Prospectus • Feb 17, 2021
Prospectus
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(A public limited liability company incorporated under the laws of the Netherlands)
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This information document (the "Information Document") has been prepared by Envipco Holding N.V. (the "Company" or "Envipco" and, together with its consolidated subsidiaries, the "Group") solely for use in connection with the admission to trading (the "Admission") of the shares of the Company (the "Shares") on Euronext Growth Oslo ("Euronext Growth").
As of the date of this Information Document, the Company's issued and outstanding share capital is EUR 2,302,564, divided into 4,605,128 Shares, each with a par value of EUR 0.50. All of the issued Shares rank pari passu with one another and each Share carries one vote.
The Shares have been approved for admission to trading on Euronext Growth and are expected to start trading on or about 18 February 2021 in the form of Depository Receipts (as defined below) under the ticker code "ENVIP".
Euronext Growth is a market operated by Euronext. Companies on Euronext Growth, a multilateral trading facility (MTF) are not subject to the same rules as companies on a Regulated Market (a main market). Instead they are subject to a less extensive set of rules and regulations adjusted to small growth companies. The risk in investing on Euronext Growth may therefore be higher than investing in a company on a Regulated Market. Investors should take this into account when making investment decisions.
The Shares are also listed on Euronext Amsterdam, which is a Regulated Market, under the ticker code "ENVI".
On Euronext Growth, the Shares will be traded in the form of depository receipts (Nw.: depotbevis) that represent the beneficial interests in the underlying Shares (the "Depository Receipts"). The Depository Receipts will be registered in the Norwegian Central Securities Depository (the "VPS") in book-entry form under the name of a "share" and will be traded in NOK on Euronext Growth in the form of depository receipts as "shares in Envipco Holding N.V.". Accordingly, all references to "Shares" in this Information Document shall in the context of the securities to be traded on Euronext Growth refer to the Depository Receipts. Existing shareholders of the Company and new investors should note that only Shares that have been registered in the VPS in the form of Depository Receipts will be tradable on Euronext Growth. Further, Depository Receipts will not be tradable on Euronext Amsterdam. Please refer to Section 10.4 ("The Depository Receipts") for further information.
THE PRESENT INFORMATION DOCUMENT DOES NOT CONSTITUTE A PROSPECTUS WITHIN THE MEANING OF REGULATION (EU) 2017/1129 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL OF 14 JUNE 2017 ON THE PROSPECTUS TO BE PUBLISHED WHEN SECURITIES ARE OFFERED TO THE PUBLIC OR ADMITTED TO TRADING ON A REGULATED MARKET, AND REPEALING DIRECTIVE 2003/71 (THE "EU PROSPECTUS REGULATION").
THE PRESENT INFORMATION DOCUMENT HAS BEEN DRAWN UP UNDER THE RESPONSIBILITY OF THE ISSUER. IT HAS BEEN REVIEWED BY THE LISTING SPONSOR AND HAS BEEN SUBJECT TO AN APPROPRIATE REVIEW OF ITS COMPLETENESS, CONSISTENCY AND COMPREHENSIBILITY BY EURONEXT.
THIS INFORMATION DOCUMENT DOES NOT CONSTITUTE AN OFFER TO BUY, SUBSCRIBE OR SELL ANY OF THE SECURITIES DESCRIBED HEREIN, AND NO SECURITIES ARE BEING OFFERED OR SOLD PURSUANT HERETO.
Investing in the Company involves a high degree of risk. Prospective investors should read the entire document and, in particular, Section 1 ("Risk Factors") and Section 3.3 ("Cautionary note regarding forward-looking statements") when considering an investment in the Company and its Shares.
Euronext Growth Advisor Carnegie AS
The date of this Information Document is 11 February 2021
This Information Document has been prepared solely by the Company in connection with the Admission. The purpose of the Information Document is to provide information about the Company and its business. This Information Document has been prepared solely in the English language.
Euronext Growth is subject to the rules in the Norwegian Securities Trading Act of 29 June 2007 no 75 (as amended) (the "Norwegian Securities Trading Act") and the Norwegian Securities Trading Regulations of 29 June 2007 no 876 (as amended) (the "Norwegian Securities Trading Regulation") that apply to such marketplaces. These rules apply to companies admitted to trading on Euronext Growth, as do the marketplace's own rules, which are less comprehensive than the rules and regulations that apply to companies listed on Oslo Børs and Euronext Expand. Euronext Growth is not a Regulated Market.
The Company is also listed on Euronext Amsterdam, which is a Regulated Market, and is thus also subject to the rules and regulations that apply to companies listed on Euronext Amsterdam.
For definitions of terms used throughout this Information Document, please refer to Section 14 ("Definitions and glossary of terms").
The Company has engaged Carnegie AS as its advisor in connection with its Admission to Euronext Growth (the "Euronext Growth Advisor"). This Information Document has been prepared to comply with the Admission to Trading Rules for Euronext Growth (the "Euronext Growth Admission Rules") and the Content Requirements for Information Documents for Euronext Growth (the "Euronext Growth Content Requirements").
All inquiries relating to this Information Document should be directed to the Company or the Euronext Growth Advisor. No other person has been authorized to give any information, or make any representation, on behalf of the Company and/or the Euronext Growth Advisor in connection with the Admission and, if given or made, such other information or representation must not be relied upon as having been authorized by the Company and/or the Euronext Growth Advisor.
The information contained herein is current as of the date hereof and subject to change, completion or amendment without notice. There may have been changes affecting the Company subsequent to the date of this Information Document. Any new material information and any material inaccuracy that might have an effect on the assessment of the Shares arising after the publication of this Information Document and before the Admission will be published and announced promptly in accordance with the Euronext Growth regulations and applicable securities laws and regulations. Neither the delivery of this Information Document nor the completion of the Admission at any time after the date hereof will, under any circumstances, create any implication that there has been no change in the Company's affairs since the date hereof or that the information set forth in this Information Document is correct as of any time since its date.
The contents of this Information Document shall not be construed as legal, business or tax advice. Each reader of this Information Document should consult with its own legal, business or tax advisor as to legal, business or tax advice. If you are in any doubt about the contents of this Information Document, you should consult with your stockbroker, bank manager, lawyer, accountant or other professional advisor.
The distribution of this Information Document in certain jurisdictions may be restricted by law. Persons in possession of this Information Document are required to inform themselves about, and to observe, any such restrictions. No action has been taken or will be taken in any jurisdiction by the Company that would permit the possession or distribution of this Admission Document in any country or jurisdiction where specific action for that purpose is required.
The Shares may be subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under applicable securities laws and regulations. Any failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction. Investors should be aware that they may be required to bear the financial risks of this investment for an indefinite period of time.
This Information Document shall be governed by and construed in accordance with Norwegian law. The courts of Norway, with Oslo District Court (Nw.: Oslo tingrett) as legal venue, shall have exclusive jurisdiction to settle any dispute which may arise out of or in connection with the Information Document.
Investing in the Company's Shares involves risks. Please refer to Section 1 ("Risk factors").
Solely for the purposes of the product governance requirements contained within: (a) EU Directive 2014/65/EU on markets in financial instruments, as amended ("MiFID II"); (b) Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 supplementing MiFID II; and (c) local implementing measures (together, the "MiFID II Product Governance Requirements"), and disclaiming all and any liability, which any "manufacturer" (for the purposes of the MiFID II Product Governance Requirements) may otherwise have with
respect thereto, the Shares have been subject to a product approval process, which has determined that they each are: (i) compatible with an end target market of retail investors and investors who meet the criteria of professional clients and eligible counterparties, each as defined in MiFID II (the "Positive Target Market"); and (ii) eligible for distribution through all distribution channels as are permitted by MiFID II (the "Appropriate Channels for Distribution"). Notwithstanding the Target Market Assessment, distributors should note that: the price of the Shares may decline and investors could lose all or part of their investment; the Shares offer no guaranteed income and no capital protection; and an investment in the Shares is compatible only with investors who do not need a guaranteed income or capital protection, who (either alone or in conjunction with an appropriate financial or other adviser) are capable of evaluating the merits and risks of such an investment and who have sufficient resources to be able to bear any losses that may result therefrom. Conversely, an investment in the Shares is not compatible with investors looking for full capital protection or full repayment of the amount invested or having no risk tolerance, or investors requiring a fully guaranteed income or fully predictable return profile (the "Negative Target Market", and, together with the Positive Target Market, the "Target Market Assessment").
For the avoidance of doubt, the Target Market Assessment does not constitute: (a) an assessment of suitability or appropriateness for the purposes of MiFID II; or (b) a recommendation to any investor or group of investors to invest in, or purchase, or take any other action whatsoever with respect to the Shares.
Each distributor is responsible for undertaking its own target market assessment in respect of the Shares and determining appropriate distribution channels.
The Company is a public limited liability company incorporated under the laws of the Netherlands. As a result, the rights of holders of the Shares will be governed by Dutch law and the Company's articles of association (Dutch: statuten) (the "Articles of Association"). The rights of shareholders under Dutch law may differ from the rights of shareholders of companies incorporated in other jurisdictions.
Although certain Group companies are incorporated, and a majority of the Group's assets are located, in the United States, a substantial portion of the Company's assets are also located outside the United States and several members of the Company's board of directors (Dutch: bestuur) (the "Board of Directors" and each member of the Board of Directors a "Board Member") and the Group's executive management team (the "Executive Management") are citizens of other jurisdictions than the United States. As a result, it may be difficult for investors in the United States to effect service of process on the Company or the Board Members or members of the Executive Management in the United States or to enforce judgments obtained in U.S. courts against the Company, whether predicated upon civil liability provisions of federal securities laws or other laws of the United Stated (including any State or territory within the United States).
The United States and Norway or the Netherlands do not currently have a treaty providing for reciprocal recognition and enforcement of judgements (other than arbitral awards) in civil and commercial matters. Uncertainty exists as to whether courts in Norway or the Netherlands will enforce judgments obtained in other jurisdictions, including the United States, against the Company or the Board Members or members of the Executive Management under the securities laws of those jurisdictions or entertain actions in Norway or the Netherlands against the Board Members or the Executive Management under the securities laws of other jurisdictions. In addition, awards of punitive damages in actions brought in the United States or elsewhere may not be enforceable in Norway or the Netherlands. The United States does not currently have a treaty providing for reciprocal recognition and enforcement of judgements (other than arbitral awards) in civil and commercial matters with Norway or the Netherlands.
Similar restrictions may apply in other jurisdictions.
| 1 | RISK FACTORS 3 | ||
|---|---|---|---|
| 1.1 | Risks related to the Group and the industry in which it operates 3 | ||
| 1.2 | Legal and regulatory risk 6 | ||
| 1.3 | Risk related to the Group's financial situation 7 | ||
| 1.4 | Risks relating to the Shares and the Admission 8 | ||
| 2 | RESPONSIBILITY FOR THE INFORMATION DOCUMENT11 | ||
| 3 | GENERAL INFORMATION12 | ||
| 3.1 | Other important investor information 12 | ||
| 3.2 | Presentation of financial and other information 12 | ||
| 3.3 | Cautionary note regarding forward-looking statements13 | ||
| 4 | REASONS FOR THE ADMISSION 14 | ||
| 5 | DIVIDENDS AND DIVIDEND POLICY15 | ||
| 5.1 | Dividends policy15 | ||
| 5.2 | Legal and contractual constraints on the distribution of dividends 15 | ||
| 5.3 | Manner of dividend payment to holders of Depository Receipts15 | ||
| 6 | THE PRIVATE PLACEMENT16 | ||
| 6.1 | Details of the Private Placement 16 | ||
| 6.2 | Shareholdings following the Private Placement 16 | ||
| 6.3 | Use of proceeds16 | ||
| 6.4 | Dilution 16 | ||
| 7 | BUSINESS OVERVIEW 17 | ||
| 7.1 7.2 |
Introduction 17 History and important events 17 |
||
| 7.3 | Vision and strategy 17 | ||
| 7.4 | Reverse Vending Machines business segment18 | ||
| 7.5 | Market overview 20 | ||
| 7.6 | Competitive situation 21 | ||
| 7.7 | Material contracts 21 | ||
| 7.8 | Material intellectual property rights 22 | ||
| 7.9 | Related party transactions 22 | ||
| 7.10 | Legal and arbitration proceedings 22 | ||
| 8 | SELECTED FINANCIAL INFORMATION AND OTHER INFORMATION23 | ||
| 8.1 | Introduction and basis for preparation23 | ||
| 8.2 | Summary of accounting policies and principles 23 | ||
| 8.3 | Selected statement of income 23 | ||
| 8.4 | Selected statement of financial position 24 | ||
| 8.5 | Selected statement of cash flows 25 | ||
| 8.6 | Selected statement of changes in equity26 | ||
| 8.7 | Significant transactions27 | ||
| 8.8 | Material borrowings27 | ||
| 8.9 | Working capital statement 27 | ||
| 9 | THE BOARD OF DIRECTORS AND EXECUTIVE MANAGEMENT 28 | ||
| 9.1 | Introduction 28 | ||
| 9.2 | The Board of Directors28 | ||
| 9.3 | Executive Management30 | ||
| 9.4 | Share incentive schemes 31 |
| 9.5 | Employees 31 | ||
|---|---|---|---|
| 9.6 | Corporate governance 31 | ||
| 9.7 | Conflicts of interests etc. 31 | ||
| 10 | SHARE CAPITAL AND SHAREHOLDER MATTERS 33 | ||
| 10.1 | Corporate information 33 | ||
| 10.2 | Legal structure 33 | ||
| 10.3 | Share capital and share capital history 34 | ||
| 10.4 | The Depository Receipts 35 | ||
| 10.5 | Ownership structure37 | ||
| 10.6 | Authorisations 38 | ||
| 10.7 | Financial instruments 38 | ||
| 10.8 | Shareholder rights 38 | ||
| 10.9 | The Articles of Association38 | ||
| 10.10 | Certain aspects of Dutch corporate law39 | ||
| 10.11 | Disclosure regulations 41 | ||
| 10.12 | Insider trading and market manipulation rules44 | ||
| 10.13 | Mandatory takeover offers 45 | ||
| 11 | TAXATION46 | ||
| 11.1 | Dutch taxation46 | ||
| 11.2 | Norwegian taxation 53 | ||
| 12 | 12.1 | SELLING AND TRANSFER RESTRICTIONS56 General 56 |
|
| 12.2 | Selling restrictions 56 | ||
| 12.3 | Transfer restrictions 57 | ||
| 13 | ADDITIONAL INFORMATION60 | ||
| 13.1 | Admission to Euronext Growth60 | ||
| 13.2 | Information sourced from third parties and expert opinions60 | ||
| 13.3 | Independent auditor60 | ||
| 13.4 | Advisors 60 | ||
| 14 | DEFINITIONS AND GLOSSARY OF TERMS 61 | ||
| APPENDIX A 63 | |||
| APPENDIX B 64 | |||
| APPENDIX C 65 | |||
| APPENDIX D 66 | |||
| APPENDIX A | ARTICLES OF ASSOCIATION OF ENVIPCO HOLDING N.V. | A1 | |
| APPENDIX B | UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED 30 SEPTEMBER 2020 |
B1 |
Investing in the Shares involves inherent risks. Before making an investment decision, investors should carefully consider the risk factors and all information contained in this Information Document, including the Financial Information and related notes. The risks and uncertainties described in this Section 1 ("Risk factors") are the principal known risks and uncertainties faced by the Group as of the date hereof that the Company believes are the material risks relevant to an investment in the Shares. An investment in the Shares is suitable only for investors who understand the risks associated with this type of investment and who can afford a loss of all or part of their investment. The absence of a negative past experience associated with a given risk factor does not mean that the risks and uncertainties described herein should not be considered prior to making an investment decision.
If any of the risks were to materialize, individually or together with other circumstances, it could have a material and adverse effect on the Group and/or its business, financial condition, results of operations, cash flow and/or prospects, which may cause a decline in the value of the Shares that could result in a loss of all or part of any investment in the Shares. The risks and uncertainties described below are not the only risks the Group may face. Additional risks and uncertainties that the Company currently believes are immaterial, or that are currently not known to the Company, may also have a material adverse effect on the Group's business, financial condition, results of operations and cash flow. The order in which the risks are presented below is not intended to provide an indication of the likelihood of their occurrence nor of their severity or significance.
The risk factors described in this Section 1 ("Risk factors") are sorted into a limited number categories, where the Company has sought to place each individual risk factor in the most appropriate category based on the nature of the risk it represents. The order in which the risks are presented below is not intended to provide an indication of the likelihood of their occurrence nor of their severity or significance. The risks mentioned herein could materialise individually or cumulatively.
The information in this Section 1 ("Risk factors") is as of the date of this Information Document.
1.1.1 The Group faces competition from a dominant competitor and several other suppliers of reverse vending machines and might not be able to continue to compete with those competitors
The global market is dominated by Tomra Systems ASA, a Norwegian group whose main activity is reverse vending machines ("RVMs") manufacture and operations. It is present in all countries which have a container deposit law. Diebold Nixdorf, a German based Group, is another competitor whose RVM division revenues is estimated to be negligible when compared to its total revenues. Sielaff GmbH and CO.KG is another German based company, involved in the RVM business, with the manufacture and operation of RVMs as its core activity. Both Diebold Nixdorf and Sielaff GmbH and CO.KG's RVM activities are primarily in the German market while in the US market, Tomra Systems ASA is the only competitor. Another competitor which is present in the Scandinavian market is RVM Systems.
The competitors' strong balance sheet and market share provide a tough competitive landscape which may have a significant negative impact on the Group's profitability. As an example, the Group might not be able to continue to compete should the competitors develop and market products that are more cost effective than the Group's products.
The ability of the Group's services to compete effectively with those developed by other companies depends, amongst other things, on its ability to obtain, maintain and enforce valid patents and other intellectual property rights. No assurance can be given that any patent application will proceed to grant or that any granted patent will be enforceable. Even if enforceable, such patents may not be sufficiently broad in their scope to provide commercially valuable protection for the Group's services. The Group's methods and policies for protecting unpatented confidential information, including proprietary know-how, concepts and documentation of proprietary technology may not afford it complete protection, and there can be no assurance that others will not obtain access to unpatented information. The costs associated with enforcement against a third party infringing the Group's rights may be substantial, and the outcome of any associated litigation may be uncertain. This could materially and adversely affect the Group's business and/or financial position.
In addition, the Group's business involves a risk of overlap with third party patents and subsequent litigation with competitors or patent-holders. Any claims, with or without merit, could be time-consuming, result in costly litigation, cause the Group to enter into licensing agreements or otherwise force the Group to change its business practices. The Group may need to develop or obtain alternative technologies or reach commercial terms on the licensing of other parties' intellectual property rights. There can be no assurance that the Group will be able to develop or obtain such alternative technology or be able to license third parties' intellectual property rights on commercially acceptable terms or at all. This could materially and adversely affect the Group's business and/or financial position. Third parties may also allege the Group's infringement of their intellectual property. Even if the Group is ultimately able to successfully defend itself against such allegations, the costs, and the disruption and negative publicity associated with the defense of such allegations may be significant and the Group may endure a long period of uncertainty regarding the outcome of such allegations.
The majority of the Group's revenues are attributable to certain key markets. The Group intends to reduce its reliance on a relatively small number of markets over time, among others by maintaining its strategy of expanding existing markets and developing its business into new markets, but there can be no assurance that it shall succeed.
To reduce the Group's reliance on a relatively small number of markets over time, and to benefit from opportunities in some new markets, the Group will invest in business in new markets. As an example, the Company is currently planning to expand its business operations to Scotland. Although the group will only invest in new businesses on the basis of a thorough market analysis, there is no certainty that customers in these markets will be interested and prepared to acquire the Group's services at a sufficient level, and that the Group will manage to build a sustainable and profitable business in such markets. If the Group is unable to manage all of these risks efficiently, this may have an adverse effect on its business and financial situation.
The Group's ability to maintain financial controls and provide a high-quality service to clients depends, in part, on the efficient and uninterrupted operation of its management information systems, including its computer systems. Any damage to or failure of the systems could result in interruptions to the Group's financial controls and/or customer service. Such interruption could have a material adverse effect on the Group's business, results of operations and/or financial condition.
The Group's business and financial performance will be affected by general economic conditions in the markets where the Company is present. Any adverse developments in the markets where the Company operates and/or global economies could have a material adverse effect on the business, financial condition, results of operations, cash flows and/or future prospects of the Group.
The Group's success depends to a certain extent on the continued services of its Executive Management and other key employees. If one or more of these individuals were unable or unwilling to continue in his or her present position, the Group's business could be disrupted and the Group might not be able to find replacements in a timely basis or with the same level of skill and experience. Finding and hiring such replacements could be costly and might require the Group to grant significant equity awards or other incentive compensation, which could adversely impact the Group's financial results. Further, the Group may be exposed to increased competition within its markets if key personnel should elect to terminate their employment. Although the Group considers that it has customary clauses appropriate for the relevant position and markets where it operates, not all contracts for key employees include inter alia non-compete or non-solicit provisions.
The Group depends on the development of new products for the growth of its business. Product development involves a large number of risks and uncertainties, including, but not limited to, the following:
• The Group might incur additional costs should products not perform according to design requirements;
These risks and other risks over which the Group has little or no control, may increase costs, give rise to liabilities or otherwise create difficulties or obstacles to the development and sale of new products.
The Group's performance is affected by the global economic conditions in the market in which it operates. The global economy has been experiencing a period of uncertainty since the outbreak of the coronavirus SARS-CoV-2 ("Covid-19"), which was recognized as a pandemic by the World Health Organization in March 2020. The outbreak of Covid-19, and the extraordinary health measures and restrictions on local and global basis imposed by authorities across the world, has, and are expected to continue to, severely impact companies and markets globally and locally. As an example, the US' initial response to Covid-19 had the effect of temporarily suspending enforcement of redemption services in certain US states for retailers, which lasted from mid-March 2020 until early June 2020. The Group experienced a decrease in revenue in the US of 20% in the first nine months of 2020. No guarantee can be given that not another suspending enforcement will be enacted.
Prospective investors should note that the Covid-19 situation is continuously changing, and new laws and regulations that could directly, or indirectly, affect the Group's operations may enter into force. The effects of the Covid-19 situation could further negatively affect the Group's revenue and operations going forward, where the severity of the Covid-19 situation will impact 2021, with the expectation that on the longer term the company will return to normal sales levels.
The Group is subject to numerous operating risks, e.g. flooding, technical failures and other accidents. In addition the Group's activities expose it to potential liability and professional indemnity risks. Although the Group believes that it should carry adequate insurance with respect to its operations in accordance with industry practice, in certain circumstances its insurance may not cover or be adequate to cover the consequences of all such events. In addition, there is a risk that insurance premiums may increase to a level where the Group considers it is unreasonable or not in its interests to maintain insurance coverage or to a level of coverage which is not in accordance with industry practice. The occurrence of a significant adverse event, the risks of which are not or not fully covered by insurance, could have a material adverse effect on the Groups' results of operation or financial condition.
The Company is dependent on the supply of raw materials from its suppliers to its production facilities. The suppliers may fail to deliver the required quality and/or quantity of raw materials. In addition, the price of raw materials may increase. Should any of these risks materialise it could have an adverse effect on the business, financial condition, results of operations, cash flows and/or future prospects of the Company.
The Company is dependent on certain third-parties, e.g. for the supply of machine components, business and technical services (including field services, water material processing and pick-up agents). Should any of these third party agreements be terminated it may negatively impact the business of the Company, as no assurance can be given that the Company would be able to enter into similar third party agreements on satisfactory terms, in a timely manner, or at all.
