Annual Report • Mar 14, 2013
Annual Report
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CVRNo.49619812
| Income statement (DKKm) | 2012* | 2011* | 2010* | 2009 | 2008 |
|---|---|---|---|---|---|
| Revenue | 1,322.3 | 1,309.8 | 1,185.5 | 1,068.0 | 1,439.5 |
| Gross profit | 270.9 | 283.4 | 237.6 | 247.7 | 437.3 |
| Profit before depreciation, amortisation and financial items (EBITDA) |
86.0 | 92.5 | (4.8) | 1.0 | 135.5 |
| Operating profit (EBIT) | 15,5 | (9.4) | (245.4) | (205.3) | 19.0 |
| Net financing costs | (44.6) | (50.3) | (29.1) | (58.3) | (17.6) |
| Profit before tax | (29.1) | (59.8) | (274.5) | (263.5) | 1.4 |
| Profit for the year from continuing operations | (59.6) | (75.8) | (262.9) | - | - |
| Profit for the year from discontinued operations | (22.7) | (48.6) | (7.6) | - | - |
| Profit for the year | (82.4) | (124.5) | (270.5) | (232.5) | 1.7 |
| Balance sheet – assets (DKKm) | |||||
| Non-current assets | 1,048.9 | 1,176.4 | 1,363.9 | 1,495.4 | 1,558.9 |
| Current assets | 343.8 | 407.5 | 294.9 | 359.6 | 363.9 |
| Total assets | 1,392.8 | 1,584.0 | 1,658.8 | 1,855.0 | 1,922.8 |
| Balance sheet – equity and liabilities (DKKm) | |||||
| Share capital | 490.5 | 490.5 | 490.5 | 490.5 | 109.0 |
| Equity | 417.9 | 472.7 | 670.7 | 958.2 | 743.2 |
| Non-current liabilities | 749.9 | 840.0 | 818.5 | 749.6 | 1,015.7 |
| Current liabilities | 225.1 | 271.3 | 169.6 | 147.2 | 163.9 |
| Total equity and liabilities | 1,392.8 | 1,584.0 | 1,658.8 | 1,855.0 | 1,922.8 |
| Cash flow (DKKm) | |||||
| Cash flow from operating activities | 23.1 | 42.9 | 46.4 | (41.7) | 60.8 |
| Cash flow from investing activities | 102.3 | (32.2) | (31.8) | (119.4) | (476.9) |
| Free cash flow | 125.4 | 10.8 | 14.6 | (161.1) | (416.1) |
| Investments and debt (DKKm) | |||||
| Investments in property, plant and equipment and | 27.0 | 36.9 | 35.2 | 104.6 | 492.7 |
| intangible assets during the year Interest-bearing debt (net) |
538.6 | 628.5 | 613.6 | 595.8 | 863.0 |
| Financial ratios | |||||
| Gross margin | 20.5% | 21.6% | 20.0% | 23.2% | 30.4% |
| Operating margin (EBIT margin) | 1.2% | (0.7%) | (20.7%) | (19.2%) | 1.3% |
| Return on invested capital (ROIC) | 1.3% | (0.7%) | (16.2%) | (7.2%) | 1.2% |
| Return on equity | 17.0 | (19.5%) | (33.2%) | (27.3%) | 0.2% |
| Solvency ratio | 30.0% | 29.8% | 40.4% | 51.7% | 38.7% |
| Net interest-bearing debt/EBITDA | 6.3 | 6.8 | (127.8) | 595.8 | 6.4 |
| Average number of shares outstanding | 9,789,511 | 9,789,511 | 9,789,511 | 1,432,844 | 1,090,436 |
| Adjusted average number of shares outstanding | 9,789,511 | 9,789,511 | 9,789,511 | 2,457,792 | 2,180,872 |
| Share price, year-end (DKK) | 26 | 42 | 53 | 63 | 304 |
| Book value per share, year-end (DKK) | 43 | 56 | 68 | 98 | 682 |
| Price/book value | 0.6 | 0.8 | 0.8 | 0.6 | 0.4 |
| Price-earnings ratio (PE) | (3.1) | (3.3) | (1.9) | (0.7) | 199.9 |
| Earnings per share (adjusted) | (8.4) | (12.7) | (27.6) | (94.6) | 0.8 |
| Diluted earnings per share (adjusted) | (8.4) | (12.7) | (27.6) | (94.6) | 0.8 |
| Dividend per share (adjusted) | 0 | 0 | 0 | 0 | 0 |
| Payout ratio | 0% | 0% | 0% | 0% | 0% |
| Average full-time equivalent staff | 1,001 | 1,084 | 1,156 | 1,238 | 1,282 |
*Figureshavebeenadjustedfordiscontinuedoperations.Figuresfor2012and2011havefurtherbeenadjustedforthetransitiontoIAS19R(2011)wherethe impactontheincomestatementisconcerned.
Earnings per share and diluted earnings per share have been calculated in accordance with IAS 33 (note 11). The other financial ratios have been calculated in accordance with the Danish Society of Financial Analysts' 'Recommendations&Ratios 2010'. Reference is made to definitions and concepts in note1'Accounting policies'.
EBITDA was DKK 86.0 million, against DKK 92.5 million in 2011. EBITDA before special items was DKK 92.0 million, which is in line with the most recently announced outlook for continuing operations, namely EBITDA before special items in the region ofDKK 90-110 million. Due to the company's efficiency programmes and price increases, earnings could be kept onapar with 2011 despite very difficult market conditions in the EU,butearnings are stillnotsatisfactory.
10.2 million in 2012. The cumulative effectofthe implementationofIAS19R (2011) is DKK 91.0 million including tax.
2012 was impacted by growing economic turmoil in the euro area, which led to significant tighteningofcredit conditions for homebuilding and reduced interest inbuyingnew homes.
Activity levels in severalofH+H's main markets were even lower than in 2009, the first full yearofcrisis, when also construction was hit hard. The main positive in 2012 was performance in Russia, where demand outstripped supply for mostofthe year, leading to considerable price increases forH+H's products.
Despite the sharp slowdown in construction in 2012, it was largely possible to keep earnings onapar with 2011, thanks to the optimisationofproduction processes,acontinued focus on cutting costs andstrongerearnings in Russia.
As partofH+H's continued focus on corebusiness,the Board ofDirectors decided in 2011 to divest assets and activities in the Finnish subsidiaryJämerä-kivitalotOy, which designs and sells the constructionofaircrete houses for private individuals. As the company had been loss-making foranumberofyears,adivestment would haveapositive effect onH+H's future earnings. The sale was finalised in June 2012, when the main partofthe company's assets and activities were sold to the Estonian Aeroc Group.
In October 2012H+HInternational A/S sold all shares inH+H-Česká republika s.r.o. toacompany in the Xella Group for DKK 114 million, excluding real estate.H+H's assessment was that H+HČeská wouldnotbe able to fulfil its strategic goals for market position and capacity utilisation withinareasonable time frame. The selling price is considered satisfactory and reflects the potential synergies for Xella.
Asaconsequenceofthe economic crisis,H+Hdiscontinued its sales activities in Ukraine, the Baltic States and Norway. For strategic reasons,H+Hhas in 2012 soldH+HČeská republika s.r.o. and decided to wind upH+HSlovenská republika s.r.o.
Going into 2013,H+Hwas active in the UK, Germany, Poland, Northwest Russia, Denmark, Sweden, Benelux and Finland, with anumber1or2position in all these countries.
In the lightofH+H's current financial performance and debt levels, the following overall guiding principles apply for the coming years:
Within these guiding principles,H+Hshould be able to grow the top line by 30% with its existing production capacity, assuming geographically balanced market growth.
Read more aboutH+H's strategy on pages 16-18.
The Bundeskartellamt (German competition authority) decided on 14 March 2012 to prohibitapossiblemergerbetween Xella International Holdings S.à.r.l. andH+HInternational A/S in the German market.
Xella has subsequently lodged an appeal against the decision at the Oberlandesgericht Düsseldorf (Düsseldorf Higher Regional Court).
H+Hhas been advised by its legal adviser that the proceedings before the Oberlandesgericht Düsseldorf are likely to be concluded in 2013. The decision by the Oberlandesgericht Düsseldorf can be appealed to theBundesgerichtshof(Federal Supreme Court). Such an appeal could take at leastanotherone to two years.
Regardlessofthe appeal case,H+Hwill continue to pursue its strategy onastand-alone basis, which includes pursuing any further structural opportunities that may arise in the markets.
There were very low levelsofbothcommercial and residential construction in Finland in 2012, and sales to the domestic market are now too low to warrant retainingafactory there.
In January 2013 it was therefore decided to start negotiations with the unions concerningapossible closureofH+H's factory in Finland.
Asales agreement for unused production equipment in the UK was signed in January 2013 ataprice in the regionofDKK5
million. The sale will haveapositive impact on earnings in the regionofDKK2million.
The BoardofDirectors will recommend at the annual general meeting on 17 April 2013 that two new members be elected, as twoofits current members arenotstanding for re-election. The Board thus recommends that there should continue to be five members going forward.
The Board will recommend that StewartABaseley, Asbjørn Bergeand Pierre-Yves Jullien be re-elected and that Kent Arentoft, President and CEOofDalhoff Larsen&Horneman A/S, and Henriette Schütze, Executive director and CFOofGeorg Jensen A/S, be elected as new members. AndersCKarlsson and Henrik Lind arenotstanding for re-election.Ifthe annual general meeting follows theBoard'sproposal, the new board will elect Kent Arentoft as Chairman.
The BoardofDirectors will recommend at the annual general meeting on 17 April 2013 that no dividend be paid for the 2012 financial year.
H+Hhad net interest-bearing debtofDKK 539 million at the endof2012, down DKK 90 million on the endof2011. With unchanged exchange rates, net interest-bearing debt would have been DKK 531 million.
The substantial decrease in interest-bearing debt was due to the saleofH+HČeská republika s.r.o., which resulted inanet reductionofaround DKK 105 million.
Asaresultofthe decrease inH+H's debt levels, the company reduced its committed credit facility at Danske Bank A/S by around DKK 100 million to around DKK 700 million in November 2012 in order to cut its borrowing costs.
In connection with the reduction in this facility, more favourable financial covenants were obtained.
The substantial investment in production capacity in 2005-2008, coupled withasignificant decrease in sales volume, has meant thatH+H's production capacity isnotbeing fully utilised. Asaresult, when markets turn and sales volumes rise again,H+H-
will be able to handle the increase in volumes with its existing production capacity.
EBITDA was DKK 86.0 million, against DKK 92.5 million in 2011. EBITDA before special items was DKK 92.0 million, which is in line with the most recently announced outlook for continuing operations, namely EBITDA before special items in the regionof-DKK 90-110 million. The original outlook for the year was DKK 110-140 million. Due to the company's efficiency programmes and price increases, earnings could be kept onapar with 2011 despite very difficult market conditions in the EU,butearnings are stillnotsatisfactory.
Revenue from continuing operations was DKK 1,322.3 million (2011: DKK 1,309.8 million), an increaseof1%.H+Hlargely maintained its market share in all markets.
Free cash flow was positive at DKK4million before disposalsofassets, which is better than the most recently announced outlook ofnegative free cash flow in the regionofDKK 0-15 million. The original outlook for the year was positive free cash flow in the regionofDKK 0-20 million before disposalsofassets. Including disposalofsubsidiaries, free cash flow was positive at DKK 125 million. Net interest-bearing debt amounted to DKK 539 million at the endofthe year, down DKK 90 million over the year. With unchanged exchange rates, debt would have been DKK7million lower.
Revenue fell in 2012, due partly toH+H's prioritisationofsalesofreinforced products to Africa rather than the Benelux countries.
Sales in Denmark were hit byasteep fall in construction activity, particularly during the second quarter. The falling volumes in 2012 haveputincreased pressure on pricing.
The German residential newbuild market declined in 2012 after growing strongly in 2011,butrevenue was still slightly up on 2011 after considerable exportsofreinforced products to Africa.
Prices forH+H's products in Germany climbed gently in 2012 and are beginning to approach the levels seen before the economic crisis. Sales from the German factories to sister companies were slightly lower than in 2011.
H+H's factory manufactures blocks and reinforced products, supplyingnotonly Finlandbutalso the Swedish market. There were very low levelsofbothcommercial and residential construction in Finland in 2012, and sales to the domestic market are now too low to financially support retainingafactory there.
In January 2013 it was therefore decided to start negotiations with the unions concerning apossible closureofH+H's factory in Finland.
2010 and 2011 saw healthy growth in residential and commercial construction in Sweden,butthere wasasharp slowdown in 2012. The Swedish krona appreciated against the euro in 2012, making the company's products more competitive relative to locally produced alternatives.
The market deteriorated in 2012, contracting in the first halfofthe year, due partly to high levelsofrainfall in the second quarter, while sales picked up in the second half. Besides the weather, sales were hit by limited mortgage availability, cuts in public spending on social housing, and reducedbuyerconfidence due to fearsoffalling house prices and an uncertain employment outlook.
As partofH+H's continued focus on corebusiness,the Board ofDirectors decided in the third quarterof2011 to divest assets and activities in the Finnish subsidiaryJämerä-kivitalotOy, which designed and sold the constructionofaircrete houses for private individuals. As the company had been loss-making foranumber ofyears,adivestment would haveapositive effect onH+H's future earnings. The sale was finalised in June 2012, when the main partofthe company's assets and activities were sold to the Estonian Aeroc Group.
Sales in the Czech Republic fell sharply in 2012 due to very difficult market conditions.
In October 2012H+HInternational A/S sold all shares inH+H-Česká republika s.r.o. toacompany in the Xella Group for DKK 114 million, excluding real estate.H+H's assessment was that H+HČeská wouldnotbe able to fulfil its strategic goals for market position and capacity utilisation withinareasonable time frame. The selling price is considered satisfactory and reflects the potential synergies for Xella.
The Polish newbuild market was again hit hard by the economic crisis. The numberofstarts has been falling in recent years and continued to decline in 2012, and there is still fierce price competition in the aircrete market.
The Russian market expanded in 2012, and demand far outstripped supply forlongperiods.H+Hmanaged to increase its production volumes during the courseofthe year, and this is expected to continue in 2013.
Prices in the aircrete market also climbed asaresultofincreased demand and rising raw material costs.
| Segment information for continuing operations | ||||
|---|---|---|---|---|
| Amounts in DKK million | 2012 | 2011 | 2012 | 2011 |
| WesternEurope | EasternEurope | |||
| Revenue | 958.7 | 928.5 | 363.5 | 381.3 |
| EBITDA | 75.1 | 94.3 | 36.8 | 11.3 |
| Depreciation | (58.0) | (58.9) | (43.5) | (42.9) |
| Impairment losses | 0 | 0 | 32.3 | 0 |
| EBIT | 17.1 | 35.4 | 25.6 | (31.6) |
| Profit before tax* | (8.2) | 10.6 | 4.7 | (68.7) |
| Non-current assets | 772.9 | 796.2 | 530.9 | 635.5 |
| Investments in intangible assets and property, plant and equipment |
19.4 | 23.4 | 7.2 | 11.4 |
| Assets | 1,075.6 1,148.1 | 618.0 | 739.1 | |
| Equity | 394.1 | 397.9 | 207.9 | 263.8 |
| Liabilities | 678.7 | 750.2 | 410.1 | 475.3 |
| Average full-time equivalent staff | 503 | 498 | 485 | 572 |
*H+H's consolidated profit before tax, management fee etc.
Further information about the Group's segments is disclosed in note 3.
EBITDA for 2013 is expected to be in the regionofDKK 90 million. Efficiency gains and structure improvements are counterbalancing the difficult market situation in Europe, the negative effectsofthe divestmentofH+HČeská and the weak British pound.
Free cash flow is expected to be positive in the regionofDKK 0-15 million before disposalsofassets.
Total investments are expected to be in the regionofDKK 50 million.
These expectations forH+H's financial performance in 2013 are based partly on the following specific assumptions:
The expectations forH+H's financial performance are based on anumberofgeneral assumptions.
Management believes that the most significant assumptions underlyingH+H's expectations relate to:
Management's expectations are associated with considerable uncertainty. No assurance can therefore be given that the
assumptions on which the financial expectations are based will hold.
H+HInternational A/S is only obliged to update and adjust the expectations presented where so required by Danish legislation, including the Danish Securities Trading Act, or the rules for issuers on NASDAQ OMX Copenhagen.
EBITDA was DKK 86.0 million, against DKK 92.5 million in 2011. EBITDA before special items was DKK 92.0 million, which is in line with the most recently announced outlook for continuing operations, namely EBITDA before special items in the regionof-DKK 90-110 million. The original outlook for the year was DKK 110-140 million. Due to the company's efficiency programmes and price increases, earnings could largely be kept onapar with 2011 despite very difficult market conditions in the EU,butearnings are stillnotsatisfactory.
The global economy has deteriorated since spring 2012, due primarily to developments in the euro area, which has plunged back into recession. In particular, the escalating debt crisis in Southern Europe has eroded consumer and business confidence. Like previous economic downturns, this has hit the construction sector hard, especially the newbuild segment,H+H's main market.
AllofH+H's markets except Russia declined in 2012, and no significant growth in these countries is anticipated before mid-2013.
Construction activity in Poland, Sweden, Denmark and the UK is currently so low that it is hard to see these markets declining significantly further even in the eventofrecession.
Earnings in 2012 were boosted byacontinued focus on production optimisation, which began in 2011 withamajor Excellence programme that has increased earnings by around DKK 40 million over the past two years. The project is continuing in 2013 and is expected to cut production costs further. Finally, earnings were bolstered by stringent managementofselling costs and administrative expenses, which fell by 5% in 2012.
Revenue from continuing operations was DKK 1,322.3 million (2011: DKK 1,309.8 million), an increaseofDKK 12.5 million or 1%. Changes in exchange rates boosted revenue by DKK 27.6 million. 2012 broughtadecrease in sales volumes, rising prices and changes in the product mix, which together resulted inaslight increase in revenue relative to 2011.
The fall in sales volumes was driven by significantly lower sales in Poland, Germany, the Czech Republic and the UK. The growing uncertainty in financial markets has made customers more cautious. Despite depressed markets with falling sales volumes,H+Hlargely maintained its market share. Sales volumes in Russia
were higer than last year. Demand in the Russian market is still very strong,butsales have been limited by production capacity.
2012 saw substantial sales ofreinforced products to Africa. These are low-margin salesbuthelp improve capacity utilisation at factories turning out reinforced products. Sales to Africa helped offset the decline in volumes. Sales to Africa are expected to continue in 2013butat slightly lower levels.
In the Western European segment, revenue grew by DKK 30 million afterapositive exchange rate effectofDKK 28.4 million. Sales volumes were somewhat down on 2011 with decreases in all Western European markets, allofwhich came under severe pressure in 2012. Despite this very tough trading environment, averageprices were higher than in 2011.
In the Eastern European segment, revenue fell by DKK 18 million, includinganegative exchange rate effectofDKK 0.8 million. The sales volume in Eastern Europe was realised atahigher price level than in 2011. Revenue rose in Russiabutfell in Poland and the Czech Republic.
Total production costs were higher in 2012 than in 2011, due primarily to increased productionofreinforced products. Price rises for rawmaterials,primarily energy, and transport were as expected. The slowdown in sales resulted in decreased capacity utilisation atanumberoffactories and necessitated reductions in staff levels. This led to higheraverageproduction costs, which were partly offset by savings due to production improvements through the Excellence programme.
Awide rangeofcost savings were made in 2012 as partof-H+H's Excellence programme,butit was difficult to maintain the same rateofimprovement as in 2011 due to the lower capacity utilisation at many factories. Given the continued focus on the Excellence programme, it is expected thataverageunit production costs will remain largely unchanged in 2013, despite rising purchase prices.
Otherexternal expenses were 1% higher than in 2011. Stringent managementofselling costs and administrative expenses continues. There wasagross reduction in the numberoffull-time employees in sales and administrationof83 relative to 2011.
2012 brought net negative special itemsofDKK6million, mainly costs relating to the implementationofthe new strategy and organisation, and costs for advisers etc. in connection with the saleofH+HČeská republika s.r.o., compared with DKK 5.1 million in 2011.
| Special items | ||
|---|---|---|
| Amounts in DKK million | 2012 | 2011 |
| Profit on sale ofH+HČeská | (5.7) | - |
| Costs in connection with competition case | 0.8 | 1.5 |
| Additional energy tax | 0.9 | 2.4 |
| Termination costs | 4.5 | 1.7 |
| Implementation of new organisation | 3.9 | - |
| Other items | 1.6 | (0.5) |
| Total | 6.0 | 5.1 |
Special items are recognised in the income statement under otheroperatingincome and expenses.
Depreciation and amortisation for the year totalled DKK 103 million.
Itwas decided in 2010 to write down the Russian factory by DKK 120 million due to lower capacity utilisation and prices than originally anticipated. The Russian market has now recovered to the extent that the wholeofthis write-down can be reversed. Net ofdepreciation, this entailsareversalofDKK 104 million.
The valueofthe remaining real estate in the Czech Republic was written down by DKK 46.4 million in 2012 in connection with the saleofH+HČeská republika s.r.o. toacompany in the Xella Group.
In addition, goodwill in Poland was written down by DKK 24 million due to recent years' very difficult market conditions.
Financial income and expenses amounted toanet chargeof-DKK 45 million, down DKK6million on 2011. The fall can partly be attributed toalower interest rate level andaloweraveragedebt level.
The tax charge for the year was DKK 30.6 million (2011: DKK 16.1 million). The increase can primarily be attributed to reversal ofthe previous write-down in Russia.
Discontinued operations and assets held for sale As partofH+H's continued focus on corebusiness,the Board ofDirectors decided in the third quarterof2011 to divest assets and activities in the Finnish subsidiaryJämerä-kivitalotOy, which designed and sold the constructionofaircrete houses for private individuals. The sale was finalised in June 2012, when the main partofthe company's assets and activities were sold to the Estonian Aeroc Group.
As partofits continued focus on core business andadesire to reduce interest-bearing debt,H+Haims to sell someofits non-strategic assets in the courseof2013. Variousplotsofland in Poland,asand pit in Germany,aplotofland in the UK and unused production equipment have therefore been readied for sale and classified as assets held for sale.
Asales agreement for unused production equipment in the UK was signed in January 2013 ataprice in the regionofDKK5 million.
Investments totalled DKK 27.0 million in 2012 (2011: DKK 36.9 million) and relate toongoingreplacementofassets.
As in 2011, no financing costs or own costs were capitalised.
Free cash flow was positive at DKK 125 million, including disposalofsubsidiaries. Adjusted for the disposalofsubsidiaries, free cash flow was positive at DKK4million, which is better than the most recently announced outlookofanegative free cash flowofaround DKK 0-15 million. The original outlook for the year was positive free cash flow in the regionofDKK 0-20 million before disposalsofassets.
Net interest-bearing debt amounted to DKK 538.6 million at the endofthe year (2011: DKK 628.5 million),adecreaseof-DKK 89.9 million. With unchanged exchange rates, net interestbearing debt would have been DKK7million lower.
Cash flow fromoperatingactivities was DKK 23.1 million (2011: DKK 42.9 million). EBITDA contributed DKK 117.2 million (2011: DKK 129.5 million), including an imporvement in working capital ofDKK 31.2 million (2011: DKK 37.0 million).
Cash flow from investing activities was positive DKK 102.3 million (2011: negative DKK 32.2 million), including proceedsofDKK 121.1 million from the disposalofsubsidiaries.Otherdisposals ofnon-current assets totalled DKK 8.2 million (2011: DKK 4.7 million).
H+H's equity fell by DKK 55 million to DKK 418 million during the year. With total assetsofDKK 1,392 million, this givesasolvency ratioof30.0%.
The loss for the year reduced equity by DKK 82.4 million, while foreign exchange adjustmentsofinvestments in subsidiaries etc. increased equity by DKK 37.6 million. Amendments toIAS-19 'Employee benefits' have meant thatH+Hnolongeruses the corridor method to calculateH+H's defined benefit pension obligation and has adopted the new standard early. The change has led toareduction in equity due to unrecognised actuarial losses calculated at 31 December 2012ofapproximately DKK 10.2 million. The cumulative effectofthe implementationofIAS-19R (2011) is DKK 91.0 million including tax.
| Changes in equity | ||
|---|---|---|
| Amounts in DKK million | 2012 | 2011 |
| Balance at1January | 472.7 | 670.7 |
| Profit for the year | (82.4) | (124.5) |
| Treasury shares, net | 0 | 0 |
| Foreign exchange adjustments in subsidiaries |
37.6 | (55.4) |
| Actuarial losses on pension obligation | (10.2) | (18.9) |
| Other adjustments | 0.2 | 0.8 |
| Balance at 31 December | 417.9 | 427.7 |
The BoardofDirectors will recommend at the annual general meeting on 17 April 2013 that no dividend be paid for the 2012 financial year.
To be market leader and preffered supplier of innovative,
H+Hwill complete its turnaround and operate mainly in markets where it can obtainanumber1or2market position.
To supply value-added and innovative aircrete solutions distributors, contractors and housebuilders.
H+H's business model is focused on increasing sales and market share in existing markets through superior products as well asawell-defined sales and marketing process to secure profit across the value chain.
The global economy has weakened since spring 2012, led by developments in the euro area where recession is again taking hold. In particular, the escalating debt crisis in Southern Europe has impacted on consumer as well as business confidence.
