Annual Report • Apr 10, 2019
Annual Report
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Annual review 2018
"Lotus Biscoff is my favourite biscuit, because the crispy texture & caramelised fl avour are very unique in China. Whenever our employees meet a customer, I tell them to start the meeting with a Lotus Biscoff . The surprising fl avour of our small biscuit makes sure the meeting always starts with a pleasant vibe. We are introducing this great product to more people in more occasions, get bought more often & easier."
— Jamila Xiao, Sales Director/Acting country manager China
This is for the little moments.
At Lotus we are constantly amazed how little things deliver instant pleasure.
And those little things are at the heart of our company. We believe that true greatness consists of being great in little things. We want people all around the world to enjoy these little moments.
2018 was a year to be proud of. A year with many commercial highpoints, a fantastic acquisition and some great investment projects making good progress.
2018 was a year with many wide-ranging achievements to be proud of. Here are a few examples: Lotus Bakeries was ranked second for the company with the best reputation in Belgium. We launched brand-new packaging for our Lotus Biscoff range. A splendid design that looks great on the shelf in store. We also achieved a production record in the factory in Lembeke: 50 million kilogrammes of biscuits produced. This was partly thanks to the start-up of an additional production line in the third manufacturing hall.
We achieved many successes commercially.
It's important for the future of Lotus Biscoff that we achieve consistent success in large consumer markets such as the US and the UK.
Lotus Biscoff continues to perform strongly in many countries. We are conquering bigger and bigger consumer markets with the taste of our original caramelised biscuits. It's important for the future of Lotus Biscoff that we achieve consistent success in large consumer markets such as the US and the UK.
We are also proud of BEAR's impressive breakthrough in the US. And in the Netherlands and Belgium, distribution of Nākd and BEAR in supermarkets continued to expand.
Last year, we brought all of our distributors for Biscoff and BEAR together for an inspiring Lotus seminar. We can look back on two successful events in the UK and the US, where we brought together people from more than 30 different countries. It was great to see how we were able to inspire this international group.
< Jan Vander Stichele Chairman Jan Boone CEO
Local 'hero' products were also successful once more. For example, in Belgium, the launch of Tartélice went down very well. Dinosaurus is doing fantastically too and we achieved a record market share for the Lotus brand in the Belgian market.
That's not all that happened in 2018. We made a fantastic acquisition in the UK in the summer: Kiddylicious, a market leader in healthy snacking for babies and toddlers, is now part of the Lotus family. Kiddylicious isn't just a good fit for our vision and strategy, the brand also goes well with our other brands belonging to the Natural Foods Business Unit.
Like BEAR and Nākd, Kiddylicious is a young brand and a young company that's growing and developing strongly. To foster this growth, we give these young brands and companies a high degree of autonomy, coupled with support from our international and corporate Lotus vision.
2018 is also the year in which two giga-projects steamed ahead: the construction of the new Biscoff factory in the US and the BEAR factory in South Africa.
At Lotus, we're always looking for the right people to fill vacant positions. So, it gives us great satisfaction that internal Lotus managers are at the helm of these projects. That's not all, it's heart-warming that we can count on many colleagues from the Lembeke factory to make the construction and start-up of the new factory in the US a success.
As of 2018, Lotus Bakeries supports Kusasa, a special educational project in South Africa's Western Cape Province. The people behind Kusasa have built a new primary school and recruited highly skilled teachers to give children from the shanty towns a decent education. Thanks partly to the support of Lotus Bakeries, 150 children receive a good basic education every year and can look forward to a better future.
We want to help make the world a better place for different people in a sustainable way. However, since we realise we can't improve the whole world, we deliberately choose "educational projects for children". We use part of our profits to support these educational projects, making a positive change to the lives of hundreds of children. Besides Kusasa, we also support other educational projects.
Our company is growing, brimming with ambition and health.
In 2019, we'll be opening two factories on two new continents: in North America and South Africa. There's still some hard work to do before we can cut the opening ribbons for these factories, but the projects are on schedule. As a result, by the end of 2019, we'll reach the milestone of 2,000 employees for the first time.
We have plenty to cope with in 2019. Many external factors will affect our business: Brexit, e-commerce, new governments, trade wars and the environment, to name but a few. No one knows exactly how it will all turn out, but Lotus Bakeries is ready to face these challenges in the coming years.
Our company is growing, brimming with ambition and health. And we continue to invest in the right people, at corporate level, in different countries and in our factories. We set the bar high for everyone who wants to join us. That's because we only want Lotus employees who are a strong fit with our culture, a culture of teamwork, ambition and a dynamic approach. We're a dynamic company and we express this to the outside world through our employees.
Jan Boone Jan Vander Stichele CEO Chairman
Biscoff redesign The new design for Lotus Biscoff is launched successfully.
BEAR on TV for the first time in the UK The first national TV campaign for BEAR in
the United Kingdom.
Agreement to transfer BEAR's production activities to South Africa. Lotus will become owner of a brand-new plant for the production of BEAR.
Lotus Bakeries is runner-up for companies with the best reputation in Belgium.
Lotus Bakeries launches two new pastries: Tartélice Chocolat and Tartélice Framboise.
The employees from Lotus Bakeries Corporate sponsor children in South Africa and commit to offer the children they sponsor 12 years of primary and secondary education.
In June 2018, an additional production line went into operation in the third production hall in Lembeke.
Michel Moortgat is appointed to Lotus Bakeries' Board of Directors as independent director.
Acquisition of Kiddylicious Lotus Bakeries acquires Kiddylicious and is now active in the healthy snacking segment for babies and toddlers.
A production record is achieved in Lembeke; 50 million kilos in the last 12 months.
Shell of Biscoff factory in Mebane, US, complete The Lotus Biscoff factory in Mebane is wind-tight and is being fitted out with the necessary utilities.
International Partner Meetings Successful International Partner Meetings in the UK and the US for distributors of Biscoff & BEAR.
Lotus Bakeries supports a second educational project in South Africa, Kusasa, which supports schoolchildren financially, academically and socially.
It's been 30 years since Lotus Bakeries was floated on the Brussels stock exchange (since 2002 Euronext Brussels).
In the second half of 2019, the first Lotus Biscoff biscuits will roll off the conveyor belt in the factory in Mebane, North Carolina, USA. The construction of the factory and the production lines is making steady progress and the start-up team has been recruited.
Last February, it was just a 15-hectare field with a few trees here and there. The same piece of land now houses a Biscoff factory covering more than 11,000 m2 where a billion biscuits can be baked each year and more than 50 people will work by the end of 2019.
From the left to the right: Johan Wilms, Bart Vanterwyngen, Els Van Parys, Jan Boone, Isabelle Maes, Dick Pouwels
The first meeting with our future plant team was hugely inspiring. It's fantastic to see how enthusiastically this team is working to make the new factory a success!
Johan Wilms, Sourcing & Finance Director
Bart Vanterwyngen, Operations Director
The new production facility for BEAR is currently under construction. In the course of 2019, the integration of the factory, along with control over BEAR's production process and know-how, will be complete.
From the left to the right: Annelies Santens, Els Rutsaert, Jan Boone, Isabelle Maes, Donald Matheson, Brechtje Haan
It's a unique experience to be part of this story: not many people get the opportunity during their career to help design and build a new factory in a country like South Africa.
Els Rutsaert, Corporate Quality Manager
I'm most looking forward to welcoming 300 new colleagues into the Lotus family. The BEAR team in South Africa is extremely proud to be relocating to the new factory and be part of the ambitious and international Lotus Bakeries.
Brechtje Haan, General Counsel
REBIT (in millions of EUR)
89.4 95.0 +6.4% 2017 2018
| Consolidated income | |
|---|---|
| statement |
| IN MILLIONS OF EUR | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| TURNOVER | 556.44 | 524.06 | 507.21 | 411.58 | 347.89 |
| RECURRENT OPERATING RESULT (REBIT) | 95.03 | 89.35 | 83.95 | 64.76 | 49.43 |
| RECURRENT OPERATING CASH FLOW (REBITDA) | 110.34 | 104.33 | 101.60 | 82.58 | 67.02 |
| Non-recurrent operating result | (3.01) | (0.09) | 4.51 | (1.75) | (0.26) |
| OPERATING RESULT (EBIT) | 92.03 | 89.26 | 88.45 | 63.02 | 49.17 |
| Financial result | (3.32) | (2.23) | (2.68) | (0.78) | 0.02 |
| PROFIT FOR THE YEAR BEFORE TAXES | 88.70 | 87.03 | 85.78 | 62.24 | 49.19 |
| Taxes | 20.83 | (22.40) | (23.32) | (16.62) | (12.42) |
| RESULT AFTER TAXES | 67.87 | 64.63 | 62.45 | 45.61 | 36.77 |
| NET RESULT – attributable to: | 67.87 | 64.63 | 62.45 | 45.61 | 36.77 |
| Non-controlling interests | 0.96 | 1.09 | 1.21 | 0.20 | (0.00) |
| Equity holders of Lotus Bakeries | 66.91 | 63.54 | 61.25 | 45.41 | 36.78 |
For definitions see financial supplement.
(in EUR) GROSS DIVIDEND
19.5 EUR 29.0 EUR +48.7% 2017 2018
| IN MILLIONS OF EUR | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| BALANCE SHEET | |||||
| Balance sheet total | 711.57 | 597.49 | 548.00 | 571.22 | 336.99 |
| Equity | 346.93 | 293.21 | 248.46 | 217.53 | 200.63 |
| Investments | 62.70 | 28.24 | 37.50 | 16.07 | 16.55 |
| Net financial debts | 96.15 | 57.20 | 94.06 | 163.86 | 20.20 |
| CONSOLIDATED KEY FIGURES PER SHARE in EUR | |||||
| Recurrent operating result (REBIT) | 118.21 | 111.77 | 105.84 | 82.15 | 63.46 |
| Recurrent operating cash flow (REBITDA) | 137.26 | 130.51 | 128.09 | 104.76 | 86.03 |
| Net result: share of the Group | 83.23 | 79.48 | 77.22 | 57.61 | 47.21 |
| Gross dividend | 29.00 | 19.50 | 16.20 | 14.20 | 12.40 |
| Weighted average number of shares | 803,878 | 799,423 | 793,147 | 788,341 | 778,944 |
| Total number of shares per 31 December | 815,733 | 814,433 | 812,513 | 811,863 | 803,013 |
For definitions see financial supplement.
"My favourite Nākd bar is Coffee Walnut: it was only launched this year in the Netherlands, but I already prefer it to all the other 'mind-blowing' Nākd flavours. As a healthy alternative to Biscoff with my morning coffee, I like to eat this new Nākd version that goes well with the taste of coffee."
— Leon Broer, General Manager Natural Foods Sales Offices Europe
| Message from the Chairman and the CEO . 5 |
|
|---|---|
| 2018 at a glance . 8 |
|
| Consolidated key figures 2018 . 16 |
| 1. | Mission statement and strategy Lotus Bakeries | 26 |
|---|---|---|
| 2. | Brands and products . | 31 |
| 3. | Lotus Bakeries 2018 . | 46 |
| 4. | Organisation . | 59 |
| - Group structure and day-to-day management . |
59 | |
| - Sales structure |
62 | |
| - Production sites . |
63 | |
| - Personnel . | 65 | |
| 1. Activities in 2018 68 |
|---|
| - Market situation and sales results in 2018 . 68 |
| - Main projects and investments . 69 |
| - Successful acquisition and integration of Kiddylicious into |
| growing Natural Foods business unit . 70 |
| 2. Financial information . 71 |
| - Profitability and evolution of costs . 71 |
| - Principal risks and uncertainties . 71 |
| - Financial instruments . 74 |
| - Research and development, innovation and sustainability . 74 |
| - Significant events after 31 December 2018 . 74 |
| 3. Prospects for 2019 . 75 |
| 4. Results and proposal for appropriation of results . 76 |
| 5. | Corporate Governance Declaration . | 77 |
|---|---|---|
| - Share capital . | 77 | |
| - Shareholders and shareholding structure . | 79 | |
| - Board of Directors and committees of the Board of Directors . 80 | ||
| - Executive Committee . | 85 | |
| - Remuneration report . | 85 | |
| - Internal code of conduct . | 90 | |
| - Internal control and risk management . | 91 | |
| - Announcements according to article 34 of the Royal Decree | ||
| of 14 November 2007 - protective constructions . | 93 | |
| - External audit . | 93 | |
| FINANCIAL STATEMENTS . | 99 | |||||
|---|---|---|---|---|---|---|
| Consolidated financial statements | 101 |
| Abridged five-year financial summary Lotus Bakeries Group | 104 | ||
|---|---|---|---|
| ----------------------------------------------------------- | -- | -- | ----- |
| RESPECT FOR TOMORROW' . | 107 |
|---|---|
"My favourite Kiddylicious product is our Mini Coconut rolls, simply because they taste so delicious that both babies and parents love them! It was the first coconut product on the baby fixture, and they are gluten, dairy and nut fee, ideal for little ones exploring new tastes and textures."
— Dee Bulsara, Marketing Director Kiddylicious
PROFILE LOTUS BAKERIES CHAPTER 1
Lotus Bakeries is active worldwide in the snacking segment with the Lotus, Biscoff, Dinosaurus, Peijnenburg, Annas, Nākd, TREK, BEAR and Kiddylicious brands. By maintaining a healthy balance between tradition and innovation, Lotus Bakeries indulges consumers with a unique range of high-quality, tasty products. Lotus Bakeries aims to offer every consumer a versatile range of responsible and tasty snacks for every consumption moment. The biscuits, waffles, cakes, gingerbread and natural snacks our company offers do not need to be a decisive moment in consumers' lives, but create a moment of pleasure, cheerfulness and joy. With the unique taste experience of its products, Lotus Bakeries wants to be an established part of consumers' daily lives, in as many countries as possible.
In order to realise this ambition and achieve sustainable growth, Lotus Bakeries has a clear strategy in mind, centred on building brands. This strategy is based on three pillars.
The first pillar focuses on the globalisation of Lotus Biscoff and Lotus Biscoff spread. Lotus Biscoff has a highly unique but accessible flavour, with a subtle caramel touch. Lotus Bakeries believes in the universal character of its original caramelised biscuit, and consequently its original caramelised biscuit spread. These products enjoy success across national borders and cultural differences—a quite exceptional situation in the food sector. Lotus Biscoff is now enjoyed in some sixty countries. This success supports the ambition of globalisation.
To support the further internationalisation of Lotus Biscoff, Lotus Bakeries operates in fourteen countries with its own sales offices and its own sales teams. Cooperation also takes place with local commercial partners in more than fifty countries and via their channels, we launch our products in new markets. We conquer the markets with our brands by approaching consumers first in hotels and restaurants and seducing them with the taste of our products. The next step is the shop shelf. Here, we want to gradually gain a more prominent place on the shelves with displays and promotions. The more households are familiar with our products, the better. Once a substantial percentage of households within a particular region consumes our products, we can start airing TV commercials to continue to grow steadily.
With the second pillar, we target a second international growth area, natural and healthy snacking. Following the acquisitions of Natural Balance Foods and Urban Fresh Foods in 2015, for the BEAR, Nākd and TREK brands, Lotus Bakeries initially focussed on their home market, the United Kingdom. Our existing sales organisations have achieved initial international successes for these brands in the Netherlands, Belgium and France. BEAR has also managed to penetrate the highly competitive retail market in the United States.
In 2018, Lotus Bakeries invested further in natural and healthy snacking with the acquisition of Kiddylicious, the fastest growing brand in the baby snacking category in the United Kingdom. Internationally, the brand has taken its first successful steps in Australia, China and Norway. This brand will also be further internationalised.
Since every strong brand has a proper personality, specific DNA and its own consumers, brand ownership is kept separate for each brand. Parallel to this, we focus strongly on our unique capacity to stimulate growth through our extensive international network of sales offices and commercial partners, across all brands.
Finally, there are our local core brands, the 'hero' products. We are present in Belgium, the Netherlands, France and the United Kingdom with a wide range of local 'hero' products: biscuits, waffles, cakes, gingerbread and natural snacks. We want to develop these already strong market positions by investing continuously in this wide range. In this way, Lotus Bakeries strengthens its position as market leader in the relevant subsegments. Belief in 'hero' products is great. It is no coincidence that, when making acquisitions, Lotus Bakeries has always focussed on companies with a strong brand, exceptional products and a strong market position in the home market of the company concerned. We are firmly convinced that, by paying attention to these local 'hero' brands in their home market, we can elevate these products from 'hero' to 'superhero'.
MISSION STATEMENT LOTUS BAKERIES
Lotus Bakeries wishes to base its sustainable growth and profitability on offering present generations a versatile range of responsible and tasty snacks for every consumption moment, without compromising the opportunities for generations to come.
Ever since Jan Boone senior founded Lotus Bakeries in 1932, the Lotus brand has been inextricably linked with original caramelised biscuits: a thoroughly Belgian product whose typical taste is due to the caramelisation during the baking process. Thanks to the acquisition of strong brands, the Lotus Bakeries Group is now active in both a broad traditional snacking segment and the natural snacking segment.
The global brand portfolio is of invaluable importance to the Lotus Bakeries Group. In both the category of biscuits and bakery as well as in the natural snacking category, we have strong brands which we intend to develop in the long term. We implement our marketing strategy by continuously investing in our 'hero' brands in our home markets whilst also stimulating the international growth of brands such as Lotus Biscoff, Nākd, TREK, BEAR and Kiddylicious. Every Lotus Bakeries brand has its own DNA and target group, and its own story.
Lotus Biscoff biscuit Our caramelised biscuits only contain carefully selected ingredients and are free from artificial colourings and flavourings. The superior quality is reflected in the brand name. It refers to the lotus flower, the ultimate symbol of purity. With its iconic shape and jagged edge, our original caramelised biscuit is gradually conquering the world.
Outside the home markets of Belgium, the Netherlands and France, Lotus original caramelised biscuits are marketed under the brand name 'Lotus Biscoff', a contraction of 'Biscuit with coffee' and a reference to the complementarity of the two tastes. Whenever coffee and Lotus Biscoff biscuits are consumed together, the two flavours lift one another to a higher level. Our international strategy therefore consists in introducing new consumers to Lotus Biscoff during their regular coffee time.
Lotus Biscoff spread Our Lotus Biscoff spread is a spreadable, sweet spread with the familiar, unique taste of Lotus original caramelised biscuits. There are two varieties: crunchy and smooth. Both varieties offer an original, delicious alternative to traditional spreads. However, as well as being delicious on bread, this perfectly spreadable spread is also a favourite ingredient for desserts.
In 2018, a new version of this product was launched in the US, Lotus 'Biscoff & Go'. This snack combines delicious Lotus Biscoff spread with small breadsticks in a handy format to eat on the go.
Lotus Biscoff ice cream Lotus Biscoff ice cream is a soft-scoop ice cream containing crunchy pieces of Lotus Biscoff biscuits and Lotus Biscoff spread. The ice cream is available in a family pack or in individual portions with the Lotus Biscoff ice cream cup. The ice cream range also includes Lotus Biscoff ice cream on a stick, mini-ice cream on a stick and an ice cream cone. The ice cream on a stick is made up of a core of Lotus Biscoff ice cream covered in a layer of crunchy Lotus Biscoff spread with a final coating of cracking real Belgian chocolate. The cone is filled with Lotus Biscoff ice cream, with a topping of Lotus Biscoff crumble and Lotus Biscoff spread.
Lotus cakes Lotus Bakeries also offers consumers in Belgium a wide range of cake specialties, including Frangipane, Madeleine and Zebra. In 2017, the entire Lotus Zebra range was updated, with new, individual packaging, an improved recipe and an extra variety, Zebra Double Chocolate, a light chocolate cake with jam and a chocolate coating. Following the successful redesign of the Lotus Biscoff range, the packaging design of other cake specialties such as Frangipane, Madeleine and Carré confiture was also modified. Last year, the range also saw the relaunch of Lotus Tartélice apple and the launch of two more varieties, Lotus Tartélice raspberry and chocolate, little round tarts that melt in the mouth, with a jam or chocolate filling.
Dinosaurus These crunchy biscuits are made from a balanced combination of high quality ingredients. In 2017, Lotus Dinosaurus was given a special brand-new look including new packaging and packaging formats. The brand inspires and motivates children and young people to discover the world, face challenges and let their imagination run wild. They can count on Lotus Dinosaurus for the energy they need.
Besides the three basic varieties—milk chocolate, dark chocolate and wholewheat—the range also includes 'Lotus Dinosaurus filled', a round biscuit with a light filling of Belgian milk or dark chocolate. In 2017, Lotus Dinosaurus Minis were added to the range. These are handy bags for eating on the go, that contain the familiar basic variety—with milk chocolate or in a cereal version—in mini-format.
Suzy Lotus Bakeries markets a waffle with pieces of pearl sugar as well as a vanilla waffle under this brand, plain or covered with dark chocolate. The waffles stand out thanks to their high quality, taste and texture. There are several formats: the classic format, the XL version and the mini-version.
The figurehead of Lotus Suzy is the young lady of the same name who promotes the waffles from her retro van, winning many hearts in the process. Through her presence at heartwarming occasions with family and friends, Suzy always makes a difference. The packaging of the waffles and the communication around the brand exude the same atmosphere.
Peijnenburg When baker Harry Peijnenburg started selling his freshly baked gingerbread in Geldrop in the Netherlands in 1883, the Peijnenburg brand was born. The gingerbread was an instant hit and over the years the bakery grew into a proper factory.
Peijnenburg stands for moist gingerbread made from specially selected rye and spices, according to a traditional preparation and baking process.
Peijnenburg offers gingerbread in a variety of flavours and different formats, including Peijnenburg Zero, a variety with no added sugar. The gingerbread contains only natural sweeteners, without affecting the taste, moistness or structure.
Snelle Jelle In 2002, the Dutch brand Snelle Jelle was born. This tasty wholemeal gingerbread snack is packed with carbohydrates and handy to eat on the go. Snelle Jelle focuses on a target group of sporty men and women looking for natural energy for their activities.
Snelle Jelle is a hit and is currently available in eight different flavours. There are also handy takeaway formats, including 'Snelle Jelle Tussendoor': small gingerbread bars with the same familiar taste. Following the success of Peijnenburg Zero, the Snelle Jelle range was expanded to include several flavours of Snelle Jelle Zero, a tasty gingerbread with no added sugar.
Annas The Annas brand dates from 1929, the year in which Anna and Emma Karlsson opened their bakery near Stockholm (Sweden). There they baked the typical Swedish speciality of pepparkakor biscuits: thin, crunchy biscuits flavoured with ginger and cinnamon.
Annas is a success story in its home markets of Sweden and Finland. The biscuits can also be found on the shelves in some twenty other countries, including the US, Canada and a number of Asian markets.
There are now four different flavours, as well as an Annas variety with organic ingredients bearing the EU Organic Logo. Although Annas pepparkakor biscuits are available all year round, in Scandinavia they are especially popular during the Christmas period. Special Annas pepparkakor houses are also sold there at that time of the year.
For the 2018 pepparkakor season, Lotus Bakeries launched a limited edition of Annas in Sweden - Annas Knäck. Annas Knäck has a deliciously sweet caramel flavour, which, combined with the classic character of the ginger biscuits, creates a perfect sweet and slightly spicy taste.
Nākd With uncomplicated snacks and bars, Nākd's approach is 100% natural.
The raw, all-natural ingredients—fruit and nuts—are unprocessed (cold pressed), never baked and wheat, lactose and gluten free. Nākd bars contain no added sugars, syrups or other additives.
Nākd is available in more than 25 different flavours. Each variety has its own bright, appealing name and packaging. The ambition? To turn every natural snack into a feast.
TREK TREK shares Nākd's natural philosophy, but these snacks are also packed with protein. The nutritionally balanced energy bars and flapjacks help keep blood sugar levels stable and supply long-lasting energy. This makes TREK ideal for anyone wanting a handy energy boost during or after playing sports.
The bars are made from different kinds of fruit and gluten-free cereals with extra protein crunchies. The gluten free cereals in the flapjacks give a healthy boost. The snacks are available in ten different flavours, including Peanut Power, Cocoa Coconut and Cocoa Oat.
BEAR BEAR offers an extensive range of healthy snacks and breakfast cereals. The snacks are made from pure fruit (not concentrate) and vegetables. The philosophy behind the brand is as simple as it is ambitious: making families happier and healthier with products that children enjoy and their parents can trust.
The innovative range of healthy snacks from BEAR includes Yoyos (fruit rolls), Paws (fruit snacks for toddlers) and Claws (shapes made of one third vegetables and two thirds fruit). BEAR only uses gently baked, freshly picked seasonal fruits. The products are free from added sugars, concentrate, preservatives and stabilisers.
BEAR Yoyos make it easier for parents to get their children to eat more fruit. Every Yoyos pack contains a set of cards to collect, to make it even more fun. BEAR Paws are the first ready-to-eat snack for toddlers made from pure fruit. This snack contains a fun element too: matching the shape with the correct animal encourages shape recognition.
Kiddylicious Kiddylicious was founded by Sally Preston in 2009 to help deliver delicious, nutritious food for little ones.
The brand includes an extensive range of responsible snacks which are healthier than alternative snacks consumed by children. Most products have no added sugars or salt and the majority of the range is free from dairy, lactose, gluten and allergens. The Kiddylicious brand—of which the most important products are Wafers, Veggie Straws and Melts—aims to offer a solution to busy parents looking for portion-controlled snacks that also benefit each stage of development.
Due to its diverse and innovative portfolio of baby snacks and meals, Kiddylicious is the fastest growing brand in the UK baby food market and has become a must-stock brand for all major retailers. The brand has also taken its first successful steps internationally, with four Kiddylicious snacks being consumed per second globally.
'Care for today, respect for tomorrow': that is the slogan of Lotus Bakeries' sustainability programme. Not hollow words, but a real plan which the company is putting into practice—partly by supporting two educational projects in South Africa financially. "We deliberately chose educational projects", explains Corporate Director Quality, Procurement & R&D William Du Pré. "Because education is a way of rescuing children from the vicious circle of poverty."
Lotus Bakeries' sustainability programme consists of the pillars of people, society, environment and employees. Supporting the South African educational projects comes under the pillar of society, according to William. "Education is an important way of rescuing children from poverty." Because someone who has access to education also has the opportunity to learn a profession. Learning a profession means that you have a chance of employment and earning an income."
Lotus Bakeries preferred projects that take a broad view of education and want to raise standards. For example, by releasing funds for good teachers who not only believe in what they do, but also have the right skills to offer a broad education. "In the end, we chose two educational projects in South Africa. We are convinced that our support for these projects can make a difference and that we're making a fundamental contribution.
Education is a way of rescuing children from the vicious circle of poverty. In this way, we empower them, increase their assertiveness and develop their talents.
We know that we're helping the children with their own personal development, as well as making an impact on their wider environment."
Firstly, there's Doug Gurr's worthwhile Kusasa project, which started in 2006 and enables around 150 children to go to school. Besides this, the organisation serves 1,000 meals a day at local crèches and schools. "So, it's about more than just education: the project focuses on healthy food for the children, who often have nothing to eat, but also makes them aware of their talents, enables them to develop these talents and boosts their assertiveness", says William enthusiastically.
Also in South Africa, Lotus Bakeries has made a long-term commitment by supporting a second educational project financially and by engaging in godparenthood of around 100 children. "The financial support
Supporting these projects is clearly a personal passion for William. In February, he even visited the Kusasa project for himself. "Both projects are situated in a region where there's lots of poverty. That's why we decided to support this area", he says. The fact that Lotus Bakeries is building a new production site for the BEAR range in the same region also played a role. "Soon, we'll be employing more than 300 people there. Perhaps the children we currently support will work for our company one day. But at the moment it's a pipe dream. For now, it's about empowering them, increasing their assertiveness and allowing them to develop their talents. We firmly believe in the importance of this. We're determined to maintain our commitment in future."
comes from the company, while the employees from the corporate department are the godparents and get to build up a one-toone relationship with their sponsored child", says William. "Our employees get to know their sponsored child and letters and school reports are exchanged. They support a child from their first year at primary school to the final year of secondary education, meaning that we're committed for around 12 years. Our employees responded very enthusiastically when we started this initiative. They commented spontaneously that they were proud to work for a company that organises this."
William Du Pré, Corporate Director Quality, Procurement & R&D
Mid-2019, the first Lotus Biscoff biscuits to be produced outside Belgium will roll off the conveyor belt in Mebane, USA. There are many challenges involved in the lead up to this, but the core team for the new factory is determined to overcome them. By recruiting the right people in the US, but also—above all—working closely with the experts in Lembeke, for the first time in Lotus' history, we will manage to transfer the expertise, but also the spirit of Lotus Bakeries to another continent.
Lotus Bakeries is starting its production activities from scratch in the US, gradually building a new plant. "This means that new people have to be recruited, and the success of this project starts there", says Johan Wilms, Sourcing & Finance Director. "It's crucial for us that they convey the same values as the people in Lembeke. That they prioritise team spirit, open dialogue and passion. In Belgium, we're all ambassadors for the Lotus family. We're passionate, set the bar high and want results. That ambassadorship can't be taught. It comes from the heart. We've already managed to recruit a passionate and ambitious plant management team, who will lead the new plant. They're the core of our future, so we're investing heavily in their training."
Plenty of knowledge, experience and technical expertise has to be exchanged before the new plant is ready to go into operation. R&D experts, engineers, operators, bakers, dough-makers, technical experts and packaging specialists: more than 30 people make up the support team in Lembeke that keeps the transfer of expertise between Lembeke and Mebane on track. "We don't just want to share knowledge and experience, but also the Lotus spirit", continues Els Van Parys, Programme Director. "Working together towards the same goal and continuously improving are key here." Members of the American team will therefore travel to Lembeke to learn from their colleagues, and employees from Belgium will also travel the other way to the US. In addition, each member of the plant team has been assigned a counterpart in Lembeke, who will support and train their American colleague during the start-up phase.
A passionate and ambitious plant management team will lead the plant in Mebane. They're the core of our future. So we're investing heavily in their training.
Johan Wilms, Sourcing & Finance Director
Veronique Onselare and Ruth Lopez—the former is production manager in Lembeke, Ruth is her counterpart in Mebane—agree with this. "It's crucial for Lotus Bakeries employees from the US to come to Belgium and experience what Lotus stands for", Ruth believes. "So they realise that they aren't just going to make a product, but build a brand. Personally, I always feel really proud when I see how big Lotus is in Belgium, and think that I can be part of that here. Fortunately, everyone in the US is at least as enthusiastic as I am."
Bart Vanterwyngen, Operations Director, Els Van Parys, Programme Director and Johan Wilms, Sourcing & Finance Director
"For the new people we're recruiting in the US, it's actually an incredible opportunity to join that very first team", continues Els. "But it's also amazing how many people in Lembeke are prepared to offer support and share their experience with the plant in the US. That surprised us, but not really. It gives us great pleasure to see how proud people are of their product. And how keen they are to share this with the new plant. We feel the Lotus passion in that. Our colleagues feel that this is an important milestone, and are really pleased to be part of it."
Veronique shares that feeling. "I'm especially proud to be part of the support team and be able to share my 20 years' experience as production manager with our new colleagues in Mebane", she says. "Soon, I'll be spending more time in the US myself. Because, naturally, production has to carry on in Belgium in the meantime, my team leaders are taking over It's amazing how many people in Lembeke are prepared to share their experience with the new colleagues. We can feel the Lotus passion in that.
Els Van Parys, Program Director
Left: Veronique Onselaere, production manager Lembeke Right: Ruth Lopez, production manager Mebane
my tasks temporarily. They're trained for that, and they're supported by my manager. So we can cover this year."
Bart Vanterwyngen, Operations Director of the new plant, is also finding that, generally speaking, preparations for the new production site are going smoothly. "The challenges lie in the fact that everything seems to be a little bit different in the United States. Raw materials, packaging materials, construction techniques: we couldn't simply transfer everything, there always had to be a transition." Fortunately, there is a solution to every challenge. When it comes to purchasing ingredients and packaging materials, purchasing and R&D work closely together and a great deal of testing is carried out in Belgium.