The Group's current RVM business model in established mandatory deposit markets is predicated on legislation. The limitation or recall of existing deposit legislation will result in loss of business, which would have a negative impact on the Group's earnings. Furthermore, should that legislation change to eliminate mandatory deposits or the requirement to return beverage containers to retail locations, the Group's business would be adversely impacted. Business opportunities for the Group in new jurisdictions depend largely on regulatory framework and new deposit legislation, and the content, timing and effectiveness of such new legislation is outside the Groups control.
The plastics recycling segment anticipates to recover food grade polyethylene terephthalate ("PET") for recycling to use for new packaging applications, based on current legislation. Should changes be made to modify current safety rules and regulations concerning the recovery and re-use of PET, the Group may not be in a position to meet those requirements, which could negatively impact its market share and profitability.
The Group is subject to environmental, health and safety laws and regulations, and compliance with or breach of environmental, health and safety laws can be costly, expose the Group to liability and could limit its operations. The possibility also exists that new legislation or regulations may be adopted that may materially adversely affect the Group's operations, its cost structure or its customers' ability to use the commodities in which the Group specializes. New legislation or regulations may also require the Group to change operations significantly or incur increased costs which could have an adverse effect on its results of operations or financial condition.
As part of its business operations, the Group receives, stores and processes personal information and other user data in multiple jurisdictions. This makes the Group exposed to data protection and data privacy laws and regulations which impose stringent data protection requirements and provides high possible penalties for non-compliance, in particular relating to storing, sharing, use, processing, disclosure and protection of personal information and other user data on its platforms. The main regulations are the General Data Protection Regulation (EU) 2016/679 (the "GDPR") and the local law implementations of GDPR in the EU member states that the Group operates in. Although the Group considers itself to comply with such laws and regulations in all material respects, this is an ongoing process and there can be no assurance that the Group is fully compliant.
Any failure to comply with data protection and data privacy policies, privacy-related obligations to customers or third parties, privacy-related legal obligations, or any compromise of security that results in an unauthorized release, transfer or use of personally identifiable information or other customer data, may result in governmental enforcement, actions, litigation or public statements against the Group. Any significant change to applicable laws, regulations or industry practices regarding the collection, use, retention, security or disclosure of users' personal data, or regarding the manner in which the express or implied consent of users for the collection, use, retention or disclosure of such personal data is obtained, could increase the Group's costs and require the Group to modify its services and features, possibly in a material manner, which the Group may be unable to complete and may limit its ability to store and process user data or develop new services and features.
Existing laws and regulations or a change of laws and regulations to which the Group is subject could hinder or delay the Group's operations, increase the Group's operating costs, and/or restrict the Group's ability to operate its daily business entirely.
The Group may fail to comply with applicable laws and regulations which may result in sanctions such as, but not limited to, litigation, monetary fees and loss of authorizations for part of, or all of its services.
The Group may from time to time be involved in legal disputes and legal proceedings related to the Group's operations or otherwise. Such disputes and legal proceedings may be expensive and time-consuming, and could divert management's attention from the Group's business.
The Group is dependent on current financing arrangements, renewal of these and/or obtaining new financing agreements to fund its operations, working capital or capital expenditures. The Company cannot assure that it will be able to obtain any additional financing or retain or renew current financing upon expiry on terms that are acceptable, or at all. If funding is insufficient at any time in the future, the Group may be unable to take execute its business strategy or take advantage of business opportunities, any of which could adversely impact the Group's business, results of operations, cash flows and financial condition.
The Group has covenants in relation to its borrowings. Not meeting these covenants may require outstanding longterm borrowings to become current and to be repaid. The Company may not be able to renegotiate new financing arrangements or obtain waivers if its performance falls behind.
Any future debt arrangements could limit the Group's liquidity and flexibility in obtaining additional financing, in pursuing other business opportunities or corporate activities or the Company's ability to declare dividends to its shareholders.
Currency risk is the risk that the value of a financial instrument will fluctuate due to exchange rate fluctuations. Exposure to currency risks arises primarily when receivables and payables are denominated in a currency other than the operating company's local currency. In addition, the Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures on translation, primarily with respect to the US dollar. The Group manages its currency risk by closely monitoring the currency fluctuations and does not hedge its currency risk.
The Group's interest rate risk arises from selected long-term borrowings. Such borrowings issues at variable rates expose the Group to cash flow interest rate risk. The Group tries to minimise its interest rate by negotiating both fixed and variable interest rates for the borrowings. The Group has no interest rate swaps to hedge interest rate risk.
The Shares are quoted in euros on Euronext Amsterdam, and will be quoted in NOK on Euronext Growth. Movements in the euro/NOK exchange rate may adversely affect the NOK price of the Shares on Euronext Growth or the euro price on Euronext Amsterdam. For example, if the euro weakens against the NOK, the NOK price of the Shares traded on Euronext Growth could decline, even if the price of Shares in euros trading on Euronext Amsterdam increases or remains unchanged.
Credit risk arises from the possibility of asset impairment occurring because counterparties are not able to meet their obligations in transactions mainly involving trade receivables.
The Group has exposure to credit risk and, for the financial year 2019, it depended on its top 10 customers for approximately 45% of its sales and receivables. In the normal course of business, the Group provides credit to clients, provides credit evaluations of these clients, and maintains an impairment provision for all credit losses. Cash and cash equivalents are held with reliable counterparties. Furthermore the Group offers services to its clients in certain countries with the possibility to pay fees through instalments. The credit risks on these instalments have been and will continue to be borne by the Group. In addition the Group invoices its partners in some cases, in relation to the services the Group has provided over a period of time. The Group is therefore subject to a greater credit default risk.
Should any of these credit risks materialise it could have a material adverse effect on the Group's business and/or financial results.
Tax audits may result in tax assessments that may differ from the Company's positions taken and that tax losses carried forward may expire or cannot be utilized if the Company's future profitable income is not sufficient to recover losses from the past. The Company has historically had tax losses.
The trading volume and price of the Shares could fluctuate significantly. Some of the factors that could negatively affect the Share price or result in fluctuations in the price or trading volume of the Shares include, for example, changes in the Group's actual or projected results of operations or those of its competitors, changes in earnings projections or failure to meet investors' and analysts' earnings expectations, investors' evaluations of the success and effects of the Group's strategy, as well as the evaluation of the related risks, changes in general economic conditions or the equities markets generally, changes in the industries in which the Group operates, changes in shareholders and other factors. This volatility has had a significant impact on the market price of securities issued by many companies. Those changes may occur without regard to the operating performance of these companies. The price of the Shares may therefore fluctuate due to factors that have little or nothing to do with the Group, and such fluctuations may materially affect the price of the Shares. Further, major sales of shares by major shareholders could also negatively affect the market price of the Shares.
Historically, the volume of trading of the Shares at Euronext Amsterdam has been low. In addition, the number of Shares that will initially be admitted on Euronext Growth is limited. No assurance can be given that an active trading market for the Shares will develop on Euronext Growth, nor sustain if an active trading market is developed.
Furthermore, due to the dual listing at both Euronext Growth and Euronext Amsterdam, there will be two separate trading markets for the shares. The dual listing may therefore reduce the liquidity in one or both markets and may adversely affect the development of an active trading market at Euronext Growth. The price of the Shares trading through Depositary Receipts on Euronext Growth could also be adversely affected by trading in the Shares on Euronext Amsterdam and the price of the Shares traded on Euronext Amsterdam could be adversely affected by trading in the Depositary Receipts on Euronext Growth. The Depository Receipts cannot be traded on Euronext Amsterdam unless they are exchanged for Shares. The speed by which Depositary Receipts can be exchanged for Shares and subsequently traded on Euronext Amsterdam and vice versa might cause differences between the market price for the Shares trading through Depositary Receipts on Euronext Growth and the market price for the Shares trading on Euronext Amsterdam. Investors might arbitrate between stock exchanges to exploit such differences, exacerbating potential volatility in the market price.
Holders of Depositary Receipts do not hold Shares directly. The Company will not treat a holder of a Depositary Receipt as one of its shareholders, and a holder of Depositary Receipts will, as a starting point, not be able to exercise shareholder rights, except through the VPS Registrar (as defined below) as permitted by the Registrar Agreement (as defined below).
The Company has entered into a registrar agreement (the "Registrar Agreement") with DNB Bank ASA, DNB Markets Registrars department (the "VPS Registrar") to facilitate registration of the Depository Receipts in the VPS in connection with the admission to trading on Euronext Growth. In accordance with the Registrar Agreement, the VPS Registrar is registered as the legal owner of the Shares for which Depository Receipts are issued. Under the Registrar Agreement, the VPS Registrar registers the beneficial interests in the Shares in book-entry form in the VPS. Accordingly, it is not the Shares issued in accordance with Dutch law that are registered in the VPS and may be traded on Euronext Growth, but the beneficial interests in the underlying Shares (i.e. the Depository Receipts).
In accordance with market practice in Norway and system requirements of the VPS, the beneficial interests in the relevant Shares will be registered in the VPS under the name of a "share". Although each "share" registered with the VPS will represent evidence of beneficial ownership of the Shares, such beneficial ownership will not necessarily be recognized by a Dutch court. As such, investors may have no direct rights against the Company and may be required to obtain the cooperation of the VPS Registrar in order to assert claims against the Company. Also, investors investing in Depository Receipts have to look solely to the VPS Registrar for the payment of any dividends, for exercise of voting rights attaching to the underlying Shares and for other rights arising in respect of the underlying Shares. Exercising such shareholder rights through the VPS Registrar is subject to certain terms and conditions. The Company cannot guarantee that the VPS Registrar will be able to execute its obligations under the Registrar Agreement, including that the beneficial owners of the Shares will receive the notice of a general meeting of the Company's shareholders (a "General Meeting") in time to instruct the VPS Registrar to either effect a re-registration of their Depository Receipts or otherwise vote for their Shares in the manner desired by such beneficial owners. Any such failure may inter alia, limit the access for, delay or prevent, the beneficial shareholders being able to exercise the rights attaching to the underlying Shares.
The VPS Registrar may terminate the Registrar Agreement by not giving less than three months' prior written notice. Further, the VPS Registrar may terminate the Registrar Agreement if the Company does not perform its payment obligations to the VPS Registrar (and such non-payment has not been remedied by the Company within ten business days following receipt of notice regarding this from the VPS Registrar) or commit any other material breach of the Registrar Agreement. In the event the Registrar Agreement is terminated, the Company will use its reasonable best efforts to enter into a replacement agreement for purposes of permitting the uninterrupted registration of the relevant Shares in the VPS and the Admission of the Shares on Euronext Growth. There can be no assurance, however, that it would be possible to enter into such new agreements on substantially the same terms or at all. A termination of the Registrar Agreement could therefore have a material and adverse effect on the Company and its shareholders.
The Registrar Agreement limits the VPS Registrar's liability for any loss suffered by the Company. The VPS Registrar disclaims any liability for any loss attributable to circumstances beyond the VPS Registrar's control, including, but not limited to, errors committed by others. The VPS Registrar is liable for direct losses incurred as a result of events within the VPS. Thus, the Company may not be able to recover its entire loss if the VPS Registrar does not perform its obligations under the Registrar Agreement.
The Company may in the future decide to offer and issue new Shares or other securities in order to finance new capital-intensive projects, in connection with a share option program for management and other key persons in the Group, in connection with unanticipated liabilities or expenses or for any other purposes. Depending on the structure of any future offering, certain existing shareholders may not have the ability to purchase additional equity securities. An issuance of additional equity securities or securities with rights to convert into equity could reduce the market price of the Shares and would dilute the economic and voting rights of the existing shareholders if made without granting subscription rights to existing shareholders. Accordingly, the Company's shareholders bear the risk of any future offerings reducing the market price of the Shares and/or diluting their shareholdings in the Company.
Mr. Alexandre Bouri, a Board Member, holds 47.1% of the Shares. Accordingly, Mr. Bouri has significant influence over the outcome of corporate actions requiring shareholder approval, including the election of members of the Board of Directors, any merger, consolidation or sale of all or substantially all of the Company's assets or any other significant corporate transaction. Mr. Bouri's substantial Shareholding could delay or prevent a change in control of the Company, even if such a change in control would benefit the other Shareholders. In addition, Mr. Gregory Garvey, the Chairman of the Board of Directors holds approximately 12.1% of the Shares. To the extent that a greater majority is not prescribed by law, pursuant to the Articles of Association all resolutions of the General Meeting will be taken by a majority of 75% of the votes cast.
Shareholders and holders of Depositary Receipts may not be able to exercise pre-emptive rights and, as a result, may experience substantial dilution upon future issuances of Shares. In the event of an issuance of Shares, subject to certain exceptions, each shareholder will have a pro rata pre-emptive right in proportion to the aggregate nominal value of the Shares held by such holder. These pre-emptive rights may be restricted or excluded by a resolution of the General Meeting or by another corporate body designated by the General Meeting. This could cause existing Shareholders and holders of Depositary Receipts to experience substantial dilution of their interest in the Company.
The Company has not paid any dividends since its incorporation and currently intends to retain future earnings, if any, to finance the growth and development of its business. As a result, the Company does not anticipate paying any dividends for the foreseeable future. Under Dutch law, the Company may only pay dividends if its shareholders' equity (Dutch: eigen vermogen) exceeds the sum of the paid-up and called-up share capital plus the reserves required to be maintained by Dutch law or by the Articles of Association. In addition, if the Company's dividend policy changes, the Company's ability to pay distributions to Shareholders will depend to a degree on the earnings and cash flow of its subsidiaries and their ability to pay distributions and to transfer funds to the Company. Other contractual and legal restrictions could also limit the Company's ability to obtain cash from its subsidiaries. If there are changes to accounting standards or to the interpretation of accounting standards, this could have an adverse impact on the Company's ability to pay dividends. Its right to participate in any distribution of the Company's subsidiaries' assets upon their liquidation, reorganization or insolvency would generally be subject to prior claims of the subsidiaries' creditors, including lenders and trade creditors.
This Information Document has been prepared solely in connection with the Admission on Euronext Growth.
We declare that, to the best of our knowledge, the information provided in the Information Document is fair and accurate and that, to the best of our knowledge, the Information Document is not subject to any material omissions, and that all relevant information is included in the Information Document.
Gregory Garvey (Non-Executive Director - Chairman)
Alexandre Bouri (Non-Executive Director)
Dick Stalenhoef (Non-Executive Director)
David D'Addario (Non-Executive Director)
Dr. Guy Lefebvre (Non-Executive Director)
Christian Y Crepet (Non-Executive Director)
Maurice Bouri (Non-Executive Director)
Simon Bolton (Executive Director)
The Company has furnished the information in this Information Document. No representation or warranty, express or implied, is made by the Euronext Growth Advisor as to the accuracy, completeness or verification of the information set forth herein, and nothing contained in this Information Document is, or shall be relied upon as, a promise or representation in this respect, whether as to the past or the future. The Euronext Growth Advisor assume no responsibility for the accuracy or completeness or the verification of this Information Document and accordingly disclaim, to the fullest extent permitted by applicable law, any and all liability whether arising in tort, contract or otherwise which it might otherwise be found to have in respect of this Information Document or any such statement.
Neither the Company nor the Euronext Growth Advisor, or any of their respective affiliates, representatives, advisors or selling agents, is making any representation to any purchaser of the Shares regarding the legality of an investment in the Shares. Each investor should consult with his or her own advisors as to the legal, tax, business, financial and related aspects of a purchase of the Shares.
The Company's audited consolidated financial statements for the financial years ended 31 December 2019 (the "2019 Financial Statements") and 2018 (the "2018 Financial Statements") (together referred to the "Financial Statements") have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("EU-IFRSs") and with Section 2:362(9) of the Dutch Civil Code. The 2019 Financial Statements have been audited by KPMG Accountants N.V. and the 2018 Financial Statements have been audited by GrantThornton Accountants en Adviseurs B.V.
In addition, the Company has prepared condensed consolidated unaudited interim financial statements for the nine months ended 30 September 2020 (the "Interim Financial Statements" and together with the Financial Statements the "Financial Information"). The Interim Financial Statements have not been audited or reviewed.
The Company presents the Financial Information in EUR (presentation currency). Reference is made to Section 8 "Selected financial information and other information" for further information.
The Financial Statements are included herein as Appendix C and D, respectively. The Interim Financial Statement are included herein as Appendix B.
The Company is scheduled to present its Q4 2020 report on 28 February 2021.
In this Information Document, the Company has used industry and market data obtained from independent industry publications, market research and other publicly available information. Although the industry and market data is inherently imprecise, the Company confirms that where information has been sourced from a third party, such information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where information sourced from third parties has been presented, the source of such information has been identified.
Industry publications or reports generally state that the information they contain has been obtained from sources believed to be reliable, but the accuracy and completeness of such information is not guaranteed. The Company has not independently verified and cannot give any assurances as to the accuracy of market data contained in this Information Document that was extracted from industry publications or reports and reproduced herein.
Market data and statistics are inherently predictive and subject to uncertainty and not necessarily reflective of actual market conditions. Such data and statistics are based on market research, which itself is based on sampling and subjective judgments by both the researchers and the respondents, including judgments about what types of products and transactions should be included in the relevant market.
As a result, prospective investors should be aware that statistics, data, statements and other information relating to markets, market sizes, market shares, market positions and other industry data in this Information Document (and projections, assumptions and estimates based on such information) may not be reliable indicators of the Company's future performance and the future performance of the industry in which it operates. Such indicators are necessarily subject to a high degree of uncertainty and risk due to the limitations described above and to a variety of other factors, including those described in Section 1 ("Risk factors") and elsewhere in this Information Document.
Unless otherwise indicated in the Information Document, the basis for any statements regarding the Company's competitive position is based on the Company's own assessment and knowledge of the market in which it operates.
This Information Document includes forward-looking statements that reflect the Company's current views with respect to future events and financial and operational performance. These forward-looking statements may be identified by the use of forward-looking terminology, such as the terms "anticipates", "assumes", "believes", "can", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "should", "will", "would" or, in each case, their negative, or other variations or comparable terminology. These forward-looking statements are not historic facts. Prospective investors in the Shares are cautioned that forward-looking statements are not guarantees of future performance and that the Company's actual financial position, operating results and liquidity, and the development of the industry in which the Company operates, may differ materially from those made in, or suggested, by the forward-looking statements contained in this Information Document. The Company cannot guarantee that the intentions, beliefs or current expectations upon which its forward-looking statements are based will occur.
By their nature, forward-looking statements involve, and are subject to, known and unknown risks, uncertainties and assumptions as they relate to events and depend on circumstances that may or may not occur in the future. Because of these known and unknown risks, uncertainties and assumptions, the outcome may differ materially from those set out in the forward-looking statements. For a non-exhaustive overview of important factors that could cause those differences, please refer to Section 1 ("Risk factors").
The forward-looking statements speak only as at the date on which they are made. The Company undertakes no obligation to publicly update or publicly revise any forward-looking statement, whether as a result of new information, future events or otherwise. All subsequent written and oral forward-looking statements attributable to the Company or to persons acting on the Company's behalf are expressly qualified in their entirety by the cautionary statements referred to above and contained elsewhere in this Information Document.
As of the date of this Information Document, the Company is listed on Euronext Amsterdam. The Company believes the Admission will:
No equity capital or proceeds will be raised by the Company upon the Admission, but the Company has recently completed the Private Placement, as defined and further described in Section 6.
The Company has not paid any dividends since its incorporation and currently intends to retain future earnings, if any, to finance the growth and development of its business. As a result, the Company does not anticipate paying any dividends for the foreseeable future.
The Company's dividend policy will, however, be reviewed from time to time and payment of any future dividends will be effective after the Shareholders approval as recommended by the Board of Directors of the Company after taking into account various factors including our business prospects, cash requirements, financial performance, new product development, plans for international expansion and the legal restrictions, as set out in Section 5.2 ("Legal and contractual constraints on the distribution of dividends").
Under Dutch law, the Company may only pay dividends if its shareholders' equity (Dutch: eigen vermogen) exceeds the sum of the paid-up and called-up share capital plus the reserves required to be maintained by Dutch law or by the Articles of Association. Cash dividends will be declared and paid in Euros.
Under the Company's Articles of Association, a dividend reserve shall be maintained in the Company's books. The profit that appears from the adopted annual accounts shall be at the disposal of the General Meeting for distribution of dividend on the Shares for adding to the dividend reserve or for such other purposes within the Company's objects as the General Meeting shall decide. Losses shall be charged to the divided reserve. The General Meeting may resolve to distribute such amounts on the Shares up to the amount of the positive balance of the dividend reserve, if and to the extent the dividend reserve is sufficient. The General Meeting may only decide not to distribute the amounts referred to in the preceding sentence if and to the extent that it can be demonstrated that the Company's liquidity position does not allow this. The claim for payment of dividends shall lapse on the expiry of a period of five years.
Pursuant to the loan agreements further described in section 8.8 ("Material borrowings") the Company has certain restrictions on dividend payments, as follows:
Any future payments of dividends on the Depository Receipts will be paid by the Company to the VPS Registrar and subsequently be denominated in the currency of the bank account of the relevant holder of the Depository Receipts, and will be paid to the holders of Depository Receipts through the VPS Registrar. Holders of Depository Receipts who have not supplied the VPS Registrar with details of their bank account, will not receive payment of dividends unless they register their bank account details with the VPS Registrar. The exchange rate(s) applied when denominating any future payments of dividends to the currency of the relevant holder of Depository Receipts will be the VPS Registrar's exchange rate on the payment date. Dividends will be credited automatically to the registered accounts of the holders of Depository Receipts, or in lieu of such registered account, at the time when the holder has provided the VPS Registrar with its bank account details, without the need for holders of the Depository Receipts to present documentation proving their ownership of the Depository Receipts. The right of holders of Depository Receipts to payment of dividend will lapse three years following the resolved payment date for those holders who have not registered their bank account details with the VPS Registrar within such date. Following the expiry of such date, the remaining, not distributed dividend will be returned from the VPS Registrar to the Company.
Immediately before the Admission, the Company will complete a private placement (the "Private Placement"), consisting of a share capital increase for a total amount of approximately EUR 8.1 million, by issuing 507,521 Shares, with a par value of EUR 0.50 each, at a subscription price of EUR 16.00 per Share.
The bookbuilding period for the Private Placement took place from 26 January 2021 to 27 January 2021, notifications of allocation was issued on 28 January 2021 and payment will take place on or about 12 February 2021, pursuant to a prepayment agreement entered into between the Company and the Euronext Advisor. Delivery of the new Shares in the Private Placement will be made through the facilities of the VPS on or about 17 February 2021.
As per the date of this Information Document, the largest shareholders of the Company are as set out in Section 10.5 ("Ownership structure").
The proceeds from the Private Placement will primarily be used for:
In addition to the above, the proceeds will be used to cover relevant transaction costs incurred in connection with the Private Placement and the listing of the Shares on Euronext Growth, estimated to be approximately EUR 400,000.
For any existing shareholders not participating in the Private Placement, the issue of new Shares implied a dilution of 11%.
This section provides an overview of the Company's business as of the date of this Information Document. The following discussion contains forward-looking statements that reflect the Company's plans and estimates, see Section 3.3 ("Cautionary note regarding forward-looking statements") above, and should be read in conjunction with other parts of this Information Document, in particular Section 1 ("Risk factors").