Declining or negative growth is expected in 2013 in the main European economies, including Germany, France and the UK, while Spain, Italy and Greece will remain in deep recession.
Having said this, construction activity in some countries, such as Poland, Sweden, Denmark and the UK, is at such low levels that growth is still to be expected in someofthese countries, and even in the eventofrecession it is hard to see these markets undergoing significant further decline.
Inothercountries, such as Germany and the Benelux countries, aircrete markets are expected to be flat,butin the eventofafurther worsening ofeconomic conditions, it has to be expected that prices and volumes will showadownward trend.
In Russia we will see significant growth due to continued domestic demand and the drive to increase standardsofliving. However, the recent acceleration in the productionofshale oil and gas (fracking) in theUSmay impact on global oil and gas prices in the medium term, with negative implications for the Russian economy.
Overall market trends:
In its current markets,H+His maintainingahigh market share and is considered among the top two suppliers.
Since early 2011 there has beenaspecific focus on raising prices in all markets, and significant improvements have been achieved in the period since.
In Germany, which also supplies Denmark, Sweden and Benelux, H+Hgenerally operated at satisfactory capacity throughout 2012, and capacity in Russia was under severe strain from May onwards. In Finland, Poland and the UK, however, there is still overcapacity.
In all markets except the UK and Poland,H+Hhas managed over the years to introduce 100% thin-joint technology for blocks, bringing significant improvements in building speed and working environment.
Reinforced elements account for an important partofsales in Denmark, Finland, Sweden and Germany and are an integrated partofH+H's system sales.
Asaconsequenceofthe economic crisis,H+Hdiscontinued its sales activities in Ukraine, the Baltic States and Norway. For strategic reasons,H+Hhas in 2012 soldH+HČeská republika s.r.o. and decided to wind upH+HSlovenská republika s.r.o.
Going into 2013,H+Hwas active in the UK, Germany, Poland, Northwest Russia, Denmark, Sweden, Benelux and Finland, with anumber1or2position in all these countries.
In the lightofH+H's current financial performance and debt levels, the following overall guiding principles apply for the coming years:
Within these guiding principles,H+Hshould be able to grow the top line by 30% with its existing production capacity, assuming geographically balanced market growth.
H+Hhas defined three strategic goals:
Actions to fulfil these goals are organised into five strategic focus areas:
■ Sales and marketing approach. Especially in continental Europe, markets can be moved inacommon direction,butthey are at different stagesofdevelopment.Auniform and unique sales and marketing approach is mandated to avoid commoditisationofH+H's products and secure optimal price levels.
The Build with ease approach is unique in its markets and is driving value forH+H:
■ Product innovation focusing on building speed, physical and working environment, and lowest possible total cost for the homeowner.
Local adaptation will depend on differences in building traditions and sophistication as well as differences in sales and distribution structure.
H+H works systematically on identifying and evaluating risks related to its business activities. Where feasible and appropriate, action to counter or limit the effectsofthese risks is taken on an ongoingbasis.
H+H's activities focus on the manufacture and saleofaircrete products in Western and Eastern Europe. Sales relate primarily to in-house production and only toalesser extent to goods for resale. Products are sold mainly to local markets close to the manufacturing facilities and normally only transported overlongdistances to markets where there is no locally produced aircrete. In 2012, however, H+H sold large numbersofreinforced products to Africa, which were transported by sea.
With significant operational gearing in the formofheavy capital expenditure and fixed costs, fluctuations in demand haveanoticeable effect on H+H's financial performance. In the last few years, H+H's gross margin has been around 21%ofrevenue. Allotherthings being equal, if revenue were to fall by 100, this would have an immediate adverse effectof21 on earnings before tax, before any adjustments to staff and fixed costs.
H+H's sales go predominantly to new dense low-rise housing, making H+H particularly vulnerable to fluctuations in the level ofactivity in this building segment. H+H is striving to expand the market for aircrete to include buildingsotherthan dense low-rise housing toagreater extent, such as apartments and commercial buildings.
Alarge proportionofsales are made via annual framework agreements with housebuilders and builders' merchants.Somesales are made without framework agreements being entered into. Selling prices for salesnotsubject to framework agreements can be highly volatile. Framework agreements typically include price levels and indicationsofanticipated demand. Actual sales depend on the levelofbuilding activity achieved by housebuildersand the actual sales recorded by builders' merchants. Order books in H+H's largest markets are very modest. Sales visibility beyond one to two weeks ahead is consequently poor and primarily based on reports from customers and on various external indicators such as trends in building permits and mortgage approvals. Visibility is further restricted by the fact that H+H's products are used mainly in the initial phasesofthe building process.Aboom oraslowdown in construction activity is therefore rapidly reflected in H+H's sales.
Developments in the global economy, and in particular the construction sector, haveasignificant direct and indirect impact on H+H. Developments in recent years have led to sharply rising unemployment,agrowing numberofbusiness failures and falling consumer spending, and it has become considerably more difficult to access finance for building. The effect is global and has hit many countries, sectors and industries, including the primary geographical markets to which mostofthe Group's revenue relates.
The renewed economic turmoil that erupted in the second halfof-2011 evolved intoafull-blown credit crisis in the second quarter of2012, making mortgages for newbuilds hard to obtain, as happened in 2008. This hadamajor impact on H+H's sales volumes in 2012, albeitnotto anywhere near the same degree as in 2008 and 2009 because the markets in 2012 had yet to recover from the previous economic downturn in 2008 and 2009.
H+H focuses on keeping its production plant in 24-hour operation, with the optionofreducing the numberofshifts in response toadownturn in demand. Where possible, non-core activities such as logistics are outsourced with relatively short notice periods.
H+H's aircrete products and building systems are sold mainly in the local markets in which the factories are located. H+H's competitors areotherlocal manufacturersofaircrete products and manufacturersofotherproducts that can be used in competition with aircrete.
H+H has builtastrong market position relative tootheraircrete manufacturers and is known asasupplierofhigh-quality products. This position has been achieved via strong, locally based sales organisations. H+H generally differentiates itself fromotheraircrete manufacturers by being more solution-oriented. Through dialogue with its customers, H+Hofferssolutions that have advantages for customers in the formoflower total costs and/ or shorter building times. H+H's factories manufacture standard products, and it is important that the factories operate with high capacity utilisation, giving the lowest possible unit costs. This is paramount in order to ensure that H+H can always compete on price in all markets.
The competitive climate has become increasingly fierce during the economic crisis and has generally led to lower prices for H+H's products. Prices did improve in 2012, however, especially in Russia.
The construction industry is relatively conservative, which means that aircrete's market share relative toothertypesofbuilding material is reasonably stable, although shifts occur on anongoingbasis, usually asaresultofchanges in the price differential between buillding materials. H+H's products can generally be substituted withotherbuildingmaterials,and the company works hard to promote the useofits products rather than these alternatives.
H+H strives continuously to raise awarenessofits products and the advantages aircrete has overotherbuilding systems. H+H believes that aircrete's properties are so unique that aircrete will continue to enjoyastrong position in future.
The principal raw materials used in the productionofaircrete products are cement, lime, water and sand orpulverisedfuel ash, as well as reinforcing steel, along with considerable energy consumption during production. Transport costs also account for asubstantial proportionofproduct costs.Ifthere are significant increases in the pricesofthe raw materials and energy used in production or in transport costs, and H+H is unable to offset this by raising the pricesofits products, this may have an adverse impact on H+H's profitability.
Bothhistorically and in 2012 H+H hasexperiencedconsiderable volatility in raw material, energy and transport costs and is consequently exposed to price fluctuations.
Cement costs account for roughly one-thirdoftotal raw material consumption, excluding energy, and around 5-10%ofrevenue.
Costs for energy consumption in production correspond to around 5-10%ofrevenue. The productionofsteam for the autoclaving process accounts forasubstantial partofenergy consumption. The primary energy sources are gas and electricity. H+H strives continuously to reduce energy consumption.
H+H presents its consolidated financial statements in Danish kroner. Mostofthe Group's products are produced and sold abroad. Sales in markets outside Denmark accounted for more than 90%ofconsolidated revenue in the 2012 financial year, with Germany, the UK and Poland as the largest markets.
H+H's net inflows are denominated mainly in EUR, GBP, PLN and RUB, and its principal exposure is currently related to these currencies. The main net exposure in termsofoutflows is also to EUR, GBP, PLN and RUB. H+H has considerable net investments in subsidiaries abroad, including in non-euro countries, resulting inahigher currency exposure. The associated foreign exchange adjustments are taken to consolidated equity.
H+H mainly has net investments in the following currencies: EUR, GBP, PLN and RUB.
H+H doesnotengagein currency speculation. The individual H+H companies arenotauthorised to take positions in foreign currencies unless commercially warranted, and commercial positions abovealimited ceiling must be hedged. Conversely, it is H+H's policy to accept unhedged currency exposure to subsidiaries and their results, although such risk is minimised withaview to financial strength and taxes.
H+H's currency risks were generallynothedged with financial instruments at the balance sheet date.
H+H made major investments in Eastern Europe in particular in 2005-2009, and this led toasubstantial increase in net interestbearing debt, especially in 2008-2009.
H+H will continue to operate withaconsiderable levelofdebt financing. H+H had net interest-bearing debtofDKK 539 million at the endof2012, down DKK 90 million on the endof2011.
H+H hasacommitted credit facility at Danske Bank A/S corresponding to around DKK 700 million, which is committed until 15 February 2015.In connection with the saleofH+H Česká republika s.r.o. and the subsequent reductionofthe facility, the financial covenants associated with the facility were adjusted to reflect the very difficult trading environment in mostofH+H's markets in 2012. Maintenanceofthe committed credit facility is conditional upon compliance withanumberoffinancial covenants.Ifearnings fall becauseofthe impacts described under 'Market risks' and 'Financial risks', this could result inabreachofthe financial covenants. These covenants are described in note 27. The loan agreement can also be terminated by Danske Bank A/S without notice if investorsotherthan Scandinavian institutional investors (defined in the agreement as Danish, Swedish, Norwegian and Finnish financial institutionsoperatingin financial markets and subject to public supervision) individually or through coordinated collaboration gain controlofmore than one-thirdofthe shares or more than one-thirdofthe total numberofvotingrights carried by the shares in H+H International A/S.
The effective interest rate for H+H in 2012 was around 4.9% (2011: 5.2%), partly reflecting the interest rate levelsofthe individual currencies. The effective interest rate is expected to be alittle higher in 2013.
With the expected development in net interest-bearing debt, a1percentagepoint change in the interest rate would affect earnings before tax in 2013 by around DKK5million. H+H International A/S's interest-bearing financial assets consist mainly ofloans to subsidiaries, while its interest-bearing liabilities consist ofbank overdrafts.
H+H invoices the majorityofits sales throughanumberofbuilders' merchants across more than 10 countries. This reduces the Group's credit exposure to contractors andhousebuilders, butconsequently increases its credit exposure to builders' merchants. In keeping with H+H's credit policy, all major customers are credit-rated internally onaregular basis,butH+H is still exposed to the riskofbad debts. H+H insures its largest trade receivablesbutnotsmaller ones. In 2012H+Hmade an agreement with its biggest customer inH+HUK Limited, leading toasignificant reduction in total debtor balances.
H+HInternational A/S has share capital withanominal value ofDKK 490,500,000 carryingatotalof98,100,000 votes and divided into 9,810,000 shares each withanominal valueofDKK 50 and carrying 10 votes.
As at2January 2013,H+HInternational A/S had 3,055 registered shareholders (corresponding to 75.17%ofthe share capital), including 147 foreign shareholders, and the company held 20,489 treasury shares.
As at2January 2013,H+HInternational A/S had three major shareholders each holding more than 5%ofits shares: ATP (11.52%), Laurids Jessen and his company DanebrogeApS (5.87%) and LD Equity1K/S (5.84%).
MembersofH+HInternational A/S's BoardofDirectors and Executive Board are included in the company's insider register. These persons and persons connected to them are only allowed tobuyand sell shares in the company during the four weeks immediately after each interim financial report or annual report.Ifin possessionofinside information, such persons are prohibited from trading even during this period for aslongas this information remains inside information. The company maynotbuyor sell its own shares duringathree-week period immediately preceding each interim financial report or annual report., and the company maynottrade whilst in possessionofinside information.
The BoardofDirectors and Executive Board regularly evaluate the capital structure on the basisofexpected cash flows with aview to ensuring an appropriate balance between adequate future financial flexibility andareasonable return to shareholders.
H+HInternational A/S had an equity ratioof30.0% at the endof-2012, compared with 29.8% at the endof2011. The company's interest-bearing debt totalled DKK 538.6 million at the endof-2012, compared with DKK 628.5 million at the endof2011.
In November 2012, the BoardofDirectors discussed the company's capital structure and concluded that the current structure is acceptable, even though reducing gearing to no more than2times EBITDA is partofH+H's strategy. The Boardof-Directors regularly assesses the company's capital structure in the lightofits earnings, debt, loan covenants etc.
H+HInternational A/S's shares are listed on NASDAQ OMX Copenhagen in the Small Cap segment (ticker code HH, ISIN DK0015202451). The company hasasingle share class, and the BoardofDirectors isofthe opinion that the shares' listing increases the company's options when it comes to raising new capital.
The company's share price fell by around 38% to DKK 26per-DKK 50 share in 2012. By wayofcomparison, the OMXC20 index gained around 27.2% and theKFMXIndex gained 14.1%.
Turnover in 2012 was 2,557,253 shares atatotal priceofDKK 99.4 million.
All major investment projects were completed in 2009, and investments were kept at low levels in 2010, 2011 and 2012. In the current trading environment,H+Hexpects investments in the regionofDKK 50 million in 2013. However,H+HInternational A/S's net interest-bearing debt is still relatively high compared withH+H's current revenue and earnings levels, and it is still uncertain when and how quickly these will return to stable growth.
Given the loss from continuing activities before tax for 2012of-DKK 29 million, and given the above uncertainty with respect to H+H's future earnings, the BoardofDirectors will recommend at the annual general meeting on 17 April 2013 that no dividend be paid for the 2012 financial year.Itshould also be noted that, under the termsofH+HInternational A/S's loan agreement with Danske Bank A/S, the BoardofDirectors is subject to an obligation to the effect that any proposed resolution concerning the distributionofdividends foragiven financial year mustnotexceed 50%ofthe company's profit after tax in the financial year in question.
Despite recent years' negative results asaconsequenceofthe economic crisis, it is stillanatural overall objective forH+HInternational A/S to generateacompetitive return for its shareholders in the formofshare price appreciation and the distributionofdividends and/or reductionofshare capital through the buyback and cancellationofshares in the company.
The purposeofH+HInternational A/S's financial communications andotherIR activities is to seekavaluationofthe company's shares that constantly reflectsH+H's current situation and expectations and to achieve adequate liquidity in trading in the shares.
All communications reflect the requirements that the information must be open, honest and timely. The main financial communications are via the annual report, interim financial reports and othercompany announcements.H+HInternational A/S is also in regular dialogue with professional and private investors, analysts and the business press. This dialogue takes the formofindividual presentations to major investors or presentations to groups ofinvestors. The company isnotnormally available for dialogue about financial matters in the three-week period leading up to the presentationoffinancial statements.
Relevant investor information is available on the company's website www.HplusH.com. Enquiries concerning IR issues should be addressed to CFO Niels Eldrup Meidahl at shareholder@HplusH. com or by telephone on +45 35 27 02 00.
The annual general meetingofH+HInternational A/S will be held on 17 April 2013 at 2.30 pm at Charlottehaven, Hjørringgade 12C, 2100 Copenhagen Ø, Denmark. Noticeofthe meeting will be sent by e-mail to registered shareholders whose e-mail address is entered in the company's registerofshareholders, and by post to registered shareholders who have asked the company in writing tonotifythem by post. The notice will also be published viaacompany announcement, on the company's website www.HplusH.com and on the Danish Business Authority's website www.cvr.dk.
Shareholders wishing to have their shares registered in their own name should contact their own depository bank or advise VP
Securities A/S, Weidekampsgade 14, 2300 Copenhagen S, Denmark. Shareholders who are already registeredbutwish to enter or amend an e-mail address in order to receive the company's noticesofgeneral meetings by e-mail can do so via theH+HShareholder Portal on the company's website at www.HplusH.com/shareholder_portal or by contacting the company's registrarComputershareA/S, Kongevejen 418, 2840 Holte, Denmark.
All shareholders may submit matters for consideration at the annual general meeting provided that the request is submitted to the BoardofDirectors in writing in sufficient time for the matter to be included in the agenda for the meeting. Requests submitted no later than six weeks before the meeting will be considered to have been submitted in sufficient time for the matter to be included in the agenda.
Ashareholder in the company may attend and vote at the annual general meeting if the shareholder has requested an access card no later than three days before the meeting, and the shareholder's holding is entered in the company's registerofshareholders no later than one week before the meeting, or the shareholder reports and documentsapurchaseofshares for entry in the registerofshareholders no later than one week before the meeting. Shareholders may alternatively vote by proxy or by post.
Documents for use at the annual general meeting will be made available on the company's website www.HplusH.com no later than three weeks before the meeting.
Financial calendar 2013
14 March 2013 Annual Report 2012 17 April 2013 Annual general meeting
22 May 2013 Interim financial report Q1 2013 22 August 2013 Interim financial report H1 2013 20 November 2013 Interim financial report Q1-Q3 2013
Carnegie Bank Kristian Tornøe Johansen [email protected] tel. +45 32 88 02 67 Danske Markets Equities Kenneth Leiling [email protected] tel. +45 45 12 80 59
| 22 November 2012 | Interim financial report Q3 2012 |
|---|---|
| 31 October 2012 | Completion ofH+HInternational A/S's sale ofH+HČeská republika s.r.o. |
| 21 September 2012 | H+HInternational A/S sellsH+HČeská republika s.r.o. |
| 23 August 2012 | Interim financial report H1 2012 |
| 20 June 2012 | Closing ofH+H's sale of Jämerä housebuilding activities to Aeroc and related supply agreements with Aeroc |
| 24 May 2012 | Interim financial report Q1 2012 |
| 22 May 2012 | H+Hsells Jämerä housebuilding activities to Aeroc and enters into related supply agreements with Aeroc |
| 7May 2012 | Major shareholder announcement–Laurids Jessen and Danebroge ApS |
| 18 April 2012 | Business transacted at annual general meeting and first meeting of the Board of Directors |
| 16 April 2012 | Xella appeals decision from the German competition authority on prohibition againstamerger between Xella andH+H |
| 23 March 2012 | Notice of annual general meeting ofH+HInternational A/S |
| 15 March 2012 | Annual Report 2011 |
| 14 March 2012 | The German competition authority prohibitsamerger between Xella International Holldings S.à.r.l. and H+HInternational A/S |
| 5March 2012 | Change of the Group Management |
| 27 February 2012 | Extension of the investigation period for Xella's merger notification targeting H+H |
| 13 January 2012 | Extension of the investigation period for Xella's merger notification targeting H+H |
*Other company announcements concerning transactions by key management personnel and their connected persons involving H+H International A/S's shares and securities related to these are not included. All announcements can be viewed at www.HplusH.com.
Asacompany listed on NASDAQ OMX Copenhagen,H+H-International A/S is subject to the rules for issuersofshares on that exchange, including the obligation to comply with the Recommendations on Corporate Governance issued by the Committee on Corporate Governance in Denmark or explain why specific recommendations arenotcomplied with. These recommendations can be viewed on the Committee's website www.corporategovernance.dk.
In accordance with these recommendations,H+HInternational A/S has preparedareport on the degree to which the company complied with the recommendations in 2012. The report takes the formofatable and reports on each individual recommendation. This corporate governance report for 2012 forms partofthe company's Statutory annual corporate governance statement under section 107bofthe Danish Financial Statements Act, which can be viewed on the company's website at www.HplusH.com/governance_statement. The full statutory statement forms partofmanagement's review in the annual report for 2012.
The BoardofDirectors isofthe opinion thatH+HInternational A/S essentially complies with the Recommendations on Corporate Governance as last revised in August 2011. However, the following recommendations arenotcomplied with for the reasons given below:
achieving the objectives, is therefore only partially complied with.
Itshould be noted in this context that, as required by section 139aofthe Companies Act,H+HInternational A/S will set an objective for the proportionofwomen on the BoardofDirectors by1April 2013, and that, as required by section 99bofthe Danish Financial Statements Act(enteringinto force on 1April 2013),H+Hwill report on progress in achieving this objective with effect from the annual report for 2013.
The company's employees representavarietyofskills,ages, nationalities and genders. All positions are filled with the emphasis on skills and without discrimination on the grounds ofage, gender, nationality etc.
At Group level, management in the subsidiaries is generally diverse, with women and peopleofdifferent nationalities and ages working asmanagers,headsoffinance and production managersin severalofthe subsidiaries. Women in fact representaclear majority among headsoffinance in the subsidiaries.
The BoardofDirectors is aware that continued good corporate governance requires constant alignmentofmanagement and company practices, processes etc. in relation to the company's activities and the expectations and wishesofexternal stakeholderssuch as shareholders, customers, suppliers and society in general.
H+Hdevelops, manufactures and sells aircrete products for construction projects in Western and Eastern Europe and is responsible for doing this inasustainable manner–fromabusiness, work and environmental pointofview. This responsibility is an integral partofH+H's activities.
Aircrete isaparticularly eco-friendly building material,notonly becauseofits excellent thermal insulation propertiesbutalso because it is easy on the environment during the production process. Mostofthe materials used in the productionofaircrete, such as lime and sand, are readily available, non-scarce natural resources, and pulverised fuel ash is used asaraw material in some countries. This ash isaresidual product frompowergeneration at coal-firedpowerstations. At the endoftheir life cycle, aircrete products can be reused, for example as road base.
H+Hhasalongtraditionofsound ethical conduct and ensuring good health&safety and sustainability in its operations. As such, H+Hhas worked on CSR for many years in practice, despite nothaving formal, consistent CSR policies across the Group's companies. Action has been taken individually in the various countries on the basis oflocal legislation, trends and, to some extent, traditions.
In 2012,H+Hcontinued implementing general Group-wide CSR policies, initially in the areasofbusiness ethics and supply chain management. These policies are gradually being developed and extended, and policies on the environment and health&safety will follow.
H+H's work on these policies builds on the guiding principles for the CSR focus areasofenvironment, health&safety and business ethics presented below. Pursuant to section 99aofthe Danish Financial Statements Act,H+HInternational A/S also publishesamore detailed annual statement on its CSR policies, actions taken to implement these policies and the resultsofthese actions. The 2012 statement forms partofmanagement's review and can be found on the company's website at www.HplusH.com/csr_statement.
H+His to work actively to reduce the environmental impactofits manufactureofaircrete, andH+H's production and products are always to comply with applicable requirements and standards.
H+His to work actively to increase the sustainabilityofits business in the production, transport and recyclingofits products.
H+H's product development is to focus on further improving aircrete's positive environmental characteristics.
Further action was taken in 2012 to reduce energy consumption. Itwas possible to cutaverageenergy consumptionpercubic metreofaircrete produced by 6.5% relative to 2011.H+His also working actively to lower the consumptionoflime and cement in production, so helping to minimise the company's carbon footprint.
H+His to beasafe place to work and is always to comply with statutory health&safety requirementswhereverit does business.
H+His to be an attractive and exciting place to work and able to attract skilled employees byofferingcompetitive termsofemployment and opportunities for personal and professional development.
H+Hrespects internationally recognised human rights as set out in the Universal DeclarationofHuman Rights, includingbutnotlimited to:
H+His to comply as far as possible with generally accepted principlesofgood corporate governance, andH+HInternational A/S is to publish an annual corporate governance report on its website www.HplusH.com.
H+Hisnotto participate directly or indirectly in corruption, bribery or extortionofany kind.
H+His to aspire to compliance with certain CSR-related minimum requirements on the partofallofits suppliers.
The BoardofDirectors held 11 meetings in 2012, while the Audit Committee and Nomination Committee each held four, and the Remuneration Committee one. The remunerationofthe individual membersofthe BoardofDirectors and the Executive Board in 2012 is presented in note 4.
During the winterof2012/2013, the BoardofDirectors undertookaself-evaluation based on input from eachmember'sreplies toaquestionnaire andasubsequent one-to-one session with the Chairman (in the Chairman's case, with the Deputy Chairman). The resultsofthis evaluation were discussed by the BoardofDirectors and considered in the light of, amongotherthings, the BoardofDirectors' competence profile as published on the company's website, and they were used together with recommendations from the Nomination Committee to decide who to nominate as candidates for the BoardofDirectors at the company's annual general meeting on 17 April 2013.
The resultsofthe evaluation showed that the numberofmeetings,agendas, time allocation and the material and information provided to the BoardofDirectors were adequate. The members ofthe BoardofDirectors work well together and collectively possess the necessary skills.Itsmembers are also considered competent individually and act independently and with very high attendance rates. The relationship between the Boardof-Directors and the Executive Board is considered to be open and constructive.
The BoardofDirectors will recommend at the annual general meeting on 17 April 2013 that StewartABaseley, AsbjørnBergeand Pierre-Yves Jullien be re-elected and that Kent Arentoft, President and CEOofDalhoff Larsen&Horneman A/S, and Henriette Schütze, Executive director and CFOofGeorg Jensen A/S, be elected as new members. AndersCKarlsson and Henrik Lind arenotstanding for re-election.Ifthe annual general meeting follows theBoard'sproposal, the new board will elect Kent Arentoft as Chairman.The noticeofmeeting will containadetailed profile ofeach candidate's skills and directorships.
