prices and direct costs are based on past experience and management’s expectation of future changes in the markets where the Group operates. Specific risks for Pandora are discussed in the relevant sections of the management’s review and in the notes. The areas that involve a high degree of judgement and estimation and that are material to the financial statements are described in more detail in the related notes. ANNUAL REPORT 2023 61 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW RESULTS FOR THE YEAR EBIT margin 2022: 25.5% 25.0% Effective tax rate 2022: 23.0% 24.0% SECTION 2 This section comprises notes related to the results for the year, including reporting segment disclosures, and provides additional information related to two of Pandora’s performance measures: revenue and EBIT. A detailed description of the results for the year is given in the Financial review on page 47. 2022: 26,463 28,136 Revenue DKK million 4,740 2022: 5,029 Net profit DKK million ANNUAL REPORT 2023 62 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 2.1 SEGMENT AND REVENUE INFORMATION Pandora’s activities are segmented into two reportable segments, each responsible for the end-to-end performance of collections. One includes our Core collections (formerly referred to as Moments incl. Collabs), while the other, Fuel with more (formerly referred to as Style), covers newer collections and innovations. In 2023, Pandora updated its collection structure by moving the Pandora ME collection and other products from the Fuel with more segment into the Core segment. The comparative figures for 2022 were restated accordingly by moving revenue of DKK 1,964 million and gross profit of DKK 1,464 million from Fuel with more into Core. The strategic reasoning centres around design aesthetics and categorisation of jewellery to better align consumer synergies among collections, leading to a centralised platform for charms and carriers. All the comparative figures have been restated to reflect the updated structure. Core includes charms and carriers which focus on collectability. Fuel with more includes the Modern Classics (Pandora Timeless and Pandora Signature accompanied by Pandora’s newest collection, PANDORA ESSENCE) and Pandora Lab-Grown Diamonds and targets both existing and new customers who may have a different aesthetic preference than the Core jewellery design. The two operating segments include all channels relating to the distribution and sale of Pandora products. INCOME STATEMENT BY SEGMENTS Fuel with DKK million Coremore Group2023Revenue 21,951 6,186 28,136Cost of sales -4,875 -1,137 -6,012Gross profit 17,076 5,049 22,125Operating expenses -15,086Consolidated operating profit (EBIT) 7,039Profit margin (EBIT margin) 25.0%2022Revenue 21,156 5,308 26,463Cost of sales -5,188 -1,085 -6,273Gross profit 15,968 4,223 20,190Operating expenses -13,448Consolidated operating profit (EBIT) 6,743Profit margin (EBIT margin) 25.5% REVENUE BY SEGMENTS 1 DKK million 2023 2022Core 21,951 21,156- Moments 18,369 17,727- Collabs 2,681 2,614- ME 900 815Fuel with more 6,186 5,3082- Timeless4,792 3,847- Signature 1,129 1,248- Pandora Lab-Grown Diamonds 265 213Total revenue 28,136 26,463Goods transferred at a point in time 28,070 26,386Services transferred over time 66 77Total revenue 28,136 26,463 1 Pandora has updated its collection structure by moving the Pandora ME collection and other products from the Fuel with more segment to the Core segment. The comparative figures for 2022 were restated accordingly by moving revenue of DKK 1,964 million from Fuel with more into Core. 2 Pandora Timeless includes revenue from the PANDORA ESSENCE collection in the amount of DKK 5 million. Management monitors the profitability of the operating segments separately for the purpose of making decisions about resource allocation and performance management. Segment results are measured at gross profit as presented in the table below. Non-unit-driven revenue, comprising mainly franchise fees, is allocated proportionately to the different revenue categories. ANNUAL REPORT 2023 63 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW GEOGRAPHIC INFORMATION, REVENUE DKK million 2023 2022US 8,306 7,907China 564 737UK 3,821 3,802Italy 2,540 2,580Australia 1,120 1,271France 1,196 1,190Germany 1,527 1,307Rest of world 9,062 7,669– of which Spain 1,246 1,123– of which Mexico 1,385 994– of which Denmark 39 28Total revenue 28,136 26,463 GEOGRAPHIC INFORMATION, ASSETS DKK million 2023 2022US 2,105 2,073Australia 436 450Germany 602 602Denmark 2,332 2,117Thailand 455 495Rest of world 1,871 1,8321Total intangible assets7,801 7,5682Property, plant and equipment2,746 2,2263Right-of-use assets3,779 2,978Deferred tax assets 1,260 1,261Other non-current financial assets 215 249Current assets 7,998 7,731Total consolidated assets 23,798 22,013 1 The allocation of intangible assets in the table above reflects the country in which the assets were acquired, including goodwill, in the functional currency in which it is denominated. This is different from the presentation in note 3.1 Intangible assets, where goodwill is allocated in accordance with management reporting and monitoring. 2 The crafting facilities in Thailand accounted for DKK 951 million (2022: DKK 1,045 million), corresponding to 34.6% of property, plant and equipment (2022: 46.9%). 3 Right-of-use assets mainly relate to stores and offices. NOTE 2.1 SEGMENT AND REVENUE INFORMATION CONTINUED SIGNIFICANT ACCOUNTING ESTIMATES Recognition and measurement of revenue is based on estimates and judgements relating to expected sales returns allowed to customers in most markets. These judgements can have a material impact on the timing and measurement of recognised revenue as well as the level of the refund liability. Reductions in revenue from expected sales returns are calculated based on historical return patterns and on a case-by-case basis for commercial and other reasons, see note 3.8 Contract assets and liabilities. The use of sales channels for the distribution of Pandora jewellery depends on the underlying market maturity and varies within markets, but is consistent when viewed between segments. REVENUE BY SALES CHANNEL DKK million 2023 2022Pandora physical stores 16,142 13,503Pandora online stores 5,892 5,612Wholesale and third-party distribution 6,103 7,349Total revenue 28,136 26,463 ANNUAL REPORT 2023 64 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 2.1 SEGMENT AND REVENUE INFORMATION CONTINUED NOTE 2.2 STAFF COSTS The Group’s pension plans are primarily defined contribution plans. Pandora has defined benefit plans relating to employees in Thailand. The defined benefit plans are recognised at the present value of the actuarially measured obligations. In 2023, these obligations amounted to DKK 104 million (2022: DKK 80 million). In 2023, the actuarial loss was DKK 9 million (2022: gain of DKK 12 million) recognised in other comprehensive income. STAFF COSTS DKK million 2023 2022Wages and salaries 5,487 4,883Pensions 244 208Share-based payments 105 87Social security costs 414 341Other staff costs 605 545Total staff costs 6,855 6,064Staff costs have been recognised in the income statement as follows:Cost of sales 990 1,177Sales, distribution and marketing expenses 4,500 3,777Administrative expenses 1,365 1,109Total staff costs 6,855 6,064 Average number of full-time employees during the year 27,480 26,986 ACCOUNTING POLICIES Retail sales – products Revenue from the sale of products through stores owned and operated by Pandora is recognised when a store sells a product to the customer. Payment is usually due when the customer picks up the product in the store or the product is delivered from an online store. However, in some instances collection is delayed and a receivable recognised, see note 3.6 Trade receivables. A refund liability and a right-of-return asset are recognised for products expected to be returned, see note 3.8 Contract assets and liabilities. The estimate for returned products is based on historical experience and expectations. Based on knowledge of the nature of returns, it is considered highly probable that a significant reversal of cumulative revenue recognised will not occur. Rebates and discounts granted to customers are recognised as a reduction in revenue. The Group’s obligation to repair or replace faulty products is part of the standard terms and is therefore recognised as a contract liability, see note 3.8 Contract assets and liabilities. Revenue is further measured excluding sales taxes and duties when these are passed on to customers. Sales taxes and duties incurred on sales that are not recoverable from the local taxation authorities are reported gross as part of revenue and cost of sales. Wholesale and third-party distributors – products Pandora manufactures and sells jewellery to wholesalers and third-party distributors. Revenue is recognised when control of the products has been transferred to the wholesaler or third-party distributor. Change of control of the products occurs when they have been delivered to the wholesaler or distributor and no further obligation exists that can affect the transfer of control. Delivery has taken place when the products have been shipped to the location of the wholesaler or distributor and control of the goods has been transferred to the buyer. Revenue from the sale is recognised based on the price specified in the contract. Revenue is only recognised to the extent it is highly probable that a significant reversal will not occur. A refund liability and a right-of-return asset are recognised for products expected to be returned, see note 3.8 Contract assets and liabilities. The estimate for returned products is based on historical experience and expectations. Based on knowledge of the nature of returns in the wholesale and distributor channels, it is considered highly probable that a significant reversal of cumulative revenue recognised will not occur. Provisions for rebates and discounts granted to wholesalers and franchisees are recognised as a reduction in revenue. The Group’s obligation to repair or replace faulty products is recognised on a gross basis in the income statement as both a reduction in revenue and a decrease in cost of goods sold. This is due to the handling of warranty claims, which leads to replacements instead of repairs. Revenue is further measured excluding sales taxes and duties when these are passed on to customers. Sales taxes and duties incurred on sales that are not recoverable from the local taxation authorities are reported gross as part of revenue and cost of sales. When control has been transferred, a receivable is recognised as the consideration to be paid is conditional only on the passage of time. The price specified in the contract is not adjusted for any financing element as payment terms never exceed 12 months. Loyalty programme Revenue related to the loyalty programme points value is deferred up to the time the points are used. The stand-alone selling price of loyalty points issued is calculated by multiplying the estimated redemption rate and the monetary value assigned to the loyalty points. In estimating the redemption rate, Pandora considers breakage, which represents the portion of loyalty points issued that will never be redeemed. ANNUAL REPORT 2023 65 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ACCOUNTING POLICIES Wages and salaries, social security contributions, leave and sick leave, bonuses and non-monetary benefits are recognised in the financial year in which services are rendered by Pandora employees. Whenever Pandora provides long-term employee benefits, the costs are accrued to match the rendering of the services by the employees. Termination benefits are recognised at the time an agreement between Pandora and the employee is made and no future service is rendered by the employee in exchange for the benefits. TOTAL REMUNERATION1DKK million Base pay Bonus Shares Benefits OtherTotal2023Executive Management 17.8 16.4 22.2 2.6 - 59.0Executive Leadership Team253.7 56.9 52.7 10.2 2.2 175.62022Executive Management 17.1 16.2 23.2 2.6 - 59.0Executive Leadership Team240.3 47.1 47.3 8.2 1.2 144.1 1 Other relates to sign-on bonuses. 2 Executive Leadership Team is reported including Executive Management. Executive Management, together with other members of the Executive Leadership Team, is considered as key management personnel in Pandora. TOTAL REMUNERATIONDKK million 2023 2022To Board of Directors 10.0 8.2 Board members receive a fixed travel fee when attending Board meetings abroad. Total travel fee for 2023 amounted to DKK 1.7 million (2022: DKK 0.9 million). For further details, see our Remuneration Report. Decisions to grant share-based incentive programmes are made by the Board of Directors in accordance with general guidelines on incentive pay for Pandora. The total cost related to share-based payments was DKK 105 million (2022: net cost of DKK 87 million). The 2021 programme was recorded at the maximum level, the 2022 programme was recorded at maximum target for financial performance and at target for sustainability performance, while the programme for 2023 was recorded at target for both the financial and sustainability metric. The cost of share-based payments is included in staff costs. In the remaining vesting periods, an amount of DKK 97 million (2022: DKK 87 million) is expected to be recognised in respect of the current programmes. The weighted average remaining contractual life of the shares at the end of the period was 1.0 years (2022: 1.3 years). For shares exercised in 2023, the average share price at the time of exercise was DKK 648. Long-term incentive plans Pandora is launching annual incentive programmes targeting Executive Management and other employees. The calculated value of each programme is recognised over the vesting period (three years) based on the likelihood that programme targets will be met. For Executive Management, a further two-year holding period applies. Vesting of the performance shares granted in 2023 is subject to achievement of Pandora’s earnings per share (EPS) for the financial year 2025 and the achievement NOTE 2.3 SHARE-BASED PAYMENTS NOTE 2.2 STAFF COSTS CONTINUED of sustainability targets, which will be assessed against objectives based on Pandora’s internal projections. As financial KPIs are commercially sensitive, Pandora’s practice is to communicate these after the end of the performance period. For further details, see our Remuneration Report. Assumptions on fair value of shares The volatility of the shares is based on the historical volatility of the price of Pandora A/S shares. The risk- free interest rate is based on a Danish government bond with similar maturity. The dividend yield applied is equal to 2.44% for the 2023 programme and is based on the assumed future dividend over the vesting period and the share price on the date of the grant. Actual paid dividends may differ from the assumptions applied in the valuation of the market value. Given that the exercise price for one performance share equals up to 1% of the market price of one share at grant date, the fair value almost equals the market value of one share at grant date. The assumptions therefore have very limited impact on the estimated fair value of the performance shares granted. ANNUAL REPORT 2023 66 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Executive Other Average exercise price per SHARES OUTSTANDINGManagementemployeesTotal performance share, DKK2023Shares outstanding at 1 January 321,412 750,049 1,071,461 0.3Shares granted during the year 56,228 224,166 280,394 -Shares exercised during the year -123,356 -384,839 -508,195 0.1Shares lapsed during the year - -38,878 -38,878 -Shares outstanding at 31 December 254,284 550,498 804,782 0.32022Shares outstanding at 1 January 279,306 869,598 1,148,904 0.9Shares granted during the year 42,106 214,252 256,358 -Shares exercised during the year - -252,971 -252,971 2.6Shares lapsed during the year - -80,830 -80,830 -Shares outstanding at 31 December 321,412 750,049 1,071,461 0.3 Shares at 31 Maximum market Accumulated cost Remaining value to be NUMBER OF OUTSTANDING SHARES Vesting December value at launchrecognised expensed IN PANDORA A/Sdate2023(DKK million)(DKK million)(DKK million)Programme start date1,2March 20192022 105,662 27 16 -3April 20212024 160,642 154 96 -2April 20212024 50,288 26 26 -3April 20222025 180,329 130 55 342April 20222025 42,106 26 12 103April 20232026 209,527 137 21 422April 20232026 56,228 34 6 11Total number of shares outstanding 804,782 534 231 97 1 Although technically structured as options for legacy Danish tax treatment reasons, the awards have the characteristics of Performance Share Units because the option exercise price is 1% of the share price. 2 Programme related to Executive Management, where a two-year holding period applies. 3 Programme related to other employees. ACCOUNTING POLICIES Selected Pandora employees receive remuneration in the form of share- based payment transactions, whereby programme participants render services as consideration for equity instruments (equity-settled transactions). Equity-settled transactions The cost of equity-settled transactions with employees is measured by refer- ence to the fair value at the grant date. The calculated fair values are based on either the Black-Scholes model or the Monte Carlo model according to the per- formance conditions of each programme. The cost of equity-settled transactions is recognised as staff costs together with a corresponding increase in equity over the period in which the performance and/or service conditions are fulfilled. The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and management’s best estimate of the number of equity instruments that will ultimately vest. The income statement expense or income for a period represents the movement in cumulative expenses recognised at the beginning and end of that period. NOTE 2.3 SHARE-BASED PAYMENTS CONTINUED ANNUAL REPORT 2023 67 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Income taxes Income tax expense The tax expense was DKK 1.5 billion in 2023, corresponding to an effective tax rate of 24.0% (2022: DKK 1.5 billion, 23.0% for the Group). As in 2022, the effective tax rate of 24.0% was negatively impacted by paid withholding taxes on dividends and other payments, non-deductible expenses and non-capitalised tax assets from losses and limitation in deduction for marketing expenses in China. The effective tax rate was reduced as part of the investment agreement entered into with the Board of Investment (BOI) in Thailand, where a specific part of the profit is treated as non-taxable profit for an agreed period. NOTE 2.4 TAXATION INCOME TAX EXPENSE DKK million 2023 20221Current income tax charge for the year1,448 1,799Change in deferred tax for the year 110 -355Adjustment to current tax for prior years -50 58Adjustment to deferred tax for prior years -14 2Total income tax expense 1,494 1,504Deferred tax on other comprehensive income -43 65Current income tax on other comprehensive income 4 -88Total tax on other comprehensive income -39 -23 1 Withholding taxes are included in current income tax charge for the year. 2023 2022RECONCILIATION OF EFFECTIVE (DKK (DKK TAX RATE AND TAX%million) %million)Profit before tax 6,234 6,533Income tax rate in Denmark, 22% 22.0% 1,371 22.0% 1,437Deviation in foreign subsidiaries’ tax rates compared with the Danish rate 1.0% 64 -0.6% -41Non-deductible expenses 3.0% 190 1.3% 87Tax incentives -2.1% -134 -2.4% -158Adjustment to tax for prior years -1.0% -64 0.9% 60Non-capitalised tax assets, net 0.8% 51 1.1% 76Withholding taxes/other taxes 0.3% 16 0.7% 43Effective income tax rate/income tax expense 24.0% 1,494 23.0% 1,504 ACCOUNTING POLICIES Income tax expense for the year comprises current tax and changes in deferred tax, including changes in tax rate, adjustment to prior years and changes in provision for uncertain tax positions. Tax is recognised in the income statement, except to the extent that it is related to items recognised in equity or other comprehensive income. The tax rates and tax laws used to compute the amounts are those