Biscoff will be made in the US using local ingredients. This process has also been tackled step by step. "We brought the American ingredients to Belgium and tested them—separately at first and then together", explains Veronique. "We now have a biscuit that's been produced in Belgium using ingredients from the US and approved by the management. Now we have to make the same biscuit at the new plant in the US. There's still some way to go, but we're really determined and fully confident that we'll succeed. We have the knowledge, the team and the experience to make it a success."
For the technical side, ideas were shared with the Belgian engineering team, so that the years of expertise gained in Belgium could be incorporated into the American design. "Meanwhile, we've also been working with strong local partners who're very familiar with the laws in the US. This makes that the plant in Mebane is a truly American plant, incorporating the Lotus expertise", Bart adds.
Now that construction and fitting-out are complete, testing can begin on the new site. "Here on the spot, you can feel the drive, and we're finding that everything is gathering pace as we approach the start-up", says Bart. "But we have every confidence that we'll keep to the timing. By the end of 2019, we hope to have completed the start-up without incident. We want to increase the workforce in the American plant to 50 employees, then there will be a full three-shift operation. If we can then deliver the same Lotus quality as in Lembeke for a decent return, we'll feel really proud."
The challenges lie in the fact that everything seems to be a little bit different in the United States. Raw materials, packaging materials, construction techniques: we couldn't simply transfer everything, there always had to be a transition.
Bart Vanterwyngen, Operations Director
As this annual report goes to press, 12,000 miles south of Belgium—in South Africa—they are working hard on a new production facility for BEAR. The new factory is a major step in the ongoing process of marketing and internationalising the 100% natural fruit snacks, which Lotus Bakeries acquired in 2015.
"When we acquired BEAR, we wanted to own the whole supply chain too", says Isabelle Maes, CEO Natural Foods. "So we're in control of the whole chain: from buying the ingredients, to marketing the end product. Straight after the acquisition, we began talks with the co-manufacturer in South Africa. At our request, our co-manufacturer is now building a new factory that will only make BEAR products. Once it's operational, we'll transfer production and take ownership of it."
The new factory is situated in one of the largest fruit-growing valleys in the world: the fertile Ceres Valley, where the ingredients for BEAR are freshly picked. "So, it makes sense to stay here", says Donald Matheson, Operations Director Urban Fresh Foods. "BEAR production is also labour-intensive. It's made from apple and pear puree, which are gently baked, then cut and rolled. Of the 350 employees who currently do this, almost everyone will move with us to our new production site. So we're bringing all of our skills and expertise with us."
Lotus Bakeries will be one of the largest employers in the region, and we're proud of that. "Unemployment is very high", says Isabelle. As a leading employer in the region, we can make a difference to the local community. The new factory on the edge of town will be more involved in the community than the current site, which is in a remote area. So, we're already building bridges with the locals."
"The brand is doing well in our home market, the UK, and since 2016 we've also expanded internationally", explains Donald. "The US will probably become the second largest market, and we're making progress in Europe too—in countries like Belgium and the Netherlands. The factory is being built to have triple our current capacity and on top of this there's enough land to increase the surface area of the factory too. The gov-
When we acquired BEAR, we wanted to own the whole supply chain too. So we're in control of the whole chain: from buying the ingredients, to marketing the end product.
Isabelle Maes, CEO Natural Foods
Isabelle Maes, CEO Natural Foods & Donald Matheson, Operations Director Urban Fresh Foods
ernment has already welcomed us enthusiastically as an international investor and sees us as an example for other companies. Because we market a healthy product, employ lots of people and invest in the region."
The site will be ready by mid-2019, while the project only started in the spring of 2018. "Of course, it's not easy managing a project that's about 12,000 miles away from the Northern Hemisphere", says Donald. "We have to deal with a different legal system, different building regulations and so on. But all difficulties are overcome by working very closely with our partner, who brings experience and knowledge and also listens to our input."
Isabelle agrees. "We arrive with our European background, but things are very different there. For example, we take utilities for granted, but in South Africa there's not always water or electricity. Our co-manufacturer has experience of this and maintains good relations with the local community. We couldn't have done it without them. After the factory is finished, the current manufacturer will continue to work closely with us for a while. So we continue to guarantee the same quality as before."
It's clear that Lotus Bakeries believes in the new factory and fully backs BEAR's potential. "The Natural Foods division is becoming a bigger and bigger part of our business. The size of the investment and the future scale of the factory confirm that we believe in BEAR's growth", confirms Donald.
It is one of Lotus Bakeries' ambitions to make Lotus Biscoff big outside of Belgium, and in the UK we've made excellent progress in doing this. In 2018, we increased our sales by a quarter on our branded portfolio within the retail and out-of-home (OOH), and around 864,000 new households discovered the taste of Lotus Biscoff for the first time. "A fantastic result that's down to our first nationwide TV commercial in the UK and the hard work of the whole team", says Country Manager Mark Staniforth.
Lotus Biscoff's excellent growth figures in the UK did not come out of the blue. The brand has already been on the market there for over 15 years, and has made great progress in the last few years. The UK's strong sales performance in 2018 comes off the back of a great year in 2017 where overall sales, for instance, rose by 17%. "We've increased this by a quarter in 2018", says Mark. "And we're really proud of that."
Lotus Biscoff's excellent figures for 2018 are partly due to the fact that, for the first time, the company invested in national TV advertising in the UK. "The commercial—with footballer Eden Hazard as brand ambassador—had a huge impact on our sales following the first wave in February last year", explains Mark. "On the back of this, our household penetration also increased with 864,000 new households. We reached up to 20 million households who saw the advert at least twice during the whole campaign." So, investing in TV was clearly a good decision.
Supporting the TV campaign with a fully aligned promotional plan led to a record number of in-store second placements. "Before it was never easy to get second placements with certain retailers, but this year we managed to deliver a record number", Mark continues. "On top of this we saw the expansion of the Biscoff range within traditional retail, value discounters and the convenience channel. That means we're delivering growth in all channels in retail. So consumers come across our brand wherever they shop."
We're delivering growth in all channels in retail. So consumers come across our brand wherever they shop.
Mark Staniforth , Country Manager UK
On the back of the success in retail, the UK continues to focus on delivering great memory structures within OOH. "Our OOH team continues to deliver good growth on the 1p, which is fantastic given the scale of our OOH channel in the UK", explains Mark. "On top of this, we are also seeing that more and more companies are using Lotus Biscoff spread as an ingredient. This also means that more and more consumers are discovering the unique taste of Lotus Biscoff. "We can't measure the impact of this exactly, but we feel that it's reinforcing our household penetration and is increasing the awareness of the Lotus Biscoff brand."
With these results, Mark is obviously proud of Lotus Biscoff's performance in the UK. "This result is down to the dedication of our whole team in the UK and to the personnel at the head office in Belgium who support us extremely well. We'll continue to forge ahead along the same path in 2019 where we hope to convince even more households to enjoy our brand and to discover more Lotus Biscoff products. It promises to be another exciting year ahead!".
This result is down to the dedication of our whole team in the UK and to the personnel at the head office in Belgium who support us extremely well.
In 2018, Lotus Bakeries acquired Kiddylicious, an innovative British food company that creates delicious, nutritious snacks for little ones. In the UK, it has built up a tremendous brand awareness and market position in the space of ten years. And now it is also making progress internationally.
It all began about ten years ago when former food scientist and mother of two Sally Preston was looking for responsible snacks for her growing children. "I was looking for something that was healthy and tasty. So, as parents, we could feel good about the choices we were making for our children, and they enjoyed eating the snack", she begins. Because such a product didn't appear to exist, she simply developed her own. Today, Kiddylicious offers a wide range of snacks for children aged six months to four years, spanning the various learning stages a child goes through during their development from infant to toddler and pre-schooler.
"But we believe portion control is just as important, so children don't eat too much", Sally continues. Each of our products is also nutritionally balanced, giving children something to eat that's tasty but also responsible: that felt like a winning combination to us."
The power behind this idea is demonstrated by Kiddylicious' performance in its home market, the UK. It is currently the second largest player in the market, and the company aims to become the market leader in 2019. Sally attributes this success partly to the loyal group of parents who recommend Kiddylicious to other parents. "Mouth-to-mouth advertising is what's made us big. There's also our broad range, through which we Kiddylicious is the growth driver in the category of baby and toddler snacks in the UK.
Sally Preston, founder Kiddylicious.
Neil Mather, Commercial Director Kiddylicious
Twan Thorn, Managing Director Kiddylicious and Sally Preston, founder of Kiddylicious
take young parents on a journey from a simple wafer for babies from six months to more complex and interesting products for when they're older."
Retailers were also enthusiastic about Kiddylicious, with its strong focus on product innovation. "Since we bring real innovation, we've become the growth driver in the category of baby and toddler snacks in the UK. This means that retailers give us more space on the shelf, and we see our turnover increase", says Sally.
For Lotus Bakeries, the acquisition completes the range of the Natural Foods division. "For us, Kiddylicious was a logical next step following the acquisition of Nākd, TREK and BEAR", adds Managing Director Twan Thorn. "Now we can offer healthy, natural snacks for babies and toddlers too. What's more, we're not just entering a new segment, we're also discovering a new way of working. The experienced and enthusiastic team behind Kiddylicious is really agile and innovative, and that's crucial for success. It's just as crucial that we keep it like this and build on it day by day. In 2019, we'll be relocating to brand-new offices and recruiting several new employees so we're ready to support all aspects of future growth."
Finally, for Lotus Bakeries, there's also the international growth potential of the brand. "We currently also sell Kiddylicious abroad", adds Neil Mather, Commercial Director. "Over 100 million wafers were sold worldwide in 2018. Lotus Bakeries' strength in Europe and Southeast Asia will give our growth an extra boost. However, a challenging factor is that food regulations vary from country to country. But we're an agile business that can meet the requirements of the various countries quickly and flexibly. That gives us a competitive advantage."
From left to right: Bart Bauwens, Ignace Heyman, Els De Smet, Michelle Singer, Mike Cuvelier, Twan Thorn, Ronald Drieduite, William Du Pré, Isabelle Maes, Paul Hunter, Jan Boone, Leon Broer, Jean-Philippe Kloutz, John Van de Par, Han van Welie
The Executive Committee ('EXCO') determines Lotus Bakeries Group's strategy and objectives and submits them to the Board of Directors for approval. This strategy is implemented by the country and regional organisations ('areas') in the different business units, supported by the corporate departments.
Corporate Controlling / Treasury / Tax Corporate R&D Corporate Quality & Food Law Corporate Procurement Global Brand (Biscoff / Dinosaurus) Corporate HR ICT (IT/SAP) Legal, IP & Corporate Communication
Jan Boone has been CEO of Lotus Bakeries Group since 2011 and leads the members of the EXCO on a day-to-day basis. He began his career in the audit department of PwC. From 2000-2005, he was responsible for corporate controlling, reporting and M&A at pharmaceutical company Omega Pharma. He sat on the Executive Committee and Board of Directors there. Jan joined Lotus Bakeries as General Manager and Director in May 2005.
Isabelle Maes is CEO Natural Foods within the Lotus Bakeries Group. She began her career as an auditor for PwC. In May 2001, she moved to the Barry Callebaut chocolate company. Having fulfilled various roles and been involved in various projects in Finance and SAP, she was appointed Finance Officer of Barry Callebaut Belgium in 2006. Between 2014 and 2017, Isabelle fulfilled the role of CFO at Lotus Bakeries Group. So as to be able to dedicate herself fully to the internationalisation and growth of the natural snacking segment, she has fulfilled the role of CEO Natural Foods since September 2017.
Ignace Heyman is COO of Lotus Bakeries Group. He pursued a career in marketing in both Belgium and France, firstly at Procter & Gamble, PAB Benelux (Panzani-Amora-Blédina) and then at Reckitt Benckiser. In 2008, Ignace joined Lotus Bakeries as Marketing Director Belgium, before going on to become Corporate Director Marketing in 2011. From mid-2012 to the end of 2015 he was General Manager France.
William Du Pré is Corporate Director Quality, Procurement and R&D, in charge of these corporate departments. William's career with Lotus Bakeries began in 1982. Over the years, he has occupied a variety of sales roles. He has been General Manager Belgium for almost ten years (2007-2015).
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William Du Pré - Corporate Director Quality, Procurement and R&D Ignace Heyman - COO Jan Boone - CEO Isabelle Maes - CEO Natural Foods Mike Cuvelier - CFO
Mike Cuvelier has been CFO of Lotus Bakeries Group since September 2017. Mike began his career in 1996 as an auditor for PwC. Between 2000 and 2013 he fulfilled various controlling roles at Bekaert in the US, Asia and finally Vice President Control Global Business Platforms in Belgium. From 2013 to 2016, Mike was CFO of the Unilin Group, part of Mohawk Industries.
Together with the general managers from the various areas within the business units, the EXCO members form the Group Management Team ('GMT'). Each area implements the Lotus Bakeries strategy according to a clearly defined business model. The corporate departments advise and support the Group across all business units and areas and report directly to the EXCO.
Lotus Bakeries has a total of twenty Sales Offices in Belgium (3), France, the Netherlands, the UK (4), Spain, Germany, Sweden, Switzerland, the Czech Republic, Austria, the US (2), Hong Kong, China and South Korea.
International Distributors
In about 50 other countries, we work closely with commercial partners. These partnerships are combined in a separate area: International Distributors. The main countries in this area are Saudi Arabia, Israel, Japan, United Arab Emirates, Kuwait, Italy, Lebanon, Qatar, Jordan and Taiwan.
The business unit 'Natural Foods' combines all of Lotus Bakeries' activities in the natural snacking segment. This business unit covers the Natural Balance Foods, Urban Fresh Foods and Kiddylicious teams as well as the Natural Foods sales teams for Europe and the United States.
Production for the traditional specialities takes place at various Lotus Bakeries sites. To guarantee the typical characteristics of our extensive product range, we deploy various production technologies. Mastering, managing and developing these technologies represent a permanent challenge for Lotus Bakeries Group. We therefore try to limit the number of products and technologies for each production site and to centralise production processes in specialised plants.
Lotus Bakeries has a total of ten production sites. They are spread across Belgium, France, the Netherlands and Sweden. We also have our own distribution centre in Lokeren (Belgium).
| Belgium | The Netherlands | ||
|---|---|---|---|
| Lembeke | Lotus Biscoff, Lotus Biscoff spread | Enkhuizen | Enkhuizer biscuits and cake specialties |
| and Lotus Dinosaurus | Geldrop | Peijnenburg gingerbread | |
| Courcelles | Lotus waffle plant | Sintjohannesga | Peijnenburg gingerbread, Snelle Jelle gingerbread |
| Oostakker | Lotus cake specialties | ||
| Eeklo | Caramelised biscuits, caramelised biscuit spread | ||
| France | Sweden | ||
| Briec-de-L'Odét | Breton butter specialities | Tyresö | Annas pepparkakor biscuits |
| Comines | Lotus cake specialties and filled waffles | ||
In the third production hall at our factory in Lembeke (Belgium), an extra production line became operational in June 2018, capable of producing different portion packs of Lotus Biscoff.
In 2016, Lotus Bakeries announced the location for the construction of the first Lotus Biscoff manufacturing facility outside Belgium, in Mebane, North Carolina (US). In 2018, the foundation works and the construction of the buildings began. According to the project schedule, the first Lotus Biscoff cookies should roll off the conveyor belt in 2019.
In March 2018, Lotus Bakeries Group came to an agreement with the current co-manufacturer of BEAR to take control of the production process for these natural snacks. This involves building a new plant in Wolseley, South Africa. The building works began in September 2018 with production of the fruit snacks scheduled to start by summer 2019.
| Evolution | |
|---|---|
| 2014 | 1,221 |
| 2015 | 1,339 |
| 2016 | 1,464 |
| 2017 | 1,495 |
| 2018 | 1,604 |
| 52.37% Women | |
| BELGIUM | 890 |
| NETHERLANDS | 222 |
| FRANCE | 122 |
| SALES OFFICES EUROPE | 68 |
| UNITED STATES | 23 |
| SALES OFFICES ASIA | 37 |
| INTERNATIONAL DISTRIBUTORS | 10 |
| Number of employees per area NATURAL FOODS |
151 |
"In 2018, we launched Biscoff & Go in the US and I mainly focused with my team on our sales forecast & alignment with supply partners. It is very rewarding to actually find the product in store now and to see it perform so well. Personally, it quickly became one of my favourite snacks on our family day trips: convenient, tasty for the whole family & easy to share !"
— Michiel Bloemen, Director Finance and Supply Chain US
In 2018, Lotus Bakeries Group's consolidated turnover increased by EUR 32.4 million to EUR 556.4 million, representing 6.2% growth. The Group achieved growth of 7% at constant exchange rates. This increase is due to organic growth of more than 5% and the acquisition of Kiddylicious, which is included in the consolidation as from August 2018.
This year, the main organic growth, in absolute terms, came from Lotus Biscoff. The internationalisation of Lotus Biscoff and Lotus Biscoff Spread remains a robust growth area. With strong growth in the United States (US), the United Kingdom (UK), China, Spain, the Netherlands and the Czech Republic, the Group increased its penetration in these countries in 2018, leaving plenty of room for further growth in the future. A positive factor here is that, with Lotus Biscoff, we are gradually conquering larger markets such as the US and the UK.
The new packaging design for all Biscoff products was very well received and is now available in stores worldwide. At the same time, the Group continues to innovate within the Biscoff concept. For example, the innovation Biscoff & Go, a Biscoff spread dip, was successfully launched in the test market of the US this year.
Natural snacks also experienced double-digit growth once more this year, with turnover reaching the EUR 100 million mark. The growth is due to a combination of the acquisition of Kiddylicious on the one hand and organic growth in the UK and the new countries on the other. TREK grew strongly once more and has earned its place as a major brand in the portfolio in the last few years. Besides their leading market position in the UK, distribution of Nākd and BEAR in supermarkets in the Netherlands and Belgium was further expanded. Nākd will be supported by a TV commercial for the first time in 2019, in both the UK and Belgium. The launch of BEAR in the US is a success. Distribution via the retail channel there is growing steadily.
The gingerbread category in the Netherlands has undergone a transition in the last few years, partly through the introduction of Peijnenburg Zero, the no added sugar version. However, the new products were unable to prevent a decline in penetration of the gingerbread category in the Dutch market. Nevertheless, Koninklijke Peijnenburg's market share remained stable. As category captain, Lotus Bakeries aims to reverse the negative trend and bring about growth in the category once more. The management of Koninklijke Peijnenburg is pursuing an integrated plan to achieve this.
In Belgium, Lotus Bakeries continues to gain market share. This is partly due to our focus on local hero products. For instance, new, modern packaging was introduced across the entire cake range, along with several product innovations, such as the successful launches of Tartélice and Mini Dinosaurus. Waffles maintained their growth momentum too.
France experienced strong growth for waffles and Dinosaurus. Media support for waffles and targeted in-store activation for Dinosaurus delivered good results. The efforts to bring profitability more in line with the group are paying off and form a sound basis for future, profitable growth.
In 2018, Lotus Bakeries invested more than EUR 100 million in the acquisition of Kiddylicious and various CAPEX projects.
As follows an overview of the main projects:
As announced at the time of the publication of the half-year figures, the investment plan continues to progress very well. The construction of the manufacturing hall was completed during the second half of the year. The utilities are currently being installed to prepare the factory for the installation of the production lines.
The local management team is now at full strength. Integration and training are in full swing.
The factory will go into operation in the second half of 2019. Then, for the first time, Lotus Biscoff will be made outside Lembeke and even on a different continent.
On 28 March 2018, it was announced that the Lotus Bakeries Group had acquired BEAR's production activities in South Africa from the co-manufacturer, Grassroots. Under the agreement, Grassroots will deliver a brand-new, turnkey production facility by mid-2019. The project team—made up of employees from both Lotus Bakeries and Grassroots has worked hard during the last few months. Construction is on schedule.
In 2016, a third production hall came into service in Lembeke. In 2018, a second production line started up in that hall. The Lembeke factory has achieved another record: for the first time, output exceeded 50 million kilogrammes. The capacity investments in Lembeke and Mebane (US) are necessary so as to continue to meet the demand for Lotus Biscoff in the future.
In 2017, the first phase of the renovation of the cake factory in Enkhuizen (Netherlands) was completed. Two new warehouses have come into service. In 2018, we also completed the second phase of the upgrade with new, modern offices.
The construction of the new offices in Lembeke is on schedule. The facilities will go into service in the second half of 2019.
On 26 July 2018, Lotus Bakeries acquired 100% of the shares of Kiddylicious. This innovative British food company creates delicious, nutritious, portion-controlled snacks for growing babies, toddlers and pre-schoolers.
The acquisition is perfectly aligned with Lotus Bakeries' strategic vision, focussed on food and health, and aimed at offering a versatile range of snacks. For every consumption moment and across all target groups. Kiddylicious is an excellent strategic fit with the Natural Foods business unit, into which it has therefore been integrated organisationally.
Kiddylicious was founded by Sally Preston, who still runs the business, together with her husband, Neil Mather, as Commercial Director. Both have continued in their roles following the acquisition, demonstrating just as much drive and passion for the brand and the business. Together with their team, they have laid the foundations for integration within Lotus Bakeries.
Sally Preston and Neil Mather have now decided that they wish to hand over their operational responsibilities. Consequently, Twan Thorn, current Global Brand Director at Lotus Bakeries, has been appointed as the new Managing Director of Kiddylicious, with effect from April 2019. Sally Preston and Neil Mather will remain closely involved as non-executive directors on Kiddylicious' board.
In the second half of the year, Kiddylicious grew in line with the high expectations. The brand has thus confirmed its position and potential to become market leader in the baby snacking category in the UK. Kiddylicious is flourishing internationally as well. The first steps towards further growth have already been taken.
Through the acquisition of Kiddylicious, Lotus Bakeries has once again demonstrated its strength and speed of execution in a competitive acquisition market for such great growth companies. I would like to thank Sally Preston and Neil Mather for the pleasant cooperation and the passion and dedication with which they have handed over their business. I look forward to their continued contribution as non-executives on the Kiddylicious board.
Jan Boone, CEO
The recurrent operating result (EUR 95.0 million) and recurrent operating cash flow (EUR 110.3 million) increased by EUR 5.7 million and EUR 6.0 million respectively year on year.
With percentages of 17.1% (REBIT) and 19.8% (REBITDA) respectively compared to turnover, Lotus Bakeries Group confirms once more that solid growth goes hand in hand with stable and high profitability.
The sales teams have been reinforced and expanded to support the international growth of Lotus Biscoff. We have invested strongly in media support and the development of international sales teams for the natural snacking category.
The non-recurrent operating result mainly comprises advice and due diligence costs for the Kiddylicious acquisition, and start-up costs relating to major investment projects such as the factory in the US. This explains why the non-recurrent operating result is EUR -3.0 million this year whereas it was still limited last year.
The financial result of EUR -3.3 million is primarily made up of interest expenses. The difference compared with the previous year is mainly due to negative results for exchange rates on balance sheet positions in foreign currencies (EUR -0.8 million).
The tax expense decreased further to EUR 20.8 million or 23.5% of the result before taxes. The tax expense was reduced compared with the end of 2017 due to the lower rates now applying in Belgium and the US.
The net profit increased by 5% to EUR 67.9 million and stands at 12.2% compared to turnover. The recurrent net result, consisting of the reported net result minus non-recurrent costs, rose by as much as 8.5% to EUR 70.2 million.
The text below describes the business risks as assessed by the Executive Committee of Lotus Bakeries. The Lotus Bakeries Group's greatest market risks are fluctuations in raw material and packaging prices, and exchange rates.
The risk of negative consequences of fluctuations in raw material prices on the results is limited by the signing of forward contracts with a fixed price for the most important volatile raw materials. For other raw materials and for packaging, yearly agreements are made when possible.
Purchasing takes place predominantly in euros. On the sales side too, a very significant portion of the turnover is invoiced in euros. The main foreign currency transactions related to buying and selling are in USD, GBP, CHF, SEK, CNY and KRW. Lotus Bakeries Group seeks to net out as far as possible its purchases and sales in foreign currencies, with net foreign exchange risks hedged if necessary by forward and/or option contracts if there is a material unhedged net risk for the Group.
Lotus Bakeries' consolidated financial statements are presented in euros. The operating results and financial position of each Lotus Bakeries company whose functional currency is not the euro have to be converted into euros at the applicable exchange rate for inclusion in the Group's consolidated financial statements. Lotus Bakeries does not hedge against this "conversion risk".
A 5% lower average rate for Lotus Bakeries' key foreign currencies would have had a negative impact on the net profit amounting to a total of 2,066 kEUR. A 5% higher average rate for Lotus Bakeries' key foreign currencies would have had a positive impact on the net profit amounting to a total of kEUR 2,196.
| EFFECT ON THE NET RESULT OF THE LOWER AVERAGE RATE OF 5% (AMOUNT IN kEUR) |
EFFECT ON THE NET RESULT OF THE HIGHER AVERAGE RATE OF 5% (AMOUNT IN kEUR) |
|
|---|---|---|
| USD | (443) | 400 |
| GBP | (1,229) | 1,358 |
| CZK | (136) | 151 |
| Other | (258) | 287 |
| Total | (2,066) | 2,196 |
The interest rate risk is the risk associated with interest-bearing financial instruments and relates to the risk of the fair value or related interest cash flows of the underlying financial instrument fluctuating due to future changes in market interest rates.
Lotus Bakeries Group's objectives with regard to interest rate risks are to reduce fluctuations in income, limit interest expenses in the long term and protect future cash flows against the impact of significant negative interest rate fluctuations.
As part of managing its interest rate risks, where necessary, the Group enters into interest rate agreements to convert a variable rate into a fixed rate. As of 31 December 2018, the financial interest-bearing liabilities (kEUR 115,000) were hedged at a variable rate under such agreements.
A change in the Euribor rate by ten basis points in 2018 would have had an impact on interest expenses amounting to approximately kEUR 91.
The Lotus Bakeries Group opts to conclude contracts as far as possible with creditworthy parties or to limit the credit risk by means of securities.
The Lotus Bakeries Group has a diversified international customer portfolio, consisting mainly of large retail, cash-and-carry and food service customers in various countries. For export outside Western and Northern Europe, the United States, South Korea and China, the Lotus Bakeries Group works on a documentary credit basis or uses credit insurance. Within the Lotus Bakeries Group, there are strict procedures to accurately follow up on customers and to handle possible risks as quickly and as efficiently as possible.
For financial operations, credit and hedging, the Lotus Bakeries Group works only with established financial institutions.
Lotus Bakeries uses an international cash pooling structure for daily cash pooling where possible. Lotus Bakeries also closely monitors the amount of short-term funds and the ratio of short-term funds to its total debts, as well as the availability of committed lines of credit in relation to the level of outstanding short-term debt.
In connection with the acquisition of Natural Balance Foods Ltd. in 2015, put options were granted to third parties with respect to the remaining non-controlling interests, where these put options give holders the right to sell part or the whole of their investment in this subsidiary. A financial liability is shown on the consolidated balance sheet for this, which could potentially result in a larger cash outlay if the acquired entity performs better than forecast in the long-term business plan. Further details are given in note 21 in the financial supplement of the 2018 annual review.
In view of the significant cash flow from operations compared with the net financial debt position, and the available committed lines of credit, the liquidity risk for the Lotus Bakeries Group is low.
Lotus Bakeries aims for a capital structure (the balance between debt and capital) which will give it the required financial flexibility to implement its growth strategy.
Lotus Bakeries strives to keep the proportion of net financial debt (defined as interest-bearing financial debt - monetary investments - liquid assets - treasury shares) and the recurrent company cash flow (REBITDA) at what is considered to be a normal healthy level in the financial market.
| FINANCIAL RATIOS | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| Days customer credit | 45 | 42 | 37 | 45 | 41 |
| Solvency ratio (%) | 48.8 | 49.1 | 45.3 | 38.1 | 59.5 |
| Net financial debts / REBITDA* | 0.87 | 0.55 | 0.93 | 1.98 | 0.30 |
| Net profitability of equity (%) | 19.6 | 22.0 | 25.1 | 21.0 | 18.3 |
(*) REBITDA normalised for the impact of acquisitions
The production, packing and sale of food products give rise to product liability risks. Lotus Bakeries applies the highest product safety standards to the entire production and distribution process, from the purchase of raw materials through to the distribution of the final product, supported and guaranteed by structured procedures and systematic internal quality audits. External audits take place at regular intervals.
The necessary product liability insurance has been subscribed within reasonable limits.
The form of and benefits under pension schemes existing within the Lotus Bakeries Group depend on the conditions and customs in the countries involved. Pension benefits can be provided under defined contribution schemes or defined benefit schemes.
A major portion of these pension schemes are defined contribution schemes, including in Belgium, France, Sweden and the United States. These are funded by employer and employee contributions and charged to the income statement of the year in question. Under this type of scheme, there is no legal or constructive obligation to pay further contributions irrespective of the capacity of the funds to pay future pension contributions.
Because of the Belgian legislation applicable to second pillar pension plans (so-called 'Vandenbroucke Law'), basically all Belgian defined contribution plans have to be considered under IFRS as defined benefit plans because of the minimum guaranteed return, although it is normally insured by an external insurance company that collects and manages the contributions. This 'Vandenbroucke Law', which came into force in 2004, stipulates that, in the context of a defined contribution plan, the employer must guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions. As from 1 January 2016, these percentages were replaced by a single percentage which changes in line with market rates, subject to a minimum of 1.75% and a maximum of 3.75%, which reduces the risk for the employer.
In the Netherlands a defined contribution scheme has been concluded with BPF. Because employers pay a fixed contribution, the scheme falls under the defined contribution scheme.
Defined benefit pension schemes exist in the Dutch and German subsidiaries. In certain companies provisions also exist for early retirement ('bridge') pensions (Belgium) and pension obligations resulting from legal requirements (France). These are also treated as defined benefit schemes. For these defined benefit schemes the necessary provisions are set up based on the actuarial present value of the future obligations to the employees concerned.
Through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
The quality of all Lotus Bakeries products is an absolute priority and all employees are intensely involved in the continuous drive for high quality products and processes, which are audited internally as well as externally.
The R&D department hopes to contribute to better products with new insights into processes and the interactions between various ingredients. In this, Lotus Bakeries does not only employ its own expertise but also calls on the expertise of well-known university knowledge centres, and of existing innovation platforms set up by the food industry.
The 'Care for Today - Respect for Tomorrow' programme represents in a clear way how Lotus Bakeries is handling sustainability. This programme has been widely communicated to all employees and the Board of Directors. Lotus Bakeries opts to report on its sustainability programme based on the Sustainable Development Goals (SDG reporting) proposed by the United Nations. You can read the result about the progress so far in the chapter 'Care for Today - Respect for Tomorrow'.
The Lotus Bakeries Group uses financial instruments to hedge the risk of adverse exchange and interest rate fluctuations. No derivatives are used for trading purposes. Derivatives are initially measured at cost and thereafter at fair value.
No significant events have occurred since 31 December 2018 which have a material impact on the 2018 financial statements.
Lotus Bakeries continues to focus successfully on its three strategic pillars:
Firstly, there is the continued internationalisation of Biscoff, our main organic growth driver. In 2018, we recorded double-digit growth in major consumer markets such as the US, the UK and China. The construction of the new factory in Mebane (US) comes under the same pillar of internationalisation.
Secondly, there is the investment in and continued growth of a strong healthy snacking business. The acquisition of Kiddylicious forms part of this, as does the organic growth of BEAR, Nākd and TREK in the UK and new countries. There is also the construction of the BEAR factory in South Africa and in addition, we have made the first commercial for Nākd, to be shown in 2019.
Finally, we are building a strong market position for our local heroes in their home markets. We can look back on good growth for waffles in Belgium and France, and the successful introduction of new products such as Tartélice and Mini Dinosaurus. The integrated plan launched to generate growth for gingerbread once more in the Netherlands also comes under this pillar.
The management and the Board of Directors of Lotus Bakeries are convinced that the current strategy is the right one for us to continue to grow in a sustainable and profitable manner in the long term.