Envipco Holding N.V. was established on 26 June 1998 and is a recognized market player in the development and operation of RVMs, which are automated technological systems for the recovery of used beverage containers. Envipco is dedicated to advancing closed loop beverage container recovery across the world in both deposit and non-deposit areas. Toward that end, the Company has developed a number of core competencies, which should position the Company well for further global growth:
As of the date of this Information Document the Group has installed approximately 8,000 RVMs worldwide.
The Group's headquarter is located in Amersfoort, the Netherlands, and the Group has per 31 January 2021 approximately 180 full time employees.
The table below summarizes the Group's key milestones in the period from 2009 and until the date of this Information Document. Although the Group has a longer history, the activities of the Group prior to 2009 is not considered material considering the long time period and that the activities are no longer relevant for the business of the Group as it is conducted today.
| Year | Event |
|---|---|
| 2009-2013 | • Launched new RVM-product, FLEX, in 2010 |
| • Reimagine/Coke project |
|
| • Entered into new market, France, in 2011 |
|
| • Company's shares admitted to trading on Euronext Brussels on 6 October 2011 |
|
| • Launched new RVM-product, ULTRA, in 2013 |
|
| 2014-2020 | • DPG settlement 2014 |
| • Launched new RVM-product, QUANTUM, in 2015 |
|
| • Entered into new market, Sweden, in 2015 |
|
| • 260,000 shares issued in 2018 via private placement |
|
| • Company's shares admitted to trading on Euronext Amsterdam on 27 June 2018 |
|
| • Launched new RVM-product, OPTIMA, in 2019 |
|
| • Company's shares delisted from Euronext Brussels on 21 September 2020 |
The Groups mission is to provide the most cost-effective and efficient technology solutions for recycling used drinks packaging in order to dramatically increase the reuse of raw materials and conserve our limited natural resources.
The Groups purpose is to provide global deposit return solutions that are convenient and scalable for every unique application.
The Groups vision is for a cleaner, more sustainable environment for the next generation.
Plastic waste is putting a growing strain on the environment. An estimated 8 million tons of plastic1 ends up in the ocean every year. Managing the world's waste of beverage packaging is, and is becoming, a major focus area for governments, environmentalist and businesses. As a result of increasing governmental legislation over the protection of the environment, expansion of activism surrounding energy conversation, and increasing demands for high value scrap commodities, cost effective recovery and recycling of packaging is a growing industry.
In the market for used beverage container recycling a distinction must be made between markets with and markets without deposit legislation, i.e. legislation obliging producers to sell beverages in containers with deposit value and to redeem empty containers. Deposit systems, unlike other recycling methodologies, offer cash incentives for consumers to return beverage packaging in a voluntary participation system outside of taxpayer funded programs. Deposit systems, while costly to operate, are significantly more effective than other recycling programs such as municipal curbside recycling. Today, a number of countries, including the United States of America, Germany, the Netherlands, Sweden Norway and Finland, all have national or regional deposit laws in place.
RVMs are just a part of a Deposit Return Scheme ("DRS"), and the Group is one of only two RVM suppliers providing all DRS activities. The material and deposit flow in a DRS is illustrated below:
The Group offers a wide range of RVMs for use in the deposit markets:
1 Source: http://www.ellenmacarthurfoundation.org
The Group also delivers capabilities across the RVM lifecycle:
The Company or its agents perform pick-up of recyclable materials directly from retailer locations and processes material for sale to polyethylene terephthalate ("PET"), glass and aluminium buyers in a competitive bid process.
The Group is responsive to customer requirements in how they want to own and run their products. The Group offers options from outright capital sale, capital or operational lease and "throughput" type models – where over a fixed cost, fees are dependent on the volume of material returned. In all cases machines placed in the field are fully supported by field service either through the Groups own team or through experienced and trained partners in that country or region. The Group is focused on providing excellent customer service which leads to high customer satisfaction and solid recurring revenues for the Group.
EnVision, the Group's suite of digital products, offers a broad choice of options for the Group customers. From RVM monitoring and supplies fulfilment to digital payment options, the Group has the solutions to maximise the efficiency of its customers drinks packaging recycling programme and provide the most technically advanced, easy to use products to the consumer. The key features of the envision Digital Suite is:
Under certain deposit redemption programs in the US, the Company is responsible for the operation of systems to redeem, collect, account for and dispose of used beverage containers. In connection with these programs, participating retailers lease or purchase RVMs from the Company. The Company then acts in a clearinghouse capacity to collect deposits and handling fees on redeemed containers from participating beverage distributors and to distribute deposit refunds and handling fees to participating retailers. In addition, the Group provides various services to participating distributors and retailers and other participants, including container collection, commodity processing, sale of recycled materials , and accounting services.
The Group currently operates in North America and Europe. In the following is a brief description of the key features of these markets.
The market in the US is defined by unique deposit legislation in ten states. The Group is engaged in the states of Michigan, New York, Connecticut, Massachusetts, Iowa and Vermont, and not California, Hawaii, Maine and Oregon. In all cases a deposit value is assigned to each container covered by the law that must be redeemed by the agent (retailers) who sold the products. The Group's technology is sold/leased to retailers to assist in the acceptance, counting, densification and pick-up of deposit containers. The Group provides comprehensive service in support of its fleet of installed RVM's.
The Group's growth focus is in Europe over the next five plus years. Currently the Group has active business in Sweden, Greece and France. Additionally, the Group has active business development activity in Scotland/UK, the Netherlands, Romania, Portugal and Malta, with early business development work in a number of other markets. For Scotland, the Group has a dedicated team which has been on the ground for over two years and established customer and wider stakeholder relationships which the Group believes positions it well for commercial success. Other markets are serviced from Group headquarters in The Netherlands with support from USA.
The company has an exclusive machine sales and parts agreement with and agent in Australia (Recyclebank) to provide RVM's in Australian deposit markets. Pending and current deposit legislation exists in New South Wales, Western Australia, Queensland and the Northern Territory.
In the Middle East there is increased awareness and interest in sustainability and recycling. Whilst not the main focus of the Group, it continues to follow up on promising and substantiated opportunities particularly in the United Arab Emirates and Israel. These markets are likely to be accessed in the future through approved distributors and partners in the region, but currently no partners have been approved.
The Company competes internationally in both markets with a container deposit law and those markets where deposit laws have yet to be passed. Success is based on a combination of: technology, experience, services, and value for money. The Group is one of only two RVM suppliers active in managing DRS systems and allows this insight to be used to help customers during system set up and operation.
The global market is dominated by Tomra Systems ASA, a Norwegian group whose main activity is materials processing, including RVM, manufacture and operations. It is present in all countries across the world which have a container deposit law, and is the Company's main competitor in the US. RVM Systems AB, a RVM based group with production, operations and services registered in Sweden has activities in Scandinavia and over a wider footprint in Europe.
The largest current market in Europe Germany has a number of other more focused competitors. Diebold Nixdorf, a German based Group, is another competitor whose RVM division revenues is estimated to be small when compared to its total revenues for other divisions. Sielaff GmbH and CO.KG and Hans Trautwein SB Technik GmbH are other German based companies, involved in the RVM business, with the manufacture and operation of RVMs as its core activity. Both Diebold Nixdorf and Sielaff GmbH, CO.KG's and Hans Trautwein SB Technik GmbH's RVM activities are primarily in the German market.
The competitors strong balance sheet and market share provide a tough competitive landscape for the Group.
The Group's material contracts include its top customer agreements at any given time. These agreements are based on the Group standard terms and conditions, with certain adjustments which may be accepted on a case by case basis. Other material contracts can include country distributor contracts, which are based on a group standard. The Company does not have any blanket material contracts for suppliers or service providers but uses a standard quotation and order process to procure services and parts from a stable and qualified supplier base.
The Group has not entered into any other contracts which are outside the ordinary course of business that contains any provision under which any member of the Group has any obligation or entitlement that is material to the Group as of the date of this Information Document. Other contracts include those with main distributors and partners which confirm to the Group standard and good commercial practice.
The Group's material intellectual property rights are comprised by a range of patents for container detection, handling and compaction. These are registered internationally and closely monitored and maintained by registered Patent Attorneys. Certain trademarks are also registered including EnVision Digitial Suite, as further described in Section 7.4.5 ("EnVision Digitial Suite").
Except for the above, the Group's existing business is not dependent on any patents, licenses or other intellectual property.
Other than changes in ordinary course intra-group receivables and payables, the Group has not entered into related party transactions for the period after the Financial Statements and up to the date of this Information Document.
For further information on related party transactions of the Group, included related party transactions for the periods covered by the Financial Statements, please refer to the Financial Statements (note 26 and 9), included in this Information Document as Appendix C and Appendix D, respectively.
The Group had recently settled an intellectual property ("IP") infringement litigation case in Germany, pursuant to which DPG Deutsche Pfandsystem GmbH agreed to pay the Company a one time lump sum payment of EUR 1.85 million. In return, Envipco will withdraw the appeal against the revocation of the patent in suit and the related infringement actions.
Other than the above, neither the Company nor any other company in the Group is, nor has been, during the course of the preceding 12 months, involved in any legal, governmental or arbitration proceedings which may have, or have had in the recent past, significant effects on the Company's and/or the Group's financial position or profitability, and the Company is not aware of any such proceedings which are pending or threatened.
The 2019 Financial Statements have been prepared in accordance with the EU-IFRS and have been audited by the independent auditor of the Group, KPMG Accountants N.V. The 2018 Financial Statements have been prepared in accordance with the EU-IFRS and audited by the Group's previous independent auditor, GrantThornton Accountants en Adviseurs B.V. In addition, the Group has prepared the Interim Financial Statements in accordance with IAS 34. The Company has been listed since 2011 and has published financial statements and interim financials in accordance with applicable laws since then. All historical financial reporting is available at the Company's website.
The selected financial information presented in Section 8.3 to Section 8.6 below has been derived from the Financial Statements and the Interim Financial Statements, and should be read in connection with, and is qualified in its entirety by reference to, the Financial Statements included herein as Appendix C and D and the Interim Financial Statements included herein as Appendix B.
For information regarding accounting policies and the use of estimates and judgments, please see note 1 in the Financial Statements, included herein as Appendix C and Appendix D.
The table below sets out selected data from the Group's unaudited consolidated interim income statement for the nine months ended 30 September 2020, with comparable figures for the nine months ended 30 September 2019, and from the Group's audited consolidated income statement for the year ended 31 December 2019, with comparable figures for the year ended 31 December 2018. Comparable figures for the nine months ended 30 September 2019 have not been adjusted for the implementation of IFRS 16 in 2019.
| Nine months ended 30 September |
Year ended 31 December | ||||
|---|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
|
| Revenues | 22,779 | 27,558 | 36,251 | 35,380 | |
| Cost of revenue | (14,353) | (16,991) | (22,699) | (21,441) | |
| Gross profit | 8,426 | 10,567 | 13,552 | 13,939 | |
| Selling and distribution expenses | (1,586) | (1,934) | (1,074) | (1,118) | |
| General and administrative | |||||
| expenses | (7,519) | (7,938) | (13,762) | (10,486) | |
| Research and development | |||||
| expenses | (787) | (853) | (1,323) | (801) | |
| Other income | 11 | 20 | 26 | 651 | |
| Operating (Loss)/Profit | (1,455) | (138) | (2,581) | 2,185 | |
| Financial expense | (281) | (151) | (273) | (269) | |
| Financial income | 292 | (47) | 93 | 3 | |
| Net finance (cost) and or income | 11 | (198) | (180) | (266) | |
| (Loss)/Profit before tax | (1,444) | (336) | (2,761) | 1,919 | |
| Income taxes | (184) | (357) | 882 | (65) | |
| (Loss)/Profit | (1,628) | (693) | (1,879) | 1,854 | |
| Other comprehensive income Items that will be reclassified subsequently to profit and loss: |
|||||
| Exchange differences on translating | (797) | 1,076 | 265 | 809 | |
| foreign operations | |||||
| Total other comprehensive income | (797) | 1,076 | 265 | 809 | |
| Total comprehensive income | (2,425) | 383 | (1,614) | 2,663 |
| Nine months ended 30 September |
Year ended 31 December | ||||
|---|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
|
| Earnings/(loss) per share for profit attributable to the ordinary equity holders of the parent during the Period |
|||||
| Basic | (0.40) | (0.17) | (0.46) | 0.47 | |
| Fully diluted | (0.40) | (0.17) | (0.46) | 0.47 |
The table below sets out selected data from the Group's unaudited consolidated interim balance sheet as at 30 September 2020, with comparable figures as at 30 September 2019, and from the consolidated audited statement of financial position as at 31 December 2019, with comparable figures as at 31 December 2018.
| As at 30 September | As at 31 December | |||
|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
| Assets | ||||
| Non-current assets | ||||
| Intangible assets | 6,547 | 6,397 | 6,160 | 6,016 |
| Property, plant and equipment | 8,622 | 9,249 | 9,668 | 9,165 |
| Financial assets | 88 | 572 | 208 | 349 |
| Deferred tax assets | 2,812 | 1,911 | 2,934 | 1,819 |
| Total non-current assets | 18,069 | 18,129 | 18,970 | 17,349 |
| Current assets | ||||
| Inventory | 10,361 | 11,341 | 10,341 | 8,525 |
| Trade and other receivables | 12,133 | 13,245 | 9,960 | 10,021 |
| Cash and cash equivalents | 1,055 | 1,481 | 675 | 4,107 |
| Total current assets | 23,549 | 26,067 | 20,976 | 22,653 |
| Total assets | 41,618 | 44,196 | 39,946 | 40,002 |
| Equity | ||||
| Share capital | 2,049 | 2,049 | 2,049 | 2,049 |
| Share premium | 51,256 | 51,488 | 51,703 | 51,874 |
| Translation reserves | 3,296 | 4,915 | 4,093 | 3,838 |
| Legal reserves | 6,147 | 5,915 | 5,700 | 5,529 |
| Retained earnings | (40,820) | (38,014) | (39,192) | (37,318) |
| Equity attributable to owners of the parent | 21,928 | 26,353 | 24,353 | 25,972 |
| Non-controlling interests | 32 | 29 | 32 | 27 |
| Total equity | 21,960 | 26,382 | 24,385 | 25,999 |
| Liabilities | ||||
| Non-current liabilities | ||||
| Borrowings | 5,665 | 3,312 | 2,975 | 3,014 |
| Lease commitments | 119 | - | 366 | - |
| As at 30 September | As at 31 December | ||||
|---|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
|
| Other liabilities | 120 | 120 | 120 | 220 | |
| Total non-current liabilities | 5,904 | 3,432 | 3,461 | 3,234 | |
| Current liabilities | |||||
| Borrowings | 2,911 | 1,329 | 1,171 | 1,420 | |
| Trade creditors | 6,662 | 9,757 | 6,569 | 6,406 | |
| Accrued expenses | 2,651 | 2,576 | 3,440 | 2,554 | |
| Provisions | 331 | 319 | 314 | 77 | |
| Lease commitments | 544 | - | 388 | - | |
| Tax and social security | 655 | 401 | 218 | 312 | |
| Total current liabilities | 13,754 | 14,382 | 12,100 | 10,769 | |
| Total liabilities | 19,658 | 17,814 | 15,561 | 14,003 | |
| Total equity and liabilities | 41,618 | 44,196 | 39,946 | 40,002 |
The table below sets out selected data from the Group's unaudited consolidated interim statement of cash flow for the nine months ended 30 September 2020, with comparable figures for the nine months ended 30 September 2019, and from the Group's consolidated audited statement of cash flows for the year ended 31 December 2019, with comparable figures for the year ended 31 December 2018.
| Nine months ended 30 September |
Year ended 31 December | ||||
|---|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
|
| Cash flows from operating activities | |||||
| Operating (Loss)/Profit | (1,455) | (138) | (2,581) | 2,185 | |
| Adjustment for: | |||||
| Amortization | 803 | 837 | 1,187 | 1,028 | |
| Depreciation | 1,904 | 1,866 | 2,488 | 2,336 | |
| Changes in trade and other receivables | (2,398) | (2,965) | 61 | (269) | |
| Changes in inventories | (20) | (2,050) | (1,418) | (583) | |
| Changes in provisions | - | 274 | 244 | 94 | |
| Changes in trade and other payables | 884 | 2,762 | 1,312 | 135 | |
| Changes in other liabilities | - | - | (100) | - | |
| Cash generated from operations | (282) | 586 | 1,193 | 4,926 | |
| Interest received and paid | (252) | (150) | (189) | (223) | |
| Income taxes paid | (184) | (357) | (199) | (65) | |
| Net cash flow from operating activities | (718) | 79 | 805 | 4,638 | |
| Investing actives | |||||
| Development expenditure, patents | (1,338) | (1,230) | (1,386) | (1,488) | |
| Investments in property, plant & equipment | (1,886) | (1,517) | (1,982) | (2,307) | |
| Net cash flow used in investing activities | (3,224) | (2,747) | (3,368) | (3,795) |
| Nine months ended 30 September |
Year ended 31 December | |||
|---|---|---|---|---|
| (In EUR thousands) | 2020 (unaudited) |
2019 (unaudited) |
2019 (audited) |
2018 (audited) |
| Financial activities | ||||
| Proceeds from issuance of shares | - | - | - | 2,711 |
| Changes in borrowings - proceeds | 8,044 | 1,062 | 1,072 | - |
| Changes in borrowings - repayments | (3,238) | (1,077) | (1,450) | (1,298) |
| Changes in lease commitments | (423) | - | (527) | - |
| Net cash flow from financing activities | 4,383 | (15) | (905) | 1,413 |
| Net increase/(decrease) in cash and cash equivalents |
441 | (2,683) | (3,468) | 2,256 |
| Opening position | 675 | 4,107 | 4,107 | 1,788 |
| Foreign currency differences on cash and cash equivalents |
(61) | 57 | 36 | 63 |
| Closing position | 1,055 | 1,481 | 675 | 4,107 |
| The closing position consist of: | ||||
| Cash and cash equivalents | 1,055 | 1,481 | 675 | 4,107 |
| Total closing balance in cash and cash equivalents |
1,055 | 1,481 | 675 | 4,107 |
Changes in equity are presented in the equity notes of the 2019 Financial Statements. An overview is included below.
| (In EUR thousands) | Share capital |
Share premium |
Translation reserve |
Legal reserve |
Retained earnings |
Total | Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2018 |
1,919 | 49,718 | 3,019 | 5,104 | (39,157) | 20,603 | 22 | 20,625 |
| Net profit/(loss) for the period |
- | - | - | - | 1,848 | 1,848 | 6 | 1,854 |
| Other comprehensive income - Currency translation adjustment |
- | - | 810 | - | - | 810 | (1) | 809 |
| Total comprehensive income for |
- | - | 810 | - | 1,848 | 2,658 | 5 | 2,663 |
| the period | ||||||||
| Issuance of shares | 130 | 2,581 | - | - | - | 2,711 | - | 2,711 |
| Legal reserve | ||||||||
| Balance at 31 December 2018 |
2,049 | 51,874 | 3,829 | 5,529 | (37,309) | 25,972 | 27 | 25,999 |
| Changes in equity for 2019 |
||||||||
| Net profit/(loss) for the period |
- | - | - | - | (1,883) | (1,883) | 4 | (1,879) |
| Other comprehensive income - Currency translation |
- | - | 264 | - | - | 264 | 1 | 265 |
| (In EUR thousands) | Share capital |
Share premium |
Translation reserve |
Legal reserve |
Retained earnings |
Total | Non controlling interests |
Total equity |
|---|---|---|---|---|---|---|---|---|
| adjustment | ||||||||
| Total comprehensive income for the period |
- | - | 264 | - | (1,883) | (1,619) | 5 | (1,614) |
| Legal reserve | - | (171) | - | 171 | - | - | - | - |
| Balance at of 31 December 2019 |
2,049 | 51,703 | 4,093 | 5,700 | (39,192) | 24,353 | 32 | 24,385 |
Other than the Private Placement, application for forgiveness for the Paycheck Protection Program loan and the settlement of a litigation case with Deutsche Pfandsystem GmbH, the Group has not carried out any transactions after the last audited accounts that represent a significant change.
The Group has the following material borrowings:
Other than what is set out above and the intra-Group loans described in section 7.9 "(Related party transactions"), the Group does not have any loans.
The Company is of the opinion that, following completion of the Private Placement, the working capital available to the Group is sufficient for the Group's present requirements, for the period covering at least 12 months from the date of this Information Document.
The Company's Board of Directors is a one-tier board, i.e. it is one board of directors consisting of both executive directors (Dutch: uitvoerend bestuurders, "Executive Directors") who are responsible for the day-to-day management of the Company, and non-executive directors (Dutch: niet-uitvoerend bestuurders, "Non-Executive Directors) who are responsible for supervising the day-to-day management of the Company. The date of the first annual general shareholder meeting following the Admission has not yet been set, but will be held prior to the end of June 2021.
Board Members are appointed by the General Meeting. A resolution to appoint a Board Member requires a majority of 75% of the votes cast. The General Meeting may suspend or dismiss Board Members at any time with a majority of at least two-thirds of the votes cast. The Non-Executive Directors shall elect the Chairman of the Board of Directors among themselves.
The Board of Directors as a whole is authorized to represent the Company. In addition, each Executive Director is entitled to represent the Company.
The Board of Directors currently consists of seven Non-Executive Directors and one Executive Director. The names and positions of the members of the Board of Directors are set out in the table below.
| Name | Function1 | Served since | Term expires | Shares | Options/ warrants |
|---|---|---|---|---|---|
| Gregory Garvey | Non-Executive Director - Chairman |
2008 | 30 June 2021 | 555,7792 | 0 |
| Alexandre Bouri | Non-Executive Director |
2008 | 30 June 2021 | 2,168,0683 | 0 |
| Dick Stalenhoef | Non-Executive Director |
2008 | 30 June 2021 | 600 | 0 |
| Dr Guy Lefebvre | Non-Executive Director |
1999 | 30 June 2021 | 0 | 0 |
| David D'Addario | Non-Executive Director |
2008 | 30 June 2021 | 80,451 | 0 |
| Christian Y Crepet | Non-Executive Director |
1998 | 30 June 2021 | 7,012 | 0 |
| Maurice Bouri | Non-Executive Director |
2020 | 30 June 2021 | 0 | 0 |
| Simon Bolton | Executive Director - CEO |
2020 | 30 June 2021 | 8,285 | 0 |
1 Mr. Garvey, Mr. Alexandre Bouri and Mr. Maurice Bouri are not considered independent in the meaning of the Dutch Corporate Governance Code.
Set out below are brief biographies of the Board Members, including their managerial expertise and experience, in addition to an indication of any significant principal activities performed by them outside of the Company.
Mr. Gregory Garvey graduated from the University of New Haven and has more than 25 years of industry experience. He has previous served as Vice Charman of Tomra and as CEO and President of its North American division. In addition he has formerly served on the board of directors of Wise Metals Group and was previously Vice Chairman of Tandberg.