enacted or substantively enacted, by the reporting date, in the countries in which Pandora operates and generates taxable income. SIGNIFICANT ACCOUNTING ESTIMATES Pandora is subject to income tax in the countries in which the Group operates, comprising various tax rates worldwide. Significant judgements are required in determining the accrual for income taxes, deferred tax assets and liabilities, and provisions for uncertain tax positions. Provisions for uncertain tax positions are measured according to IFRIC 23. As part of Pandora conducting business globally, tax and transfer pricing disputes with tax authorities may occur. Any unresolved disputes with local tax authorities are recognised as income tax payable/receivable based on the expected value method or the most likely amount. Management believes that the provisions made for uncertain tax positions are adequate. However, the actual obligation may deviate from this and is dependent on the result of litigation and settlements with the relevant tax authorities. ANNUAL REPORT 2023 68 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW OECD Pillar Two minimum tax Pillar Two of the OECD’s two-pillar solution for the challenges arising from the digitalisation of the economy will apply to Pandora from 2024. Pandora expects to be subject to minimum tax primarily in respect of jurisdictions with corporate income tax rates lower than 15% or in which we receive tax incentives. This is mainly related to Thailand and to a lesser extent a few other countries, including the United Arab Emirates, Ireland and Panama. Where qualifying domestic minimum taxes are implemented in applicable jurisdictions, Pandora will pay the minimum tax in those jurisdictions. Where no qualifying domestic minimum tax has been implemented, tax will be paid in Denmark. Based on 2023, 11% of Pandora’s profits, with an average effective tax rate of 4%, will be subject to minimum tax in 2024. Of the minimum tax due, 97% is expected to relate to Thailand, where Pandora receives tax incentives as part of the investment agreement with BOI. DEFERRED TAXDKK million 2023 2022Deferred tax at 1 January 1,089 778Exchange rate adjustments -2 6Recognised in the income statement -96 353Recognised in other comprehensive income 43 -65Recognised in equity, share-based payments 62 17Deferred tax at 31 December 1,096 1,089Deferred tax assets 1,260 1,261Deferred tax liabilities -164 -172Deferred tax, net 1,096 1,089 BREAKDOWN OF DEFERRED TAX DKK million 2023 2022Intangible assets -719 -686Property, plant and equipment -15 42Right-of-use assets 27 20Current assets 1,388 1,434Non-current assets and liabilities 379 244Tax loss carryforwards 36 35Deferred tax, net 1,096 1,089 ACCOUNTING POLICIES Deferred tax on all temporary differences between the carrying amounts for financial reporting purposes and the tax base of assets and liabilities are measured using the balance sheet liability method. No deferred tax is recognised on temporary differences that arise from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither accounting profit nor taxable profit or loss. The recognition of deferred tax assets includes the expected tax value of tax loss carryforwards to the extent that these tax assets can be offset against positive taxable income in the foreseeable future. The same applies to deferred tax assets related to investments in subsidiaries. Management has considered future taxable income and applied judgements to determine whether deferred tax assets should be recognised. Deferred tax assets and liabilities are measured according to current tax rules and at the tax rates expected to be effective on elimination of the temporary differences. Deferred tax assets and liabilities are offset if the Group has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax relates to the same taxable entity and the same tax authority. ACCOUNTING POLICIES The Group has adopted the amendments to the Pillar Two model rules published by the OECD, including tax law that implements qualified domestic minimum taxes described in those rules. The amendments introduce a temporary exception to the accounting requirements for deferred taxes in IAS 12, so that an entity would neither recognise nor disclose information about deferred tax assets and liabilities related to minimum taxes. The mandatory exception from accounting for deferred tax in respect of minimum tax has been applied. Deferred tax At the end of 2023, deferred tax assets amounted to DKK 1,260 million (2022: DKK 1,261 million), and deferred tax liabilities amounted to DKK 164 million (2022: DKK 172 million). Net deferred tax assets amounted to DKK 1,096 million (2022: DKK 1,089 million). Of the total deferred tax assets recognised, DKK 36 million (2022: DKK 35 million) related to tax loss carryforwards, the utilisation of which depends on future positive taxable income exceeding realised deferred tax liabilities. It is management’s opinion that these tax loss carryforwards can be utilised. Tax assets not recognised were DKK 191 million (2022: DKK 142 million), of which DKK 100 million (2022: DKK 66 million) relate to tax loss carryforwards that are not expected to be utilised in the foreseeable future. Tax losses that can expire amounted to DKK 23 million (2022: DKK 24 million). No deferred tax has been recognised in respect of entities’ earnings that are intended for distribution in the short term, as no material tax expense will be payable on distribution. Only insignificant latent tax liabilities remained at 31 December 2023. These liabilities are not recognised as the Group is able to control this liability and it is considered probable that the liability will not crystallise in the foreseeable future. NOTE 2.4 TAXATION CONTINUED ANNUAL REPORT 2023 69 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Our approach to taxes and taxes paid Our sustainability strategy is reflected in our tax approach, and we aim at paying a fair tax in all markets where we operate. Pandora considers tax to play a key role for societies and to be an important contribution towards reaching the UN Sustainability Development Goals. Pandora is committed to ensure compliance with the letter and spirit of tax law in the markets where we operate, while striving to maximise shareholder value in a responsible way. The Group tax policy, which has been approved by the Board of Directors of Pandora, is available at pandoragroup.com/investor/corporate-governance/ tax-information and includes more information on our approach to taxes. Pandora operates globally under a vertically integrated business model, and we own a significant part of our value chain from production to retail. Pandora’s transfer pricing policy follows a so-called principal operating model, where profit follows risk and value creation throughout the value chain. While all steps of the value chain are important to Pandora, Pandora A/S is the principal value driver and also assumes the majority of business risks. Other entities in the Group achieve a profit margin, based on benchmark studies, and the residual profit (or loss) in the value chain remains with Pandora A/S. With a principal operating model, Pandora by nature has a significant number of intercompany transactions. Intercompany transactions are made on arm’s length basis and therefore priced on a basis consistent with the way unrelated parties would have priced such transactions. This impacts the taxes we pay in the countries in which we do business. Pandora understands the need for more transparency by both taxpayers and COUNTRY-BY-COUNTRY Current income 1OVERVIEWBusiness Third-party Profit Tax tax charge Employees Accumulated 2revenue before tax3DKK millionactivities Total revenuepaidfor the year(FTE)earningsUK 4,203 3,821 309 50 32 1,996 595Italy 2,600 2,540 114 30 61 927 60France1,280 1,196 38 18 19 576 84Germany 1,970 1,527 82 33 27 927 65Denmark 15,953 39 4,223 1,381 958 1,031 13,528US 17,133 8,306 290 24 67 2,474 103Australia1,683 1,120 322 102 102 337 162China738 564 -4 - - 1,026 -77Thailand 5,750 - 628 34 27 13,089 323Spain1,258 1,246 57 32 17 679 150Mexico1,771 1,385 44 34 39 774 26Rest of world7,131 6,392 283 94 107 3,644 245IFRS eliminations 4 - -153 - -8 - -7,485Total Group 61,474 28,136 6,234 1,832 1,448 27,480 7,779 1 The country-by-country overview is based on the accounting information collected for the Pandora Group Annual Report for 2023. 2 Total revenue includes third-party revenue, related-party revenue, other income and financial income. 3 Profit before tax excludes intercompany dividend income. Headquarters DistributionWarehouse Crafting facilities tax administrations, and the need to provide more clarity about Pandora’s position on tax. In doing so, we provide insight on key markets and make our full country-by- country report for all markets, including definitions, available at pandoragroup.com/investor/corporate- governance/tax-information. NOTE 2.4 TAXATION CONTINUED ANNUAL REPORT 2023 70 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Paid income tax In 2023, we paid corporate taxes in the amount of DKK 1,832 million (2022: DKK 1,790 million). The increased tax payments mainly relate to Denmark and Pandora’s key markets as the profit in these markets has increased. The major part of the taxes paid is attributable to Denmark and Pandora’s key markets, and mainly relates to the current year. Income tax paid reflects the cash tax payments made in the year and relates to taxes on account for the current year as well as payments regarding prior years. For the majority of the countries, the final taxes are paid in the year following the financial year, creating a timing difference in cash tax payments. At the beginning of the year, net income tax payable by Pandora amounted to DKK 913 million (2022: DKK 934 million). The net income tax payable decreased to DKK 480 million during the year, as shown in the bridge “Movement in net tax payable”. The decrease is reflected in the higher tax paid for 2023 and the reduced current tax charge for the year. CASH INCOME TAX PAIDDKK million 2023 2022Income tax expense in income statement -1,494 -1,504Tax on other comprehensive income and exchange rate adjustments -1 88Adjustments regarding deferred taxes 96 -353Movement in income tax receivable/payable -433 -21Income tax paid in the year -1,832 -1,790- of which relates to prior years -751 -658- of which relates to current year -1,081 -1,132Income tax paid in the year -1,832 -1,790 NOTE 2.4 TAXATION CONTINUED The difference between income tax expense in the income statement and income tax paid is explained in the bridge “From income tax expense to tax paid”. The income tax expense in the income statement for 2023 has been calculated at DKK 1,494 million. This is adjusted for taxes on other income posted on equity and adjustments to taxes for timing differences. Adding the tax payable from 2022 of DKK 913 million, we have a total tax payable of DKK 2,312 million. Of this amount, DKK 480 million will be paid in 2024 or later, and the remaining DKK 1,832 million were settled as cash tax payments in 2023. 1 50 Net tax payable, start of year Current income tax charge for the year Adjustments to current tax in prior years Tax on other comprehensive income and exchange rate adjustments Income tax paid in the year as reflected in our cash flows Net tax payable, year-end 913 1,448 1,832 480 Income tax expense in income statement Adjustments regarding deferred taxes Tax on other comprehensive income and exchange rate adjustments Net tax payable, start of year Net tax payable, year-end 1,494 1 96 913 480 1,832 Income tax paid in the year as reflected in our cash flows FROM INCOME TAX EXPENSE TO TAX PAID DKK million MOVEMENT IN NET TAX PAYABLE DKK million ANNUAL REPORT 2023 71 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW INVESTED CAPITAL AND WORKING CAPITAL ITEMS WORKING CAPITAL DKK million Notes 2023 2022 Inventories 3.5 4,166 4,211 Trade receivables 3.6 1,342 1,262 Trade payables 3.9 -3,211 -3,131 Operating working capital 2,297 2,342 Other receivables 1 904 1,078 Current provisions 3.7, 3.8 -744 -649 Commodity derivatives, net -16 133 Contract liabilities -185 -136 Other payables -1,745 -1,666 Net working capital 510 1,104 1 Including right-of-return assets. SECTION 3 The notes in this section describe the assets that form the basis for the activities of Pandora and the related liabilities. Financial risks are described in note 4.4 . In 2023, net working capital ended at 1.8% of revenue (2022: 4.2%), mainly driven by lower inventory levels as a percentage of the last 12 months' revenue, while the inventory balance in absolute terms remains in line with 2022. INVESTED CAPITAL DKK million Notes 2023 2022 Intangible assets 3.1 7,801 7,568 Property, plant and equipment 3.2 2,746 2,226 Right-of-use assets 3.3 3,779 2,978 Other non-current financial assets 215 249 Non-current provisions 3.7 -408 -363 Net working capital 510 1,104 Deferred tax, net 2.4 1,096 1,089 Currency derivatives, net -25 23 Income tax receivables/ payables, net -480 -913 Other liabilities -108 - Invested capital 15,126 13,961 Capital expenditure/ revenue 2022: 4.9% 5.8% 2022: 4.2% 1.8% Net working capital/ revenue ANNUAL REPORT 2023 72 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Other INTANGIBLE ASSETS intangible DKK million Goodwill Brand Distribution assetsTotal2023Cost at 1 January 4,822 1,057 1,613 2,434 9,925Acquisition of subsidiaries and activities 143 - - - 143Additions - - - 448 448Disposals - - - -183 -183Exchange rate adjustments -50 - -2 -21 -73Cost at 31 December 4,914 1,057 1,610 2,678 10,259Amortisation and impairment losses at 1 January - - 566 1,791 2,357Amortisation for the year - - 8 294 302Disposals - - - -181 -181Exchange rate adjustments - - -2 -17 -19Amortisation and impairment losses at 31 December - - 572 1,887 2,459Carrying amount at 31 December 4,914 1,057 1,039 790 7,801 NOTE 3.1 INTANGIBLE ASSETS DKK million 2023 2022Amortisation and impairment losses have been recognised in the income statement as follows: Cost of sales 21 46Sales, distribution and marketing expenses 128 107Administrative expenses 153 143Total 302 297 The majority of the intangible assets have been acquired through business combinations. Other INTANGIBLE ASSETS intangible DKK million Goodwill Brand Distribution assets Total2022Cost at 1 January 4,418 1,057 1,609 2,059 9,143Acquisition of subsidiaries and activities 364 - - - 364Additions - - - 361 361Disposals - - - -5 -5Exchange rate adjustments 39 - 4 19 62Cost at 31 December 4,822 1,057 1,613 2,434 9,925Amortisation and impairment losses at 1 January - - 528 1,521 2,049Amortisation for the year - - 33 263 297Disposals - - - -4 -4Exchange rate adjustments - - 4 11 15Amortisation and impairment losses at 31 December - - 566 1,791 2,357Carrying amount at 31 December 4,822 1,057 1,047 642 7,568 ANNUAL REPORT 2023 73 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Goodwill Additions in 2023 relate to acquisitions of activities. Note 3.4 Business combinations includes an overview of acquired goodwill for the year. Brand The “Pandora” brand is the only brand of the Group that is capitalised in the consolidated financial statements. It comprises a group of complementary intangible assets relating to the brand, domain name, products, image and customer experience of products sold under the Pandora brand. The brand was acquired as part of the Pandora core business in 2008. Distribution Distribution includes distribution network and distribution rights acquired. The distribution network covers Pandora’s relations with its distributors. The main part of the distribution network was acquired with the Pandora core business in 2008. Distribution rights mainly relate to the distribution rights for Pandora products in North America. These were acquired with the American distributor in 2008, and the carrying amount at 31 December 2023 was DKK 1.0 billion (2022: DKK 1.0 billion). Other intangible assets Other intangible assets mainly comprise software. NOTE 3.1 INTANGIBLE ASSETS CONTINUED ACCOUNTING POLICIES Goodwill Goodwill is initially recognised at the amount by which the purchase price for a business combination exceeds the recognised value of the identifiable assets and liabilities acquired. Goodwill comprises future growth expectations, buyer-specific synergies, the workforce in place and know-how. After initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortised, but is tested for impairment annually or if an impairment indication arises. Impairment losses charged in previous years cannot be reversed. Brand Brand is initially recognised at cost based on the “Relief from Royalty” method, which is considered to have an indefinite useful life and is tested for impairment annually. Distribution The distribution network is initially recognised at fair value based on an estimation of the costs the entity avoids by owning the intangible assets and therefore does not need to rebuild the network (the cost approach). The distribution network is amortised over an expected useful life of 15 years. The distribution rights for Pandora products in the North American market are measured based on a residual model, since the distribution agreement underlying the distribution rights is non- terminable. Consequently, the distribution rights are considered to have an indefinite useful life. Other acquired distribution rights are initially recognised at cost based on the “Multi-period Excess Earnings” model and amortised over their expected useful lives. Other intangible assets Software is initially recognised at cost and amortised over 2-10 years. Software obtained through a Software-as-a-Service (SaaS) arrangement is capitalised to the extent that the IAS 38 criteria are met, and amortised over the contract period. Costs directly attributable to prepare the software for its intended use, such as costs related to implementation and configuration, is capitalised together with the software. Any cost not directly attributable to the assets recorded is expensed as incurred. Amortisation is allocated to segments on a pro rata basis based on the standard cost per segment. Impairment At each reporting date, Pandora assesses whether there is any indication that an asset may be impaired. If any such indication exists, or when annual impairment testing of an asset is required, Pandora estimates the recoverable amount of the asset. The recoverable amount of an asset is the higher of the fair value of the asset or cash-generating unit (CGU) less costs to sell and its value in use. The recoverable amount is determined for the smallest group of assets that is independent from other assets or groups of assets. Where the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. The most significant factors when assessing the potential need for impairment are: — decreasing revenue; — increasing production cost; — decreasing brand value; — changes to the product mix. The indicators above should be viewed in the context of Pandora’s relatively high margins and low asset base. The brand is applied and supported globally in all of the Group’s entities. The brand is maintained and preserved through common strategy and product development at Group level and marketing in the individual sales entities. The brand is consequently tested for impairment at Group level. Like the brand described above, goodwill is reported and managed internally at Group level. Due to the constraint in IAS 36, goodwill is allocated to the CGUs in the two operating segments for impairment testing purposes. It is management’s opinion that this best reflects Pandora’s value creation. ANNUAL REPORT 2023 74 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Method for impairment testing In the impairment test, the recoverable amount is compared with the carrying amount. The recoverable amount is based on a calculation of the value in use using cash flow estimates based on the budget for 2024 and a forecast for the two subsequent years. The long-term growth rate in the terminal period has been set so that it equals the expected long-term rate of inflation. All intangible assets are tested for impairment if