We continue to focus closely on our three strategic pillars and this is bringing results. Besides organic growth, the Group remains open to targeted and selective acquisitions in the longer term. We're managing to acquire and integrate successful brands and growth companies such as Kiddylicious and—while preserving their uniqueness—make them even stronger within the Group. Lotus Bakeries will take further significant strides forward in 2019. For example, by starting up two new manufacturing facilities on two new continents: the Biscoff factory in the US, and the BEAR factory in South Africa. As a result, by the end of 2019, the Group will have more than 2,000 employees worldwide. Every one of them an ambassador who joins us in helping Lotus Bakeries develop further.
Jan Boone, CEO
The consolidated net profit for 2018 amounted to EUR 67.9 million as compared to 64.6 million EUR in 2017.
The 2018 results for the parent company Lotus Bakeries NV are as follows:
| Profit for the financial year | 11,454,054.17 |
|---|---|
| Transfer from untaxed reserves | - |
| Transfer to untaxed reserves | - |
| Profit for the year available for appropriation | 11,454,054.17 |
The Board of Directors proposes to appropriate the profit as follows:
| TOTAL | 11,454,054.17 |
|---|---|
| Distribution of emoluments to directors | 250,000.00 |
| Distribution of a gross dividend (1) | 23,644,377.00 |
| Allocation / (Transfer) to other reserves | (12,460,894.83) |
| Allocation to legal reserves | 572 |
(1) The dividends on the purchased Lotus Bakeries shares will be paid to Lotus Bakeries NV and, as a consequence, will not be suspended.
The Board of Directors will propose to the Ordinary General Meeting of Shareholders of 10 May 2019 to pay a gross dividend of EUR 29.0 per share for 2018 compared with EUR 19.5 per share in 2017.
We propose to pay a gross dividend of EUR 29 per share for 2018. This corresponds to one third of the recurrent net profit and gives us the right balance between providing a decent remuneration for shareholders and reinvesting the profit in the business. We believe that it's important to continue to offer Lotus Bakeries Group every opportunity for development in future, so as to be able to fully realise its strategic ambitions.
Jan Boone, CEO
Lotus Bakeries has adopted a Corporate Governance Charter under which we commit to apply the principles of the Corporate Governance Code of 12 March 2009 and to respect the associated legal norms and regulations. The charter outlines our corporate governance policy and the internal rules of procedure of the Board of Directors, the Committees and the Executive Committee. It can be consulted on our website (www.lotusbakeries.com).
Based on the relevant legislation or developments in corporate governance policy, we adapt the charter as necessary or advisable. In this annual review, we report actual changes to the Corporate Governance Charter. There are no deviations from the provisions of the Corporate Governance Code.
As a result of the exercise of warrants the share capital of Lotus Bakeries NV was increased on 4 April 2018 by EUR 1,320.00 from EUR 3,584,231.65 to EUR 3,585,551.65. This was followed by another increase on 3 October 2018 by EUR 4,400.00. This brought the share capital to EUR 3,589,951.65.
Through the exercise of warrants and subsequent capital increases, new shares of Lotus Bakeries NV were issued: 300 on 4 April 2018 and 1,000 on 3 October 2018.
As a result, the total number of shares of Lotus Bakeries increased from 814,433 to 814,733 and subsequently to 815,733.
As of 31 December 2018, there were 815,733 shares of Lotus Bakeries NV, in registered or dematerialised form.
In the context of the Lotus Bakeries share option scheme, 1,179 share options were issued in 2018. As at 31 December 2018 the total number of unexercised share options was 9,718.
| YEAR OF ISSUE OF THE OPTIONS |
NUMBER OF ALLOCATED OPTIONS (1) |
NUMBER OF OPTIONS EXERCISED (2) |
TOTAL OF AVAILABLE OPTIONS |
|---|---|---|---|
| 2013 | 3,998 | (3,998) | - |
| 2014 | 5,358 | (4,239) | 1,119 |
| 2015 | 3,367 | - | 3,367 |
| 2016 | 2,367 | - | 2,367 |
| 2017 | 1,726 | - | 1,726 |
| 2018 | 1,139 | - | 1,139 |
(1) Number allocated minus cumulative number lapsed.
(2) Cumulative number exercised.
The key conditions of the warrant plan set out in 2007, the exercise conditions and the key consequences of the abolition of the pre-emptive right for shareholders are set out in note 24 of the financial supplement.
The Extraordinary General Meeting of 15 May 2018 authorised the Board of Directors of Lotus Bakeries NV for 5 years (i) to acquire the shares or profit certificates of the company in an amount of up to 20 percent of the issued capital under the conditions stipulated by the Companies Code, with as compensation the average closing share price of the company over the last 30 calendar days prior to the date of purchase, reduced by 20 per cent as a minimum price and increased by 10 percent as a maximum price; this authorisation also applies to the acquisition of shares and profit certificates of the company by one of its directly controlled subsidiaries under Article 627 of the Companies Code, and (ii) to dispose of any shares or profit certificates of the company, regardless of when and on what basis they were acquired, if this divestment either forms part of a stock option plan approved by the Board of Directors of the Company, subject to payment of the agreed option price, or takes place against compensation that is higher than the average closing share price of the company over the last 30 calendar days prior to the date of sale reduced by 20 percent and lower than this average increased by 20 percent.
In 2018, 80 treasury shares were purchased. The total number of purchased treasury shares in the portfolio at the end of the financial year is 9,740. They represent an accounting par value of EUR 42,856.00 or 1.19% of the issued capital.
All stock market transactions were executed in accordance with the various mandates granted by the Extraordinary General Meeting of Shareholders to the Board of Directors.
The shareholding structure of Lotus Bakeries NV on 31 December 2018:
| Total | 815,733 | 100.00% |
|---|---|---|
| Publicly held (3) | 350,576 | 42.98% |
| Lotus Bakeries NV (2) | 9,740 | 1.19% |
| Stichting Administratiekantoor van Aandelen Lotus Bakeries (1) | 455,417 | 55.83% |
| NO. OF VOTING RIGHTS | % OF VOTING RIGHTS |
(1) Stichting Administratiekantoor van Aandelen Lotus Bakeries is not controlled. The interest of Stichting Administratiekantoor van Aandelen Lotus Bakeries in Lotus Bakeries NV appears
in the transparency notification that Lotus Bakeries NV received on 5 April 2013* and in the notifications to Lotus Bakeries NV of the certification of Lotus Bakeries shares in July 2014 and in April 2018.
(2) The voting rights attached to the shares held by Lotus Bakeries NV have been suspended. The dividends have not been suspended and will be distributed to Lotus Bakeries NV.
(3) Under publicly held shares, 27,000 shares (3.31%) are held by Holding Biloba BVBA and 20,298 shares (2.49%) by Christavest Comm.VA (controlled by Holding Biloba BVBA). The interest of Christavest Comm.VA in Lotus Bakeries NV appears in the transparency notification that Lotus Bakeries NV received on 3 July 2014*. (*) Pursuant to article 6 of the Law of 2 May 2007 on disclosure of major holdings.
Lotus Bakeries NV is not aware of any updates to any communication according to article 74 of the Law of 1 April 2007.
The composition of the Board of Directors as of 15 May 2018:
Vasticom BVBA, represented by its permanent representative Jan Vander Stichele Current term of office ends: 2021 General Meeting
Mercuur Consult BVBA, represented by its permanent representative Jan Boone Current term of office ends: 2021 General Meeting
• Brechtje Haan
Benedikte Boone Non-executive director
Jan Boone CEO / Managing director
Johan Boone Non-executive director
Peter Bossaert Independent director
Michel Moortgat Independent director
Sabine Sagaert Independent director
Since May of the 2018 financial year, the Board of Directors has been composed of the above directors. For the composition of the Board of Directors in the first four months of 2018, please refer to the annual review of the 2017 financial year.
In the selection of candidates for the Board of Directors by the current members of the Board of Directors, prior to the proposal of a new director to the General Shareholders Meeting, skills, competencies and diversity are paramount. Lotus Bakeries is conscious that it must ensure the presence of a critical Board of Directors, with specialist knowledge of the various areas relevant to Lotus Bakeries. Certain diversity criteria are imposed by law and are naturally adopted by Lotus Bakeries, including the number of independent directors and the number of directors of a different gender. In this respect, Lotus Bakeries declares that, with the aforementioned composition, it complies with the requirement for at least one third of directors to be of a different gender than that of the other members. The aforementioned obligation is contained in Art. 518bis, §1 of the Companies Code. It also wishes to point out in this connection that the abovementioned independent directors fulfil the independence criteria of Article 526-ter of the Companies Code. Besides these diversity criteria enshrined in law, Lotus Bakeries also aims for diversity in knowledge and experience and, when selecting candidates, performs a thorough assessment based on competencies which would additionally benefit the company in view of the existing competencies among the members of the Board of Directors. The results of this policy are illustrated in the CVs described above.
This means Lotus Bakeries has a balanced Board of Directors in which the majority shareholder, the independent directors and the executive board are sufficiently represented.
The Board of Directors met six times in 2018. All directors were present at all meetings.
The subjects dealt with at the meetings were:
An induction training programme is provided for new directors and for the Committees.
In the course of 2018, there were no incidences within the Board of Directors which led to the application of the conflict of interest procedure as set out in Article 523 of the Companies Code.
The Audit Committee consists of two independent directors and one non-executive director. The two independent directors are Lema NV, represented by its permanent representative Michel Moortgat (Chairman) and Benoit Graulich BVBA, represented by its permanent representative Benoit Graulich. The non-executive director is Vasticom BVBA, represented by its permanent representative Jan Vander Stichele. All members have accounting and audit experience.
The Audit Committee met three times in 2018 and all members were present at all meetings. The Auditor participated in all three meetings, at which he presented his findings to the Audit Committee.
The subjects examined were:
The Remuneration and Nomination Committee consists of two independent directors and one non-executive director. The independent directors are Sabine Sagaert BVBA, represented by its permanent representative Sabine Sagaert (Chairman) and Benoit Graulich BVBA, represented by its permanent representative Benoit Graulich. The non-executive director is Vasticom BVBA, represented by its permanent representative Jan Vander Stichele. All members have both HR management and remuneration policy experience. The Committee met twice in 2018, with all members present.
The subjects examined were:
The operation of the Board of Directors and of the Committees is evaluated every three years. The evaluation of the effectiveness of the Board of Directors is undertaken by the Board itself under the leadership of its Chairman. This evaluation covers the size of the Board, the general functioning of the Board of Directors, the way meetings are prepared, the contribution of each individual director to the work of the Board, the presence and involvement of each individual director at meetings and decision-making, the composition of the Board of Directors and the interaction with the Executive Committee.
This assessment makes it possible to constantly optimise the management of Lotus Bakeries. Where appropriate, based on this review, and eventually in consultation with external experts, the Remuneration and Nomination Committee presents a report on the strengths and weaknesses of the Board of Directors and, where necessary, a proposal for the appointment of a new director or the non-prolongation of a directorship. The non-executive directors evaluate annually the interaction of the Board of Directors and the Executive Committee and when appropriate, submit proposals for improving cooperation. The CEO and the Remuneration and Nomination Committee also together evaluate annually the operation and performance of the Executive Committee. The CEO is not present at his own evaluation.
Composition of the Executive Committee since 1 September 2017:
The members of the Executive Committee are appointed by the Remuneration and Nomination Committee.
The Remuneration and Nomination Committee selects on the basis of knowledge, competencies, experience, background and skills and aims for diversity in these areas so as to have all knowledge in house to manage Lotus Bakeries with a team specialising in all relevant areas. Within the Executive Committee, there is currently a good balance between members with a financial background and members with a marketing and/or sales background. A good proportion of members with a long history in the company and members with a fresh view of matters is also ensured.
The Executive Committee met twenty-five times in 2018. All members were present at all meetings.
The purpose of the 2018 remuneration report is to provide transparent information about the specific remuneration policy adopted by Lotus Bakeries for directors and executive managers. The remuneration report below will be submitted to the General Meeting of 10 May 2019 for approval. The works council has been informed in accordance with the provisions of the Act. The report has also been reviewed by the Auditor.
The Remuneration and Nomination Committee set up by the Board of Directors makes specific recommendations to the Board of Directors with regard to remuneration policy and its application to executive and non-executive directors.
The current remuneration policy for directors was approved by the General Meeting of 13 May 2011, based on a proposal by the Board of Directors, on the advice of the Remuneration and Nomination Committee. Directors' remuneration is benchmarked every two years against a relevant sample of other listed companies to enable Lotus Bakeries to attract directors with appropriate competences in order to realise its ambitions.
For the purpose of determining who falls into the category of 'executive managers' according to the Act of 6 April 2010 to strengthen corporate governance, Lotus Bakeries considers the members of its Executive Committee as falling into this category. The Executive Committee is responsible for the management of the company.
The remuneration policy for members of the Executive Committee is set every two years by the Board of Directors based on a proposal by the Remuneration and Nomination Committee. Individual remuneration is reviewed annually. For this Lotus Bakeries uses the services of an international HR consultancy firm, that assesses the functions and presents the corresponding salary package as commonly awarded in the relevant market. The consultant reports directly to the Remuneration and Nomination Committee and provides verbal explanations.
Remuneration policy for senior managers ('kaderleden') is set by the Executive Committee. This is then approved by the Remuneration and Nomination Committee. The services of an international HR consultancy are also called upon in this regard. They propose the job weighting and the corresponding salary package as commonly awarded in the relevant market.
The non-executive directors receive a remuneration as indicated in the table on the opposite page, with no performance-based remuneration such as bonuses, stock-related long-term incentive schemes, fringe benefits or pension plan-related benefits.
Neither Lotus Bakeries nor its subsidiaries provide any personal loans, guarantees or the like to other members of the Board of Directors.
Besides the fee, all reasonable expenses of members of the Board of Directors incurred with the consent of the Chairman of the Board of Directors are reimbursed.
The provisions concerning the remuneration of non-executive directors apply equally to executive directors in their capacity as directors.
Lotus Bakeries aims at a competitive remuneration, based on a comparison of directors' remuneration in companies that are comparable in terms of size, complexity and international activity.
Directors' remuneration is benchmarked every two years against a relevant selection of listed companies, to enable Lotus Bakeries to attract directors with appropriate competences in order to realise its ambitions.
Members of the Board of Directors each receive EUR 20,000 a year. The Chairman receives EUR 40,000 a year. Each member of the Audit Committee and Remuneration and Nomination Committee receives a fee of EUR 5,000 a year.
No other compensation is provided to non-executive directors, such as performance bonuses in cash, shares or options. The table on the opposite page shows the remuneration awarded for 2018 to each member of the Board of Directors.
| NAME | BOARD OF DIRECTORS |
AUDIT COMMITTEE |
REMUNERATION AND NOMINATION COMMITTEE |
TOTAL REMUNERATION 2018 |
|---|---|---|---|---|
| Vasticom BVBA, represented by its permanent representative Jan Vander Stichele | Chairman | Member | Member | 50,000 EUR |
| Mercuur Consult BVBA, represented by its permanent representative Jan Boone | Managing Director | - | - | 20,000 EUR |
| PMF NV, represented by its permanent representative Johan Boone | Non-executive Director | - | - | 20,000 EUR |
| Anton Stevens | Non-executive Director | - | - | 20,000 EUR |
| Beneconsult BVBA, represented by its permanent representative Benedikte Boone | Non-executive Director | - | - | 20,000 EUR |
| Concellent NV, represented by its permanent representative Sofie Boone | Non-executive Director | - | - | 20,000 EUR |
| Peter Bossaert | Independent Director | - | - | 20,000 EUR |
| Benoit Graulich BVBA, represented by its permanent representative Benoit Graulich | Independent Director | Member | Member | 30,000 EUR |
| Lema NV, represented by its permanent representative, Michel Moortgat | Independent Director | Chairman | - | 25,000 EUR |
| Sabine Sagaert BVBA, represented by its permanent representative Sabine Sagaert | Independent Director | - | Chairman | 25,000 EUR |
The Chairman of the Board of Directors shall be provided with the necessary material resources to perform his task properly.
The Chairman receives an additional compensation of EUR 100,000 for representing the company with respect to interest groups.
The Remuneration and Nomination Committee makes specific recommendations to the Board of Directors on the remuneration of the members of the Executive Committee.
The level and structure of the remuneration of the Executive Committee must be such as to attract, retain and continually motivate qualified and skilled managers, taking into account the nature and scope of their individual responsibilities. To this end, a survey is carried out every two years of the remuneration of managers in Belgium in order to facilitate an external comparison of key functions. In order to ensure an internal logic between remuneration levels, in defining the remuneration for executive managers for each function, account is taken of the way the function is fulfilled at Lotus Bakeries.
In addition to their fixed remuneration, there is a variable compensation. For executive managers, this depends on the results of Lotus Bakeries, based on well-defined criteria with a one year evaluation period and evaluation periods of two and three years. The evaluation criteria used to determine the variable compensation in 2018 are the main performance indicators based on the objectives for 2018. The evaluation period for this is one year.
Already since the financial year 2011, a long-term incentive plan is in place for executive managers with objectives set over 2 and 3-year periods. The criteria used are the objectives of the strategic plan of the Lotus Bakeries Group.
There is an additional pension plan, on the basis of a predetermined contribution. The plan is placed with an insurance company.
Apart from this, there is also a stock option plan in place with a fixed number of options for the members of the Executive Committee.
In principle shares which have been allotted or other forms of deferred compensation are not deemed to be acquired, and options may not be exercised during the first three and a half year after being allocated. The Board of Directors does not plan any changes in the existing remuneration policy in the coming years.
The bonus plan for executive management provides that the bonus is earned only after approval of the consolidated figures by the Auditor and then by the Remuneration and Nomination Committee.
The objectives for 2018 were presented to the Remuneration and Nomination Committee. The evaluation criteria used to determine the variable compensation in 2018 are the main performance indicators based on the objectives for 2018. The evaluation period for this is one year. The bonus plan for executive management provides that the bonus is earned only after approval of the consolidated figures by the Auditor and then by the Remuneration and Nomination Committee.
Objectives for the 2017-2019 period were decided upon and presented to the Remuneration and Nomination Committee for determining the long-term remuneration. The main performance indicators are taken from the strategic plan of the Lotus Bakeries Group.
The CEO is paid on a self-employed basis and via a number of directorships. The remunerations mentioned are expressed as cost for the company.
The cost of the fixed basic salary in 2018 amounts to EUR 775,862. The variable portion based on the 2018 targets amounts to EUR 514,823 and will be paid in 2018. The contributions to the pension scheme amount to EUR 123,760. Other components of the remuneration amount to EUR 43,064. There is no recovery provision. Evaluation of the performance is based on the audited results.
In 2018, three members of the EXCO were paid on a self-employed basis and via directorships and one member through an employment contract. In the case of pay through an employment contract, the amounts given do not include social insurance contributions and in the case of pay on a self-employed basis, the full cost is given.
The remuneration for all executive managers together on a full year's basis, are the following for 2018.
The fixed annual salary in 2018 amounts to EUR 1,354,297. The variable portion based on the 2018 targets amounts to EUR 680,345 and will be paid in 2018. The contributions to the pension scheme amount to EUR 211,444. Other components of the remuneration amount to EUR 111,433. There is no recovery provision. Evaluation of the performance is based on the audited results.
The pension plan is based on defined contributions as a function of the annual base salary. The other compensation relates primarily to insured benefits such as guaranteed income and the cost of a company car. A share option plan also exists.
In 2018, share options relating to the financial year 2017 were granted to members of the former Executive Committee.
| NAME | YEAR OF ALLOCATION |
NUMBER OF OPTIONS |
EXERCISE PRICE |
|---|---|---|---|
| Jan Boone | 2018 | 255 | 2,373 eur |
| William Du Pré | 2018 | 128 | 2,373 eur |
| Ignace Heyman | 2018 | 128 | 2,373 eur |
| Isabelle Maes | 2018 | 128 | 2,373 eur |
| Mike Cuvelier | 2018 | 128 | 2,373 eur |
The members of the Executive Committee have exercised the following share options or warrants in 2018:
| DATE | NAME | TRANSACTION | AMOUNT | PRICE | TOT. VALUE |
|---|---|---|---|---|---|
| 10/04/2018 | William Du Pré | Exerc. options | 112 | 650.31 eur | 72,834.72 eur |
| 10/04/2018 | William Du Pré | Exerc. options | 196 | 802.55 eur | 157,299.80 eur |
| 18/04/2018 | Jan Boone | Exerc. options | 500 | 650.31 eur | 325,155.00 eur |
| 20/08/2018 | Ignace Heyman | Exerc. options | 135 | 802.55 eur | 108,405.00 eur |
In 2018 there are no lapsed unexercised options relating to members of the Executive Committee.
No special severance arrangements have been agreed with members of the Executive Committee. Members of the Executive Committee compensated on a self-employed basis and via directorships are entitled to severance pay equal to 12 months' fixed and variable remuneration. The other member of the Executive Committee is bound by a salaried employee contract. In 2018 no severance pay was paid to members of the Executive Committee.
Respect for and promotion of human rights and the fight against bribery and corruption are self-evident at Lotus Bakeries. It is no coincidence that the corporate culture of Lotus Bakeries is expressed in the TOP values of 'team spirit', 'open dialogue' and 'passion'. The management of Lotus Bakeries emphasizes these values based on respect for fellow human beings, transparency, togetherness and the purity of pleasure in our work. The focus lies on upholding these values in our own organisation. We also focus on the activities of our suppliers of raw materials and packaging materials and co-manufacturers. Since 2012, Lotus Bakeries has summarised its internal code of conduct in the 'Code of Conduct', which is regularly reviewed in the light of changed circumstances. In this document, employees are reminded that bribery is unacceptable in our company, that employees must not accept any personal gifts or favours irrespective of material or commercial value except for small gifts in line with generally accepted commercial practice and that any form of inappropriate, unethical or illegal behaviour is absolutely forbidden. Armed with this code of conduct, Lotus Bakeries intends to ensure uniform respect for the above principles. In view of the increased risk of bribery in both China and South Korea, the ban on bribery and a strict gift and entertainment policy is included in the contract of employment and/or employee handbook in both countries.
The result of all this is that compliance with the law and ethical standards, respect for one another, open dialogue, collaboration, focus on training and development are not empty concepts in our company. The members of the Executive Committee and senior management who have determined these values display this corporate culture. This corporate culture is applied daily by our employees. We are therefore not aware of any case of fraud, bribery or unethical behaviour in 2018. Hence there is no need for key performance indicators in this area at present.
In running its business, Lotus Bakeries seeks to implement a sustainable policy regarding internal control and risk management.
The organisation of the finance function is based on three pillars.
First, the responsibilities of the various financial departments in the Lotus Bakeries Group are set out in general corporate guidelines ('General Directives') at Group level so that each employee clearly knows his or her role and responsibility. These are set out for all operational finance-related fields such as accounting and consolidation, management reporting, costing, planning, budgeting and forecasting processes, the central master data management, the treasury function, approval of investments, insurance and the internal control environment.
Second, there is a Lotus Bakeries Accounting Manual which establishes the accounting policies and procedures. There are also financial management reporting standards to ensure that the financial information can be interpreted unambiguously in the whole organisation.
Thirdly, Lotus Bakeries has opted to implement the financial function in the same ERP package (SAP). This offers comprehensive capabilities for internal control and management and facilitates the internal audits carried out by the Corporate Finance department.
Lotus Bakeries implemented an ongoing process of risk management aimed at ensuring that this is organised so that risks are identified, assessed, controlled and monitored in such a way that they can be kept at an acceptable level. The risk management process fits very closely with the implementation of the strategic, operational and financial objectives of the company. The entire risk management process is based on the COSO Internal Control Framework. The Executive Committee has total responsibility for the risk management process for Lotus Bakeries. The Corporate Director Quality, Procurement and R&D is responsible for coordination. The Executive Committee has defined special risks which are considered to be the most important at group level. These risks, which are defined very specifically, are tackled with the highest priority. A process owner is appointed for each of these risks who puts in place a specific action plan to avert or mitigate the risks or be as well prepared as possible. The process owner is also responsible for following up the specified actions. This top-down approach was proposed and approved at the meeting of the Audit Committee on 2 December 2016. The results will be reported to the Audit Committee on an annual basis.
Each month the results of each area within the business units are discussed and explained by the area manager. The Executive Committee also discusses the results on a monthly basis at its meeting. The Corporate Finance department directs the whole process.For this Lotus Bakeries has developed various KPIs for the sales operations, for the financial reporting of each area and for the consolidated results. There are also KPIs relating to personnel and for factory operations, purchasing and logistics. These KPIs and reports exist for each area separately and are aggregated for the Lotus Bakeries Group. The Corporate Treasury department monitors the cash position closely on a daily basis.
Finally, various internal audits are organised by the corporate departments in their areas of expertise: Corporate Finance for proper compliance with accounting principles and standards or the investment procedure, Corporate Treasury for the authorisation of payments, the Corporate Quality department for quality standards in the production plants.
Lotus Bakeries has chosen to manage all key business processes through a single ERP package (SAP). This not only offers extensive functionality with regard to internal reporting and communication, but also the ability to manage and audit access rights and authorisation management on a centralised basis. As mentioned above, the results of each area within the business units are reported in writing on a monthly basis and discussed and explained verbally by the area manager. The Executive Committee also discusses the results on a monthly basis at its meeting. The Corporate Finance department directs the information and communication process. For both internal and external information reporting and communication there exists an annual financial calendar in which all reporting dates are set out and which is communicated to all parties involved.
For the provision of information Lotus Bakeries has developed various KPIs for its sales operations, for the financial reporting, as well as KPIs relating to personnel, factory operations, purchasing and logistics. These reports are available on an individual basis, but also aggregated at area or group level.
Lotus Bakeries evaluates every internal audit and takes appropriate steps to avoid any deficiencies in the future by means of concrete action points.
Employees are asked to constantly question and improve existing procedures and practices based on the Lotus competencies.
First and foremost both the Audit Committee and the Auditor play an important role in internal control and risk management. Any remarks by the Auditor are discussed in the Audit Committee and monitored for improvement.
Finally, the shareholders have a right to ask questions during the General Meeting, and the company falls under the supervision of the Financial Services and Markets Authority (FSMA).
PwC Bedrijfsrevisoren CVBA, represented by Mr. Peter Opsomer, 'bedrijfsrevisor', was reappointed as Auditor of Lotus Bakeries NV on 13 May 2016 by the Ordinary General Meeting for a term of three years. Its mandate expires immediately after the Ordinary General Meeting of 2019. The compensation received in 2018 for auditing and non-auditing services by PwC Bedrijfsrevisoren and by people connected to PwC Bedrijfsrevisoren, is described in note 38 of the financial supplement.
| Total | 402 |
|---|---|
| Lotus Bakeries Group | 322 |
| Lotus Bakeries NV | 80 |
| AUDIT FEE FOR THE GROUP AUDIT 2018 | IN THOUSANDS OF EUR |
"If I have to choose my favorite cookie I have to stick to Annas original ginger thins. I am a friend of traditions and the experience every time you consume one of those crispy biscuits with the cinnamon and cloves start and the ginger finish, it´s great. Working in the factory, one of the great advantages is that you have to taste on a daily basis for quality control reasons." — Claes Bergsten, Plant Manager Sweden
Both share evolutions are with reinvested net dividend.
| STOCK DATA ABOUT THE LOTUS BAKERIES SHARE IN EUR | 31-03-2019 | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|---|
| Highest price till 31/12 (till 31/03 in 2019) | 2,640.00 | 2,690.00 | 2,529.00 | 2,617.95 | 1,845.00 | 989.95 |
| Lowest price till 31/12 (till 31/03 in 2019) | 2,080.00 | 2,010.00 | 2,025.00 | 1,550.00 | 926.10 | 711.00 |
| Price per 31/12 (per 31/03 in 2019) | 2,370.00 | 2,150.00 | 2,116.95 2,500.00 | 1,750.00 | 933.00 | |
| Market capitalization per 31/12 in millions of EUR (per 31/03 in 2019 in millions of EUR) | 1,933.29 | 1,753.83 | 1,724.11 | 2,031.28 | 1,420.76 | 749.21 |
| Number of shares per 31/12 (per 31/03 in 2019) | 815,733 | 815,733 | 814,433 | 812,513 | 811,863 | 803,013 |
| Ratio price/earning (PER) (1) per 31/12 (per 31/03 in 2019) | 28.89 | 26.21 | 27.13 | 33.17 | 31.29 | 20.37 |
(1) PER: Price Earnings Ratio: The price at the end of the year (per 31 March in 2019 respectively) divided by net result, per share at the end of the year.
The Lotus Bakeries shares have been listed since the beginning of January 2002 on the continuous market of Euronext (Brussels). Previously, the shares were listed on the spot market with double fixing. The share code is LOTB (ISIN code 0003604155).
Financial servicing for the Lotus Bakeries share is provided by Degroof - Petercam, BNP Paribas Fortis, Belfius, ING Bank and KBC Bank. The main paying agent is BNP Paribas Fortis.
Lotus Bakeries has appointed the stock market company Degroof - Petercam as 'liquidity provider'. The liquidity and market activation agreement that was agreed with Degroof - Petercam lies within the context of the care taken by Lotus Bakeries to ensure a sufficiently active market in the share so that in normal circumstances adequate liquidity can be maintained.
On 31 December 2018, market capitalisation of Lotus Bakeries amounted to EUR 1,753.83 million.
The graph on the previous page shows the evolution of the share price with reinvested net dividend as from 31 December 1988 of the Lotus Bakeries share in comparison to the BASR (Brussels All Share Return) index. The BASR-index reflects the price of the total Belgian market.
Charts with the consolidated key figures per share and the stock market performance of the Lotus Bakeries share can be found on pages 16-19 and 96 of this annual review.
A substantial portion of the corporate website is reserved for investor relations. The website (www.lotusbakeries.com) thus plays an increasingly important role in the Lotus Bakeries Group's financial communication.
Annual review 2018 available on www.lotusbakeries.com Friday 10 May 2019 Ordinary General Meeting of Shareholders at 4.30 PM Friday 25 May 2019 Payment of dividend for the 2018 financial year Monday 19 August 2019 Announcement of the half-year results for 2019 Monday 10 February 2020
This annual review is also available on the internet site: www.lotusbakeries.com
Announcement of the year results for 2019
The first part of this annual review is also available in Dutch and in French. The financial supplement (the second part) of the annual review is available in Dutch and in English.
In matters of any misinterpretation, the Dutch annual review will prevail.
"Bear Yoyos is a fantastic product: delicious, healthy and it scores 10 out of 10 for fun factor. My children are already fans! So, they're now real ambassadors. With the postcards, they take their friends along with them into the world of BEAR and introduce them to the delicious fruit rolls! I'm really proud to be able to develop a brand like BEAR in Belgium."
— Carolien De Vriese, Sales Director Belgium
In this section of the 2018 annual review, only the consolidated balance sheet, the consolidated income statement and the abridged five-year financial summary for the Lotus Bakeries Group are presented. The financial supplement to this annual review contains the entire consolidated annual account, including the consolidated external Auditor's report, and is available in Dutch and English.
The consolidated financial statements for 2018 shown, are based on the 2018 consolidated annual account, which has been prepared in accordance with IFRS rules as adopted for use within the European Union with comparative IFRS figures for 2017.
The statutory financial statements that have been condensed are presented in the financial supplement and are prepared in accordance with Belgian accounting standards (BGAAP).
Only the consolidated annual financial statements present a faithful picture of the assets, financial position and results of the Lotus Bakeries Group.
In light of the fact that the statutory annual financial statements give only a limited picture of the financial situation of the Group, the Board of Directors considers it appropriate to only present an abridged version of the statutory annual financial statements of Lotus Bakeries NV, in accordance with Article 105 of the Belgian Companies Code.
The full statutory annual financial statements, together with the statutory annual report of the Board of Directors and the statutory audit report of the Auditor, will be submitted to the National Bank of Belgium within the legally prescribed term. These documents are available on the website www.lotusbakeries.com (Investor Relations) or can be obtained for free from the Corporate Secretary of Lotus Bakeries on simple request.