A citizen of Greece and Lebanon, Mr. Alexandre Bouri is the Chairman of the board of directors of Seament International Sal and Seabulk S.A, within a much-diversified conglomerate including the world's largest independent cement handling and shipping company doing business under "Seament" and "Seabulk" trade names. He is the Chairman of the board of directors of Seament Net Sal Offshore, B F 737 Sal, Al Ikar Sal, Universal Bulk Holding Sal, Bouri Trading Sal, Al Kharoubi Sal, Al Moutell Al Ikariat Sal, Medorient Holding Sal, Southern Sal and Al Ziraieh Sal. In addition, Mr Bouri is a member of the board of directors of Seament Holding Sal, Seament Int'l Sal (Offshore), Sleimanieh Sal, Seament Albania SHPK, Elbassan Cement Factory SHPK and United Quarries SHPK. Mr. Bouri is also the principal owner of several companies. Mr. Bouri is the holder of a BSC from the American University in Beirut. Mr. Alexandre Bouri is the father of Mr. Maurice Bouri
A citizen of the Netherlands, Mr. Dick Stalenhoef is an independent consultant and director and principal shareholder of Stahold B.V. He has previously served as Vice Chairman of the board of directors of Delta Lloyd Bank, Amsterdam, Chief Executive Officer of Smeets Securities N.V in Antwerp, Belgium and Managing Director of Chase Manhattan Bank, Amsterdam. Mr. Stalenhoef is the holder of a Civil Law degree from the University of Tilburg. Mr. Stalenhoef was director of Milders, Heijboer & Stalenhoef B.V.
A citizen of Belgium, Mr. Guy Lefebvre is a partner of Lefebvre-Lahaye, a law firm with offices in France and Belgium. He is the holder of a law degree from the Université Libre of Brussels, Belgium, and a graduate of the Institut d'Etudes Europeennes de Bruxelles, Belgium.
A citizen of the United States of America, Mr. David D'Addario is currently the Chairman and Chief Executive Officer of Wise Metals Group, also known as Wise Alloys, North America's third largest producer of aluminum sheet for beverage and food cans. He also serves as Chairman and CEO of D'Addario Industries, a privately held diversified group involved in several industries. Mr. D'Addario holds a B.A. degree from Yale University. Mr. D'Addario is a member of the following boards of directors: The Aluminum Association, Inc., Barnum Festival Foundation, Bridgeport Hospital, Bridgeport Regional Business Council, The School for Ethical Education, and the University of Bridgeport.
A citizen of France, Mr. Christian Crepet is the former Managing Director of Sorepla Industrie S.A; a plastics recycling company. He held this position from 2002 until 2016. Mr. Crepet is currently the Executive Director of the board of directors of Petcore. He is also a co-founder and member of EPBP (European PET Bottle Platform) and was formerly Vice President of PRE (Plastics Recyclers Europe). Mr. Crepet is the holder of a degree in law and executive MBA from Haute Etude Commerciales, Paris, France.
A citizen of the United Kingdom, Mr. Maurice Bouri is the former President of Societe des Huiles et Dérives (SHD), a grain derivatives manufacturing and commodities trading company. He held this position from 2012 until 2019. Mr. Bouri is currently Executive Director of SHD, and was formerly Director of Sales and Marketing for the Balkan Region for Fushe Kruja Cement, a cementitious products manufacturing company. Mr. Bouri is the holder of a dual degree in Industrial Psychology and Marketing from the University of Buckingham, England. Mr. Maurice Bouri is the son of Mr. Alexandre Bouri.
Mr. Bolton has more than 25 years of business & leadership experience. Before joining the Group, Mr. Bolton was the CEO of Waterlogic and has held senior management positions at General Electric and other industrial and technology companies. Mr. Bolton has education from IMD Lausanne, Warwick University and Imperial College London.
The Executive Director is supported in the day-to-day management by a number of senior managers. As of the date of this Information Document, the Group's Executive Management consists of six individuals. The names of the members of the Executive Management and their respective positions are presented in the table below.
| Name | Position | Employed since | Shares | Options/warrants held |
|---|---|---|---|---|
| Simon Bolton | Executive Director and CEO |
2020 | 8,285 | 0 |
| Robert Lincoln | President and COO | 2010 | 100,000 | 0 |
| Derk Visser | Group CFO | 2020 | 0 | 0 |
| Terje Hanserud | CTO | 2014 | 25,000 | 0 |
| Nick Augelli | VP Manufacturing | 1994 | 0 | 0 |
| Fons Buurman | VP Business Development, Europe |
2020 | 0 | 0 |
In addition, it is also noted that Mr. Erik Thorsen has acted as Senior Advisor to the board and management since 2010. The Company's registered business address, Arnhemseweg 10, 3817 CH in Amersfoort, the Netherlands, serves as business address for the Executive Director and CEO, the Group CFO and the VP Business Development in relation to their employment with the Company. The CTO is employed by the Company's German subsidiary Envipco Automaten GmbH and the President and COO and VP Manufacturing are employed by the Company's US subsidiary.
Mr. Simon Bolton has more than 25 years of business & leadership experience. Before joining the Group Mr. Bolton was the CEO of Waterlogic and has held senior management positions at General Electric and other industrial and technology companies. Mr. Bolton has education from IMD Lausanne, Warwick University and Imperial College London
Mr. Robert Lincoln oversees global operations and production, and is responsible for technology development, new market initiatives and core business development. He has more than 32 years of industry experience, amongst other as president of Tomra. Mr. Lincoln has education from St. Lawrence University.
Mr. Derk Visser has education from University of Maastricht and University of Amsterdam and has more than 20 years of international financial leadership experience, and was CFO of Crocs ENEMA before joining the Company. Other previous experience includes CFO Praxis for Maxeda DIY group and CFO Staples Inc. for global high growth markets.
Mr. Terje Hanserud is responsible for R&D and manufacturing activities and has more than 20 years of industry experience. He has extensive experience from technology innovation in national deposit systems and recycling machinery and previous experience as CTO of Tomra. Mr. Hanserud has education from the Norwegian University of Technology
Mr. Nick Augelli, a 25 year veteran of the company rose through various senior positions in Technical Support, Supply Chain and Production and today provides leadership across the Company's production facilities in USA, Germany and Romania.
A citizen of The Netherlands, Mr. Fons Buurman joined Envipco in 2020 as VP Business Development Europe, responsible for building out the organization in the greater European area. Prior to joining Envipco, Mr. Burman held Marketing, Sales and Business Development positions in international consumer packaging industry with Tetra Pak and WestRock and in Consumer Electronics with Philips. Mr. Burman holds a bachelor degree from the Haarlem Business School.
Mr. Erik Thorsen acts as advisor to the Board of Directors and Executive Management and has more than 25 years of industry experience. Previous experience include CEO of Tomra ASA (1996-2005), CEO of REC ASA (2005-2009), chairman of several public companies and positions as board chairman and board member of, and advisor to several technology companies. Mr. Thorsen has education from University of Karlstad.
The Group currently has no share incentive schemes, but has the intention, and obligation towards certain employees, to develop and implement a long term incentive plan for certain employees during 2021.
As of the date of this Information Document, the Group has 180 employees. The table below shows the development in the numbers of full-time employees over the last two years:
| Year ended 31 December | |||||
|---|---|---|---|---|---|
| 2020 | 2019 | ||||
| Number of employees1 | 180 | 186 |
1 Number of employees stated as the number of employees at the end of each financial year.
Pursuant to article 2:391(5) of the Dutch Civil Code, the Dutch Corporate Governance Code (the "Code") applies to the Company. The Code contains principles and best practice provisions for a managing board, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditing, disclosure, compliance with and enforcement of the Code. The corporate governance code can be accessed at https://www.mccg.nl/english. Dutch companies admitted to trading on a registered stock exchange or, under certain circumstances, registered on a multilateral trading facility, whether in the Netherlands or elsewhere, are required under Dutch law to disclose in their annual reports whether or not they apply the provisions of the Code and, if and to the extent they do not apply, to explain the reasons why. The Company acknowledges the importance of good corporate governance. Since 2011 the Company supports the Code and is in compliance with the Code, subject to the exceptions as described in the Financial Statements for the financial year ending 31 December 2019 (starting on page 9), included herein as Appendix C.
No member of the Board of Directors or Executive Management has, or have had, as applicable, during the last five years preceding the date of the Information Document:
To the Company's knowledge, there are currently no actual or potential conflicts of interest between the Company and the private interests or other duties of any of the Board Members and members of the Executive Management, including any family relationships between such persons, except that Mr. Maurice Bouri is the son of Mr Alexandre Bouri.
The Company's legal name is Envipco Holding N.V. and the Company's commercial name is Envipco. The Company is a public limited liability company, incorporated and existing under the laws of the Netherlands. The Company is registered in the Trade Register of the Dutch Chamber of Commerce with company registration number 33304225. The Company was incorporated on 26 June 1998.
The Company's registered business address is Arnhemseweg 10, 3817 CH Amersfoort, the Netherlands, which is the Group's principal place of business. The telephone number to the Company's principal offices is +31 (0)33 285 1773 and its website is "http://www.envipco.com".
The Company is a holding company at the head of the Envipco corporate group. The following legal entities are subsidiaries of the Company.
| Company name | Registered office | Activity | Ownership interest |
Group shareholder |
|---|---|---|---|---|
| Envipco France SAS | Boulogne-Billancourt, France |
Operations company for the Group's French activities. |
100% | The Company |
| Envipco Automaten GmbH | Westerkappeln, Germany |
Operations company for the Group's German activities. |
100% | The Company |
| Envipco Hellas SA | Pallini, Greece | Operations company for the Group's Greek activities. |
100% | The Company |
| Envipco Solutions S.R.L | Alba, Romania | Operations company for the Group's Romanian activities. |
100% | The Company |
| Envipco Sweden AB | Borlänge, Sweden | Operations company for the Group's Swedish activities. |
100% | The Company |
| Envipco (UK) Ltd | Buckinghamshire, UK | Operations company for the Group's UK activities. |
100% | The Company |
| Environmental Products Corporation | Naugatuck, USA | Operations company for the Group's US activities. |
99.85% | The Company |
| Environmental Products Recycling Inc | Naugatuck, USA | Service & operations company in support of US activities |
99.85% | Environmental Products Corporation |
| Envipco Pickup & Processing Services Inc |
Naugatuck, USA | Materials handling service in support of US activities |
99.85% | Environmental Products Corporation |
| Envipco N.D | Naugatuck, USA | Dormant | 99.85% | Environmental Products Corporation |
| Envipco AS | Oslo, Norway | Dormant | 100% | The Company |
In addition to the above, Stichting Employees Envipco Holding ("SEEH") is a foundation controlled by the Company, for the purpose of administering an employee share option scheme. Currently there are no activities of the foundation and no options have been issued to employees. The Group plans to introduce a long term incentive plans for employees in 2021, see Section 9.4 ("Share incentive schemes").
The following chart sets out the Group's legal structure as of the date of this Information Document:
Under Dutch law, a company's authorized share capital reflects the maximum amount of shares that it may issue without amending its articles of association. The Company has an authorised share capital of EUR 4,000,000 divided into 8,000,000 shares, each having a par value of EUR 0.50. As at the date of this Information Memorandum, the Company and an issued and outstanding share capital of EUR 2,302,564.00 divided into 4,605,128 Shares, each having a par value of EUR 0.50, which includes the 507,521 Shares issued in the Private Placement.
All the issued and outstanding Shares have been created under the laws of the Netherlands. The Shares are equal in all respects and there is no difference in voting rights or classes of shares. Each Share carries one vote and all Shares carry equal rights in all respects, including rights to dividends.
The Shares trading on Euronext Amsterdam and the Shares issued in the Private Placement are included in the bookentry system operated by Euroclear Netherlands, the central security depository in the Netherlands.
It is expected that the Euronext Growth listing committee will resolve to admit all of the Company's Shares to trading on Euronext Growth on or about 15 February 2021. The first day of trading on Euronext Growth is expected to be on or about 18 February 2021 under the ticker code "ENVIP". The Company's Shares are also listed on Euronext Amsterdam, which is a regulated market.
On Euronext Growth, the Shares will be traded in the form of Depository Receipts (Nw: depotbevis) that represent the beneficial interests in the underlying Shares. The Depository Receipts will be registered in the VPS in book-entry form under the name of a "share" and will be traded on Euronext Growth in NOK in the form of Depository Receipts as "shares in Envipco Holding N.V.". Each Depository Receipt will represent one Share included in the Euroclear Netherlands system and the Depository Receipts will have the same par value as the Shares.
Through its nominee in the Netherlands, Citibank Europe plc UK Branch, the VPS Registrar will hold the underlying Shares to be registered in the VPS in the form of Depository Receipts in the Euroclear Netherlands system. The VPS Registrar will register the beneficial interests representing the relevant Shares in the VPS, which following such registration will reflect the beneficial shareholders, personally or through nominee registrations.
All Shares and the Depository Receipts, are freely transferable, meaning that a transfer of Shares and/or Depository Receipts is not subject to the consent of the Board of Directors or any other corporate consents or rights of first refusal. The Depository Receipts are registered in the VPS with ISIN code NL0009901610.
Existing shareholders of the Company and new investors should note that only Shares that have been registered in the VPS in the form of Depository Receipts will be tradable on Euronext Growth. Further, Depository Receipts will not be tradable on Euronext Amsterdam. Please refer to Section 10.4 ("Depository Receipts") for further information.
The Company's VPS Registrar is DNB Bank ASA, DNB Markets Registrars department, with registered address Dronning Eufemias gate 30, 0191 Oslo, Norway.
The table below shows the development in the Company's share capital for the period covered by the Financial Statements to the date of the Information Document. There has not been any other capital increases in the Company other than as set out in the table below, neither by way of contribution in cash or in kind for the period covered by the Financial Statements until the date of this Information Document.
| Date of registration |
Type of change |
Change in share capital (EUR) |
New share capital (EUR) |
Nominal value (EUR) |
New number of total issued shares |
Subscription price per share |
|---|---|---|---|---|---|---|
| 18 October 2018 | Share issue |
130,000 | 2,048,803.5 0 |
0.50 | 4,097,607 | EUR 11.00 |
| On or about 15 February 2021 |
Share issue |
253,760.50 | 2,302,564 | 0.50 | 4,605,128 | EUR 16.00 |
The VPS Registrar will issue and deliver the Depository Receipts to the holders of the Depository Receipts. Holders of Depository Receipts will not have direct shareholder rights as the nominee of the VPS Registrar will be the registered owner of the underlying financial instruments of the Depository Receipts, i.e. the relevant Shares. Because the Depository Receipts have similarities to depository receipts as such term is known under Dutch law, for the purpose of it corporate governance structure the Company considers the holders of Depository Receipts to be holders of depository receipts under Dutch law issued with its cooperation. As a consequence, holders of the Depository Receipts shall have certain rights under Dutch law, including meeting rights relating to General Meetings and the rights of those entitled to attend General Meetings, as further described in Section 10.10 ("Certain aspects of Dutch corporate law").
The rights and obligations of the VPS Registrar described further in Section 10.4.6.2 ("The Registrar Agreement").
The VPS Registrar will issue and deliver the Depository Receipts to the holders in the VPS, in accordance with the Norwegian Act on Registration of Financial Instruments of 5 July 2002 no. 64. All Depository Receipts will be issued and registered in book-entry form through the VPS system and holders of Depository Receipts may obtain statements, showing the number of Depository Receipts held, online or through the VPS account operator who maintains the holder's VPS account.
The Company may fix a record date for the determination of the holders of Depository Receipts who will be entitled to receive any distribution on or in respect of the Shares, to give instructions for the exercise of any voting rights, to receive any notice or to act in respect of other matters and only such holders of Depository Receipts at such record date will be so entitled or obligated. The VPS Registrar may fix the same.
Each Share underlying a Depository Receipt carries one vote. Although the Depository Receipts do not carry voting rights, holders of Depository Receipts may instruct the VPS Registrar to vote on the Shares underlying their Depository Receipts, subject to any applicable provisions of Dutch law. The Company will furnish voting materials to the VPS Registrar and the VPS Registrar will notify the holders of Depository Receipts of the upcoming vote and arrange to deliver the Company's voting materials to the holders of Depository Receipts. Otherwise, holders of Depository Receipts will not be able to exercise the voting rights attached to the underlying Shares unless the steps outlined in Section 10.4.6.3 ("Transfer of Depository Receipts") are followed. The VPS Registrar's notice will describe the information in the voting materials and explain how holders of Depository Receipts may instruct the VPS Registrar to vote the underlying Shares.
The VPS Registrar will only vote or attempt to vote as the holders of Depository Receipts instruct. The VPS Registrar itself will not exercise any voting rights.
In the event of any change or alteration of the share capital of the Company all necessary amendments to the Depository Receipts shall be made in the VPS system.
In order to facilitate registration of the Depository Receipts in the VPS, the Company has entered into a deposit and registrar agreement (the "Registrar Agreement") with the VPS Registrar, which administrates the Company's VPS register.
Pursuant to the Registrar Agreement, Citibank Europe plc UK Branch, which is the nominee of the VPS Registrar, is registered as the holder in the Euroclear Netherlands system of the Shares for which Depository Receipts are issued. The VPS Registrar registers the Depository Receipts in book-entry form in the VPS. Therefore, it is not the underlying Shares, but the beneficial interests in such Shares in book-entry form, that are registered with the VPS.
At the date of this Prospectus, there is one class of Depository Receipts. The Depository Receipts have ISIN NL0009901610.
The Registrar Agreement is subject to Norwegian law and, accordingly, the Depository Receipts will be established under Norwegian law. Each Depository Receipt registered with the VPS will represent the beneficial ownership of one Share. The Depository Receipts are freely transferable, with delivery and settlement through the VPS system. The Depository Receipts will be priced and traded in NOK on Euronext Growth.
Pursuant to the Registrar Agreement, the VPS Registrar will register the Depository Receipts in the VPS. The holders of Depository Receipts must look solely to the VPS Registrar for the payment of dividends, for the exercise of voting rights attached to the Shares underlying the Depository Receipts and for all other rights arising in respect of the Depository Receipts. In order to exercise any rights directly as shareholder, a holder of Depository Receipts must retire his or her Depository Receipts in the VPS in exchange for Shares and has the right to do so. The VPS Registrar will assist with establishing a market practice conversion program which will enable the holders of Shares and Depository Receipts to exchange the Shares with Depository Receipts within a standard VPS settlement period (T+2). Holders of Depository Receipts who wish to retire their Depository Receipts in the VPS are advised to contact a bank or a broker for further assistance.
The Company will pay dividends directly to the VPS Registrar, which in turn has undertaken to distribute the dividends and other declared distributions to the holders of Depository Receipts in accordance with the Registrar Agreement. Please see Section 5.3 ("Manner of dividend payment to holders of Depository Receipts") for further information.
The VPS Registrar will not hold any right to share in profits and any liquidation surplus which are not passed on to the holders of the Depository Receipts. The VPS Registrar shall not attend nor vote at a General Meeting, other than pursuant to an instruction from the holders of Depository Receipts.
The VPS Registrar is only liable for any direct loss suffered by the Company as a result of breach of contract. Each of the Company and the VPS Registrar may terminate the Registrar Agreement at any time with a minimum of three months' prior written notice, or immediately upon written notice of a material breach by the other party of the Registrar Agreement. In the event that the Registrar Agreement is terminated, the Company will use its reasonable best efforts to enter into a replacement agreement for purposes of permitting the uninterrupted trading of the Depository Receipts on Euronext Growth.
All transactions relating to securities registered with the VPS are made through computerized book entries. No physical share certificates are, or may be, issued. The VPS confirms each entry by sending a transcript to the registered owner irrespective of any beneficial ownership. To give effect to such entries, the individual security holder must establish a VPS securities account with a Norwegian VPS account operator. Norwegian banks, Norges Bank (being the Central Bank of Norway), authorised securities brokers in Norway and Norwegian branches of credit institutions established within the EEA are allowed to act as VPS account operator.
The entry of a transaction in the VPS is prima facie evidence under Norwegian law in determining the legal rights of parties as against the issuing company or any third party claiming an interest in the given security.
Shareholders who hold Shares through the Euroclear Netherlands system and wish to exchange these Shares into corresponding Depository Receipts in the VPS must instruct and authorize the VPS Registrar to receive such Depository Receipts. Upon the VPS Registrar's receipt of the Shares (through its nominee), the Depository Receipts will be issued by the VPS Registrar and delivered to the VPS account of the relevant holder. Holders of Depository Receipts who wish to exchange their Depository Receipts in the VPS into Shares held through Euroclear Netherlands, must advise the VPS Registrar to deliver and transfer the Depository Receipts to an intermediary VPS account of the VPS Registrar and they will then receive the corresponding number of Shares upon the VPS Registrar's receipt of instructions on delivery.
The VPS is liable for any loss suffered as a result of faulty registration or amendment to, or deletion of, rights in respect of registered securities unless the error is caused by matters outside the VPS' control which the VPS could not reasonably be expected to avoid or overcome the consequences of. Damages payable by the VPS may, however, be reduced in the event of contributory negligence by the aggrieved party.
The VPS must provide information to the Norwegian Financial Supervisory Authority on an ongoing basis, as well as any information that the Norwegian Financial Supervisory Authority requests. Further, Norwegian tax authorities may require certain information from the VPS regarding any individual's holdings of securities, including information about dividends and interest payments.
As a consequence of the Company's listing on Euronext Amsterdam, pursuant to the Dutch Financial Supervision Act (Dutch: Wet op het financieel toezicht), each party who holds a substantial holding in the Company should forthwith notify the Netherlands Authority for the Financial Markets (Dutch: Stichting Autoriteit Financëe Markten, "AFM") of such substantial holding. A substantial holding means the holding of at least 3% of the shares or the ability to vote on at least 3% of the total voting rights.
According to notifications made to the AFM as set out in the publicly accessible Register substantial holdings and gross short positions of the AFM at www.afm.nl as at the day immediately preceding the date of the Information Document, the following parties held a substantial holding of at least 3% of the Company's capital and/or voting rights.
| # | Shareholder | Number of Shares |
Number of voting rights |
Per cent of share capital1 |
Per cent of voting rights2 |
Notified on |
|---|---|---|---|---|---|---|
| 1 | Mr. Alexandre Bouri3 | 2,168,068 | 2,168,068 | 47.08% | 47.08% | 25 September 2019 |
| 2 | Mr. Gregory Garvey4 | 555,779 | 555,779 | 12.07% | 12.07% | 18 September 2020 |
| 3 | Otus Capital Management Ltd. | - | 225,000 | 0% | 4.89% | 10 May 2018 |
| 4 | Lazard Freres Gestion SAS | 222,532 | 222,532 | 4.83% | 4.83% | 16 October 2018 |
| 5 | Mr. Douglas Pouling | 200,000 | 200,000 | 4.34% | 4.34% | 18 July 2013 |
| 6 | Mr. Bhajun Gool Santchurn5 | 155,480 | 155,480 | 3.38% | 3.38% | 5 May 2017 |
| Total notified substantial holdings | 3,301,859 | 3,526,859 | 71.70% | 76,59% | ||
| Others | 1,303,269 | 1,078,269 | 28.30% | 23.41% |
The table above sets out the information on substantial holdings of each of the named parties based on the number of Shares and voting rights notified by them to the AFM as at the date indicated in the last column of the above table. The number of Shares or voting rights as well as the percentage of Shares or voting rights held by these parties at the date of the Information Document may be different.
For the number of Shares held by the Board Members and the Executive Management, please see sections 9.2.1 ("The composition of the Board of Directors") and 9.3.1 ("General").
As of the date of this Information Document, the Company does not hold any treasury shares.
There are no arrangements known to the Company that may lead to a change of control in the Company.
On 26 June 2018 a General Meeting was held at which it was resolved to authorize the Board of Directors to issue up to 757.521 shares for a period of five years from the date of the General Meeting (i.e. up to 26 June 2023) and to exclude pre-emptive rights in relation thereto. As of the date of this Information Document 757,521 shares have been issued on the basis of this authority, as a consequence whereof, the Board of Directors no longer authorised to issue shares on the basis of the authorisation granted to it by the General Meeting on 26 June 2018.