there is any indication of impairment. Intangible assets with indefinite useful lives are tested at least annually. ALLOCATION OF INTANGIBLE ASSETS TO CGUSDKK million Goodwill Brand Distribution 2023Core 3,580 766 751Fuel with more 1,334 291 288Total 4,914 1,057 1,0392022Core 3,505 766 758Fuel with more 1,316 291 289Total 4,822 1,057 1,047 The EBIT margin in the budget of each group of CGUs is based on historical experience and expectations concerning: • revenue development taking into account development in network (stores, retail/wholesale share), product mix and market share; • cost of sales based on raw materials consumption affected by mix of materials (stones, silver and gold), salaries and average lagged hedge commodity prices at the time the budget is prepared; • development in operating expenses; • currency rates that are based on actual rates at the time the budget is prepared; • increasing inflation and interest rates; • increasing climate risk and geographical exposure; • the transition to a circular economy and to net zero impact, including investments required, change in consumer behaviour and impact on the useful economic life of the assets. For more information, see note 1.3 Management’s judgements and estimates under IFRS. Net working capital in the budget for next year, relative to the revenue of each group of CGUs, is based on historical experience and is maintained for the remainder of the expected useful economic lives. Net working capital thus increases on a linear basis as the level of activity increases. The impairment test of the brand at Group level is based on the "Relief from Royalty" method. The impairment tests did not identify any need for impairment losses to be recognised. Based on sensitivity analysis, it is management’s opinion that no probable change in any key assumptions would cause the carrying amounts of the two operating segments or at Group level to exceed the recoverable amounts. Even with a significant reduction in growth rate and an increase in discount rate, management has not identified any likely impairment. Assumptions The calculations of the recoverable amounts of CGUs or groups of CGUs are based on the following key assumptions. Discount rates reflect the current market assessment of the risks specific to each CGU or group of CGUs. The Group discount rates have been estimated based on a weighted average cost of capital for the industry. The rates have also been adjusted to reflect the market assessment of any risk specific to each group of CGUs. The EBIT figures used in the impairment test are based on the budget for next year, prepared and approved by man- agement, and a forecast for the two subsequent years. High inflation rates were still observed in 2023, affecting the estimates for the upcoming years. Pandora expects the long-term inflation rate to stabilise, and the 2% growth rate applied is thus an estimate of the expected average inflation in the terminal period. As such, no real growth has been applied to the terminal period when calculating the recoverable amounts. NOTE 3.1 INTANGIBLE ASSETS CONTINUED DISCOUNT RATES AND GROWTH Discount rate Growth rate in RATES IN TERMINAL PERIOD before taxterminal period2023Core 13.1% 2%Fuel with more 13.1% 2%Group 13.1% 2%2022Core 12.6% 2%Fuel with more 12.7% 2%Group 12.6% 2% ANNUAL REPORT 2023 75 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW PROPERTY, PLANT AND EQUIPMENT Land and Plant and Assets under DKK million buildings equipment constructionTotal 2023Cost at 1 January 1,302 3,937 289 5,529Acquisition of subsidiaries and activities - 31 - 31Additions 15 179 968 1,161Disposals -10 -398 - -408Transfers 15 976 -992 -Exchange rate adjustments -37 -64 -2 -103Cost at 31 December 1,286 4,661 263 6,210Depreciation and impairment losses at 1 January 449 2,854 - 3,303Depreciation for the year 84 529 - 614Disposals -9 -388 - -397Exchange rate adjustments -13 -43 - -56Depreciation and impairment losses at 31 December 511 2,953 - 3,464Carrying amount at 31 December 774 1,708 263 2,7462022Cost at 1 January 1,193 3,582 91 4,866Acquisition of subsidiaries and activities - 32 - 32Additions 55 211 663 929Disposals -15 -350 - -365Transfers 43 425 -468 -Exchange rate adjustments 26 39 3 68Cost at 31 December 1,302 3,937 289 5,529Depreciation and impairment losses at 1 January 366 2,684 - 3,050Depreciation for the year 89 474 - 563Disposals -14 -341 - -355Exchange rate adjustments 8 37 - 45Depreciation and impairment losses at 31 December 449 2,854 - 3,303Carrying amount at 31 December 853 1,083 289 2,226 NOTE 3.2 PROPERTY, PLANT AND EQUIPMENT ACCOUNTING POLICIES Property, plant and equipment is stated at cost, net of accumulated depreciation and accumulated impairment losses. Depreciation is calculated on a straight-line basis over the estimated useful life according to the list below. Asset Useful lifeLand IndefiniteBuildings 20-50 yearsLeasehold improvements Lease termPlant and equipment 3-5 yearsOther fixtures and fittings 3-5 years DKK million 2023 2022Depreciation has been recognised in the income statement as follows: Cost of sales 144 167Sales, distribution and marketing expenses 427 359Administrative expenses 43 37Total 614 563 ANNUAL REPORT 2023 76 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Many of the Group’s property leases contain terms on variable lease payments that are linked to the volume of sales made from leased stores according to normal market practice. In 2023, around 27% (2022: 24%) of the lease payments recognised in the income statement were variable rent. Pandora has estimated that a 1% increase in annual physical store revenue would result in a 0.5% (2022: 0.5%) increase in lease payments. The average standard store leases are three to five years with a three to five-year option to extend in approximately 18% (2022: 21%) of current leases, typically with one or more termination options. Approximately 22% of current leases are up for renegotiation in 2024. The estimated value of lease options that Pandora is not reasonably certain of executing, is around DKK 0.4 billion (2022: DKK 0.3 billion). NOTE 3.3 LEASES Depreciation mainly relates to leased stores and is presented in the sales, distribution and marketing expenses. Costs recognised in the period for short-term and low-value leases were DKK 67 million (2022: DKK 60 million). Expenses are recognised on a straight-line basis. OTHER ITEMS RELATING TO LEASESDKK million 2023 2022Interest expense 270 162Total interest for the period 270 162 DKK million 2023 2022Property 1,149 1,098IT 1 1Cars 9 11Other 4 4Total depreciation on right-of-use assets for the period 1,163 1,114 Amounts recognised in the income statement: RECOGNISED DEPRECIATION ON RIGHT-OF-USE ASSETS CHARGED TO THE INCOME STATEMENT Pandora leases stores, various offices, office equipment and cars. RIGHT-OF-USE ASSETSDKK million 2023 2022Property 3,765 2,960IT 2 2Cars 10 11Other 2 5Total right-of-use assets 3,779 2,978 TOTAL CASH FLOWS RELATING TO LEASES DKK million 2023 2022Fixed lease payments 1,107 1,068Interest payments 270 162Variable leases linked to revenue 521 412Short-term and low-value leases 67 60Total cash flows relating to leases 1,965 1,702 Amounts recognised in the balance sheet: LEASE LIABILITIESDKK million 2023 2022Non-current 2,765 2,113Current 1,116 950Total lease liabilities 3,880 3,063 Additions of right-of-use assets amounted to DKK 2,129 million in 2023 (2022: DKK 1,717 million). Lease liabilities are recognised in loans and borrowings. ACCOUNTING ESTIMATES When assessing the lifetime of leases, Pandora considers the non-cancellable lease term and options to extend or terminate the lease where Pandora is reasonably certain to extend or not to terminate. Leases in Pandora mainly comprise stores and office buildings. Most lease contracts for stores average three to five years with a three to five-year option to extend in approximately 18% of current leases, typically with one or more termination options. The lease term for stores has been assessed to be up to 10 years, depending on location, revenue and earnings. For office buildings, the lease term is usually 5 to 15 years. ANNUAL REPORT 2023 77 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ACCOUNTING POLICIES Pandora applies a single recognition and measurement approach to all leases, except for short-term leases and low-value leases. Pandora recognises right-of-use assets at the commencement date of the lease when the asset is available for use. Right-of-use assets are measured at cost less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities recognised, initial direct costs incurred, lease payments made at or before the commencement date, key money, less any lease incentives received. Key money is measured at cost and amortised over the term of the contract. Right-of-use assets are depreciated on a straight- line basis over the shorter of the asset’s useful life and the lease term. At each reporting date, Pandora assesses whether there is any indication that a right-of-use asset may be impaired. If any such indication exists, Pandora carries out impairment testing for the relevant CGU. Pandora recognises lease liabilities at the commencement date of the lease, measured at the present value of lease payments to be made over the lease term. Lease payments include fixed payments less any lease incentives receivable. Some leases are exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take effect. Payments relating to services are not included in lease liabilities. Some property leases contain variable payment terms that are linked to sales generated from a store. Variable lease payments that depend on sales are recognised in profit or loss in the period in which the condition that triggers those payments occurs and are not included in the lease liability. In calculating the present value of lease payments, Pandora uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a modification, for example a change in the lease term or a change in the lease payments. Lease payments are classified in financial activities in the statement of cash flows. Pandora applies the short-term lease recogni - tion exemption to its short-term leases. Pay- ments related to short-term leases and leases of low-value assets continue to be recognised on a straight-line basis as an expense in the income statement. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise some IT equipment and other office equipment. NOTE 3.3 LEASES CONTINUED NOTE 3.4 BUSINESS COMBINATIONS The contribution from the acquisitions as highlighted below includes retail revenue and net profit after the acquisition date. Lost revenue and net profit from the franchise channel have not been adjusted, thus the highlighted contributions cannot be directly linked to the income statement from a performance perspective. Acquisitions in 2023 In 2023, Pandora took over 54 concept stores (35 concept stores in the US, 14 concept stores in Colombia and 5 concept stores in Canada). Net assets acquired mainly consisted of store properties, inventories and related liabilities. The total purchase price for the acquisitions was DKK 356 million. Based on the purchase price allocations, goodwill was DKK 143 million. Goodwill from the acquisitions was mainly related to the synergies from converting the stores from wholesale and distribution to Pandora-owned retail. Among the goodwill acquired, DKK 93 million was deductible for income tax purposes. Cost relating to the acquisitions was immaterial and has been recognised as operating expenses in the income statement. Excluding the temporary drag on gross margin from inven- tory buybacks and the impact from converting the stores from wholesale to Pandora-owned retail, the contribution to Group revenue and net profit from acquisitions for the period 1 January – 31 December 2023 was DKK 339 million and DKK 136 million, respectively. On a pro forma basis, if the acquisitions had been effective from 1 January 2023, the impact on Group revenue and net profit for the period 1 January – 31 December 2023 would have been approxi- mately DKK 463 million and DKK 169 million, respectively. Acquisitions in 2022 Ben Bridge In Q1 2022, Pandora took over 37 concept stores in the US and Canada (32 concept stores in the US acquired on 3 March and five concept stores in Canada acquired on 25 February) from Ben Bridge in two business combinations. Net assets acquired mainly consisted of store properties, inventories and related liabilities. The total purchase price for the acquisitions was DKK 291 million. Based on the purchase price allocations, goodwill was DKK 194 million. Excluding the temporary drag on gross margin from inventory buybacks, the contributions to the Group’s revenue and net earnings from the acquisition were DKK 445 million and DKK 186 million, respectively. Panbor On 13 July 2022, Pandora took over 13 concept stores in Las Vegas from Panbor. Net assets acquired mainly consisted of store properties, inventories and related liabilities. The total purchase price for the acquisitions was DKK 166 million. Based on the purchase price allocations, goodwill was DKK 95 million. Excluding the temporary drag on gross margin from inventory buybacks, the contributions to the Group’s revenue and net earnings from the acquisition were DKK 121 million and DKK 55 million, respectively. Portugal On 20 July 2022, Pandora acquired the distribution in Portugal from the previous distributor, Visão do Tempo. The acquisition comprised mainly inventories, non-current assets and liabilities relating to 25 concept stores and nine shop-in-shops. The total purchase price for the acquisitions was DKK 99 million. Based on the purchase ANNUAL REPORT 2023 78 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW price allocations, goodwill was DKK 64 million. Excluding the temporary drag on gross margin from inventory buybacks, the contributions to the Group’s revenue and net earnings from the acquisition were DKK 99 million and DKK 51 million, respectively. Other business combinations in 2022 Pandora acquired five more concept stores in the US and Italy in 2022. The purchase price was DKK 20 million. Assets acquired mainly consisted of inventories and other assets and liabilities relating to the stores. Of the purchase price, DKK 11 million was allocated to goodwill. Total business combinations in 2022 The total purchase price for the acquisitions in 2022 was DKK 577 million. Based on the purchase price allocations, goodwill was DKK 364 million. Goodwill from the acquisitions was mainly related to the synergies from converting the stores from wholesale and distribution to Pandora-owned retail. All the goodwill recognised was deductible for income tax purposes. The cost relating to the acquisitions was immaterial and has been recognised as operating expenses in the income statement. Excluding the temporary drag on gross margin from inventory buybacks, the contributions to the Group’s revenue and net earnings from the acquisitions for the period 1 January to 31 December 2022 were DKK 693 million and DKK 305 million, respectively. On a pro forma NOTE 3.4 BUSINESS COMBINATIONS CONTINUED basis, if the acquisitions had been effective from 1 January 2022, the impact on Group revenue and net earnings for the period 1 January to 31 December 2022 would have been approximately DKK 825 million and DKK 346 million, respectively. Business combinations after the reporting period No business combinations of significance to Pandora took place after the reporting period. ACQUISITIONSDKK million 2023 2022Property, plant and equipment and right-of-use assets 144 159Inventories 194 195Other current assets 3 -Assets acquired 341 354Non-current liabilities 75 78Payables 4 3Other current liabilities 49 61Liabilities assumed 128 141Total identifiable net assets acquired 213 213Goodwill arising on acquisitions 143 364Purchase consideration 356 577Cash movements on acquisitions:1Consideration transferred regarding previous years14 -2Deferred payment-21 -14Net cash flows on acquisitions 349 562 1 The deferred payment of DKK 14 million related to the acquisition in Portugal and Italy in 2022 was paid in 2023. 2 The deferred payment of DKK 21 million relates mainly to the acquisition in Colombia in 2023. ACCOUNTING POLICIES Business combinations are accounted for in accordance with the IFRS 3 acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date fair value, and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition costs incurred are expensed. Subsequent to initial recognition, goodwill is measured at cost less any accumulated impairment losses. As goodwill is reported and managed internally at Group level, goodwill acquired should also be allocated to the Group. However, goodwill acquired is allocated to the CGUs in the two operating segments for impairment testing purposes due to the constraint in IAS 36. ANNUAL REPORT 2023 79 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW INVENTORIES DKK million 2023 2022Raw materials and consumables 615 743Work in progress 141 151Finished goods 3,216 3,088Point-of-sale materials 194 229Total inventories at 31 December 4,166 4,211Inventory write-downs at 1 January 735 765Write-downs during the year 200 118Utilised in the year -185 -148Inventory write-downs at 31 December 750 735 NOTE 3.5 INVENTORIES Write-downs Inventory write-downs primarily relate to finished goods and are recognised in cost of sales, DKK 170 million (2022: DKK 97 million), and operating expenses, DKK 30 million (2022: DKK 21 million). Write-downs include mainly the cost of remelting obsolete jewellery. Remelting of goods (realised and unrealised) negatively impacted gross profit by DKK 138 million (2022: DKK 63 million). Production overheads Production overheads are calculated using a standard cost method, which is reviewed regularly to ensure relevant assumptions concerning capacity utilisation, lead times and other relevant factors. ACCOUNTING POLICIES Inventories are valued at the lower of cost and net realisable value. Costs are accounted for on a first-in, first-out basis (FIFO). Besides raw materials, costs include labour and a proportion of production overheads based on normal operating capacity, but excluding borrowing costs. Point-of-sale materials comprise purchase costs regarding equipment, displays and packaging materials etc. and are also accounted for on a FIFO basis. SIGNIFICANT ACCOUNTING ESTIMATES Estimates relating to write-downs are impacted by forecasting accuracy in the number of obsolete products that will need to be remelted. The impact from remelt is also influenced by fluctuations in the market prices of silver and gold. Further, significant management judgements are required with regards to the calculations of internal gain on inventory when goods are sold from production entities to sales entities. Net realisable value Net realisable value is based on the estimated selling price less estimated costs of completion and distribution. Alternatively, for inventories that are not expected to be sold, net realisable value is based on the recycle value of the reusable raw materials (primarily silver, gold and lab- grown diamonds). NOTE 3.6 TRADE RECEIVABLES TRADE RECEIVABLES DKK million 2023 2022Receivables related to third-party distribution and wholesale 705 747Receivables related to retail revenue sales 637 515Total trade receivables at 31 December 1,342 1,262Ageing of trade receivables at 31 DecemberNot past due 1,056 1,035Up to 30 days 233 176Between 30 and 60 days 27 31Between 60 and 90 days 14 12Over 90 days 12 8Total past due, not impaired 286 227Total trade receivables at 31 December 1,342 1,262Development in impairment losses on trade receivablesImpairment at 1 January 83 86Additions 20 61Utilised -2 -11Unused amounts reversed -10 -55Exchange rate adjustments 4 2Impairment at 31 December 94 83 Trade receivables are amounts due from the sale of goods to wholesalers and distributors, or due from landlords, malls or e-commerce providers responsible for the collection of cash related to retail sales on behalf of Pandora. The impairment on receivables increased by DKK 11 million for the year. Realised losses were not material