Executive Chairman, Home Builders Federation (UK).
■ Managing director, chairman or member of the boards of 12 companies in the Hempel Group.
■ Member of the board of KP Komponenter A/S.
Partner in the law firmGorrissen-Federspiel.
■ Chairman of the board of SoundEar A/S.
The Executive Board and the BoardofDirectors have today discussed and approved the annual reportofH+HInternational A/S for the financial year 2012.
The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
Itis our opinion that the consolidated financial statements and the parent company financial statements giveatrue and fair view ofthe Group's and the parent company's financial position at 31 December 2012 andofthe resultsofthe Group's and the parent
company's operations and cash flows for the financial year 1January–31 December 2012.
In our opinion, the management's review includesafair reviewofthe development in the parent company's and the Group's operations and financial conditions, the results for the year and the parent company's financial position, and the position asawhole for the entities included in the consolidated financial statements, as well asadescriptionofthe more significant risks and uncertainty factors that the parent company and the Group face.
We recommend that the annual report be approved at the annual general meeting.
Copenhagen, 14 March 2013
Executive Board
Michael Troensegaard Andersen CEO
Niels Eldrup Meidahl CFO
Board of Directors
Anders C Karlsson Chairman
Stewart A Baseley Pierre-Yves Jullien
Asbjørn Berge Deputy Chairman
Henrik Lind
To the shareholders of H+H International A/S
We have audited the consolidated financial statements and parent company financial statementsofH+HInternational A/S for the financial year1January–31 December 2012, which comprise the income statement, statementofcomprehensive income, balance sheet, statementofchanges in equity, cash flow statement andnotes,including the accounting policies, for the Group as well as for the parent company. The consolidated financial statements and parent company financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
Management is responsible for the preparationofconsolidated financial statements and parent company financial statements that giveatrue and fair view in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies and for such internal control as Management determines is necessary to enable the preparation and fair presentationofconsolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on the consolidated financial statements and parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements and parent company financial statements are free from material misstatement.
An audit involvesperformingprocedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and parent company financial statements. The procedures selected depend on the auditor's judgement, including the assessmentofthe risksofmaterial misstatementsofthe consolidated financial statements and parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparationofconsolidated financial statements and parent company financial statements that giveatrue and fair view in order to design audit procedures that are appropriate in the circumstances,butnotfor the purposeofexpressingan opinion on the effectivenessofthe entity's internal control. An audit also includes evaluating the appropriatenessofaccounting policies used and the reasonablenessofaccounting estimates made by Management, as well as the overall presentationofthe consolidated financial statements and parent company financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provideabasis for our audit opinion.
Our audit hasnotresulted in any qualification.
In our opinion, the consolidated financial statements and parent company financial statements giveatrue and fair viewofthe Group's and the parent company's financial position at 31 December 2012, andofthe resultsoftheir operations and cash flows for the financial year1January–31 December 2012 in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
Pursuant to the Danish Financial Statements Act, we have read the management's review. We havenotperformedany further procedures in addition to the auditofthe consolidated financial statements and parent company financial statements.
On this basis, it is our opinion that the information provided in the management's review is consistent with the consolidated Copenhagen, 14 March 2013 financial statements and parent company financial statements.
Deloitte Statsautoriseret Revisionspartnerselskab
Anders O. Gjelstrup State Authorised Public Accountant
Kirsten Aaskov Mikkelsen State Authorised Public Accountant
| Group | Parent company | ||||
|---|---|---|---|---|---|
| Note (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| 3 | Revenue | 1,322,274 | 1,309,753 | 0 | 0 |
| 4, 15 Production costs | (1,051,390) | (1,026,384) | 0 | 0 | |
| Gross profit | 270,884 | 283,369 | 0 | 0 | |
| 4 | Other external expenses | (196,090) | (194,954) | (27,707) | (26,713) |
| 5 | Other operating income and expenses | 11,239 | 4,107 | 2,477 | 13,872 |
| Profit before depreciation, amortisation and financial items (EBITDA) |
86,033 | 92,522 | (25,230) | (12,841) | |
| 6 | Depreciation and amortisation | (102,878) | (101,938) | (1,421) | (283) |
| 7 | Impairment losses | 32,327 | 0 | (111,435) | (354,204) |
| Operating profit (EBIT) | 15,482 | (9,416) | (138,086) | (367,328 | |
| 8 | Financial income | 1,579 | 1,360 | 34,349 | 32,575 |
| 9 | Financial expenses | (46,136) | (51,696) | (32,711) | (38,208) |
| Profit from continuing operations before tax | (29,075) | (59,752) | (136,448) | (372,961) | |
| 10 | Tax on profit from continuing operations | (30,570) | (16,094) | 0 | 1,509 |
| Profit for the year from continuing operations | (59,645) | (75,846) | (136,448) | (371,452) | |
| 24 | Profit for the year from discontinued operations | (22,711) | (48,637) | 0 | 0 |
| Profit for the year | (82,356) | (124,483) | (136,448) | (371,452) | |
| Attributable to: | |||||
| Shareholders in H+H International A/S | (82,356) | (124,483) | (136,448) | (371,452) | |
| Total | (82,356) | (124,483) | (136,448) | (371,452) | |
| 11 | Earnings per share (EPS-Basic) | (8.41) | (12.72) | ||
| 11 | Diluted earnings per share (EPS-D) | (8.41) | (12.72) | ||
| 11 | Earnings per share from continuing operations (EPS-Basic) | (6.09) | (7.75) | ||
| 11 | Diluted earnings per share from continuing operations (EPS-D) |
(6.09) | (7.75) |
| Group | Parent company | |||
|---|---|---|---|---|
| Note (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Profit for the year | (82,356) | (124,483) | (136,448) | (371,452) |
| Other comprehensive income | ||||
| Foreign exchange adjustments, foreign companies | 39,178 | (56,602) | 0 | 0 |
| Tax on foreign exchange adjustments, foreign companies | (1,616) | 1,228 | 0 | 0 |
| Actuarial losses and gains | (14,249) | (14,495) | 0 | 0 |
| Effect of change of tax rate | 0 | (8,533) | 0 | 0 |
| Tax on actuarial losses and gains | 4,039 | 4,058 | 0 | 0 |
| Other comprehensive income after tax | 27,352 | (74,344) | 0 | 0 |
| Total comprehensive income | (55,004) | (198,827) | (136,448) | (371,452) |
| Attributable to: | ||||
| Shareholders in H+H International A/S | (55,004) | (198,827) | (136,448) | (371,452) |
| Non-controlling interests | 0 | 0 | 0 | 0 |
| (55,004) | (198,827) | (136,448) | (371,452) |
| Group | Parent company | ||||||
|---|---|---|---|---|---|---|---|
| Note (DKK '000) | 2012 | 2011* | 2010* | 2012 | 2011 | 2010 | |
| Non-current assets | |||||||
| Intangible assets | |||||||
| Goodwill | 59,062 | 81,773 | 88,388 | 0 | 0 | 0 | |
| Other intangible assets | 11,835 | 13,337 | 28,207 | 5,010 | 6,262 | 6,445 | |
| 12 | 70,897 | 95,110 | 116,595 | 5,010 | 6,262 | 6,445 | |
| Property, plant and equipment | |||||||
| Land and buildings | 345,557 | 398,202 | 467,789 | 0 | 0 | 0 | |
| Plant and machinery | 445,099 | 507,637 | 560,231 | 0 | 0 | 0 | |
| Fixtures and fittings, tools and equipment |
154,690 | 123,504 | 137,187 | 457 | 588 | 897 | |
| Property, plant and equipment under construction |
15,608 | 8,358 | 22,183 | 0 | 0 | 0 | |
| 12 | 960,954 | 1,037,701 | 1,187,390 | 457 | 588 | 897 | |
| Other non-current assets | |||||||
| 13 | Deferred tax assets | 17,092 | 43,610 | 59,868 | 0 | 0 | 0 |
| 14 | Equity investments in subsidiaries | 0 | 0 | 0 | 891,550 | 1,034,408 | 1,129,072 |
| Receivables from subsidiaries | 0 | 0 | 0 | 380,852 | 382,339 | 649,808 | |
| 17,092 | 43,610 | 59,868 | 1,272,402 | 1,416,747 | 1,778,880 | ||
| Total non-current assets | 1,048,943 | 1,176,421 | 1,363,853 | 1,277,869 | 1,423,597 | 1,786,222 | |
| Current assets | |||||||
| 15 | Inventories | 194,213 | 190,991 | 181,779 | 0 | 0 | 0 |
| 16 | Trade receivables | 22,695 | 87,821 | 78,275 | 0 | 0 | 0 |
| Tax receivable | 495 | 386 | 599 | 0 | 0 | 0 | |
| 16 | Other receivables | 16,024 | 11,684 | 12,180 | 540 | 677 | 1,117 |
| Prepayments | 7,280 | 5,207 | 9,039 | 0 | 0 | 0 | |
| Cash and cash equivalents | 15,474 | 19,855 | 13,062 | 15 | 18 | 19 | |
| 256,181 | 315,944 | 294,934 | 555 | 695 | 1,136 | ||
| 24 | Assets held for sale | 87,667 | 91,597 | 0 | 0 | 0 | 0 |
| Total current assets | 343,848 | 407,541 | 294,934 | 555 | 695 | 1,136 | |
| TOTAL ASSETS | 1,392,791 | 1,583,962 | 1,658,787 | 1,278,424 | 1,424,292 | 1,787,358 |
*The figures have been restated to reflect IAS 19R (2011).
| Group | Parent company | ||||||
|---|---|---|---|---|---|---|---|
| Note (DKK '000) | 2012 | 2011* | 2010* | 2012 | 2011 | 2010 | |
| Equity | |||||||
| Share capital | 490,500 | 490,500 | 490,500 | 490,500 | 490,500 | 490,500 | |
| Translation reserve | (87,715) | (125,277) | (69,903) | 0 | 0 | 0 | |
| Retained earnings | 15,097 | 107,449 | 250,095 | 444,257 | 580,491 | 951,136 | |
| Shareholders in H+H International A/S's share of equity |
417,882 | 472,672 | 670,692 | 934,757 | 1,070,991 | 1,441,636 | |
| Non-controlling interests | 0 | 0 | 0 | 0 | 0 | 0 | |
| Total equity | 417,882 | 472,672 | 670,692 | 934,757 | 1,070,991 | 1,441,636 | |
| Liabilities | |||||||
| Non-current liabilities | |||||||
| 18 | Pension obligation | 167,401 | 164,236 | 157,920 | 0 | 0 | 0 |
| 19 | Provisions | 6,940 | 7,725 | 20,137 | 0 | 0 | 0 |
| 13 | Deferred tax liabilities | 21,397 | 19,688 | 14,295 | 7,264 | 7,264 | 8,773 |
| 20 | Credit institutions | 554,112 | 648,307 | 626,174 | 253,967 | 275,531 | 286,643 |
| Total non-current liabilities | 749,850 | 839,956 | 818,526 | 261,231 | 282,795 | 295,416 | |
| Current liabilities | |||||||
| 20 | Credit institutions | 0 | 88 | 493 | 0 | 9 | 23 |
| Trade payables | 107,097 | 130,867 | 72,193 | 1,708 | 1,819 | 2,872 | |
| Income tax | 750 | 710 | 12,876 | 0 | 0 | 0 | |
| Payables to subsidiaries | 0 | 0 | 0 | 66,880 | 58,736 | 34,961 | |
| Other payables | 65,000 | 74,159 | 84,007 | 13,848 | 9,942 | 12,450 | |
| 172,847 | 205,824 | 169,569 | 82,436 | 70,506 | 50,306 | ||
| 24 | Liabilities relating to assets held for sale |
52,212 | 65,510 | 0 | 0 | 0 | 0 |
| Total current liabilities | 225,059 | 271,334 | 169,569 | 82,436 | 70,506 | 50,306 | |
| Total liabilities | 974,909 | 1,111,290 | 988,095 | 343,667 | 353,301 | 345,722 | |
| TOTAL EQUITY AND LIABILITIES | 1,392,791 | 1,583,962 | 1,658,787 | 1,278,424 | 1,424,292 | 1,787,358 |
*The figures have been restated to reflect IAS 19R (2011).
| Group | Parent company | ||||
|---|---|---|---|---|---|
| Note (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Operating activities | |||||
| Operating profit | 15,482 | (9,416) | (138,086) | (367,328) | |
| Financial items, paid | (44,557) | (50,336) | 1,638 | (5,633) | |
| Depreciation, amortisation and impairment losses | 70,551 | 101,938 | 112,856 | 354,487 | |
| Other adjustments | (16,785) | 2,453 | 205 | 583 | |
| Change in inventories | 2,433 | (13,439) | 0 | 0 | |
| Change in receivables | 61,545 | (17,639) | 137 | 440 | |
| Change in trade payables and other payables | (32,827) | 66,998 | 3,795 | (3,562) | |
| Change in provisions | (33,321) | (21,194) | 0 | 0 | |
| Income tax paid | 610 | (16,420) | 0 | 0 | |
| 23,131 | 42,945 | (19,455) | (21,013) | ||
| Investing activities | |||||
| Sale of property, plant and equipment | 8,170 | 4,710 | 216 | 1,926 | |
| Capital contributions to subsidiaries | 0 | 0 | (25,261) | (232,721) | |
| 25 | Sale of subsidiaries | 121,144 | 0 | 56,684 | 252,764 |
| Acquisition of property, plant and equipment and intangible assets | (27,012) | (36,889) | (254) | (1,928) | |
| 102,302 | (32,179) | 31,385 | 20,041 | ||
| Free cash flow | 125,433 | 10,766 | 11,930 | (972) | |
| Financing activities | |||||
| Change in intragroup balances | 0 | 0 | 9,631 | 11,886 | |
| Raising of long-term debt | 0 | 281,697 | 0 | 0 | |
| Reduction of long-term debt | (105,499) | (265,069) | (21,564) | (10,915) | |
| (105,499) | 16,628 | (11,933) | 971 | ||
| Cash flow from discontinued operations | (28,084) | (17,404) | 0 | 0 | |
| Cash flow for the year | (8,150) | 9,990 | (3) | (1) | |
| Cash and cash equivalents at1January | 22,454 | 13,062 | 18 | 19 | |
| Foreign exchange adjustments of cash and cash equivalents | 1,171 | (598) | 0 | 0 | |
| Cash and cash equivalents at 31 December 2012 | 15,475 | 22,454 | 15 | 18 | |
| Cash and cash equivalents at 31 December 2012, continuing operations |
15,474 | 19,855 | |||
| Cash and cash equivalents at 31 December 2012, discontinued operations |
1 | 2,599 | |||
| 15,475 | 22,454 |
| Group | ||||||
|---|---|---|---|---|---|---|
| (DKK '000) | ||||||
| Share capital |
Translation reserve |
Retained earnings |
Total | Non-con trolling interests |
Total | |
| Equity at 1 January 2011 | 490,500 | (69,903) | 304,955 | 725,552 | 0 | 725,552 |
| Changes in accounting policies | 0 | 0 | (54,860) | (54,860) | 0 | (54,860) |
| Adjusted equity at 1 January 2011 | 490,500 | 69,903 | 250,095 | 670,692 | 0 | 670,692 |
| Profit for the year | 0 | 0 | (124,483) | (124,483) | 0 | (124,483) |
| Other comprehensive income in 2011 | ||||||
| Foreign exchange adjustments, subsidiaries | 0 | (56,602) | 0 | (56,602) | 0 | (56,602) |
| Actuarial gains/losses on pension plans | 0 | 0 | (14,495) | (14,495) | 0 | (14,495) |
| Tax on other comprehensive income | 0 | 1,228 | (4,475) | (3,247) | 0 | (3,247) |
| Net gains recognised directly in equity |
0 | (55,374) | (18,970) | (74,344) | 0 | (74,344) |
| Total comprehensive income | 0 | (55,374) | (143,453) | (198,827) | 0 | (198,827) |
| Share-based payment | 0 | 0 | 807 | 807 | 0 | 807 |
| Total changes in equity in 2011 | 0 | (55,374) | (142,646) | (198,020) | 0 | (198,020) |
| Equity at 31 December 2011 | 490,500 | (125,277) | 107,449 | 472,672 | 0 | 472,672 |
| Profit for the year | 0 | 0 | (82,356) | (82,356) | 0 | (82,356) |
| Other comprehensive income in 2012 | ||||||
| Foreign exchange adjustments, subsidiaries | 0 | 39,178 | 0 | 39,178 | 0 | 39,178 |
| Actuarial gains/losses on pension plans | 0 | 0 | (14,249) | (14,249) | 0 | (14,249) |
| Tax on other comprehensive income | 0 | (1,616) | 4,039 | 2,423 | 0 | 2,423 |
| Net gains recognised directly in equity | 0 | 37,562 | (10,210) | 27,352 | 0 | 27,352 |
| Total comprehensive income | 0 | 37,562 | (92,566) | (55,004) | 0 | (55,004) |
| Share-based payment | 0 | 0 | 214 | 214 | 0 | 214 |
| Total changes in equity in 2012 | 0 | 37,562 | (92,352) | (54,790) | 0 | (54,790) |
| Equity at 31 December 2012 | 490,500 | (87,715) | 15,097 | 417,882 | 0 | 417,882 |
| Parent company | ||||||
|---|---|---|---|---|---|---|
| (DKK '000) | ||||||
| Share capital | Hedging reserve |
Retained earnings |
Proposed dividend |
Total | ||
| Equity at 1 January 2011 | 490,500 | 0 | 951,136 | 0 | 1,441,636 | |
| Profit for the year | 0 | 0 | (371,452) | 0 | (371,452) | |
| Other comprehensive income in 2011 | 0 | 0 | 0 | 0 | 0 | |
| Total comprehensive income | 0 | 0 | (371,452) | 0 | (371,452) | |
| Share-based payment | 0 | 0 | 807 | 0 | 807 | |
| Total changes in equity in 2011 | 0 | 0 | (370,645) | 0 | (370,645) | |
| Equity at 31 December 2011 | 490,500 | 0 | 580,491 | 0 | 1,070,991 | |
| Profit for the year | 0 | 0 | (136,448) | 0 | (136,448) | |
| Other comprehensive income in 2012 | 0 | 0 | 0 | 0 | 0 | |
| Total comprehensive income | 0 | 0 | (136,448) | 0 | (136,448) | |
| Share-based payment | 0 | 0 | 214 | 0 | 214 | |
| Total changes in equity in 2012 | 0 | 0 | (136,234) | 0 | (136,234) | |
| Equity at 31 December 2012 | 490,500 | 0 | 444,257 | 0 | 934,757 |
| 1 | Accounting policies42 | |
|---|---|---|
| 2 | Management's estimates and judgements55 | |
| 3 | Segmentinformation57 | |
| 4 | Staff costs 59 | |
| 5 | Otheroperatingincome and expenses62 | |
| 6 | Depreciation and amortisation62 | |
| 7 | Impairment losses63 | |
| 8 | Financial income63 | |
| 9 | Financial expenses64 | |
| 10 | Tax64 | |
| 11 | Earningspershare 65 | |
| 12 | Intangible assets and property, plant and equipment65 | |
| 13 | Deferred tax69 | |
| 14 | Equity investments 70 | |
| 15 | Inventories/production costs71 | |
| 16 | Receivables71 | |
| 17 | Share capital and treasury shares73 | |
| 18 | Pension obligations74 | |
| 19 | Otherprovisions78 | |
| 20 | Credit institutions79 | |
| 21 | Contingent liabilities80 | |
| 22 | Auditors' remuneration80 | |
| 23 | Dividend80 | |
| 24 | Discontinued operations and assets held for sale 81 | |
| 25 | Saleofsubsidiaries83 | |
| 26 | Related parties83 | |
| 27 | Financial instruments and financial risks84 | |
| 28 | Management's holdingsofshares inH+HInternational A/S90 | |
| 29 | Major shareholders and shareholder groups90 | |
| 30 | Events after the balance sheet date 91 | |
H+HInternational A/S isapublic limited company registered in Denmark. The annual report for the period1January–31 December 2012 comprisesboththe consolidated financial statementsofH+HInternational A/S and its subsidiaries (theH+HGroup) and separate financial statements for the parent company.
The annual reportofH+HInternational A/S for 2012 has been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and additional Danish disclosure requirements for annual reports oflisted companies.
The BoardofDirectors and Executive Board discussed and approved the annual reportofH+HInternational A/S for 2012 on 14 March2013. The annual report will beputbeforeH+HInternational A/S's shareholders for approval at the annual generalmeetingon 17 April 2013.
The annual report is presented in DKK rounded to the nearest DKK 1,000.
The annual report hasbeenprepared using the historical cost principle. However, recognised derivatives are measured at fair value, and non-current assets and disposal groups classified as held for sale are measured at the lower oftheir carrying amount before the reclassification and fair value less selling costs.
The accounting policies set out below have been applied consistently during the financial year and to the comparative figures.
There have been no changes to the accounting policies compared with last year, except for implementationofnew accounting standards.
H+HInternational A/S has adopted the new or revised and amended International Financial Reporting Standards (IFRSs) issued byIASBand endorsed by the European Union effective for the financial year 2012. Based on an analysis carried out byH+HInternational A/S, the applicationofthe new IFRSs hasnothadamaterial impact on the consolidated financial statements in 2012 and we donotanticipate any significant impact on future periods from the adoptionofthese new IFRSs.
H+HInternational A/S implementedIAS19R (rev. 2011) Employee benefits with effect from1January 2012, ahead ofthe revision's effective date.
H+HInternational A/S has ceased using the corridor approach for actuarial gains and losses. All changes in the expected pension obligation and plan assets will in future be recognised immediately inothercomprehensive income. Previously, the corridor approach made it possible to defer recognitionofcertain actuarial gains and losses. The comparative figures for 2011 have been restated accordingly, and accumulated actuarial gains and losses at 31 December 2010 are recognised directly in equity at1January 2011.
The accounting effectofthe implementationofIAS19R (2011) is as follows:
| 1 Accounting policies – continued | ||||||||
|---|---|---|---|---|---|---|---|---|
| (DKK '000) | 1 January 2011 | 2011 | 31 December 2011 | |||||
| Pension obligation (net) |
Deferred tax (net) |
Total equity |
Profit for the year |
Other comprehen sive income |
Pension obligation (net) |
Deferred tax(net) |
Total equity |
|
| In accordance with previous policy |
(80,585) | 23,098 | 725,552 | (117,534) | (55,374) | (65,457) | 5,922 | 553,451 |
| Recognition of accumulated actuarial gains/ losses |
(77,335) | 0 | (77,335) | 0 | (21,444) | (98,779) | 0 | (98,779) |
| Change from expected return to interest on assets |
0 | 0 | 0 | (1,228) | 1,228 | 0 | 0 | 0 |
| Gains on curtailment |
0 | 0 | 0 | (7,018) | 7,018 | 0 | 0 | 0 |
| Amortisation for the year |
0 | 0 | 0 | 1,297 | (1,297) | 0 | 0 | 0 |
| Effect of change of tax rate |
0 | 0 | 0 | 0 | (8,533) | 0 | 0 | 0 |
| Tax effect of adjustments |
0 | 22,475 | 22,475 | 0 | 4,058 | 0 | 18,000 | 18,000 |
| Total adjustments | (77,335) | 22,475 | (54,860) | (6,949) | (18,970) | (98,779) | 18,000 | (80,779) |
| In accordance with new policy |
(157,920) | 45,573 | 670,692 | (124,483) | (74,344) | (164,236) | 23,922 | 472,672 |
| (DKK '000) | 2012 | 31 December 2012 | |||
|---|---|---|---|---|---|
| Profit for the year |
Other compre hensive income |
Pension obligation (net) |
Deferred tax(net) |
Total equity |
|
| In accordance with previous policy | (79,637) | 37,562 | 54,373 | (26,344) | 508,871 |
| Recognition of accumulated actuarial gains/losses (net) | 0 | (14,249) | 113,028 | 0 | (113,028) |
| Recognised actuarial gains/losses | (3,625) | 0 | 0 | 0 | 0 |
| Tax effect of adjustments | 906 | 4,039 | 0 | 22,039 | 22,039 |
| Total adjustments | (2,719) | (10,210) | 113,028 | 22,039 | (90,989) |
| In accordance with new policy | (82,356) | 27,352 | 167,401 | (4,305) | 417,882 |
In addition, the implementation of IAS 19R (2011) has led to a reduction of DKK 4,129 thousand in staff costs in 2012 from DKK 297,940 thousand to DKK 293,811 thousand (2011: reduction of DKK 1,067 thousand from DKK 282,218 thousand to DKK 281,151 thousand) and an increase of DKK 7,754 thousand in financial expenses in 2012 from DKK 38,380 thousand to DKK 46,136 thousand (2011: increase of DKK 8,016 thousand from DKK 43,680 thousand to DKK 51,696 thousand) as a result of H+H International A/S having decided to present interest expenses relating to pension obligations under financial expenses instead of pension costs, and interest being calculated on the basis of the net obligation unlike previously, when interest was calculated on the gross obligation and expected return on the plan assets.
In addition to the above,IASBhas issuedanumberofnew or amended standards and interpretations (IFRSs) which have been endorsed by the European Unionbutnotyet come into effect.H+HInternational A/S has thoroughly assessed the impactofthese IFRSs that arenotyet effective.
Noneofthe newstandards or interpretations are expected to haveamaterial impact onH+HInternational A/S.