The Auditor has issued an opinion without reservation with respect to the consolidated and the statutory annual financial statements of Lotus Bakeries NV.
| Consolidated financial statements . | 101 |
|---|---|
| - Consolidated balance sheet . | 101 |
| - Consolidated income statement . . |
102 |
Abridged five-year financial summary Lotus Bakeries Group . 104
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| ASSETS | ||
| NON CURRENT ASSETS | 545,647 | 447,693 |
| Property, plant and equipment | 219,897 | 174,426 |
| Goodwill | 177,639 | 141,001 |
| Intangible assets | 138,887 | 123,924 |
| Participations | 2,448 | - |
| Investment in other companies | 12 | 12 |
| Deferred tax assets | 3,936 | 4,310 |
| Other non current assets | 2,828 | 4,020 |
| CURRENT ASSETS | 165,925 | 149,801 |
| Inventories | 39,066 | 33,653 |
| Trade receivables | 71,097 | 60,104 |
| VAT receivables | 4,503 | 4,789 |
| Income tax receivables | 523 | 484 |
| Other amounts receivable | 2,993 | 1,487 |
| Cash and cash equivalents | 45,597 | 48,129 |
| Deferred charges and accrued income | 2,146 | 1,155 |
| TOTAL ASSETS | 711,572 | 597,494 |
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| EQUITY | ||
| EQUITY AND LIABILITIES | 346,927 | 293,213 |
| Share Capital | 16,319 | 15,999 |
| Retained earnings | 369,114 | 316,954 |
| Treasury shares | (11,406) | (13,919) |
| Other reserves | (27,156) | (25,877) |
| Non-controlling interests | 56 | 56 |
| NON-CURRENT LIABILITIES | 198,042 | 193,923 |
| Interest-bearing loans and borrowings | 116,500 | 117,500 |
| Deferred tax liabilities | 52,725 | 49,206 |
| Pension liabilities | 3,519 | 3,846 |
| Provisions | 377 | 414 |
| Derivative financial instruments | 2,319 | 1,970 |
| Other non-current liabilities | 22,602 | 20,987 |
| CURRENT LIABILITIES | 166,603 | 110,358 |
| Interest-bearing loans and borrowings | 36,655 | 1,750 |
| Pension liabilities | 234 | 152 |
| Provisions | 21 | 21 |
| Trade payables | 86,794 | 68,542 |
| Employee benefit expenses and social security | 21,330 | 18,383 |
| VAT payables | 300 | 119 |
| Tax payables | 14,761 | 16,464 |
| Derivative financial instruments | - | 1 |
| Other current liabilities | 3,102 | 1,662 |
| Accrued charges and deferred income | 3,406 | 3,264 |
| TOTAL EQUITY AND LIABILITIES | 711,572 | 597,494 |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| TURNOVER | 556,435 | 524,055 |
| Raw materials, consumables and goods for resale | (184,804) | (171,494) |
| Services and other goods | (150,732) | (145,568) |
| Employee benefit expense | (111,977) | (105,580) |
| Depreciation and amortisation on intangible and tangible assets | (12,942) | (12,105) |
| Impairment on inventories, contracts in progress and trade debtors | (1,706) | (2,198) |
| Other operating charges | (2,123) | (3,168) |
| Other operating income | 2,879 | 5,407 |
| RECURRENT OPERATING RESULT (REBIT) (1) | 95,030 | 89,349 |
| Non-recurrent operating result | (3,005) | (91) |
| OPERATING RESULT (EBIT) (2) | 92,025 | 89,258 |
| Financial result | (3,324) | (2,228) |
| Interest income (cost) | (2,435) | (2,096) |
| Currency gains (loss) | (596) | 175 |
| Other financial income (cost) | (293) | (307) |
| PROFIT FOR THE YEAR BEFORE TAXES | 88,701 | 87,030 |
| Taxes | (20,829) | (22,397) |
| RESULT AFTER TAXES | 67,872 | 64,633 |
| NET RESULT | 67,872 | 64,633 |
| Attributable to: | ||
| Non-controlling interests | 964 | 1,094 |
| Equity holders of Lotus Bakeries | 66,908 | 63,539 |
(1) REBIT is defined as the recurrent trading result, consisting of all the proceeds and costs relating to normal business.
(2) EBIT is defined as recurrent operating result + non-recurrent operating result.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| OTHER COMPREHENSIVE INCOME | ||
| Items that may be subsequently reclassified to profit and loss | (1,726) | (2,727) |
| Currency translation differences | (587) | (5,989) |
| Gain / (Loss) on cash flow hedges, net of tax | (1,139) | 3,262 |
| Items that will not be reclassified to profit and loss | 276 | (757) |
| Remeasurement gains / (losses) on defined benefit plans | 276 | (757) |
| Other comprehensive income | (1,450) | (3,484) |
| Total comprehensive income | 66,422 | 61,149 |
| Attributable to: | ||
| Non-controlling interests | 793 | 449 |
| Equity holders of Lotus Bakeries | 65,629 | 60,700 |
| EARNINGS PER SHARE (EUR) | ||
| Weighted average number of shares | 803,878 | 799,423 |
| Basic earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.20 | 1.37 |
| Equity holders of Lotus Bakeries | 83.23 | 79.48 |
| Weighted average number of shares after effect of dilution | 808,813 | 808,735 |
| Diluted earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.19 | 1.35 |
| Equity holders of Lotus Bakeries | 82.72 | 78.57 |
| Total number of shares (1) | 815,733 | 814,433 |
| Earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.18 | 1.34 |
| Equity holders of Lotus Bakeries | 82.02 | 78.02 |
(1) Total number of shares including treasury shares, per 31 December.
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 | 31-12-2016 | 31-12-2015 | 31-12-2014 |
|---|---|---|---|---|---|
| NON CURRENT ASSETS | 545,647 | 447,693 | 437,310 | 442,884 | 263,881 |
| Property, plant and equipment | 219,897 | 174,426 | 161,590 | 139,377 | 137,569 |
| Goodwill | 177,639 | 141,001 | 144,368 | 93,229 | 46,135 |
| Intangible assets | 138,887 | 123,924 | 126,006 | 107,901 | 74,674 |
| Participating interests | 2,488 | - | - | - | - |
| Investment in other companies | 12 | 12 | 37 | 96,244 | 22 |
| Deferred tax assets | 3,936 | 4,310 | 4,854 | 5,889 | 5,275 |
| Other non current assets | 2,828 | 4,020 | 455 | 244 | 206 |
| CURRENT ASSETS | 165,925 | 149,801 | 110,692 | 128,337 | 73,108 |
| Inventories | 39,066 | 33,653 | 32,175 | 35,659 | 17,898 |
| Trade receivables | 71,097 | 60,104 | 50,922 | 56,143 | 38,804 |
| Cash and cash equivalents | 45,597 | 48,129 | 19,932 | 18,547 | 11,855 |
| TOTAL ASSETS | 711,572 | 597,494 | 548,002 | 571,221 | 336,989 |
| EQUITY | 346,927 | 293,213 | 248,464 | 217,525 | 200,629 |
| Non-current liabilities | 198,042 | 193,923 | 197,245 | 169,242 | 39,506 |
| Interest-bearing loans and borrowings | 116,500 | 117,500 | 118,500 | 97,000 | 325 |
| Deferred tax liabilities | 52,725 | 49,206 | 50,666 | 44,607 | 34,905 |
| Other non-current liabilities | 22,602 | 20,987 | 19,560 | 22,815 | 57 |
| Current liabilities | 166,603 | 110,358 | 102,293 | 184,454 | 96,854 |
| Interest-bearing loans and borrowings | 36,655 | 1,750 | 7,533 | 99,086 | 41,144 |
| Trade payables | 86,794 | 68,542 | 54,742 | 42,498 | 33,309 |
| Employee benefit expenses and social security | 21,330 | 18,383 | 18,418 | 18,336 | 12,357 |
| TOTAL EQUITY AND LIABILITIES | 711,572 | 597,494 | 548,002 | 571,221 | 336,989 |
| IN THOUSANDS OF EUR | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| TURNOVER | 556,435 | 524,055 | 507,208 | 411,576 | 347,890 |
| RECURRENT OPERATING RESULT (REBIT) | 95,030 | 89,349 | 83,945 | 64,764 | 49,433 |
| Non-recurrent operating result | (3,005) | (91) | 4,507 | (1,748) | (261) |
| OPERATING RESULT (EBIT) | 92,025 | 89,258 | 88,452 | 63,016 | 49,172 |
| Financial result | (3,324) | (2,228) | (2,675) | (778) | 16 |
| PROFIT FOR THE YEAR BEFORE TAXES | 88,701 | 87,030 | 85,777 | 62,238 | 49,188 |
| Taxes | (20,829) | (22,397) | (23,322) | (16,623) | (12,415) |
| RESULT AFTER TAXES | 67,872 | 64,633 | 62,455 | 45,615 | 36,773 |
| NET RESULT - attributable to: | 67,872 | 64,633 | 62,455 | 45,615 | 36,773 |
| Non-controlling interests | 964 | 1,094 | 1,210 | 202 | (2) |
| Equity holders of Lotus Bakeries | 66,908 | 63,539 | 61,245 | 45,413 | 36,775 |
"I've been in the role for nearly two years now, and in that time it has been great to see the household penetration of my ultimate favourite cookie, Lotus Biscoff, grow thanks to above the line investments, strong brand awareness and activation across the market."
— Larysa Dushko, Key Account Manager Retail UK
It was not by chance that founder Jan Boone named his company Lotus in 1932. It was a reference to the purity of the lotus flower. Right from the start, the recipe for Lotus Biscoff has consisted solely (and exclusively) of natural ingredients. We still respect his decision today.
Our objective is to make Lotus Bakeries products more and more sustainable. This ambition involves much more than just the production process. People, environment and society—we treat them all with care and respect. So that we remain successful as a company, today and tomorrow. And consumers can continue to enjoy our products.
Lotus Bakeries' approach to Corporate Social Responsibility (CSR) is reflected in our sustainability programme 'Care for Today - Respect for Tomorrow'.
To ensure that the outside world was sufficiently represented in our Corporate Social Responsibility policy (CSR), we carried out a materiality analysis in 2014. For this, we identified several issues that are important to our stakeholders as well as the company.
Using a questionnaire, partly based on the themes of our sustainability programme 'Care for Today - Respect for Tomorrow' and inspired by the latest trend analyses in CSR, we gauged the relevance and importance of these issues. Besides the stakeholders, we also submitted the questionnaire to the Executive Committee.
Importance for Lotus Bakeries
We plotted the stakeholders' answers on the y-axis theme by theme and the Executive Committee's answers on the x-axis. The result of the exercise is known as the 'materiality matrix'. materiality matrix. very low
This materiality matrix was recently updated by both external stakeholders and the Exco. You can see the result of this update in the modified At the top right, the materiality matrix shows the aspects viewed by both Lotus Bakeries and its stakeholders as most important. These underlie the four pillars of sustainability which form the basis for the 'Care for Today - Respect for Tomorrow' programme: society, employees, people and environment.
Lotus Bakeries has decided to report on its sustainability programme according to the sustainable development goals (SDG reporting) proposed by the United Nations.
| Lotus Bakeries' pillars of sustainability |
SDGs | Lotus Bakeries' reporting |
|---|---|---|
| End hunger, achieve food security and improved nutrition and promote sustainable agriculture |
• Partner of 'Entrepreneurs for Entrepreneurs' • Lotus Bakeries child sponsorship • Support for The Kusasa Project |
|
| Ensure inclusive and quality education for all and promote lifelong learning |
• Support for The Kusasa Project • Lotus Bakeries child sponsorship |
|
| SOCIETY | Ensure sustainable consumption and production patterns (waste management, sustainable production and consumption patterns, sustainable supply chain, etc.) |
• Preparation employment of employees in Wolseley, South Africa • Partner of 'Entrepreneurs for Entrepreneurs' • Training of farmers in Benin |
| Promote just, peaceful and inclusive societies, ensure access to justice for all and build effective, accountable institutions at all levels |
• Lotus Bakeries Code of Conduct |
|
| MPLOYEES | Achieve gender equality and empower all women and girls |
• Lotus Bakeries fulfils the requirement for at least one third of directors to be of a different gender to the other members • Lotus Bakeries has excellent gender diversity, with 52.4% female and 47.6% male employees |
| E | Promote lasting, inclusive and sustainable economic growth, full and productive employment and decent work for all |
• TOP values • 'Safety First' strategy • The Arbovignet (Netherlands) |
| Lotus Bakeries' pillars of sustainability |
SDGs | Lotus Bakeries' reporting | |||
|---|---|---|---|---|---|
| End hunger, achieve food security and improved nutrition and promote sustainable agriculture |
• Internal and external audit for high-quality products and processes (IFS, BRC, ACG) |
||||
| PEOPLE | Ensure healthy lives and promote well-being for all at all ages |
• Clear communication to consumers • Reduction of sugar and salt content and saturated fat in our products • Offer of both large and small packs to give consum ers the opportunity to consume less calories • Entry into the natural snacking segment |
|||
| Ensure access to water and sanitation for all | • Efficient use of ingredients to reduce waste |
||||
| MENT | Ensure sustainable consumption and production patterns (waste management, sustainable production and consumption patterns, sustainable supply chain, etc.) |
• Efficient use of ingredients to reduce waste • Processing of food waste (from production) into animal feed • Use of plastic packaging to keep products fresh • Different packaging formats |
|||
| ENVIRON | Take urgent action to combat climate change and its impacts |
• Energy consumption and emission reduction + offset via WWF Gold Standard • Ecological footprint reduced by the creation of a Lotus Biscoff production site outside Belgium (in North Carolina |
|||
| Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss |
• Traceability audit • RSPO certified |
Lotus Bakeries has a role to play in society. We are only too happy to assume our responsibilities, time and time again.
Employees Every employee deserves our respect. After all, it is thanks to the motivation and commitment of our employees that we make a difference.
People Our aim is to ensure in a responsible way that consumers can enjoy products produced by us in a sustainable manner.
Environment Because all of our ingredients come from nature, we like to give something back.
Lotus Bakeries is in the midst of society and we are fully aware of our social responsibility. Under the first CSR pillar, we enthusiastically take on this role.
Locally, naturally, where we are present with our factories and sales organisations and where the main challenge lies in clear and accurate communication to consumers and in quality assurance for our products. The risks this entails are adequately dealt with by Lotus' professional quality department and focus on top quality as discussed below.
Respect for human rights is in our company's DNA. Locally and internationally, in the Lotus Bakeries family, among its other business partners. It is our duty to take steps to reduce the risk of violations of human rights—in whatever form. However, our social responsibility goes further: Lotus Bakeries also actively supports local and international social initiatives.
In its social role, Lotus Bakeries also guards against fraud and corruption and the social damage that can result from this.
These aspects are receiving more and more attention as, like similar companies, we are faced with the risks of the market: the geographical scale of our buying and selling activities, the cultural and regulatory differences in all these countries and the multitude of parties involved from purchase to sale. The risk of corrupt practices is relatively low for our company since we do not have any production facilities or sales offices of our own in countries with a Corruption Perception Index of below 57, except for South Korea (CPI score 57) and China (CPI score 39). This is compared to a global average CPI score of 43 and an increased risk for a CPI score below 50 (source: "Transparency International 2018").
At Lotus Bakeries, we believe that it is important to support education because education is the key to breaking the vicious circle of poverty. Anyone who has access to education can learn a profession and thus also gain access to the labour market, earn an income and support a family. The quality of the education is also crucial here. In order to fulfil this commitment, Lotus Bakeries has chosen to support two educational projects.
As of 2018, Lotus Bakeries supports Kusasa, a special charity in South Africa's Western Cape Province. The people behind Kusasa have built a new primary school and recruited highly skilled teachers to offer children from the shanty towns a decent education. Every year, more than 150 children can receive a good basic education. As a result, they can look forward to a better future.
By providing an outstanding "Whole Child Education" in our independent primary school, The Kusasa Project seeks to help children from South Africa's Western Cape to reach their potential, to love learning and develop skills necessary to achieve their dreams.
Doug Gurr, founder of The Kusasa Project
As a Lotus employee, it's great that we can do our bit for the 'Care for Today - Respect for Tomorrow' programme. We consider it a privilege to be able to do this as a family for children who have less opportunities than our own children, and support them in their schooling so that they too can use their talents and ultimately also do their bit to help create a better future.
Roel de Jong, Corporate Procurement Director
It gives you a fantastic feeling to be assigned a sponsored child with whom you not only develop a bond, but whom you also support tangibly by making it possible for them to receive a high quality education.
Annelies Santens, Finance Director Business Unit Natural Foods
This project was set up together with Cunina at the school in Reichenau, Underberg, South Africa. It was our wish to provide extra support in developing regions, especially in education. We wanted to increase the involvement of our employees. In 2017, we initiated a project with Cunina and the employees of Lotus Bakeries Corporate were given the opportunity to become godparents. All sponsored children are offered education from the first year of primary education to the final year of secondary education. This means a long-term commitment for 12 years. The Lotus employees involved will communicate with the children they sponsor several times a year, receive their photo and school report and follow their development. In this way, a personal bond can be developed. We chose a school in South Africa, due to the link with the manufacture of our BEAR products there.
We are particularly proud that our employees responded positively to this project en masse when it was presented. They say that they are proud to be able to work for a company in which such an initiative is proposed and carried out. An individual sponsor cannot save all of the children in the world, but they can save the world of an individual child. We are therefore pleased with our decision—together with our colleagues from the corporate departments—to give about a hundred children access to a decent education, giving them the chance of a better future.
By starting up production facilities for BEAR in Wolseley, South Africa, Lotus Bakeries will provide extra employment in the region. We plan to employ more than 300 people when the factory starts up in Wolseley. This means that we will be a major employer in the region, and as a result make a significant contribution to improving local society.
Unemployment in the region is very high. As a leading employer in the region, we can make a difference to the local community. The new factory on the edge of town will be more involved in the community than the current site, which is in a remote area. So, we're already building bridges with the locals.
Isabelle Maes, CEO Natural Foods
When Entrepreneurs for Entrepreneurs was founded almost two decades ago, Lotus Bakeries was one of its partners right from the start. After all, the mission of helping entrepreneurs in developing countries was a perfect fit for our family values. Today we are still actively involved as a key member of this not-for-profit organisation.
In the north of Benin, fonio is one of the staple food crops, which can be used in many ways. However, crops have been declining for several years. Via Entrepreneurs for Entrepreneurs and Louvain Coopération, Lotus Bakeries supports a project with the goal of ensuring continuous access all year round to healthy and nutritious food products for 8,000 families. For this, 850 microprojects have been set up and 3,300 families receive help to produce fonio.
Offering pleasant work in a challenging environment is our motto. Our employees' well-being and an inspirational corporate culture form the key objectives of our second pillar of sustainability. Lotus Bakeries is committed to sustainable growth so as to offer long-term employment.
Team spirit: each link in the process is equally important, from marketing to production and packaging. It is essential to work as a well-oiled team. We work together every day to make Lotus Bakeries a success, in a safe and inspiring working environment
Open dialogue: a listening, open attitude, proactive communication and respectful feedback are priorities in dealings with and between employees. This is put into practice via regular departmental meetings, use of internal communication platforms and promotion of two-way communication between employees
Passion: our employees' dedication and commitment are evident on a daily basis in the workplace. In their justified pride in our products, for example. Investing in our employees benefits the whole company.
A key challenge for Lotus Bakeries is to attract competent employees who reflect the TOP values. Lotus Bakeries wants to offer its consumers high-quality products and for this it needs to be able to rely on capable employees who go about their work confidently and efficiently. When selecting new employees, the competencies of the applicant and the TOP corporate values are paramount. During the selection process, the applicants meet several Lotus Bakeries employees and, where relevant, undergo an external assessment adapted to the role for which they are applying. The aim is twofold: to create a broad platform for selecting the candidates with the best set of skills and competencies for the role in question and to give the candidates a better idea of the corporate values and culture. In this way, we believe that we can employ a diversified group of employees who all have the TOP values in common.
Lotus Bakeries does not apply any quotas based on gender, age, nationality, language or any other factor. We recruit each candidate using the same process as described above, subject to internal and external assessments of competencies, skills and values, regardless of origin, age, gender and nationality. For each role within Lotus Bakeries, a job weighting is performed, based on which a pay package is defined for each role, so that an objectively determined pay package is available for each candidate.
We find that Lotus Bakeries' objective recruitment policy results in excellent gender diversity, with 52.4% female and 47.6% male employees.
Once on board, Lotus Bakeries aims for thorough onboarding, in which new Lotus members are immersed in our company, our products, our brands and our culture. Special induction days are organised for new employees. In the case of acquisitions too, we ensure that employees have a good idea of how the Lotus Bakeries Group works.
Only when we are all working towards the same goal can we realise our long-term objectives together and with even greater pleasure in our work. For this reason, we communicate about these long-term objectives via various internal channels. The various departments then determine their own priorities based on this general direction and devise an action plan to achieve this.
Lotus Bakeries wants to build bridges between all of its employees. This happens firstly through treating one another with respect and care. It is not by chance that team spirit is one of the TOP values. To enhance cooperation between employees, Lotus Bakeries fosters clear communication throughout the entire Group, locally and internationally, including via our information sharing system LotusLink SharePoint. Teambuilding activities are also organised so that employees can get to know one another outside their everyday context. Finally, Lotus Bakeries has appointed several well-trained confidential counsellors whom employees can approach.
Once they are on board, it is a question of retaining these engaged and motivated TOP talents in the company so that the know-how these employees have acquired is not lost. Here, the focus lies on giving employees opportunities to develop, offering adequate training opportunities, but also making sure that there are sufficient challenges within the Group for employees who are hungry for more.
We are convinced that internal mobility is one of the keys to greater commitment and improved employability for our employees. At Lotus Bakeries Netherlands, for instance, we managed to fill more than 75% of our vacancies internally last year. Employees are given a new set of tasks or different responsibilities to enable them to develop to the full within the organisation. In 2018, we were able once again to give several Lotus employees the opportunity to gain experience abroad as expats. Regular training opportunities are offered too and we have also started up a 'Young graduates programme'. This contributes to the continuous development of skills and high-grade competencies among the Lotus team.
Another challenge especially in the production environment of Lotus Bakeries is the safety and well-being of employees. 'Safety first' is always top of the agenda.
Our employees' well-being depends first and foremost on a safe working environment. An accident can happen any time, and a moment's carelessness can have serious consequences on a production floor. That's why 'safety first' is always top of the agenda at work meetings. Our employees and managers discuss safety situations on a daily basis and we are committed to bringing about improvements across the board.
In 2018 across all Lotus Bakeries Group sites, there were a total of 47 occupational accidents resulting in absence from work and—although none of them could be classed as a serious occupational accident—that is 47 too many.
The Dutch Working Conditions Act, known as the Arbowet for short, contains rules for promoting the health, safety and well-being of employees and preventing occupational accidents. The Dutch Association for the Baking and Confectionary Industry (VBZ) has developed an "Arbovignet" or occupational health and safety label for the industry. Both the plant in Enkhuizen and the plant in Geldrop have proved that they can meet the high quality standards and been awarded the label.
The majority of occupational accidents occurred in two plants where volumes have increased enormously and many new employees have started. In themselves, these factors are no excuse for the increase in occupational accidents. We will therefore make an extra effort to bring about a dramatic improvement in results in future.
The fact that some departments and even some factories have kept the counter at zero for several years strengthens our assurance that we must continue our efforts just as strongly to achieve our ultimate goal: 'zero' occupational accidents across all Group sites.
Lotus Bakeries aims to offer a pleasant working environment with a variety of facilities such as standing desks to encourage working standing up, showers so that employees can easily cycle to work, sufficient expanses of glass to create light and airy offices.
Following the occupation of new offices in the US, Germany, Switzerland, China, South Korea and Austria and the renovation of the offices in Comines, in 2018, we began renovating the office complex in Lembeke. The aim is to make the workplace as pleasant as possible.
The plant and offices at Enkhuizen (NL) have also been fully renovated.
Lotus Bakeries believes that paying attention to health and fitness benefits both the employee and the company. In 2018, all employees in Belgium were given the opportunity to join a bicycle leasing scheme. More than 150 enthusiastic employees have now chosen to hire a bicycle under this scheme and cycle to work regularly. This is not only good for the employees' health, but also has a positive effect on CO2 emissions.
Ensuring that people enjoy our products to the full but responsibly, now and in the future. We are committed to this day after day as part of our third pillar of sustainability.
Lotus Bakeries wants to be able to offer its consumers delicious, high-quality snacks, for all times of the day, in both the biscuits and bakery and the natural snacking category. Within the range of biscuits and bakery, the emphasis is on enjoyment, but with a constant focus on a healthy balance between enjoyment and health. In the natural snacking range, the primary focus is on health, but with the aim of offering healthy, natural products which are also really tasty. Lotus Bakeries wants to make 'tasty' as healthy as possible and 'healthy' as tasty as possible. Ensuring the quality, origin, composition and safety of our products is vital.
This policy is associated with many challenges. In order to be able to bring high-quality products to the market we rely on a skilled internal R&D department. Ever-growing public awareness of healthy eating requires us to commit to a diversified offer of products and to analyse the product composition and keep updating it where possible.
We work to achieve high-quality products and processes every day, accompanied by high levels of investment in research. Accordingly, our R&D department refines the composition of our products. In addition to their own expertise, they also rely on new insights into various ingredients from well-respected knowledge institutions and innovation platforms in the food industry. We learn a lot from one another too. In order to apply best practices in the other plants as soon as possible, we use a system of organised consultation. The constant striving for high-quality products and processes is audited both externally and internally (IFS, BRC, ACG) and all of our employees are closely involved in this.
As Lotus Bakeries, we consider it important to be able to offer consumers different solutions for leading a responsible lifestyle. Such a responsible lifestyle can be presented as a balance between diet and exercise.
In order to support consumers in their nutritional choices, we believe that it is paramount to give them the correct information about the nutritional value of every item. This information can be found not only on the packaging, but also on our website. We are also responding to growing awareness of healthy eating by offering several of our top products in large and small packs.
Our R&D department is tasked with developing products with an improved nutritional composition, while still maintaining the quality of the product. They have made significant progress in reducing trans fats, saturated fats and sugars.
Finally, since the acquisition of Nākd, TREK, BEAR, Urban Fruit and Kiddylicious, our range has expanded to include healthy snacks.
Anyone who learns about healthy eating and a healthy lifestyle as a child will reap the rewards in later life. Based on this reasoning, our site at Geldrop in the Netherlands has teamed up with the JOGG organisation, which promotes a healthy weight among young people. We have also signed up to 'healthy school canteens' and, in partnership with JOGG, we offer healthy alternatives for breaktime by introducing Nākd, BEAR, Snelle Jelle and Peijnenburg Zero.
When it comes to respect for the environment, we leave nothing to chance. From purchasing to production and packaging: care for our living environment is key. As part of the fourth pillar of sustainability, we continuously monitor and improve the impact of all of our processes on nature.
Lotus Bakeries wishes to achieve sustainable growth. Compliance with the relevant environmental legislation is an obvious aim. Our goal goes further. Lotus Bakeries closely monitors the impact of its activities on the environment and constantly strives to reduce its ecological footprint.
Based on the materiality matrix, we have identified some key environmental risks. Firstly, Lotus Bakeries now sells products in sixty countries and produces them in four—soon to be six—countries, so that we have to deal with constantly changing legislation, including in relation to the environment. Reducing waste, but also cutting energy, CO2 and water consumption are also a key focus in the food sector. Finally, the purchasing side presents various challenges, regarding traceability and compliance of our suppliers with principles corresponding to those valued by Lotus Bakeries with regard to the environment and society.
Our Corporate Quality Assurance department is responsible for constantly monitoring changes in the law and incorporating them in our Quality Management System (QMS). Among other aspects, the department ensures that there is clear information on packaging in accordance with the law, so that the consumer is well informed about our products and their ingredients. Suppliers and their products are also tested against the requirements that Lotus Bakeries imposes on them, so that we can offer consumers high-quality, safe food products. Quality guarantees are constantly monitored by laboratory testing and supplier evaluations.
By systematically optimising the production process, we keep our production waste as low as possible. Anything left over from production is processed into animal feed, but we also intend to minimise waste flows through more efficient use of ingredients.
We also help consumers waste less food by offering a choice of different packaging formats. And we are increasingly using portion packs. The idea behind this: throwing away food is much more damaging to the environment than using a small amount of plastic to package portions separately. The ecological footprint of the production process in the broadest sense (growing, harvesting, assembling, etc.) is generally significantly larger than that of the packaging. At Lotus, we seek flexibility in our packaging formats and a solution for different sizes of household and consumption moments, depending on how often people want to enjoy our biscuits.
Without its contents, packaging is often perceived as waste, since it has no significance for the consumer when it no longer contains a biscuit or product. However, packaging fulfils a number of important functions that are crucial, amongst other purposes, for preserving and protecting the product during transport and interim storage between Lotus Bakeries' factory and the consumer. In addition, good packaging guarantees the health and safety of consumers. Packaging also fulfils other roles, such as providing information (allergens), marketing, diversification and portion-controlled presentation of products.
Lotus Bakeries uses three types of packaging material to ensure our products reach the consumer safely and full of flavour: cardboard, glass and plastic.
For transport, the main packaging material, in terms of weight, is cardboard. This offers optimal protection. More than 90% of our transport packaging consists of recycled materials. Cardboard is already collected and recycled on a large scale and helps create a circular economy.
Our Lotus Biscoff spread is mostly sold in glass jars because this ensures optimum preservation and taste. The used jars can then be collected and recycled.
When Lotus Bakeries uses plastic, it is to preserve the product and keep it fresh for longer. In using plastic, we deliberately choose mono-materials, in order to maximise the recycling possibilities.
If we want to continue to enjoy the advantages of plastic in future without harming the environment, we must use it smartly. We design packaging that protects the product as well as possible, while also minimising the environmental impact of both product and packaging. We also note that the weight of all packaging material per consumer trade item (or kg of product) for Lotus Bakeries is extremely low.
We actively analyse the recyclability of our packaging, but recyclability alone is not enough. Biscoff is marketed globally. But collection and sorting is organised locally. For materials that are "harder" to recycle, we seek alternatives, together with our suppliers and scientific institutions. These alternatives are extensively tested, without losing sight of the quality and taste of our product.
It is a misconception that large value packs are better for the environment than portion packs. It is true that the amount of packaging is less here than for portion packs. But, on the other hand, portion packs can prevent food waste and are therefore better for the environment. This is because the impact of throwing away food versus the impact of a few grams more of plastic is much greater.
When we develop new products and packaging formats, we consider the whole supply chain. For example, we always try to load the pallets and trucks in the best possible way to minimise the impact of the transport. Naturally, we consider it our job to keep a close eye on trends and developments in the areas of materials, sustainability and recycling and implement them where possible.
Reducing energy consumption and emissions In 2018, our Carbon Footprint (kg CO2 ) Scope 1 & 2 per produced tonne fell by 8% compared with 2017. A reduction was achieved at no less than 10 out of 11 production sites, while the other site remained virtually stable.
Our gas consumption is also offset via the WWF Gold Standard programme and our electricity is green. The result of all these efforts: since 2015, Lotus Bakeries' production has been CO2 neutral.
Our employees are involved in reducing waste and emissions too. For example, Lotus has installed a LotusLink SharePoint platform whereby information is completely digitised and access to it facilitated. This is a significant step towards a paperless working environment. The use of modern means of communication is also promoted to reduce travel. Attention is also paid to a greener car fleet and a bicycle leasing scheme has been introduced for our employees in Belgium.
*These KPIs apply to scope 1 and 2 emissions and are calculated on the basis of Bilan Carbone.
Local production in our largest export market When developing a new product or a different packaging format, we always take the whole logistics chain into account. Such as optimal loading of pallets and trucks. In this way we minimise the impact of transport.
To supply our largest export market for Biscoff, we are even going a step further. The first Lotus Biscoff manufacturing facility outside Belgium will be built in North Carolina, USA. As for our European factories, in the US we will purchase our raw materials and packaging materials locally as far as possible. Moreover, the production lines will be equipped with modern energy recovery technology. The aim is to organise all production for the US market locally. This will not only have a significant impact on our ecological footprint, we will also create new jobs in that region. The first Lotus Biscoff biscuits will roll off the production line there in 2019.