and remained low. ANNUAL REPORT 2023 80 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 3.6 TRADE RECEIVABLES CONTINUED NOTE 3.7 PROVISIONS PROVISIONS DKK million 2023 2022Provisions at 1 January 384 442Additions in the year 140 77Utilised in the year -53 -15Unused provisions reversed -36 -120Exchange rate adjustments -4 -Provisions at 31 December 431 384Provisions are recognised in the balance sheet as follows: Current 23 21Non-current 408 363Provisions at 31 December 431 384 ACCOUNTING POLICIES Provisions are recognised when Pandora has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. The expense relating to any provision is recognised in the income statement net of any reimbursement. Provisions are liabilities of uncertain timing or amount and consist of defined benefit pension plans of DKK 104 million (2022: DKK 80 million), obligations to restore leased property of DKK 159 million (2022: DKK 163 million), and other legal and constructive obligations of DKK 168 million (2022: DKK 141 million). See note 5.1 Contingent assets and liabilities for estimates relating to litigation. NOTE 3.8 CONTRACT ASSETS AND LIABILITIES CONTRACT ASSETS AND LIABILITIES DKK million 2023 2022Contract assets Receivables from sale of products, see note 3.6 1,342 1,262Right-of-return assets 55 54Total contract assets 1,397 1,316Contract liabilitiesPrepayments from customers 14 16Coupons, gift cards etc. 142 102Loyalty programme 29 18Refund and warranty liability 721 628Total contract liabilities 906 763 REFUND AND WARRANTY LIABILITY DKK million Refund Warranty Total2023Liability at 1 January 339 288 628Performance obligations for which consideration has been received 1,093 431 1,525Revenue recognised, included in the contract liability -946 -336 -1,281Contract liabilities reversed -106 -35 -141Exchange rate adjustments -5 -4 -9Refund and warranty liability at 31 December 376 345 7212022Liability at 1 January 478 246 724Performance obligations for which consideration has been received 982 327 1,309Revenue recognised, included in the contract liability -897 -214 -1,111Contract liabilities reversed -243 -66 -308Exchange rate adjustments 19 -5 14Refund and warranty liability at 31 December 339 288 628 ACCOUNTING POLICIES Trade receivables are initially recognised at the amount of consideration that is unconditional and consequently recognised at fair value. The Group holds trade receivables with the objective of collecting the contractual cash flows and therefore measures them subsequently at amortised cost using the effective interest method. Pandora applies the simplified approach to measure expected credit losses, using a lifetime expected loss allowance. Management continues to assess credit risk in order to ensure credit risk never exceeds the recognised write-down on trade receivables. For a further description of credit risk, see note 4.4 Financial risks. In view of the low historical loss rates on receivables, adjusting these rates to reflect current and forward-looking information on macroeconomic factors such as GDP and unemployment rates affecting the ability of customers to settle receivables will not increase the risk of losses significantly. ANNUAL REPORT 2023 81 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ACCOUNTING POLICIES Pandora recognises a refund and warranty liability related to return rights provided to customers in most markets. A corresponding right-of-return asset is also recognised as part of contract assets. The value of the right-of-return asset is determined by how many of the returned products are expected to be sold. Remaining products are written down to remelt value together with returns covered by warranties. The refund liability for estimated sales returns is recognised when there is historical experience or when a reasonably accurate estimate of expected future returns can otherwise be made. The income effect recognised is the gross margin of the expected returns and the potential effect of writing down parts of the returned goods to remelt value. Changes to the right-of-return asset and refund liability are recognised gross in the income statement as both revenue and cost of sales. Refund liability to cover warranty claims is based on expected replacements provided for products still covered by warranty at the end of the period. The liability is recognised gross in the income statement, as both a reduction in revenue and in cost of goods sold. This is due to the handling of warranty claims which lead to replacements instead of repairs. Revenue related to the gift cards and coupons is deferred up to the time the gift cards and coupons are used. The stand-alone selling price of the gift cards and coupons is the monetary value of the cards and coupons. In estimating the redemption rate, Pandora considers breakage, which represents the portion of the gift cards and coupons value issued that will never be redeemed. As a common practice in Pandora, no costs to obtain contracts with customers were capitalised in 2023 or previous years. SIGNIFICANT ACCOUNTING ESTIMATES In most markets, Pandora has provided return and warranty rights to customers. The handling of warranty claims leads to replacements instead of repairs. The recognised refund liability relating to return and warranty rights is assessed to a large extent on the basis of historical return patterns. NOTE 3.9 TRADE PAYABLES The Group generally accepts that vendors sell off their receivables arising from the sale of goods and services to the Group to a third party. Pandora has established a supply chain financing programme where vendors can sell off their receivables from Pandora on attractive terms, based on invoices approved by Pandora, but at the bank's sole discretion. Pandora is not directly or indirectly a party to these agreements. The amounts payable to suppliers included in the supply chain financing programme are classified as trade payables in the balance sheet as well as in the statement of cash flows (working capital within cash flows from operations) and amounted to DKK 82 million at 31 December 2023 (2022: DKK 79 million). NOTE 3.8 CONTRACT ASSETS AND LIABILITIES CONTINUED ANNUAL REPORT 2023 82 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NET INTEREST-BEARING DEBT DKK million 2023 2022 Loans and borrowings, non-current 6,973 1,017 Lease liabilities, non-current 2,765 2,113 Loans and borrowings, current 313 3,508 Lease liabilities, current 1,116 950 Cash -1,397 -794 Net interest-bearing debt 9,770 6,794 CAPITAL STRUCTURE AND NET FINANCIALS SECTION 4 This section includes notes related to Pandora’s capital structure and net financials, including financial risks in note 4.4. As a consequence of its operations, investments and financing, Pandora is exposed to a number of financial risks that are monitored and managed by Pandora’s Group Treasury department. Pandora uses a number of derivative financial instru- ments to hedge its exposures to fluctuations in commodity prices and currencies. Derivative financial instruments are described in note 4.5. Pandora’s capital structure policy is to maintain a leverage ratio (NIBD to EBITDA ratio) between 0.5x and 1.5x (including leases in accordance with IFRS 16). At 31 December 2023, the ratio was 1.1x (2022: 0.8x), reflecting the decision to increase leverage from the low end of the capital structure range to around the mid-point. The cash conversion was 78% in 2023 compared with 39% in 2022. 1 Includes the bond of EUR 500 million issued in March 2023. Unutilised committed facilities of DKK 4.5 billion underpin Pandora’s strong liquidity position. 4.5 DKK billion ANNUAL REPORT 2023 83 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 4.1 SHARE CAPITAL At the Annual General Meeting of Pandora A/S on 16 March 2023, the shareholders resolved to cancel 6,500,000 SHARE CAPITAL Number of shares Nominal value (DKK)2023Balance at 1 January 95,500,000 95,500,000Cancellation of shares -6,500,000 -6,500,000Balance at 31 December 89,000,000 89,000,0002022Balance at 1 January 100,000,000 100,000,000Cancellation of shares -4,500,000 -4,500,000Balance at 31 December 95,500,000 95,500,000 Number of Nominal TREASURY SHARESsharesvalue (DKK) Purchase price% of shares2023Balance at 1 January 6,104,531 6,104,531 3,319,975,573 6.4%Used to settle share-based incentive plans -508,195 -508,195 -277,749,702 -0.5%Purchase of treasury shares 7,693,692 7,693,692 4,997,666,138 8.3%Cancellation of treasury shares -6,500,000 -6,500,000 -3,686,966,729 -6.8%Balance at 31 December 6,790,028 6,790,028 4,352,925,278 7.6%2022Balance at 1 January 4,261,882 4,261,882 3,416,201,836 4.3%Used to settle share-based incentive plans -252,971 -252,971 -198,579,700 -0.3%Purchase of treasury shares 6,595,620 6,595,620 3,588,038,037 6.7%Cancellation of treasury shares -4,500,000 -4,500,000 -3,485,684,600 -4.5%Balance at 31 December 6,104,531 6,104,531 3,319,975,573 6.4% treasury shares. At 31 December 2023, the share capital comprised 89,000,000 shares with a par value of DKK 1. No shares have special rights. Pandora maintains an equity ratio of 23% and high returns to the shareholders. In 2023, Pandora executed a new share buyback programme under which Pandora bought back own shares of DKK 5.0 billion. In 2023, Pandora purchased 7,693,692 treasury shares, corresponding to a total purchase price of DKK 5.0 billion (DKK 0.4 billion related to the share buyback programme from 2022, and DKK 4.6 billion related to the share buyback programme in 2023). At 31 December 2023, Pandora had yet to repurchase own shares at a total purchase price of DKK 0.4 billion as part of the share buyback programme. Own shares of DKK 0.4 billion have been repurchased after 31 December 2023. Treasury shares All treasury shares are owned by Pandora A/S. Treasury shares include hedges for share- based incentive plans granted to the Executive Management and other employees. NOTE 4.2 EARNINGS PER SHARE AND DIVIDEND EARNINGS PER SHAREDKK million 2023 2022Profit attributable to equity holders 4,740 5,029Weighted average number of ordinary shares 85,408,547 92,746,543Effect of performance shares 671,905 949,850Weighted average number of ordinary shares adjusted for the effect of dilution 86,080,451 93,696,393Basic earnings per share, DKK 55.5 54.2Diluted earnings per share, DKK 55.1 53.7 There have been no transactions between the reporting date and the date of completion of the Annual Report involving shares that would have significantly changed the number of shares or potential shares in Pandora A/S. Dividend The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 18 per share (2022: DKK 16), corresponding to DKK 1.5 billion, be distributed for 2023. No dividend is paid on treasury shares. ANNUAL REPORT 2023 84 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ACCOUNTING POLICIES Dividend proposed is recognised as a liability at the date of the adoption at the Annual General Meeting (declaration date). Extraordinary dividend is recognised as a liability at the declaration date. In 2023, a dividend of DKK 1.4 billion in total was paid. Dividend paid had no effect on the Group’s tax expense for the year. For further shareholder information on dividend payments, see page 45 . Distributable reserves Cash distribution to the shareholders is, by law, limited to the amount of the free reserves of the Parent Company. As at 31 December 2023, free reserves in the Parent Company amounted to DKK 13.5 billion. When calculating the amount available for distribution of dividend and share buyback, treasury shares are deducted from distributable reserves. 2 TOTAL LIABILITIES FROM FINANCING ACTIVITIES Financial liabilities Foreign exchange Financial liabilities 1DKK millionat 1 January Cash flows, net New leases etc. Otheradjustmentsat 31 December2023Non-current borrowings1,017 5,927 - 29 - 6,973Non-current lease liabilities 2,113 - 1,560 -886 -23 2,765Current borrowings 3,508 -3,321 - 128 -2 313Current lease liabilities 950 -1,107 520 769 -16 1,116Total liabilities from financing activities 7,588 1,499 2,080 40 -41 11,1652022Non-current borrowings 1,041 74 - -99 - 1,017Non-current lease liabilities 1,724 - 1,253 -857 -6 2,113Current borrowings 274 2,935 - 299 - 3,508Current lease liabilities 886 -1,068 465 665 2 950Total liabilities from financing activities 3,926 1,941 1,717 7 -3 7,588 1 Includes the effect of the reclassification of the non-current portion of interest-bearing loans and borrowings to the current portion due to the passage of time. Also includes the effect of accrued but not yet paid interest on interest-bearing loans and borrowings, upfront prepayment of lease liabilities and the effect of the lease modification and reassessment. The Group classifies interest paid as cash flows from operating activities. 2 Includes the bond of EUR 500 million issued in March 2023. ACCOUNTING POLICIES On initial recognition, interest-bearing debt and borrowings are measured at fair value less transaction costs. Subsequent to initial recognition, interest-bearing loans and borrowings are measured at amortised cost using the effective interest rate method. Gains and losses are recognised in the income statement when the liabilities are derecognised and through the effective interest rate method. Amortised cost is calculated by taking into account any discount or premium at inception, as well as fees and other costs. NOTE 4.3 LIABILITIES FROM FINANCING ACTIVITIES NOTE 4.2 EARNINGS PER SHARE AND DIVIDEND CONTINUED ANNUAL REPORT 2023 85 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW As a consequence of its operations, investments and financing, Pandora is exposed to a number of financial risks that are monitored and managed by Pandora’s Group Treasury department. To manage financial risks, Pandora may use a number of financial instruments, such as forward contracts in silver and gold, currency and interest rate swaps, options and similar instruments within the framework of its current policies. Financial risks are divided into commodity price risk, foreign currency risk, credit risk, liquidity risk and interest rate risk. It is Pandora’s policy to hedge at least 50% of the combined commodity, exchange rate and interest rate risk. However, at least 70% of estimated commodity purchases for the next 12 months must be hedged. The table on the right illustrates the sensitivity on 2023 revenue, EBIT and EBIT margin from exchange rates and commodity price movements. In addition, the sensitivity of assets and liabilities as at 31 December from currency and commodity price movements is illustrated on the next page. Commodity price risk Raw material risk is the risk of fluctuating commodity prices resulting in additional production costs. The most important raw materials are silver and gold, which are priced in USD. It is Pandora’s policy to ensure stable, predictable raw material prices. Based on a rolling 12-month production plan, the general policy is for Group Treasury to hedge at least 70% of the Group’s expected consumption. NOTE 4.4 FINANCIAL RISKS Consumption is hedged from 1 to 12 months forward with a hedge ratio target that decreases with time to maturity as illustrated to the right. Commodity hedging is updated at the end of each month or in connection with revised 12-month rolling production plans. Actual production may deviate from the 12-month roll- ing production plan. In case of deviations, the realised commodity hedge ratio may deviate from the estimated hedge ratio. The effective portion of the realised gain or loss from commodity hedging is recognised in Group inventories and subsequently in cost of sales. For the fair value of hedging instruments, see note 4.5 Derivative financial instruments. Foreign currency risk Pandora’s presentation currency is DKK, but the majority of Pandora’s activities and investments are denominated in other currencies. Consequently, exchange rate fluctuations may have a substantial impact on Pandora’s cash flows, profit (loss) and/or financial position in DKK. The majority of Pandora’s revenue is denominated in USD, EUR, GBP, AUD, MXN, CAD, PLN and CNY. The functional currency of subsidiaries is generally the local currency, and a substantial portion of Pandora’s costs relates to raw materials purchased in USD. Min Max COMMODITY HEDGE RATIO TARGET (%) % MONTHS AHEAD % MONTHS AHEAD % MONTHS AHEAD % MONTHS AHEAD REVENUE BREAKDOWN BY CURRENCY (%) USD EUR GBP AUD MXN CAD PLN CNY Other 20222023 5% 4% 2% 27% 14% 32% 10% 2023 2022SENSITIVITY ANALYSIS ON EXCHANGE Change in EBIT EBIT 1RATES AND COMMODITY PRICESexchange rate and margin margin DKK millioncommodity prices Revenue EBITimpact Revenue EBITimpactUSD +10% 894 339 0.4% 858 367 0.5%CAD +10% 81 41 0.1% 80 47 0.1%AUD +10% 154 104 0.2% 167 117 0.3%GBP +10% 383 238 0.5% 382 252 0.6%EUR +1% 77 45 0.1% 71 44 0.1%CNY +10% 55 -3 -0.1% 73 -9 -0.1%MXN +10% 124 69 0.1% 86 47 0.1%PLN +10% 76 59 0.1% 64 47 0.1%THB +10% - -231 -0.8% - -220 -0.8%SILVER and GOLD +10% - -210 -0.7% - -218 -0.8% 1 Revenue and EBIT would have been impacted by the above amounts if exchange rates and commodity prices in 2023 had been higher than the realised exchange rates and commodity prices. The impact would have been the opposite if exchange rates and commodity prices had been decreasing by similar percentages. The analysis is based on the transaction currency. The analysis excludes the effects of hedging and time lag of inventory. 3% 3% 32% 27% 14% 6% 3% 3% 3% 10% 2% ANNUAL REPORT 2023 86 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 4.4 FINANCIAL RISKS CONTINUED In addition, Pandora incurs costs denominated in THB. Changes in the exchange rate of these currencies versus DKK will result in changes to the translated value of future EBIT and cash flows. Pandora finances the majority of its subsidiaries’ cash requirements via intercompany loans denominated in the local currency of the individual subsidiary. A devaluation of these currencies against DKK will in general result in a foreign exchange loss. Exchange rate fluctuations may lead to a decrease in revenue and an increase in costs and thus declining margins. In addition, exchange rate fluctuations affect the translated value of the profits or losses of foreign subsidiaries and the translation of foreign currency assets and liabilities. 