The Company can acquire fully paid-up shares in its own capital for no consideration, or if (i) the shareholders' equity less the acquisition price is not less than the sum of the paid-in and called-up part the Company's capital and the reserves that it is required to maintain by law, (ii) the nominal value of the shares to be acquired in its own capital, which it holds or holds in pledge, or which are held by one of its subsidiaries is not more than 50% of the issued capital, such in accordance with section 2:98 of the Dutch Civil Code and (iii) the acquisition is authorized by the General Meeting. At the date of this Information Memorandum, there is no authorization by the General Meeting outstanding on the basis of which the Company can acquire shares in its own capital.
Neither the Company nor any of the Company's subsidiaries has issued any options, warrants, convertible loans or other instruments that would entitle a holder of any such instrument to subscribe for any shares in the Company or its subsidiaries.
The Company has one class of shares in issue and all Shares provide equal rights in the Company, including the rights to any dividends. Each share carries one vote. The rights attached to the Shares are further described in Section 10.9 ("The Articles of Association") and Section 10.10 ("Certain aspects of Dutch corporate law").
The Articles of Association as they read on the date of the Information Memorandum are enclosed in Appendix A to the Information Document. Below is a summary of the current provisions of the Articles of Association.
Pursuant to section 2, the objective of the Company is to:
Pursuant to section 3, the Company's authorised share capital is EUR 4,000,000 divided into 8,000,000 ordinary shares, each with a nominal value of EUR 0.5. The Company's authorised share capital reflects the maximum amount of shares that the Company may issue without amending the Articles of Association.
Pursuant to section 8, the Board of Directors shall have at least one or more Executive Directors and one or more Non-Executive Directors. Board Members are appointed by the General Meeting of shareholders. A resolution to appoint a Board Member requires a majority of 75% of the votes cast. The General Meeting may suspend or dismiss Board Members at any time with a majority of at least two-thirds of the votes cast.
There are no restrictions on the transferability of the Shares in the Articles of Association.
General Meetings must be held in Amsterdam, Haarlemmermeer (Schiphol), The Hague, Rotterdam, or Amersfoort, the Netherlands. The annual General Meeting must be held at least once a year, no later than in June. Extraordinary General Meetings may be held, as often as the Board deems desirable. In addition, pursuant to Dutch law, one or more Shareholders or holders of depository receipts, who solely or jointly represent at least one-tenth of the issued capital, may request that a General Meeting be convened, the request setting out in detail matters to be considered. If no General Meeting has been held within eight weeks of the Shareholder(s) and/or holders of depository receipts making such request, the requestors will be authorized to request in summary proceedings a District Court to convene a General Meeting. Furthermore, within three months of it becoming apparent to the Board that the Company's equity has decreased to an amount equal to or lower than one-half of the paid-up part of the capital, a General Meeting must be held to discuss any requisite measures.
The convocation of the General Meeting must be published through an announcement by electronic means. The convening notice must include, among other items, an agenda indicating the location and time of the General Meeting, the record date, the manner in which persons entitled to attend the General Meeting may register and exercise their rights, the time on which registration for the meeting must have occurred ultimately, as well as the place where the meeting documents may be obtained. The convening notice must be given at least 42 days prior to the day of the meeting.
The agenda for the annual General Meeting must contain certain subjects, including, among other things, the adoption of the financial statements, the discussion of any substantial change in the Company's corporate governance structure and the allocation of the profit, insofar as this is at the disposal of the General Meeting. In addition, the agenda shall include such items as have been included therein by the Board or such items as one or more Shareholders and others entitled to attend General Meetings, representing at least 3% of the issued and outstanding share capital, have requested the Board with a motivated request to include in the agenda, at least 60 days before the day of the General Meeting. If the agenda of the General Meeting contains the item of granting discharge to the members of the Board concerning the performance of their duties in the financial year in question, the matter of the discharge shall be mentioned on the agenda as separate item. No resolutions may be adopted on items other than those which have been included in the agenda.
Shareholders who, individually or with other Shareholders, hold Shares that represent at least 1% of the issued and outstanding share capital or a market value of at least EUR 250,000, may request the Company to disseminate information that is prepared by them in connection with an agenda item for a General Meeting. The Company can only refuse disseminating such information, if received less than seven business days prior to the General Meeting if the information gives or could give an incorrect or misleading signal or if, in light of the nature of the information, the Company cannot reasonably be required to disseminate it.
The General Meeting is chaired by the chairman of the Board. The members of the Board may attend a General Meeting. In these General Meetings, they have an advisory vote. The chairman of the General Meeting may decide at his discretion to admit other persons to the General Meeting.
Each Shareholder and each holder of depository receipts may attend the General Meeting, address the General Meeting and, in so far as they have such right, exercise voting rights pro rata to his shareholding, either in person or by proxy. Shareholders and others with meeting rights under Dutch law may exercise these rights, if they are the holders of Shares or depository receipts on the record date as required by Dutch law, which is currently the 28th day before the day of the General Meeting, and they or their proxy have notified the Company of their intention to attend the General Meeting in writing or by any other electronic means that can be reproduced on paper at least seven days prior to the General Meeting, specifying such person's name and the number of Shares for which such person may exercise the voting rights and/or meeting rights at such General Meeting. The convocation notice shall state the record date and the manner in which the persons entitled to attend the General Meeting may register and exercise their rights.
Each Share confers the right to cast one vote in the General Meeting.
Pursuant to the Articles of Association, resolutions of the General Meeting are taken by 75% of the votes cast, except where Dutch law or the Articles of Association prescribe a larger majority.
Pursuant to Dutch law, no votes may be cast at a General Meeting in respect of Shares which are held by the Company.
Under the Articles of Association, the General Meeting has the power to resolve the issuance of Shares and to determine the conditions under which such shares are issued, unless the General Meeting of Shareholders has designated another corporate body with that power. Such designation can be made for a period not exceeding five years and may be renewed from time to time for periods not exceeding five years. For as long as a body other than the General Meeting has the power to issue shares, the General Meeting shall not have this power.
Unless the Articles of Association provide otherwise, each shareholder shall have a pre-emptive right on the issue of shares in proportion to the aggregate amount of his shares. A shareholder shall not have a pre-emptive right to shares issued to employees of the company or of a group company. The pre-emptive right may, each time for a single issue, be limited or excluded by resolution of the General Meeting. Pre-emption rights may also be limited or excluded by the corporate body which has been designated by the General Meeting as having the power to limit or exclude pre-emption rights for a period not exceeding five years.
On 26 June 2018 a General Meeting was held at which it was resolved to authorize the Board of Directors to issue up to 757,521 shares for a period of 5 years from the date of the General Meeting (i.e. up to 26 June 2023) and to exclude pre-emptive rights in relation thereto. As of the date of this Information Document, 757,521 shares have been issued on the basis of this authority, as a consequence whereof the Board of Directors is no longer authorised to issue shares on the basis of the authorisation granted to it by the General Meeting on 26 June.
The Company can acquire fully paid-up shares in its own capital for no consideration, or if (i) the shareholders' equity less the acquisition price is not less than the sum of the paid-in and called-up part the Company's capital and the reserves that it is required to maintain by law, (ii) the nominal value of the shares to be acquired in its own capital, which it holds or holds in pledge, or which are held by one of its subsidiaries is not more than 50% of the issued capital, such in accordance with section 2:98 of the Dutch Civil Code and (iii) the acquisition is authorized by the General Meeting.
The General Meeting may resolve to reduce the issued capital by cancelling shares or by reducing the amount of shares by amending the Articles of Association. This resolution must designate the shares to which the resolution relates and provide for the implementation of the resolution. A resolution for cancellation of shares may only relate to shares held by the Company itself or of which it holds the depositary receipts.
Dutch law provides that decisions of the Board of Directors involving a significant change in the Company's identity or character are subject to the approval of the General Meeting. Such changes include:
A legal merger or demerger also requires a resolution by the General Meeting.
The General Meeting may resolve to amend the Articles of Association. A proposal to amend the Articles of Association must be included in the agenda. A copy of the proposal, containing the verbatim text of the proposed amendment, must be deposited at the Company's offices for the inspection of every Shareholder until the end of the General Meeting. A copy of the proposal shall be made available free of charge to those who are entitled to attend the General Meeting.
The Company may be dissolved by a resolution of the General Meeting. In the event of dissolution, the Company's business will be liquidated in accordance with Dutch law and the Articles of Association and the liquidation shall be arranged by the Board, unless the General Meeting has designated other liquidators. During liquidation, the provisions of the Articles of Association will remain in force as far as possible. The balance of the remaining equity after payments of debts and liquidation costs will be distributed to holders of the Shares, in proportion to the aggregate nominal value of the Shares held by them.
The Netherlands is the Company's home member state for the purposes of the European Union Transparency Directive (Directive 2004/109/EC, as amended). As a result and as a consequence of the Company's Euronext Amsterdam listing, it is subject to financial and other reporting obligations under the Financial Supervision Act and the Dutch Financial Reporting Supervision Act (Wet toezicht financiële verslaggeving), which both implement the European Union Transparency Directive in the Netherlands.
The Company is required to publish its financial statements (consisting of the audited annual accounts, the directors' report and the responsibility statement) within four months after the end of each financial year and its half-yearly figures within three months after the end of the first six months of each financial year. Publication of the financial statements within these deadlines will also be in compliance with the Company's continuing obligations on Euronext Growth. Within five calendar days after adoption of its financial statements, the Company must file its financial statements with the AFM.
On the basis of the Financial Reporting Supervision Act, the AFM supervises the application of financial reporting standards by, among others, companies whose corporate seat is in the Netherlands and whose securities are listed on a regulated market, as defined in the Financial Supervision Act, or a foreign stock exchange.
Pursuant to the Financial Reporting Supervision Act, the AFM has an independent right to (i) request an explanation from the Company regarding its application of the applicable financial reporting standards and (ii) recommend the Company to make available of further explanations and to file these with the AFM. If the Company does not comply with such a request or recommendation, the AFM may request that the Enterprise Chamber orders it to (i) make available further explanations as recommended by the AFM, (ii) provide an explanation of the way the Company has applied the applicable financial reporting standards to its financial statements or (iii) prepare its financial reports in accordance with financial reporting requirements following the Enterprise Chamber's instructions.
Pursuant to the Financial Supervision Act, each party who holds a substantial holding in the Company should forthwith notify the AFM of such substantial holding. Substantial holding means the holding of at least 3% of the Shares or the ability to vote on at least 3% of the total voting rights.
Any person who, directly or indirectly, acquires or disposes of an interest in the share capital or voting rights must give notice to the AFM without delay, if, as a result of such acquisition or disposal, the percentage of capital interest or voting rights held by such person, directly or indirectly, reaches, exceeds or falls below any of the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%. In addition, if, as a result of such change, a person's direct or indirect interest in the share capital or voting rights passively reaches, exceeds or falls below the abovementioned thresholds, the person in question must give notice to the AFM no later than the fourth trading day after the AFM has published the change in the share capital and/or voting rights in the public register.
For the purpose of calculating the percentage of capital interest or voting rights, among others, the following interests must be taken into account: (i) shares or depositary receipts for shares or voting rights directly held (or acquired or disposed of) by any person, (ii) shares or depositary receipts for shares or voting rights held (or acquired or disposed of) by such person's controlled undertakings or by a third party for such person's account or by a third party with whom such person has concluded an oral or written voting agreement (including a discretionary power of attorney), (iii) voting rights acquired pursuant to an agreement providing for a temporary transfer of voting rights against a payment, (iv) shares or depositary receipts for shares or voting rights which such person, or any controlled undertaking or third party referred to above, may acquire pursuant to any option or other right held by such person (including, but not limited to, on the basis of convertible bonds), and (v) shares which determine the value of certain cash settled instruments, whereby the increase in value of the financial instruments is dependent on the increase in value of the (underlying) shares or related dividends.
For the same purpose of calculating the percentage of capital interest or voting rights, the following instruments qualify as 'shares': (i) financial instruments of which the value depends on the increase in value of the shares or dividend rights and which will be settled other than in those shares, (ii) rights to acquire shares or depositary receipts, and (iii) negotiable instruments which provide for an economic position similar to the economic position of a holder of shares or depositary receipts.
The notification to the AFM should indicate whether the interest is held directly or indirectly, and whether the interest is an actual or a potential interest.
A person is deemed to hold the interest in the share capital or voting rights that is held by its controlled undertakings as defined in the Financial Supervision Act. The controlled undertaking does not have a duty to notify the AFM because the interest is attributed to the undertaking in control, which as a result has to notify the interest as an indirect interest. Any person, including an individual, may qualify as an undertaking in control for the purposes of the Financial Supervision Act. A person who has a 3% or larger interest in the share capital or voting rights and who ceases to be a controlled undertaking for purposes of the Financial Supervision Act must without delay notify the AFM. As of that moment, all notification obligations under the Financial Supervision Act will become applicable to the former controlled undertaking itself.
A holder of a right of pledge or usufruct in respect of shares or depositary receipts for shares can also be subject to the reporting obligations of the Financial Supervision Act, if such person has, or can acquire, the right to vote on the shares or, in the case of depositary receipts for shares, the underlying shares. If a pledgee or usufructuary acquires the voting rights on the shares or depositary receipts for shares, this may trigger a corresponding reporting obligation for the holder of the shares or depositary receipts for shares. Special rules apply with respect to the attribution of shares or depositary receipts for shares or voting rights which are part of the property of a partnership or other community of property.
Each person holding a gross short position in relation to the issued share capital of a Dutch listed company that reaches, exceeds or falls below any one of the following thresholds: 3%, 5%, 10%, 15%, 20%, 25%, 30%, 40%, 50%, 60%, 75% and 95%, must immediately give notice to the AFM. If a person's gross short position reaches, exceeds or falls below one of the above mentioned thresholds as a result of a change in the Company's issued share capital, such person is also required to make a notification no later than the fourth trading day after the AFM has published the Company's notification in the public register of the AFM. Shareholders are advised to consult with their own legal advisers to determine whether the gross short-selling notification obligation applies to them.
In addition, pursuant to Regulation (EU) No 236/2012, each person holding a net short position attaining 0.2% of the issued share capital of a Dutch listed company is required to notify such position to the AFM. Each subsequent increase of this position by 0.1% of the issued share capital must also be notified. Each net short position equal to 0.5% of the issued share capital of a Dutch listed company and any subsequent increase of that position by 0.1% of the issued share capital will be made public via the AFM short-selling register. To calculate whether a natural person or legal person has a net short position, their short positions and long positions must be set off. A short transaction in a share can only be contracted if a reasonable case can be made that the shares sold can actually be delivered, which requires the confirmation of a third party that the shares have been located. The notification shall be made no later than 3:30pm Central European (Summer) Time, on the following trading day.
Under the Financial Supervision Act, the Company is required to notify the AFM without delay of any changes in its share capital if it has changed by 1% or more compared to the previous disclosure in respect of its share capital. The Company is also required to notify the AFM without delay of any changes in the voting rights, insofar as it has not already been notified at the same time as a related change in the share capital. Changes in share capital and voting rights of less than 1% must also be notified; these changes can be notified at any time but at the latest within eight days after the end of each calendar quarter. The AFM will publish such notifications in a public register.
In addition, every holder of 3% or more of the shares or voting rights whose interest has a different composition as a result of (for example) an exchange of options for depositary receipts for shares or shares, or the exercise of rights under an agreement to acquire voting rights whereby in comparison to the previous notification a threshold is reached, exceeded or fallen below without this affecting the total percentage of the previously notified holding, must notify the AFM of this change within four trading days after the date on which he becomes aware of this or should have become aware of this.
The AFM keeps a public register of all notifications made pursuant to these disclosure obligations and publishes all notifications received by it. The notifications referred to in this paragraph should be made in writing by means of a standard form or electronically through the notification system of the AFM.
Non-compliance with the disclosure obligations set out in the paragraph above is an economic offence (economisch delict) and may lead to the imposition of criminal prosecution, administrative fines, imprisonment or other sanctions. The AFM may impose administrative penalties or a cease-and-desist order under penalty for non-compliance. If criminal charges are pressed, the AFM is no longer allowed to impose administrative penalties and vice versa, the AFM is no longer allowed to seek criminal prosecution if administrative penalties have been imposed. Furthermore, a civil court can impose measures against any person who fails to notify or incorrectly notifies the AFM of matters required to be correctly notified. A claim requiring that such measures be imposed must be instituted by the Company and/or one or more shareholders who alone or together with others represent(s) at least 3% of the issued share capital or are able to exercise at least 3% of the voting rights. The measures that the civil court may impose include: (i) an order requiring the person violating the disclosure obligations under the Financial Supervision Act to make appropriate disclosure;(ii) suspension of voting rights in respect of such person's shares for a period of up to three years as determined by the court; (iii) voiding a resolution adopted by a general meeting of shareholders, if the court determines that the resolution would not have been adopted but for the exercise of the voting rights of the person who is obliged to notify, or suspension of a resolution until the court makes a decision about such voiding; and (iv) an order to the person violating the disclosure obligations under the Financial Supervision Act to refrain, during a period of up to five years as determined by the court, from acquiring the shares and/or voting rights in the shares.
As of July 3, 2016, the regulatory framework on market abuse within Europe has been amended and extended. These revisions are laid down in the Market Abuse Directive (2014/57/EU) (MAD II) as implemented in Dutch law and the Market Abuse Regulation (no. 596/2014) (the "Market Abuse Regulation"), which is directly applicable in the Netherlands. The Company, the members of the Board, Executive Management and other insiders and persons performing or conducting transactions in the Company's financial instruments, as applicable, will be subject to the insider trading prohibition, the prohibition on divulging inside information and tipping and the prohibition on market manipulation. In certain circumstances, the Company's investors may also be subject to market abuse rules. Equivalent rules also apply to the Depository Receipts, pursuant to the Norwegian Securities Trading Act section 3- 1(4), cf. sections 3-3, 3-4, 3-7 and 3-8.
Pursuant to the Market Abuse Regulation, no natural or legal person is permitted to: (a) engage or attempt to engage in insider dealing in financial instruments listed on a regulated market or for which a listing has been requested, such as the ordinary shares, (b) recommend that another person engages in insider dealing or induce another person to engage in insider dealing, or (c) unlawfully disclose inside information relating to our ordinary shares or us. Furthermore, no person may engage in or attempt to engage in market manipulation.
Pursuant to the Market Abuse Regulation and also the continuing obligations on Euronext Growth, the Company is required to inform the public as soon as possible and in a manner which enables fast access and complete, correct and timely assessment of the information, of inside information which directly concerns the Company. Inside information is knowledge of information of a precise nature directly or indirectly relating to the issuer or the trade in its securities which has not yet been made public and publication of which could significantly affect the trading price of the securities (i.e. information a reasonable investor would be likely to use as part of the basis of his investment decisions). An intermediate step in a protracted process can also be deemed to be inside information by itself. The Company is required to post and maintain on its website all inside information for a period of at least five years. Under certain circumstances, the disclosure of inside information may be delayed, which needs to be notified to the AFM after the disclosure has been made. Upon request of the AFM, a written explanation needs to be provided setting out why a delay of the publication was considered permitted.
Persons discharging managerial responsibilities, as well as persons closely associated with them (within the meaning of the Market Abuse Regulation) are obliged to notify the Company and the AFM, ultimately on the third trading day after the transaction date, of every transaction conducted on their own account relating to our shares or debt instruments (or other financial instruments linked thereto), once the threshold of €5,000 has been reached within a calendar year (without netting). Once the threshold has been reached, all transactions will need to be notified, regardless of amount and wherever concluded. The same also applies pursuant to the continuing obligations on Euronext Growth, but with no monetary threshold for the notification obligation.
Furthermore, a person discharging managerial responsibilities is not permitted to (directly or indirectly) conduct any transactions on its own account or for the account of a third party, relating to our shares or debt instruments or other financial instruments linked thereto, during a closed period of thirty calendar days before the announcement of an half-yearly report or an annual report.
Persons discharging managerial responsibilities within the meaning of the Market Abuse Regulation include: (a) members of the Board, or (b) members of the senior management who have regular access to inside information relating directly or indirectly to that entity and the authority to take managerial decisions affecting our future developments and business prospects. A person closely associated means: (a) a spouse, or a partner considered to be equivalent to a spouse in accordance with national law, (b) a dependent child, in accordance with national law, (c) a relative who has shared the same household for at least one year on the date of the transaction concerned, or (d) a legal person, trust or partnership, the managerial responsibilities of which are discharged by a person discharging managerial responsibilities or by a person referred to in point (a), (b) or (c), which is directly or indirectly controlled by such a person, which is set up for the benefit of such a person, or the economic interests of which are substantially equivalent to those of such a person.
In accordance with the Market Abuse Regulation, the AFM has the power to take appropriate administrative sanctions, such as fines, and/or other administrative measures in relation to possible infringements.
Non-compliance with the market abuse rules set out above could also constitute an economic offense and/or a crime (misdrijf) and could lead to the imposition of administrative fines by the AFM. The public prosecutor could press criminal charges resulting in fines or imprisonment. If criminal charges are pressed, it is no longer allowed to impose administrative penalties and vice versa. Similar sanctions may be imposed by Norwegian authorities in case of infringements of the Norwegian Securities Trading Act.
The AFM shall in principle also publish any decision imposing an administrative sanction or measure in relation to an infringement of the Market Abuse Regulation.
The Company adopted a code of conduct in respect of the reporting and regulation of transactions in the Company's securities by members of the Board and its employees. The Company and any person acting on its behalf or on its account is obligated to draw up an insiders list, to promptly update the insider list and provide the insider list to the AFM upon its request. The Company and any person acting on its behalf or on its account is obligated to take all reasonable steps to ensure that any person on the insider list acknowledges in writing the legal and regulatory duties entailed and is aware of the sanctions applicable to insider dealing and unlawful disclosure of inside information.
Pursuant to the Financial Supervision Act, a shareholder who (individually or acting in concert with others) directly or indirectly obtains control of a Dutch company whose shares are listed on a regulated market within the European Union or European Economic Area is required to make a public offer for all issued and outstanding shares in that company's share capital. Such control is deemed present if a (legal) person is able to exercise, alone or acting in concert, at least 30% of the voting rights in the general meeting of shareholders. The legislation also applies to persons acting in concert who jointly acquire 30% of the voting rights. An exemption exists if such shareholder or group of shareholders reduces its holding below 30% within 30 days of the acquisition of controlling influence provided that (i) the reduction of its holding was not effected by a transfer of shares or depositary receipts to an exempted party and (ii) during this period such shareholder or group of shareholders did not exercise its voting rights. Euronext Growth does not impose any such rules or obligations of a similar nature.
The following is a brief summary of certain Dutch tax considerations relevant to the acquisition, ownership and disposal of Shares in the Company (which includes the Depository Receipts) by holders that are both (i) tax residents of the Netherlands under the laws of the Netherlands (resident taxpayers), and holders that are (ii) not residents of the Netherlands under such laws, but who do earn certain income from the Netherlands (non-resident taxpayers).
The summary is based on applicable Netherlands laws, rules and regulations as at the date of this Information Document. Such laws, rules and regulations may be subject to changes after this date, possibly on a retroactive basis for the same tax year. Any changes in Netherlands tax law, regulations and administrative interpretations, including those changes that could have retroactive effect may affect the validity of this summary. Please note that this document shall not be updated to cater for such changes in Netherlands tax law.