The consolidated financial statements include the parent companyH+HInternational A/S and subsidiaries in which H+HInternational A/S has controlofthe subsidiary's financial andoperatingpolicies so as to obtain returns orotherbenefits from the subsidiary's activities. Control exists when H+HInternational A/S holds or has the ability to exercise, directly or indirectly, more than 50%ofthevotingrights or otherwisehas controlofthe subsidiary in question.
The consolidated financial statements have been prepared by aggregationofthe parent company's and the individual subsidiaries' financial statements, applying theH+HGroup's accounting policies. Intragroup income and expenses, shareholdings, balances and dividends as well as realised and unrealised gains arising from intragroup transactions are eliminated on consolidation.
Equity investments in subsidiaries are offset against the proportionate shareofthe fair valueofthe subsidiaries' identifiable net assets and recognised contingent liabilities at the dateofacquisition.
Entities acquired or formed during the year are recognised in the consolidated financial statements from the dateofacquisition. Entities disposedofor wound up during the year are recognised in the consolidated income statement up to the dateofdisposal. Comparative figures arenotrestated to reflect acquisitions.
On the acquisitionofentities whereby the parent company obtains controlofthe acquiree, the purchase method is
applied. The acquirees' identifiable assets, liabilities and contingent liabilities are measured at fair value at the dateofacquisition. Identifiable intangible assets are recognised if they are separable or arise fromacontractual right. Deferred tax on the restatements made is recognised.
The acquisition date is the date on whichH+HInternational A/S obtains controlofthe acquiree.
Any excess of, on the one hand, the consideration transferred, the valueofnon-controlling interests in the acquiree, and the fair valueofany previously held equity interests, and, on theother,the fair valueofthe identifiable assets acquired and liabilities and contingent liabilities assumed is recognised as goodwill under intangible assets.
Goodwill isnotamortised, but tested at least annually for impairment. The first impairment test is carried out before the endofthe yearofacquisition. On acquisition, goodwill is allocated to thecash-generatingunits which subsequently form the basis for impairment testing. Goodwill and fair value adjustments in connection with the acquisitionofaforeign entity withafunctional currencyotherthan theH+H-Group's presentation currency are accounted for as assets and liabilitiesbelongingto the foreign entity and translated on initial recognition into the foreign entity's functional currency at the exchange rate at the transaction date. Any excessofthe fair value over the costofacquisition (negative goodwill) is recognised in the income statement at the date ofacquisition.
The consideration for an entity consistsofthe fair valueofthe agreed consideration in the formofassets acquired, liabilities assumed and equity instruments issued.Ifpartofthe consideration is contingent on future events or fulfilment ofagreed terms and conditions, this part is recognised at fair value at the acquisition date. Costs attributable to business combinations are recognised directly in the income statement when incurred.
Should there be uncertainty about the identification or measurementofthe assets acquired, the liabilities and contingent liabilities assumed, or the calculationofthe consideration transferred, these are recognised initially on the basisofprovisional values. Should the identification or measurementofthe consideration transferred, the assets
acquired or the liabilities and contingent liabilities assumed on initial recognition prove incorrect, the amounts (including goodwill) may be adjusted with retrospective effect for up to 12 months from the acquisition date, and the comparative figures restated accordingly. After this, no adjustments may be made. Changes in estimated contingent consideration are generally recognised directly in the income statement.
Gains or losses on disposal or winding-upofsubsidiaries are determined as the difference between selling price or disposal consideration and the carrying amountofnet assets including goodwill at the dateofdisposal and selling costs or winding-up costs.
For each entity included in the consolidated financial statements,afunctional currency has been determined. The functional currency of an entity is the currency of the primary economic environment in which the entity operates. Transactions in currencies other than the functional currency are accounted for as transactions in foreign currencies.
On initial recognition, transactions denominated in foreign currencies are translated into the functional currency at the exchange rates at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses.
Receivables, payables and other monetary items denominated in foreign currencies are translated into the functional currency at the exchange rates at the balance sheet date. The difference between the exchange rate at the balance sheet date and the exchange rate at the date at which the receivable or payable arose or the exchange rate used in the last annual report is recognised in the income statement as financial income or financial expenses.
On the recognition in the consolidated financial statements of foreign entities withafunctional currency other than DKK, the income statements are translated at the exchange rates at the transaction date and the balance sheet items are translated at the exchange rates at the balance sheet date. An average exchange rate for each month is used as the exchange rate at the transaction date to the extent that this does not give asignificantly different view. Foreign exchange differences
arising on translation of the opening equity of foreign entities at the exchange rates at the balance sheet date, and on translation of the income statements from the exchange rates at the transaction date to the exchange rates at the balance sheet date, are recognised directly in equity underaseparate translation reserve. These differences are allocated between the parent company shareholders' share of equity and noncontrolling interests' share of equity.
Foreign exchange adjustments of balances considered part of the overall net investment in entities withafunctional currency other than DKK are recognised in the consolidated financial statements directly in equity underaseparate translation reserve. Correspondingly, foreign exchange gains and losses on that part of loans and derivative financial instruments entered into to hedge the net investment in such entities which effectively hedges against corresponding exchange gains/losses on the net investment in the entity are recognised directly in equity underaseparate translation reserve.
On the complete or partial disposal ofaforeign operation, or on the repayment of balances that are considered part of the net investment, the share of the cumulative exchange adjustments that is recognised directly in equity and attributable to this is recognised in the income statement when the gain or loss on disposal is recognised. On the disposal of partially owned foreign subsidiaries, the part of the translation reserve attributable to non-controlling interests is not transferred to the income statement.
On the partial disposal of foreign subsidiaries without loss of control,aproportionate share of the translation reserve is transferred from the parent company shareholders' share of equity to non-controlling interests' share of equity.
The repayment of balances that are considered part of the net investment is not itself considered to constitute partial disposal of the subsidiary.
Derivative financial instruments are recognised from the trade date and measured in the balance sheet at fair value. Positive and negative fair valuesofderivative financial instruments are recognised asotherreceivables andotherpayables respectively, andoffsettingofpositive and negative fair values is only effected if the entity is permitted to and
intends to settle several financial instruments net in cash. Fair valuesofderivative financial instruments are determined on the basisofcurrent market data and recognised valuation methods.
Fair value hedges. Changes in the fair valueofderivative financial instruments designated as and qualifying for recognition as hedgesofthe fair valueofarecognised asset or liability are recognised in the income statement together with changes in the valueofthe hedged asset or liability to the extentofthe hedged risk. Hedgesofthe valueoffuture cash flows from contracts concluded (firm commitments) are accounted for as fair value hedges, except in the caseofforeign currency hedging.
That partofaderivative financial instrument that isnotpart ofahedging relationship is presented under financial items.
Cash flow hedges. Changes in the portionofthe fair valueofderivative financial instruments designated as and qualifying for recognition as hedgesoffuture cash flows and providing an effective hedge against changes in the valueofthe hedged item are recognised inothercomprehensive income underaseparate hedging reserve until the hedged cash flows affect the income statement. The resulting gain or loss is then transferred fromothercomprehensive income and recognised in the same item as the hedged item.
Ifthe hedging instrument nolongermeets the criteria for hedge accounting, the hedging relationship is discontinued prospectively. The cumulative change in value recognised inothercomprehensive income is transferred to the income statement when the hedged cash flows affect the income statement.
Ifthe hedged cash flows are nolongerexpected to be realised, the cumulative change in value is transferred immediately to the income statement.
That partofaderivative financial instrument that isnotpart ofahedging relationship is presented under financial items.
Hedges of a net investment. Changes in the fair valueofderivative financial instruments that are used to hedge net investments in foreign Group entities and that provide an effective hedge against changes in foreign exchange rates in these Group entities are recognised in the consolidated financial statements directly inothercomprehensive income underaseparate translation reserve.
That partofaderivative financial instrument that isnotpart ofahedging relationship is presented under financial items.
Other derivative financial instruments. For derivative financial instruments that donotqualify for hedge accounting, changes in fair value are recognised in the income statement under financial items onacontinuing basis.
Some contracts have terms and conditions equivalent to derivative financial instruments. Such embedded financial instruments are recognised separately and measured at fair value onacontinuing basis if they differ significantly from the host contract, unless the entire combined contract is recognised and measured at fair value onacontinuing basis.
Revenue from the saleofgoods for resale and finished goods is recognised in the income statement if delivery and transferofrisk to thebuyerhave taken place, and if the income can be measured reliably and is expected to be received.
Revenue is measured netofVAT and duties collected on behalfofthird parties. All typesofdiscount and rebate granted are recognised in revenue.
Production costs comprise costs incurred ingeneratingthe revenue for the year. The trading entities recognise cost ofsales and the producing entities' production costs, corresponding to revenue for the year. This includes the direct and indirect costofraw materials and consumables, and wages and salaries.
Other external expenses coverotherexpenses, including purchasesofgoods and services that arenotdirectly attributable to production. Also included in this item are staff costs that arenotdirectly attributable to production.
Otherexternal expenses also include research and development costs that donotmeet the criteria for capitalisation.
Other operating income and expenses comprise items secondary to the entities' activities, such as gains and losses on disposalofproperty, plant and equipment. Gains and losses on disposalofintangible assets and property, plant and equipment are determined as the selling price less selling costs and the carrying amount at the dateofdisposal.
Financial income and expenses comprise interest income and expenses, capital gains and losses, and impairment losses relating to securities, payables and transactions denominated in foreign currencies, amortisationoffinancial assets and liabilities, including finance lease obligations, and surcharges and allowances under the tax prepayment scheme etc. Financial income and expenses also include realised and unrealised gains and losses relating to derivative financial instruments that cannot be designated as hedging transactions.
However, borrowing costs related to the financingofthe productionoftheH+HGroup's assets are recognised in the costofthe assets.
Dividends from equity investments in subsidiaries are credited to the parent company's income statement in the financial year in which they are declared.
Tax on profit comprises current tax and changes in deferred tax for the year. The portion that relates to profit for the year is recognised in the income statement, and the portion that relates to amounts recognised directly in equity is recognised directly in equity.
H+HInternational A/S is taxed jointly with all its Danish subsidiaries.The current Danish income tax is allocated among the jointly taxed companies in proportion to their taxable income. Subsidiaries that utilise tax losses inothersubsidiaries pay joint taxation contributions to the parent company equivalent to the tax baseofthe utilised losses, while subsidiaries with tax losses that are utilised byothersubsidiaries receive joint taxation contributions from the parent company equivalent to the tax baseofthe tax losses utilised (full absorption). The jointly taxed companies are taxed under the tax prepayment scheme.
Where theH+HGroup receivesatax deduction in the calculationoftaxable income in Denmark or abroad asaresult ofshare-based payment schemes, the tax effectofthese schemes is recognised in tax on profit.Ifthe total deduction exceeds the total remuneration expense, the tax effectofthe excess deduction is recognised directly in equity.
Goodwill is recognised initially in the balance sheet at cost as described under Business combinations. Subsequent to initial recognition, goodwill is measured at cost less accumulated impairment losses. Goodwill isnotamortised.
The carrying amountofgoodwill is allocated to theH+H-Group'scash-generatingunits at the dateofacquisition. The determinationofcash-generatingunits follows theH+H-Group's organisational and internal reporting structure.
Other intangible assets comprise patents/licences and development projects.
Development projects that are clearly defined and identifiable, and for which technical feasibility, adequate resources andapotential future market or an application in the entity can be demonstrated, and which the entity intends to manufacture, market or use, are recognised as intangible assets if the cost can be determined reliably and if there is reasonable certainty that the future earnings or the net selling price will cover production costs, selling costs, administrative expenses and development costs.Otherdevelopment costs are recognised in the income statement when incurred.
Recognised development costs are measured at cost less cumulative amortisation and impairment losses. Cost comprises salaries, amortisation andotherexpenses attributable to theH+HGroup's development activities and interest expenses on loans to finance the productionofdevelopment projects that relate to the production period.
On completionofthe development work, development projects are amortised onastraight-line basis over the estimated economic useful life from the date the asset is available for use. The amortisation period is normally 5-10 years. The amortisation base is reduced by any impairment losses.
Patents and licences are measured at cost less cumulative amortisation and impairment losses. Patents and licences are amortised onastraight-line basis over the shorterofthe remaining patent or contract period and the useful life. The amortisation base is reduced by any impairment losses.
Otherintangible assets are amortised onastraight-line basis over the expected useful livesofthe assets.
Property, plant and equipment. Land and buildings, plant and machinery, and fixtures andfittings,tools and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost comprises purchase price and any costs directly attributable totheacquisition up tothedatetheasset is available for use. The cost of self-constructed assets comprises direct and indirect costsofmaterials,components, subsuppliers and labour. Cost is increased by estimated costs for dismantling and removal oftheasset and restoration costs, totheextent that they are recognised asaprovision, and interest expenses on loans tofinancetheproduction of property, plant and equipment that relate totheproduction period.Thecost ofacombined asset is divided into separate components that are depreciated separately ifthecomponents have different useful lives.
In the caseofassets held under finance leases, cost is determined at the lowerofthe assets' fair value and the present valueofthe future minimum lease payments. In determining the present value, the interest rate implicit in the lease or theH+HGroup's incremental borrowing rate is used as the discount rate.
Subsequent costs, for example in connection with replacementofpartofan itemofproperty, plant or equipment, are recognised in the carrying amountofthe asset if it is probable that future economic benefits will flow to theH+H-Group from the expenses incurred. The replaced part is derecognised in the balance sheet, and the carrying amount is transferred to the income statement. Allotherexpenses for general repair and maintenance are recognised in the income statement as incurred.
Property, plant and equipment are depreciated onastraightline basis over the expected useful livesofthe assets as follows:
Land isnotdepreciated.
The depreciation base is determined taking into account the asset's residual value and is reduced by any impairment losses. The residual value is determined at the dateofacquisition and reviewed annually. Depreciation ceases if the residual valueofan asset exceeds its carrying amount.
The effect on depreciationofany changes in depreciation period or residual value is recognised prospectively asachange in accounting estimates.
Equity investments in subsidiaries in the parent company's financial statements. Equity investments in subsidiaries are measured at cost.Ifthere is any indicationofimpairment, an impairment test is carried out as described in theH+H-Group's accounting policies. Cost is written down to the recoverable amount whenever the carrying amount exceeds the recoverable amount.
Impairment of non-current assets. Goodwill is tested for impairment annually, the first time before the endofthe year ofacquisition.
The carrying amountofgoodwill is tested for impairment together with theothernon-current assetsofthe cashgeneratingunit to which the goodwill has been allocated, and written down to the recoverable amount in the income statement if the carrying amount exceeds the recoverable amount. Asarule, the recoverable amount is determined as the present valueofthe expected future net cash flows from the entity or activity(cash-generatingunit) to which the goodwill relates.
The carrying amountsofothernon-current assets are reviewed annually to determine whether there is any indicationofimpairment.Ifany such indication exists, the asset's recoverable amount is estimated. The recoverable amountofan asset is the higherofits fair value less expected disposal costs and its value in use. The value in use is determined as the present valueofexpected future cash flows from the asset or thecash-generatingunit to which the asset belongs.
An impairment loss is recognised whenever the carrying amountofan asset orcash-generatingunit exceeds its recoverable amount.
Impairment losses are recognised in the income statement under depreciation, amortisation and impairment losses.
Impairment losses relating to goodwill arenotreversed. Impairment losses relating tootherassets are reversed to the extent that the assumptions or estimates that led to the impairment loss have changed. Impairment losses are only reversed to the extent that the asset's new carrying amount doesnotexceed the value the asset would have had after depreciation/amortisation if no impairment losses had been charged.
Inventories are measured at cost using the FIFO method. Where the net realisable value is lower than the cost, inventories are written down to this lower value.
In the caseofgoods for resale, and raw materials and consumables, cost comprises purchase price plus expenses incurred in bringing the inventories to their existing location and condition.
In the caseoffinished goods and work in progress, cost comprises rawmaterials,consumables, direct labour, and production overheads. Production overheads comprise indirect materials and labour as well as maintenance and depreciationofthe machinery, factory buildings and equipment used in the production process, and the costoffactory administration and management.
The net realisable valueofinventories is determined as the selling price less any costsofcompletion and costs incurred to execute the sale. The net realisable value is determined
on the basisofmarketability, obsolescence and developments in expected selling price.
Receivables are measured at amortised cost, which in all material respects corresponds to the nominal value less write-downs for bad and doubtful debts.
Awrite-down for bad and doubtful debts is recorded if there is an objective indicationofimpairment onareceivable.Ifthere is an objective indicationofimpairment, the impairment loss is determined individually. Receivables that have been foundnotto be individually impaired are tested for impairment in groups. Impairment losses are calculated as the difference between the carrying amount and the present valueofthe estimated future cashflows,including the realisable valueofany collateral received. The discount rate applied is the effective interest rateofthe individual receivable. Write-downs and losses on receivables are recognised asotherexternal expenses.
Prepayments recognised under assets comprise expenses incurred in respectofsubsequent financial years. Prepayments are measured at amortised cost.
Proposed dividends are recognised asaliability at the date ofadoption at the annual general meeting (declaration date).
Treasury shares. Acquisition costs, disposal costs and dividends relating to treasury shares are recognised directly in retained earnings under equity. Capital reductions on the cancellationoftreasury shares reduce the share capital by an amount equivalent to the nominal valueofthe shares. Proceeds from the saleoftreasury shares inH+HInternational A/S in connection with the exerciseofshare options are taken directly to equity.
Translation reserve. This comprises parent company shareholders' shareofforeign exchange differences arising on the translationoffinancial statementsofentities with afunctional currencyotherthan DKK, foreign exchange adjustments relating to assets and liabilities that form partoftheH+HGroup's net investment in such entities, and foreign exchange adjustments relating to hedging transactions that hedge theH+HGroup's net investment in such entities.
Hedging reserve. This comprises the accumulated net change in the fair valueofhedging transactions that qualify for designation as hedgesoffuture cashflows,and where the hedged transaction has yet to be realised.
Incentive schemes. TheH+HGroup's incentive schemes compriseashare option plan for senior executives andamatching share programme launched in June 2011.
The valueofservices rendered by employees in return for option and share grants is measured at the fair valueofthe options and shares.
For equity-settled share options, the grant date fair value is measured and recognised in the income statement as staff costs over the vesting periodofthe options and shares.
The costs are setoffdirectly against equity.
On initial recognitionofthe share options and shares,the numberofoptions and shares expected to vest is estimated, cf. the service condition described in note 4. The figure initially recognised is subsequently adjusted for changes in the estimateofthe numberofoptions and shares expected to vest, so that the total recognition is based on the actual numberofvested options and shares.
The fair valueofthe options and shares granted is estimated using an option pricing model. The calculation takes accountofthe terms and conditions attaching to the share options and shares granted.
Pension obligations. TheH+HGroup has entered into pension agreements and similar agreements with someofits employees.
Obligations relating to defined contribution plans are recognised in the income statement over the vesting period, and any contributions payable are recognised in the balance sheet asotherpayables.
In the caseofdefined benefit plans, the value in useoffuture benefits to be paid under the plan is determined actuarially on an annual basis. The value in use is determined on the basisofassumptions concerning future trends in factors such as salary levels, interest rates, inflation and mortality.
The value in use is determined only for the benefits attributable to service already rendered to theH+HGroup. The actuarially determined value in use less the fair valueofany plan assets is recognised in the balance sheet under pension obligations.
The pension cost for the year is recognised in the income statement based on actuarial estimates and the financial outlook at the startofthe year. Differences between the expected development in plan assets and obligations and the realised values determined at year-end are designated as actuarial gains or losses and recognised in other comprehensive income.
Ifthe calculation results in plan assets exceeding liabilities to theH+HGroup, the recognised asset is limited to the net totalofany future refunds from the plan or reductions in future contributions to the plan.
Income tax and deferred tax. Current tax payable and receivable is recognised in the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable incomeofprior years and for tax paid on account.
Deferred tax is measured using the balance sheet liability method, providing for all temporary differences between the carrying amount and tax baseofassets and liabilities. However, the following temporary differences arenotrecognised: goodwillnotdeductible for tax purposes andotheritems –apart from business combinations–where temporary differences have arisen at the dateofacquisition that affect neither profit nor taxable income. Where alternative tax rules can be applied to compute the tax base, deferred tax is measured on the basisofmanagement's planned useofthe asset or settlementofthe liability respectively.
Deferred tax assets, including the tax base oftax loss carry-forwards, are recognised asothernon-current assets at the value at which they are expected to be utilised either by elimination against tax on future earnings or by set-off against deferred tax liabilities within the same legal tax entity and jurisdiction.
Deferred tax assets and liabilities are offset if theH+H-Group hasalegally enforceable right to offset current tax liabilities and assets or intends to settle current tax liabilities and assets onanet basis or to realise tax assets and liabilities simultaneously.
Adjustmentofdeferred tax is made in respectofelimination ofunrealised intragroup profits and losses.
Deferred tax is measured on the basisofthe tax rules and at the tax rates that will apply under the legislation enacted at the balance sheet date in the respective countries when the deferred tax is expected to crystallise in the formofcurrent tax. Changes in deferred tax asaresultofchanges in tax rates are recognised in the income statement.
Under the joint taxation rules,H+HInternational A/S, as the administration company, becomes liable to the tax authorities for the subsidiaries' income taxes as the subsidiaries pay their joint taxation contributions. Joint taxation contributions payable and receivable are recognised in the balance sheet underreceivables/payables from Group entities.
Other provisions. Provisions are recognised when, asaresultofan event occurring before or at the balance sheet date, theH+HGroup hasalegal or constructive obligation, the settlementofwhich is expected to result in an outflow from the companyofresources embodying economic benefits.
The measurementofprovisions is based on management's bestestimateof the amount expected to be required to settle the obligation.
In connection with the measurementofprovisions, the costs required to settle the obligation are discounted to net present value if this hasamaterial effect on the measurementofthe obligation.Apre-tax discount rate is applied that reflects society's general interest rate level plus the specific
risks attaching to the provision. The changes in present values during the financial year are recognised under financial expenses.
Aprovision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data.
Aprovision for restructuring is recognised whenadetailed formal plan for the restructuring has been made public, no later than the balance sheet date, to those affected by the plan.
Aprovision for onerous contracts is recognised when the benefits expected to be derived by theH+HGroup fromacontract are lower than the unavoidable costsofmeetingits obligations under the contract.
When theH+HGroup has an obligation to dismantle or remove an asset or restore the site on which the asset has been used,aprovision equivalent to the present valueofthe expected future expenses is recognised.
Leasing. Lease commitments are accounted for as commitments under finance leases and commitments under operating leases respectively.Alease isclassifiedasafinance lease if it transfers substantially all the risks and rewards of ownership of the leased asset. Other leases areclassifiedas operating leases.
The accounting treatmentofassets held under finance leases and the associated liability is described in the sections on property, plant and equipment, and financial liabilities respectively.
Lease payments underoperatingleases are recognised in the income statement onastraight-line basis over the term ofthe lease.
Financial liabilities. Bank loans etc. are recognised at the dateofborrowing at the proceeds received netoftransaction costs incurred. In subsequentperiods,the financial liabilities are measured at amortised cost using the effective interest rate method. Accordingly, the difference between the proceeds and the nominal value is recognised in the income statement under financial expenses over the termofthe loan.
Financial liabilities also include the capitalised residual obligation on finance leases, measured at amortised cost.
Otherliabilities are measured at amortised cost.
Assets held for sale. Assets held for sale comprise noncurrent assets and disposal groups which are intended for sale.Adisposal group isagroupofassets which will be disposedoftogether by meansofsale or similar inasingle transaction. Liabilities relating to assets held for sale are liabilities directly associated with these assets, which will be transferred at the timeofthe transaction. Assets are classified as'held for sale'if their carrying amount will primarily be recovered by meansofsale within 12 months in accordance withaformal plan rather than by meansofcontinued use.
Assets or disposal groups held for sale are measured at the lowerofthe carrying amount at the timeofclassification as'held for sale'and the fair value less selling costs. No depreciation or amortisation is applied to assets from the time they are classified as 'held for sale'.
Impairment losses arising in connection with initial classification as 'held for sale' and gains or losses on subsequent measurement at the lowerofcarrying amount and fair value less selling costs are recognised in the income statement under the items to which they relate. Gains and losses are disclosed in the notes.
Assets and associated liabilities are recorded separately in the balance sheet, and the main items are specified in the notes. The comparative figures in the balance sheet arenotrestated.
Presentation of discontinued operations. Discontinued operations make upasignificant partofthebusiness,the activities and cash flowsofwhich can be clearly separated from the restofthe business in operational and accounting terms and where the entity has either been disposed ofor has been classified as 'held for sale' and the sale is expected to be implemented within one year in accordance withaformal plan. Discontinued operations also include entities classified as 'held for sale' in connection with the acquisition.
Profit after tax from discontinued operations, value adjustments after tax on associated assets and liabilities, and gains/losses on sale are presented inaseparate line in the income statement, and the comparative figures are restated. Revenue, expenses, value adjustments and tax
on the discontinued operation are disclosed in the notes. Assets and associated liabilities for discontinued operations are recorded separately in the balance sheet without the comparative figures being restated, cf. 'Assets held for sale', and the main items are specified in the notes.
Cash flows fromoperating,investing and financing activities for the discontinued operations are disclosed inanote.
The cash flow statement shows the cash flows for the year, broken down byoperating,investing and financing activities, and the year's change in cash and cash equivalents as well as the cash and cash equivalents at the beginning and end ofthe year.