31 December 2023 31 December 2022CURRENCY AND COMMODITY EXPOSURE 1FROM ASSETS AND LIABILITIESChange in Profit (loss) Profit (loss) DKK million exchange ratebefore taxEquitybefore taxEquityUSD +10% 32 -61 -22 240CAD +10% 15 6 33 -AUD +10% 20 -15 11 -64GBP +10% -63 -97 - -64EUR +1% -68 -68 -9 -34CNY +10% -10 -10 -17 -9MXN +10% 60 34 52 52PLN +10% 12 12 1 1THB +10% -36 168 -46 247SILVER and GOLD +10% - 190 - 189 1 The movements in the income statement arise from monetary items (cash, borrowings, receivables and payables) where the functional currency of the entity differs from the currency that the monetary items are denominated in. The currency movements in equity arise from monetary items and hedging instruments where the functional currency of the entity differs from the currency that the hedging instruments or monetary items are denominated in. The commodity movements in equity arise from the change in the hedging reserve. The impact would have been the opposite if exchange rates had been decreasing by similar percentages. The analysis is based on the transaction currency. OUTSTANDING COMMITTED LOAN FACILITIESAvailable Maturity Drawn Avg. effective AvailableDKK millionfacilities dateamount interest rateliquidity1Revolving credit facilities7,080 April 2028 2,609 6.07% 4,4721Term loan maturing in 2030646 May 2030 646 2.80% -1Bond maturing in 20283,726 April 2028 3,726 5.04% -Total outstanding committed loan facilities at 31 December 11,453 6,981 4,472 1 Sustainability-linked facilities. It is Pandora’s policy to hedge foreign currency risks related to the risk of declining net cash flows resulting from exchange rate fluctuations. Pandora does not hedge balance sheet items or ownership interests in foreign subsidiaries. For 2023, 70% of the cash flows from currencies with risk above policy threshold were hedged based on a rolling 12 month forecast. In 2023, this included USD, THB, GBP, AUD and MXN. Cash flows are hedged from 1 to 12 months forward with a hedge ratio that decreases with time to maturity. Foreign currency hedging is updated at the end of each month or in connection with revised 12-month rolling cash forecasts. The realised profit (loss) from exchange rate hedging is taken to financial items. The table below illustrates the currency revaluation impact in DKK million on net profit and changes in equity resulting from a change in the Group’s primary foreign currencies after the effect of hedge accounting. Credit risk Credit risk is primarily related to trade receivables, cash and unrealised gains on financial contracts. The maximum credit risk related to financial assets corresponds to the carrying amounts recognised in the consolidated balance sheet. It is Pandora’s policy for subsidiaries to be responsible for credit evaluation and credit risk on their trade receivables. Credit limits above certain policy thresholds must be approved by Group Treasury and/or the Chief Financial Officer. Note 3.6 Trade receivables includes an overview of the credit risk related to trade receivables. Rating of trade receivables does not differ materially either by type of cus- tomer or geographic location. The risk of further impairment is considered to be limited. Credit risk related to Pandora’s other financial assets mainly includes cash and unrealised gains on financial contracts. The credit risk is related to default of the counterparty with a maximum exposure corresponding to the carrying amount of the assets. Group Treasury is responsible for managing these credit risks. Liquidity risk Pandora’s cash conversion is high and Pandora maintains an adequate level of cash and unutilised credit facilities to meet financial obligations when due. Pandora’s liquidity risk and refinancing risk are considered to be low. ANNUAL REPORT 2023 87 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Pandora has one revolving credit facility of EUR 950 million and one term loan of EUR 87 million committed until April 2028 and May 2030, respectively. On 3 March 2023, Pandora announced the successful issuance of EUR 500 million in senior notes under its newly established Euro Medium Term Note programme. The issuance is a result of Pandora’s desire to diversify its funding sources and was well received by investors across Europe. The net proceeds from the bond have been used for refinancing of a bridge loan facility established in December 2022. In connection with the bond issuance, Pandora obtained a credit rating of BBB by S&P Global Ratings and a Baa2 rating from Moody’s Investor Service. Pandora has uncommitted credit facilities to ensure efficient and flexible local liquidity management. The credit facilities are managed by Group Treasury. Interest rate risk Interest rate risk is the risk of interest rate fluctuations resulting in changed interest rate payments and market value of net borrowings. At the reporting date, only the revolving credit facilities were based on floating interest rates. All else being equal, it is estimated that a general increase in interest rates by 1.0 percentage point would lead to a DKK 37 million decrease in profit before tax and equity, excluding tax effect (2022: DKK 49 million decrease). Contractual maturities of financial liabilities The table below breaks the Group’s financial liabilities down into relevant maturity groupings based on contractual maturities for: • all non-derivative financial liabilities; • net and gross settled derivative financial instruments for which the contractual maturities are essential for an understanding of the timing of the cash flows. NOTE 4.4 FINANCIAL RISKS CONTINUED LIABILITIES FALL DUE AS FOLLOWS Within Within After more than DKK million1 year1-5 years5 yearsTotal2023Non-derivativesLoans and borrowings 343 3,049 153 3,545Bond 168 4,397 - 4,565Lease liabilities 1,248 2,818 1,142 5,209Trade payables 3,211 - - 3,211Other payables 137 92 - 229DerivativesDerivative financial instruments 128 - - 128Total at 31 December 5,234 10,357 1,295 16,8862022Non-derivativesLoans and borrowings 3,615 813 253 4,681Lease liabilities 1,134 2,046 539 3,718Trade payables 3,131 - - 3,131Other payables 239 - - 239DerivativesDerivative financial instruments 74 - - 74Total at 31 December 8,193 2,859 792 11,844 The amounts disclosed in the table are the contractual undiscounted cash flows. Based on the Group’s expectations for the future operation and the Group’s current cash resources, no significant liquidity risks have been identified. ANNUAL REPORT 2023 88 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Pandora uses a number of derivative financial instruments to hedge its exposure to fluctuations in commodity prices and exchange rates. Derivative financial instruments include silver and gold forward contracts and foreign exchange forward contracts. It is Pandora’s policy to hedge at least 70% of the Group’s expected silver and gold consumption based on a rolling 12-month production plan. The table to the right illustrates the timing of the hedges related to the purchase of silver and gold for production, excluding the time-lag effect from inventory to cost of sales (when the product is sold). The time-lag from use in production to impact on cost of sales is usually 2 to 7 months. Classification according to the fair value hierarchy The fair value at 31 December 2023 of Pandora’s derivative financial instruments was measured in accordance with level 2 in the fair value hierarchy (IFRS 13). Level 2 is based on non-quoted prices, observable either directly (as prices) or indirectly (derived from prices). Pandora uses input from third-party valuation specialists to quote prices for unrealised derivative financial instruments. The value of unrealised silver and gold instruments is tested against the prices observable at London Bullion Market Association (LBMA). The value of unrealised foreign exchange instruments is tested against observable foreign exchange forward rates. NOTE 4.5 DERIVATIVE FINANCIAL INSTRUMENTS The value of financial instruments recognised in other comprehensive income is recycled from equity at the time the instrument is settled, within 12 months. Derivative financial instruments that qualify for cash flow hedge accounting The hedges are expected to be highly effective due to the nature of the economic relation between the exposure and the hedge. The effective portion of the unrealised gain or loss on all hedging instruments is recognised directly as other comprehensive income in the equity hedging reserve. The ineffective portion is recognised in net financials. The effective portion of the realised gain or loss on a commodity hedging transaction is recognised in Group inventories and subsequently in cost of sales whereas the ineffective portion is realised in net financials. The impact in net financials was a gain of DKK 9 million (2022: loss of DKK 46 million). The realised gain or loss on all foreign exchange contracts is recognised in net financials. For information about risk management strategy, see note 4.4 Financial risks. DERIVATIVE FINANCIAL INSTRUMENTS Carrying Hedge reserve, DKK millionAssetsLiabilitiesamountnet of tax2023Commodities 55 -71 -16 -13Foreign exchange 32 -57 -25 -20Total derivative financial instruments 87 -128 -41 -332022Commodities 166 -33 133 103Foreign exchange 65 -42 23 18Total derivative financial instruments 231 -74 157 121HEDGED AND REALISED PURCHASE PRICESRealised in Hedged Hedged Hedged Hedged 1At use of the silver and gold for production (USD/OZ)2023Q1 2024Q2 2024Q3 2024Q4 2024Silver price 22.60 23.97 24.95 25.23 25.34Gold price 1,877 1,998 2,023 2,078 2,144Commodity hedge ratio, % Realised 70-100% 70-90% 50-70% 30-50% 1 Realised hedges are initially recognised in Group inventories and subsequently in cost of sales when the products are sold. ANNUAL REPORT 2023 89 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 4.5 DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED ACCOUNTING POLICIES Derivative financial instruments are initially recognised at fair value at the date on which a contract is entered into and are subsequently measured at fair value. For derivative financial instruments not traded in an active market, the fair value is determined using appropriate valuation methods. Such methods may include comparison with recent arm’s length market transactions, reference to the current fair value of another instrument that is substantially the same, or discounted cash flow analysis. Pandora has designated certain derivative financial instruments as cash flow hedges as defined under IFRS 9. Hedge accounting is classified as a cash flow hedge when the hedges of a particular risk is associated with the cash flows of recognised assets and liabilities and highly probable forecast transactions. Pandora designates and documents all hedging relation- ships between commodity contracts and purchase transactions relating to silver and gold. The effective portion of the unrealised gain or loss on all hedging instruments is recognised directly as other comprehensive income in the equity hedging reserve. The ineffective portion is recognised in net financials. The effective portion of the realised gain or loss from commodity hedging is recognised in Group inventories and subsequently in cost of sales. The realised profit (loss) from exchange rate hedging is taken to financial items. FINANCE INCOMEDKK million 2023 2022Reclassified from equity hedge reserves 36 12Total finance income from derivative financial instruments 36 12Finance income from loans and receivables measured at amortised cost:Foreign exchange gains 175 393Interest income, bank 20 5Interest income, loans and receivables 20 2Total finance income from loans and receivables 215 400Total finance income 251 412 FINANCE COSTSDKK million 2023 2022Reclassified from equity hedge reserves 131 167Total finance costs from derivative financial instruments 131 167Finance costs from financial liabilities measured at amortised cost:Foreign exchange losses 209 134Interest on loans and borrowings 374 100Interest on lease liabilities 270 162Other finance costs 72 59Total finance costs from loans and borrowings 925 455Total finance costs 1,056 622 NOTE 4.6 NET FINANCIALS ACCOUNTING POLICIES Finance income and costs comprise interest income and expenses, realised and unrealised gains and losses on payables/receivables and transactions in foreign currencies. For all financial instruments measured at amortised cost, interest income or expense is recognised using the effective interest rate, which is the rate that discounts the estimated future cash payments or receipts over the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or liability. OTHER NON-CASH ADJUSTMENTS DKK million 2023 2022Effects from exchange rate adjustments 8 16Effects from IFRS 16 rent concessions - -30Other, incl. gains/losses from the sale of property, plant and equipment -63 -4Total other non-cash adjustments -55 -18 NOTE 4.7 OTHER NON-CASH ADJUSTMENTS ANNUAL REPORT 2023 90 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW OTHER DISCLOSURES SECTION 5 ANNUAL REPORT 2023 91 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 5.1 CONTINGENT ASSETS AND LIABILITIES Litigation Pandora is from time to time party to various legal proceedings with current business partners, authorities and other third parties, related to copyright, marketing conduct and pricing. None of these proceedings is expected to have a material effect on Pandora’s financial position or future earnings. SIGNIFICANT ACCOUNTING ESTIMATES The factors taken into account when estimating a potential liability in connection with litigation include the nature of the litigation or claim. Other factors taken into account are the development of the case, the judgements and recommendations of legal or other advisers, experience from similar cases and management’s decision on how the Group will react to the litigation or claim. Related parties with significant interests At 31 December 2023, treasury shares accounted for 7.6% of the share capital (2022: 6.4%), for further information see note 4.1 Share capital. Other related parties of Pandora include the Board of Directors, Executive Leadership Team and their close family members. Related parties also include companies in which the aforementioned persons have control or significant interests. Transactions with related parties As part of the share buyback carried out in 2023, Pandora purchased own shares from shareholders. The shares were purchased at the volume-weighted average purchase price for the shares purchased under the share buyback programme in the market on the relevant day of trading. Pandora did not enter into any significant transactions with members of the Board of Directors or the Executive Leadership Team, except for compensation and benefits received as a result of their membership of the Board of Directors, employment with Pandora or shareholdings in Pandora. For further information, see note 2.2 Staff costs and note 2.3 Share-based payments. NOTE 5.2 RELATED PARTIES The costs in the table above are recognised in the income statement as administrative expenses. Pandora has implemented a policy regarding non-audit services provided by the auditor appointed at the Annual General Meeting. The policy states which services are allowed or prohibited. In addition to statutory audit, EY Godkendt Revisionspartnerselskab, the Group auditors appointed at the Annual General Meeting, provided other assurance engagements, primarily consisting of a limited assurance report on the Sustainability Report, a reasonable assurance report on the Remuneration Report, comfort letter work as well as audit of turnover certificates. All non-audit services have been approved according to the policy for non-audit services and within the 70% fee cap restrictions. NOTE 5.3 FEES TO INDEPENDENT AUDITOR NOTE 5.4 EVENTS OCCURRING AFTER THE REPORTING PERIOD No subsequent events have occurred after the balance sheet date that required adjustment to or disclosure in the consolidated financial statements. Contractual obligations Pandora has entered into a number of long-term purchase, sales and supply contracts in the course of the Group’s ordinary business. Contractual obligations amounted to DKK 810 million at 31 December 2023 (2022: DKK 827 million) and relate mainly to commercial collaborations and IT contracts. Apart from the liabilities already recognised in the balance sheet, no significant financial losses are expected to be incurred as a result of these contracts. FEES TO INDEPENDENT AUDITOR DKK million 2023 2022Fee for statutory audit 12 11Other assurance engagements 2 2Total audit-related services 14 13Tax consultancy 0 -Other services 0 1Total non-audit services 0 1Total fees to independent auditor 14 14 Contingent assets The insurance compensation for Pandora’s European Distribution Center, located in Hamburg, Germany, that was affected by a fire in October 2022, has been recognised in Sales, distribution and marketing expenses in 2023. ANNUAL REPORT 2023 92 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW The table below shows information about the Group entities at 31 December 2023. Company Ownership Registered office Date of consolidationOWNED BY PANDORA A/SPandora Jewelry Argentina SRL 100% Argentina 27 September 2017AD Astra Holdings Pty Ltd. 100% Australia 1 July 2009Pandora Österreich GmbH 100% Austria 23 May 2012Pandora Jewellery Belgium NV 100% Belgium 13 April 2017Pandora do Brasil Participações Ltda. 100% Brazil 24 October 2013Pandora Jewelry Ltd. 100% Canada 7 March 2008Pandora Jewelry Chile SpA 100% Chile 7 May 2017Pandora Jewelry Colombia S.A.S 100% Colombia 17 January 2019Pandora Int. ApS 100% Denmark 1 October 2009Pan Me A/S 100% Denmark 16 January 2015Pandora Jewelry Taiwan A/S 100% Denmark 18 May 2018Pandora Production Holding A/S 100% Denmark 3 May 2022Pandora Jewellery UK Limited 100% England 1 December 2008Pandora Jewelry Finland Oy 100% Finland 1 January 2012Pandora France SAS 100% France 25 February 2011Pandora Jewelry GmbH 100% Germany 5 January 2010Pandora EMEA Distribution Center GmbH 100% Germany 5 December 2011Pandora Greece Single Member S.A. 100% Greece 1 October 2023Pandora Jewelry Asia-Pacific Limited 100% Hong Kong 1 November 2009Pan Jewelry Limited 100% Ireland 10 January 2018Pandora Italia SRL 100% Italy 23 May 2012Pandora Jewelry Japan Ltd. 100% Japan 29 October 2014Pandora Jewelry Macau Company Ltd. 100% Macau 1 January 2016Pandora Jewelry Mexico, S.A. de C.V. 100% Mexico 8 March 2017Pandora Jewelry Mexico Servicios, S.A. de C.V. 100% Mexico 8 March 2017Pandora Jewelry B.V. 100% Netherlands 20 September 2010Pandora Jewelry Panama S.A. 100% Panama 5 July 2016Pandora Jewelry Panama Retail, S.A. 100% Panama 14 April 2021Pandora Jewelry Peru S.A.C 100% Peru 10 July 2018 Company Ownership Registered office Date of consolidationOWNED BY PANDORA A/SPandora Jewelry CEE Sp. z.o.o. 100% Poland 1 March 2009Pandora Jewelry Shared Services Sp. z.o.o. 100% Poland 7 February 2012Pandora Portugal, Unipessoal LDA 100% Portugal 4 April 2022Pandora Jewelry Singapore Pte. Ltd. 100% Singapore 1 January 2016Pandora Jewelry Slovakia s.r.o. 100% Slovakia 6 September 2016Pandora Jewellery South Africa Pty Ltd. 100% South Africa 31 January 2017Pandora Jewellery Spain S.L 100% Spain 28 September 2017Pandora Sweden AB 100% Sweden 4 November 2013Pandora Schweiz AG 100% Switzerland 6 December 2011Pandora Services Co. Ltd. 100% Thailand 15 October 2010Pandora Jewelry Mücevherat Anonim Şirketi 100% Turkey 4 November 2013Pandora Jewelry Inc. 100% United States 1 July 2008Pandora Jewelry Latam LLC 100% United States 20 October 2021Company Ownership Registered office Date of consolidationOWNED BY OTHER COMPANIES IN THE PANDORA GROUPPandora Jewelry Pty Ltd. 100% Australia 1 July 2009Pandora Retail Pty Ltd. 100% Australia 1 July 2009Pandora do Brasil Comércio e Importação Ltda. 100% Brazil 24 October 2013Pyrrha Importação e Comércio Atacadista Ltda. 100% Brazil 3 October 2023Pandora Franchise Canada Ltd. 100% Canada 19 January 2011Pandora Retail Canada Ltd. 100% Canada 4 February 2014Pandora Jewelry (Shanghai) Company Ltd. 100% China 4 February 2015Pandora Jewelry Design (Beijing) Company Ltd. 100% China 1 March 2016Pandora Jewelry CR s.r.o. 100% Czech Republic 2 December 2009Pandora Jewelry Hong Kong Company Ltd. 100% Hong Kong 4 February 2015Pandora Jewelry Hungary Ltd. 100% Hungary 2 June 2010Pandora Norge AS 100% Norway 17 August 2010Pandora Jewelry Romania SRL 100% Romania 18 August 2011Pandora Production Co. Ltd. 100% Thailand 7 March 2008Panmeas Jewellery LLC 100% United Arab Emirates 16 January 2015Pandora Jewelry LLC 100% United States 7 March 2008Pandora Franchising LLC 100% United States 1 November 2009Pandora Ventures LLC 100% United States 10 May 2012Pandora ECOMM LLC 100% United States 21 August 2014Pandora Production Vietnam Company Limited 100% Vietnam 31 March 2023Pandora Group has seven dormant companies, which have been omitted from the table. NOTE 5.5 COMPANIES IN THE PANDORA GROUP ANNUAL REPORT 2023 93 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW Forward-looking statements This Annual Report contains forward-looking statements, including, but not limited to, guidance, expectations, strategies, objectives and statements regarding future events or prospects with respect to the Company’s future financial and operating results. Forward- looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words such as “expect”, “estimate”, “intend”, “will be”, “will continue”, “will result”, “could”, “may”, “might” or any variations of such words or other words with similar meanings. Forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from the results discussed in such forward-looking statements. Prospective information is based on management’s then current expectations or forecasts. Such information is subject to the risk that such expectations or forecasts, or the assumptions underlying such expectations or forecasts, may change. The Company assumes no obligation to update any such forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting such forward-looking