Lotus Bakeries NV Gentstraat 1 B-9971 Lembeke T + 32 9 376 26 11 F + 32 9 376 26 26 www.lotusbakeries.com
Register of legal persons of Ghent, Enterprise number 0401.030.860
For further information about the data of the annual review or more information about the Lotus Bakeries Group, please contact: Lotus Bakeries NV Corporate Secretary Gentstraat 1 B-9971 Lembeke T + 32 9 376 26 11 F + 32 9 376 26 26 [email protected]
Concept and realisation Focus Advertising and Lotus Bakeries www.focus-advertising.be Illustration cover
Flore Deman www.floredeman.com
"Without a doubt my favourite Lotus Biscoff product is the 1p. Not only is it at the core of everything that we do in the out of home department, but it helps to make each coff ee moment in all of our channels memorable and continues to be fundamental in driving our growth."
— Max Kenyon, Key Account Manager OOH UK
www.lotusbakeries.com
Annual review 2018 - Financial supplement
The consolidated financial statements for 2018 shown below have been prepared in accordance with IFRS as adopted for application within the European Union with comparative IFRS figures for 2017.
The condensed statutory financial statements are presented in the financial supplement and are prepared in accordance with Belgian accounting standards (BGAAP).
Only the consolidated financial statements, as set out on the following pages, present a faithful picture of the assets, financial position and results of the Lotus Bakeries Group.
In light of the fact that the statutory annual financial statements give only a limited picture of the financial situation of the Group, the Board of Directors considers it appropriate to only present an abridged version of the statutory annual statements of Lotus Bakeries NV, in accordance with Article 105 of the Belgian Companies Code.
The full statutory annual statements, together with the statutory annual report of the Board of Directors and the statutory audit report of the Auditor, will be submitted to the National Bank of Belgium within the legally prescribed term. These documents are available on the corporate website of Lotus Bakeries, www.lotusbakeries.com (Investor Relations) or can be obtained for free from the Corporate Secretary of Lotus Bakeries on simple request.
This financial supplement is a part of the 2018 annual review of Lotus Bakeries NV. This annual review consists of two parts which are available on the Lotus Bakeries corporate website and also on simple request, separately and free of charge, from the Lotus Bakeries Corporate Secretary.
The Auditor has issued an unqualified audit opinion with respect to the consolidated and the statutory annual statements of Lotus Bakeries NV.
| Consolidated balance sheet 4 |
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|---|---|
| Consolidated income statement 5 |
|
| Consolidated statement of changes in equity6 | |
| Consolidated cash flow statement8 |
| 1. | Consolidated companies 9 |
|---|---|
| 1.1 List of consolidated companies9 |
|
| 1.2 Changes in the group structure in 2018 10 |
|
| 1.3 Legal structure 11 |
|
| 2. Accounting principles 12 |
|
| 3. | Segment reporting by geographical region 24 |
| 4. Acquisitions and disposal of subsidiaries 28 |
|
| 5. | Tangible assets29 |
| 6. Goodwill 31 |
|
| 7. | Intangible assets32 |
| 8. Deferred taxes 36 |
|
| 9. | Participating interests and other long-term receivables 37 |
| 10. Inventories 37 |
|
| 11. Trade receivables and other amounts receivable. 37 | |
| 12. Cash and cash equivalents 38 |
|
| 13. Net financial debt 38 |
|
| 14. Issued capital38 | |
| 15. Dividends39 | |
| 16. Treasury shares 40 |
|
| 17. Interest-bearing liabilities 40 |
|
| 18. Net employee defined benefit liabilities 41 |
|
| 19. Provisions 43 |
|
| 20. Financial derivatives 43 |
|
| 21. Other non-current liabilities 44 |
|
| 22. Trade payables and other liabilities 45 |
| 24. Share-based payments 46 |
|---|
| 25. Depreciation and amounts written down on (in)tangible assets 49 |
| 26. Other operating income and charges 49 |
| 27. Non-recurrent operating result 49 |
| 28. Financial results. . 50 |
| 29. Taxes 50 |
| 30. Earnings per share 51 |
| 31. Related parties 51 |
| 32. Rights and commitments not reflected in the balance sheet 51 |
| 33. Financial risk management. 52 |
| 34. Categories and fair value of financial instruments. 52 |
| 35. Research and development. . 56 |
| 36. Subsequent events. . 56 |
| 37. Management responsibility statement. . 56 |
| 38. Information about the Statutory Auditor, its remuneration |
| and additional services rendered 57 |
| AUDITOR'S REPORT 58 |
| ABRIDGED FIVE-YEAR FINANCIAL SUMMARY |
| LOTUS BAKERIES GROUP 64 |
| ABRIDGED STATUTORY FINANCIAL STATEMENTS |
| OF LOTUS BAKERIES NV 66 |
| Balance sheet after appropriation of profit. . 66 |
| Non-consolidated income statement. 67 |
| Appropriation account. 67 |
| Extract from the notes 67 |
| IN THOUSANDS OF EUR | NOTES | 31-12-2018 | 31-12-2017 |
|---|---|---|---|
| ASSETS | |||
| NON-CURRENT ASSETS | 545,647 | 447,693 | |
| Property, plant and equipment | 5 | 219,897 | 174,426 |
| Goodwill | 6 | 177,639 | 141,001 |
| Intangible assets | 7 | 138,887 | 123,924 |
| Participating interests | 9 | 2,448 | - |
| Investment in other companies | 4 | 12 | 12 |
| Deferred tax assets | 8 | 3,936 | 4,310 |
| Other non-current assets | 9, 20 | 2,828 | 4,020 |
| CURRENT ASSETS | 165,925 | 149,801 | |
| Inventories | 10 | 39,066 | 33,653 |
| Trade receivables | 11 | 71,097 | 60,104 |
| VAT receivables | 11 | 4,503 | 4,789 |
| Income tax receivables | 11 | 523 | 484 |
| Other amounts receivable | 11 | 2,993 | 1,487 |
| Cash and cash equivalents | 12, 13 | 45,597 | 48,129 |
| Deferred charges and accrued income | 2,146 | 1,155 | |
| TOTAL ASSETS | 711,572 | 597,494 |
| IN THOUSANDS OF EUR | NOTES | 31-12-2018 | 31-12-2017 |
|---|---|---|---|
| EQUITY AND LIABILITIES | |||
| EQUITY | 346,927 | 293,213 | |
| Share Capital | 14 | 16,319 | 15,999 |
| Retained earnings | 369,114 | 316,954 | |
| Treasury shares | 13, 16, 24 | (11,406) | (13,919) |
| Other reserves | 18 | (27,156) | (25,877) |
| Non-controlling interests | 56 | 56 | |
| NON-CURRENT LIABILITIES | 198,042 | 193,923 | |
| Interest-bearing loans and borrowings | 13, 17 | 116,500 | 117,500 |
| Deferred tax liabilities | 8 | 52,725 | 49,206 |
| Pension liabilities | 18 | 3,519 | 3,846 |
| Provisions | 19 | 377 | 414 |
| Derivative financial instruments | 20 | 2,319 | 1,970 |
| Other non-current liabilities | 21 | 22,602 | 20,987 |
| CURRENT LIABILITIES | 166,603 | 110,358 | |
| Interest-bearing loans and borrowings | 13, 17 | 36,655 | 1,750 |
| Pension liabilities | 18 | 234 | 152 |
| Provisions | 19 | 21 | 21 |
| Trade payables | 22 | 86,794 | 68,542 |
| Employee benefit expenses and social security | 22 | 21,330 | 18,383 |
| VAT payables | 22 | 300 | 119 |
| Tax payables | 22 | 14,761 | 16,464 |
| Derivative financial instruments | 20, 22 | - | 1 |
| Other current liabilities | 22 | 3,102 | 1,662 |
| Accrued charges and deferred income | 22 | 3,406 | 3,264 |
| TOTAL EQUITY AND LIABILITIES | 711,572 | 597,494 |
| IN THOUSANDS OF EUR | NOTES | 2018 | 2017 |
|---|---|---|---|
| Turnover | 556,435 | 524,055 | |
| Raw materials, consumables and goods for resale | (184,804) | (171,494) | |
| Services and other goods | (150,732) | (145,568) | |
| Employee benefit expense | 23 | (111,977) | (105,580) |
| Depreciation and amortisation on intangible and tangible assets |
25 | (12,942) | (12,105) |
| Impairment on inventories, contracts in progress and trade debtors |
10, 11 | (1,706) | (2,198) |
| Other operating charges | 26 | (2,123) | (3,168) |
| Other operating income | 26 | 2,879 | 5,407 |
| RECURRENT OPERATING RESULT (REBIT)(1) | 95,030 | 89,349 | |
| Non-recurrent operating result | 27 | (3,005) | (91) |
| OPERATING RESULT (EBIT) (2) | 92,025 | 89,258 | |
| Financial result | 28 | (3,324) | (2,228) |
| Interest income (expense) | (2,435) | (2,096) | |
| Foreign exchange gains (losses) | (596) | 175 | |
| Other financial income (expense) | (293) | (307) | |
| PROFIT FOR THE YEAR BEFORE TAXES | 88,701 | 87,030 | |
| Taxes | 8, 29 | (20,829) | (22,397) |
| RESULT AFTER TAXES | 67,872 | 64,633 | |
| NET RESULT - attributable to | 67,872 | 64,633 | |
| Non-controlling interests | 964 | 1,094 | |
| Equity holders of Lotus Bakeries | 66,908 | 63,539 |
| IN THOUSANDS OF EUR | NOTES | 2018 | 2017 |
|---|---|---|---|
| OTHER COMPREHENSIVE INCOME | |||
| Items that may be subsequently reclassified to profit and loss |
(1,726) | (2,727) | |
| Currency translation differences | (587) | (5,989) | |
| Gain/(Loss) on cash flow hedges, net of tax | (1,139) | 3,262 | |
| Items that will not be reclassified to profit and loss | 276 | (757) | |
| Remeasurement gains/(losses) on defined benefit plans |
18 | 276 | (757) |
| Other comprehensive income | (1,450) | (3,484) | |
| Total comprehensive income - attributable to: | 66,422 | 61,149 | |
| Non-controlling interests | 793 | 449 | |
| Equity holders of Lotus Bakeries | 65,629 | 60,700 | |
| EARNINGS PER SHARE | 30 | ||
| Weighted average number of shares | 803,878 | 799,423 | |
| Basic earnings per share (EUR) - attributable to: | |||
| Non-controlling interests | 1.20 | 1.37 | |
| Equity holders of Lotus Bakeries | 83.23 | 79.48 | |
| Weighted average number of shares after effect of dilution |
808,813 | 808,735 | |
| Diluted earnings per share (EUR) - attributable to: | |||
| Non-controlling interests | 1.19 | 1.35 | |
| Equity holders of Lotus Bakeries | 82.72 | 78.57 | |
| Total number of shares (3) | 815,733 | 814,433 | |
| Earnings per share (EUR) - attributable to: | |||
| Non-controlling interests | 1.18 | 1.34 | |
| Equity holders of Lotus Bakeries | 82.02 | 78.02 |
(1) REBIT is defined as the recurrent operating result, consisting of all the proceeds and costs relating to normal business.
(2) EBIT is defined as recurrent operating result + non-recurrent operating result.
(3) Total number of shares including treasury shares at 31 December.
| 6 Lotus Bakeries |
Annual review 2018 | |||
|---|---|---|---|---|
| Consolidated statement of changes in equity | ||||
| ISSUED | RETAINED | |||
| IN THOUSANDS OF EUR | CAPITAL | SHARE PREMIUM | CAPITAL | EARNINGS |
| EQUITY as on 1 January 2018 | 3,584 | 12,415 | 15,999 | 316,954 |
| Net result of the Financial Year | - | - | - | 66,908 |
| Currency translation differences | - | - | - | - |
| Remeasurement gains / (losses) on defined benefit plans | - | - | - | - |
| Cash flow hedge reserves | - | - | - | - |
| Taxes on items taken directly to or transferred from equity | - | - | - | - |
| Net income / (expense) for the period recognised directly in equity | - | - | - | - |
| Total comprehensive income / (expense) for the period | - | - | - | 66,908 |
| Dividend to shareholders | - | - | - | (15,887) |
| Increase in capital | 6 | 314 | 320 | - |
| Acquisition / sale own shares | - | - | - | - |
| Employee share-based compensation expense | - | - | - | (1,436) |
| - | - | - | 590 | |
| Impact written put options on non-controlling interests | ||||
| Other | - | - | - | 1,985 |
| EQUITY as on 1 January 2017 | 3,576 | 11,951 | 15,527 | 267,947 |
|---|---|---|---|---|
| Net result of the Financial Year | - | - | - | 63,539 |
| Currency translation differences | - | - | - | - |
| Remeasurement gains / (losses) on defined benefit plans | - | - | - | - |
| Cash flow hedge reserves | - | - | - | - |
| Taxes on items taken directly to or transferred from equity | - | - | - | - |
| Net income / (expense) for the period recognised directly in equity | - | - | - | - |
| Total comprehensive income/(expense) for the period | - | - | - | 63,539 |
| Dividend to shareholders | - | - | - | (13,191) |
| Increase in capital | 8 | 464 | 472 | - |
| Acquisition / sale own shares | - | - | - | - |
| Employee share-based compensation expense | - | - | - | 620 |
| Impact written put options on non-controlling interests | - | - | - | (2,013) |
| Other | - | - | - | 52 |
| EQUITY as on 31 December 2017 | 3,584 | 12,415 | 15,999 | 316,954 |
| TOTAL EQUITY |
NON-CONTROLLING INTERESTS |
EQUITY PART OF THE GROUP |
OTHER RESERVES |
CASH FLOW HEDGE RESERVES |
REMEASUREMENT GAINSLOSSES ON DEFINED BENEFIT PLANS |
TRANSLATION DIFFERENCES |
TREASURY SHARES |
|---|---|---|---|---|---|---|---|
| 293,213 | 56 | 293,157 | (25,877) | 1,005 | (454) | (26,428) | (13,919) |
| 67,872 | 964 | 66,908 | - | - | - | - | - |
| (586) | (170) | (416) | (416) | - | - | (416) | - |
| 199 | - | 199 | 199 | - | 199 | - | - |
| (1,594) | - | (1,594) | (1,594) | (1,594) | - | - | - |
| - | 533 | 533 | 456 | 77 | - | - | |
| (1,448) | (170) | (1,278) | (1,278) | (1,138) | 276 | (416) | - |
| 66,424 | 794 | 65,630 | (1,278) | (1,138) | 276 | (416) | - |
| (16,331) | (444) | (15,887) | - | - | - | - | - |
| - | 320 | - | - | - | - | - | |
| - | 2,513 | - | - | - | - | 2,513 | |
| (1,786) | (350) | (1,436) | - | - | - | - | - |
| - | 590 | - | - | - | - | - | |
| - | 1,984 | (1) | (1) | - | - | - | |
| 346,927 | 56 | 346,871 | (27,156) | (134) | (178) | (26,844) | (11,406) |
| 248,464 | 66 | 248,398 | (23,038) | (2,257) | 303 | (21,084) | (12,038) |
|---|---|---|---|---|---|---|---|
| 64,633 | 1,094 | 63,539 | - | - | - | - | - |
| (5,990) | (646) | (5,344) | (5,344) | - | - | (5,344) | - |
| (828) | - | (828) | (828) | - | (828) | - | - |
| 4,974 | - | 4,974 | 4,974 | 4,974 | - | - | - |
| (1,641) | - | (1,641) | (1,641) | (1,712) | 71 | - | - |
| (3,485) | (646) | (2,839) | (2,839) | 3,262 | (757) | (5,344) | - |
| 61,148 | 448 | 60,700 | (2,839) | 3,262 | (757) | (5,344) | - |
| (13,549) | (358) | (13,191) | - | - | - | - | - |
| 472 | - | 472 | - | - | - | - | - |
| (1,881) | - | (1,881) | - | - | - | - | (1,881) |
| 620 | - | 620 | - | - | - | - | - |
| (2,113) | (100) | (2,013) | - | - | - | - | - |
| - | 52 | - | - | - | - | - | |
| 293,213 | 56 | 293,157 | (25,877) | 1,005 | (454) | (26,428) | (13,919) |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Operating activities | ||
| Net result (Group) | 66,908 | 63,539 |
| Depreciation and amortization of (in)tangible assets | 12,942 | 12,105 |
| Net valuation allowance current assets | 1,701 | 2,198 |
| Provisions | 68 | (1,316) |
| Disposal of fixed assets | 29 | 1,776 |
| Financial result | 3,324 | 2,228 |
| Taxes | 20,829 | 22,397 |
| Employee share-based compensation expense | 589 | 620 |
| Non-controlling interests | 964 | 1,094 |
| Gross cash provided by operating activities | 107,354 | 104,641 |
| Decrease/(Increase) in inventories | (5,023) | (4,345) |
| Decrease/(Increase) in trade accounts receivable | (8,098) | (9,825) |
| Decrease/(Increase) in other assets | 1,821 | (955) |
| Increase/(Decrease) in trade accounts payable | (3,445) | 12,819 |
| Increase/(Decrease) in other liabilities | (2,694) | (2,982) |
| Change in operating working capital | (17,439) | (5,288) |
| Income tax paid | (20,051) | (22,240) |
| Interest paid | (2,461) | (2,102) |
| Other financial income and charges received/(paid) | (504) | (263) |
| Net cash provided by operating activities | 66,899 | 74,748 |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Investing activities | ||
| (In)tangible assets - acquisitions | (42,590) | (26,172) |
| (In)tangible assets - other changes | 630 | - |
| Acquisition of subsidiaries | (48,284) | - |
| Financial assets - other changes | (2,448) | 24 |
| Net cash used in investing activities | (92,692) | (26,148) |
| Net cash flow before financing activities | (25,793) | 48,600 |
| Financing activities | ||
| Dividends paid | (16,129) | (13,218) |
| Treasury shares | 4,056 | (1,155) |
| Proceeds of capital increase | 320 | 472 |
| Proceeds / (Reimbursement) of long-term borrowings | (1,000) | (1,000) |
| Proceeds / (Reimbursement) of short-term borrowings | 34,352 | (5,734) |
| Proceeds / (Reimbursement) of long-term receivables | (49) | (50) |
| Cash flow from financing activities | 21,550 | (20,685) |
| Net change in cash and cash equivalents | (4,243) | 27,915 |
| Cash and cash equivalents on January 1 | 48,129 | 19,932 |
| Effect of exchange rate fluctuations | 1,711 | 282 |
| Cash and cash equivalents on 31 December | 45,597 | 48,129 |
| Net change in cash and cash equivalents | (4,243) | 27,915 |
| ADDRESS | VAT OR NATIONAL NUMBER | 31-12-2018 | 31-12-2017 | |
|---|---|---|---|---|
| A. Fully consolidated subsidiaries | % | % | ||
| Cremers-Ribert NV | Gentstraat 52, 9971 Lembeke, BE | VAT BE 0427.808.008 | 100.0 | 100.0 |
| Interwaffles SA | Rue de Liège 39, 6180 Courcelles, BE | VAT BE 0439.312.406 | 100.0 | 100.0 |
| Lotus Bakeries NV | Gentstraat 1, 9971 Lembeke, BE | VAT BE 0401.030.860 | 100.0 | 100.0 |
| Lotus Bakeries Corporate NV | Gentstraat 1, 9971 Lembeke, BE | VAT BE 0881.664.870 | 100.0 | 100.0 |
| Lotus Bakeries België NV | Gentstraat 52, 9971 Lembeke, BE | VAT BE 0421.694.038 | 100.0 | 100.0 |
| Biscuiterie Willems BVBA | Nieuwendorpe 33 Bus C, 9900 Eeklo, BE | VAT BE 0401.006.413 | 100.0 | 100.0 |
| B.W.I. BVBA | Ambachtenstraat 5, 9900 Eeklo, BE | VAT BE 0898.518.522 | 100.0 | 100.0 |
| Lotus Bakeries Schweiz AG | Nordstrasse 3, 6300 Zug, CH | VAT CHE 105.424.218 | 100.0 | 100.0 |
| Lotus Bakeries CZ s.r.o. | Slezská 844/96, Vinohrady (Praha 3), 130 00 Praha, CZ | VAT CZ 271 447 55 | 100.0 | 100.0 |
| Lotus Bakeries GmbH | Rather Strasse 110a, 40476 Düsseldorf, DE | VAT DE 811 842 770 | 100.0 | 100.0 |
| Biscuiterie Le Glazik SAS | Zone Industrielle 2, 29510 Briec-de-l'Odet, F | VAT FR95 377 380 985 | 100.0 | 100.0 |
| Biscuiterie Vander SAS | Place du Château BP 70091, 59560 Comines, F | VAT FR28 472 500 941 | 100.0 | 100.0 |
| Lotus Bakeries France SAS | Place du Château BP 50125, 59560 Comines, F | VAT FR93 320 509 755 | 100.0 | 100.0 |
| Lotus Bakeries UK Ltd. | 3000 Manchester Business Park, Aviator Way, Manchester, M22 5TG, UK | VAT GB 606 739 232 | 100.0 | 100.0 |
| Natural Balance Foods Ltd. | Unit 1A Drakes Drive, Longcrendon, Bucks, HP18 9BA, UK | VAT GB 841 254 348 | 67.2 | 67.2 |
| Urban Fresh Foods Ltd. | The Emerson Building, 4-8 Emerson Street, London, SE1 9DU, UK | VAT GB 883 0600 32 | 100.0 | 100.0 |
| Lotus Bakeries Réassurances SA | 74, Rue de Merl, 2146 Luxembourg, L | R.C.S. Luxembourg B53262 | 100.0 | 100.0 |
| Koninklijke Peijnenburg BV | Nieuwendijk 45, 5664 HB Geldrop, NL | VAT NL003897187B01 | 100.0 | 100.0 |
| Peijnenburg's Koekfabrieken BV | Nieuwendijk 45, 5664 HB Geldrop, NL | VAT NL001351576B01 | 100.0 | 100.0 |
| WK Koek Beheer BV | Streek 71, 8464 NE Sintjohannesga, NL | VAT NL006634199B01 | 100.0 | 100.0 |
| WK Koek Bakkerij BV | Streek 71, 8464 NE Sintjohannesga, NL | VAT NL006634151B01 | 100.0 | 100.0 |
| Enkhuizer Koekfabriek BV | Oosterdijk 3e, 1601 DA Enkhuizen, NL | VAT NL823011112B01 | 100.0 | 100.0 |
| Lotus Bakeries Nederland BV | Nieuwendijk 45, 5664 HB Geldrop, NL | VAT NL004458953B01 | 100.0 | 100.0 |
| Lotus Bakeries Asia Pacific Limited | Room 2302, 23rd floor, Caroline Centre, Lee Garden Two, 28 Yun Ping road, Hong Kong | Inland Revenue Department file no. 22/51477387 | 100.0 | 100.0 |
| Lotus Bakeries North America Inc. | 1000 Sansome Street Suite 220, San Francisco, CA 94111-1323, USA | IRS 94-3124525 | 100.0 | 100.0 |
| Lotus Bakeries US, LLC | 1000 Sansome Street Suite 220, San Francisco, CA 94111-1323, USA | IRS 82-1300826 | 100.0 | 100.0 |
| Lotus Bakeries US Manufacturing, LLC | 1000 Sansome Street Suite 220, San Francisco, CA 94111-1323, USA | IRS 82-2542596 | 100.0 | 100.0 |
| Natural Balance Foods USA Inc. | 406 Bryant Circle, Unit G, Ojai, CA 93023, USA | C3598146 | 67.2 | 67.2 |
| Lotus Bakeries Ibérica S.L. | C/ Severo Ochoa, 3, 2a Planta Oficina 8A, 28232 Las Rozas (Madrid), Spain | VAT ESB80405137 | 95.0 | 95.0 |
| ADDRESS | VAT OR NATIONAL NUMBER | 31-12-2018 | 31-12-2017 | |
|---|---|---|---|---|
| A. Fully consolidated subsidiaries (continued) | % | % | ||
| Annas - Lotus Bakeries Holding AB | Radiovägen 23, SE 135 48 Tyresö, Sweden | Registration no. 556757-7241 | 100.0 | 100.0 |
| AB Annas Pepparkakor | Radiovägen 23, SE 135 48 Tyresö, Sweden | BTW SE556149914501 | 100.0 | 100.0 |
| Lotus Bakeries North America Calgary Inc. | L.M. Gordon LAW Office, 2213 - 20th Street P.O. Box 586, Nanton, Alberta, Canada, T0L 1R0 |
GST 131 644 205 | 100.0 | 100.0 |
| Lotus Bakeries Chile SpA | Nueva Tajamar #555 OF401, Las Condes, Santiago, Chile 7550099 | VAT (RUT) 76.215.081-6 | 100.0 | 100.0 |
| Lotus Bakeries China Ltd | Room 01.02, Floor 15, No. 511 Weihai Road, Jing'an Disctrict, Shanghai 200041, P.R. China |
Registration no. 913100000781169357 | 100.0 | 100.0 |
| Lotus Bakeries Korea Co. Ltd. | 4/F, AIA Tower, 16 Tongil-ro-2-gil, Jung-gu, Seoul 04511, South Korea | Registration no. 128-81-19621 | 100.0 | 100.0 |
| Lotus Bakeries Austria GmbH | Fleischmarkt 1/6/12, 1010 Wien, Austria | VAT ATU72710827 | 100.0 | 100.0 |
| The Kids Food Company Ltd | Kiddy Hq Amersham Court, 152 Station Road Amersham, Buckinghamshire, HP6 5DW | VAT GB 977396157 | 100.0 | - |
| Kiddylicious International Ltd. | Kiddy Hq Amersham Court, 152 Station Road Amersham, Buckinghamshire, HP6 5DW | VAT GB 211115184 | 100.0 | - |
| Kids Food Global Ltd. | Dixcart House, Fort Charles, Charlestown, Nevis, St Kitts and Nevis | C44487 | 100.0 | - |
On the basis of section 2:403 of the Dutch Civil Code, legal entities with a Dutch company number are exempt from the requirements for a local statutory audit. Lotus Bakeries UK Ltd. en Urban Fresh Foods Ltd. are exempt from the requirement for a local statutory audit, based on section 479A of company law. The holding entity guarantees the debts of these two companies as at 31 December 2018.
The following changes to the group structure took place in 2018:
In July 2018, Lotus Bakeries UK Ltd. acquired 100% of the shares of The Kids Food Company Ltd. and Kids Food Global Ltd.
Further information about these acquisitions can be found in note 4.
1.3 Legal Structure of the Lotus Bakeries Group at 31 December 2018
(*) Deviations in percentages with note 1.1 are due to insignificant non-controlling interests held by group entities other than
Lotus Bakeries NV. For reasons of simplicity, they are not included in the above legal structure.
(**) 2019 restructuring – Kids Food Global Ltd. in winding-up procedure.
The consolidated financial statements for the Group have been prepared in accordance with the International Financial Reporting Standards (IFRS), as endorsed by the European Union. Lotus Bakeries has used IFRS as its only accounting standards since 1 January 2005.
The consolidated financial statements are presented in thousands of euros and present the financial situation as of 31 December 2018.
The accounting principles were applied consistently.
The consolidated financial statements are presented on the basis of the historical cost price method, with the exception of the measurement at fair value of derivatives and financial assets available for sale.
The consolidated financial statements are presented before allocation of the parent company's result, as proposed to the General Meeting of Shareholders and approved by the Board of Directors on 8 February 2019 for publication.
The following amendments and annual improvements to standards are mandatory for the first time for the financial year beginning 1 January 2018 and have been endorsed by the European Union:
This interpretation relates to foreign currency transactions or parts of foreign currency transactions where there is advance consideration expressed in a foreign currency. The interpretation contains additional information for when a single payment/ receipt takes place and for when multiple payments/receipts take place. This interpretation is designed to reduce the current diversity in accounting for such transactions.
The following new standards and amendments to standards have been published, but are not yet mandatory for the first time for the financial year beginning 1 January 2018 and have been endorsed by the EU:
Amendments to IFRS 9, 'Prepayment features with negative compensation' (effective 1 January 2019 within the EU). Amendment allowing companies to measure prepayable financial assets with negative compensation at amortised cost or fair value through other comprehensive income, instead of at fair value in profit or loss, because they would otherwise fail the SPPI test. This amendment also explains an aspect of accounting for a modification of a financial liability.
IFRIC 23, The treatment of uncertainty concerning income tax (effective 1 January 2019). This interpretation clarifies the accounting for uncertainties in income taxes. The interpretation is to be applied to the determination of taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, when there is uncertainty over income tax treatments under IAS 12.
The following new standards, amendments and interpretations for standards have been published, but are not yet mandatory for the first time for the financial year beginning 1 January 2018 and have not been endorsed by the EU:
reporting financial performance, improved definitions and guidance (in particular the definition of a liability); and clarifications in important areas, such as the role of stewardship, prudence and measurement uncertainty in financial reporting.
they need. The amendments are not expected to have a significant effect on the preparation of the financial statements.
Lotus Bakeries expects that, except for IFRS 16, for which an analysis has been performed, the application of these standards will not have a material impact on the consolidated financial statements.
Lotus Bakeries will apply the new IFRS 16 standard as from 1 January 2019, the mandatory adoption date. The Group has opted for the 'simplified transition approach' and will not publish comparative figures for periods prior to 1 January 2019. The Group has performed an analysis, in which all current operating leases were inventorized. These mainly relate to office buildings, machinery and cars. As at 31 December 2018, the Group had taken out leases worth a total of EUR 4.1 million for 2019 (see note 32). EUR 1.2 million-worth of these leases concerns short-term or low-value leases. These are outside the scope of the standard and are recognised for accounting purposes as an expense in the income statement. The Group estimates that leases falling within the scope of IFRS 16, will give rise to an increase of approximately EUR 9.2 million in both tangible assets and debts. It is estimated that the Group's REBITDA will increase by between EUR 2.5 million and EUR 3.5 million.
The standard deals with the classification, valuation and derecognition of financial assets and liabilities. The standard is effective from 1 January 2018. Lotus Bakeries performed an analysis via the expected credit loss model defined in IFRS 9, the impact of this is not material for the Group.
The Group is primarily involved in the sale of goods and recognises the revenue at the time at which physical possession of the asset is transferred to the customer, generally upon delivery of the goods. As far as the transaction price is concerned, an impact analysis was performed in 2017, based on the underlying contracts. The Group concluded that there was no need for a shift in presentation between turnover and costs.
The consolidated financial statements comprise the financial statements of Lotus Bakeries NV and its subsidiaries (collectively referred to as the 'Group'). All material balances and transactions within the Group have been eliminated.
Subsidiaries are entities controlled by the Group. The Group has control over an investee when it is exposed to, or has the right to, variable returns arising from its involvement with the investee and has the ability to affect those returns through its power over the investee. The financial statements of the subsidiaries are included in the consolidation scope as from the date that the Group obtains control until the date such control ceases.
Acquisition of subsidiaries is accounted for according to the acquisition method. The financial statements of the subsidiaries have the same financial year as the Group and are prepared in accordance with the accounting principles of the Group.
A list of subsidiaries of the Group is disclosed in the relevant notes.
The Group granted put options to third parties with non-controlling interests in a subsidiary, with these options giving the holders the right to sell part or all of their investment in the subsidiary. These financial liabilities do not bear interest. In accordance with IAS 32, when non-controlling interests hold put
options enabling them to sell their investment in the Group, a financial liability is recognised in an amount corresponding to the present value of the estimated exercise price. This financial liability is included in the other non-current liabilities. The counterpart of this liability is a write-down of the value of the non-controlling interest underlying the option.
The difference between the value of the non-controlling interest and the fair value of the liability is allocated to the retained earnings (Group share), which are included in shareholders' equity.
This item is adjusted at the end of each reporting period to reflect changes in the estimated exercise price of the option and the carrying amount of noncontrolling interests. If the option matures without exercising, the liability is written off against non-controlling interests and retained earnings (Group share).
In order to prepare the financial statements in accordance with IFRS, management has to make judgements, estimates and assumptions which have an impact on the financial statements and notes.
Estimates made on the reporting date reflect existing conditions on that date (for example: market prices, interest rates and foreign exchange rates). Though these estimates are made by management based on maximum knowledge of ongoing business and of the actions that the Group may undertake, the actual results may be different.