The cash flow effectofacquisitions and disposalsofentities is shown separately under cash flows from investing activities. Cash flows from acquisitionsofentities are recognised in the cash flow statement from the dateofacquisition, and cash flows from disposalsofentities are recognised up to the dateofdisposal.
Cash flows in currenciesotherthan the functional currency are translated ataverageexchange rates, unless these deviate significantly from the rates at the transaction date.
Cash flows fromoperatingactivities are determined as pretax profit adjusted for non-cashoperatingitems, change in working capital, interest received and paid, and income tax paid.
Cash flows from investing activities comprise payments in connection with acquisitions and disposalsofentities and activities; acquisitions and disposalsofintangible assets, property, plant and equipment, andothernon-current assets; and acquisitions and disposalsofsecurities that are notrecognised as cash and cash equivalents.
Finance leases are accounted for as non-cash transactions.
Cash flows from financing activities comprise changes in the size or compositionofthe share capital and associated expenses as well as the raisingofloans, repaymentofinterest-bearing debt, purchase and saleoftreasury shares, and paymentofdividends.
Cash flows relating to assets held under finance leases are recognised as paymentofinterest and repaymentofdebt.
Cash and cash equivalents comprise cash and securities withamaturityofless than three months at the timeofacquisition that are readily convertible to cash and are subject to an insignificant riskofchanges in value.
Segment information is prepared in accordance withH+H's accounting policies and internal financial reporting.
Segment revenue, segment expenses, segment assets and segment liabilities are those items that are directly attributable to the individual segment or can be allocated to the segment onareliable basis. Unallocated items comprise primarily assets, liabilities, income and expenses relating to H+H's administrative functions, investing activities etc.
Non-current segment assets are those non-current assets that are employed directly by the segment in itsoperatingactivities, including intangible assets and property, plant and equipment.
Current segment assets are those current assets that are employed directly by the segment in itsoperatingactivities, including inventories, trade receivables,otherreceivables, prepayments, and cash and cash equivalents.
Segment liabilities are those liabilities that result from the segment'soperatingactivities, including trade payables and otherpayables.
Earningspershare (EPS) and diluted earningspershare (EPS-D) are determined in accordance withIAS33.
Otherfinancial ratios have been prepared in accordance with the Danish SocietyofFinancial Analysts' 'Recommendations&Financial Ratios 2010'.
Earnings per share (EPS-Basic) Profit
Price-earnings ratio (PE)
Gross margin Gross profit×100 Revenue
Operating margin Operating profit×100 Revenue
Return on invested capital (ROIC) Operating profit×100 Average invested capital
Profit for the year Profit attributable to the shareholders in the parent company
Average number of shares outstanding
Diluted earnings per share (EPS-D) Diluted earnings Diluted average number of shares outstanding
Return on equity Profit×100 Average equity excl. non-controlling interests
Solvency ratio Equity at year-end attributable toH+H×100 Total equity and liabilities, year-end
Book value per share, year-end Equity inH+H, year-end Number of shares, year-end
Price/book value Share price Book value per share, year-end
Share price Earnings per share
Payout ratio Total dividend paid×100 Profit
Free cash flow The sum of cash flow from operating and investing activities
Determining the carrying amountsofsome assets and liabilities requires management to make judgements, estimates and assumptions concerning future events.
The estimates and assumptions made are based on historicalexperienceandotherfactors that are believed by management to be sound under the circumstances, butthat, by their nature, are uncertain and unpredictable. The assumptions may be incomplete or inaccurate, and unforeseen events or circumstances may occur. Moreover, theH+HGroup is subject to risks and uncertainties that may lead to the actual outcomesdifferingfrom these estimates. Particular risks to theH+HGroup are discussed in the management review on pages 12-15, and in note 27.
Itmay be necessary to change estimates made previously asaresultofchanges in the factors on which these were based or asaresultofnew knowledge or subsequent events.
Due to developments in the global economy and financial markets in 2012, the uncertainty related toanumberofkey assumptions concerning the future, including sales volume, credit risks, interest ratelevels and profitability etc., remained greater thanin the years before 2010.
Estimates that haveasignificant effect on the financial reporting are made in connection with, for example, the determinationofdepreciation, amortisation and impairment losses, provisions, fair values, contingent assets and liabilities, and pension obligations. TheH+HGroup will be dependent on debt financing in the coming years and maintenanceofthe committed credit facilities is conditional upon compliance withanumberoffinancial covenants; see note 27.
Impairment testing. Annual impairment testingofgoodwill and property, plant and equipment is based on the value in useofthe individualcash-generatingunit, using the discounted cash flow method. The calculation is based on budgets approved by management. Cash flows after the budget period are extrapolated using individual growth rates. The discount rate used for the calculation incorporates possible impactsoffuture risks.
The cash flows and growth rates take accountofexperience from previous years, and represent management's best estimateoffuture developments. In combination with the discount rate, however, these estimates may haveasignificant impact on the calculated values. Further information can be found in note 12. The total carrying amountofgoodwill at the endof2012 was DKK 59 million (2011: DKK 82 million). The total carrying amountofproperty, plant and equipment at the end of2012 was DKK 961 million (2011: DKK 1,038 million).
The assumptions used in connection with impairment testing may be summarised as follows:
| Poland | Germany | UK | Russia* | Finland | |
|---|---|---|---|---|---|
| Property, plant and equipment at 31 December 2012(DKK '000) |
241,357 | 246,905 | 205,298 | 248,900 | 13,832 |
| Estimated average annual growth in revenue 2013-2018 (CAGR) |
13.7% | 1.5% | 6.3% | 15.7% | 6.6% |
| Estimated gross margin 2013-2018 | 6-19% | 20-22% | 19-20% | 40-42% | 11-21% |
| WACC, after tax | 9.3% | 5.7% | 6.1% | 12.6% | 6.4% |
*For Russia the forecast period has been extended to 2022. CAGR for the period 2013-2022 is 11.3%.
Recovery of deferred tax assets. Deferred tax assets are recognised for all unutilised tax loss carry-forwards to the extent it is considered likely that the losses can be offset against taxable income in the foreseeable future. The amount recognised for deferred tax assets is based on estimatesofthe likely date and sizeoffuture tax loss carryforwards.
At 31 December 2012H+HInternational A/S assessed that tax loss carry-forwards totalling DKK 47 million could be realised within the foreseeable future.
Inventories. Estimation uncertainty relates to write-downs to net realisable value.
Inventories are generally written down in accordance with the Group's policies in this area, which comprise individual assessmentofinventories withaview to possible losses as aresultofobsolescence, poor quality and cyclical effects. Write-downsofDKK 4.4 million (2011: DKK 1.0 million) have been made in 2012; see note 15.
Receivables. Management currently makes estimates in assessing the recoverabilityofreceivables at the balance sheet date. The international financial situation means there is an increased riskoflosses on receivables, which has been taken into consideration in assessmentofwrite-downs at the balance sheet date and in the day-to-day management and controlofreceivables.
Defined benefit pension plans. The present valueof pension obligations depends on the actuarial assumptions made. These assumptions comprise the discount rate, the estimated return on plan assets, future salary increases, mortality and future developments in pension obligations.
All assumptions are reviewed at the reporting date. Any changes in the assumptions will affect the carrying amount ofthe pension obligations. Estimates regarding pension obligations are discussed in note 18.
Assets held for sale and discontinued operations. In the second quarterof2011, the BoardofDirectors announced its decision to divest various assets that are nolongercentral toH+H's strategy, and the subsidiary Jämerä-kivitalot Oy wasputup for sale in the third quarterof2011. The main partofthe activities in Jämerä-kivitalot Oy was disposed ofin 2012, leaving justafew projects in the company now renamed Stone Kivitalot Oy. These are expected to be finished in the first halfof2013.
Estimates significant to the financial reporting for discontinued operations mainly comprise measurementofthe selling priceofprojects in progress, which is determined i.a. on the basisofexpected residual expenses and income. Also relevant here is the outcomeofdisputes relating to claims for additional performance, payment for delays etc., determined i.a. on the basisof the stageofnegotiation with the counterparty and an assessmentofthe likely outcome; see note 24.
As partofthe applicationofH+H's accounting policies, management makes judgements, in addition to estimates, that may haveasignificant effect on the amounts recognised in the consolidated and parent company financial statements.
No special estimates were made in either 2011 or 2012.
| DKK million | 2012 | |||||||
|---|---|---|---|---|---|---|---|---|
| Western Europe | Eastern Europe | |||||||
| Production companies |
Sales companies |
Western Europe, total |
Production companies |
Sales companies |
Eastern Europe, total |
Discon tinued operation* |
Reporting segments |
|
| Revenue, external | 766.6 | 192.1 | 958.7 | 358.4 | 5.1 | 363.5 | 103.6 | 1,425.9 |
| Revenue, internal | 108.1 | 0 | 108.1 | 10.1 | 0.1 | 10.2 | 0 | 118.3 |
| EBITDA | 68.4 | 6.7 | 75.1 | 37.8 | (1.0) | 36.8 | (20.7) | 91.2 |
| Depreciation and amortisation | (57.1) | (0.9) | (58.0) | (43.5) | 0 | (43.5) | (0.5) | (102.0) |
| EBITA | 11.3 | 5.8 | 17.1 | (5.7) | (1.0) | (6.7) | (21.2) | (10.8) |
| Impairment losses | 0 | 0 | 0 | 32.3 | 0 | 32.3 | 0 | 32.3 |
| Operating profit (EBIT) | 11.3 | 5.8 | 17.1 | 26.6 | (1.0) | 25.6 | (20.3) | 22.4 |
| Financial income | 3.3 | 0.6 | 3.9 | 0.3 | 0.2 | 0.5 | 0.1 | 4.5 |
| Financial expenses | (27.1) | (2.1) | (29.2) | (20.1) | (1.3) | (21.4) | (1.6) | (52.2) |
| Profit before tax** | (12.5) | 4.3 | (8.2) | 6.8 | (2.1) | 4.7 | (21.8) | (25.3) |
| Non-current assets | 751.7 | 21.2 | 772.9 | 529.5 | 1.4 | 530.9 | 0 | 1,303.8 |
| Investments in intangible assets and property, plant and equipment |
19.1 | 0.3 | 19.4 | 7.2 | 0 | 7.2 | 0 | 26.6 |
| Assets | 1,012.7 | 62.9 | 1,075.6 | 616.3 | 1.7 | 618.0 | 26.7 | 1,720.3 |
| Equity | 382.4 | 11.7 | 394.1 | 244.4 | (36.6) | 207.9 | (28.4) | 573.6 |
| Liabilities | 627.7 | 51.1 | 678.7 | 371.9 | 38.4 | 410.1 | 55.2 | 1,144.1 |
| Average full-time equivalent staff | 459 | 44 | 503 | 482 | 3 | 485 | 1 | 989 |
| 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Western Europe | Eastern Europe | |||||||
| Production companies |
Sales companies |
Western Europe, total |
Production companies |
Sales companies |
Eastern Europe, total |
Discon tinued operation* |
Reporting segments |
|
| Revenue, external | 707.3 | 221.2 | 928.5 | 376.0 | 5.3 | 381.3 | 129.0 | 1,438.8 |
| Revenue, internal | 148.6 | 0.3 | 148.9 | 9.0 | 0.3 | 9.3 | 0 | 158.2 |
| EBITDA | 89.1 | 5.2 | 94.3 | 12.5 | (1.2) | 11.3 | (41.6) | 64.0 |
| Depreciation and amortisation | (57.5) | (1.4) | (58.9) | (42.9) | 0 | (42.9) | (0.7) | (102.5) |
| EBITA | 31.6 | 3.8 | 35.4 | (30.4) | (1.2) | (31.6) | (42.3) | (38.5) |
| Impairment losses | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Operating profit (EBIT) | 31.6 | 3.8 | 35.4 | (30.4) | (1.2) | (31.6) | (42.3) | (38.5) |
| Financial income | 1.8 | 0.3 | 2.1 | 0.6 | 0 | 0.6 | 0 | 2.7 |
| Financial expenses | (24.9) | (2.0) | (26.9) | (36.1) | (1.6) | (37.7) | (0.3) | (64.9) |
| Profit before tax** | 8.5 | 2.1 | 10.6 | (65.9) | (2.8) | (68.7) | (42.6) | (100.7) |
| Non-current assets | 777.5 | 18.7 | 796.2 | 634,3 | 1.2 | 635.5 | 0 | 1,431.7 |
| Investments in intangible assets and property, plant and equipment |
22.8 | 0.6 | 23.4 | 11.4 | 0 | 11.4 | 0.9 | 35.7 |
| Assets | 1,070.3 | 77.8 | 1,148.1 | 737.4 | 1.7 | 739.1 | 58.3 | 1,945.5 |
| Equity | 389.0 | 8.9 | 397.9 | 298.2 | (34.4) | 263.8 | (5.7) | 656.0 |
| Liabilities | 681.3 | 68.9 | 750.2 | 439.2 | 36.1 | 475.3 | 64.0 | 1,289.5 |
| Average full-time equivalent staff | 454 | 44 | 498 | 569 | 3 | 572 | 21 | 1,091 |
*See note 24.
**H+H's consolidated profit before tax and management fee etc. Transactions between segments are carried out at arm's length.
| 3 Segment information – continued | Group | |||
|---|---|---|---|---|
| Reconciliation of revenue, profit before tax, assets and liabilities of reporting segments | ||||
| Revenue | 2012 | 2011 | ||
| Segment revenue for the reporting segments | 1,544.2 | 1,597.0 | ||
| Elimination of inter-segment sales | (118.3) | (158.2) | ||
| Revenue for discontinued operations | (103.6) | (129.0) | ||
| 1,322.3 | 1,309.8 | |||
| Profit before tax | ||||
| Segment profit before tax for reporting segments | (25.3) | (100.7) | ||
| Elimination of inter-segment transactions | 0 | 0 | ||
| Profit from discontinued operations | 21.8 | 42.6 | ||
| Non-allocated Group expenses, central functions | (25.6) | (1.6) | ||
| (29.1) | (59.7) | |||
| Assets | ||||
| Total assets for reporting segments | 1,720,3 | 1,945.5 | ||
| Elimination of internal profit on assets | 0 | 0 | ||
| Other non-allocated assets, eliminations and similar | (300.8) | (303.2) | ||
| Assets relating to discontinuing operations | (26.7) | (58.3) | ||
| 1,392.8 | 1,584.0 | |||
| Liabilities | ||||
| Total liabilities for reporting segments | 1,144.1 | 1,289.5 | ||
| Other non-allocated obligations, eliminations and similar | (114.0) | (114.2) | ||
| Liabilities relating to discontinuing operations | (55.2) | (64.0) | ||
| 974.9 | 1,111.3 |
Revenue in Denmark was DKK 94,848 thousand in 2012 (2011: DKK 104,603 thousand). Non-current assets in Denmark at year-end 2012 amounted to DKK 10,289 thousand (2011: DKK 16,854 thousand).
None of theH+HGroup's customers represented more than 10% of theH+HGroup's total revenue in 2012 or 2011. The following countries represent more than 10% of revenue or non-current assets.
| DKK million | 2012 | 2011 | ||
|---|---|---|---|---|
| Non-current | Non-current | |||
| Revenue | assets | Revenue | assets | |
| UK | 411.2 | 209.2 | 412.5 | 207.3 |
| Germany | 354.1 | 290.6 | 351.5 | 306.5 |
| Poland | 176.8 | 275.4 | 221.3 | 295.9 |
| Russia | 143.2 | 261.4 | 101.1 | 200.0 |
| Czech Republic | 48.4 | 0 | 62.7 | 152.6 |
| Other countries and eliminations | 188.6 | 12.3 | 160.7 | 14.1 |
| 1,322.3 | 1,048.9 | 1,309.8 | 1,176.4 |
When presenting information on geographical areas, information on revenue is based on the legal entity.
| 4 Staff costs | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Wages and salaries | 241,807 | 238,541 | 13,310 | 12,639 | |
| Defined benefit plans, see note 18 | 0 | 4,630 | 0 | 0 | |
| Defined contribution plans | 14,488 | 5,722 | 0 | 0 | |
| Share-based payment | 214 | 807 | 146 | 619 | |
| Remuneration to the Board of Directors | 1,950 | 2,025 | 1,950 | 2,025 | |
| Other staff costs | 35,352 | 29,426 | 481 | 774 | |
| 293,811 | 281,151 | 15,887 | 16,057 | ||
| Staff costs are recognised as follows: | |||||
| Production costs | 177,829 | 165,149 | 0 | 0 | |
| Other external expenses | 115,982 | 116,002 | 15,887 | 16,057 | |
| 293,811 | 281,151 | 15,887 | 16,057 | ||
| Remuneration to the Executive Board: | |||||
| Michael Troensegaard Andersen: | |||||
| Salaries and fees | 2,700 | 2,025 | 2,700 | 2,025 | |
| Bonus plans Share-based payment |
500 30 |
0 133 |
500 30 |
0 133 |
|
| Hans Gormsen: Salaries and fees |
0 | 717 | 0 | 717 | |
| Share-based payment | 0 | 270 | 0 | 270 | |
| Niels Eldrup Meidahl: | |||||
| Salaries and fees | 1,500 | 1,654 | 1,500 | 1,654 | |
| Bonus plans | 300 | 0 | 300 | 0 | |
| Share-based payment | 18 | 75 | 18 | 75 | |
| 5,048 | 4,874 | 5,048 | 4,874 | ||
| Average full-time equivalent staff | 1,001 | 1,084 | 12 | 14 |
The annual general meeting on 18 April 2012 approved remuneration to the Chairman and Deputy Chairman of the Board of DKK 600,000 (2011: DKK 600,000) and DKK 450,000 (2011: DKK 450,000) respectively for 2012. Remuneration to ordinary board members for 2012 was DKK 300,000 (2011: DKK 300,000).
The Board of Directors comprised five members until the annual general meeting on 18 April 2012.All members were re-elected.
Until4April 2011 the Executive Board comprised CEO Hans Gormsen and CFO Niels Eldrup Meidahl. Michael Troensegaard Andersen joined the Executive Board as CEO on4April 2011, with Hans Gormsen resigning at the same time, and the Executive Board subsequently comprised Michael Troense-gaard Andersen and Niels Eldrup Meidahl.
In June 2012amatching share programme for the Executive Board and certain key employees was launched. These officerspurchasedatotalof15,195 shares at market price in June 2012, which will trigger allocationofafurther 45,585 shares in June 2015 if allofthe vesting criteria are fulfilled.
The vesting criteria relate to employment in the vesting period, the Group'soperatingprofit andotherfinancial targets. The valueofthe programme at inception in June 2012 is estimated at DKK 1.8 million and will be recognised as staff costs until the expiryofthe vesting period in June 2015.
The fair valueofthe programme has been determined as the maximum numberofshares which can be granted. The share price used in calculating the valueofthe programme is the share price at 30 June 2012. The programme is currentlynothedged by purchaseoftreasury shares.
In May 2011amatching share programme was launched, similar to the one described above. The vesting criteria relate to employment in the vesting period, the Group's operatingprofit andotherfinancial targets. The valueofthe programme at inception in June 2011 was DKK 1.9 million, which is recognised as staff costs until the expiryofthe vesting period in June 2014. Oneofthe key employees covered by the programme left the Group in 2012 and partofthe programme has therefore been reversed. The programme is currentlynothedged by purchaseoftreasury shares.
InMay 2007, the BoardofDirectorsofH+HInternational A/S establishedashare option plan for the Executive Board andothersenior executives withavesting periodof2007- 2009. No option plan was adopted for 2012. The Boardof-DirectorsofH+HInternational A/S isnotincluded in the company's share option plan.
Each share option entitles the holder tobuyone share. The exercise price is calculated as theaverageprice in the 10 business days after the publicationofthe annual report for the financial year to which the share options relate, plus 20%. The options are exercisable duringaone-year period beginning three years and ending four years after the publicationofthe annual report for the financial year to which the share options relate. Unless specifically agreed as part of atermination agreement, the right to be granted and to exercise share options is conditional upon the option holder's employment with the companynothaving ceased, either due to the option holder having given noticeoftermination or breachofcontract on the partofthe option holder. There are noothervesting conditions. The fair valueofthe share option plan at the issue date has been calculated at DKK 4.5 million in total, and breaks down into DKK 1.5 million for the 2007 grant, DKK 1.5 million for the 2008 grant and DKK 1.5 million for the 2009 grant. The fair valueofthe programme at 31 December 2012 is DKK0million.
The share option plans that are expected to be exercisable are substantially hedged by treasury shares at the dateoffinal pricing, however no hedging has been carried out in recent years as the relatively large drop in the company's share price means that the probabilityofthe oldest options still exercisable being used before expiryofthe exercise period isconsidered very low. Treasury shares amounted to 20,489 shares at year-end 2012 and 2011. The outstanding options have anaverageremaining contractual lifeof0.8 years (2011: 1.8 years) and an exercise price in the rangeof-DKK 79-93peroption (2011: DKK 79-638peroption). The cost recognised in the 2012 income statement in respect ofshare options is DKK 140 thousand (2011: DKK 484 thousand).
| 4 Staff costs – continued | ||||
|---|---|---|---|---|
| -- | -- | -- | -- | --------------------------- |
| (DKK '000) | Total | FormerExecutive Board | Other employees | ||||
|---|---|---|---|---|---|---|---|
| Avg. exercise | Avg. exercise | Avg. exercise | |||||
| Outstanding options | Number | price | Number | price | Number | price | |
| Outstanding options at 31 December 2010 | 71,739 | 19,341 | 52,398 | ||||
| Additions | 0 | 0 | 0 | ||||
| Forfeited | 0 | 0 | 0 | ||||
| Expired | (8,850) | (2,703) | (6,147) | ||||
| Outstanding options at 31 December 2011 | 62,889 | 16,638 | 46,251 | ||||
| Additions | 0 | 0 | 0 | ||||
| Forfeited | 0 | 0 | 0 | ||||
| Expired | (29,007) | (8,088) | (20,919) | ||||
| Outstanding options at 31 December 2012 | 33,882 | 8,550 | 25,332 | ||||
| Breakdown of outstanding options by exercise period: |
|||||||
| Outstanding option plans at 31 December 2011 | |||||||
| 2010-2012 | 13,032 | 638 | 3,813 | 638 | 9,219 | 638 | |
| 2011-2012 | 15,975 | 541 | 4,275 | 541 | 11,700 | 541 | |
| 2012-2013 | 15,750 | 93 | 4,275 | 93 | 11,475 | 93 | |
| 2013-2014 | 18,132 | 79 | 4,275 | 79 | 13,857 | 79 | |
| Total | 62,889 | 16,638 | 46,251 | ||||
| Outstanding option plans at 31 December 2012 | |||||||
| 2012-2013 | 15,750 | 93 | 4,275 | 93 | 11,475 | 93 | |
| 2013-2014 | 18,132 | 79 | 4,275 | 79 | 13,857 | 79 | |
| Total | 33,882 | 8,550 | 25,332 |
There wasasignificant dilution of the share options in connection with the company's rights issue in December 2009. The numberofoptions and the exercise price have been recalculated asaresultofthe rights issue. This adjustment is equivalent to three times the numberofshare options. The exercise price has also been adjusted. The total valueofthe options is unchanged.
The Executive Board have the opportunity to earn an annual cash bonus. The maximum bonus payment is 40%ofthe person's fixed annual salary in the year in which the bonus was earned. The earningofbonuses is dependent on EBITDA in the year in which the bonus was earned,and on certain qualitative targets related to the company's strategy, and the bonus is thereforenotguaranteed. The bonus payment will depend on EBITDA relative to budgeted EBITDA, with the bonus payment being calculated onastraight-line basis withinafixed range for budget performance. In case ofterminationofemployment, regardlessofthe cause, the personin question is entitled to proportionately earned bonus up to the dateofterminationofhis orheremployment.
The Executive Board earned bonuses totalling DKK 800,000 in 2012, which wasnotthe case in 2011.