statements. Some important risk factors that could cause the Company’s actual results to differ materially from those expressed in its forward-looking statements include, but are not limited to: economic and geopolitical uncertainty (including interest rates and exchange rates), financial and regulatory developments, general changes in market trends and end-consumer preferences, demand for the Company’s products, competition, the availability and pricing of materials used by the Company, production and distribution-related issues, IT failures, litigation, pandemics and other unforeseen factors. The nature of the Company’s business means that risk factors and uncertainties may arise, and it may not be possible for management to predict all such risk factors, nor to assess the impact of all such risk factors on the Company’s business or the extent to which any individual risk factor, or combination of factors, may cause results to differ materially from those contained in any forward-looking statement. Accordingly, forward-looking statements should not be relied on as a prediction of actual results. Key figures and financial ratios stated in the consolidated financial statements have been calculated in accordance with the CFA Society Denmark guidelines. Pandora presents the following alternative performance measures not defined according to IFRS (non-GAAP measures) in the Annual Report: Furthermore, a breakdown of “Operating working capital”, “Net working capital” and “Invested capital” is given on the section 3 divider. NOTE 5.6 FINANCIAL DEFINITIONS Revenue growth, % (Current year’s revenue - last year’s revenue) / last year’s revenue Revenue growth, local currency, % (Current year’s revenue at last year’s exchange rates - last year’s revenue) / last year’s revenue Gross margin, % Gross profit / revenue Effective tax rate, % Income tax expense / profit before tax Equity ratio, % Equity / total assets Total payout ratio, % (Dividends paid for the year + value of share buyback) / net profit EPS, basic Net profit / average number of shares outstanding EPS, diluted Net profit / average number of shares outstanding, including the dilutive effect of share options “in the money” Capital expenditure (CAPEX) Purchase of intangible assets and property, plant and equipment for the year, excluding acquisitions of subsidiaries Days sales outstanding (DSO) Last three months of wholesale and third-party distribution revenue relative to trade receivables from these channels and not adjusted for VAT Return on invested capital (ROIC), % EBIT / invested capital including goodwill Net Interest- bearing debt (NIBD) Loans, borrowings, capitalised leases and other liabilities relating to obligations to acquire non-controlling interests (current and non-current) less cash NIBD to EBITDA NIBD / EBITDA (rolling 12 months) Cash conversion incl. lease payments, % Free cash flows incl. lease payments / EBIT Like-for-like, % Like-for-like growth includes sell-out from all concept stores (including partner-owned), owned and operated Shop in Shops and Pandora Online. Partner-owned other points of sale are not included in like-for-like. The KPI includes stores which have been operating for +12 months Organic growth, % Revenue growth in local currency relative to the same period in the comparative year adjusted for the acquisition/ divestment of distributors and franchisee stores (the effect of converting wholesale to retail revenue and vice versa) EBITDA Profit before interest, tax, depreciation and amortisation EBITDA margin, % EBITDA / revenue EBIT Profit before interest and tax EBIT margin, % EBIT / revenue Free cash flows incl. lease payments Cash flows from operating activities, excluding financial items and cash flows from investing activities excluding acquisitions of subsidiaries and activities and including the repayment of lease commitments ANNUAL REPORT 2023 94 CONSOLIDATED FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW PRIMARY FINANCIAL STATEMEMENTS Statement of comprehensive income 97 Balance sheet 98 Statement of changes in equity 99 Statement of cash flows 100 PARENT COMPANY Notes for the Parent Company The notes are grouped into five sections related to key figures. The notes contain the relevant financial information as well as a description of accounting policies, judgements and estimates applied for the topics of the individual notes. For some notes, reference is made to notes in the consolidated financial statements. INVESTED CAPITAL AND WORKING CAPITAL ITEMS 3.1 Intangible assets 104 3.2 Leases 104 3.3 Investments in subsidiaries and business combinations 105 3.4 Inventories 106 3.5 Contract assets and liabilities 106 3.6 Trade payables 106 BASIS OF PREPARATION 1.1 General accounting policies 101 1.2 New accounting policies and disclosures 101 1.3 Management’s judgements and estimates under IFRS 101 SECTION 1 RESULTS FOR THE YEAR 2.1 Revenue from contracts with customers 102 2.2 Staff costs 102 2.3 Share-based payments 102 2.4 Taxation 103 SECTION 2 SECTION 3 CAPITAL STRUCTURE AND NET FINANCIALS 4.1 Share capital 106 4.2 Liabilities from financing activities 107 4.3 Derivative financial instruments 107 4.4 Financial risks 107 4.5 Net financials 108 4.6 Other non-cash adjustments 108 SECTION 4 OTHER DISCLOSURES 5.1 Contingent assets and liabilities 108 5.2 Related parties 109 5.3 Fees to independent auditor 109 SECTION 5 PANDORA A/S FINANCIAL REVIEW 96 FINANCIAL STATEMENTS ANNUAL REPORT 2023 95 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW The Parent Company operates as the principal of Pandora, and all inventories are consequently traded from the crafting facilities in Thailand to wholesalers and sales subsidiaries through the Parent Company. Similarly, all inventories are returned from subsidiaries through the Parent Company for the purpose of remelting any excess inventory. Gross profit is therefore impacted by realised losses from remelting activities, unrealised losses from inventory write-downs and fluctuations in silver and gold market prices. Apart from the sale of jewellery, the Parent Company maintains and develops Group functions, including administration, distribution, business development, retail set-up, product development and risk management, which all determine the activity level in the Parent Company. The risk management activities carried out by the Parent Company include hedging the Group’s risk relating to commodity prices and exchange rates. Revenue was DKK 14.5 billion (2022: DKK 16.7 billion), while net profit was DKK 4.7 billion (2022: DKK 12.7 billion). The decrease in net profit was mainly related to the gain from intra-group share transfer in 2022, where Pandora A/S transferred its controlling equity investment in Pandora Production Co. Ltd. to Pandora Production Holding A/S, which resulted in a gain of DKK 5.9 billion. In addition, Pandora A/S received dividends from subsidiaries of DKK 1.5 billion in 2023 compared to DKK 2.4 billion in 2022. At the end of 2023, equity amounted to DKK 14.0 billion (2022: DKK 15.6 billion). The decrease was primarily driven by share buyback of a total purchase price of DKK 5.0 billion and paid dividend of DKK 16 per share, corresponding to DKK 1.4 billion (2022: DKK 1.5 billion), partially offset by profit for the year. Free cash flows including lease payments ended at DKK 4.8 billion (2022: DKK 1.8 billion), mainly driven by changes in intercompany balances. Other events and impacts in 2023 • In 2023, Pandora executed a new share buyback programme under which Pandora bought back own shares of DKK 5.0 billion. In 2023, Pandora purchased 7,693,692 treasury shares, corresponding to a total purchase price of DKK 5.0 billion (DKK 0.4 billion related to the share buyback programme from 2022, and DKK 4.6 billion related to the share buyback programme in 2023). • On 3 March 2023, Pandora A/S successfully placed an aggregate principal amount of EUR 500 million in senior unsecured sustainability-linked notes due in 2028 PANDORA A/S FINANCIAL REVIEW 2022: 16.7 2022: 12.7 Revenue DKK billion Net profit DKK billion 14.5 4.7 under its newly established Euro Medium Term Note programme. The net proceeds from the transaction were used by Pandora A/S for planned refinancing and general corporate purposes. For more details, see note 4.4 Financial risks. • In 2023, Pandora A/S increased its investment in Pandora Jewelry Inc. United States, by converting debt of DKK 3.7 billion. For more details, see note 3.3 Investments in subsidiaries and business combinations. • In 2023, as part of the strategy to simplify the Group’s structure, Pandora made an intra-group restructuring whereby shares of Pandora’s Australian holding company AD Astra Holdings PL were transferred from Pandora Jewellery UK Ltd to Pandora A/S. The intra- group transfer was carried out at the fair value of AD Astra Holdings PL, which amounted to DKK 0.7 billion using a generally accepted valuation method in the form of a return-based discounted cash flow valuation model. The transaction was settled in cash. For more details, see note 1.1 General accounting policies and note 3.3 Investments in subsidiaries and business combinations. ANNUAL REPORT 2023 96 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW INCOME STATEMENT DKK million Notes 2023 2022 Revenue 2.1 14,454 16,686 Cost of sales -6,097 -7,226 Gross profit 8,357 9,460 Sales, distribution and marketing expenses 2.2, 3.1 -2,441 -2,295 Administrative expenses 2.2, 3.1 -1,478 -1,261 Operating profit 4,439 5,904 Gain from intra-group share transfer 3.3 - 5,917 Dividends from subsidiaries 3.3 1,485 2,437 Impairment of investments in subsidiaries 3.3 - -60 Finance income 4.5 774 652 Finance costs 4.5 -1,000 -799 Profit before tax 5,698 14,051 Income tax expense 2.4 -983 -1,380 Net profit for the year 4,715 12,671 STATEMENT OF COMPREHENSIVE INCOME DKK million Notes 2023 2022 Net profit for the year 4,715 12,671 Other comprehensive income: Items that have been or may be reclassified to profit/loss for the year Commodity hedging instruments: - Realised in cost of sales 3 -1 - Realised in net financials 1 -2 - Fair value adjustments -15 -4 Foreign exchange hedging instruments: - Realised in net financials 103 110 - Fair value adjustments -151 -61 Tax on other comprehensive income 2.4 13 -9 Other comprehensive income, net of tax -46 33 Total comprehensive income for the year 4,668 12,705 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER ANNUAL REPORT 2023 97 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW ASSETS DKK million Notes 2023 2022 Intangible assets 3.1 3,918 3,705 Property, plant and equipment 28 23 Right-of-use assets 3.2 78 99 Investments in subsidiaries 3.3 15,530 11,140 Loans to subsidiaries 5.2 1,331 5,035 Other financial assets 21 26 Total non-current assets 20,905 20,028 Inventories 3.4 824 1,023 Trade receivables 1 14 Receivables from subsidiaries 5.2 5,290 3,690 Right-of-return assets 3.5 546 258 Derivative financial instruments 4.3, 4.4 87 231 Income tax receivable 27 37 Other receivables 305 403 Cash 274 37 Total current assets 7,355 5,692 Total assets 28,259 25,721 EQUITY AND LIABILITIES DKK million Notes 2023 2022 Share capital 4.1 89 96 Treasury shares -4,353 -3,320 Reserves 382 329 Dividend proposed 1,480 1,430 Retained earnings 16,407 17,051 Total equity 14,005 15,586 Provisions 54 52 Loans and borrowings 4.2, 4.4 7,023 1,090 Deferred tax liabilities 2.4 139 163 Other payables 80 - Total non-current liabilities 7,297 1,306 Refund liabilities 3.5 2,144 1,941 Loans and borrowings 4.2, 4.4 294 3,506 Derivative financial instruments 4.3, 4.4 128 74 Payables to subsidiaries 4.4, 5.2 2,979 1,455 Trade payables 3.6, 4.4 759 786 Income tax payable 135 580 Other payables 4.4 519 486 Total current liabilities 6,958 8,829 Total liabilities 14,255 10,135 Total equity and liabilities 28,259 25,721 BALANCE SHEET AT 31 DECEMBER ANNUAL REPORT 2023 98 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 DECEMBER DKK million Notes Share capital Treasury shares Hedging reserve Other reserves 1 Dividend proposed Retained earnings Total equity 2023 Equity at 1 January 96 -3,320 13 316 1,430 17,051 15,586 Net profit for the year - - - - - 4,715 4,715 Other comprehensive income, net of tax - - -46 - - -46 Total comprehensive income for the year - - -46 - - 4,715 4,668 Transfers - - - 100 - -100 - Share-based payments 2.3 - 278 - - - -117 161 Purchase of treasury shares 4.1 - -4,998 - - - - -4,998 Cancellation of treasury shares 4.1 -7 3,687 - - - -3,680 - Dividend paid - - - - -1,412 - -1,412 Dividend proposed - - - - 1,462 -1,462 - Equity at 31 December 89 -4,353 -34 415 1,480 16,407 14,005 2022 Equity at 1 January 100 -3,416 -20 236 1,516 9,462 7,877 Net profit for the year - - - - - 12,671 12,671 Other comprehensive income, net of tax - - 33 - - - 33 Total comprehensive income for the year - - 33 - - 12,671 12,705 Transfers - - - 80 - -80 - Share-based payments 2.3 - 199 - - - -93 106 Purchase of treasury shares 4.1 - -3,588 - - - - -3,588 Cancellation of treasury shares 4.1 -5 3,486 - - - -3,481 - Dividend paid - - - - -1,516 2 -1,514 Dividend proposed - - - - 1,430 -1,430 - Equity at 31 December 96 -3,320 13 316 1,430 17,051 15,586 ¹ Other reserves include non-distributable reserves under Danish legislation relating to the capitalisation of internal development projects. The Board of Directors will propose at the Annual General Meeting that a dividend of DKK 18 per share, corresponding to DKK 1.5 billion (2022: DKK 16 per share, corresponding to DKK 1.4 billion), be distributed for 2023. In 2023, Pandora continued the share buyback programmes, which resulted in repurchases of 7,693,692 treasury shares, corresponding to DKK 5.0 billion (2022: 6,595,620 treasury shares, corresponding to DKK 3.6 billion). For further shareholder information on dividend payments, see page 45. ANNUAL REPORT 2023 99 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW DKK million Notes 2023 2022 Operating profit 4,439 5,904 Depreciation and amortisation 267 238 Share-based payments 2.3 78 58 Change in inventories 198 -335 Change in intercompany receivables/payables -1,918 3,815 Change in receivables -166 -344 Change in payables and other liabilities 231 269 Other non-cash adjustments 4.6 58 -408 Finance income received 390 239 Finance costs paid -413 -295 Income tax paid -1,382 -1,219 Cash flows from operating activities, net 1,781 7,922 Acquisitions of subsidiaries and activities, net of cash acquired 3.3 -720 3 Purchase of intangible assets -354 -325 Purchase of property, plant and equipment -11 -3 Change in financial assets -5 -1 Dividends received 1 321 575 Change in interest-bearing loans to/from subsidiaries 2 3,073 -6,390 Cash flows from investing activities, net 2,304 -6,141 Dividend paid -1,412 -1,514 Purchase of treasury shares -5,022 -3,527 Proceeds from loans and borrowings 4.2 5,925 4,994 Repayment of loans and borrowings 4.2 -3,307 -1,984 Repayment of lease liabilities 4.2 -27 -28 Cash flows from financing activities, net -3,844 -2,059 Net increase/decrease in cash 242 -277 DKK million Notes 2023 2022 Cash and cash equivalents at 1 January -135 142 Net increase/decrease in cash 242 -277 Cash and cash equivalents at 31 December 107 -135 Cash balances 274 37 Overdrafts -167 -172 Cash and cash equivalents at 31 December 107 -135 Cash flows from operating activities, net 1,781 7,922 - Finance income received -390 -239 - Finance costs paid 413 295 Cash flows from investing activities, net 2,304 -6,141 - Acquisition of subsidiaries and activities, net of cash acquired 720 -3 Repayment of lease liabilities -27 -28 Free cash flows incl. lease payments 4,801 1,807 Unutilised committed credit facilities 4,472 6,693 1 Non-cash dividends received amounted to DKK 1.2 billion (2022: DKK 1.9 billion). 2 Change in interest-bearing loans to/from subsidiaries has been changed from cash flows from financing activities to cash flows from investing activities. The comparative figures were restated accordingly. 3 See note 4.4 Financial risks to the consolidated financial statements. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER The above cannot be derived directly from the income statement and the balance sheet. ANNUAL REPORT 2023 100 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW The Parent Company financial statements show the financial position, results and cash flows of Pandora A/S on a non-consolidated basis for the financial year 1 January to 31 December 2023. Parent Company financial statements The accounting policies of the Parent Company are unchanged from last year and identical to the accounting policies in Pandora’s consolidated financial statements, with the following exceptions: Foreign currency translation Foreign exchange adjustments of balances accounted for as part of the total net investment in entities that have a functional currency other than DKK are recognised in profit for the year as net financials in the Parent Company financial statements. Derivative financial instruments The effective portion of realised and unrealised gains and losses on all commodity hedging instruments is recognised as cost of goods sold, while the ineffective portion is recognised in net financials. Derivative financial instruments are treated as economic hedging if the hedge accounting requirements in IFRS 9 are not met. Dividends from subsidiaries Dividends from investments in subsidiaries are recognised in the financial year in which they are declared. NOTE 1.1 GENERAL ACCOUNTING POLICIES NOTE 1.2 NEW ACCOUNTING POLICIES AND DISCLOSURES The description in note 1.2 New accounting policies and disclosures to the consolidated financial statements regarding new standards issued effective for the Annual Report 2023 fully covers the Parent Company as well. Investments in subsidiaries Investments in subsidiaries are measured at cost. Impairment testing is carried out if there is any indication of impairment, as described in Pandora's consolidated financial statements. The carrying amount is written down to the recoverable amount whenever the carrying amount exceeds the recoverable amount. If the Parent Company has a legal or constructive obligation to cover a deficit in subsidiaries, a provision for this is recognised. Internal acquisition and disposal of subsidiary Pandora A/S accounts for transactions in which an investment in a subsidiary is acquired/disposed of at the fair value of the shares transferred. As of the date of the transfer of the shares, the investment in the subsidiary is acquired/disposed of at fair value. Gain/loss on the disposals is recognised in the income statement. NOTE 1.3 MANAGEMENT’S JUDGEMENTS AND ESTIMATES UNDER IFRS SIGNIFICANT ACCOUNTING ESTIMATES In the process of preparing the Parent Company financial statements, a number of accounting estimates and judgements have been made that affect assets and liabilities at the reporting date and income and expenses for the reporting period. Management regularly reassesses these estimates and judgements, partly on the basis of historical experience and a number of other factors in the given circumstances, see note 1.3 Management’s judgements and estimates under IFRS to the consolidated financial statements. Estimates that are material to the Parent Company’s financial statements are made on determination of impairment of subsidiaries, see note 3.3 Investments in subsidiaries and business combinations, on return and warranty provision, see note 2.1 Revenue from contracts with customers and on inventory, see note 3.4 Inventories. ANNUAL REPORT 2023 101 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW REVENUE BY SALES CHANNEL DKK million 2023 2022 Distributors 14,454 16,686 Total revenue 14,454 16,686 NOTE 2.1 REVENUE FROM CONTRACTS WITH CUSTOMERS ACCOUNTING POLICIES Revenue is recognised when control of the products has been transferred to the subsidiaries. Change of control of the products occurs when they have been delivered to the subsidiary and no further obligation exists that can affect the transfer of control. The Parent Company provides return rights to subsidiaries, which cover products received in subsidiaries for both returns and warranty, based on