The assumptions made for measuring goodwill, intangible assets, post-employment benefits and financial derivatives are included in notes 6, 7, 18 and 20.
The Group's reporting currency is the euro.
Transactions in foreign currencies are converted using the exchange rate applicable on the date of the transaction. Monetary assets and liabilities in foreign currencies are converted to the closing rate on the reporting date.
For foreign entities using a different functional currency than the euro:
Translation differences resulting from conversion of equity into euro using the rate at the end of the reporting period are recognised as translation differences under equity. Translation differences remain in equity up to the disposal of the company. In case of disposal, the deferred cumulative amount included in equity is included in the results for the foreign activity in question.
Goodwill from the acquisition of a foreign entity and possible fair value changes in carrying amount of the acquired assets and liabilities at the moment of acquisition, are considered as assets and liabilities of the foreign activity and are converted using the closing rate.
The Group has no entities in hyper-inflationary economies.
The following exchange rates were used in preparing the financial statements:
| CLOSING RATE | AVERAGE RATE | |||||
|---|---|---|---|---|---|---|
| 2018 | 2017 | 2018 | 2017 | |||
| EUR/CAD | 1.5605 | 1.5039 | 1.5329 | 1.4718 | ||
| EUR/CHF | 1.1269 | 1.1702 | 1.1515 | 1.1161 | ||
| EUR/CLP | 792.9810 | 733.9410 | 755.6531 | 732.0983 | ||
| EUR/CNY | 7.8751 | 7.8044 | 7.8152 | 7.6556 | ||
| EUR/CZK | 25.7240 | 25.5350 | 25.6725 | 26.2863 | ||
| EUR/GBP | 0.8945 | 0.8872 | 0.8857 | 0.8758 | ||
| EUR/KRW | 1277.9300 | 1279.6100 | 1295.9567 | 1275.7250 | ||
| EUR/PLN | 4.3014 | 4.1770 | 4.2675 | 4.2427 | ||
| EUR/SEK | 10.2548 | 9.8438 | 10.2952 | 9.6437 | ||
| EUR/USD | 1.1450 | 1.1993 | 1.1792 | 1.1368 | ||
| EUR/ZAR | 16.4594 | 14.8054 | 15.6125 | 15.0552 |
Intangible assets which are acquired separately are measured initially at cost. After initial recognition, intangible assets are measured at cost less cumulative amortization and impairment. The residual value of intangible assets is assumed to be zero.
Intangible assets acquired upon acquisition of a subsidiary or as a result of the acquisition of a customer portfolio, are recognised separately in the balance sheet at their estimated fair value at acquisition date.
Costs for internally generated goodwill are recognised as costs in the income statement when they occur.
Intangible assets with a finite life are amortised on a straight-line basis over the estimated useful life and reviewed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation begins when the intangible asset is ready for its intended use.
Intangible assets with indefinite useful lives are not amortised but tested for impairment annually or whenever there is a valid reason to do so. The indefinite life is re-assessed annually to determine whether the indefinite life continues to be supportable. If not, the change in useful life from indefinite to finite is made prospectively.
The investments in software and licences are amortised over a period of three to five years. The brands acquired in acquisitions or the value of the customer portfolios obtained through acquisition are amortised on a straight-line basis over a maximum period of ten years, except when the brand can be regarded as having an indefinite life.
Goodwill arising from a business combination is initially measured at cost (i.e. the positive difference between the cost of the business combination and the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities). After initial recognition, goodwill is measured at cost less accumulated impairment losses, if any.
Goodwill is tested for impairment annually or more often if events or changes in circumstances indicate that the carrying amount may have been impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from acquisition date onwards, allocated to each of the Group's cash generating units that are expected to benefit from the combination, irrespective of whether other assets or liabilities of the acquiree are assigned to those units.
Property, Plant and Equipment is valued at cost less cumulative depreciation and impairment. Cost includes the purchase price and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.
The cost of self-produced assets includes direct material costs, direct labour costs and a proportional part of the production overhead.
If the various parts of a tangible asset have different useful lives, they are depreciated according to their respective useful lives.
The depreciation methods, residual value, as well as the useful lives of the Property, Plant and Equipment is reassessed and adjusted if appropriate, annually.
Costs of maintenance and repair of Property, Plant and Equipment are capitalised if the cost can be measured reliably and the expenditure will result in a future economic benefit.
All other costs are recognised as operating charges when they occur.
Depreciation is calculated on a straight-line basis over the estimated useful lives of the assets. Depreciation of an asset begins when the asset is ready for its intended use.
Useful life is assigned as follows:
| Buildings and warehouses | 25-30 years |
|---|---|
| Plant and equipment | 15 years |
| Basic machines | 20-25 years |
| Common machines, tools | 10-15 years |
| Furniture | 15 years |
| Office equipment | 5 years |
| Computer equipment | 3-5 years |
| Passenger vehicles | 4-5 years |
| Trucks | 10 years |
Land is not depreciated given that it has an undefined useful life.
A financial lease is a lease that transfers substantially all risks and rewards incidental to ownership of an asset to the lessee. Fixed assets held under a financial lease are, at the beginning of the lease term, measured at present value of the future minimum lease payments during the lease term. Minimum lease payments are apportioned between the finance charge and the reduction of the outstanding liability. The finance charge shall be allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Leases in which a significant portion of the risks and rewards of ownership remain with the lessor are classified as operating leases. Payments made under operating leases are charged to the income statement on a straight-line basis over the period of the lease.
Government grants are recognised at fair value when it is probable that they will be received and that the Group will comply with the conditions attached to the grant. If the grant is related to a cost item, the grant is systematically recognised as income over the periods required to attribute these grants to the costs which they are intended to compensate. When the grant is related to an asset, it is presented in the balance sheet deducted from the asset. Grants are recognised in income net of the depreciation of the related asset.
For the Group's non-current assets, other than deferred tax assets, the Group assesses, at each reporting date, whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. The recoverable amount is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets. An asset's recoverable amount is the higher of an asset's or cash generating unit's fair value less costs of disposal and the value in use. In assessing value in use, the estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessment of the time value of money and the risks specific to the asset or cash generating unit.
When the carrying amount exceeds the recoverable amount, an impairment loss is recognised as an operating charge in the income statement.
Impairments for financial assets normally held by the Group until maturity or receivables are reversed if a subsequent increase in their net asset value can be objectively associated with an event arising after the recording of the loss.
A previously recognised impairment for other assets is reversed where there has been a change in the assumptions used to determine the recoverable amount. An increase in the carrying amount of an asset resulting from the reversal of an impairment cannot be higher than the carrying amount (after depreciation) that would have been determined had no impairment loss been recognised in prior years.
An impairment loss recognised on goodwill is never reversed in a subsequent period.
Financial assets available for sale include shares in companies in which the Group does not exercise control nor significant influence.
Financial assets are initially measured at cost. The cost includes the fair value of the compensation provided and acquisition costs associated with the investment.
After the initial recognition, the financial assets are measured at fair value. Changes in fair value are directly recognised in a separate component of other comprehensive income. For listed companies, the share price is the best estimate of the fair value. Investments for which no fair value can be determined, are recognised at historical cost.
The Group assesses at each reporting date whether there is objective evidence that the asset is impaired. Objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost.
If the financial asset is sold or an impairment loss is recognised, the cumulative profits or losses recognised in equity are transferred to profit or loss. An impairment loss on a financial asset available for sale is not reversed through the income statement, unless it includes a debt instrument.
Long-term receivables are valued at their actual net value based on an average market interest rate in accordance with the useful life of the receivable.
Raw materials, consumables and goods for resale are measured at purchase price on a FIFO basis.
Finished products are measured at the standard manufacturing cost price. This includes, in addition to direct production and material costs, a proportional part of the fixed and variable overhead costs based on the normal production capacity.
If the purchase price or the manufacturing price exceeds the net realisable value, the stock is measured at the lower net realisable value.
The net realisable value is defined as the estimated selling price in the ordinary course of business, less the estimated cost of completion and the estimated costs necessary to make the sale.
Trade receivables and other amounts receivable are measured at their nominal value less impairment, if any.
Impairments are recognised in the operating results if it becomes probable that the Group will not be able to collect all outstanding amounts.
At each reporting date, the Group estimates the impairment by evaluating all outstanding amounts individually. An impairment is recognised in the results of the period in which it was identified as such.
Cash and cash equivalents include liquid assets and bank balances (current and deposit accounts). In general, investments are held until the expiration date. Profits and losses are recognised in the income statement when the investment is realized or impaired.
For the cash flow statement, cash and cash equivalents include cash and bank balances. Possible negative cash is recognised as short-term interest-bearing loans and borrowings with credit institutions.
A disposal group qualifies as discontinued operation if it is a component of an entity that either has been disposed of, or is classified as held for sale, and:
A non-current asset (or a disposal group) is classified as held for sale if the carrying amount will be recovered principally through a sale transaction rather than through continuing use.
A non-current asset (or a disposal group) classified as held for sale is recognised at the lower of the carrying amount and the fair value less cost to sell.
An impairment test is performed on these assets at the end of each reporting date.
For the purchase of treasury shares, the amount paid, including any directly attributable costs, is recognised as a change in this section. Treasury shares purchased are considered as a reduction in equity.
2.18 Interest-bearing financial debts All interest-bearing financial debts are initially recognised at fair value less direct attributable transaction costs. After initial recognition, the interest-bearing financial debts will be recognised at the amortised cost price based on the effective interest rate method.
Provisions are recognised in the balance sheet if the Group has obligations (legal or constructive) resulting from a past event and if it is probable that fulfilment of these commitments will incur expenses that can be estimated reliably on reporting date.
No provisions are recognised for future operating costs. If the effect of the time value of money is material, the provisions are discounted.
A provision for restructuring is recognised when a formal, detailed restructuring plan is approved by the Group and if this restructuring has either begun or been announced to the ones concerned.
The Group uses financial derivatives to limit risks from adverse exchange rate and interest rate fluctuations. No derivatives are used for trading purposes.
Financial derivatives are initially recognised at cost. After initial recognition, these instruments are recognised at their fair value.
Changes in fair value of the Group's derivatives that do not meet the criteria of IAS 39 for hedge accounting, are recognised in the income statement.
The effective portion of the change in fair value of derivative financial instruments that are identified as cash flow hedges is recognised in other comprehensive income. The gain or loss on the ineffective portion is immediately recognised in the income statement. Amounts accumulated in equity are reclassified to the income statement in the periods in which the hedged position impacts the income statement.
All regular purchases and sales of financial assets are recognised on transaction date.
2.21 Trade payables and other debts Trade payables and other debts are recognised at their nominal value. A financial obligation is derecognised once the obligation is fulfilled, settled or lapsed.
Dividends payable to shareholders of the Group are recognised as a liability in the balance sheet in the period in which the dividends are approved by the shareholders of the Group.
Revenues are included in the income statement when it is probable that the Group will receive economic benefits from the transaction and the revenues can be measured reliably.
Revenue is deemed to have been earned when the risks and rewards of the sale are payable by the purchaser and any uncertainty has been removed in terms of the collection of the agreed amount, transaction costs and any return of the goods.
Financial income (interests, dividends, royalties, etc.) are considered to be realised once it is probable that the Group will receive the economic benefits from the transaction and the revenues can be measured reliably.
The Group holds a number of defined contribution plans. These pension plans are funded by members of personnel and the employer and are recognised in the income statement of the reporting period to which they refer.
In addition, there is also a defined benefit pension plan in the subsidiary in Germany and the Netherlands.
There are also provisions in some companies for early retirement (Belgium) and pension obligations arising from legal requirements (France). These are classified as employment benefits of the defined benefit pension plans.
For the defined benefit pension plans, provisions are measured by calculating the present value of future amounts payable to the employees.
Defined benefit costs are divided into 2 categories:
The current and past service cost, the net interest expense, the remeasurement of other long term personnel expenses, administrative expenses and taxes for the reporting period are included in the personnel expenses in the statement of profit or loss. The remeasurement on the net defined benefit liability as a consequence of actuarial gains or losses is included in the statement of comprehensive income as part of other comprehensive income.
The stock option plan and the warrant plan allow employees to acquire shares in the company at relatively advantageous conditions. The exercise price of the option and warrant is equal to the average stock market closing price of the Lotus Bakeries share during the thirty calendar days preceding the date of offering. A personnel cost is recognised for options and warrants granted to employees as part of the stock option plan or warrant plan. The cost is determined based on the fair value of the stock options and warrants on the grant date and, together with an equal increase in equity, is recognised over the vesting period, ending on the date when the employees receive full right to the options. When the options or warrants are exercised, equity is increased by the amount of the revenues.
Bonuses for employees and management are calculated based on key financial objectives and individual objectives. The estimated amount of the bonuses is recognised as a charge for the financial year based on an estimate on the reporting date.
Income taxes in the result of the reporting period include current and deferred taxes. Both taxes are recognised in the income statement except if they have been recognised directly in other comprehensive income. If so, these taxes are also directly recognised in other comprehensive income.
Current taxes include the amount of tax payable on the taxable earnings for the period calculated at the tax rate applicable on the reporting date. They also include adjustments of fiscal liabilities for previous years. In line with IAS 12§46 'Income Taxes', management assesses on a periodic basis the positions taken in tax declarations in respect of items subject to interpretation in the tax legislation, and records – if necessary– additional income tax liabilities based on the expected amounts payable to the tax authorities. The evaluation is made for all fiscal periods still subject to controls by the authorities.
Deferred taxes are calculated using the balance sheet method and result mainly from temporary differences between the carrying amount of both assets and liabilities in the balance sheet and their respective taxable base. Deferred taxes are measured at the tax rates that are expected to apply in the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at reporting date. Deferred taxes are recognised at their nominal value and are not discounted.
Deferred tax assets from deductible temporary differences and unused tax loss carry forwards are recognised to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the carry forward of unused tax credits and unused tax losses can be utilised.
The carrying amount of deferred tax assets is reassessed at each reporting date and reduced when it is no longer probable that the related tax savings can be generated. Unrecognised deferred tax assets are reassessed at each reporting date and are recognised to the extent that it is probable that future taxable profits allow the deferred tax asset to be recovered.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
The Group calculates the ordinary profit per share on the basis of the weighted average of the number of outstanding shares during the period. For the diluted profit per share, the dilutive effect of stock options during the period is also taken into account.
Group turnover is centralised around a number of products that are all included in the traditional and natural snacking segment. For these products, the Group is organised according to geographical regions for sales, production and internal reporting. As a result, segment reporting presents the geographical markets.
The Group's geographical segments are based on the location of the assets. The results of a segment include the income and charges directly generated by a segment. To this is added the portion of the income and charges that can be reasonably attributed to the segment. Intersegment price-fixing is defined based on the 'at arm's length' principle.
The assets and liabilities of a segment are reported excluding taxes and after deduction of depreciation, impairments and valuation allowances.
Segment reporting by geographical region (2018)
For the purpose of sales, production and internal reporting, the Group is classified according to geographical regions. The regions presented in the segment reporting, which are based on the internal reporting system, are composed as follows:
Sales between the various segments are carried out at arm's length.
| YEAR ENDED 31 DECEMBER 2018 | CONTINUING OPERATIONS | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| IN THOUSANDS OF EUR | BELGIUM | FRANCE | NETHERLANDS | UK | OTHER (1) | ELIMINATIONS + CORPORATE COMPANIES |
TOTAL | ||
| TURNOVER | |||||||||
| Sales to external customers | 148,948 | 69,189 | 87,629 | 116,229 | 134,440 | - | 556,435 | ||
| Inter-segment sales | 102,958 | 13,564 | 2,276 | 6,769 | 790 | (126,357) | - | ||
| Total turnover | 251,906 | 82,753 | 89,905 | 122,998 | 135,230 | (126,357) | 556,435 | ||
| RESULTS | |||||||||
| Segment result REBIT | 34,468 | 3,114 | 15,478 | 12,041 | 20,946 | 8,983 | 95,030 | ||
| Non-recurrent operating result | (416) | - | 67 | - | (1,385) | (1,271) | (3,005) | ||
| Segment result EBIT | 34,052 | 3,114 | 15,545 | 12,041 | 19,561 | 7,712 | 92,025 | ||
| Financial result | (3,324) | ||||||||
| Profit for the year before taxes | 88,701 | ||||||||
| Taxes | (20,829) | ||||||||
| Result after taxes | 67,872 | ||||||||
| ASSETS AND LIABILITIES | |||||||||
| Non-current assets | 143,724 | 8,230 | 107,390 | 191,504 | 70,034 | 20,829 | 545,647 | ||
| Segment assets | 143,724 | 8,230 | 107,390 | 191,504 | 70,034 | 20,829 | 541,711 | ||
| Unallocated assets: | 3,936 | ||||||||
| Deferred taxes | 3,936 | ||||||||
| YEAR ENDED 31 DECEMBER 2018 | CONTINUING OPERATIONS | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| IN THOUSANDS OF EUR | BELGIUM | FRANCE | NETHERLANDS | UK | OTHER (1) | ELIMINATIONS + CORPORATE COMPANIES |
TOTAL | ||
| Current assets | 29,759 | 12,399 | 16,210 | 33,098 | 19,743 | 4,093 | 165,925 | ||
| Segment assets | 29,759 | 12,399 | 16,210 | 33,098 | 19,743 | 4,093 | 115,302 | ||
| Unallocated assets: | 50,623 | ||||||||
| VAT receivables | 4,503 | ||||||||
| Income tax receivables | 523 | ||||||||
| Cash and cash equivalents | 45,597 | ||||||||
| Total assets | 711,572 | ||||||||
| Non-current liabilities | 1,539 | 679 | 873 | - | 478 | 2,646 | 198,042 | ||
| Segment liabilities | 1,539 | 679 | 873 | - | 478 | 2,646 | 6,215 | ||
| Unallocated liabilities: | 191,827 | ||||||||
| Deferred tax liabilities | 52,725 | ||||||||
| Interest-bearing loans and borrowings | 116,500 | ||||||||
| Other non-current liabilities | 22,602 | ||||||||
| Current liabilities | 39,302 | 7,821 | 8,033 | 19,295 | 26,471 | 13,965 | 166,603 | ||
| Segment liabilities | 39,302 | 7,821 | 8,033 | 19,295 | 26,471 | 13,965 | 114,887 | ||
| Unallocated liabilities: | 51,716 | ||||||||
| VAT payables | 300 | ||||||||
| Tax payables | 14,761 | ||||||||
| Interest-bearing loans and borrowings | 36,655 | ||||||||
| Total liabilities | 364,645 | ||||||||
| OTHER SEGMENT INFORMATION | |||||||||
| Capital expenditure: | |||||||||
| Tangible fixed assets | 17,831 | 1,073 | 4,254 | 77 | 34,795 | 1,779 | 59,809 | ||
| Intangible fixed assets | 257 | - | 13 | - | - | 175 | 445 | ||
| Depreciation | 7,911 | 748 | 2,241 | 110 | 635 | 1,297 | 12,942 | ||
| Increase/(decrease) in amounts written off stocks, contracts in progress and trade debtors |
895 | 122 | 265 | 374 | 48 | 2 | 1,706 |
(1) 'Other' segment: there are no geographical regions representing more than 10% of total sales.
For the purpose of sales, production and internal reporting, the Group is classified according to geographical regions. The regions presented in the segment reporting, which are based on the internal reporting system, are composed as follows:
The Netherlands: sales by Sales Office Netherlands and intra-group sales by factories in the Netherlands
UK: sales by Sales Office UK, Natural Balance Foods and Urban Fresh Foods
Other: sales from Belgium to countries without own Sales Office and by own Sales Offices in Germany/Austria, Switzerland, the Czech Republic/Slovakia, North America, Spain, China, South Korea, Sweden/Finland plus production in Sweden.
Sales between the various segments are carried out at arm's length.
| YEAR ENDED 31 DECEMBER 2017 | CONTINUING OPERATIONS | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| IN THOUSANDS OF EUR | BELGIUM | FRANCE | NETHERLANDS | UK | OTHER (1) | ELIMINATIONS + CORPORATE COMPANIES |
TOTAL | ||
| TURNOVER | |||||||||
| Sales to external customers | 143,362 | 65,707 | 90,436 | 101,321 | 123,229 | - | 524,055 | ||
| Inter-segment sales | 94,618 | 11,441 | 1,502 | 4,129 | 688 | (112,378) | - | ||
| Total turnover | 237,980 | 77,148 | 91,938 | 105,450 | 123,917 | (112,378) | 524,055 | ||
| RESULTS | |||||||||
| Segment result REBIT | 31,913 | 276 | 17,629 | 9,824 | 19,006 | 10,701 | 89,349 | ||
| Non-recurrent operating result | 2,082 | (9) | (1,070) | - | (1,093) | (1) | (91) | ||
| Segment result EBIT | 33,995 | 267 | 16,559 | 9,824 | 17,913 | 10,700 | 89,258 | ||
| Financial result | (2,228) | ||||||||
| Profit for the year before taxes | 87,030 | ||||||||
| Taxes | (22,397) | ||||||||
| Result after taxes | 64,633 | ||||||||
| ASSETS AND LIABILITIES | |||||||||
| Non-current assets | 133,581 | 7,901 | 105,379 | 136,726 | 38,443 | 21,353 | 447,693 | ||
| Segment assets | 133,581 | 7,901 | 105,379 | 136,726 | 38,443 | 21,353 | 443,383 | ||
| Unallocated assets: | 4,310 | ||||||||
| Deferred tax assets | 4,310 | ||||||||
| YEAR ENDED 31 DECEMBER 2017 | CONTINUING OPERATIONS | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| IN THOUSANDS OF EUR | BELGIUM | FRANCE | NETHERLANDS | UK | OTHER (1) | ELIMINATIONS + CORPORATE COMPANIES |
TOTAL | ||
| Current assets | 25,987 | 11,874 | 15,429 | 23,459 | 16,716 | 2,934 | 149,801 | ||
| Segment assets | 25,987 | 11,874 | 15,429 | 23,459 | 16,716 | 2,934 | 96,399 | ||
| Unallocated assets: | 53,402 | ||||||||
| VAT receivables | 4,789 | ||||||||
| Income tax receivables | 484 | ||||||||
| Cash and cash equivalents | 48,129 | ||||||||
| Total assets | 597,494 | ||||||||
| Non-current liabilities | 1,704 | 700 | 937 | - | 512 | 2,377 | 193,923 | ||
| Segment liabilities | 1,704 | 700 | 937 | - | 512 | 2,377 | 6,230 | ||
| Unallocated liabilities: | 187,693 | ||||||||
| Deferred tax liabilities | 49,206 | ||||||||
| Interest-bearing loans and borrowings | 117,500 | ||||||||
| Other non-current liabilities | 20,987 | ||||||||
| Current liabilities | 33,369 | 8,396 | 7,379 | 13,758 | 17,305 | 11,818 | 110,358 | ||
| Segment liabilities | 33,369 | 8,396 | 7,379 | 13,758 | 17,305 | 11,818 | 92,025 | ||
| Unallocated liabilities: | 18,333 | ||||||||
| VAT payables | 119 | ||||||||
| Tax payables | 16,464 | ||||||||
| Interest-bearing loans and borrowings | 1,750 | ||||||||
| Total liabilities | 304,281 | ||||||||
| OTHER SEGMENT INFORMATION | |||||||||
| Capital expenditure: | |||||||||
| Tangible fixed assets | 17,599 | 1,305 | 3,864 | 95 | 4,164 | 522 | 27,549 | ||
| Intangible fixed assets | - | - | 59 | - | 151 | 480 | 690 | ||
| Depreciation | 7,386 | 643 | 2,053 | 119 | 592 | 1,312 | 12,105 | ||
| Decrease/(increase) in amounts written off stocks, contracts in progress and |
trade debtors 1,278 64 500 41 305 10 2,198
(1) 'Other' segment: there are no geographical regions representing more than 10% of total sales.
In July 2018, Lotus Bakeries acquired 100% of the shares of Kiddylicious. This British food company creates responsible and delicious snacks for growing babies, toddlers and pre-schoolers. The total purchase price was EUR 49.2 million.
The results of Kiddylicious are included in the consolidation as from 26 July 2018.
The purchase price is composed as follows:
| IN THOUSANDS OF EUR | PROVISIONAL FAIR VALUE |
|---|---|
| Purchase price | 49,183 |
| Intangible assets | 16,014 |
| Stocks | 1,847 |
| Trade and other receivables | 3,179 |
| Cash and cash equivalents | 899 |
| Other assets | 46 |
| Deferred tax liabilities | (2,236) |
| Interest-bearing loans and borrowings | (559) |
| Trade and other payables | (7,575) |
| TOTAL NET ASSETS | 11,615 |
| GOODWILL | 37,568 |
The Goodwill of kEUR 37,568 arising from the acquisition relates to various components. Kiddylicious is a perfect strategic fit for the Natural Foods business unit of Lotus Bakeries, which was established following the acquisition of the Nākd, TREK, BEAR and Urban Fruit brands in 2015.
The Kiddylicious brand includes an extensive range, of which the most important products are Wafers, Veggie Straws and Melts. These products enrich the product range in the healthy snacking segment. Kiddylicious products can already be found in mul tiple countries and, with the help of Lotus Bakeries' international sales team, its international growth can be accelerated. Kiddylicious' statutory turnover is estimated at GBP 21 million for 2018.
Within a period of twelve months following the acqui sition date, the final value of the acquired assets and liabilities will be calculated and the necessary addi tional adjustments made to the fair value.
The combined activities of the Kiddylicious compa nies (The Kids Food company Ltd. and Kiddylicious international Ltd.) represent the lowest level (cash generating unit) within the Group at which goodwill is monitored for internal management purposes.
Tangible assets are purchased by and are the full property of Lotus Bakeries. This includes land and buildings, machinery and office equipment. The tangible assets are unencumbered with the exception of the notes included in 32.4.
Once again in 2018, the main investments relate to expansions of capacity. Investments totalled EUR 59.8 million. They mainly relate to the new factory in the United States. The construction of the manufacturing hall was completed during the second half of the year and the factory is scheduled to go into operation in the second half of 2019.
In 2018, an extra line came into service in the third production hall in Lembeke. Together with the factory in the United States, this expansion of capacity is needed to be able to continue to meet rising demand for Lotus Biscoff efficiently.
In 2018, the upgrade of the cake factory in Enkhuizen was completed. Following the first phase, during which two new warehouses were erected, in a second phase, the offices are being refurbished.
During 2018, the Group invested in new, modern offices in Lembeke. The works are on schedule and the new offices will go into service in the second half of 2019.
| LAND AND |
PLANT, MACHINERY AND |
FURNITURE, OFFICE EQUIP MENT AND |
ASSETS UNDER CONSTRUC |
||
|---|---|---|---|---|---|
| IN THOUSANDS OF EUR On 31 December 2018 |
BUILDINGS | EQUIPMENT | VEHICLES | TION | TOTAL |
| Acquisition cost | |||||
| At the end of the preceding year | 108,905 | 275,563 | 15,907 | 7,839 | 408,214 |
| Acquisition during the year | 12,093 | 13,366 | 841 | 33,509 | 59,809 |
| Sales and disposals | (1,335) | (1,599) | (88) | - | (3,022) |
| Transfers from one heading to another | 918 | 10 | - | (928) | - |
| Translation differences | (205) | (263) | (6) | 96 | (378) |
| Acquisistion through business combinations | - | 5 | 144 | - | 149 |
| Receipt of investment grants | (622) | (8) | - | - | (630) |
| Total acquisition cost | 119,754 | 287,074 | 16,798 | 40,516 | 464,142 |
| Depreciation and amounts written down | |||||
| At the end of the preceding year | (42,506) | (177,850) | (13,261) | (171) | (233,788) |
| Depreciation during the year | (2,731) | (8,830) | (690) | - | (12,251) |
| Sales and disposals | - | 1,570 | 77 | - | 1,647 |
| Translation differences | 69 | 213 | 7 | 7 | 296 |
| Acquisistion through business combinations | - | (5) | (144) | - | (149) |
| Total depreciation and amounts written down |
(45,168) | (184,902) | (14,011) | (164) | (244,245) |
| NET BOOK VALUE | 74,586 | 102,172 | 2,787 | 40,352 | 219,897 |
| Total acquisition cost | 108,905 | 275,563 | 15,907 | 7,839 | 408,214 |
|---|---|---|---|---|---|
| Translation differences | (241) | (37) | (59) | (7) | (344) |
| Transfers from one heading to another | 5,170 | 5,520 | - | (10,690) | - |
| Sales and disposals | (3,071) | (1,124) | (134) | - | (4,329) |
| Acquisition during the year | 9,564 | 10,166 | 1,033 | 6,785 | 27,548 |
| At the end of the preceding year | 97,483 | 261,038 | 15,067 | 11,751 | 385,339 |
| Acquisition cost | |||||
| On 31 December 2017 | |||||
| IN THOUSANDS OF EUR | LAND AND BUILDINGS |
PLANT, MACHINERY AND EQUIPMENT |
FURNITURE, OFFICE EQUIP MENT AND VEHICLES |
ASSETS UNDER CONSTRUC TION |
TOTAL |
During 2018 kEUR 630 of newly granted capital grants were received and kEUR 55 of capital grants were taken into the income statement, giving at year end a remaining balance of kEUR 1,060, which is deducted from the net book value as reported in the above tables of movements.
| On 31 December | 2018 | 2017 |
|---|---|---|
| At the end of the preceding year |
(485) | (548) |
| Taken into the income statement |
55 | 63 |
| Newly granted capital grants | (630) | - |
| At the end of the year | (1,060) | (485) |
| NET BOOK VALUE | 66,399 | 97,713 | 2,646 | 7,668 | 174,426 |
|---|---|---|---|---|---|
| Total depreciation and amounts written down |
(42,506) | (177,850) | (13,261) | (171) | (233,788) |
| Translation differences | 49 | 5 | 34 | 5 | 93 |
| Sales and disposals | (47) | 1,114 | 189 | - | 1,256 |
| Depreciation during the year | (2,434) | (8,288) | (666) | - | (11,388) |
| At the end of the preceding year | (40,074) | (170,681) | (12,818) | (176) | (223,749) |
The carrying value of goodwill at the end of 2018 is EUR 178 million.
For sales, production and internal reporting, the Group is organised into geographic regions (see also geographic segment information). The segments consist of underlying business units. These business units represent the lowest level within the Group at which the goodwill is monitored for internal management purposes. These business units are the cash generating units to which goodwill is allocated.
The net carrying value of goodwill has been allocated to the various independent cash generating units as follows:
| Cash flow-generating unit | Amount kEUR |
|---|---|
| Netherlands (Koninklijke Peijnenburg) | 17,151 |
| Spain (Lotus Bakeries Ibérica) | 1,704 |
| Sweden (AB Annas Pepparkakor) | 5,981 |
| Customer Brand Business (Biscuiterie Willems BVBA en B.W.I. BVBA) |
20,773 |
| Lotus Korea | 9,707 |
| Natural Foods | 122,323 |
| Total | 177,639 |
The change for the year is due to the acquisition of Kiddylicious and translation differences:
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Acquisition cost | ||
| Balance at end of previous year | 141,001 | 144,368 |
| Acquisitions of subsidiaries | 37,568 | - |
| Effect of movements in foreign exchange rates |
(930) | (3,367) |
| Balance at end of year | 177,639 | 141,001 |
Goodwill, representing approximately 25% of the total assets of Lotus Bakeries at 31 December 2018, is tested for impairment every year (or whenever there is a specific reason to do so) by comparing the carrying value of each cash generating unit (CGU) with its recoverable amount. The recoverable amount of a cash generating unit is determined on the basis of the calculated value in use.
The value in use is determined as the present value of expected future cash flows based on the current long-term planning of the Group. The discount rate used in determining the present value of expected future cash flows is based on a weighted average cost of capital (WACC). The impairment test for goodwill is based on a number of critical judgements, estimates and assumptions.
The assumptions are consistent and realistic for the six cash generating units, which are mainly located in Europe:
End 2018, Lotus Bakeries has completed its annual impairment test on goodwill and concluded from this that no further impairment allowance is necessary. Lotus Bakeries believes all of its estimates to be reasonable: they are consistent with the internal reporting and reflect management's best estimates.