This summary is of a general nature and does not purport to be a comprehensive description of all tax considerations that may be relevant, and does not address taxation in any other jurisdiction than the Netherlands. All references in this summary to the Netherlands and Dutch law are to the European part of the Kingdom of the Netherlands and its law, respectively, only.
The summary does not concern tax issues for the Company. The summary only focuses on the specific shareholder categories explicitly mentioned below. Special rules may apply to shareholders who are considered 'tax transparent' for tax purposes, for shareholders holding Shares through a permanent establishment in the Netherlands and for shareholders that have ceased or cease to be resident in the Netherlands for tax purposes.
For purposes of Dutch personal and corporate income taxes, shares, or certain other assets, which may include depositary receipts in respect of shares, legally owned by a third party such as a trustee, foundation or similar entity or arrangement, may under certain circumstances have to be allocated to the (deemed) settlor, grantor or similar originator, or, upon the death of the settlor to his/her beneficiaries, in proportion to their entitlement to the estate of the settlor of such trust or similar arrangement, or the separated private assets (Dutch: afgezonderd particulier vermogen). The same may apply to Dutch gift, estate and inheritance tax.
The summary does not address the tax consequences of a holder of the Shares who is an individual and who has a substantial interest (Dutch: aanmerkelijk belang) or a deemed substantial interest (Dutch: fictief aanmerkelijk belang) in the Company within the meaning of the Income Tax Act 2001 (Dutch: Wet inkomstenbelasting 2001). Generally, a holder of the Shares will have a substantial interest in the company if such holder of the Shares, whether alone or together with his spouse or partner and/or certain other close relatives (as defined in the Income Tax Act 2001), holds directly or indirectly, or as settlor, or beneficiary of separated private assets (i) (x) the ownership of, (y) certain other rights, such as usufruct, over, or (z) rights to acquire (whether or not already issued), shares (including the Shares) representing 5% or more of our total issued and outstanding capital (or the issued and outstanding capital of any class of our shares) or (ii) (x) the ownership of, or (y) certain other rights, such as usufruct over, profit participating certificates (Dutch: winstbewijzen) that relate to 5% or more of our annual profit or to 5% or more of our liquidation proceeds. In addition, a holder of the Shares has a substantial interest in the company if he, whether alone or together with his spouse or partner and/or certain other close relatives (as defined in the Income Tax Act 2001), has the ownership of, or other rights over, Shares in, or profit certificates issued by, the Company that represent less than 5% of the relevant aggregate that either (a) qualified as part of a substantial interest as set forth above and where shares, or depositary receipts in respect of shares, profit certificates and/or rights there over have been, or are deemed to have been, partially disposed of, or (b) have been acquired as part of a transaction that qualified for non-recognition of gain treatment.
This summary does not address the tax consequences of a holder of Shares who:
Each shareholder, and especially non-resident shareholders, should explicitly consult with- and rely upon advice of their own individual tax counsels to determine their particular tax consequences of acquiring, owning and disposing of the Shares.
11.1.1.1 Netherlands resident corporate shareholders
A holder of the Shares that is resident or deemed to be resident in the Netherlands for corporate income tax purposes, and that is:
but which is not:
will in general be subject to regular corporate income tax, generally levied at a rate of 25% (15% over profits up to EUR 245,000; expected per January 1, 2022: 15% on first EUR 395,000) (the "Regular Dutch CIT rates") over income derived from the Shares and the gain or loss realized upon the acquisition, redemption or disposal of the Shares, unless, and to the extent that, the participation exemption (deelnemingsvrijstelling) applies.
The Netherlands participation exemption regime (Dutch: deelnemingsvrijstelling) may provide for an exemption from such Netherlands corporate income tax on income (including dividends received) derived from so-called qualifying shareholdings (also referred to as 'participations' or 'deelnemingen').
In summary, the specific requirements that need to be met for the application of the Netherlands participation exemption are as follows:
The abovementioned 'Subject-to-Tax' test is met if the Company is subject to a profit tax that results in a 'realistic levy' based on Netherlands tax principles.
The Asset Test is met if less than 50% of the assets of the Company (both at the direct level of the Company, as well as all underlying subsidiaries on a consolidated basis) generally consist of (i) low-taxed (ii) free portfolio investments. This test is to be applied using the fair market value of the relevant assets and is a continuous test.
In case the requirements for application of the participation exemption have been met, application of the exemption shall be mandatory i.e. corporate taxpayers residing in the Netherlands shall have to apply these rules in case they are within scope.
In addition to the aforementioned Netherlands corporate income tax, the Company is, in principle, also required to withhold 15% Netherlands dividend withholding tax in respect of the dividends paid. The expression "dividends distributed by the company" as used herein includes, but is not limited to:
Netherlands resident corporate shareholders may often be able to (i) qualify for an exemption, (ii) set off dividend withholding taxes withheld on such dividend distributions against Netherlands corporate income tax levied, or may be able to (iii) claim a refund for such dividend withholding taxes levied on distributed dividends in case these withholding taxes exceed the corporate income tax due. If, however, a Netherlands resident entity receives a dividend which is exempt in the Netherlands (e.g. by virtue of the participation exemption – see above) and Netherlands dividend withholding tax has been withheld, such dividend withholding tax cannot be credited against the corporate income tax due, but will be refunded to the entity receiving the dividend. An entity residing in the Netherlands which is not subject to Netherlands corporate income tax can, under certain conditions, also request a refund of the dividend withholding tax withheld.
A holder of the Shares will not be treated as a resident, or a deemed resident, of the Netherlands by reason only of the acquisition, or the holding, of the Shares or the performance by the Company under the Shares. A holder of the Shares, that is a legal entity, another entity with a capital divided into shares, an association, a foundation or a fund or trust, not resident or deemed to be resident in the Netherlands for corporate income tax purposes, will not be subject to any Dutch taxes on income derived from the Shares and the gains realized upon the acquisition, redemption and/or disposal of the Shares (other than the dividend withholding tax described above), unless: (i) the Shares held in the Company are attributable to a permanent establishment or permanent representative of a shareholder in the Netherlands, or (ii) a substantial interest in share capital of the Company is held for which certain anti-abuse tests cannot be met.
If one of the abovementioned conditions applies, income derived from the Shares and the gain or loss realized upon the acquisition, redemption or disposal of the Shares will, in general, be subject to Dutch regular corporate income tax, levied at a rate of 25% (15% over profits up to EUR 245,000; expected per January 1, 2022: 15% on first EUR 395,000), unless, and to the extent that, with respect to a holder as described under (i), the participation exemption (Dutch: deelnemingsvrijstelling) applies.
Similar to Netherlands resident corporate shareholders, distributions to non-resident corporate shareholders are generally also subject to Netherlands dividend withholding tax at the statutory rate of 15% (2021). Under specific circumstances, an exemption from, reduction of, or refund of Netherlands dividend withholding tax may be available pursuant to (i) Netherlands domestic law or (ii) tax treaties for the avoidance of double taxation. Availability and applicability should be analysed by each investor on an individual basis.
In case the Shares held in the Company are attributable to a permanent establishment or permanent representative of a shareholder in the Netherlands, dividends distributed to that shareholder by the Company will, in principle, be subject to Netherlands corporate income tax at the Regular Dutch CIT Rates, unless the participation exemption is applicable (reference is made to Section 11.1.1.1 "Netherlands resident corporate shareholders" of this Information Document for a more detailed overview of these rules). Dividend withholding taxes withheld, if any (see below), can generally be set off against the Netherlands corporate income tax on this income, provided that the recipient is the beneficial owner to the dividends.
Netherlands non-resident corporate tax (levied at the Regular Dutch CIT Rates) may, in some cases, be levied from investors:
A holder of the Shares that is resident in a country with which the Netherlands has a double taxation convention in effect, may, depending on the terms of such double taxation convention and subject to the anti-dividend stripping rules described below, be eligible for a full or partial exemption from, or full or partial refund of, Dutch dividend withholding tax on dividends received.
A holder of the Shares, that is a legal entity resident in (i) a Member State of the European Union, (ii) Iceland, Norway or Liechtenstein, or (iii) a country that has concluded a double taxation agreement containing a dividend clause, is generally entitled, subject to the anti-dividend stripping rules and anti-abuse rules described below, to a full exemption from Dutch dividend withholding tax on dividends received if it holds an interest of at least 5% (in shares or, in certain cases, in voting rights) in the Company or if it holds an interest of less than 5%, in either case where, had the holder of the Shares been a Dutch resident, it would have had the benefit of the participation exemption (this may include a situation where another related party holds an interest of 5% or more in the Company).
A holder of the Shares, that is an entity resident in (i) a Member State of the European Union, or (ii) Iceland, Norway or Liechtenstein, or (iii) in a jurisdiction which has an arrangement for the exchange of tax information with the Netherlands and such holder as described under (iii) holds the Shares as a portfolio investment, i.e., such holding is not acquired with a view to the establishment or maintenance of lasting and direct economic links between the holder of the Shares and the company and does not allow the holder of the Shares to participate effectively in the management or control of the company, which is exempt from tax in its country of residence, and that would have been exempt from Dutch corporate income tax if it had been a resident of the Netherlands, is generally entitled, subject to the anti-dividend stripping rules described below, to a full refund of Dutch dividend withholding tax on dividends received. This full refund will in general benefit certain foreign pension funds, government agencies and certain government controlled commercial entities.
According to the anti-dividend stripping rules, no exemption, reduction, credit or refund of Dutch dividend withholding tax will be granted if the recipient of the dividend paid by us is not considered the beneficial owner (Dutch: uiteindelijk gerechtigde) of the dividend as defined in the Dividend Withholding Tax Act 1965 (Dutch: Wet op de dividendbelasting 1965). A recipient of a dividend is not considered the beneficial owner of the dividend if, as a consequence of a combination of transactions, (i) a person (other than the holder of the dividend coupon), directly or indirectly, partly or wholly benefits from the dividend, (ii) such person directly or indirectly retains or acquires a comparable interest in the Shares, and (iii) such person is entitled to a less favorable exemption, refund or credit of dividend withholding tax than the recipient of the dividend distribution. The term "combination of transactions" includes transactions that have been entered into in the anonymity of a regulated stock market, the sole acquisition of one or more dividend coupons and the establishment of short-term rights or enjoyment on the Shares (e.g., usufruct).
According to the anti-abuse rules, no exemption of Dutch dividend withholding tax will be granted if the Shares are held (i) with the avoidance of Dutch dividend withholding tax of another person as (one of) the main purpose(s) and (ii) forms part of an artificial structure or series of structures (such as structures which are not put into place for valid business reasons reflecting economic reality).
The latter requirement signifies that such taxation will only be due if the structuring of the ownership in the Company by the individual investor is regarded 'abusive'. Both a 'subjective test' and an 'objective test' are to be applied. Conducting these tests requires a detailed understanding and analysis of the ownership structure of the relevant individual investor.
Additionally, on a case-by-case basis investors may be able to invoke tax treaty protection in relation to taxation of dividends, depending on whether they are eligible for tax treaty benefits under a tax treaty concluded by the Netherlands on an individual basis.
Under the Netherlands Personal Income Tax Act 2001 (Dutch: Wet inkomstenbelasting 2001), income of an individual residing in the Netherlands for tax purposes is divided up into three separate so-called 'boxes', each of which is governed by its own rules:
Losses from one box can, in principle, not be offset against income from another box (several specific exceptions to this general rule may apply).
An individual residing in the Netherlands, who holds Shares in the Company that can be attributed to the business assets of an enterprise which is, in whole or in part, carried on for the account of such shareholder, is liable for income tax on the dividends received from these Shares at progressive rates (the maximum rate in 2021 being 49,50%) (the "Box 1 Rate"). Income derived that qualifies as 'income from miscellaneous activities' (Dutch: resultaat uit overige werkzaamheden), which includes activities pertaining to Shares held in the Company that exceed 'regular portfolio management' (Dutch: normal vermogensbeheer), are also taxable at the aforementioned progressive rates.
Income from a substantial interest held in the Company (which includes dividends) are generally taxable with Netherlands personal income tax at a rate of 26.90% (2021) (the "Box 2 Rate"). The definition of a substantial interest under Netherlands tax law is a very detailed one. In summary, a taxpayer is considered to have a substantial interest if they, either individually or together with their 'fiscal partner', directly or indirectly own at least 5% of the subscribed capital of the Company or a specific class of shares of the Company, or when they have the right to acquire at least 5% of the capital of the Company.
An individual residing in the Netherlands that does not fall within the first two boxes in respect of their investment in Shares of the Company must determine taxable income with regard to the Shares held in the Company on the basis of a deemed return on income from savings and investments (Dutch: sparen en beleggen), rather than on the basis of income actually received or gains actually realised. This deemed return on income from savings and investments is fixed at a percentage of the individual's yield basis (Dutch: rendementsgrondslag) at the beginning of the calendar year (1 January), insofar as the individual's yield basis exceeds a certain threshold (Dutch: heffingvrij vermogen). The individual's yield basis is determined as the fair market value of certain qualifying assets held by the individual less the fair market value of certain qualifying liabilities on 1 January. The fair market value of the Notes will be included as an asset in the individual's yield basis. The deemed return percentage to be applied to the yield basis increases progressively depending on the amount of the yield basis. For the 2021 tax year, the deemed return derived from savings and investments amounts to 1,90% of the individual's yield basis up to EUR 50,000, 4,50% of the individual's yield basis exceeding EUR 50,000 up to EUR 950,000 and 5,69% of the individual's yield basis in excess of EUR 950,000. The percentages to determine the deemed return will be reassessed every year on the basis of historic market yields. The deemed return on income from savings and investments is taxed at a rate of 31% (2021).
Distributions are generally subject to Netherlands dividend withholding tax at the statutory rate of 15% (2021). Under circumstances, an exemption from, reduction of or refund of Netherlands dividend withholding tax may be available. Availability and applicability should be analysed on a case-by-case basis.
In principle, capital gains which are derived from the sale of Shares in the Company by an individual residing in the Netherlands are not subject to personal income tax in the Netherlands, provided that (i) the Shares do not form part of a 'substantial interest', (ii) cannot be attributed to the enterprise of that individual, and (iii) the capital gains realized do not qualify as so-called 'income from miscellaneous activities' (Dutch: resultaat uit overige werkzaamheden) which includes activities pertaining to the Shares that exceeds 'regular portfolio management'.
Capital gains realized on the disposal of the Shares in the Company that form part of a 'substantial interest' (Dutch: aanmerkelijk belang) are subject to taxation in the Netherlands in Box II, at the Box 2 Rate.
Capital gains are subject to personal income tax at the Box 1 Rate if the Shares can be attributed to the business assets of an enterprise carried on, in whole or in part, for the account of the relevant individual or if the Share can be attributed to the 'income from miscellaneous activities' (Dutch: resultaat uit overige werkzaamheden).
Individual holders of Shares in the Company that do not reside the Netherlands will be taxable in the Netherlands in respect of income realized on their Shares if these Shares:
The right of the Netherlands to levy personal income tax on dividends received by non-resident individuals may be restricted under specific provisions of applicable tax treaties.
Similar to Netherlands resident individual shareholders, distributions to non-resident individual shareholders are generally also subject to Netherlands dividend withholding tax at the statutory rate of 15% (2020). Under circumstances, an exemption from, reduction of or refund of Netherlands dividend withholding tax may be available pursuant to treaties for the avoidance of double taxation. Availability and applicability should be analysed on a caseby-case basis.
The Netherlands does not levy registration tax, capital tax, stamp duty or any other similar documentary tax or duty (other than court fees) in respect of or in connection with the issuance, ownership or the transfer of Shares in the Company.
Gift tax may be due in the Netherlands with respect to an acquisition of the Shares by way of a gift by a holder of the Shares who is resident or deemed to be resident of the Netherlands at the time of the gift.
Inheritance tax may be due in the Netherlands with respect to an acquisition or deemed acquisition of the Shares by way of an inheritance or bequest on the death of a holder of the Shares who is resident or deemed to be resident of the Netherlands, or by way of a gift within 180 days before his death by an individual who is resident or deemed to be resident in the Netherlands at the time of his death.
For purposes of Dutch gift and inheritance tax, among others, an individual with the Dutch nationality will be deemed to be resident in the Netherlands if he has been resident in the Netherlands at any time during the ten years preceding the date of the gift or his death. For purposes of Dutch gift tax, an individual not holding the Dutch nationality will be deemed to be resident of the Netherlands if he has been resident in the Netherlands at any time during the twelve months preceding the date of the gift.
No gift, estate or inheritance taxes will arise in the Netherlands with respect to an acquisition of Shares by way of a gift by, or on the death of, a holder of the Shares who is neither resident nor deemed to be resident of the Netherlands, unless, in the case of a gift of the Shares by an individual who at the date of the gift was neither resident nor deemed to be resident in the Netherlands, such individual dies within 180 days after the date of the gift, while being resident or deemed to be resident in the Netherlands.
For purposes of Dutch gift, estate and inheritance tax, under certain circumstances (i) a gift by a third party can be construed as a gift by the settlor, trustee, grantor or originator, and (ii) upon the death of the settlor, trustee, grantor or originator, as his/her beneficiaries can be deemed to have inherited directly from such settlor, trustee, grantor or originator. Subsequently, such beneficiaries will be deemed the settlor, trustee, grantor or similar originator of the separated private assets (Dutch: afgezonderd particulier vermogen) for purposes of Dutch gift, estate and inheritance tax in case of subsequent gifts or inheritances.
For the purposes of Dutch gift and inheritance tax, a gift that is made under a condition precedent is deemed to have been made at the moment such condition precedent is satisfied. If the condition precedent is fulfilled after the death of the donor, the gift is deemed to be made upon the death of the donor.
No Dutch value added tax will arise in respect of or in connection with the subscription, issue, placement, allotment or delivery of the Shares.
The Company is responsible for, and shall deduct, report and pay any applicable withholding tax to the Netherlands tax authorities in respect of proceeds from the Shares in the company. These proceeds include:
This section describes certain tax rules in Norway applicable to shareholders who are resident in Norway for tax purposes ("Norwegian Shareholders") and to shareholders who are not resident in Norway for tax purposes ("Non-Norwegian Shareholders"). The statements herein regarding taxation are based on the laws in force in Norway as of the date of this Information Document and are subject to any changes in law occurring after such date. Such changes could possibly be made on a retrospective basis.
The summary below assumes that the Company is incorporated and tax resident in the Netherlands, and that the Company is genuinely established in and conducts genuine business activities in the Netherlands. The following summary does not purport to be a comprehensive description of all the tax considerations that may be relevant to a decision to purchase, own or dispose of the Shares. Investors are advised to consult their own tax advisors concerning the overall tax consequences of their ownership of Shares. The statements only apply to shareholders who are beneficial owners of Shares.
Please note that for the purpose of the summary below, references to Norwegian Shareholders or Non-Norwegian Shareholders refers to the tax residency rather than the nationality of the shareholder.
The tax legislation in the Netherlands, where the Company is resident, and the tax legislation in the jurisdiction in which the shareholders are resident for tax purposes may have an impact on the income received from the Consideration Shares.
11.2.1.1 Taxation of dividends
Corporate shareholders (i.e. limited liability companies and similar entities) resident in Norway for tax purposes ("Norwegian Corporate Shareholders") are comprised by the Norwegian participation exemption. Under the exemption, only 3% of dividend income on shares comprised by the Norwegian participation exemption is subject to tax as ordinary income (22% flat rate as of 2019), implying that such dividends are effectively taxed at a rate of 0.66%. The shares in a non-Norwegian company, such as the Company, will be comprised by the Norwegian participation exemption provided that the Company is a limited liability company (or a similar entity) which is incorporated and performs genuine economic activity within the EEA.
For Norwegian Corporate Shareholders that are considered to be "Financial Institutions" under the Norwegian financial activity tax the effective rate of taxation for dividends is 0.75%.
Dividends distributed to shareholders who are individuals resident in Norway for tax purposes ("Norwegian Individual Shareholders") are grossed up with a factor of 1.44 before taxed as ordinary income (22% flat rate, resulting in an effective tax rate of 31.68%) to the extent the dividend exceeds a tax-free allowance.
The tax-free allowance is calculated on a share-by-share basis for each individual shareholder on the basis of the cost price of each of the Shares multiplied by a risk-free interest rate. The risk-free interest rate is based on the effective rate of interest on treasury bills (Nw.: statskasseveksler) with three months maturity plus 0.5 percentage points, after tax. The tax-free allowance is calculated for each calendar year and is allocated solely to Norwegian Individual Shareholders holding Shares at the expiration of the relevant calendar year. Norwegian Individual Shareholders who transfer Shares will thus not be entitled to deduct any calculated allowance related to the year of transfer. Any part of the calculated tax-free allowance one year exceeding the dividend distributed on the Share ("unused allowance") may be carried forward and set off against future dividends received on (or gains upon realization of, see below) the same Share. Any unused allowance will also be added to the basis of computation of the tax-free allowance on the same Share the following year.
If certain requirements are met, Norwegian Individual Shareholders are entitled to a tax credit in the Norwegian tax for withholding tax imposed on the dividends distributed in the jurisdiction where the Company is resident for tax purposes. However, any tax exceeding the withholding tax rate according to an applicable tax treaty with the country in which the Company is resident will not be deductible.
The Shares will not qualify for Norwegian share saving accounts (Nw.: aksjesparekonto) for Norwegian Individual Shareholders as the shares are listed on Euronext Growth (and not Oslo Børs).
Sale, redemption or other disposal of Shares is considered as a realization for Norwegian tax purposes.
Capital gains generated by Norwegian Corporate Shareholders through a realization of shares comprised by the Norwegian participation exemption are tax exempt. Net losses from realization of Shares and costs incurred in connection with the purchase and realization of such shares are not tax deductible for Norwegian Corporate Shareholders. The shares in a non-Norwegian company, such as the Company, will be comprised by the Norwegian participation exemption provided that the Company is a limited liability company (or a similar entity) which is incorporated and performs genuine economic activity within the EEA.
Norwegian Individual Shareholders are taxable in Norway for capital gains derived from realization of Shares, and have a corresponding right to deduct losses. This applies irrespective of how long the Shares have been owned by the individual shareholder and irrespective of how many Shares that are realized. Gains are taxable as ordinary income in the year of realization and losses can be deducted from ordinary income in the year of realization. Any gain or loss is grossed up with a factor of 1.44 before being taxed at a rate of 22% (resulting in an effective tax rate of 31.68%. Under current tax rules, gain or loss is calculated per Share, as the difference between the consideration received for the Share and the Norwegian Individual Shareholder's cost price for the Share, including costs incurred in connection with the acquisition or realization of the Share. From a capital gain, Norwegian Personal Shareholders are entitled to deduct a calculated allowance provided that such allowance has not already been used to reduce taxable dividend income. Please refer to "Taxation of dividends — Norwegian Individual Shareholders" above for a description of the calculation of the allowance. The allowance may only be deducted in order to reduce a taxable gain, and cannot increase or produce a deductible loss, i.e. any unused allowance exceeding the capital gain upon the realisation of a share will be annulled. Further, unused tax-free allowance related to a Share cannot be set off against gains from realization of other Shares.
If a Norwegian shareholder realizes Shares acquired at different points in time, the Shares that were first acquired will be deemed as first sold (the "first in first out"-principle) upon calculating taxable gain or loss. Costs incurred in connection with the purchase and sale of Shares may be deducted in the year of sale.
A shareholder who ceases to be tax resident in Norway due to domestic law or tax treaty provisions may become subject to Norwegian exit taxation of capital gains related to shares in certain circumstances.