The Executive BoardofH+HInternational A/S may resign with six months' notice. The company may dismiss the Executive Board with 12 months' notice. Under normal circumstances, if the company gives notice to the Executive Board without reason, those concerned are entitled toatermination benefit equivalent to 12 months' fixed salary. However, ifashareholder acquires the majorityofvotes in the company asaresultofacompulsory or voluntaryofferin accordance with the rules governing this in the Danish Securities Trading Act, or if the company's operations are transferred toanew owner, the periodofnotice the Executive Board must give the company is shortened to three months foraperiodoftwo years. Inacorresponding takeover situation, the company's Executive Board has aclaim to twice the termination benefit, equivalent to 24 months' fixed salary.
| 5 Other operating income and expenses | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Management fee | 0 | 0 | 17,000 | 15,000 | |
| Gain on disposal of property, plant and equipment | 4,355 | 5,951 | 0 | 386 | |
| Loss on disposal of property, plant and equipment | (109) | (371) | 0 | 0 | |
| Expenses in connection with competition case | 0 | (1,514) | 0 | (1,514) | |
| Extraenergy tax | (908) | (2,384) | 0 | 0 | |
| Rental income | 2,174 | 2,136 | 0 | 0 | |
| Adjustment of environmental provision | 7,340 | 0 | 0 | 0 | |
| Special costs related to closure of business units and terminated employees | (5,344) | (1,730) | (3,467) | 0 | |
| Gain on sale ofH+HČeská | 5,732 | 0 | 0 | 0 | |
| Expenses in connection with sale ofH+HČeská | 0 | 0 | (7,176) | 0 | |
| Gain on sale of the Jämerä trademark | 0 | 0 | 5,921 | 0 | |
| Provisionfor closureofJämerä | 0 | 0 | (5,789) | 0 | |
| Other | (2,001) | 2,019 | (4,012) | 0 | |
| 11,239 | 4,107 | 2,477 | 13,872 |
| 6 Depreciation and amortisation | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Other intangible assets | 3,513 | 2,911 | 1,252 | 0 | |
| Buildings | 19,090 | 19,022 | 0 | 0 | |
| Plant and machinery | 65,720 | 61,263 | 0 | 0 | |
| Fixtures and fittings, tools and equipment | 14,555 | 18,742 | 169 | 283 | |
| 102,878 | 101,938 | 1,421 | 283 |
| 7 Impairment losses | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2012 | 2011 | ||
| Plant and machinery | 0 | 0 | 0 | 0 | |
| Fixtures and fittings, tools and equipment | 0 | 0 | 0 | 0 | |
| Land and buildings | 44,248 | 0 | 0 | 0 | |
| Write-down of equity investments | 0 | 0 | 111,435 | 354,204 | |
| Reversal of previous write-down relating to assets in Russia | (103,782) | 0 | 0 | 0 | |
| Impairment loss relating to goodwill in Poland | 24,487 | 0 | 0 | 0 | |
| Impairment loss relating to goodwill in the Czech Republic | 2,720 | 0 | 0 | 0 | |
| (32,327) | 0 | 111,435 | 354,204 |
In 2012 the Group reversed the write-downofassets in Russia carried out in 2010. This was done in the lightoffavourable developments on the Russian market, which have been significantly more positive forbothcapacity utilisation and prices than previously anticipated.
An impairment lossofDKK 24 million relating to goodwill in Poland has been recognised in 2012 asaresultoflower capacity utilisation and prices than previously anticipated. Impairment losses relating to goodwill and land and buildings in the Czech Republic have also been recognised in connection with the saleofH+HČeská republika s.r.o.
In connection with the closing of the financial statements for 2012, it was found that the recoverable amount of some of the Group's companies was lower than the parent company's original cost. Asaresult, impairment losses were recognised for the Poland and the Czech Republic in the parent company financial statements. However, these impairment losses have no bearing on the consolidated financial statements.
In 2011, significant impairment losses were recognised for the UK, Russia, the Czech Republic and Stone Kivitalot Oy in the parent company financial statements. However, these impairment losses have no bearing on the consolidated financial statements.
| 8 Financial income | Group | Parent company | ||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Interest income | 105 | 192 | 0 | 0 |
| Interest income from subsidiaries | 0 | 0 | 21,453 | 32,466 |
| Realised foreign exchange gain relating to loans to subsidiaries | 0 | 0 | 0 | 109 |
| Exchange rate adjustments relating to loans to subsidiaries | 0 | 0 | 5,775 | 0 |
| Dividends from subsidiaries | 0 | 0 | 7,121 | 0 |
| Other exchange rate adjustments | 588 | 301 | 0 | 0 |
| Other financial income | 886 | 867 | 0 | 0 |
| 1,579 | 1,360 | 34,349 | 32,575 |
TheH+HGroup's total interest income in 2012 amounted to DKK 105 thousand (2011: DKK 192 thousand). The parent company's total interest income in 2012 amounted to DKK 21,453 thousand (2011: DKK 32,466 thousand).
| 9 Financial expenses | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Interest expenses | 32,033 | 34,487 | 12,695 | 12,109 | |
| Interest expenses to subsidiaries | 0 | 0 | 2,899 | 1,373 | |
| Exchange rate adjustments relating to loans to subsidiaries | 0 | 0 | 0 | 11,398 | |
| Other exchange rate adjustments | 1,461 | 2,545 | 538 | 1,774 | |
| Foreign exchange losses on derivatives | 0 | 81 | 0 | 0 | |
| Write-down of intragroup debt | 0 | 0 | 12,897 | 5,521 | |
| Financial expenses relating to pension plans | 7,754 | 8,016 | 0 | 0 | |
| Other financial expenses | 4,888 | 6,567 | 3,682 | 6,033 | |
| 46,136 | 51,696 | 32,711 | 38,208 |
The Group's total interest expenses in 2012 amounted to DKK 32,033 thousand (2011: DKK 34,487 thousand). The parent company's total interest expenses in 2012 amounted to DKK 15,594 thousand (2011: DKK 13,482 thousand).
| 10 Tax | Group | Parent company | ||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Tax on profit from continuing operations | 30.570 | 16,094 | 0 | (1,509) |
| Tax on other comprehensive income | (2,423) | 3,247 | 0 | 0 |
| 28,147 | 19,341 | 0 | (1,509) | |
| Tax on continuing operations can be broken down as follows: | ||||
| Current tax for the year | 671 | 4,871 | 0 | 0 |
| Adjustment relating to changes in tax rate | (1,246) | 0 | 0 | 0 |
| Adjustment of deferred tax | 28,760 | 16,060 | 0 | 1,509 |
| Prior-year adjustments | (38) | (1,590) | 0 | 0 |
| 28,147 | 19,341 | 0 | 1,509 | |
| Current joint taxation contribution for the year | 0 | 0 | 0 | 0 |
| Tax on profit from continuing operations can be broken down as follows: | ||||
| Calculated 25%(2011:25%) tax on income from ordinary activities | (7,269) | (13,201) | (34,112) | (93,240) |
| Less tax in foreign Group entities compared with 25% rate (2011:25%) | (6,076) | 5,186 | 0 | 0 |
| Tax effect of: | ||||
| Unrecognised deferred tax asset | 27,031 | 11,741 | 6,251 | 3,236 |
| Write-down of deferred tax asset | 0 | 25,677 | 0 | 0 |
| Reversal of deferred tax asset write-down | 0 | (10,784) | 0 | 0 |
| Other adjustments | 2,988 | (2,746) | 0 | (1,509) |
| Tax on other comprehensive income | (2,423) | 3,247 | 0 | 0 |
| Non-deductible expenses | 15,215 | 2,212 | 31,085 | 90,073 |
| Prior-year adjustments | 1,839 | (1,590) | 0 | 0 |
| Non-taxable income | (3,158) | (401) | (3,224) | (69) |
| 28,147 | 19,341 | 0 | (1,509) |
| Group | |||||||
|---|---|---|---|---|---|---|---|
| 2012 | 2011 | ||||||
| Tax income/ | Tax income/ | ||||||
| Tax on other comprehensive income | Before tax | expense | After tax | Before tax | expense | After tax | |
| Exchange rate adjustments, foreign entities | 39,178 | (1,616) | 37,562 | (56,602) | 1,228 | (55,374) | |
| Actuarial losses on pension plans | (14,249) | 4,039 | (10,210) | (14,495) | (4,475) | (18.970) | |
| 24,929 | 2,423 | 27,352 | (71,097) | (3,247) | (74,344) |
| 11 Earnings per share (EPS) | Group | |
|---|---|---|
| (DKK '000) | 2012 | 2011 |
| Average number of shares | 9,810,000 | 9,810,000 |
| Average number of treasury shares | (20,489) | (20,489) |
| Average number of outstanding shares | 9,789,511 | 9,789,511 |
| Dilution from share options | 0 | 0 |
| Average number of outstanding shares, diluted | 9,789,511 | 9,789,511 |
| Adjustment of number of DKK 50 shares | ||
| Adjusted average number of outstanding shares | 9,789,511 | 9,789,511 |
| Adjusted average number of outstanding shares, diluted | 9,789,511 | 9,789,511 |
| Profit for the year | (82,356) | (124,483) |
| Attributable to non-controlling interests | 0 | 0 |
| Shareholders inH+HInternational A/S | (82,356) | (124,423) |
| Earnings per share (EPS) | (8.41) | (12.72) |
| Diluted earnings per share (EPS-D) | (8.41) | (12.72) |
See note 24 for earnings and diluted earnings per share from discontinued operations.
Earnings per share from continuing and discontinued operations respectively for 2011 and 2012 are calculated on the basis of the equivalent key figures used to calculate earnings per share.
| (DKK '000) | 2012 | 2011 |
|---|---|---|
| Shareholders inH+HInternational A/S's share of: | ||
| Profit from discontinued operations | (22,711) | (48,637) |
| Profit from continuing operations | (59,645) | (75,846) |
| Profit for the year | (82,356) | (124,483) |
The calculation of diluted earnings per share excludes 33,882 share options(2011: 62,889), which are out of the money but may potentially dilute earnings per share in the future.
In accordance with IAS 33, an adjustment has been made to the calculation of earnings per share (EPS) and diluted earnings per share (EPS-D) such that the average number of shares has been adapted toaface value of DKK 50.
| 12 Intangible assets and property, plant and equipment | Parent company | |||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | ||
| Fixtures Other and fittings, tools |
Other | Fixtures and fittings, tools |
||
| intangible assets | and equipment | intangible assets | and equipment | |
| Total cost at1January | 6,262 | 1,102 | 6,445 | 1,681 |
| Additions during the year | 0 | 254 | 1,612 | 316 |
| Disposals during the year | 0 | (336) | (1,795) | (895) |
| Total cost at 31 December | 6,262 | 1,020 | 6,262 | 1,102 |
| Total depreciation and amortisation at1January | 0 | 514 | 0 | 784 |
| Depreciation and amortisation of assets disposed of | 0 | (120) | 0 | (553) |
| Depreciation and amortisation for the year | 1,252 | 169 | 0 | 283 |
| Total depreciation and amortisation at 31 December | 1,252 | 563 | 0 | 514 |
| Carrying amount | 5,010 | 457 | 6,262 | 588 |
| 12 Intangible assets and property, plant and equipment – continued | Group | |||||
|---|---|---|---|---|---|---|
| (DKK '000) | 2012 | |||||
| Goodwill | Other intangible assets |
Land and buildings |
Plant and machinery |
Fixtures and fittings, tools and equipment |
Property, plant and equip ment under construction |
|
| Total cost at1January 2012 | 81,773 | 29,631 | 560,242 | 1,333,911 | 263,674 | 16,291 |
| Transfers | 0 | 1,552 | 2,003 | 278 | 2,816 | (6,649) |
| Foreign exchange adjustments,year-end rate | 5,058 | 676 | 24,174 | 38,221 | 7,732 | 107 |
| Additions during the year | 0 | 752 | 983 | 6,345 | 5,118 | 13,814 |
| Disposals during the year | 0 | (462) | (254) | (6,651) | (8,268) | (22) |
| Disposals relating to divestment of enterprise | (2,724) | (2,423) | (56,009) | (132,344) | 0 | 0 |
| Transferred to assets held for sale | 0 | 0 | (11,575) | (860) | 0 | 0 |
| Total cost at 31 December 2012 | 84,107 | 29,726 | 519,564 | 1,238,900 | 271,072 | 23,541 |
| Total depreciation and amortisation at1January 2012 | 0 | 16,294 | 162,040 | 826,274 | 140,170 | 7,933 |
| Transfer | 0 | 185 | 0 | 0 | (185) | 0 |
| Foreign exchange adjustments, year-end rate | 0 | (46) | 4,686 | 18,463 | 3,970 | 0 |
| Foreign exchange adjustments for the year | 562 | (1) | 118 | 131 | 69 | 0 |
| Depreciation and amortisation of assets disposed of | 0 | (259) | (88) | (6,301) | (6,272) | 0 |
| Depreciation and amortisation for the year | 0 | 3,513 | 19,090 | 65,719 | 14,555 | 0 |
| Impairment losses for the year | 27,207 | 0 | 44,248 | 0 | 0 | 0 |
| Reversal of write-down | 0 | 0 | 0 | (67,857) | (35,925) | 0 |
| Disposals relating to divestment of enterprise | (2,724) | (1,795) | (56,087) | (42,628) | 0 | 0 |
| Total depreciation, amortisation and impairment losses at 31 December 2012 |
25,045 | 17,891 | 174,007 | 793,801 | 116,382 | 7,933 |
| Carrying amount | 59,062 | 11,835 | 345.557 | 445,099 | 154,690 | 15,608 |
| Of which, assets held under finance leases | 0 | 0 | 0 | 0 | 0 | 0 |
| Group | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2011 | |||||||||
| Goodwill | Other intangible assets |
Land and buildings |
Plant and machinery |
Fixtures and fittings, tools and equipment |
Property, plant and equip ment under construction |
||||
| Total cost at1January 2011 | 88,388 | 44,812 | 620,100 | 1,344,060 | 267,095 | 30,116 | |||
| Transfers | 0 | 2,154 | 8,915 | 8,190 | 2,020 | (21,279) | |||
| Foreign exchange adjustments, year-end rate | (6,615) | (850) | (16,200) | (14,179) | (5,923) | (302) | |||
| Additions during the year | 0 | 4,817 | 396 | 15,135 | 9,261 | 8,143 | |||
| Disposals during the year | 0 | (1,907) | (5,168) | (2,188) | (6,686) | 0 | |||
| Transferred to assets held for sale | 0 | (19,395) | (47,801) | (17,107) | (2,093) | (387) | |||
| Total cost at 31 December 2011 | 81,773 | 29,631 | 560,242 | 1,333,911 | 263,674 | 16,291 | |||
| Total depreciation and amortisation at1January 2011 | 0 | 16,605 | 152,311 | 783,829 | 129,908 | 7,933 | |||
| Foreign exchange adjustments, year-end rate | 0 | (576) | (1,042) | 144 | (2,585) | 0 | |||
| Foreign exchange adjustments for the year | 0 | (74) | (489) | (541) | (395) | 0 | |||
| Depreciation and amortisation of assets disposed of | 0 | (31) | 0 | (1,314) | (4,950) | 0 | |||
| Depreciation and amortisation for the year | 0 | 3,380 | 19,134 | 61,263 | 18,801 | 0 | |||
| Impairment losses for the year | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Transferred to assets held for sale | 0 | (3,010) | (7,874) | (17,107) | (609) | 0 | |||
| Total depreciation, amortisation and impairment losses at 31 December 2011 |
0 | 16,294 | 162,040 | 826,274 | 140,170 | 7,933 | |||
| Carrying amount | 81,773 | 13,337 | 398,202 | 507,637 | 123,504 | 8,358 | |||
| Of which, assets held under finance leases | 0 | 0 | 0 | 21 | 193 | 0 |
Interest totalling DKK0thousand was capitalised in 2012 (2011: DKK0thousand).
Development costs totalling DKK0thousand were capitalised in 2012 (2011: DKK0thousand).
Development costs in the region of DKK5million were expensed in 2011 and 2012.
On 31 December 2012, management tested the carrying amountofgoodwill for impairment based on the allocation ofthe costofgoodwill to thecash-generatingunits. Of total goodwillofDKK 59,062 thousand (2011: DKK 81,773 thousand), DKK 30,802 thousand (2011: DKK 53,590 thousand) related to the Eastern European segment, while DKK 28,260 thousand (2011: DKK 28,183 thousand) related to the Western European segment.
Management isofthe opinion that the lowest levelofcashgeneratingunit to which the carrying amountofgoodwill can be allocated is in each country.
The recoverable amount was defined as the value in use for the purposeofimpairment testing.
In general the impairment tests were based on the budget for 2013 and strategy projections for 2014-2018, as approved by management.Averageannual growth in revenueof1.5-14.2% (2011: 3.1-9.9%) has been assumed for the period 2013-2018. Growth has been assessed by local and Group management. An assumed growth rateof2-3% p.a. (2011: 2-3%) has been used for the years after 2018. The growth rate isnotexpected to exceed theaveragelongterm growth rate in theH+HGroup's markets. An increasing gross margin has been estimated for the period 2013-2018, after which it is expected to be constant. The rising gross margin assumes more expedient utilisationofproduction capacity as well as price increases.Adiscount rate after tax (WACC)of5.7-9.3% (2011: 6.6-10.4%) has been applied. The WACC is based on generally recognised principles and assumptions provided by external analysts.
The assumptions made can be summarised as follows:
| Poland | Germany | |
|---|---|---|
| Carrying amount of goodwill at 31 December 2012 (DKK '000) |
30,802 | 28,260 |
| Estimated average annual growth in revenue 2013-2018 (CAGR) |
13.7% | 1.5% |
| Estimated gross margin 2013-2018 | 6-19% | 20-22% |
| WACC, after tax | 9.3% | 5.7% |
The impairment tests showed indicationsofimpairment ofDKK 24 million relating to goodwill in Poland, which is discussed in more detail below. After recognising an impairment loss on goodwill in Poland and based on the assumptions above, management considers the recoverable amount to exceed the carrying amountofgoodwill.
Ifthe assumptions arenotmet, it could result in further indicationsofimpairment. The main assumptions relate to annual growth in revenue and gross margin.
The primary reason for the impairment loss relating to goodwill in Poland isagenerally greater slowdown in the Polish market for building materials than anticipated, and the fact that the Polish market is characterised by significant overcapacity and low prices. Continued cyclical difficulties in the market and increased competition have resulted in significant losses in the Polish subsidiary in recent years.
The Group's key non-current assets were tested for impairment in 2012, including with regard to assets in Poland, Germany, the UK, Russia and Finland which together represent approx.98%ofthe Group's total non-current assets at 31 December 2012.
The impairment tests were based on the budget for 2013 and strategy projections for 2014-2018, as approved by management. Average annual growth in revenue of 1.5-15.7% (2011: 3.1-17.9%) has been assumed for the period 2013-2018. Growth has been assessed by local and Group management. An assumed growth rate of 2.0-4.0% (2011: 2.0-3.5%) p.a. has been used for the years after 2018. The growth rate is not expected to exceed the average long-term growth rate inH+H's markets. An increasing gross margin has been assumed for the period 2013-2018, after which it is expected to be constant.
The increasing gross margin assumes more expedient utilisation of production capacity and weak price increases. Adiscount rate after tax (WACC) of5.7-12.6% (2011: 6.6- 17.8%) has been applied. The WACC is based on generally recognised principles and assumptions provided by external analysts.
Assumed annual growth in Russia is 15.7% (2011: 17.9%), because in Russia there is an almost new factory inanew market.
The assumptions made can be summarised as follows:
| Poland | Germany | UK | Russia* | Finland | |
|---|---|---|---|---|---|
| Carrying amount of property, plant and equipment at 31 December 2012 (DKK '000) |
241,357 | 246,905 | 205,298 | 248,900 | 13,832 |
| Estimatedaverage annual growth in revenue 2013-2018 (CAGR) |
13.7% | 1.5% | 6.3% | 15.7% | 6.6% |
| Estimated gross margin 2013-2018 | 6-19% | 20-22% | 19-20% | 40-42% | 11-21% |
| WACC, after tax | 9.3% | 5.7% | 6.1% | 12.6% | 6.4% |
*For Russia the forecast period has been extended to 2022. CAGR for the period 2013-2022 is 11.3%.
The impairment tests performed at 31 December 2012 donotshow any indicationsofimpairment, apart from the special circumstances mentioned below. Based on the assumptions above, management considers the recoverable amount to exceed the carrying amountofproperty, plant and equipment.
If the assumptions above are not met,itcould result in indications of impairment. The main assumptions relate to annual growth in revenue and gross margin.
In connection with the impairment tests performed, the Group has decided to reverse the write-downofDKK 120 million relating to the assets in Russia carried out in 2010. Reduced for depreciation in the period 2010-2012, the reversal is DKK 104 million. This is being done asaresult ofhigher capacity utilisation and significantly higher prices on the Russian market through 2012 than anticipated in previous years.
Asaresultofthe economic situation for the Group, there is aparticular risk that the future will bring further indications ofimpairment in some subsidiaries. The assets in Poland are the most exposed to impairment in relation to the assumptions mentioned below.
On 31 December 2012 the recoverable amount for the cash-generatingunit Poland is equivalent tothe carrying amount. Any negative change in the assumptions will necessitate further impairment losses. Sensitivity analyses for the key assumptions underlying the impairment test are shown below. The sensitivity analyses indicate the following consequences:
| 13 Deferred tax, assets | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2010 | 2012 | 2011 |
| Deferred tax assets at1January | 43,610 | 59,868 | 44,348 | 0 | 0 |
| Foreign exchange adjustments | 977 | (470) | 1,031 | 0 | 0 |
| Change in deferred tax | (31,533) | (5,257) | 9,804 | 0 | 0 |
| Transferred to assets held for sale | 0 | (6,057) | 0 | 0 | 0 |
| Tax effect of adjustment of accumulated actuarial losses | 4,038 | (4,474) | 4,685 | 0 | 0 |
| Deferred tax assets at 31 December | 17,092 | 43,610 | 59,868 | 0 | 0 |
| Deferred tax assets relate to: | |||||
| Non-current assets | (53,784) | (12,842) | 8,441 | 0 | 0 |
| Current assets | (345) | 4,150 | 969 | 0 | 0 |
| Liabilities | 23,875 | (3,587) | 4,844 | 0 | 0 |
| Tax loss carry-forwards | 47,346 | 55,889 | 45,614 | 0 | 0 |
| 17,092 | 43,610 | 59,868 | 0 | 0 |
| Deferred tax, liabilities | Group | Parent company | ||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | 2010 | 2012 | 2011 | ||
| Deferred tax liabilities at1January | 19,688 | 14,295 | 46,282 | 7,264 | 8,773 | |
| Foreign exchange adjustments | 1,229 | (936) | 1,599 | 0 | 0 | |
| Change in deferred tax | 480 | 6,329 | (15,796) | 0 | (1,509) | |
| Tax effect of adjustment of accumulated actuarial losses | 0 | 0 | (17,790) | 0 | 0 | |
| Deferred tax liabilities at 31 December | 21,397 | 19,688 | 14,295 | 7,264 | 7,264 | |
| Provisions for deferred tax relate to: | ||||||
| Non-current assets | 14,430 | 14,189 | 40,181 | 0 | 0 | |
| Current assets | (297) | (547) | (33,150) | 0 | 0 | |
| Retaxation balance relating to discontinued joint taxation | 7,264 | 7,264 | 7,264 | 7,264 | 7,264 | |
| Tax loss carry-forwards | 0 | (1,218) | 0 | 0 | 0 | |
| 21,397 | 19,688 | 14,295 | 7,264 | 7,264 |
No provision has been made in respectofdeferred tax in connection with the share option plan, as the priceofthe shares at the balance sheet date was less than the exercise priceofthe options.
No deferred tax has been recognised on the difference between the costofequity investments and the estimated fair value. This is because the shareholdings in the equity investments are all considered to be 'shares inasubsidiary', and any gain/loss is thereforenottaxable.
The tax valueofloss carry-forwards has been recognised as deferred tax assets in the companies where it is considered likely that this can be utilised in future earnings.Thetax value of loss carry-forwards of DKK 48 million at 31 December 2012 (2011: DKK 70 million) has not been recognised as deferred tax assets, astheseare not considered likely to be utilised.
| 14 Equity investments in subsidiaries | Parent company | |
|---|---|---|
| (DKK '000) | 2012 | 2011 |
| Acquisition cost at1January | 1,307,300 | 1,500,943 |
| Additions | 25,261 | 765,075 |
| Disposals | (110,976) | (958,718) |
| Cost at 31 December | 1,221,585 | 1,307,300 |
| Impairment losses at1January | 272,892 | 371,871 |
| Reversal in connection with disposals | (54,293) | (453,183) |
| Reversal of previous write-down | (52,610) | 0 |
| Impairment losses, equity investments | 164,046 | 354,204 |
| Impairment losses at 31 December | 330,035 | 272,892 |
| Carrying amount at 31 December | 891,550 | 1,034,408 |
The costofequity investments in subsidiaries was tested for impairment at the endof2011 and 2012. The recoverable amountofthe equity investments at 31 December 2012 is based on the value in use, which has been determined using expected net cash flows based on estimates for the years 2013-2018 andaWACC after taxof5.7-12.6% (2011: 6.6-17.8%). The weightedaveragegrowth rate used for extrapolating expected future net cash flows for the years after 2017 has been estimated at 2.0-4.0% (2011: 2.0-3.5%).Itis estimated that the growth rate willnotexceed the long-termaveragegrowth rate in the company's markets.
In connection with the closing of the financial statements for 2012, it was found that the recoverable amount of some of the Group's companies was lower than the parent company's original cost. Asaresult, impairment losses were recognised for the Poland and the Czech Republic in the parent company financial statements, andaprevious write-down in Russia was reversed. However, the impairment losses and the reversal have no bearing on the consolidated financial statements.
| 2012 | 2011 | ||
|---|---|---|---|
| Registered office | Equity interest,% | Equity interest,% | |
| KWAY Holding Limited* | UK | 100 | 100 |
| H+HDeutschland GmbH | Germany | 100 | 100 |
| H+HDanmark A/S | Denmark | 100 | 100 |
| HHI A/S af 3. maj 2004 | Denmark | 100 | 100 |
| H+HFinland Oy | Finland | 100 | 100 |
| Stone Kivitalot Oy | Finland | 100 | 100 |
| H+HSverige AB | Sweden | 100 | 100 |
| H+HNorge AS | Norway | 100 | 100 |
| H+HPolska Sp.zo.o. | Poland | 100 | 100 |
| H+HČeská republika s.r.o. | Czech | 0 | 100 |
| H+HEIQ s.r.o. | Czech | 100 | 0 |
| H+HSlovenská republika s.r.o. | Slovakia | 100 | 100 |
| H+HUkraina TOV | Ukraine | 100 | 100 |
| H+HUA TOV | Ukraine | 100 | 100 |
| OOOH+H | Russia | 100 | 100 |
| H+HBelgien SPRL | Belgium | 100 | 100 |
| H+HBenelux B.V. | Netherlands | 100 | 100 |
| Diverse af 29.9.2011 ApS | Denmark | 100 | 100 |
The above list does not include indirectly owned companies without any activities.