historical return rates and current return liabilities in subsidiaries. STAFF COSTS DKK million 2023 2022 Wages and salaries 1,059 850 Pensions 77 64 Share-based payments 78 58 Social security costs 26 16 Other staff costs 153 103 Total staff costs 1,393 1,090 Staff costs have been recognised in the income statement as follows: Sales, distribution and marketing expenses 663 530 Administrative expenses 730 561 Total staff costs 1,393 1,090 Average number of full-time employees during the year 1,011 898 NOTE 2.2 STAFF COSTS NOTE 2.3 SHARE-BASED PAYMENTS The performance share programmes described in note 2.3 Share-based payments to the consolidated financial statements are issued by Pandora A/S. The value of shares granted to employees in the Parent Company’s subsidiaries is recognised in Investments in subsidiaries. As described in note 2.3 Share-based payments to the consolidated financial statements, the costs related to share-based payments were DKK 105 million (2022: DKK 87 million), of which DKK 78 million relates to Pandora A/S (2022: DKK 58 million). Revenue mainly comprises sales of jewellery to subsidiaries carrying out the distribution. All sales are thus intra-group sales. Contracts are generally five-year distribution contracts. Key management personnel at Pandora A/S represents the same individuals as key management personnel of the Pandora Group. For information regarding remuneration of key management personnel of Pandora A/S, see note 2.2 Staff costs to the consolidated financial statements. REVENUE BY SEGMENTS 1 DKK million 2023 2022 Core 11,261 13,358 - Moments 9,444 11,068 - Collabs 1,345 1,714 - ME 472 575 Fuel with more 3,193 3,329 - Timeless 2 2,325 2,237 - Signature 534 773 - Pandora Lab-Grown Diamonds 335 318 Total revenue 14,454 16,686 Goods transferred at a point in time 14,455 16,684 Services transferred over time - 2 Total revenue 14,454 16,686 1 Pandora has updated its collection structure by moving the Pandora ME collection and other products from the Fuel with more segment to the Core segment. The comparative figures for 2022 were restated accordingly by moving revenue of DKK 1,241 million from Fuel with more into Core. 2 Pandora Timeless includes revenue from the PANDORA ESSENCE collection in the amount of DKK 5 million. ANNUAL REPORT 2023 102 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 2.4 TAXATION ACCOUNTING POLICIES Income tax Pandora A/S is taxed jointly with its Danish subsidiaries. These subsidiaries are included in the joint taxation from the date they are recognised in the consolidated financial statements and up to the date on which they are no longer consolidated. The jointly taxed Danish companies are taxed under the on-account tax scheme. Pandora A/S is the principal for the Transfer Pricing with all the subsidiaries. Further information is provided in note 2.4 Taxation to the consolidated financial statements. INCOME TAX EXPENSE DKK million 2023 2022 Current income tax charge for the year 1 959 1,291 Change in deferred tax for the year 43 83 Adjustment to current tax for prior years -12 9 Adjustment to deferred tax for prior years -7 -3 Total income tax expense 983 1,380 Deferred tax on other comprehensive income -13 9 Tax on other comprehensive income -13 9 1 Withholding taxes are included in the current income tax charge for the year. RECONCILIATION OF EFFECTIVE TAX RATE AND TAX 2023 2022 % DKK million % DKK million Profit before tax 5,698 14,051 Corporate tax rate in Denmark, 22% 22.0% 1,254 22.0% 3,091 Non-taxable dividend income -5.7% -327 -3.9% -536 Non-deductIble impairment expenses - - 0.1% 13 Gain from intra-group share transfer - - -9.3% -1,302 Non-deductible expenses and non-taxable income 1.1% 63 0.5% 67 Other adjustments incl. adjustment to tax for prior years -0.3% -19 0.1% 9 Withholding taxes 0.2% 12 0.3% 38 Effective income tax rate/income tax expense 17.3% 983 9.8% 1,380 DEFERRED TAX DKK million 2023 2022 Deferred tax at 1 January -163 -93 Recognised in the income statement -36 -80 Recognised in other comprehensive income 13 -9 Recognised in equity, share-based payments 47 19 Deferred tax at 31 December -139 -163 Deferred tax liabilities -139 -163 Deferred tax, net -139 -163 BREAKDOWN OF DEFERRED TAX DKK million 2023 2022 Intangible assets -631 -605 Property, plant and equipment 43 9 Inventories -4 25 Provisions 359 380 Other assets and liabilities 94 28 Deferred tax, net -139 -163 ANNUAL REPORT 2023 103 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 3.1 INTANGIBLE ASSETS LEASE LIABILITIES DKK million 2023 2022 Non-current 51 74 Current 29 26 Total lease liabilities 80 100 Additions of right-of-use assets were DKK 8 million in 2023 (2022: DKK 20 million). NOTE 3.2 LEASES RIGHTOFUSE ASSETS DKK million 2023 2022 Property 75 94 Cars 3 5 Total right-of-use assets 78 99 Amounts recognised in the balance sheet: Lease liabilities are recognised in loans and borrowings. Depreciation on right-of-use assets charged to the income statement for the period was DKK 28 million (2022: DKK 26 million). Interest expense for the period was DKK 1 million (2022: DKK 1 million). Total cash outflows relating to leases was DKK 30 million in 2023 (2022: DKK 29 million). INTANGIBLE ASSETS DKK million Goodwill 1 Brand 1 Distri- bution Other intangible assets Total Cost at 1 January 1,139 1,044 1,541 1,608 5,332 Additions - - - 446 446 Disposals - - - -128 -128 Cost at 31 December 1,139 1,044 1,541 1,927 5,650 Amortisation and impairment losses at 1 January - - 487 1,140 1,627 Amortisation for the year - - 5 228 233 Disposals - - - -128 -128 Amortisation and impairment losses at 31 December - - 492 1,241 1,732 Carrying amount at 31 December 1,139 1,044 1,049 686 3,918 Cost at 1 January 1,139 1,044 1,541 1,273 4,997 Additions - - - 337 337 Disposals - - - -2 -2 Cost at 31 December 1,139 1,044 1,541 1,608 5,332 Amortisation and impairment losses at 1 January - - 457 967 1,424 Amortisation for the year - - 30 173 203 Amortisation and impairment losses at 31 December - - 487 1,140 1,627 Carrying amount at 31 December 1,139 1,044 1,054 467 3,705 1 The impairment test did not identify any need for impairment losses to be recognised and no probable change in any key assumptions that would cause the carrying amount to exceed the recoverable amounts. Pandora A/S has a risk similar to the Pandora Group as per the Transfer Pricing setup. All the assumptions used for the impairment test are similar to the Group assumptions, see note 3.1 Intangible assets to the consolidated financial statements. DKK million 2023 2022 Amortisation has been recognised in the income statement as follows: Sales, distribution and marketing expenses 113 93 Administrative expenses 120 110 Total 233 203 ANNUAL REPORT 2023 104 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW expected growth for the market in the terminal period, including the expected average inflation. Transfer of AD Astra Holding PL to Pandora A/S in 2023 In 2023, as part of the strategy to simplify the Group’s structure, Pandora made an intra-group restructuring whereby shares of Pandora’s Australian holding company AD Astra Holdings PL were transferred from Pandora Jewellery UK Ltd to Pandora A/S. The intra-group transfer was carried out at the fair value of AD Astra Holdings PL, which amounted to DKK 0.7 billion using a generally accepted valuation method in the form of a return-based discounted cash flow valuation model. The transaction was settled in cash. Input and assumptions applied in the discounted cash flow valuation model comprise level 3 inputs only, as there are no quoted prices in active markets for an identical asset or other observable market inputs. The valuation is based on internal financial forecasts for the period 2024 to 2026 and is affected by the Group’s transfer pricing setup, a terminal growth rate of 2% and an applied market-specific discount rate post tax of 9.8%. Transfer of Pandora Production Co. Ltd to Pandora Production Holding A/S in 2022 In 2022, Pandora A/S made an intra-group restructuring whereby its controlling equity investment in Pandora Production Co. Ltd., Thailand, was transferred as a contribution-in-kind to a newly established intermediate holding company, Pandora Production Holding A/S. The commercial and strategic rationale is explained in the management’s review. For those reasons, and the fact that the new holding structure impacts future cash flows for the Parent Company, it is management’s judgement that the transaction should be accounted for at fair value. The intra-group transfer was carried out at the fair value of Pandora Production Co. Ltd, which amounted to DKK 7.1 billion using a generally accepted valuation method in the form of a return-based discounted cash flow valuation model. A gain of DKK 5.9 billion is recognised in Gain from intra-group share transfer in the income statement. The transaction is non-cash, and there is no impact on the statement of cash flows. Input and assumptions applied in the discounted cash flow valuation model comprise level 3 inputs only, as there are no quoted prices in active markets for an identical asset or other observable market inputs. The valuation is based on internal financial forecasts for the period 2023 to 2027, reflecting the macroeconomic uncertainties as well as the cannibalisation effect from the new crafting facility in Vietnam. In addition, the valuation is affected by the Group’s transfer pricing setup, a terminal growth rate of 1.6% and an applied market- specific discount rate after tax of 10%. As an illustration of the sensitivity of the assumptions, a 0.5 percentage points increase/decrease in the discount rate would affect the valuation by approximately +/- DKK 0.4 billion, and a 1.0 percentage point increase/decrease in the forecasted EBIT margin would affect the valuation by approximately +/- DKK 0.6 billion. NOTE 3.3 INVESTMENTS IN SUBSIDIARIES AND BUSINESS COMBINATIONS INVESTMENTS IN SUBSIDIARIES DKK million 2023 2022 Cost at 1 January 11,442 5,499 Additions 1 4,363 7,120 Disposals 2 - -1,202 Additions relating to share-based payments 27 25 Cost at 31 December 15,832 11,442 Impairment at 1 January 302 242 Impairment for the year - 60 Impairment at 31 December 302 302 Carrying amount at 31 December 15,530 11,140 1 In 2023, mainly relating to additonal investment into Pandora Jewelry Inc. United States, of DKK 3.7 billion and to the internal purchase of AD Astra Holdings PL, Australia, from Pandora Jewellery UK Ltd of DKK 0.7 billion. In 2022, mainly relating to the investment into Pandora Production Holding A/S of DKK 7.1 billion. 2 In 2022, mainly relating to the intra-group share transfer of Pandora Production Co. Ltd., Thailand, of DKK 1.2 billion. Dividend received In 2023, Pandora A/S received a total of DKK 1.5 billion in dividends, mainly from subsidiaries in Denmark (DKK 0.7 billion), the UK (DKK 0.3 billion) and the US (DKK 0.1 billion). In 2022, Pandora A/S received a total of DKK 2.4 billion in dividends, mainly from subsidiaries in Thailand (DKK 1.1 billion), the UK (DKK 0.5 billion) and the US (DKK 0.3 billion). Annual impairment test As at 31 December 2023, the cost price of investments in subsidiaries was tested for impairment, and Pandora has not identified any indication of impairment. The impairment test did not identify any impairment charges for 2023 (2022: DKK 60 million). The impairment test was based on a three-year forecast and an applied market-specific discount rate in the range of 8% to 16%. The growth rate applied was an estimate of the ANNUAL REPORT 2023 105 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW CONTRACT ASSETS AND LIABILITIES DKK million 2023 2022 Contract assets Receivables from sale of products 2,570 1,046 Right-of-return assets 546 258 Total contract assets 3,116 1,304 Contract liabilities Refund liabilities 2,144 1,941 Total contract liabilities 2,144 1,941 NOTE 3.5 CONTRACT ASSETS AND LIABILITIES Refund liabilities The Parent Company recognises a refund liability related to return rights provided to subsidiaries. The returns relate to external customers, and the Parent Company is carrying the inventory risk as the retail subsidiaries are limited risk distribution entities. The refund liability in Pandora A/S relates to subsidiaries and reflects the lower margin in the Parent Company. A corresponding right-of-return asset is also recognised as part of contract assets. The value of the right-of-return asset is determined by how many of the returned products are expected to be sold. Remaining products are written down to remelt value. INVENTORIES DKK million 2023 2022 Finished goods 725 868 Point-of-sale materials 99 155 Total inventories at 31 December 824 1,023 Inventory write-downs at 1 January 274 253 Write-downs during the year 177 163 Utilised in the year -195 -142 Inventory write-downs at 31 December 256 274 NOTE 3.4 INVENTORIES Estimates relating to write-downs are impacted by forecasting accuracy in the number of obsolete products that will need to be remelted. The impact from remelt is also influenced by fluctuations in the market prices of silver and gold. Inventory write-downs are recognised in the income statement as cost of sales, DKK 157 million (2022: DKK 152 million), and operating expenses, DKK 20 million (2022: DKK 11 million). NOTE 3.6 TRADE PAYABLES Pandora generally accepts that vendors sell off their receivables arising from the sale of goods and services to Pandora to a third party. Pandora A/S has established a supply chain financing programme where vendors can sell off their receivables from Pandora A/S on attractive terms, based on invoices approved by Pandora A/S, but at the bank's sole discretion. Pandora A/S is not directly or indirectly a party to these agreements. The amounts payable to suppliers included in the supply chain financing programme are classified as trade payables in the balance sheet as well as in the statement of cash flows (working capital within cash flows from operations) and amounted to DKK 28 million at 31 December 2023 (2022: DKK 54 million). See note 4.1 Share capital to the consolidated financial statements. NOTE 4.1 SHARE CAPITAL ANNUAL REPORT 2023 106 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 4.2 LIABILITIES FROM FINANCING ACTIVITIES TOTAL LIABILITIES FROM FINANCING ACTIVITIES DKK million Financial liabilities 1 January Cash flows, net New leases Other 1 Financial liabilities 31 December Non-current borrowings 1,017 5,927 - 29 6,973 Non-current lease liabilities 74 - 5 -28 51 Current borrowings 3,481 -3,309 - 95 266 Current lease liabilities 26 -27 2 28 29 Total liabilities from financing activities 4,597 2,590 8 123 7,318 Non-current borrowings 1,041 74 - -99 1,017 Non-current lease liabilities 83 - 13 -23 74 Current borrowings 274 2,935 - 272 3,481 Current lease liabilities 24 -28 7 23 26 Total liabilities from financing activities 1,423 2,981 20 173 4,597 Includes the effect of the reclassification of the non-current portion of interest-bearing loans and borrowings to current portion due to the passage of time. Further, it includes the effect of accrued but not yet paid interest on interest-bearing loans and borrowings and upfront prepayment of lease liabilities. The Parent Company classifies interest paid as cash flows from operating activities. Includes the bond of EUR 500 million issued in March 2023. NOTE 4.3 DERIVATIVE FINANCIAL INSTRUMENTS All hedging is carried out by the Parent Company’s Treasury department. As all instruments are also recorded in the Parent Company, all effects from financial instruments are shown in note 4.5 Derivative financial instruments to the consolidated financial statements. As a consequence of its operations, investments and financ ing, Pandora A/S is exposed to a number of financial risks that are monitored and managed by Pandora's Group Treasury department. The Parent Company’s financial risks and the management of these are in all material respects identical to the disclo- NOTE 4.4 FINANCIAL RISKS sures made in note 4.4 Financial risks to the consolidat- ed financial statements, unless otherwise stated below. Credit risk The Parent Company’s credit risk includes the risk related to receivables from subsidiaries. Contractual maturities of financial liabilities The table below provides a breakdown of Pandora A/S’ financial liabilities similar to note 4.4 Financial risks to the consolidated financial statements. LIABILITIES FALL DUE AS FOLLOWS DKK million Within 1 year Within 1-5 years After more than 5 years Total 2023 Non-derivatives Loans and borrowings 294 3,049 153 3,497 Bond 168 4,397 - 4,565 Lease liabilities 29 52 - 81 Payables to subsidiaries 2,979 - - 2,979 Trade payables 759 - - 759 Other payables 12 92 - 104 Derivatives Derivative financial instruments 128 - - 128 Total at 31 December 4,369 7,590 153 12,112 2022 Non-derivatives Loans and borrowings 3,588 813 253 4,654 Lease liabilities 27 75 - 102 Payables to subsidiaries 1,455 - - 1,455 Trade payables 786 - - 786 Other payables 77 - - 77 Derivatives Derivative financial instruments 74 - - 74 Total at 31 December 6,007 888 253 7,148 ANNUAL REPORT 2023 107 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW FINANCE INCOME DKK million 2023 2022 Reclassified from equity hedge reserves 36 19 Total finance income from derivative financial instruments 36 19 Finance income from loans and receivables measured at amortised cost: Interest income from subsidiaries 386 300 Foreign exchange gains 344 330 Interest income, bank 8 2 Total finance income from loans and receivables 738 633 Total finance income 774 652 FINANCE COSTS DKK million 2023 2022 Reclassified from equity hedge reserves 140 127 Total finance costs from derivative financial instruments 140 127 Finance costs from financial liabilities measured at amortised cost: Interest costs to subsidiaries 23 2 Foreign exchange losses 412 524 Interest on loans and borrowings 374 100 Interest on lease liabilities 1 1 Other finance costs 50 46 Total finance costs from loans and borrowings 860 673 Total finance costs 1,000 799 NOTE 4.5 NET FINANCIALS NOTE 4.6 OTHER NON-CASH ADJUSTMENTS OTHER NONCASH ADJUSTMENTS DKK million 2023 2022 Effects from exchange rate adjustments -86 -146 Effects from derivative financial instruments 138 -255 Other, incl. gains/losses from sale of property, plant and equipment 6 -7 Total other non-cash adjustments 58 -408 Litigation Pandora is from time to time party to various legal proceedings with current business partners, authorities and other third parties, related to copyright, marketing conduct and pricing. None of these proceedings is expected to have a material effect on Pandora A/S’ financial position or future earnings. Contractual obligations Pandora A/S has entered into a number of long-term purchase, sales and supply contracts in the course of the company’s ordinary business. Contractual obligations amounted to DKK 808 million at 31 December 2023 NOTE 5.1 CONTINGENT ASSETS AND LIABILITIES (2022: DKK 794 million) and relate mainly to commercial collaborations and IT contracts. Apart from the liabilities already recognised in the balance sheet, the company does not expect to incur any significant financial losses as a result of these contracts. Other contingent liabilities The Parent Company has issued guarantees totalling DKK 313 million at 31 December 2023 in favour of certain subsidiaries related to securing local credit lines and rental agreements (2022: DKK 270 million). The Parent Company is jointly taxed with its Danish subsidiaries. The company is jointly and severally liable with other jointly taxed Danish companies within the Group for income tax and withholding taxes due on or after 1 July 2012 in the joint taxation. Contingent assets See note 5.1 Contingent assets and liabilities to the consolidated financial statements. ANNUAL REPORT 2023 108 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW NOTE 5.3 FEES TO INDEPENDENT AUDITOR NOTE 5.2 RELATED PARTIES In 2023, Pandora A/S converted an intercompany loan of DKK 3.7 billion into capital and acquired an investment in a subsidiary of DKK 0.7 billion, see note 3.3 Investments in subsidiaries and business combinations. In addition to the related