The Shares will not qualify for Norwegian share saving accounts (Nw.: aksjesparekonto) for Norwegian Individual Shareholders as the shares are listed on Euronext Growth (and not Oslo Børs).
The value of Shares is taken into account for net wealth tax purposes in Norway. The marginal net wealth tax rate is currently 0.85% of the value assessed. The value for assessment purposes for the Shares is equal to 55% of the assumed sales value of the Shares as of 1 January of the tax assessment year (i.e. the year following the relevant fiscal year) unless otherwise requested by the shareholder.
If requested by the shareholder, the value for assessment purposes may instead be equal to the total tax value of the Company as of 1 January of the year before the tax assessment year, or if the share capital in the Company has been increased or reduced by payment from or to shareholders in the year before the tax assessment year, the value for assessment purposes for the Shares may be equal to 55% of the total tax value of the Company as of 1 January of the tax assessment year. In order to request such valuation, the shareholder must be able substantiate the total tax value of the Company.
The value of debt allocated to the Shares for Norwegian wealth tax purposes is reduced correspondingly (i.e. to 55%).
Norwegian limited liability companies and similar entities are exempted from net wealth tax.
As a general rule, dividends received by non-Norwegian tax resident shareholders from shares in non-Norwegian companies are not subject to Norwegian taxation unless the Non-Norwegian Shareholder holds the shares in connection with the conduct of a trade or business in Norway.
As a general rule, capital gains or loss derived from the sale or other disposal of shares in a Non-Norwegian company by a Non-Norwegian Shareholder will not be subject to taxation in Norway unless the Non-Norwegian Shareholder holds the shares in connection with business activities carried out or managed from Norway.
As a consequence of the following restrictions, prospective investors are advised to consult legal counsel prior to making any offer, resale, pledge or other transfer of the Shares admitted to trading on Euronext Growth.
The Company is not taking any action to permit a public offering of the Shares in any jurisdiction. Receipt of this Information Document does not constitute an offer and this Information Document is for information only and should not be copied or redistributed. If an investor receives a copy of this Information Document, the investor may not treat this Information Document as constituting an invitation or offer to it, nor should the investor in any event deal in the Shares, unless, in the relevant jurisdiction, the Shares could lawfully be dealt in without contravention of any unfulfilled registration or other legal requirements. Accordingly, if an investor receives a copy of this Information Document, the investor should not distribute or send the same, or transfer Shares, to any person or in or into any jurisdiction where to do so would or might contravene local securities laws or regulations.
The Shares have not been and will not be registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction in the United States, and may not be offered or sold except: (i) within the United States to QIBs in reliance on Rule 144A or pursuant to another available exemption from the registration requirements of the U.S. Securities Act; or (ii) outside the United States to certain persons in offshore transactions in compliance with Regulation S under the U.S. Securities Act, and, in accordance with any applicable securities laws of any state or territory of the United States or any other jurisdiction. Accordingly, the Euronext Growth Advisor has represented and agreed that it has not offered or sold, and will not offer or sell, any of the Shares as part of its allocation at any time other than (i) within the United States to QIBs in accordance with Rule 144A or (ii) outside of the United States in compliance with Rule 903 of Regulation S. Transfer of the Shares will be restricted and each purchaser of the Shares in the United States will be required to make certain acknowledgements, representations and agreements, as described under Section 12.3.1 ("United States").
No Shares have been offered or will be offered pursuant to an offering to the public in the United Kingdom, except that the Shares may be offered to the public in the United Kingdom at any time in reliance on the following exemptions under the UK Prospectus Regulation:
provided that no such offer of the Shares shall result in a requirement for the Company or Euronext Advisor to publish a prospectus pursuant to Section 85 of the FSMA or supplement a prospectus pursuant to Article 23 of the UK Prospectus Regulation.
For the purposes of this provision, the expression an "offer to the public" in relation to the Shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and any Shares to be offered so as to enable an investor to decide to purchase or subscribe for any Shares and the expression "UK Prospectus Regulation" means Regulation (EU) 2017/1129 as it forms part of domestic law by virtue of the European Union (Withdrawal) Act 2018.
The Euronext Growth Advisor has represented, warranted and agreed that:
a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated any invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) in connection with the issue or sale of any Shares in circumstances in which Section 21(1) of the FSMA does not apply to the Company; and
b) it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Shares in, from or otherwise involving the United Kingdom.
In no member state (each a "Relevant Member State") of the EEA have Shares been offered and in no Relevant Member State will Shares be offered to the public pursuant to an offering, except that Shares may be offered to the public in that Relevant Member State at any time in reliance on the following exemptions under the EU Prospectus Regulation:
provided that no such offer of Shares shall result in a requirement for the Company or Euronext Growth Advisor to publish a prospectus pursuant to Article 3 of the EU Prospectus Regulation or supplementary prospectus pursuant to Article 23 of the EU Prospectus Regulation.
For the purpose of this provision, the expression an "offer to the public" in relation to any Shares in any Relevant Member State means a communication to persons in any form and by any means presenting sufficient information on the terms of the an offering and the Shares to be offered, so as to enable an investor to decide to acquire any Shares.
This EEA selling restriction is in addition to any other selling restrictions set out in this Information Document.
The Shares may not be offered, sold, resold, transferred or delivered, directly or indirectly, in or into, Switzerland, Japan, Canada, Australia or any other jurisdiction in which it would not be permissible to offer the Shares.
In jurisdictions outside the United States and the EEA where an offering would be permissible, the Shares will only be offered pursuant to applicable exceptions from prospectus requirements in such jurisdictions.
The Shares have not been, and will not be, registered under the U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction in the United States, and may not be offered or sold except: (i) within the United States only to QIBs in reliance on Rule 144A or pursuant to another exemption from the registration requirements of the U.S. Securities Act; and (ii) outside the United States in compliance with Regulation S, and in each case in accordance with any applicable securities laws of any state or territory of the United States or any other jurisdiction. Terms defined in Rule 144A or Regulation S shall have the same meaning when used in this section.
Each purchaser of the Shares outside the United States pursuant to Regulation S will be deemed to have acknowledged, represented and agreed that it has received a copy of this Information Document and such other information as it deems necessary to make an informed investment decision and that:
The purchaser acknowledges that the Shares have not been and will not be registered under the U.S. Securities Act, or with any securities, regulatory authority or any state of the United States, subject to certain exceptions, may not be offered or sold within the United States.
The purchaser is, and the person, if any, for whose account or benefit the purchaser is acquiring the Shares, was located outside the United States at the time the buy order for the Shares was originated and continues to be located outside the United States and has not purchased the Shares for the account or benefit of any person in the United States or entered into any arrangement for the transfer of the Shares or any economic interest therein to any person in the United States.
Each purchaser of the Shares within the United States purchasing pursuant to Rule 144A or another available exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act will be deemed to have acknowledged, represented and agreed that it has received a copy of this Information Document and such other information as it deems necessary to make an informed investment decision and that:
If, in the future, the purchaser decides to offer, resell, pledge or otherwise transfer such Shares, or any economic interest therein, as the case may be, such Shares or any economic interest therein may be offered, sold, pledged or otherwise transferred only (i) to a person whom the beneficial owner and/or any person acting on its behalf reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, (ii) outside the United States in a transaction meeting the requirements of Regulation S, (iii) in accordance with Rule 144 (if available), (iv) pursuant to any other exemption from the registration requirements of the U.S. Securities Act, subject to the receipt by the Company of an opinion of counsel or such other evidence that the Company may reasonably require that such sale or transfer is in compliance with the U.S. Securities Act or (v) pursuant to an effective registration statement under the U.S. Securities Act, in each case in accordance with any applicable securities laws of any state or territory of the United States or any other jurisdiction.
The purchaser is not an affiliate of the Company or a person acting on behalf of such affiliate, and is not in the business of buying and selling securities or, if it is in such business, it did not acquire the Shares from the Company or an affiliate thereof in the initial distribution of such Shares.
Each person in a Relevant Member State who receives any communication in respect of, or who acquires any Shares under, the offers contemplated in this Information Document will be deemed to have represented, warranted and agreed to and with the Euronext Growth Advisor and the Company that:
For the purpose of this representation, the expression an "offer to the public" in relation to any Shares in any Relevant Member State means a communication to persons in any form and by any means presenting sufficient information on terms of an offering and the Shares to be offered, so as to enable an investor to decide to acquire any Shares.
On 31 January 2021, the Company applied for Admission to Euronext Growth. The first day of trading on Euronext Growth is expected to be on or about 18 February 2021.
Apart from the Company's Shares being listed on Euronext Amsterdam, neither the Company nor any other entity of the Group have securities listed on any stock exchange or other regulated market place.
In this Information Document, certain information has been sourced from third parties. The Company confirms that where information has been sourced from a third party, such information has been accurately reproduced and that as far as the Company is aware and is able to ascertain from information published by that third party, no facts have been omitted that would render the reproduced information inaccurate or misleading. Where information sourced from third parties has been presented, the source of such information has been identified.
The Company confirms that no statement or report attributed to a person as an expert is included in this Information Document.
The Company's independent auditor is KPMG Accountants N.V. (registered in the Trade Register of the Dutch Chamber of Commerce with company registration number 33263683, and registered business address at Laan van Langerhuize 1, 1186 DS Amstelveen, Netherland). KPMG Accountants N.V. has been the Company's independent auditor since 2019.
The Company has engaged Carnegie AS (business registration number 936 310 974, and registered business address at Aker Brygge Fjordalléen 16, 0250 Oslo, Norway) as the Euronext Growth Advisor.
Advokatfirmaet Thommessen AS (business registration number 957 423 248, and registered business address at Haakon VIIs gate 10, N-0116 Oslo, Norway) is acting as the Norwegian legal counsel to the Company. The Company's Dutch legal counsel is Bird & Bird (Netherlands) LLP (registered in the Trade Register of the Dutch Chamber of Commerce with company registration number 74212044, and registered business address at Zuid-Hollandplein 22, 2596 AW, the Netherlands).
When used in this Information Document, the following defined terms shall have the following meaning:
| Admission | The admission to trading of the Company's shares on Euronext Growth. |
|---|---|
| AFM | Netherlands Authority for the Financial Markets. |
| Appropriate Channels for Distribution | Has the meaning ascribed to such term under "Important Information". |
| Articles of Association | Articles of Association of the Company as of 5 July 2013. |
| Board of Directors | The board of directors of the Company. |
| Board Members | The members of the Board of Directors. |
| Box 1 rate | Has the meaning ascribed to such term under Section 11.1.1.3. |
| Box 2 rate | Has the meaning ascribed to such term under Section 11.1.1.3. |
| CEO | Chief Executive Officer. |
| Code | The Dutch Corporate Governance Code of December 2016 effective 1 January 2017 |
| Company | Envipco Holding N.V. |
| Covid-19 | Coronavirus SARS-CoV-2 |
| Depository Receipts | Depository receipts (Nw.: depotbevis) that represent the beneficial interests in the |
| underlying Shares, registered in VPS in book-entry form | |
| DRS | Deposit Return Scheme |
| EEA | European Economic Area. |
| Envipco | The Company. |
| EU Prospectus Regulation | Regulation (EU) 2017/1129 of the European Parliament and of the Council of 14 June |
| 2017 on the prospectus to be published when securities are offered to the public or | |
| admitted to trading on a regulated market, and repealing Directive 2003/71/EC. | |
| EU-IFRSs | International Financial Reporting Standards as adopted by the European Union |
| EUR | Euro, the lawful common currency of the Member States who have adopted the |
| Euro as their sole national currency. | |
| Euronext Advisor | Carnegie AS. |
| Euronext Growth | The multilateral trading facility for equity instruments operated by Oslo Børs ASA. |
| Euronext Growth Admission Rules | Admission to trading rules for Euronext Growth as of 30 November 2020. |
| Euronext Growth Content Requirements | Content requirements for Admission Documents for Euronext Growth as of March |
| 2020. | |
| Executive Director | Has the meaning ascribed to such term under Section 9.1. |
| Executive Management | The members of the Group's executive management team. |
| Financial Information | The Financial Statements and Interim Financial Statements together. |
| Financial Statements | The 2019 Financial Statements and 2018 Financial Statements. |
| FSMA | The Financial Services and Markets Act 2000. |
| GDPR | General Data Protection Regulation (EU) 2016/679. |
| Group | The Company together with its subsidiaries. |
| Information Document | This Information document, dated 11 February 2021. |
| Interim Financial Statements | Unaudited consolidated financial statements for the nine months ended 30 |
| September 2020. | |
| IP | Intellectual property. |
| LEI | Legal Entity Identifier. |
| Market Abuse Regulation | Market Abuse Regulation (no. 596/2014). |
| MiFID II | EU Directive 2014/65/EU on markets in financial instruments, as amended. |
| MiFID II Product Governance | MiFID II, Articles 9 and 10 of Commission Delegated Directive (EU) 2017/593 |
| Requirements | supplementing MiFID II and local implementing measures. |
| Negative Target Market | Has the meaning ascribed to such term under "Important Information". |
| NOK | Norwegian kroner, the currency of the Kingdom of Norway. |
| Non-Executive Director | Has the meaning ascribed to such term under Section 9.1. |
| Non-Resident Shareholders | Shareholders who are not resident in Norway for tax purposes. |
| Norwegian Corporate Shareholders | Shareholders who are limited liability companies (and certain similar entities) |
| domiciled in Norway for tax purposes. | |
| Norwegian Individual Shareholders | Norwegian Shareholders other than Norwegian Corporate Shareholders. |
| Norwegian Securities Trading Act | The Norwegian Securities Trading Act of 29 June 2007 no. 75 (as amended) (Nw.: |
| verdipapirhandelloven). | |
| Norwegian Securities Trading Regulation | The Norwegian Securities Trading Regulation of 29 June 2007 no 876 (as amended) |
| (Nw.: verdipapirforskriften). | |
Norwegian Shareholders |
Shareholders who are resident in Norway for tax purposes. |
| Oslo Børs (or OSE) | Oslo Børs ASA. |
| PET | Polyethylene terephthalate. |
| Positive Target Market | Has the meaning ascribed to such term under "Important Information". |
| Private Placement | Has the meaning ascribed to such term under Section 6 ("The Private Placement"). |
|---|---|
| Regulated Market | Means a regulated market in meaning of EU Directive 2014/65/EU on markets in |
| financial instruments, as amended ("MiFID II"). | |
| Relevant Member State | Each Member State of the European Economic Area which has implemented the EU |
| Prospectus Directive. | |
| RVMs | Reverse Vending Machines |
| SEEH | Stichting Employees Envipco Holding |
| Shares (or Share) | Means the shares of the Company, each with a nominal value of 0.50, or any one of |
| them. | |
| Target Market Assessment | Negative Target Market together with the Positive Target Market. |
| United States (or US) | The United States of America. |
| VPS | The Norwegian Central Securities Depository (Nw.: Verdipapirsentralen). |
| VPS Registrar | DNB Bank ASA, DNB Markets Registrars department, with registered address |
| Dronning Eufemias gate 30, 0191 Oslo, Norway | |
| 2018 Financial Statements | The Company's audited consolidated financial statements for the financial years |
| ended 31 December 2018 | |
| 2019 Financial Statements | The Company's audited consolidated financial statements for the financial years |
| ended 31 December 2019 |
***
| STATUTEN Andre Experiment Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contract Contra | |
|---|---|
| NAAM EN ZETEL ——————————————— | |
| Artikel 1 — | |
| $\mathfrak{l}$ . $\mathfrak{l}$ | De vennootschap is genaamd: Envipco Holding N.V. ---------------------------------- |
| $\frac{1}{2}$ | Zij is gevestigd te Amsterdam. - and a series of the series of the series of the series of the series of the series of the series of the series of the series of the series of the series of the series of the series of the |
| $DOEL$ —— | |
| Artikel 2 — — — — — — — — — — — — — — — — — — | |
| De vennootschap heeft ten doel: ------------------------------------ | |
| L. | het deelnemen in-, het financieren van-, het samenwerken met-, het voeren van |
| directie over- en het verlenen van adviezen en andere diensten aan rechtsper- - | |
| sonen of andere ondernemingen; example and and and and and and and and and and | |
| λ, | het verkrijgen, exploiteren en vervreemden van industriële en intellectuele ei-- gendomsrechten; ------------------------------------ |
| ļ, | het verstrekken van zekerheden voor schulden en andere verplichtingen van - |
| rechtspersonen of andere vennootschappen die met de vennootschap in een - | |
| groep verbonden zijn en derden, entwerpenden zijn en derden aan de staat zijn en derden zijn en derden zijn en | |
| Ismede het verrichten van al hetgeen met het vorenstaande verband houdt of daartoe - | |
| evorderlijk kan zijn, alles in de ruimste zin van het woord. —————————————— | |
| EXAPITAAL EN AANDELEN | |
| the control of the control of the control of Artikel $3 -$ |
|
| ,1 | Het maatschappelijk kapitaal van de vennootschap bedraagt vier miljoen euro - |
| (EUR 4.000.000), verdeeld in acht miljoen (8.000.000) gewone aandelen, elk - | |
| nominaal groot vijftig eurocent (EUR 0,50). ------------------------------------ | |
| 3.2 | De vennootschap verleent medewerking aan de uitgifte van certificaten van - |
| aandelen in haar kapitaal vanaf vijftien december tweeduizend acht. - - - - - - - | |
| Onder de vergadergerechtigden wordt in de statuten van deze vennootschap - | |
| verstaan: houders van met medewerking van de vennootschap uitgegeven cer-- | |
| tificaten van aandelen, alsmede aandeelhouders. - | |
| , 3 | Aandelen in de vennootschap kunnen worden verpand. - - - - - - - - - - - - - - - - - - - |
| ,4 | Aan de vruchtgebruiker van aandelen kan het stemrecht niet worden toegekend |
| en de vruchtgebruiker heeft niet de rechten die de wet toekent aan houders van | |
| met medewerking van de vennootschap uitgegeven certificaten van aandelen. - | |
| REGISTER VAN AANDEELHOUDERS ———————————————————————————————————— | |
| Artikel 4 - | |
| $\mathbf{L}$ | De aandelen luiden op naam en zijn doorlopend genummerd van 1 af. ------- |
| volgestorte aandelen in haar kapitaal te verkrijgen. INDERING VAN HET GEPLAATSTE KAPITAAL- $7 -$ |
|---|
| De algemene vergadering kan besluiten tot vermindering van het geplaatste — |
| kapitaal door intrekking van aandelen of door het bedrag van aandelen bij sta-- |
| tutenwijziging te verminderen. In dit besluit moeten de aandelen waarop het - |
| besluit betrekking heeft, worden aangewezen en moet de uitvoering van het - |
| besluit zijn geregeld. ______ |
| Een besluit tot intrekking van aandelen kan slechts betreffen aandelen die de- vennootschap zelf houdt of waarvan zij de certificaten houdt. - aantal en aangele |
| Gedeeltelijke terugbetaling op aandelen of ontheffing van de verplichting tot $-$ |
| storting is slechts mogelijk ter uitvoering van een besluit tot vermindering van |
| het bedrag van de aandelen. Zulk een terugbetaling of ontheffing moet naar — |
| evenredigheid op alle aandelen geschieden. - |
| Van het vereiste van evenredigheid mag worden afgeweken met instemming - |
| van alle betrokken aandeelhouders. ---------- |
| $\overline{\text{UR}}$ |
| 1980 - Jan James Bernstein, martin a x |
| De vennootschap heeft een bestuur bestaande uit één of meer uitvoerende be-- |
| stuurders en één of meer niet uitvoerende bestuurders. Alleen natuurlijke per-- |
| sonen kunnen niet uitvoerende bestuurders zijn. |
| De niet uitvoerende bestuurders wijzen uit hun midden een voorzitter aan van - het bestuur. |
| TT-4 T = 400000 at 14000 4 to 10 the continuity of 11.4 Think and the host individual and the |
| Behoudens de beperkingen volgens deze statuten is het bestuur belast met het |
|---|
| besturen van de vennootschap. |
Interim Financial Report | Third Quarter & Nine Months 2020
| Highlights | 1 |
|---|---|
| Business Segment Review | 3 |
| Market Outlook |
3 |
| Risks and Uncertainties |
4 |
| Capital & Shareholding | 4 |
| Consolidated Statement of Comprehensive Income |
6 |
| Consolidated Balance Sheet |
7 |
| Consolidated Cash Flow Statement |
8 |
| Consolidated Statement of Changes in Equity |
9 |
| Selected Explanatory Notes |
10 |
| in EUR millions | 9M 2020 | 9M 2019 | 3Q 2020 | 3Q 2019 | FY 2019 |
|---|---|---|---|---|---|
| Revenues | 22.78 | 27.56 | 9.15 | 10.14 | 36.25 |
| Gross Profit | 8.43 | 10.57 | 3.85 | 4.29 | 13.55 |
| Gross profit % | 37% | 38% | 42% | 42% | 37% |
| Operating profit/(loss) | (1.46) | (0.14) | 1.11 | 0.74 | (2.58) |
| Net profit/(loss) after taxes after minority | (1.63) | (0.69) | 1.38 | 0.33 | (1.88) |
| EBITDA* | 1.95 | 2.52 | 2.58 | 1.64 | 1.61 |
| Earnings/(loss) per share in € | (0.40) | (0.17) | 0.34 | 0.08 | (0.46) |
| Shareholders' equity | 21.93 | 26.36 | 21.93 | 26.36 | 24.35 |
*Earnings before interest, taxes, depreciation and amortisation
Whilst the business is still impacted by the Covid-19 situation, sustained recovery is starting to be seen both in the US and Europe during Q3. Revenues vs. Prior Year are recovering with Revenue Q3 2020 being 10% down vs. Q3 2019; an improvement on 1HY 2020 which was 22% lower than 1HY 2019. This was driven by recovery in US service and operating throughput revenues and by continued improvement in Europe with a good performance for the Swedish business, which grew 84% in Q3 2020 vs Q3 2019.
Another highlight was profitability of €1.11m in Q3 2020 versus €0.74m in Q3 2019 and increased EBITDA of EUR 2.58m or 28% of revenues compared to Q3 2019 EUR 1.64m or 16% of revenues. This improvement was driven by stable gross profit margin (42% Q3 2020 and Q3 2019), cost control of G&A expenses and lower IP litigation cost.
During this period the business has maintained strict cost controls, as such operating expenses for Q3 2020 decreased to €2.75m compared to €3.56m for Q3 2019, with the largest reductions being in curtailed general and administration costs and lower IP litigation cost.
Revenues for the first nine months of 2020 decreased 17% to €22.78m from €27.56m in 2019.
The North American 2020 business revenues declined 20% for the 9 month period with limited currency impact over this period. The lower North American business revenue is attributable to the Covid-19 impact on lower container throughput business and lower RVM machine sales.
The European platform continues to perform well vs. Prior Year, 2020 revenue growth was 7% higher for the nine months period compared to the same period for 2019.
Gross profit for the 9M 2020 period decreased to €8.43m from €10.57m for the first nine months of 2019 as a result of the Covid-19 impact resulting in lower throughput volume and RVM sales. Gross profit margin was slightly down: 37% for the first nine months of 2020 compared to 38% for the first nine months of 2019, on account of fixed costs and lower manufacturing overhead cost absorption.
The operating profit for 9M 2020 was a loss of (€1.46m) compared to a loss of (€0.14m) for the first nine months of 2019. The North American operating profit at €1.86m for the first nine-months of 2020 was lower compared with €3.46m for the same period in 2019. The European business operating loss reduced to (€1.48m) compared to a loss of (€1.63m) over
this 9M period, driven by higher volumes and reduced expenses. The Holding company expenses decreased to €1.84m for the nine months 2020 compared to €1.97m for the same period in 2019. This nine-month 2020 decrease is principally attributed to savings in IP litigation cost of €0.37m offset by higher other administration costs of €0.24m.