*This activity comprises ownership ofH+HUK Holding Limited, and thus the activities ofH+HUK Limited.
| 15 Inventories/production costs | Group | Parent company | ||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Raw materials and consumables | 49,705 | 49,167 | 0 | 0 |
| Finished goods and goods for resale | 144,508 | 141,824 | 0 | 0 |
| 194,213 | 190,991 | 0 | 0 | |
| Write-downs recognised in the inventories above have developed as follows: |
||||
| Write-downs at1January | 6,500 | 12,448 | 0 | 0 |
| Foreign exchange adjustments | 88 | (13) | 0 | 0 |
| Write-downs for the year | 4,431 | 1,008 | 0 | 0 |
| Realised during the year | (140) | (6,943) | 0 | 0 |
| Reversals | (164) | 0 | 0 | 0 |
| Inventory write-downs, year-end | 10,715 | 6,500 | 0 | 0 |
| Wages and salaries | 177,827 | 165,149 | 0 | 0 |
| Production overheads | 92,845 | 97,305 | 0 | 0 |
| Cost of sales | 776,451 | 762,922 | 0 | 0 |
| Write-downs for the year | 4,431 | 1,008 | 0 | 0 |
| Reversals of inventory write-downs | (164) | 0 | 0 | 0 |
| Total production costs | 1,051,390 | 1,026,384 | 0 | 0 |
| 16 Receivables | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Trade receivables | 22,695 | 87,821 | 0 | 0 | |
| Other receivables | 16,024 | 11,684 | 540 | 677 | |
| 38,719 | 99,505 | 540 | 677 | ||
| Write-downs of impaired receivables have developed as follows: | |||||
| Write-downs at1January | 5,146 | 6,573 | 0 | 0 | |
| Foreign exchange adjustments | 47 | (208) | 0 | 0 | |
| Write-downs for the year | 867 | 950 | 0 | 0 | |
| Realised during the year | (1,170) | (1,670) | 0 | 0 | |
| Reversals | (377) | (149) | 0 | 0 | |
| Transferred to assets held for sale | 0 | (350) | 0 | 0 | |
| Write-downs relating to receivables, year-end | 4,513 | 5,146 | 0 | 0 |
Receivables that arenotpast due are predominantly deemed to haveahigh credit quality.
Security isnotnormally required in respectofclaims. The Group's customers are typically large well-consolidated builders' merchants andhousebuilders,and customers are credit rated onaregular basis. Only limited security had been provided at 31 December 2012.
Receivables are written down directly if the value has been impaired, for example asaresultofsuspensionofpayments, compulsory winding-up or similar, based on an individual assessmentofthe individual debtor's ability to pay. Write-downs are made to estimated net realisable value. The income statement for 2012 recognises write-downs and losses on receivablesofDKK 490 thousand (2011: DKK 801 thousand).
| 16 Receivables – continued | Group | Parent company | |||
|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | |
| Age analysis of trade receivables: | |||||
| Not past due | 15,128 | 67,882 | 0 | 0 | |
| 0-30 days | 5,640 | 14,109 | 0 | 0 | |
| 30-90 days | 1,211 | 5,569 | 0 | 0 | |
| Over 90 days | 716 | 261 | 0 | 0 | |
| 22,695 | 87,821 | 0 | 0 | ||
| Write-downs relating to receivables, year-end | 4,513 | 5,146 | 0 | 0 |
| 2012 | |||||
|---|---|---|---|---|---|
| Germany | |||||
| Netherlands | Norway | ||||
| Belgium | Sweden | Eastern | |||
| UK | Denmark | Finland | Europe | Total | |
| Write-downs at1January | 1,060 | 947 | 339 | 2,800 | 5,146 |
| Foreign exchange adjustments | 10 | 5 | 6 | 26 | 47 |
| Write-downs for the year | 64 | 410 | 296 | 97 | 867 |
| Realised during the year | (147) | (223) | (246) | (554) | (1,170) |
| Reversals | 0 | 0 | (127) | (250) | (377) |
| Transferred to assets held for sale | 0 | 0 | 0 | 0 | (0) |
| Write-downs relating to receivables, year-end | 987 | 1,139 | 268 | 2,119 | 4,513 |
| 2011 | ||||||
|---|---|---|---|---|---|---|
| Germany | ||||||
| Netherlands | Norway | |||||
| Belgium | Sweden | Eastern | ||||
| UK | Denmark | Finland | Europe | Total | ||
| Write-downs at1January | 885 | 1,456 | 1,277 | 2,955 | 6,573 | |
| Foreign exchange adjustments | 29 | (2) | (14) | (221) | (208) | |
| Write-downs for the year | 232 | 179 | 258 | 281 | 950 | |
| Realised during the year | 0 | (671) | (832) | (167) | (1,670) | |
| Reversals | (86) | (15) | 0 | (48) | (149) | |
| Transferred to assets held for sale | 0 | 0 | (350) | 0 | (350) | |
| Write-downs relating to receivables, year-end | 1,060 | 947 | 339 | 2,800 | 5,146 |
Trade receivables which were past due at 31 December 2012butnotimpaired are also included, as follows:
| Group | Parent company | ||||
|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | ||
| Maturity period of trade receivables: | |||||
| 0-30 days | 5,640 | 14,109 | 0 | 0 | |
| 30-90 days | 1,211 | 5,569 | 0 | 0 | |
| Over 90 days | 0 | 0 | 0 | 0 | |
| 6,851 | 19,678 | 0 | 0 |
| Number | Nominal value, DKK 1,000 | |||||
|---|---|---|---|---|---|---|
| 2012 | 2011 | 2012 | 2011 | |||
| 1January | 9,810,000 | 9,810,000 | 490,500 | 490,500 | ||
| 31 December–fully paid | 9,810,000 | 9,810,000 | 490,500 | 490,500 |
The share capital comprises 9,810,000 sharesofnominal value DKK 50. All the shares have the same rights, with each share carrying 10 votes at the general meeting.
| Treasury shares | |||
|---|---|---|---|
| %of share capital, | |||
| Number | Nominal value, DKK 1,000 | year-end | |
| Holding at1January 2011 | 20,489 | 1,024 | 0.2 |
| Purchased during the year | 0 | 0 | 0 |
| Sold during the year | 0 | 0 | 0 |
| Holding at 31 December 2011 | 20,489 | 1,024 | 0.2 |
| Purchased during the year | 0 | 0 | 0 |
| Sold during the year | 0 | 0 | 0 |
| Holding at 31 December 2012 | 20,489 | 1,024 | 0.2 |
All the treasury shares are owned byH+HInternational A/S.
Treasury shares are acquired partly in order to hedge liabilities related to the company's option plans.
At 31 December 2012atotalof33,882 shares are required in connection with the company's option plan (2011: 62,889 shares). Management has chosennotto hedge all the outstanding options as it is unlikely that all the options will be exercised.
The company's matching share programme isnothedged by treasury shares.
Under defined contribution plans, the employer is obliged to payaspecific contribution (e.g.afixed amount orafixed percentageofsalary). Under defined contribution plans, the Group doesnotbear the risk associated with future developments in interest rates, inflation, mortality and disability.
Under defined benefit plans, the employer is obliged to payaspecific amount (e.g.aretirement pension asafixed amount orafixed percentageoffinal salary). Under defined benefit plans, the Group bears the risk associated with future developments in interest rates, inflation, mortality and disability.
Danish entities' pension obligations are insured. Some foreign entities' pension obligations are also insured. Foreign entities that arenotinsured or only insured in part (defined benefit plans) calculate the obligation actuarially at present value at the balance sheet date. These pension plans are fully or partly funded in pension funds for the employees. In the consolidated financial statements, an amountofDKK 167,401 thousand (2011: DKK 164,236 thousand) has been recognised under liabilities in respectofthe Group's obligations to existing and former employees after deductionofthe assets associated with the plans.
In the consolidated income statement, an amountofDKK 14,488 thousand (2011: DKK 5,722 thousand) has been recognised in respectofexpenses relating to insured plans (defined contribution). For non-insured plans (defined benefit plans), an amountofDKK0thousand (2011: DKK 4,630 thousand) has been recognised in the consolidated income statement in respectofexpenses.
The Group has defined benefit plans in the UK andGermany. The UK pension plans are managed byapension fund fund–legally separate from the company–to which payments are made, whereas the German pension plans are unfunded.
The boardofthe pension fund is composedoftwo representatives appointed by the employer, two elected by the pension fund members and two professional independent members.
The boardofthe pension fund is required by law and by articlesofassociation to act in the interestofthe pension fund members. The boardofthe pension fund is responsible for the investment policy with regard to the plan assets.
Under the pension plan, the employees are entitled to postretirement annual payments amounting to 1/60ofthe final pensionable salary for each yearofservice until the retirement ageof65. In addition, the service period is limited to 40 years, resulting inamaximum yearly entitlement (lifetime annuity)of2/3ofthe final pensionable salary.
The defined benefit pension fund in the UK typically exposes the company to actuarial risks, such as investment, interest rate and longevity risk.
H+HCelcon Pension Fund is supervised by an independent fundmanager,H+HCelcon Pension Fund Trustee Limited. In accordance with the legislation governing pension funds, amongotherthings the fundmanagermust ensure thatalimited actuarial calculationofthe pension obligations is carried out each year andamore detailed actuarial calculationofthe pension obligations every three years.Adetailed actuarial calculation carried out in April 2008 showed an unfunded pension obligationofDKK 128 million (GBP 15.6 million). Based on this calculation, on 26 June 2009H+H-UK Limited andH+HCelcon Pension Fund Trustee Limited entered into an agreement on the paymentofcontributions to cover the unfunded pension obligation (Scheduleof-Contributions). The agreement sets outa15-year repayment profile under whichH+HUK Limited will pay DKK 1.0 million (GBP 0.12 million)peryear in the period April 2009– March 2011 and DKK 18 million (GBP 2.17 million)peryear in the period April 2011–March 2023.
The pension fund was closed to new entrants in June 2007, and closed to the accrualoffuture service benefits in December 2011. The link to final salary ended at this point.
The most recent actuarial valuations (based on FRS 17 and IAS19R)ofplan assets and the present valueofthe defined benefit obligation were carried out at 31 December 2012 by MrCRichards, Fellowofthe UK InstituteofActuaries. The present valueofthe defined benefit obligation, and the related service and past service cost, were measured using the'projected unit credit method'.
The pension fund has been replaced byadefined contribution pension scheme where the company isnotsubject to anyongoinginvestment, interest rate or longevity risk.
| 18 Pension obligations – continued | Group | |
|---|---|---|
| (DKK '000) | 2012 | 2011 |
| Pensions and similar obligations: | ||
| Present value of fully or partly funded defined benefit plans | 560,480 | 504,989 |
| Fair value of plan assets | 402,821 | 349,094 |
| Deficit | 157,659 | 155,895 |
| Unrecognised actuarial losses (gains) | 0 | 0 |
| Present value of unfunded defined benefit plans recognised in the balance sheet | 9,742 | 8,341 |
| Unrecognised actuarial losses (gains) on unfunded benefits | 0 | 0 |
| Net obligation recognised in the balance sheet | 167,401 | 164,236 |
| Development in present value of fully or partly funded defined benefit obligation: | ||
| Obligation at1January | 504,989 | 462,130 |
| Foreign exchange adjustments | 12,965 | 13,539 |
| Pension costs relating to the current financial year | 0 | 4,630 |
| Calculated interest on obligation | 25,084 | 25,110 |
| Gains/losses asaresult of changes in economic assumptions | 44,039 | 22,877 |
| Gains/losses asaresult of changes in demographic assumptions | (9,514) | 0 |
| Employee contributions | 0 | 2,551 |
| Gains on curtailment of defined benefit plans | 0 | (7,018) |
| Pensions paid | (18,588) | (18,650) |
| Empirical changes | 1,505 | (180) |
| Obligation at 31 December | 560,480 | 504,989 |
| Development in present value of unfunded defined benefit obligation: | ||
| Obligation at1January | 8,297 | 8,162 |
| Foreign exchange adjustments | 37 | 0 |
| Pension costs relating to the current financial year | 0 | 0 |
| Calculated interest on obligation | 350 | 345 |
| Gains/losses asaresult of changes in economic assumptions | 1,348 | 303 |
| Empirical changes | 216 | 0 |
| Pensions paid | (506) | (469) |
| Obligation at 31 December | 9,742 | 8,341 |
| 18 Pension obligations – continued | Group | |
|---|---|---|
| (DKK '000) | 2012 | 2011 |
| Development in fair value of pension assets: | ||
| Plan assets at1January | 349,094 | 312,367 |
| Foreign exchange adjustments | 8,890 | 9,427 |
| Expected return on plan assets | 17,680 | 17,439 |
| Return on plan assets over and above the calculated interest | 25,166 | 7,405 |
| The company's contributions to plan assets | 20,579 | 18,555 |
| Employees' contributions to plan assets | 0 | 2,551 |
| Pensions paid | (18,588) | (18,650) |
| Pension assets at 31 December | 402,821 | 349,094 |
| Pension costs relating to the current financial year: | ||
| Pension costs relating to defined benefit plans | 0 | (4,630) |
| Pension costs relating to defined contribution plans | 14,488 | (5,722) |
| Total pension costs | 14,488 | (10,352) |
| Calculated interest on obligation | (25,434) | (25,455) |
| Calculated interest on plan assets | 17,680 | 17,439 |
| Net interest on defined benefit plans | (7,754) | (8,016) |
| Pension costs recognised in other comprehensive income: | ||
| Gains/losses asaresult of change in economic assumptions | (47,208) | (22,080) |
| Gains/losses asaresult of change in demographic assumptions | 9,514 | 0 |
| Return on plan assets over and above the calculated interest | 25,166 | 7,405 |
| Empirical changes | (1,721) | 180 |
| Total | (14,249) | (14,495) |
The cost has been recognised in the income statement under staff costs; see note 4. Costs recognised under production costs amount to DKK 8,769 thousand (2011: DKK 6,851 thousand), and costs recognised under other external expenses amount to DKK 5,719 thousand (2011: DKK 4,568 thousand).
| Group | ||
|---|---|---|
| 2012 | 2011 | |
| Plan assets can be broken down as follows: | ||
| Shares | 160,726 | 139,987 |
| Bonds | 239,276 | 207,013 |
| Cash | 2,820 | 2,094 |
| Total | 402,822 | 349,094 |
| Return on plan assets: | ||
| Actual return on plan assets | 42,846 | 24,844 |
| Calculated interest on plan assets | 17,680 | 17,439 |
| Actuarial gain (loss) on plan assets | 25,166 | 7,405 |
| The average assumptions for the actuarial calculations at the balance sheet date can be stated as follows: |
||
| Discount rate (avg.) | 4.50% | 4.90% |
| Expected return on plan assets | 2.70% | 2.90% |
| Expected lifetime from retirement age (years) | 21.60 | 21.44 |
The table below shows the sensitivity of the pension obligation to changes in the key assumptions for determination of the obligation on the balance sheet date. The H+H Group is also exposed to developments in the market value of the plan assets. The key actuarial assumptions in the determination of pension obligations relate to interest rate level, pay increases and mortality.
The analysis is based on the reasonably likely changes which can be expected on the balance sheet date, provided that the other parameters in the calculations are unchanged and not subject to consequential changes:
| (DKK '000) | 2012 |
|---|---|
| Sensitivity relative to discount rate: | |
| If the discount falls by 0.1%, the pension obligation will increase by | 9,607 |
| Sensitivity relative to inflation: | |
| If the inflation rate increases by 0.1%, the pension obligation will increase by | 4,119 |
| Sensitivity relative to life expectancy from retirement age: | |
| If the life expectancy from retirement age increases by1year, the pension obligation will increase by | 14,008 |
The Group expects to pay DKK 21 million into the defined benefit pension plan in 2013.
| (DKK '000) | 2012 |
|---|---|
| 0-1 years | 21,000 |
| 1-5 years | 84,000 |
| Over5years | 455,000 |
| Total | 560,000 |
| 19 Provisions | Group | |||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Non-current portion | Current portion | |||
| Warranty obligations at1January | 2,047 | 5,199 | 0 | 0 |
| Foreign exchange adjustments | 19 | (54) | 0 | 0 |
| Transfers | 0 | 0 | 0 | 0 |
| Provisions for the year | 0 | 50 | 0 | 0 |
| Utilised during the year | 1 | 0 | 0 | 0 |
| Reversals during the year | (257) | (3,148) | 0 | 0 |
| Warranty obligations at 31 December | 1,810 | 2,047 | 0 | 0 |
| Other provisions at1January | 1,121 | 1,836 | 0 | 0 |
| Foreign exchange adjustments | 68 | (129) | 0 | 0 |
| Transfers | 0 | 0 | 0 | 0 |
| Provisions for the year | 1,589 | 7,636 | 0 | 0 |
| Utilised during the year | 0 | 0 | 0 | 0 |
| Reversals during the year | (1,750) | 0 | 0 | 0 |
| Transferred to liabilities relating to assets held for sale | (188) | (8,222) | 0 | 0 |
| Other provisions at 31 December | 840 | 1,121 | 0 | 0 |
| Obligation relating to restoration of sites at1January | 4,557 | 13,102 | 0 | 0 |
| Foreign exchange adjustments | 142 | 40 | 0 | 0 |
| Provisions for the year | 0 | 78 | 0 | 0 |
| Utilised during the year | 0 | 0 | 0 | 0 |
| Reversals during the year | (409) | (1,543) | 0 | 0 |
| Transferred to liabilities relating to assets held for sale | 0 | (7,120) | 0 | 0 |
| Obligation relating to restoration of sites at 31 December | 4,290 | 4,557 | 0 | 0 |
| Total other provisions | 6,940 | 7,725 | 0 | 0 |
H+H's companies provide normal warranties in respect of products supplied to customers. The provision for warranty obligations thus relates to warranties provided in respect of products supplied prior to the balance sheet date. The warranty period varies depending on normal practice in the markets in question. The warranty period is typically between one and five years. Warranty obligations have been determined separately for each company based on normal practice in the market in question and historical warranty costs. At 31 December 2012 warranty obligations relate predominantly to Germany.
Warranty obligations also includeabank guarantee pledged on behalf ofabusiness partner.
The obligation in respect of restoration of sites relates toH+H's sites in Finland, Germany, Poland and the UK. The obligation has been calculated on the basis of external assessments of the restoration costs. Restoration is expected to take place after five years.
| 20 Credit institutions | Group | Parent company | ||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Bank loans | 557,482 | 651,058 | 256,046 | 278,572 |
| Lease commitments | 0 | 678 | 0 | 9 |
| Amortised borrowing costs | (2,079) | (3,041) | (2,079) | (3,041) |
| 555,403 | 648,695 | 253,967 | 275,540 | |
| Payables to credit institutions are recognised in the balance sheet as follows: | ||||
| Non-current | 554,112 | 648,307 | 253,967 | 275,531 |
| Current | 0 | 88 | 0 | 9 |
| Liabilities relating to assets held for sale | 1,291 | 300 | 0 | 0 |
| 555,403 | 648,695 | 253,967 | 275,540 |
H+Hwill be dependent on debt financing in the coming years, and maintenanceofthe committed credit facilities is conditional upon compliance withanumberoffinancial covenants; see note 27.
| 2012 | 2011 | |||||
|---|---|---|---|---|---|---|
| Lease | Carrying | Lease | Carrying | |||
| Finance leases | payments | Interest | amount | payments | Interest | amount |
| 0-1 year | - | - | - | 196 | 54 | 142 |
| 1-5 years | - | - | - | 588 | 52 | 536 |
| - | - | - | 784 | 106 | 678 |
TheH+HGroup leases production equipment under finance leases. The lease term is typically between two and five years, with an option to purchase the asset in question atafavourable price on expiryofthe lease term.
All leases followafixed repayment profile and noneofthe leases include provisions about conditional lease payments apart from provisions on indexation based on public indices. The leases are non-cancellable during the agreed lease term,butmay be extended on renewed terms. The leases are normally based onafixed interest rate.
| 2012 | 2011 | 2012 | 2011 | |
|---|---|---|---|---|
| Operating leases | Lease payments |
Lease payments |
Lease payments |
Lease payments |
| 0-1 year | 4,917 | 3,231 | 370 | 383 |
| 1-5 years | 10,625 | 6,772 | 231 | 601 |
| Over5years | 728 | 532 | 0 | 0 |
| Total minimum lease payments | 16,270 | 10,535 | 601 | 984 |
TheH+HGroup leases property, production equipment and vehicles underoperatingleases inafew cases.
| 2012 | 2011 | 2012 | 2011 | |
|---|---|---|---|---|
| Rental | Rental | Rental | Rental | |
| Rental obligations | payments | payments | payments | payments |
| 0-1 year | 3,147 | 2,855 | 606 | 606 |
| 1-5 years | 6,531 | 7,179 | 1,364 | 1,970 |
| Over5years | 59,337 | 57,516 | 0 | 0 |
| 69,015 | 67,550 | 1,970 | 2,576 |
TheH+HGroup's key rental obligations consistoflong-term land leases in Poland and the UK. An amountofDKK 6,086 thousand (2011: DKK 5,605 thousand) has been recognised in the consolidated income statement for 2012 in respectofoperatingleases and rental obligations.
| 21 | Contingent liabilities | Group | Parent company | |||
|---|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 | ||
| Financial guarantee | 0 | 0 | 294,356 | 372,486 | ||
| 0 | 0 | 294,356 | 372,486 |
The parent companyH+HInternational A/S acts as guarantor for the subsidiaries' drawdowns on the Group's credit facility.
The parent companyH+HInternational A/S has issued lettersofsupport to someofthe subsidiaries. Management doesnotexpect these to give rise to losses for the parent company.
TheH+HGroup isaparty toafew pending legal proceedings. In management's opinion, the outcomeofthese proceedings will nothave any impact on the Group's financial position apart from the receivables and payables recognised in the balance sheet.
The company is the administration company for the jointly taxed Danish companies. Pursuant to the rules on this contained in the Danish Corporation Tax Act, with effect from1July 2012 the company is thus liable to withhold tax at source on interest, royalties and dividends for the jointly taxed companies for contingent liabilities.
The Group's Danish companies are further jointly and severally liable for joint registration of VAT.
| 22 Auditors' remuneration | Group | Parent company | ||
|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | 2012 | 2011 |
| Total fees for the parent company's auditors elected at the annual general meeting: |
||||
| Deloitte | 2,224 | 0 | 435 | 0 |
| KPMG | 585 | 3,403 | 405 | 1,165 |
| 2,809 | 3,403 | 840 | 1,165 | |
| The fee can be broken down as follows: | ||||
| Statutory audit | 1,735 | 1,992 | 435 | 495 |
| Other assurance engagements | 0 | 28 | 0 | 0 |
| Tax and VAT assistance | 327 | 991 | 11 | 670 |
| Other services | 747 | 392 | 394 | 0 |
| 2,809 | 3,403 | 840 | 1,165 |
It is recommended to the annual general meeting that no dividend be paid for the financial year 2012.
As partofits continued focus on core business andadesire to reduce interest-bearing debt,H +Haims to sell someofits non-strategic assets in the coming year.
Variousplotsofland in Poland,asand pit in Germany, an officeproperty in Denmark,aplotofland in the UK and unused production equipment were readied for sale during the second quarterof2011 and classified as assets held for sale.Ifall the assets are sold at the expected value, the selling price for the assets will be DKK 80-90 million, and the sale is expected to result in an accounting gain before taxofDKK 25-35 million. The transactions are expected to be completed before the endofthe first halfof2013 and are notincluded in the outlook for 2013.
Aconditional purchase agreement for theofficeproperty in Denmark was signed in the third quarterof2011. The proceeds from the sale are around DKK 7.5 million and were received from thebuyerin the first quarterof2012 in connection with the handoverofthe property. The property was sold for more than DKK 1.8 million more than its book value, ofwhich DKK 0.5 million was taken to income in 2011.
As part ofH +H's continued focus on core business, the Board of Directors decided in the third quarter of 2011 to divest the Finnish subsidiary Jämerä-kivitalot Oy, which designs and sells the construction of aircrete houses for private individuals. As the company has been loss-making foranumber of years, the divestment will haveapositive effect onH +H's future earnings. The company switched strategy in 2009 in favour of an increased focus on deliver ing turnkey solutions to customers, but this strategy has not proved sustainable, as the processes required to control the building phases were not fully implemented.