As a part of the valuation test, Lotus Bakeries carried out a sensitivity analysis for important assumptions used, including the weighted average capital costs and long term growth percentage. Here, a fall in the long-term growth percentage by 100 basis points and an increase in the weighted average capital costs before tax by 100 basis points were applied. A change in the estimates used, as described above, does not lead to a potential material impairment.
Although Lotus Bakeries believes that its assessments, assumptions and estimates are suitable, actual results may differ from these estimates in the event of changed assumptions and conditions.
Intangible assets refer to brands, software and an acquired customer portfolio.
The value of these brands was established as part of the valuation at fair value of the asset and liability components upon first consolidation.
As the Peijnenburg brand serves as the base brand in the Netherlands, it is not amortised. In accordance with the valuation rules, its fair value is tested annually, using the DCF method. The 'Netherlands' segment is defined here as a cash generating unit.
The Annas brand is used as the base brand for the Nordic region and as the base brand for its pepparkakor products outside the Nordic region. This brand is not being amortised. Here too, the fair value is tested annually using the DCF method. The activity in the Nordic region plus the pepparkakor activity outside this region are defined as a cash generating unit. This cash generating unit is part of the segment 'Other' in note 3.
In 2012 the intellectual property rights in the Dinosaurus brand were acquired. Based on an analysis of all relevant factors, there is no foreseeable limit to the period of time over which this brand is expected to generate cash flows. The Dinosaurus brand has been assigned indefinite useful life and therefore is not amortised.
In 2015, the Nākd brand was acquired as part of the acquisition of Natural Balance Foods. Nākd is loved by customers for its delicious, innovative products made from 100% natural ingredients with no added sugar. They are dairy, wheat and gluten free. Since Nākd is the base brand of Natural Balance Foods in the UK and elsewhere, it is not amortised. In accordance with the valuation rules, its fair value is tested annually, using the DCF method. Accordingly, the sale of Nākd products in the UK and elsewhere is treated as a cash generating unit.
At the end of 2015, the BEAR brand was acquired as part of the acquisition of Urban Fresh Foods. The BEAR brand is the market leader in the UK for pure fruit snacks for children. Since BEAR is the base brand of Urban Fresh Foods in the UK and elsewhere, it is not amortised. In accordance with the valuation rules, its fair value is tested annually, using the DCF method. Accordingly, the sale of BEAR products in the UK and elsewhere is treated as a cash generating unit.
In 2018, the Kiddylicious brand was acquired as part of the acquisition of Kiddylicious. Delicious, nutritious, portion-controlled snacks for growing babies, toddlers and pre-schoolers are marketed under this brand. Since Kiddylicious is the base brand in the UK and elsewhere, it is not amortised. In accordance with the valuation rules, its fair value is tested annually, using the DCF method. Accordingly, the sale of Kiddylicious products in the UK and elsewhere is treated as a cash generating unit.
At year-end 2018, the Group tested the value of these brands for possible impairment. Taking into account the assumptions used, the value in use of the unit exceeds its carrying amount and no impairment loss was recognised.
The main judgements, assumptions and estimates are:
Revenue and gross profit margin: revenue and gross profit margin reflect management's expectations based on past experience and taking into account the risks specific to the cash generating unit.
The first year of the model is based on the budget for the year, taking into account historical results and is management's best estimate of the free cash flow outlook for the current year;
As a part of the valuation test, Lotus Bakeries carried out a sensitivity analysis for important assumptions used, including the weighted average capital costs and long term growth percentage. Here, a fall in the longterm growth percentage by 100 basis points and an increase in the weighted average capital costs before tax by 100 basis points were applied. A change in the estimates used, as included above, does not lead to a potential material impairment.
Although Lotus Bakeries believes that its assessments, assumptions and estimates are suitable, actual results may differ from these estimates in the event of changed assumptions and conditions.
Software relates mainly to the capitalised external and internal costs connected with the further basic implementation of the ERP information system SAP.
The portfolio concerns Spanish out-of-home customers purchased in 2011.
| IN THOUSANDS OF EUR | INDEFINITE LIFE BRANDS |
DEFINITE LIFE BRANDS |
SOFTWARE | CUSTOMER PORTFOLIO |
TOTAL |
|---|---|---|---|---|---|
| On 31 December 2018 | |||||
| Acquisition cost | |||||
| At the end of the preceding year | 122,280 | 4,627 | 10,123 | 1,030 | 138,060 |
| Acquisitions during the year | - | - | 445 | - | 445 |
| Translation differences | (805) | - | 10 | - | (795) |
| Acquisition through business combinations | 16,014 | - | - | - | 16,014 |
| Total acquisition cost | 137,489 | 4,627 | 10,578 | 1,030 | 153,724 |
| Depreciation and amounts written down | |||||
| At the end of the preceding year | - | (4,627) | (8,865) | (644) | (14,136) |
| Depreciation during the year | - | - | (588) | (103) | (691) |
| Translation differences | - | - | (10) | - | (10) |
| Total depreciation and amounts written down |
- | (4,627) | (9,463) | (747) | (14,837) |
| NET BOOK VALUE | 137,489 | - | 1,115 | 283 | 138,887 |
| NET BOOK VALUE | 122,280 | - | 1,258 | 386 | 123,924 |
|---|---|---|---|---|---|
| Total depreciation and amounts written down |
- | (4,627) | (8,865) | (644) | (14,136) |
| Translation differences | - | - | 45 | - | 45 |
| Depreciation during the year | - | - | (611) | (103) | (714) |
| At the end of the preceding year | - | (4,627) | (8,299) | (541) | (13,467) |
| Depreciation and amounts written down | |||||
| Total acquisition cost | 122,280 | 4,627 | 10,123 | 1,030 | 138,060 |
| Translation differences | (2,056) | - | (45) | - | (2,101) |
| Sales and disposals | - | - | (3) | - | (3) |
| Acquisitions during the year | - | - | 691 | - | 691 |
| At the end of the preceding year | 124,336 | 4,627 | 9,480 | 1,030 | 139,473 |
| Acquisition cost | |||||
| On 31 December 2017 | |||||
| IN THOUSANDS OF EUR | BRANDS | BRANDS | SOFTWARE | PORTFOLIO | TOTAL |
INDEFINITE LIFE
DEFINITE LIFE
CUSTOMER
Deferred tax assets are included for the companies which have a loss at the end of the year, except for Interwaffles SA (kEUR 4,477 in 2018 versus kEUR 4,792 in 2017). The recognition of these deferred tax assets is supported by profit expectations in the foreseeable future.
| IN THOUSANDS OF EUR | ON 31 DECEMBER 2017 |
CHARGED/ CREDITED TO THE INCOME STATEMENT |
CHARGED/ CREDITED TO EQUITY |
CHARGED/ CREDITED ACQUISITION |
EXCHANGE DIFFERENCES |
ON 31 DECEMBER 2018 |
|---|---|---|---|---|---|---|
| Property, plant and equipment and intangible assets |
(44,646) | (372) | - | (2,722) | 160 | (47,580) |
| Inventories | 291 | 120 | - | - | 4 | 415 |
| Pension liabilities | 586 | 39 | 77 | - | - | 702 |
| Tax effect of tax loss carry forwards |
2,880 | (612) | - | - | (29) | 2,239 |
| Provisions | (1,966) | (40) | - | - | - | (2,006) |
| Derivative financial instruments | (554) | - | 456 | - | - | (98) |
| Other | (1,487) | (1,767) | - | 486 | 307 | (2,461) |
| Total deferred tax | (44,896) | (2,632) | 533 | (2,236) | 442 | (48,789) |
| IN THOUSANDS OF EUR | ON 31 DECEMBER 2016 |
CHARGED/ CREDITED TO THE INCOME STATEMENT |
CHARGED/ CREDITED TO EQUITY |
CHARGED/ CREDITED ACQUISITION |
EXCHANGE DIFFERENCES |
ON 31 DECEMBER 2017 |
|---|---|---|---|---|---|---|
| Property, plant and equipment and intangible assets |
(48,897) | 4,037 | - | - | 214 | (44,646) |
| Inventories | 24 | 280 | - | - | (13) | 291 |
| Pension liabilities | 744 | (228) | 71 | - | (1) | 586 |
| Tax effect of tax loss carry forwards |
3,269 | (249) | - | - | (140) | 2,880 |
| Provisions | (2,158) | 197 | - | - | (5) | (1,966) |
| Derivative financial instruments | 1,164 | (6) | (1,712) | - | - | (554) |
| Other | 42 | (1,755) | - | - | 226 | (1,487) |
| Total deferred tax | (45,812) | 2,276 | (1,641) | - | 281 | (44,896) |
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Participating interests | 2,448 | - |
In March 2018, an agreement was reached with Grassroots, the current co-manufacturer for the BEAR range, for the acquisition of the production activities of BEAR. The new turnkey production facility should be operational in 2019. In that respect, a first payment was done, which is reported under participating interests in the accounting report. The transfer will become official when all specified conditions are met and after approval by the regulatory authorities.
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Derivative financial instruments | 2,280 | 3,525 |
| Cash guarantees | 538 | 485 |
| Other long-term receivables | 10 | 10 |
| Total | 2,828 | 4,020 |
Please refer to note 20.
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Raw materials and consumables | 10,764 | 10,252 |
| Work in progress | 433 | 376 |
| Finished goods | 18,551 | 12,531 |
| Goods for resale | 9,318 | 10,494 |
| Total | 39,066 | 33,653 |
Valuation allowances of kEUR 1,551 relate mainly to raw materials (kEUR 138), packaging material (kEUR 357), finished products (kEUR 550) and goods for resale (kEUR 505). In 2017, valuation allowances amounted to kEUR 2,075.
The amount of valuation allowances in 2018 is kEUR 155. In 2017, kEUR 123 of valuation allowances were charged. The trade receivables represent an average of 45 days of sales outstanding (2017: 42 days).
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Trade receivables | 71,097 | 60,104 |
| Tax receivables | ||
| VAT receivables | 4,503 | 4,789 |
| Income tax receivables | 523 | 484 |
| Total | 5,026 | 5,273 |
| Other amounts receivable | 2,993 | 1,487 |
The other current amounts receivables item includes amongst others the proportion of long-term receivables that are due within one year, empties in custody and investment grants to be received. The increase compared with 2017 is due to a receivable relating to the sale of a tangible asset.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Amounts written off on 1 January | 434 | 1,148 |
| Increase of amounts written off | 155 | 123 |
| Amounts written off used during the year | 22 | (837) |
| Amounts written off on 31 December | 611 | 434 |
With regard to trade receivables there are no indications that debtors will not meet their payment obligations. In 2017, a provision was used for doubtful debts, which was not the case for 2018. Nor are there any customers representing more than 10% of the consolidated turnover. IFRS 9 requires Lotus Bakeries to establish a provision for expected losses on the recovery of trade receivables. The application of this new IFRS standard has no material impact. More information regarding the credit risk is included in the chapter 'Report of the Board of Directors' in part 1 of the Lotus Bakeries 2018 annual review.
Cash and cash equivalents are balances on bank accounts remunerated at market conditions. The market value of these cash and cash equivalents is therefore equal to the carrying value.
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Cash and cash equivalents | 45,597 | 48,129 |
| Total | 45,597 | 48,129 |
Net financial debt is defined as interest-bearing financial debt less monetary investments, cash and cash equivalents and treasury shares.
Net financial debt has increased by kEUR 38,950 compared with the end of the previous financial year. The increase is due to investments in non-current assets and the acquisition of Kiddylicious. This increase is partially offset by very strong operating cash flow.
| Total | (96,152) | (57,202) |
|---|---|---|
| Treasury shares | 11,406 | 13,919 |
| Cash and cash equivalents | 45,597 | 48,129 |
| Short term interest-bearing liabilities | (36,655) | (1,750) |
| Non current interest-bearing liabilities | (116,500) | (117,500) |
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
All shares are ordinary shares, registered or dematerialised. The treasury shares have been purchased as part of the share option plans mentioned in note 24.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| On 1 January | 3,584 | 3,576 |
| Increase | 6 | 8 |
| On 31 December | 3,590 | 3,584 |
| Number of ordinary shares | ||
| On 1 January | 814,433 | 812,513 |
| Increase | 1,300 | 1,920 |
| On 31 December | 815,733 | 814,433 |
| Less: treasury shares held at 31 December | (9,740) | (15,171) |
| Shares outstanding at 31 December | 805,993 | 799,262 |
| Amounts of authorized capital, not issued | ||
| IN THOUSANDS OF EUR | 943 | 949 |
Further details of the shareholding structure of Lotus Bakeries NV as of 31 December 2018 are contained in the Corporate Governance Statement in part 1 of the 2018 annual review of Lotus Bakeries.
The goal of Lotus Bakeries as far as capital management is concerned is to ensure that Lotus Bakeries can continue to operate as a going concern in order to generate a return for shareholders and provide benefits for other stakeholders. Furthermore, Lotus Bakeries aims for a capital structure (balance between debt and equity) that gives it the required financial flexibility to implement its growth strategy. The aim is to maintain the ratio of net financial debt (defined as interest-bearing financial debt less monetary investments, cash equivalents and treasury shares) to recurring operating cash flow (REBITDA) at what is considered as a normal healthy level in the financial market.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Dividend payments in | ||
| Gross dividend per ordinary share (EUR) | 19.50 | 16.20 |
| Gross dividend on ordinary shares | 15,887 | 13,191 |
| Proposed dividend per ordinary share (EUR) | 29.00 | 19.50 |
| Gross dividend on ordinary shares | 23,664 | 15,887 |
The Board of Directors will propose to the Ordinary General Meeting of Shareholders of 10 May 2019 to pay a gross dividend of EUR 29.00 per share for 2018 compared to EUR 19.50 per share in 2017.
This amount is not recognised as a debt on 31 December.
The gross dividend takes into account warrants exercised prior to the Ordinary General Meeting of Shareholders of 10 May 2019.
Treasury shares purchased as part of the stock option plans as declared in note 24 are subtracted from equity.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| On 1 January | 13,919 | 12,038 |
| Purchased during the year | 173 | 3,437 |
| Sold during the year | (2,686) | (1,556) |
| On 31 December | 11,406 | 13,919 |
| Number of treasury shares | ||
| On 1 January | 15,171 | 17,630 |
| Purchased during the year | 80 | 1,611 |
| Sold during the year | (5,511) | (4,070) |
| On 31 December | 9,740 | 15,171 |
Non-current financial debts with an initial maturity of more than 1 year increased by kEUR 1,000. The current interest-bearing liabilities increased by kEUR 34,905. The currency of all non-current interest-bearing liabilities is euro. Current interest-bearing liabilities are mainly expressed in euro.
All interest-bearing liabilities were contracted at market conditions and therefore the carrying amount approximates the fair value.
| IN THOUSANDS OF EUR | DUE WITHIN 1 YEAR |
DUE BETWEEN 1 TO 5 YEARS |
DUE AFTER 5 YEARS |
TOTAL |
|---|---|---|---|---|
| Non current interest-bearing liabilities |
- | 116,500 | - | 116,500 |
| Current interest-bearing liabilities | 36,655 | - | - | 36,655 |
| Total on 31 December 2018 | 36,655 | 116,500 | - | 153,155 |
| Interests due on non current interest-bearing liabilities |
1,805 | 4,382 | - | 6,187 |
| DUE | DUE | DUE |
| IN THOUSANDS OF EUR | WITHIN 1 YEAR |
BETWEEN 1 TO 5 YEARS |
AFTER 5 YEARS |
TOTAL |
|---|---|---|---|---|
| Non current interest-bearing liabilities |
- | 42,500 | 75,000 | 117,500 |
| Current interest-bearing liabilities | 1,750 | - | - | 1,750 |
| Total on 31 December 2017 | 1,750 | 42,500 | 75,000 | 119,250 |
| Interests due on non current interest-bearing liabilities |
1,816 | 5,872 | 315 | 8,003 |
The interests due on the loans with variable interest rate are calculated at the actual interest rate.
The unused committed credit lines amounted to kEUR 72,499 on 31 December 2018.
As part of a defined contribution plan, the Group pays contributions to well-defined insurance institutions. Management of the pension plan is outsourced to an insurance company. These employer contributions are subtracted from the results for the year concerned. The Group has no further payment obligations in addition to these contributions.
Because of the Belgian legislation applicable to 2nd pillar pension plans (so-called 'Law Vandenbroucke'), all Belgian defined contribution plans have to be considered under IFRS as defined benefit plans. This 'Law Vandenbroucke', which came into force in 2004, states that in the context of defined contribution plans, the employer must guarantee a minimum return of 3.75% on employee contributions and 3.25% on employer contributions. As from 1 January 2016, these percentages will be replaced by a single percentage which changes in line with market rates, ubject to a minimum of 1.75% and a maximum of 3.75%, reducing the risk for the employer.
Because of this minimum guaranteed return for defined contribution plans in Belgium, the employer is exposed to a financial risk (there is a legal obligation to pay further contributions if the fund does not hold sufficient assets to pay all employee benefits relating to employee service in the current and prior periods). These plans should therefore in principle be classified and accounted for as defined benefit plans under IAS 19.
In the past the company did not apply the defined benefit accounting for these plans because the return on plan assets provided by insurance companies was sufficient to cover the minimum guaranteed return. As a result of continuous low interest rates offered by the European financial markets, the employers in Belgium effectively assumed a higher financial risk related to the pension plans with a minimum fixed guaranteed return than in the past, requiring them to measure the potential impact of defined benefit accounting for these plans. We made an estimate of the potential additional liabilities as at 31 December 2018 and these are assessed as not significant. The employer's contribution related to the plans amounted to a total of kEUR 1,297 in 2018.
In the Netherlands a defined benefit pension plan has been concluded with BPF ('Stichting Bedrijfstakpensioenfonds voor de Zoetwarenindustrie' (collective schemes of several employers in the sector)). The employer pays an annual fixed percentage on a part of the salary (pension base) of the year in which pension is accrued. Because employers pay a fixed contribution, the scheme falls under the defined contribution scheme.
The Group expects to pay around kEUR 3,583 of contributions to these defined contribution plans in respect of 2019.
There is a defined benefit pension plan in the subsidiaries in Germany and the Netherlands. For the Belgian companies, there are provisions for early retirement in accordance with the valid Collective Work Agreement. In France, there are pension requirements deriving from legal requirements.
Defined benefit costs are split into 2 categories:
The total service cost, the net interest expense, the remeasurement of other long term personnel charges, administrative expenses and taxes for the year are included in the personnel charges in the consolidated income statement. The remeasurement on the net defined benefit liability is included in the statement of comprehensive income as part of other comprehensive income.
The provisions for early retirement pensions ('bridging pensions') of the Belgian companies make up the largest part of the defined benefit pension liabilities. For the defined benefit pension plan, provisions are formed by calculating the actuarial value of future payments to the employees in question. No investments are held in respect of these pension plans.
The actuarial calculation for the Belgian companies is based on the following assumptions:
| 2018 | 2017 | |
|---|---|---|
| Discount rate | 1.15% | 0.76% |
| Inflation rate | 1.8% p.a. | 1.8% p.a. |
No major adaptations were required in the past for pension liabilities.
The Group expects to pay out around kEUR 21 in 2019 under defined benefit pension schemes for Germany and France.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Net periodic cost | ||
| Service cost | 103 | 118 |
| Interest charges | 33 | 33 |
| (Gains) / losses | (52) | (44) |
| NET PERIODIC COST | 84 | 107 |
| Remeasurements (recognised in OCI) | ||
| Remeasurements on the defined benefit obligation | (199) | 833 |
| REMEASUREMENTS | (199) | 833 |
| Movement in the net liability | ||
| Net debts as at 1 January | 3,998 | 3,203 |
| Service cost | 103 | 118 |
| Interest charges | 33 | 33 |
| Remeasurements | (199) | 833 |
| Employers contribution | (129) | (145) |
| (Gains) / losses | (52) | (44) |
| Other | - | - |
| NET DEBT AS AT 31 DECEMBER | 3,754 | 3,998 |
Through its defined benefit plans, the Group is exposed to a number of risks, the most significant of which are detailed below:
The actuary has performed a sensitivity analysis on actuarial assumptions used. In this respect, both the discount rate and the inflation rate were altered by 50 basis points. A change in the estimates used, as recorded above, does not lead to a possible material impact on Lotus Bakeries' financial statements.
The provisions mainly relate to contractual or legal obligations towards personnel.
| IN THOUSANDS OF EUR | INTEGRATION AND RESTRUCTURING |
OTHER | TOTAL |
|---|---|---|---|
| Provisions on 1 January 2018 | - | 435 | 435 |
| Increase of provisions | - | - | - |
| Reversal of unutilised provisions | - | (16) | (16) |
| Provisions used during the year | - | (21) | (21) |
| Provisions on 31 December 2017 | - | 398 | 398 |
| Long-term | - | 377 | 377 |
| Short-term | - | 21 | 21 |
| IN THOUSANDS OF EUR | INTEGRATION AND RESTRUCTURING |
OTHER | TOTAL |
|---|---|---|---|
| Provisions on 1 January 2017 | 1,400 | 607 | 2.007 |
| Increase of provisions | - | - | - |
| Reversal of unutilised provisions | - | (22) | (22) |
| Provisions used during the year | (1,400) | (150) | (1.550) |
| Provisions on 31 December 2017 | - | 435 | 435 |
| Long-term | - | 414 | 414 |
| Short-term | - | 21 | 21 |
Current provisions are expected to be settled within 12 months.
The Lotus Bakeries Group uses financial derivatives to cover risks from adverse exchange rate and interest rate fluctuations. No derivatives are used for trading purposes. Financial derivatives are initially valued at cost price and thereafter at fair value.
The interest rate contracts cover the interest rate risk of the financial liabilities with variable interest rates based on the Euribor. The fair value of the interest rate derivatives is calculated using a model that takes into account the available market information on current and expected interest rates (level 2 valuation).
In 2016, Lotus Bakeries acquired additional finance with bank loans worth EUR 18 million over a period of 7 years (variable rate), for which seven-year interest rate agreements were entered into at the same time (variable for fixed) to hedge against fluctuations in cash flow caused by changes in interest rates.
In 2015, Lotus Bakeries already acquired finance with bank loans worth EUR 40 million (over a period of 5 years) and EUR 57 million (over a period of 7 years), for which interest rate agreements were entered into at the same time (variable for fixed) to hedge against fluctuations in cash flow caused by changes in interest rates. The maturity dates and nominal value of the interest rate swaps ('hedging instrument') correspond to those of the underlying debt ('hedged position'), and the transaction meets the hedge accounting requirements (cf. IAS 39). The Group has identified and documented these transactions as a 'cashflow hedge' and processed this in the accounts as such from the issue dates.
As of 31 December 2018, the market value of these interest rate swaps was kEUR -2,319, and the change in market value is included in equity under other comprehensive income (loss on cash flow hedge).
The Group is subject to foreign currency risks. The main foreign currency transactions take place in USD, GBP, ZAR, CHF, SEK, CNY and KRW. Management is considering the hedging of the net foreign exchange risk of these currencies by forward and/ or option contracts whenever there exists a material uncovered net risk for the Group. As of 31 December 2018, the market value of this hedge was kEUR 2,280, and the change in market value is included in equity under other comprehensive income.
The fair value of the foreign currency derivatives is calculated using a valuation model based on the available market data on exchange rates and interest rates (level 2 valuation).
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Financial derivatives | ||
| Fair value | (39) | 1,554 |
| Cost/(revenue) in results before tax | (1) | (3) |
| Decrease/(increase) in equity before tax | 1,594 | (4,974) |
The financial instruments are level 2 instruments. The fair value is calculated on the basis of the available market information. With respect to put options on non-controlling interests, please refer to note 21.
Other non-current liabilities mainly concern the impact of the financial liability relating to put options granted to third parties with respect to the entire non-controlling interest in Natural Balance Foods Ltd., where these put options give holders the right to sell part or the whole of their investment in this subsidiary. This financial liability, amounting to EUR 22.6 million, does not give rise to interest expenses. The options were exercisable for the first time in 2017 and expire in 2024.
These put options are unconditional and the exercise price depends on the future results (turnover and operating result) of Natural Balance Foods. In accordance with IAS 32, where non-controlling interests hold put options giving them the right to sell their investment, a financial liability is recorded for the present value of the exercise price expected to be paid. These put options are level 3 instruments.
The counterpart of this liability is a cancellation of the underlying non-controlling interest. The difference between the value of the non-controlling interest and the fair value of the liability is added to the consolidated reserves, which are included in shareholders' equity. This item is adjusted at the end of each reporting period to take into account changes in the exercise price expected to be paid for the option and non-controlling interests. If the option expires without being exercised, the liability is cancelled with the non-controlling interests and consolidated reserves.
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Trade payables | 86,794 | 68,542 |
| Remuneration and social security | 21,330 | 18,383 |
| Tax payables | ||
| VAT payables | 300 | 119 |
| Tax payables | 14,761 | 16,464 |
| Total | 15,061 | 16,583 |
| Derivative financial instruments | - | 1 |
| Other current liabilities | 3,102 | 1,662 |
| Accrued charges and deferred income | 3,406 | 3,264 |
| TOTAL | 129,693 | 108,435 |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Salaries and wages | 75,005 | 69,801 |
| Social security contributions | 14,361 | 13,489 |
| Contributions for company pension plans with fixed contribution | 3,245 | 2,659 |
| Other personnel costs | 19,366 | 19,631 |
| Total personnel costs | 111,977 | 105,580 |
| Average number of members of personnel | 1,555 | 1,500 |
| Number of members of personnel as at the end of the year | 1,604 | 1,495 |
The other personnel costs include among other things the costs of temporary staff, training costs and compensation for directors.
Personnel costs increased in 2018 compared with 2017 due to the increase in the number of staff.
The stock option plan ratified by the Board of Directors of March 2012 stipulates that options are granted each financial year to executives and senior management, based on category, results and evaluation.
One option gives the holder the right to purchase one normal Lotus Bakeries share at the fixed exercise price. The exercise price is equal to the average closing stock market price of the underlying share during the thirty calendar days prior to offering date. The standing options have a term of five years. After the exercise period, the options are no longer valid. The exercise period of the options granted in 2007 has been extended by five years under the terms of the Economic Recovery Act ('Herstelwet'). To retain their exercise rights, option holders must remain attached to Lotus Bakeries or an Affiliated Company as an employee or executive director. These rights remain in their entirety in the event of pension retirement, early pension retirement, invalidity or death. Options are exercised via equity.
In 2018, 1,179 share options were granted to and accepted by Lotus Bakeries employees.
In 2017, 2,260 share options were granted to and accepted by Lotus Bakeries employees.
In 2007, a warrant plan was issued for executives and senior management, with a term of seven years. Each warrant entitles the warrant holder to subscribe one Lotus Bakeries share at the established exercise price. This exercise price is equal to the average stock market closing price of the Lotus Bakeries share during the thirty calendar days preceding the date of offering. After the expiry of the exercise period the warrants become worthless. Upon exercise the company will issue shares in favour of the warrant holder.
Warrants are definitively acquired only three years after the date of the offering, viz. 19 July 2010. All warrants that have been allocated become null and void if the employment contract or directorship is terminated before the end of this three-year period, except where the warrant holder takes retirement pension, early retirement pension, or in the event of definitive disability or death. Where the warrant holder's employment contract or directorship ends in the period between the third and fifth anniversaries of the date of offering, only half of the warrants that have been definitively acquired at that time may be exercised, and the other half of the definitively acquired warrants become null and void and lose all value.
No new warrants were allocated in 2018 and 2017. The warrants run for seven years, with the exercise period of the warrants granted in 2007 extended for five years by the Economic Recovery Act.
The share options and warrants outstanding at the end of 2018 have a weighted average term of two years and three months (2017: two years and three months).
The fair value of the options and warrants is estimated at the time of allotment, using the binomial valuation method. This valuation model is based on the following market data and assumptions: the share price at the time of allotment, the exercise price, the exercise arrangements, the estimated volatility, the dividend expectations and the risk-free interest rate. The fair value of the share options and warrants is charged to the vesting period.
For all allotted and accepted options, a charge of kEUR 590 was recorded in the income statement in 2018 (kEUR 620 in 2017). For share options exercised during 2018, the weighted average share price at exercise date was EUR 2,352.57 (2017: EUR 2,370.98). For the exercised warrants, the weighted average share price at the exercise date was EUR 2,529.74 (2017: EUR 2,316.09).
| Number of options and warrants | 2018 | 2017 |
|---|---|---|
| Outstanding at January, 1 | 15,971 | 20,687 |
| Options granted during the year | 1,179 | 2,260 |
| Options exercised during the year | (5,511) | (4,070) |
| Options expired during the year | (341) | (986) |
| Warrants exercised during the year | (1,300) | (1,920) |
| Outstanding at 31 December | 9,998 | 15,971 |
| Exercisable at 31 December | 1,429 | 2,852 |
| Charge recorded in the income statement (kEUR) | 590 | 620 |
The weighted average exercise price of options and warrants is as follows:
| IN EUR | 2018 | 2017 |
|---|---|---|
| Outstanding at January, 1 | 1,148.04 | 841,50 |
| Options granted during the year | 2,373.00 | 2.347,52 |
| Options exercised during the year | 767.41 | 560.70 |
| Options expired during the year | 1,981.06 | 1,646.83 |
| Warrants exercised during the year | 246.02 | 246.02 |
| Outstanding at 31 December | 1,591.17 | 1,148.04 |
| Exercisable at 31 December | 695.97 | 426.33 |
Weighted average term of the share options and warrants outstanding at the end of the period.
| 2018 | 2017 | |
|---|---|---|
| Number of years | 2 | 2 |
| Number of months | 3 | 3 |
| ALLOTED IN | NUMBER ALLOTED (1) |
NUMBER EXERCISED (2) |
AVAILABLE BALANCE | EXERCISE PRICE | EXERCISE PERIOD | ||
|---|---|---|---|---|---|---|---|
| 2007 | Options | 11,950 | 11,950 | 232.82 | 01/01/2011 - |
10/05/2017 | |
| 15/03/2018 - |
31/03/2018 | ||||||
| 15/09/2018 - |
30/09/2018 | ||||||
| 2007 | Warrants | 43,450 | 43,170 | 280 | 246.02 | 15/03/2019 - |
31/03/2019 |
| 16/06/2019 - |
30/06/2019 | ||||||
| 2010 | Options | 2,400 | 2,400 | - | 367.72 | 01/01/2014 - |
17/05/2015 |
| 2011 | Options | 800 | 800 | - | 405.12 | 01/01/2015 - |
12/05/2016 |
| 2011 | Options | 500 | 500 | - | 387.12 | 18/03/2015 - |
29/07/2016 |
| 2012 | Options | 5,069 | 5,069 | - | 496.77 | 01/01/2016 - |
10/09/2017 |
| 2013 | Options | 3,998 | 3,998 | - | 650.31 | 01/01/2017 - |
13/05/2018 |
| 2014 | Options | 5,358 | 4,239 | 1,119 | 802.55 | 01/01/2018 - |
08/05/2019 |
| 2015 | Options | 30 | - | 30 | 919.92 | 25/08/2018 - |
01/01/2020 |
| 2015 | Options | 3,317 | - | 3,317 | 1,243.57 | 01/01/2019 - |
07/05/2020 |
| 2016 | Options | 20 | - | 20 | 1,591.00 | 10/08/2019 - |
12/12/2020 |
| 2016 | Options | 2,367 | - | 2,367 | 1,702.49 | 01/01/2020 - |
12/05/2021 |
| 2017 | Options | - | - | - | 2,417.75 | 01/01/2021 - |
31/12/2021 |
| 2017 | Options | 1,726 | - | 1,726 | 2,331.77 | 01/01/2021 - |
11/05/2022 |
| 2018 | Options | 1,139 | - | 1,139 | 2,373.00 | 01/01/2022 - |
14/05/2023 |
| Total | 82,124 | 72,126 | 9,998 |
(1) Cumulated number allocated minus cumulative number lapsed.
(2) Cumulative number exercised.