parties disclosed in note 5.2 Related parties to the consolidated financial statements, related parties of Pandora A/S include the subsidiaries listed in note 5.5 Companies in the Pandora Group to the consolidated financial statements. The costs are recognised in the income statement as administrative expenses. In addition to statutory audit, EY Godkendt Revisionspartnerselskab, the Parent Company auditors, provided other assurance engagements to the Parent Company, primarily consisting of a limited assurance report on the Sustainability Report, a reasonable assurance report on the Remuneration Report and comfort letter work. TRANSACTIONS ENTERED INTO WITH RELATED PARTIES DKK million 2023 2022 Income statement: Sales to subsidiaries 14,450 16,679 Purchases from subsidiaries -5,710 -6,739 Recharges from subsidiaries -853 -737 Gain from intra-group share transfer - 5,917 Dividends from subsidiaries 1,485 2,437 Finance income 386 300 Finance costs -23 -2 Total 9,736 17,855 Balance sheet: Loans to subsidiaries, non-current 1,331 1,375 Intercompany loan converted into capital in subsidiaries - 3,660 Trade receivables from subsidiaries 2,568 1,032 Loans to subsidiaries, current 2,722 2,658 Right-of-return assets 546 258 Payables to subsidiaries -2,979 -1,455 Refund liabilities -2,144 -1,941 Total 2,043 5,587 Development in impairment losses on trade receivables Impairment at 1 January 44 39 Additions - 5 Unused amounts reversed -10 - Impairment at 31 December 34 44 FEES TO INDEPENDENT AUDITOR DKK million 2023 2022 Fee for statutory audit 4 3 Other assurance engagements 1 1 Total audit-related services 5 4 Other services 0 1 Total non-audit services 0 1 Total fees to independent auditor 5 5 ANNUAL REPORT 2023 109 PARENT FINANCIAL STATEMENTS STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS 111 Management statement 112 Independent auditor’s report ANNUAL REPORT 2023 The Board of Directors and the Executive Management have today discussed and approved the Annual Report of Pandora A/S for 2023. The Annual Report has been prepared in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial State- ments Act. It is our opinion that the consolidated financial state- ments and the Parent Company financial statements give a true and fair view of the financial position of the Group and the Parent Company at 31 December 2023 and of the results of the Group's and the Parent Company's operations and cash flows for the financial year 1 January to 31 December 2023. Alexander Lacik Chief Executive Officer Anders Boyer Chief Financial Officer STATEMENT BY THE EXECUTIVE MANAGEMENT AND THE BOARD OF DIRECTORS Executive Management Peter A. Ruzicka Chair Marianne Kirkegaard Christian Frigast Deputy Chair Catherine Spindler Lilian Fossum Biner Jan Zijderveld Birgitta Stymne Göransson Board of Directors Further, in our opinion, the management's review gives a fair review of the development in the Group's and the Parent Company's activities and financial matters, results of operations, cash flows and financial position as well as a description of material risks and uncertainties that the Group and the Parent Company face. In our opinion, the Annual Report of Pandora A/S for the financial year 1 January to 31 December 2023 with the file name PAND-2023-12-31-en.zip has been prepared, in all material respects, in compliance with the ESEF Regulation. We recommend that the Annual Report be approved at the Annual General Meeting. Copenhagen, 7 February 2024 ANNUAL REPORT 2023 111 FINANCIAL STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS INDEPENDENT AUDITOR’S REPORT Report on the audit of the consolidated financial statements and Parent Company financial statements Opinion We have audited the consolidated financial statements and the Parent Company financial statements of Pandora A/S for the financial year 1 January to 31 December 2023, which comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including material accounting policy information, for the Group and the Parent Company. The consolidated financial statements and the Parent Company financial statements are prepared in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view of the financial position of the Group and the Parent Company at 31 December 2023 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 January to 31 December 2023 in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act. Our opinion is consistent with our long-form audit report to the Audit Committee and the Board of Directors. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (ISAs) and additional requirements applicable in Denmark. Our responsibilities under those standards and requirements are further described in the “Auditor’s responsibilities for the audit of the consolidated financial statements and the Parent Company financial statements” (hereafter collectively referred to as “the financial statements) section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Independence We are independent of the Group in accordance with the International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (IESBA Code) and the additional ethical requirements applicable in Denmark, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA code. To the best of our knowledge, we have not provided any prohibited non-audit services as described in article 5(1) of Regulation (EU) no. 537/2014. Appointment of auditor Subsequent to Pandora A/S being listed on Nasdaq OMX Copenhagen, EY was appointed auditors of Pandora A/S on 8 April 2011. We have been reappointed annually at the General Meeting for a total consecutive period of 13 years up to and including the financial year 2023. Subsequent to a tender process, we were re-appointed at the Annual General Meeting on 11 March 2021. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the financial year 2023. These matters were addressed during our audit of the financial statements as a whole and in forming our opinion thereon. We do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context. We have fulfilled our responsibilities described in the “Auditor’s responsibilities for the audit of the financial statements” section, including in relation to the key audit matters below. Accordingly, our audit included the design and performance of procedures to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the financial statements. To the shareholders of Pandora A/S ANNUAL REPORT 2023 112 FINANCIAL STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Our procedures in relation to revenue recognition and measurement of expected sales returns included considering the Group’s accounting policies for revenue recognition, including those related to measurement of expected sales returns, and assessing compliance of policies with applicable accounting standards. We identified and assessed internal controls related to the timing of revenue recognition and measurement of expected sales returns. We tested the effectiveness of the Group’s internal controls in relation to calculation of expected sales returns and timing of revenue recognition. On a sample basis, we tested sales transactions taking place at either side of the balance sheet date as well as credit notes issued after the balance sheet date to assess whether those transactions were recognised in the correct period. We assessed the key assumptions applied by Management regarding expected sales returns based on our knowledge of the business and by reviewing the supporting documentation prepared by Management. As part of our audit we have utilised data analytics, analysing the relationship between revenue, trade receivables and cash receipts. Furthermore, we evaluated the disclosures provided by Management in the consolidated financial statements and the Parent Company financial statements to applicable accounting standards. Revenue recognition and measurement of expected sales returns Our procedures in relation to inventory valuation included assessing the Group’s processes related to inventory valuation including on a sample basis testing of direct costs related to raw materials, labour costs and attributable overhead costs incurred in the crafting process, recording of write-downs and understanding of the process for internal gain elimination. We assessed the basis for write-downs and performed analytical procedures to assess slow-moving items. We assessed the key assumptions applied by Management regarding items’ life-cycle status and expected value of the reusable raw materials based on our knowledge of the business, and on a sample basis tested the supporting documentation. On a sample basis we tested the calculation of elimination of internal gain at Group level. Furthermore, we evaluated the disclosures provided by Management in the consolidated financial statements and the Parent Company financial statements to applicable accounting standards. DESCRIPTION OF MATTER CONSIDERATION OF THE MATTER IN THE AUDIT The Group carries inventory in the balance sheet at the lower of cost and net realisable value. Significant management judgements are required with regards to valuation of inventories due to the uncertainty associated with the estimate of slow-moving items and expected value of the reusable raw materials, as well as calculations of elimination of internal gain. Given the level of management judgements and estimates, inventory valuation was a matter of most significance in our audit. Additional details on the valuation of inventories are provided in note 3.5 of the consolidated financial statements and in note 3.4 of the Parent Company financial statements, to which we refer. Revenue is recognised when control of the goods has been transferred to the buyer and it is measured at fair value of the expected consideration to be received, less rebates, discounts, sales taxes, duties and expected sales returns. Revenue recognition and measurement of the related expected sales returns was a matter of most significance in our audit due to the inherent risk in the estimates and judgements which Management makes in the normal course of business as to timing of revenue and measurement of expected sales returns. Details on revenue recognition and expected sales returns are provided in notes 2.1 and 3.8 of the consolidated financial statements and in notes 2.1 and 3.5 of the Parent Company financial statements, to which we refer. Inventory valuation ANNUAL REPORT 2023 113 FINANCIAL STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Statement on the Management’s review Management is responsible for the Management’s review. Our opinion on the financial statements does not cover the Management’s review, and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the Management’s review and, in doing so, consider whether the Management’s review is materially inconsistent with the financial statements or our knowledge obtained during the audit, or otherwise appears to be materially misstated. Moreover, it is our responsibility to consider whether the Management’s review provides the information required by relevant law and regulations. Based on the work we have performed, we conclude that the Management’s review is in accordance with the financial statements and has been prepared in accordance with the requirements of relevant law and regulations. We did not identify any material misstatement of the Management’s review. Management’s responsibilities for the financial statements Management is responsible for the preparation of consolidated financial statements and Parent Company financial statements that give a true and fair view in accordance with IFRS Accounting Standards as adopted by the EU and additional requirements of the Danish Financial Statements Act and for such internal control as Management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, Management is responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting in preparing the financial statements unless Management either intends to liquidate the Group or the Parent Company or to cease operations, or has no realistic alternative but to do so. Auditor’s responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance as to whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs and additional requirements applicable in Den- mark will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the eco- nomic decisions of users taken on the basis of the finan- cial statements. As part of an audit conducted in accordance with ISAs and additional requirements applicable in Denmark, we exer- cise professional judgement and maintain professional scepticism throughout the audit. We also: • Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations or the override of internal control. • Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s and the Parent Company’s internal control. • Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by Management. • Conclude on the appropriateness of Management’s use of the going concern basis of accounting in preparing the financial statements and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s and the Parent Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group and the Parent Company to cease to continue as a going concern. • Evaluate the overall presentation, structure and contents of the financial statements, including the note disclosures, and whether the financial statements represent the underlying transactions and events in a manner that gives a true and fair view. ANNUAL REPORT 2023 114 FINANCIAL STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the Group audit. We remain solely responsible for our audit opinion. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats or safeguards applied. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial state- ments and the Parent Company financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter. Report on compliance with the ESEF Regulation As part of our audit of the consolidated financial statements and Parent Company financial statements of Pandora A/S we performed procedures to express an opinion on whether the Annual Report of Pandora A/S for the financial year 1 January to 31 December 2023 with the file name PAND-2023-12-31-en.zip is prepared, in all material respects, in compliance with the Commission Delegated Regulation (EU) 2019/815 on the European Single Electronic Format (ESEF Regulation) which includes requirements related to the preparation of the Annual Report in XHTML format and iXBRL tagging of the consolidated financial statements, including notes. Management is responsible for preparing an Annual Report that complies with the ESEF Regulation. This responsibility includes: • The preparing of the Annual Report in XHTML format; • The selection and application of appropriate iXBRL tags, including extensions to the ESEF taxonomy and the anchoring thereof to elements in the taxonomy, for all financial information required to be tagged using judgement where necessary; • Ensuring consistency between iXBRL tagged data and the consolidated financial statements presented in human readable format; and • For such internal control as Management determines necessary to enable the preparation of an Annual Report that is compliant with the ESEF Regulation. Our responsibility is to obtain reasonable assurance on whether the Annual Report is prepared, in all material respects, in compliance with the ESEF Regulation based on the evidence we have obtained, and to issue a report that includes our opinion. The nature, timing and extent of pro- cedures selected depend on the auditor’s judgement, in- cluding the assessment of the risks of material departures from the requirements set out in the ESEF Regulation, whether due to fraud or error. The procedures include: Torben Bender State Authorised Public Accountant mne21332 Jens Thordahl Nøhr State Authorised Public Accountant mne32212 Copenhagen, 7 February 2024 EY Godkendt Revisionspartnerselskab CVR no. 30 70 02 28 • Testing whether the Annual Report is prepared in XHTML format; • Obtaining an understanding of the company’s iXBRL tagging process and of internal control over the tagging process; • Evaluating the completeness of the iXBRL tagging of the consolidated financial statements, including notes; • Evaluating the appropriateness of the company’s use of iXBRL elements selected from the ESEF taxonomy and the creation of extension elements where no suitable element in the ESEF taxonomy has been identified; • Evaluating the use of anchoring of extension elements to elements in the ESEF taxonomy; and • Reconciling the iXBRL tagged data with the audited consolidated financial statements. In our opinion, the Annual Report of Pandora A/S for the financial year 1 January to 31 December 2023 with the file name PAND-2023-12-31-en.zip is prepared, in all material respects, in compliance with the ESEF Regulation. ANNUAL REPORT 2023 115 FINANCIAL STATEMENTSTHE BIG PICTURE OUR BUSINESS CORPORATE GOVERNANCE FINANCIAL REVIEW STATEMENTS Pandora A/S — Havneholmen 17-19 — 1561 Copenhagen V Denmark — CVR no. 28505116 — Phone +45 3672 0044 — www.pandoragroup.com Annual reportAuditor's report on audited financial statementsParsePort XBRL Converter2023-01-012023-12-312022-01-012022-12-315299007OWYZ6I1E46843Reporting class DOpinionBasis for Opinion5299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember5299007OWYZ6I1E468432023-01-012023-12-315299007OWYZ6I1E468432022-01-012022-12-315299007OWYZ6I1E468432023-12-315299007OWYZ6I1E468432022-12-315299007OWYZ6I1E468432022-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432023-01-012023-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432023-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432022-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432023-01-012023-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432023-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432023-01-012023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432023-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432022-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432023-01-012023-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432023-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432022-12-31PAN:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299007OWYZ6I1E468432023-01-012023-12-31PAN:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299007OWYZ6I1E468432023-12-31PAN:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299007OWYZ6I1E468432022-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432023-01-012023-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432023-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432021-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432022-01-012022-12-31ifrs-full:IssuedCapitalMember5299007OWYZ6I1E468432021-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432022-01-012022-12-31ifrs-full:TreasurySharesMember5299007OWYZ6I1E468432021-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432022-01-012022-12-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember5299007OWYZ6I1E468432021-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432022-01-012022-12-31ifrs-full:ReserveOfCashFlowHedgesMember5299007OWYZ6I1E468432021-12-31PAN:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299007OWYZ6I1E468432022-01-012022-12-31PAN:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersRecognisedInEquityMember5299007OWYZ6I1E468432021-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432022-01-012022-12-31ifrs-full:RetainedEarningsMember5299007OWYZ6I1E468432021-12-315299007OWYZ6I1E468432023-12-31cmn:ConsolidatedMember5299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember35299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember45299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember55299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember65299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember75299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember15299007OWYZ6I1E468432023-01-012023-12-31cmn:ConsolidatedMember25299007OWYZ6I1E468432022-01-012022-12-31cmn:ConsolidatedMemberiso4217:DKKiso4217:DKKxbrli:sharesxbrli:pure
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