Disposal of the main part of the activities in Jämerä-kivitalot Oy took place in June 2012, leaving justafew projects in the company, now renamed Stone Kivitalot Oy. These are expected to be finished in the first half of 2013. Stone Kivitalot Oy is therefore classified asadiscontinued operation.
| (DKK '000) | 2012 | 2011 |
|---|---|---|
| The discontinued operation has impacted the income statement as follows: | ||
| Operating profit for the period until transfer of control | (29,055) | (42,580) |
| Tax on profit for the period | 0 | (6,057) |
| Write-down of non-current assets to fair value less expected selling costs | 0 | 0 |
| Gain on sale of non-current assets held for sale | 6,344 | 0 |
| Recirculation of accumulated currency translation adjustment relating to foreign entities | 0 | 0 |
| Tax on gain on sale | 0 | 0 |
| Impact on profit for the year, net | (22,711) | (48,637) |
| Operating profit for the period until transfer of control can be specified as follows: | ||
| Revenue | 103,584 | 129,043 |
| Expenses | (132,639) | (171,623) |
| Profit for the year before tax | (29,055) | (42,580) |
| Tax on profit for the year | 0 | (6,057) |
| Profit for the year after tax | (29,055) | (48,637) |
| Profit for the year from discontinued operations | (29,055) | (48,637) |
| Earnings per share from discontinued operations (EPS) | (2.32) | (4.97) |
| Diluted earnings per share from discontinued operations (EPS-D) | (2.32) | (4.97) |
| Cash flow from operating activities | (30,280) | (10,335) |
| Cash flow from investing activities | 1,214 | (641) |
| Cash flow from financing activities | 982 | (6,428) |
| Total cash flow | (28,084) | (17,404) |
| The sale of the discontinued operation can be specified as follows: | ||
| Carrying amount of net assets | 1,116 | |
| Goodwill attributed to the operation | 0 | |
| Gain on sale | 6,344 | |
| Selling price | 7,460 | |
| Assets for sale and liabilities relating to assets held for sale | ||
| Intangible assets | 15,215 | 16,385 |
| Property, plant and equipment | 46,416 | 41,798 |
| Inventories | 0 | 0 |
| Receivables | 26,036 | 30,815 |
| Cash and cash equivalents | 0 | 2,599 |
| Assets held for sale, total | 87,667 | 91,597 |
| Credit institutions | 1,291 | 330 |
| Trade payables | 3,193 | 8,594 |
| Other payables | 5,583 | 0 |
| Other provisions | 42,145 | 56,586 |
| Liabilities relating to assets held for sale, total | 52,212 | 65,510 |
During the financial yearH+HInternational A/S sold the subsidiaryH+HČeská republika s.r.o. and the majority of the activities in Jämerä-kivitalotOy. No entities were disposed of in 2011.
The sales can be specified as follows:
| (DKK '000) | H+H Česká republika | Jämerä-kivitalot | Total |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 631 | 713 | 1,344 |
| Property, plant and equipment | 86,648 | 427 | 87,075 |
| Other non-current assets | 0 | 0 | 0 |
| Other current assets | |||
| Inventories | 12,096 | 0 | 12,096 |
| Other current assets | 5,286 | 0 | 5,286 |
| Non-current liabilities | (109) | 0 | (109) |
| Current liabilities | (7,682) | (24) | (7,706) |
| Carrying amount of net assets disposed of | 96,870 | 1,116 | 97,986 |
| Gain on sale | 5,733 | 6,344 | 12,077 |
| Expenses in connection with disposal | 10,660 | 0 | 10,660 |
| Total consideration | 113,263 | 7,460 | 112,723 |
| Of which subsequent purchase price adjustment | 421 | 0 | 421 |
| Transferred interest-bearing debt | 0 | 0 | 0 |
| Transferred cash at bank and in hand | 0 | 0 | 0 |
| Cash selling price | 113,684 | 7.460 | 121.144 |
TheGroup'srelatedpartiesaretheExecutiveBoard,theBoardofDirectorsandseniorexecutivesintheH+HGroup.
Apartfromcontractsofemployment,noagreementsortransactionshavebeenenteredintobetweenthecompanyandthe ExecutiveBoard.RemunerationtotheBoardofDirectors,theExecutiveBoardandseniorexecutivesisdisclosedinnote4.
AmemberoftheBoardofDirectors–HenrikLind–isapartnerinthelawfirmGorrissenFederspiel,whichwaspaidfeestotallingDKK103thousandin2012forlegalassistance(2011:DKK607thousand).
H+HInternationalA/Shasnocontrollingshareholders.Besidesthepartiesspecifiedabove,theparentcompany'srelatedpartiesconsistofitssubsidiaries,cf.note14.
AmanagementfeetotallingDKK17,000thousand(2011:DKK15,000thousand)wasreceivedbytheparentcompanyfromtheremainderoftheGroup.
Transactionsbetweentheparentcompanyandsubsidiariesalsoincludedeposits,loansandinterest;theseareshowninthe parentcompanybalancesheetandnotes8and9.
Tradingwithrelatedpartiesisatarm'slength.
Asaresultofitsoperating,investing and financing activities, H+His exposed to various financial risks, including market risks (currency, interest rate and commodity risks), credit risks and liquidity risks.ItisH+H's policynotto speculate actively in financial risks.
H+H's financial risk management is thus aimed exclusively atmanagingthe financial risks that areadirect consequenceofH+H'soperating,investing and financing activities. This note relates exclusively to financial risks directly associated withH+H's financial instruments. There have been no material changes inH+H's risk exposure or risk management compared with last year.
H+H's companies are exposed to currency risks. Financial instruments are primarily entered into in the individual consolidated entities' functional currencies asaresultoftheir purchase and sales transactions. However,H+Hhas atranslation risk, and asaresultofthisH+H's profit/loss is exposed to fluctuations in the functional currencies.
H+Hdoesnotengagein currency speculation. The individual consolidated entities donotenter into financial instruments denominated in foreign currencies unless commercially warranted, and expected transactions and financial instruments in foreign currencies that exceedalimited level and time horizon require hedging. Derivatives andotherfinancial instruments are used only toalimited extent to hedge currency risks.H+Hdidnotuse derivatives orotherfinancial instruments to hedge currency risks in 2012, and in 2011aminor position in EUR was hedged for SEK. This hedging took the formofaforward exchange transaction for purchaseofEUR with payment in SEK. At 31 December 2011 the contract hadafair valueofDKK (81) thousand, which has been recognised under financial expenses and otherpayables.
The individual subsidiaries do not have any material exposure to currencies other than the functional currency. The table on the following page shows the Group's monetary items by currency.
H+Hregularly evaluates the capital structure on the basisofexpected cash flows withaview to ensuring an appropriate balance between adequate future financial flexibility andareasonable return to shareholders.
In 2011H+Hrefinanced debt denominated in CZK and PLN in GBP to provideamore expedient currency exposure and interest savings.
H+Hwill continue to operate with significant loan financing. At year-end 2012H+Hhad net interest-bearing debtofDKK 539 million,a decreaseof DKK 90 million compared with year-end 2011.
The effective interest rate forH+Hin 2012 was in the region of4.9% (2011: 5.2%).
The effective interest rate for 2013 is expected to be in line with 2012.
At year-end 2012H+HInternational A/S hadasolvency ratioof30.0%, compared with 29.8% at year-end 2011.
| Monetary items in foreign currency | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (DKK '000) | 2012 | |||||||||
| EUR | GBP | PLN | DKK | RUB | Others | Total | ||||
| Trade receivables | 4,370 | 0 | 2,317 | 6,844 | 2,872 | 6,292 | 22,695 | |||
| Cash and cash equivalents | 9,512 | 44 | 4,969 | 164 | 341 | 445 | 15,475 | |||
| Trade payables | (31,821) | (42,108) | (20,671) | (6,016) | (1,951) | (4,530) | (107,097) | |||
| Credit institutions | 0 | (288,309) | 0 | (261,686) | 0 | (4,117) | (554,112) | |||
| Gross exposure | (17,939) | (330,373) | (13,385) | (260,694) | 1,262 | (1,910) | (623,039) | |||
| Hedged via derivative financial instruments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| Net exposure | (17,939) | (330,373) | (13,385) | (260,694) | 1,262 | (1,910) | (623,039) |
| (DKK '000) | 2011 | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| EUR | GBP | PLN | DKK | RUB | Others | Total | |||
| Trade receivables | 5,335 | 48,689 | 11,704 | 10,089 | 3,895 | 8,109 | 87,821 | ||
| Cash and cash equivalents | 5,098 | 100 | 12,580 | 166 | 297 | 1,614 | 19,855 | ||
| Trade payables | (41,519) | (42,509) | (24,217) | (9,729) | (4,072) | (8,821) | (130,867) | ||
| Credit institutions | (21,918) | (279,139) | 0 | (290,165) | (19) | (57,154) | (648,395) | ||
| Gross exposure | (53,004) | (272,859) | 67 | (289,639) | 101 | (56,252) | (671,586) | ||
| Hedged via derivative financial instruments | 0 | 0 | 0 | 0 | 0 | 0 | 0 | ||
| Net exposure | (53,004) | (272,859) | 67 | (289,639) | 101 | (56,252) | (671,586) |
| (DKK '000) | 2012 | 2011 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Position | Sensitivity | Position | Sensitivity | ||||||
| Cash and receivables |
Potential volatility of exchange rate |
Hypothetical impact on profit before tax for the year* |
Hypothetical impact on equity |
Cash and receivables |
Potential volatility of exchange rate |
Hypothetical impact on profit before tax for the year* |
Hypothetical impact on equity |
||
| EUR/DKK | 347,903 | 1% | 3,479 | 2,609 | 322,166 | 1% | 3,322 | 2,491 | |
| GBP/DKK | (60,446) | 5% | (3,022) | (2,267) | (24,510) | 5% | (1,226) | (919) | |
| PLN/DKK | 51,531 | 5% | 2,577 | 1,932 | 41,630 | 5% | 2,082 | 1,561 | |
| 3,033 | 2,274 | 4,178 | 3,133 |
*The hypothetical impact on profit/loss and equity is significant to the parent company's financial statements but not necessarily to the consolidated financial statements.
The parent company has significant monetary items in currenciesotherthan the functional currency in the formofloans to subsidiaries. The table above shows the parent company's key monetary positions broken down by currency and derived sensitivity.
| (DKK '000) | 2012 | |||
|---|---|---|---|---|
| Profit | Equity | Profit | Equity | |
| 5% increase in GBP/DKK | 216 | 4,918 | 768 | 15,352 |
| 5% increase in PLN/DKK | (3,200) | 11,074 | (2,092) | 13,087 |
| 5% increase in RUB/DKK | 3,843 | 1,191 | (1,025) | (2,962) |
| 859 | 17,183 | (2,349) | 25,477 |
The table above shows the sensitivityofprofit/loss and equity to market fluctuations.Adecline in the GBP/DKK, RUB/DKK and PLN/DKK exchange rates would result inacorresponding increase in profit/loss after tax and equity. The sensitivity analysis has been calculated at the balance sheet date on the basis of the exposure to the stated currencies at the balance sheet date. The calculations are based solely on the stated change in the exchange rate and do not take into account any knock-on effects on interest rates, other exchange rates etc.
The principal raw materials used in the production of aircrete are cement, lime, water and sand or pulverised fuel ash. Costs for cement account for roughly one-third of total raw materials consumed, excluding energy consumption. Energy costs also account forasubstantialproportionof total variable costs. Thepricingof most of the raw materials is hedged through standardfixed-pricecontracts with suppliers, typically withaterm of less than one year, under which committed minimumquantitiescan be purchased at fixed prices.
Asaresultofits investing and financing activities,H+His exposed to interest rate fluctuationsbothin Denmark and abroad. The main interest rate exposure is related to fluctuations in CIBOR, LIBOR, EURIBOR and WIBOR.
ItisH+H's policy to hedge interest rate risks onH+H's loans if it is assessed that the interest payments can be hedged atasatisfactory level. Hedging is normally effected using interest rate swaps, where floating-rate loans are swapped to fixed-rate loans.
The table below illustratesH+H's interest rate exposure on financial instruments at the balance sheet date.
At 31 December 2012 the Group isnotinvolved in any interest rate swaps.
Allotherthings being equal, based onH+H'saveragenet interest-bearing debt (expressed by quarter), an increaseof-1percentagepointperyear in the interest rate level in relation to theaverageinterest rate level in 2012 would reduce profit/loss before tax by DKK 5.4 million (2011: DKK 6.7 million).
| Interest rate exposure | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| (DKK '000) | 2012 | 2011 | ||||||||
| Net interest bearing debt |
Interest hedged |
Net position | Weighted time to maturity of hedging |
Net interest bearing debt |
Interest hedged |
Net position | Weighted time to maturity of hedging |
|||
| DKK | 261,523 | 0 | 261,523 | 0 | 289,999 | 0 | 289,999 | 0 | ||
| EUR | (9,512) | 0 | (9,512) | 0 | 16,820 | 0 | 16,820 | 0 | ||
| PLN | (4,969) | 0 | (4,969) | 0 | (12,580) | 0 | (12,580) | 0 | ||
| CZK | (126) | 0 | (126) | 0 | 53,570 | 0 | 53,570 | 0 | ||
| RUB | (341) | 0 | (341) | 0 | (278) | 0 | (278) | 0 | ||
| GBP | 288,265 | 0 | 288,265 | 0 | 279,040 | 0 | 279,040 | 0 | ||
| Others | 3,797 | 0 | 3,797 | 0 | 1,969 | 0 | 1,969 | 0 | ||
| Total | 538.637 | 0 | 538,637 | 0 | 628,540 | 0 | 628,540 | 0 |
TheH+HGroup's liquidity risk is defined as the risk that theH+HGroup willnot,inaworst-case scenario, be able to meet its financial obligations due to insufficient liquidity.Itis theH+HGroup's policy for capital procurement and placing ofsurplus funds to be managed centrally by the parent company.
AsaresultofH+H's reduced debt level, in November 2012 the company reduced the committed loan agreement with Danske Bank A/S by approx. DKK 100 million to approx. DKK 700 million in order to reduce its borrowing costs.
The loan agreement with Danske Bank A/S isacommitted credit facility running until 15 February 2015. More favourable covenants were obtained in connection with reducing the committed credit facility. The loan agreement's covenants will be calculated quarterly until the agreements expire on 15 February 2015.
There is no obligation to make ordinary repayments prior to the expiryofthe loan agreements on 15 February 2015.The company and thoseofits subsidiaries that are participating in the loan agreements, or that may be consideredamaterial subsidiary, provide cross-guarantees for eachother'sobligations under the loan agreements.
The loan agreements may be cancelled without notice by the lender if the company's shares are delisted from NAS- DAQ OMX Copenhagen. The loan agreements may also be terminated by Danske Bank A/S without notice if investors otherthan Scandinavian institutional investors, individually or through coordinated collaboration, gain controlofmore than one-thirdofthe shares or more than one-thirdofthe total numberofvotingrights carried by the shares inH+H-International A/S.
The loan agreements prevent the BoardofDirectors, without the prior permissionofthe lender, from recommending annual dividend distributions to shareholdersofan amount that exceeds 50%ofthe company's profit after tax in the preceding financial year. The company is also subject to restrictions on its rightofdisposal over its assets without the prior permissionofthe lender, including:
H+His exposed to credit risks in the course of its activities. These risks are primarily related to receivables in respect of sales ofH+H'sproducts.Other credit risks, which relate to
| H+H's financial liabilities fall due as follows | ||||||||
|---|---|---|---|---|---|---|---|---|
| (DKK '000) | 2012 | |||||||
| Non-derivative financial instruments | Carrying amount | 0-1 year | 1-5 years | Over5years | ||||
| Credit institutions and banks | 554,112 | 0 | 554,112 | 0 | ||||
| Finance lease commitments | 0 | 0 | 0 | 0 | ||||
| Trade payables | 107,097 | 107,097 | 0 | 0 | ||||
| 661,209 | 107,097 | 554,112 | 0 |
| 2011 | |||||||
|---|---|---|---|---|---|---|---|
| Non-derivative financial instruments | Carrying amount | 0-1 year | 1-5 years | Over5years | |||
| Credit institutions and banks | 648,018 | 0 | 648,018 | 0 | |||
| Finance lease commitments | 678 | 142 | 536 | 0 | |||
| Trade payables | 130,867 | 130,867 | 0 | 0 | |||
| 779,563 | 131,009 | 648,554 | 0 |
bank deposits and counterparties under financialcontracts, are considered to be insignificant.
The maximum credit risk related to financial assets corresponds to the carrying amounts recognised in the balance sheet. TheH+HGroup doesnothave any material risks relating toasingle customer, business partner or country.
TheH+HGroup's customers are primarily large wellconsolidated builders' merchants. TheH+HGroup has modest credit exposure to housebuilders and developers inafew markets. In keeping with theH+HGroup's credit policy, all major customers are credit rated onaregular basis. Credit limits are determined on the basisofthe individual customer's credit rating.
Ifthe credit ratingofacustomer is considerednotto be sufficient, the payment terms will be changed or security or credit insurance will be obtained. TheH+HGroup regularly monitors its credit exposure to customers as partofits risk management. The customer types in the individual segments are typically very similar, regardlessofwhich segment they come from. TheH+HGroup has historically suffered relatively small losses asaresultofnon-payment on the partofcustomers. These losses have been evenly distributed among theH+H Group's geographical segments. The credit qualityofreceivables is consequently considered to be identical, regardlessofwhich segment the receivables come from.
TheH+HGroup's maximum credit risk is equivalent to the carrying amountofthe receivables and amounts to DKK 38,719 thousand (2011: DKK 99,505 thousand).
TheH+HGroup uses financial instruments, including derivatives, to onlyavery limited extent to hedge financial risks.
The fair valueofthose financial instruments that qualify for designation as hedge accounting underIAS39 is recognised directly in equity until the hedged items are recognised in the income statement. No such financial instruments were used in 2011 or 2012.
No long-term contracts fixing purchase prices for gas or suppliesofotherraw materials were entered into in 2011 and 2012.
The fair valueofthose financial instruments that donotqualify for hedge accounting underIAS39 is recognised directly in the income statement and disclosed in notes8 and 9.Aforward exchange contract for purchaseofEUR in SEK was entered into in 2011. At 31 December 2011 the contract hadafair valueofDKK (81) thousand, which has been recognised under financial expenses andotherpayables.
| Financial instruments that hedge expected transactions but do not qualify for hedge accounting under IAS 39 | |||||||
|---|---|---|---|---|---|---|---|
| (DKK '000) 2012 |
2011 | ||||||
| Gain/loss recognised in the income statement |
Fair value at 31 December |
Time to maturity | Gain/loss recognised in the income statement |
Fair value at 31 December |
Time to maturity | ||
| Forward exchange contract EUR/SEK EUR 650 thousand |
(81) | 0 | - | (81) | (81) | 0-1 year |
The fair valueofunlisted financial instruments is determined as the present valueofexpected future instalments and interest payments. The current market rate for instruments with similar maturities is used as the discount rate.
Itis estimated that the fair valueoffinancial instruments relating to the purchase and saleofproducts etc. withashort credit period matches the carrying amount. Foradescriptionofaccounting policies and methods, including recognition criteria and basisofmeasurement, reference is made to the relevant sectionsofthe accounting policies.
| Categories of financial instruments | |||||
|---|---|---|---|---|---|
| 2012 | 2011 | ||||
| Carrying amount | Fair value | Carrying amount | Fair value | ||
| Trade receivables | 22,695 | 22,695 | 87,821 | 87,821 | |
| Other receivables | 23,204 | 23,204 | 16,891 | 16,891 | |
| Cash and cash equivalents | 15,474 | 15,474 | 19,855 | 19,855 | |
| Total receivables | 61,373 | 61,373 | 124,567 | 124,567 | |
| Financial liabilities (derivatives) measured at fair value via the income statement |
0 | 0 | (81) | (81) | |
| Financial liabilities (derivatives) used as hedging instruments | 0 | 0 | (81) | (81) | |
| Finance lease liabilities | 0 | 0 | 678 | 678 | |
| Loans | 554,112 | 557,482 | 648,018 | 651,059 | |
| Trade payables and other payables | 172,097 | 172,097 | 205,026 | 205,026 | |
| Total financial liabilities measured at amortised cost | 726,209 | 727,089 | 853,722 | 856,763 |
Derivative financial instruments: Forward exchange contracts and interest rate swaps are valued using generally recognised valuation methods based on relevant observable swap rates and exchange rates.
Other financial instruments: Current bank loans at variable interest rates are valued atarate of 100. The fair value of long-term loans and finance leases is calculated using models that discount all estimated and fixed cash flows to net present value. The expected cash flows for the individual loan or lease are based on contractual cash flows. Financial instruments relating to sale and purchase of goods etc. withashort credit period are considered to haveafair value equal to the carrying amount.
The methods are unchanged from 2011.
The internal rules for trading inH+HInternational A/S's shares by boardmembers,executives and certain employees only permit trading in the 4-week period following each quarterly announcement.
| Shares in H+H International A/S | ||||||
|---|---|---|---|---|---|---|
| 1January | Sold/settled | 31 December | ||||
| (DKK '000) | 2012 | On entry/exit | Additions | during the year | 2012 | Market value* |
| Board of Directors: | ||||||
| AndersCKarlsson | 4,500 | 0 | 1,000 | 0 | 5,500 | 143 |
| Asbjørn Berge | 6,000 | 0 | 0 | 0 | 6,000 | 156 |
| StewartABaseley | 10,000 | 0 | 0 | 0 | 10,000 | 260 |
| Pierre-Yves Jullien | 0 | 0 | 0 | 0 | 0 | 0 |
| Henrik Lind | 0 | 0 | 0 | 0 | 0 | 0 |
| Board of Directors, total | 20,500 | 0 | 1,000 | 0 | 21,500 | 559 |
| Executive Board: | ||||||
| Michael Troensegaard Andersen | 4,974 | 0 | 10,091 | 0 | 15,065 | 392 |
| Niels Eldrup Meidahl | 2,532 | 0 | 6,835 | 0 | 9,367 | 244 |
| Executive Board, total | 7,506 | 0 | 16,926 | 0 | 24,432 | 636 |
| Total | 30,738 | 0 | 17,026 | 0 | 45,932 | 1,195 |
*Calculation of the market value is based on the quoted share price of DKK 26 at the end of the year.
| 29 Major shareholders and shareholder groups Parent company |
|||||
|---|---|---|---|---|---|
| (DKK '000) | Nominal value | %of total | Votes | %of total | |
| Share capital at1January 2012: | |||||
| Shares of DKK 50 | 490,500 | 100.0 | 98,100 | 100.0 | |
| Total | 490,500 | 98,100 |
All shares carry the same rights. Each share carries 10 votes at general meetings.
| Major shareholders | |||||
|---|---|---|---|---|---|
| Nominal value | %of total | Votes | %of total | ||
| The following shareholders hold more than 5% of the share capital or at least 5% of the voting rights inH+HInternational A/S at1January 2013: |
|||||
| Danish Labour Market Supplementary Pension Fund (ATP), Hillerød | 56,490 | 11.52 | 11,298 | 11.52 | |
| Laurids Jessen and Danebroge ApS (a company owned by Laurids Jessen), Skive |
28,802 | 5.87 | 5,758 | 5.87 | |
| LD Equity1K/S, Copenhagen | 28,624 | 5.84 | 5,724 | 5.84 |
| Nominal value | %of total | Votes | %of total | |
|---|---|---|---|---|
| Board of Directors and Executive Board | 2,297 | 0.47 | 459 | 0.47 |
| LD Equity1K/S, Laurids Jessen and Danebroge ApS, ATP | 112,736 | 23.00 | 22,547 | 23.00 |
| Foreign investors | 45,187 | 9.20 | 9,037 | 9.20 |
| H+HInternational A/S | 1,024 | 0.21 | 205 | 0.21 |
| Other registered shareholders | 207,455 | 42.29 | 41,490 | 42.29 |
| Unregistered shareholders | 121,801 | 24.83 | 24,361 | 24.83 |
| Total | 490,500 | 100.00 | 98,100 | 100.00 |
There were very low levelsofbothcommercial and residential construction in Finland in 2012, and sales to the domestic market are now too low to warrant retainingafactory there.
In January 2013 it was therefore decided to start talks with the unions concerningapossible closureofH+H's factory in Finland.
Asales agreement for unused production equipment in the UK was signed in the first quarterof2013 ataprice in the regionofDKK5million. The sale will haveapositive impact on earnings in the regionofDKK2million.
Noothersignificant events have occurred after the balance sheet date.
CVR No. 49 61 98 12 Dampfærgevej 3, 3rd Floor 2100 CopenhagenØ-Denmark
Tel.: +45 35 27 02 00 Fax: +45 35 27 02 01 www.HplusH.com
Bushøjvænget 129 8270 Højbjerg Denmark
Tel.: +45 70 24 00 50 Fax: +45 70 24 00 51 www.HplusH.dk
Industristr.3 23829 Wittenborn Germany
Tel.: +49 4554 700-0 Fax: +49 4554 700-223 www.HplusH.de
Teikankaantie 256 39500 Ikaalinen Finland
Tel.:+358 207 524 200 Fax:+358 207 524 222 www.HplusH.fi
Magnesiumstraat1A 6031 RV Nederweert Netherlands
Tel.: +31 495 450169 Fax: +31 495 450069 www.HplusH.nl
Stenyxegatan 35 213 76 Malmö Sweden
Tel.:+46 40 55 23 00 Fax:+46 40 55 23 10 www.HplusH.se
Celcon House, Ightham Sevenoaks, Kent TN15 9HZ UK
Tel.: +44 1732 886333 Fax: +44 1732 886810 www.hhcelcon.co.uk
ul. Kupiecka6 03-042 Warsaw Poland
Tel.:+48 22 51 84 000 Fax:+48 22 51 84 029 www.HplusH.pl
Polná 4/1967 903 01 Senec Slovakia
Tel.:+421 245 258 601 Fax:+421 245 258 604 www.HplusH.sk
Fuchikastr4,LetterK,Office602 192102StPetersburg Russia
Tel.: +7812609-09-00 Fax:+7812 609-09-01 www.HplusH.ru
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