The weighted fair value of the options and assumptions used in applying the option pricing model are as follows:
| 2018 | 2017 | |
|---|---|---|
| Fair value of options granted | 316.29 | 378.27 |
| Share price | 2,310.00 | 2,459.00 |
| Exercise price | 2,373.00 | 2,331.77 |
| Expected volatility | 22.43% | 22.02% |
| Expected dividends | 0.93% | 1.07% |
| Risk-free interest rate | 0.11% | (0.12%) |
The volatility measured at the standard deviation is based on daily share prices of Lotus Bakeries over the last three years.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Depreciation of intangible assets | 691 | 714 |
| Depreciation of property, plant & equipment | 12,251 | 11,391 |
| Total | 12,942 | 12,105 |
See notes 5, 7 and 27 concerning tangible assets, intangible assets and non-recurrent operating result.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Other costs | ||
| Other taxes | 2,310 | 2,931 |
| Other operating charges | (187) | 237 |
| Total | 2,123 | 3,168 |
| Other revenues | ||
| Transport charges | (7) | (7) |
| Fixed assets - own construction | (890) | (1,006) |
| Other operating income | (1,982) | (4,394) |
| Total | (2,879) | (5,407) |
| Other operating charges (income) | (756) | (2,239) |
The other charges are mainly local indirect taxes (property taxes, municipal taxes, packaging tax, etc.), losses on sales of fixed assets and compensation amounts paid.
The other income consists primarily of various costs recovered at the time of sale, contributions to the cost of training, and damage compensation payments.
Grouped under non-recurrent operating result are those operating income items and charges that do not belong to or derive from the recurrent operating activities of the Group. This category includes primarily results from the disposal of fixed assets, any goodwill impairment losses, write-downs or impairment losses on brands from takeovers, project costs for the start-up of new factories under construction, provisions and costs for restructuring and takeovers.
The non-recurrent operating result at the end of 2018 amounts to kEUR -3,005. It comprises costs relating to acquisitions, start-up costs for the factory in the United States and the gain on the sale of land in South Korea.
In 2017, the non-recurrent operating result amounted to kEUR -91. It comprised the proceeds of the sale of land in Meise, restructuring costs, start-up costs for the factory in the US and costs relating to the recall of Lotus Biscoff spread and the fipronil crisis.
On an annual basis, the Group reports a financial charge of kEUR 3,324 versus kEUR 2,228 in 2017. The net financial result for 2018 consists mostly of interest expenses. The higher charge compared with the previous year is due to a foreign exchange loss and the higher net financial debt on average in 2018 as a result of the investments in tangible assets and the acquisition of Kiddylicious.
Income tax amounted to EUR 20.8 million and fell by 7% compared with 2017. The average effective tax rate was 23.48% in 2018 compared with 25.73% in 2017.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Income taxes on the results | ||
| Income taxes on the results of the current year | 20,264 | 21,054 |
| Tax adjustments for prior years | (2,067) | 3,619 |
| Deferred taxes of the current year | 2,632 | (2,276) |
| Total tax charge reported in the income statement | 20,829 | 22,397 |
| Accounting profit before tax | 88,701 | 87,030 |
| Effective tax rate of the year | 23.48% | 25.73% |
| Reconciliation between theoretical and effective tax rate | ||
| Results before taxation | 88,701 | 87,030 |
| Legal tax rate | 29.58% | 33.99% |
| Legal income tax expense | 26,238 | 29,581 |
| Effect of different tax rates in other countries | (2,481) | (4,203) |
| Deductions of taxable income (Deduction Notional Interest + various tax credits) |
(1,329) | (1,335) |
| Tax adjustments for prior years | (2,067) | 3,619 |
| Taxes on dividend income | (35) | 174 |
| Disallowed expenses | 870 | 1,950 |
| Tax free income | 35 | (287) |
| Tax losses used for which no deferred tax asset has been recorded | (162) | (170) |
| Changes in tax rate or new taxes | (153) | (6,767) |
| Other | (87) | (165) |
| Effective tax | 20,829 | 22,397 |
| Effective tax rate | 23.48% | 25.73% |
Earnings per share is calculated by dividing the Group's share in net profit by the weighted average number of outstanding shares over the year (total number of shares - treasury shares).
Diluted earnings per share is calculated by dividing the Group's share in net profit by the weighted average number of outstanding shares over the year, adjusted for the potential dilution of ordinary shares as a result of options and warrants granted under the stock option plan for management (see note 24).
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Net result - attributable to: | 67,872 | 64,633 |
| Non-controlling interests | 964 | 1,094 |
| Equity holders of Lotus Bakeries | 66,908 | 63,539 |
| Weighted average number of shares | 803,878 | 799,423 |
| Ordinary earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.20 | 1.37 |
| Equity holders of Lotus Bakeries | 83.23 | 79.48 |
| Dilutive effect | 4,935 | 9,312 |
| Weighted average number of shares under option | 11,266 | 15,716 |
| Weighted average number of shares which should be issued at average market rate |
(6,331) | (6,404) |
| Weighted average number of shares after effect of dilution | 808,813 | 808,735 |
| Diluted earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.19 | 1.35 |
| Equity holders of Lotus Bakeries | 82.72 | 78.57 |
| Total number of shares | 815,733 | 814,433 |
| Earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.18 | 1.34 |
| Equity holders of Lotus Bakeries | 82.02 | 78.02 |
| Total number of shares less treasury shares | 805,993 | 799,262 |
| Earnings per share (EUR) - attributable to: | ||
| Non-controlling interests | 1.20 | 1.37 |
| Equity holders of Lotus Bakeries | 83.01 | 79.50 |
A list of all Group companies is provided in note 1. Further details of the shareholding structure of Lotus Bakeries NV as of 31 December 2018 are contained in the Corporate Governance Statement in part 1 of the 2018 annual review of Lotus Bakeries.
For information on the remuneration of the CEO and the remuneration of the executive managers (excluding the CEO) in 2018, we refer to the remuneration report included in part 1 of the 2018 annual review.
Apart from remuneration and transactions between companies included in the scope of consolidation, no significant transactions took place with related parties.
The Group's commitments mainly relate to the leasing of office buildings, storage space and cars.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Less than one year | 4,089 | 4,880 |
| More than one year and less than five years | 6,399 | 6,652 |
| More than 5 years | 1,157 | 1,621 |
The annual rent costs of these commitments totalled kEUR 4,569 in 2018 (kEUR 4,892 in 2017).
Lease agreements in which a significant portion of the risks and benefits of ownership are retained by the lessor are classified as operating lease agreements. Payments made under operating lease agreements are charged to the income statement on a straight-line basis over the life of the lease agreement.
As per 31 December 2018, the Group had kEUR 25,394 of commitments (2017: kEUR 5,661) for the purchase of fixed assets.
The main commitments relate to the construction of the new factory in Mebane, North Carolina, USA
Purchased but not yet delivered raw materials and finished products in 2019 and 2020 amount to kEUR 95,888, as detailed below.
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| Less than one year | 76,819 | 85,295 |
| More than one year and less than five years | 19,069 | 10,828 |
Bank guarantees as per 31 December 2018: kEUR 601 (as per 31/12/2017: kEUR 601).
Lotus Bakeries commits itself not to dispose of, mortgage or pledge any fixed assets without prior consultation with the credit-granting institutions. These assets serve as guarantee for the loans ('full negative pledge').
The Lotus Bakeries Group's greatest market risks are fluctuations in raw material and packaging prices, exchange rates and interest rates.
For a description of these risks, please refer to the financial information contained in the report of the Board of Directors in part 1 of the 2018 annual review of Lotus Bakeries.
Financial assets (trade receivables, cash and cash equivalents) are measured at amortised cost. Financial liabilities (interest-bearing liabilities, trade payables) are recognised at amortised cost. Derivative financial instruments are measured at fair value.
| Financial Assets by Class and Measurement Category: | 31 DECEMBER 2018 | |||
|---|---|---|---|---|
| FINANCIAL ASSETS MEASURED AT AMORTISED COST |
FINANCIAL ASSETS MEASURED AT FAIR VALUE |
|||
| IN THOUSANDS OF EUR | NOTE | LOANS AND RECEIVABLES |
DERIVATIVES - THROUGH EQUITY |
TOTAL |
| Derivative financial instruments | 20 | - | 2,280 | 2,280 |
| Trade receivables | 11 | 71,097 | - | 71,097 |
| Cash and cash equivalents | 12, 13 | 45,597 | - | 45,597 |
| Total financial assets | 116,694 | 2,280 | 118,974 |
| FINANCIAL ASSETS MEASURED AT AMORTISED COST |
FINANCIAL ASSETS MEASURED AT FAIR VALUE |
|||
|---|---|---|---|---|
| IN THOUSANDS OF EUR | NOTE | LOANS AND RECEIVABLES |
DERIVATIVES - THROUGH EQUITY |
TOTAL |
| Derivative financial instruments | 20 | - | 3,525 | 3,525 |
| Trade receivables | 11 | 60,104 | - | 60,104 |
| Cash and cash equivalents | 12, 13 | 48,129 | - | 48,129 |
| Total financial assets | 108,233 | 3,525 | 111,758 |
| Financial Liabilities by Class and Measurement Category | 31 DECEMBER 2018 | |||||
|---|---|---|---|---|---|---|
| FINANCIAL LIABILITIES AT FAIR VALUE | ||||||
| IN THOUSANDS OF EUR | NOTE | FINANCIAL LIABILITIES AT AMORTISED COST |
DERIVATIVES - THROUGH PROFIT OR LOSS |
DERIVATIVES - THROUGH EQUITY |
FAIR VALUE HIERARCHY |
TOTAL |
| Interest-bearing liabilities | 13, 17 | 116,500 | - | - | - | 116,500 |
| Derivative financial instruments | 20 | - | - | 2,319 | Level 2 | 2,319 |
| Other non-current liabilities | 21 | 5 | - | 22,597 | Level 3 | 22,602 |
| Non-current liabilities | 116,505 | - | 24,916 | - | 141,421 | |
| Interest-bearing liabilities | 13, 17 | 36,655 | - | - | - | 36,655 |
| Trade payables | 22 | 86,794 | - | - | - | 86,794 |
| Derivative financial instruments | 20, 22 | - | 1 | - | Level 2 | 1 |
| Current liabilities | 123,449 | 1 | - | - | 123,450 | |
| Total financial liabilities | 239,954 | 1 | 24,916 | - | 264,871 |
| FINANCIAL LIABILITIES AT FAIR VALUE | ||||||
|---|---|---|---|---|---|---|
| IN THOUSANDS OF EUR | NOTE | FINANCIAL LIABILITIES AT AMORTISED COST |
DERIVATIVES - THROUGH PROFIT OR LOSS |
DERIVATIVES - THROUGH EQUITY |
FAIR VALUE HIERARCHY |
TOTAL |
| Interest-bearing liabilities | 13, 17 | 117,500 | - | - | - | 117,500 |
| Derivative financial instruments | 20 | - | - | 1,970 | Level 2 | 1,970 |
| Other non-current liabilities | 21 | 5 | - | 20,982 | Level 3 | 20,987 |
| Non-current liabilities | 117,505 | - | 22,952 | - | 140,457 | |
| Interest-bearing liabilities | 13, 17 | 1,750 | - | - | - | 1,750 |
| Trade payables | 22 | 68,542 | - | - | - | 68,542 |
| Derivative financial instruments | 20, 22 | - | 1 | - | Level 2 | 1 |
| Current liabilities | 70,292 | 1 | - | - | 70,293 | |
| Total financial liabilities | 187,797 | 1 | 22,952 | - | 210,750 |
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. IFRS 13 requires, for financial instruments that are measured in the balance sheet at fair value, the disclosure of fair value measurements by level of fair value measurement hierarchy. For financial instruments not measured at fair value, the disclosure of their fair value and the fair value measurement level is necessary.
The fair value measurements have to be categorised by the following level of fair value measurement hierarchy:
Level 1: The fair value of a financial instrument that is traded in an active market is measured based on quoted (unadjusted) prices for identical assets or liabilities. A market is considered as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency. Those prices represent actual and regularly occurring market transactions on an arm's length basis.
Level 2: The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required to determine the fair value of an instrument are observable, either directly (i.e., as prices) or indirectly (i.e., derived from prices), the instrument is included in Level 2.
Level 3: If one or more of the significant inputs used in applying the valuation technique is not based on observable market data, the financial instrument is included in Level 3.
No transfers between the different fair value hierarchy levels took place in 2018 and 2017.
External and internal costs of research and development are expensed to the income statement during the year in which they are incurred. For 2018 these costs amounted to kEUR 1,623.
| YEAR | EXTERNAL AND INTERNAL COSTS OF RESEARCH AND DEVELOPMENT |
|---|---|
| 2018 | 1,623 |
| 2017 | 1,568 |
| 2016 | 1,320 |
| 2015 | 1,384 |
| 2014 | 1,434 |
We hereby certify that, to the best of our knowledge, the consolidated financial statements for the year ended 31 December 2018, which have been prepared in accordance with IFRS (International Financial Reporting Standards), give us a true and fair view of the assets, liabilities, financial position and profit or loss of the company and the subsidiaries included in the consolidation as a whole, and that the annual report includes a fair review of the important events that have occurred during the year 2018 and of the major transactions with the related parties, and their impact on the consolidated financial statements, together with a description of the principal risks and uncertainties with which the company is confronted.
Lembeke, 10 April 2019 On behalf of the Board of Directors
No significant events have occurred since 31 December 2018 which have a material impact on the 2018 financial statements.
The company's Statutory Auditor is PwC Bedrijfsrevisoren CVBA, represented by Peter Opsomer.
IN THOUSANDS OF EUR
| Fees for the mandates of PwC Bedrijfsrevisoren | 277 |
|---|---|
| Total | 402 |
| Lotus Bakeries Group | 322 |
| Lotus Bakeries NV | 80 |
| Fees for the mandates of persons related to PwC bedrijfsrevisoren | 125 |
|---|---|
| Other audit-related fees | 2 |
|---|---|
| Tax fees | - |
| Other non-audit fees | 24 |
| Other audit-related fees | - |
|---|---|
| Tax fees | 472 |
| Other non-audit fees | 105 |
We present to you our statutory auditor's report in the context of our statutory audit of the consolidated financial statements of Lotus Bakeries NV (the "Company") and its subsidiaries (jointly "the Group"). This report includes our report on the consoli- dated financial statements, as well as the other legal and regulatory requirements. This forms part of an integrated whole and is indivisible.
We have been appointed as statutory auditor by the general meeting d.d. 13 May 2016, following the proposal formulated by the board of directors and following the recommendation by the audit committee. Our mandate will expire on the date of the general meeting which will deliberate on the annual financial statements for the year ended 31 December 2018. We have performed the statutory audit of the consolidated financial statements of Lotus Bakeries NV for 12 consecutive years.
We have performed the statutory audit of the Group's consolidated financial statements, which comprise the consolidated balance sheet as at 31 December 2018, the consolidated income statement, the consolidated statement of changes in equity and the consolidated cash flow statement for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies and other explanatory information, and which is characterised by a consolidated balance sheet total of EUR'000 711,572 and a profit for the year, Group share, of EUR'000 66,908.
In our opinion, the consolidated financial statements give a true and fair view of the Group's net equity and consolidated financial position as at 31 December 2018, and of its consolidated financial performance and its consolidated cash flows for the year then ended, in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium.
We conducted our audit in accordance with International Standards on Auditing (ISAs) as applicable in Belgium. Furthermore, we have applied the International Standards on Auditing (ISAs) as approved by the IAASB for the years ending as from 31 December 2018, which are not yet approved at the national level.
Our responsibilities under those standards are further described in the "Statutory auditor's responsibilities for the audit of the consolidated accounts" section of our report. We have fulfilled our ethical responsibilities in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Belgium, including the requirements related to independence.
We have obtained from the board of directors and Company officials the explanations and information necessary for performing our audit.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated statements of the current period. These matters were addressed in the context of our audit of the consolidated statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The carrying value of the Group's goodwill and other intangible assets with an indefinite life amounts to EUR'000 177,639 and EUR'000 137,489 respectively at 31 December 2018.
These assets are subject to impairment testing on an annual basis or more frequently if there are indicators of impairment.
We consider this as most significant to our audit because the determination of whether or not an impairment charge is necessary involves significant judgement in estimating the future results of the business.
We evaluated the appropriateness of the Group's accounting policies and assessed compliance with the policies in accordance with IFRS.
We evaluated management's annual impairment testing and assessment of the indicators of impairment and challenged impairment calculations by assessing the future cash flow forecasts used in the models, and the process by which they were drawn up, including comparing them to the latest budgets approved by the board of directors. We understood and challenged:
In performing the above work, we utilized our internal valuation experts to provide challenge and external market data to assess the reasonableness of the assumptions used by management.
We evaluated the sensitivity analysis around the key drivers within the cash flow forecasts to ascertain the extent of change in those assumptions and also considered the likelihood of such a movement in those key assumptions arising.
Whilst recognizing that cash flow forecasting, impairment modeling and valuations are all inherently judgmental, we concluded that the assumptions used by management were within an acceptable range of reasonable estimates.
As described in Note 2 on the applied accounting policies, the Group enters into commercial agreements with its customers whereby volume-related allowances, promotional & marketing allowances and various other fees and discounts are contractually agreed. The Group measures revenue, cost of sales and cost of services & other goods taken into consideration the estimated amount based on those contractual agreements and the specific classification criteria in accordance with IFRS.
Due to the nature of some arrangements there is a risk that these arrangements are not appropriately accounted for and as a result revenue would be misstated.
We consider this as most significant to our audit because the assessment of customer allowances requires significant judgement from management concerning:
We evaluated the appropriateness of the Group's revenue recognition accounting policies, in particular those relating to volume rebates and promotional & marketing allowances and assessed compliance with the policies in accordance with IFRS.
We tested the effectiveness of the Group's controls over accounting for commercial arrangements and the accuracy of the contractual agreements registered in the accounting system.
In addition, we challenged management's assumptions used in determining the commercial accruals through discussions with management and performing specific substantive procedures including:
Our procedures confirmed that management's assumptions and estimates in respect of accounting for commercial arrangements are appropriate in all material aspects.
The company's disclosures concerning deferred and current income taxes are included in Notes 8 and 29 of the consolidated financial statements. As per 31 December 2018, the total balance of deferred taxes for the entire Group amounts to EUR'000 3,936 of deferred tax assets and EUR'000 52,725 of deferred tax liabilities.
The Group operates in various countries and is present in many different tax jurisdictions where transfer pricing assessments can be challenged by the tax authorities. Furthermore, developments in local fiscal regulations are impacting the valuation of deferred tax positions.
In the normal course of business, group management makes judgments and estimates in relation to tax issues and exposures resulting in the recognition of other tax liabilities. This area required our focus due to its inherent complexity and the estimation and judgement involved in calculating such liabilities.
We evaluated the appropriateness of the Group's accounting policies and assessed compliance with the policies in accordance with IFRS.
We tested the completeness and accuracy of the amounts reported for deferred tax, including the assessment of disputes with tax authorities, based on the developments in 2018. In this area our audit procedures included:
We also assessed the applicable local fiscal regulations and developments as these are key assumptions underlying the recognition and valuation of the current and deferred tax positions. In addition, we also focused on the adequacy of the company's disclosures on income tax positions and uncertain tax positions.
We found the estimates to be reasonable in all material aspects in the context of the applicable fiscal regulations.
The board of directors is responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the European Union and with the legal and regulatory requirements applicable in Belgium, and for such internal control as the board of directors determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the board of directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the board of directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.
In performing our audit, we comply with the legal, regulatory and normative framework applicable to the audit of the consolidated financial statements in Belgium.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
supervision and performance of the Group audit. We remain solely responsible for our audit opinion.
We communicate with the audit committee regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide the audit committee with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with the audit committee, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.
The board of directors is responsible for the preparation and the content of the directors' report on the consolidated financial statements, the separate report on non-financial information and the other information included in the annual report.
In the context of our mandate and in accordance with the Belgian standard (Revised in 2018) which is complementary to the International Standards on Auditing (ISAs) as applicable in Belgium, our responsibility is to verify, in all material respects, the directors' report on the consolidated financial statements, the separate report on non-financial information and the other information included in the annual report and to report on these matters.
In our opinion, after having performed specific procedures in relation to the directors' report on the consolidated financial statements and to the other information included in the annual report, this report is consistent with the consolidated financial statements for the year under audit, and it is prepared in accordance with article 119 of the Companies' Code.
In the context of our audit of the consolidated financial statements, we are also responsible for considering, in particular based on the knowledge acquired resulting from the audit, whether the directors' report is materially misstated or contains information which is inadequately disclosed or otherwise misleading. In light of the procedures we have performed, there are no material misstatements we have to report to you.
The non-financial information required by virtue of article 119, §2 of the Companies' Code is included in the directors' report on the consolidated financial statements. The Company has prepared the non-financial information, based on the Sustainable Development Goals (SDG) framework. However, in accordance with article 148, §1, 5° of the Companies' Code, we do not express an opinion, in this report, as to whether the non-financial information has been prepared in accordance with the Sustainable Development Goals (SDG) framework as disclosed in the consolidated financial statements.
This report is consistent with the additional report to the audit committee referred to in article 11 of the Regulation (EU) N° 537/2014.
Ghent, 8 April 2019
The statutory auditor PwC Bedrijfsrevisoren cvba Represented by
Peter Opsomer Bedrijfsrevisor
| IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 | 31-12-2016 | 31-12-2015 | 31-12-2014 |
|---|---|---|---|---|---|
| NON CURRENT ASSETS | 545,647 | 447,693 | 437,310 | 442,884 | 263,881 |
| Property, plant and equipment | 219,897 | 174,426 | 161,590 | 139,377 | 137,569 |
| Goodwill | 177,639 | 141,001 | 144,368 | 93,229 | 46,135 |
| Intangible assets | 138,887 | 123,924 | 126,006 | 107,901 | 74,674 |
| Participating interests | 2,448 | - | - | - | - |
| Investment in other companies | 12 | 12 | 37 | 96,244 | 22 |
| Deferred tax assets | 3,936 | 4,310 | 4,854 | 5,889 | 5,275 |
| Other non-current assets | 2,828 | 4,020 | 455 | 244 | 206 |
| CURRENT ASSETS | 165,925 | 149,801 | 110,692 | 128,337 | 73,108 |
| Inventories | 39,066 | 33,653 | 32,175 | 35,659 | 17,898 |
| Trade receivables | 71,097 | 60,104 | 50,922 | 56,143 | 38,804 |
| Cash and cash equivalents | 45,597 | 48,129 | 19,932 | 18,547 | 11,855 |
| TOTAL ASSETS | 711,572 | 597,494 | 548,002 | 571,221 | 336,989 |
| EQUITY | 346,927 | 293,213 | 248,464 | 217,525 | 200,629 |
| Non-current liabilities | 198,042 | 193,923 | 197,245 | 169,242 | 39,506 |
| Interest-bearing liabilities | 116,500 | 117,500 | 118,500 | 97,000 | 325 |
| Deferred tax liabilities | 52,725 | 49,206 | 50,666 | 44,607 | 34,905 |
| Other non-current liabilities | 22,602 | 20,987 | 19,560 | 22,815 | 57 |
| Current liabilities | 166,603 | 110,358 | 102,293 | 184,454 | 96,854 |
| Interest-bearing liabilities | 36,655 | 1,750 | 7,533 | 99,086 | 41,144 |
| Trade payables | 86,794 | 68,542 | 54,742 | 42,498 | 33,309 |
| Employee benefit expenses and social security | 21,330 | 18,383 | 18,418 | 18,336 | 12,357 |
| TOTAL EQUITY AND LIABILITIES | 711,572 | 597,494 | 548,002 | 571,221 | 336,989 |
| IN THOUSANDS OF EUR | 2018 | 2017 | 2016 | 2015 | 2014 |
|---|---|---|---|---|---|
| TURNOVER | 556,435 | 524,055 | 507,208 | 411,576 | 347,890 |
| RECURRENT OPERATING RESULT (REBIT) | 95,030 | 89,349 | 83,945 | 64,764 | 49,433 |
| Non-recurrent operating result | (3,005) | (91) | 4,507 | (1,748) | (261) |
| OPERATING RESULT (EBIT) | 92,025 | 89,258 | 88,452 | 63,016 | 49,172 |
| Financial result | (3,324) | (2,228) | (2,675) | (778) | 16 |
| PROFIT FOR THE YEAR BEFORE TAXES | 88,701 | 87,030 | 85,777 | 62,238 | 49,188 |
| Taxes | (20,829) | (22,397) | (23,322) | (16,623) | (12,415) |
| RESULT AFTER TAXES | 67,872 | 64,633 | 62,455 | 45,615 | 36,773 |
| NET RESULT - attributable to: | 67,872 | 64,633 | 62,455 | 45,615 | 36,773 |
| Non-controlling interests | 964 | 1,094 | 1,210 | 202 | (2) |
| Equity holders of Lotus Bakeries | 66,908 | 63,539 | 61,245 | 45,413 | 36,775 |
| ASSETS IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Fixed Assets | 400,761 | 373,592 |
| II. Intangible assets | 5,987 | 7,484 |
| IV. Financial assets | 394,774 | 366,108 |
| A. Affiliated enterprises | 394,774 | 366,108 |
| 1. Participating interests | 394,774 | 366,108 |
| Current Assets | 25,713 | 42,625 |
| VII. Amounts receivable within one year | 13,103 | 28,622 |
| A. Trade debtors | 12,473 | 11,670 |
| B. Other amounts receivable | 630 | 16,952 |
| VIII. Current investments | 11,406 | 13,919 |
| A. Own shares | 11,406 | 13,919 |
| IX. Cash at bank and in hand | 1,184 | 64 |
| X. Deferred charges and accrued income | 20 | 20 |
| TOTAL ASSETS | 426,474 | 416,217 |
| LIABILITIES IN THOUSANDS OF EUR | 31-12-2018 | 31-12-2017 |
|---|---|---|
| Equity | 55,894 | 68,026 |
| I. Capital | 3,590 | 3,584 |
| A. Issued capital | 3,590 | 3,584 |
| II. Share premium account | 12,729 | 12,415 |
| IV. Reserves | 39,567 | 52,027 |
| A. Legal reserve | 359 | 358 |
| B. Reserves not available for distribution | 11,478 | 13,991 |
| 1. Own shares | 11,406 | 13,919 |
| 2. Other | 72 | 72 |
| C. Untaxed reserves | 545 | 545 |
| D. Reserves available for distribution | 27,185 | 37,133 |
| Amounts payable | 370,588 | 348,191 |
| VIII. Amounts payable after one year | 107,573 | 107,436 |
| A. Financial debts | 98,140 | 98,140 |
| 5. Other loans | 98,140 | 98,140 |
| D. Other debts | 9,433 | 9,296 |
| IX. Amounts payable within one year | 263,009 | 240,750 |
| A. Current portion of amounts payable after one year | - | - |
| B. Financial debts | 233,101 | 217,756 |
| 2. Other loans | 233,101 | 217,756 |
| C. Trade debts | 5,590 | 5,785 |
| 1. Suppliers | 5,590 | 5,785 |
| E. Taxes, remuneration and social security | 384 | 1,053 |
| 1. Taxes | 384 | 1,053 |
| F. Other amounts payable | 23,934 | 16,156 |
| X. Accrued charges and deferred income | 6 | 5 |
| TOTAL LIABILITIES | 426,474 | 416,217 |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| I. Operating income | 12,470 | 11,670 |
| D. Other operating income | 12,470 | 11,670 |
| II. Operating charges | (6,399) | (5,148) |
| B. Services and other goods | 3,606 | 3,130 |
| D. Depreciation of and other amounts written off formation expenses, intangible and tangible fixed assets |
1,497 | 1,497 |
| G. Other operating charges | 257 | 41 |
| H. Non-recurring operating charges | 1,039 | 480 |
| III. Operating profit | 6,071 | 6,522 |
| IV. Financial income | 9,608 | 7,104 |
| A. Income from financial fixed assets | 7,962 | 6,288 |
| C. Other financial income | 1,646 | 816 |
| V. Financial charges | (3,501) | (3,492) |
| A. Interest and other debt charges | 3,345 | 3,196 |
| C. Other financial charges | 156 | 296 |
| IX. Profit for the year before taxes | 12,178 | 10,134 |
| X. Income taxes | (724) | (1,088) |
| A. Income taxes | 724 | 1,088 |
| B. Adjustment of income taxes and write-back of tax provisions | - | - |
| XI. Profit for the year | 11,454 | 9,046 |
| XIII. Profit for the year available for appropriation | 11,454 | 9,046 |
| IN THOUSANDS OF EUR | 2018 | 2017 |
|---|---|---|
| A. Profit to be appropriated | 11,454 | 9,046 |
| 1. Profit for the year available for appropriation | 11,454 | 9,046 |
| B. Withdrawals from capital and reserves | 12,461 | 7,092 |
| 2. From reserves | 12,461 | 7,092 |
| C. Transfer to capital and reserves | (1) | (1) |
| 2. To legal reserve | 1 | 1 |
| 3. To other reserves | - | - |
| F. Distribution of profit | (23,914) | (16,137) |
| 1. Dividends | 23,664 | 15,887 |
| 2. Directors' entitlements | 250 | 250 |
| VIII. Statement of capital | 2018 | 2017 | 2018 |
|---|---|---|---|
| IN THOUSANDS OF EUR |
IN THOUSANDS OF EUR |
NUMBER OF SHARES |
|
| A. Capital | |||
| 1. Issued capital | |||
| At the end of the preceding year | 3,584 | 3,576 | |
| At the end of the year | 3,590 | 3,584 | |
| 2. Structure of the capital | |||
| 2.1. Different categories of shares | |||
| Ordinary shares | 3,590 | 3,584 | 815,733 |
| 2.2. Registered shares and dematerialised shares | |||
| Registered | 468,994 | ||
| Dematerialised | 346,739 | ||
| C. Teasury shares held by: | |||
| The company itself | 11,406 | 13,919 | 9,740 |
| its subsidiaries | - | - | - |
| E. Amounts of authorised capital, not issued | 943 | 949 |
Formation expenses are recorded at cost and depreciated at 100%.
Intangible fixed assets are recorded at purchase or transfer price.
The amortisation percentages applied are:
brand: 10%
software: 33%
Financial fixed assets are valued at acquisition price or contribution value without supplementary costs.
Reductions in value are applied where the estimated value of the financial fixed assets is less than the accounting value and where the loss of value so determined is of a lasting nature in the opinion of the Board of Directors.
The estimated value of the financial fixed assets is determined at the end of the accounting period based on the most recent available balance sheet and on one or more criteria.
Reductions in value are reversed, up to the amount of the previously recorded reductions in value, where the valuation at the closing date of the accounting period concerned significantly exceeds the previous valuation.
The necessary reductions in value are applied to receivables, the collection of which is in doubt.
Receivables are recorded at their nominal value, less any credit notes remaining to be drawn up.
Receivables in foreign currencies are converted at the exchange rate applying on the balance sheet date.
Negative exchange rate differences in non-euro currencies are included in the income statement as in the past.
Treasury shares are valued at purchase price.
Cash at bank and in hand in foreign currency is converted at the exchange rate applying on the balance sheet date.
Both the negative and the positive conversion differences are included in the profit and loss account.
Provisions are made for all normally foreseeable liabilities and charges.
Debts to suppliers are booked at their nominal value. Debts in foreign currencies are valued at the rate of exchange on the balance date.
Exchange rate differences are processed in the same way as for foreign currency receivables.
The company is part of a VAT unit which was formed within the Group and to which the following companies belong:
Consequently, the company is jointly and severally liable for the tax debts of all the above companies.
Lotus Bakeries NV Gentstraat 1 B-9971 Lembeke T + 32 9 376 26 11 F + 32 9 376 26 26 www.lotusbakeries.com
Register of legal persons of Ghent, Enterprise number 0401.030.860
For further information about the data of the annual review or more information about the Lotus Bakeries Group, please contact: Lotus Bakeries NV Corporate Secretary Gentstraat 1 B-9971 Lembeke T + 32 9 376 26 11 F + 32 9 376 26 26 [email protected]
Concept and realisation Focus Advertising and Lotus Bakeries www.focus-advertising.be Cover illustration Flore Deman www.floredeman.com
www.lotusbakeries.com
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