EBITDA decreased to €1.95m from €2.52m for the first nine months of 2020 compared to 2019, though showing strong recovery compared to the previous quarters of 2020, turning EBITDA from negative to positive in Q3 and YTD 2020.
"Whilst we continue to work aggressively to meet the Covid-19 impacts for the company, we are encouraged by the recovery and strengthening of the business seen in Q3 2020. We expect continuing recovery through year end 2020 and a solid start to 2021. We are managing the business carefully in these challenging times, while maintaining our focus on new market development and building our capability in Europe to capture future exciting growth." Simon Bolton, CEO Envipco.
| Nine Months | rd Quarter 3 |
Full Year | |||
|---|---|---|---|---|---|
| in EUR millions | 2020 | 2019 | 2020 | 2019 | 2019 |
| Revenues | 22.78 | 27.56 | 9.15 | 10.14 | 36.25 |
| North America | 19.98 | 24.95 | 7.70 | 9.37 | 32.65 |
| Europe | 2.80 | 2.61 | 1.45 | 0.77 | 3.60 |
| ROW | - | - | - | - | - |
| Gross Profit | 8.43 | 10.57 | 3.85 | 4.29 | 13.55 |
| Gross Profit in % | 37% | 38% | 42% | 42% | 37% |
| Operating expenses excluding | |||||
| new market development costs | 9.16 | 9.69 | 2.54 | 2.97 | 14.73 |
| New market development costs | 0.73 | 1.03 | 0.21 | 0.59 | 1.40 |
| Operating expenses | 9.89 | 10.72 | 2.75 | 3.56 | 16.13 |
| Operating profit/(loss) | (1.46) | (0.14) | 1.11 | 0.74 | (2.58) |
Whilst the Company has seen sustained improvements during Q3 2020, we are subject to continuing negative impacts of Covid-19 and also the potential for further shut-downs and restrictions. This impact is especially seen in North America which could delay full return of the normalised throughput volume until Q1/Q2 of 2021. Our European business is less impacted with Sweden expected to finish a strong year in new machine sales and service revenues from an increasing installed base in 2020. We also continue to engage a number of other European markets for RVM sales in Q4 and early 2021.
Travel restrictions and specific Covid-19 market challenges may have an impact on timing of new European DRS initiatives as well as on the development of several non-deposit markets. We expect the Scottish market opportunity to gain momentum in early 2021 when the administrator is appointed. Consequently, we expect no delay in Scotland of the DRS implementation date of July 2022. The Company has adequate financial resources to continue to execute during these challenging times.
The Company's authorised capital is €4,000,000 divided into 8,000,000 shares, each having a nominal value of €0.50. The issued share capital of the Company currently amounts to €2,048,803.50 divided into 4,097,607 shares, each having a nominal value of €0.50.
The Group has been notified of or is aware of the following 3% or more interest as at 30 September 2020.
| Number of Shares | Shareholding % |
Voting Rights % |
|
|---|---|---|---|
| Alexandre Bouri/Megatrade International SA | 2,168,068 | 52.91 | 52.91 |
| Gregory Garvey | 555,779 | 13.56 | 12.73 |
| Douglas Poling/GD Env LLC | 200,000 | 4.88 | 4.88 |
| B. Santchurn/Univest Portfolio Inc. | 155,480 | 3.79 | 3.79 |
| Otus Capital Management Ltd | 247,727 | 6.05 | 6.05 |
| Lazard Freres Gestion SAS | 222,532 | 5.43 | 5.43 |
Amersfoort, 24 November 2020 Board of Directors Simon Bolton
Envipco Holding N.V. CEO and Executive Board Member
| in EUR thousands | Note | Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | FY 2019 |
|---|---|---|---|---|---|---|
| Revenues | 9,153 | 10,138 | 22,779 | 27,558 | 36,251 | |
| Cost of revenue | (5,303) | (5,852) | (14,353) | (16,991) | (22,699) | |
| Gross Profit | 3,850 | 4,286 | 8,426 | 10,567 | 13,552 | |
| Selling and distribution expenses | (586) | (659) | (1,586) | (1,934) | (1,074) | |
| General and administrative | ||||||
| expenses | (1,738) | (2,504) | (7,519) | (7,938) | (13,762) | |
| Research and development | ||||||
| expenses | (427) | (394) | (787) | (853) | (1,323) | |
| Other income /(expenses) | 6 | 13 | 11 | 20 | 26 | |
| Operating Results | 1,105 | 742 | (1,455) | (138) | (2,581) | |
| Financial expense | (89) | (51) | (281) | (151) | (273) | |
| Financial income | 472 | (53) | 292 | (47) | 93 | |
| Net finance (cost) and or income | 383 | (104) | 11 | (198) | (180) | |
| Results before tax | 1,488 | 638 | (1,444) | (336) | (2,761) | |
| Income taxes | (106) | (304) | (184) | (357) | 882 | |
| Net Results | 1,382 | 334 | (1,628) | (693) | (1,879) | |
| Other comprehensive income | ||||||
| Items that will be reclassified subsequently to profit and loss |
||||||
| Exchange differences on translating | ||||||
| foreign operations | (1,414) | 923 | (797) | 1,076 | 265 | |
| Total other comprehensive income | (1,414) | 923 | (797) | 1,076 | 265 | |
| Total comprehensive income | (32) | 1,257 | (2,425) | 383 | (1,614) | |
| Profit attributable to: | ||||||
| Owners of the parent | ||||||
| Profit/(loss) for the period | 1,384 | 332 | (1,627) | (696) | (1,883) | |
| Non-controlling interests | ||||||
| Profit/(loss) for the period | (2) | 2 | (1) | 3 | 4 | |
| Total | ||||||
| Profit/(loss) for the period | 1,382 | 334 | (1,628) | (693) | (1,879) | |
| Total comprehensive income attributable to: |
||||||
| Owners of the parent | (30) | 1,255 | (2,424) | 380 | (1,619) | |
| Non-controlling interests | (2) | 2 | (1) | 3 | 5 | |
| (32) | 1,257 | (2,425) | 383 | (1,614) | ||
| Number of weighted average (exclude treasury shares) shares |
||||||
| used for calculations of EPS | 4,097,607 | 4,097,607 | 4,097,607 | 4,097,607 | 4,097,607 | |
| - Basic (euro) | 0.34 | 0.08 | (0.40) | (0.17) | (0.46) | |
| - Diluted (euro) | 0.34 | 0.08 | (0.40) | (0.17) | (0.46) | |
| Earnings/(loss) per share for profit attributable to the ordinary equity holders of the parent during the period |
||||||
| - Basic (euro) | 0.34 | 0.08 | (0.40) | (0.17) | (0.46) | |
| - Fully diluted (euro) | 0.34 | 0.08 | (0.40) | (0.17) | (0.46) |
| in EUR thousands | Note | 9M 2020 | 9M 2019 | FY 2019 |
|---|---|---|---|---|
| ASSETS | ||||
| Non-current assets | ||||
| Intangible assets | 6,547 | 6,397 | 6,160 | |
| Property, plant and equipment | 8,622 | 9,249 | 9,668 | |
| Financial assets | 88 | 572 | 208 | |
| Deferred tax assets | 2,812 | 1,911 | 2,934 | |
| Total non-current assets | 18,069 | 18,129 | 18,970 | |
| Current assets | ||||
| Inventory | 10,361 | 11,341 | 10,341 | |
| Trade and other receivables | 12,133 | 13,245 | 9,960 | |
| Cash and cash equivalents | 1,055 | 1,481 | 675 | |
| Total current assets | 23,549 | 26,067 | 20,976 | |
| Total assets | 41,618 | 44,196 | 39,946 | |
| EQUITY | ||||
| Share capital | 2,049 | 2,049 | 2,049 | |
| Share premium | 51,256 | 51,488 | 51,703 | |
| Translation reserves | 3,296 | 4,915 | 4,093 | |
| Legal reserves | 6,147 | 5,915 | 5,700 | |
| Retained earnings | (40,820) | (38,014) | (39,192) | |
| Equity attributable to owners of the parent | 21,928 | 26,353 | 24,353 | |
| Non-controlling interests | 32 | 29 | 32 | |
| Total equity | 21,960 | 26,382 | 24,385 | |
| Liabilities | ||||
| Non-current liabilities | ||||
| Borrowings | (5) | 5,665 | 3,312 | 2,975 |
| Lease commitments | 119 | - | 366 | |
| Other liabilities | 120 | 120 | 120 | |
| Total non-current liabilities | 5,904 | 3,432 | 3,461 | |
| Current liabilities | ||||
| Borrowings | (5) | 2,911 | 1,329 | 1,171 |
| Trade creditors | 6,662 | 9,757 | 6,569 | |
| Accrued expenses | 2,651 | 2,576 | 3,440 | |
| Provisions | 331 | 319 | 314 | |
| Lease commitments | 544 | - | 388 | |
| Tax and social security | 655 | 401 | 218 | |
| Total current liabilities | 13,754 | 14,382 | 12,100 | |
| Total liabilities | 19,658 | 17,814 | 15,561 | |
| Total equity and liabilities | 41,618 | 44,196 | 39,946 |
| in EUR thousands | Note | 9M 2020 | 9M 2019 | FY 2019 |
|---|---|---|---|---|
| Cashflow from operating activities | ||||
| Operating results | (1,455) | (138) | (2,581) | |
| Adjustment for: | ||||
| Amortisation | 803 | 837 | 1,187 | |
| Depreciation | 1,904 | 1,866 | 2,488 | |
| Changes in trade and other receivables | (2,398) | (2,965) | 61 | |
| Changes in inventories | (20) | (2,050) | (1,418) | |
| Changes in provisions | - | 274 | 244 | |
| Changes in trade and other payables | 884 | 2,762 | 1,312 | |
| Changes in other liabilities | - | - | (100) | |
| Cash generated from operations | (282) | 586 | 1,193 | |
| Interest received and paid | (252) | (150) | (189) | |
| Income taxes (payment)/refund | (184) | (357) | (199) | |
| Net cash flow from operating activities | (6) | (718) | 79 | 805 |
| Investing activities | ||||
| Investment in intangible fixed assets | (1,338) | (1,230) | (1,386) | |
| Investments in property, plant & equipment | (1,886) | (1,517) | (1,982) | |
| Net cash flow used in investing activities | (6) | (3,224) | (2,747) | (3,368) |
| Financial activities | ||||
| Changes in borrowings – proceeds | 8,044 | 1,062 | 1,072 | |
| Changes in borrowings – repayments | (3,238) | (1,077) | (1,450) | |
| Changes in lease commitments | (423) | - | (527) | |
| Net cash flow from financing activities | (6) | 4,383 | (15) | (905) |
| Net increase/(decrease) in cash and cash equivalents | 441 | (2,683) | (3,468) | |
| Opening position | 675 | 4,107 | 4,107 | |
| Foreign currency differences on cash and cash | ||||
| equivalents | (61) | 57 | 36 | |
| Closing position | 1,055 | 1,481 | 675 | |
| The closing position consists of: | ||||
| Cash and cash equivalents | 1,055 | 1,481 | 675 | |
| Total closing balance in cash and cash equivalents | 1,055 | 1,481 | 675 |
| in EUR thousands | Share Capital |
Share Premium |
Translation Reserve |
Legal Reserve |
Retained Earnings |
Total | Non Controlling Interests |
Total Equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2020 | 2,049 | 51,703 | 4,093 | 5,700 | (39,192) | 24,353 | 32 | 24,385 |
| Net profit/(loss) for the period |
- | - | - | - | (1,628) | (1,628) | - | (1,628) |
| Other comprehensive income |
||||||||
| - Currency translation adjustment |
- | - | (797) | - | - | (797) | - | (797) |
| Total recognised movements for the period |
||||||||
| ended 30 September 2019 Legal reserve |
- | - (447) |
(797) | - 447 |
(1,628) | (2,425) - |
- | (2,425) - |
| Balance at 30 September 2020 |
2,049 | 51,256 | 3,296 | 6,147 | (40,820) | 21,928 | 32 | 21,960 |
| Q3 2020 | Q3 2019 | 9M 2020 | 9M 2019 | FY 2019 | |
|---|---|---|---|---|---|
| Opening Balance | 21,992 | 25,125 | 24,385 | 25,999 | 25,999 |
| Net profit/(loss) for the period | 1,382 | 334 | (1,628) | (693) | (1,879) |
| Other comprehensive income: | |||||
| - Currency translation adjustment | (1,414) | 923 | (797) | 1,076 | 265 |
| Total recognised movements for the period | (32) | 1,257 | (2,425) | 383 | (1,614) |
| Closing Balance | 21,960 | 26,382 | 21,960 | 26,382 | 24,385 |
Envipco Holding N.V. is a public limited liability company incorporated in accordance with the laws of The Netherlands, with its registered address at Arnhemseweg 10, 3817 CH Amersfoort, The Netherlands.
Envipco Holding N.V. and Subsidiaries ("the Company" or "Envipco") are engaged principally in Recycling in which it develops, manufactures, assembles, leases, sells, markets and services a line of "reverse vending machines" (RVMs) mainly in the USA and Europe.
The consolidated interim financial information for the nine months ended 30 September 2020 has been prepared in accordance with IAS 34 "interim financial reporting." The consolidated interim financial information should always be read in conjunction with the annual financial statements for the year ended 31 December 2019, which have been prepared in accordance with IFRS as endorsed by the European Union.
All financial information is reported in thousands of euros unless stated otherwise.
Except as set out below, the accounting policies of these interim financial statements are consistent with the annual financial statements for the year ended 31 December 2019.
In accordance with the provisions of IFRS 8, the segments are identified based on internal reporting. The senior management board has been identified as the chief operating decision-maker. The senior management board reviews internal reporting on a periodical basis. The Group's two segments are the RVM and Holding company functions.
| in EUR thousands | RVM Segment | Holding Segment | Total |
|---|---|---|---|
| Segment Results – 30 September 2020 | |||
| Revenue from external customers | 22,779 | - | 22,779 |
| Other income/(expenses) | 11 | - | 11 |
| Depreciation & amortization | 1,904 | 803 | 2,707 |
| Net profit attributable to owners of the parent | (132) | (1,496) | (1,628) |
| Segment Assets – 30 September 2020 | 34,424 | 7,194 | 41,618 |
| Segment Results – 30 September 2019 | |||
| Revenue from external customers | 27,558 | - | 27,558 |
| Other income/(expenses) | 20 | - | 20 |
| Depreciation & amortization | 1,866 | 837 | 2,703 |
| Net profit attributable to owners of the parent | 1,339 | (2,032) | (693) |
| Segment Assets – 30 September 2019 | 36,981 | 7,215 | 44,196 |
There is a loan receivable of €0.69m due from an affiliate under common control of the majority shareholder.
| in EUR thousands | 9 months to 30 Sep 2020 |
9 months to 30 Sep 2019 |
|---|---|---|
| At beginning of period | 4,146 | 4,434 |
| Additions | 8,044 | 1,062 |
| Repayments | (3,238) | (1,077) |
| Translation effect | (376) | 222 |
| At end of period | 8,576 | 4,641 |
The group generated a negative €0.72m cash from its operating activities for the first nine months of 2020 versus a positive €0.08m for the same period in 2019. Investments in tangible and intangible assets were €3.22m for the nine months of 2020 (first nine months 2019 - €2.75m). Net borrowings were €4.81m for the nine months 2020 compared to net debt repayment of €0.02m in the nine months of 2019.
| Chief Executive Officer Statement | 2 |
|---|---|
| Report of the Board of Directors | 3 |
| Remuneration Report | 16 |
| Financial Statements | 19 |
| Consolidated Statement of Profit or Loss and Comprehensive Income |
20 |
| Consolidated Statement of Financial Position |
21 |
| Consolidated Statement of Cash Flows |
22 |
| Consolidated Statement of Changes in Equity |
23 |
| Notes to Consolidated Financial Statements | 24 |
| Separate Financial Statements | 65 |
| Separate Statement of Financial Position | 66 |
| Separate Statement of Profit or Loss |
67 |
| Notes to Separate Financial Statements | 68 |
| Other information | 76 |
| Independent Auditor's Report | 77 |
The world is turning from accelerated awareness of the environmental issues of single-use material waste to a call for action to halt the crisis, "The climate emergency is a race we are losing, but it is a race we can win … we have had enough talk … You don't negotiate with nature. This is a climate action summit" United Nations Secretary-General António Guterres1 . This call for action is spreading from supranational movements like Extinction Rebellion2 to youth protests championed by new emerging voices and leadership such as Greta Thurnberg3 . These voices effect political priorities and drive, in the end, to try and find real world solutions. This is where Envipco comes in and we get to work.
With this continued focus on reducing litter and driving recycling rates especially for plastic materials, for example EU targets4 , implementing a deposit return scheme (DRS) that uses reverse vending machines (RVMs) within a circular system is seen as the only really scalable solution. The volumes are staggering, globally we consume nearly 1 Trillion containers per year 5 that
could be recycled through a DRS. To handle such volume the current global systems needs to scale 3-4 times from where they are now, Envipco is determined to help get these systems working well and win a solid share of this market.
It is my pleasure to join the Company at this critical and exciting time. The business had a transitional year last year and, whilst timing changed in several new DRS markets, we continue to strengthen our ability to capitalise on significant potential growth particularly in Europe over the next 5-8 years. Envipco helped invent and shape the RVM concept back in the 70s, and I have already seen in the business the commitment and depth of knowledge about the product and systems that delights our customers. Highlights of 2019 included: implementation of extensive pilot projects in Scotland, official opening of our Greek facility, continued growth and development in our core US market, and largescale roll-out of our innovative Quantum product in Sweden. Envipco has demonstrated the ability to deliver success, we need to work with all our stakeholders to deliver on the opportunity ahead.
In joining a solid business like Envipco, you do so to build on the strong foundation made possible by the previous efforts and support of customers, suppliers, employees, partners, leadership, the Board, and supportive shareholders. Thank you for your efforts over the years and the continued support to the business. I look forward to working with each of you as we embark on the next stage of the journey.
Simon Bolton CEO
Post-note: As this report is released the world finds itself in the grips of an unprecedented global pandemic due to Coronavirus/COVID-19. As a responsible business we are working with government authorities and implementing guidelines to keep customers supported and employees safe. We have a more detailed update in the body of the report, as a Company helped by high recurring revenues, options to work remotely, and an excellent team, we are mitigating the effects of this crisis to the very best of our abilities.
Note: Mr. Simon Bolton will be proposed as an executive board member at the Company's next AGM.
Ref:
1 – Pre-summit press release, UNs Climate Action Summit, New York, September 2019
2 – https://rebellion.global/
3 – https://www.businessinsider.com/greta-thunberg-bio-climate-change-activist-2019
4 – https://ec.europa.eu/environment/index_en.htm
5 – https://www.nationalgeographic.com/environment
The Board of Directors of the Company hereby presents its director's report for the financial year ended on 31 December 2019.
Envipco Holding N.V. is a public limited liability Company incorporated in accordance with the laws of The Netherlands. Envipco Holding N.V. and its subsidiaries listed on page 31 consist of the Group (hereafter the Group).
Our mission is to provide the most cost-effective and efficient technology solutions for recycling used drinks packaging in order to dramatically increase the reuse of raw materials and conserve our limited natural resources.
Our purpose is to provide global deposit return solutions that are convenient and scalable for every unique application.
Our vision is for a cleaner, more sustainable environment for the next generation.
The Group's principal activity is the design, development and operation of automated solutions to recover used beverage containers which includes:
| 2019 | 2018 | |
|---|---|---|
| in EUR millions Continuing Operations |
||
| Revenues | 36.25 | 35.38 |
| Gross profit | 13.55 | 13.94 |
| Gross profit % | 37.4% | 39.4% |
| Operating profit/(loss) | (2.58) | 2.19 |
| Net profit/(loss) after taxes after minority | (1.88) | 1.85 |
| EBITDA (earnings before interest, taxes, depreciation and amortisation) | 1.61 | 5.48 |
| Earnings/(loss) per share in € | (0.46) | 0.47 |
| Equity | ||
| Shareholders' equity | 24.35 | 25.97 |
| Liquidity ratio (current assets/current liabilities) | 1.73 | 2.11 |
| Total Assets | 39.95 | 40.00 |
The table above including the financial highlights contain the main Key Performance Indicators (KPI's) consisting of revenues, gross profit, net profit, and EBITDA.
Revenues for the full year 2019 increased 2.5% to €36.25m from €35.38m in 2018. The North American business growth was 1.0% for the year 2019. On a constant currency basis, the North American business revenue was down 4.1% for the year ended 2019 compared to 2018. The reduced North American business revenue in constant currency is attributable to lower RVM machine sales and lower commodity prices on our container throughput business. The European revenue growth was 17.6% for the year ended 2019 compared to 2018. The European growth for the year was attributable to strong growth in Sweden.
Gross profit for the full year 2019 decreased to €13.55m from €13.94m for 2018. After adjustment for the favourable USD to EUR currency rate the gross profit declined €1.07m or 7.3% for 2019 compared to 2018.
Gross profit margin was 37.4% for the year 2019 compared to 39.4% in 2018. The gross margin was negatively impacted by lower manufacturing overhead cost absorption in North America and by the mix of RVM machine sales in Europe where Quantum represented a greater percentage of sales.
The operating profit/(loss) for the year 2019 was a loss of (€2.58m) compared to a profit of €2.19m for 2018.
The North American operating profit was €2.89m for 2019 compared to €5.22m for 2018. After adjusting for the Q4 2019 financial charge of €1.0m for the separation agreement with the former CEO and adjusting for the favourable one-time legal settlement of €0.62m realised in 2018, the North American operating profit declined by €0.71m. This decline was attributable to lower RVM machine sales and €0.30m of operating expense increases.
The European business operating profit/(loss) was a loss of (€2.79m) for the year 2019 compared to a loss of (€1.03m) in 2018. The European new market development expenses increased by €0.93m to €1.40m for 2019 from €0.48m in 2018. These costs principally relate to our UK/Scotland organisation in anticipation of the new Scotland DRS legislation and establishment of our Greece European showroom and assembly facility. The operating profit of the European business for 2019 was also negatively impacted by €0.47m of increased R&D expense in support of new DRS opportunities and some reduction in gross margin due to the mix of RVM machine sales.
The Holding Company expenses increased to €2.68m for the year ended 2019 compared to €2.00m for 2018. The 2019 increase is principally attributed to increased IP litigation cost of €0.30m, new CEO recruitment cost of €0.18m and increased R&D amortisation of €0.14m.
Net profit/(loss) after taxes was a loss of (€1.88m) for the year ended 2019 compared to a profit of €1.85m for 2018. The 2019 net loss was favourably impacted by an additional adjustment of €1.11m to recognise the deferred tax asset tied to North America net operating losses.
EBITDA decreased to €1.61m for the year of 2019 compared to €5.48m for 2018. After adjusting the 2018 results for the €0.62m one-time legal settlement and after allowing for the 2019 increases of €0.93m in DRS new market development costs, €1.00m separation agreement cost, increased R&D expense of €0.52m and increased Holding Company cost of €0.48m related to IP litigation and CEO recruitment; the 2019 full year EBITDA results and the 2018 full year EBITDA results are €4.54m and €4.86m respectively.
The Company generated a positive €0.81m cash from its operating activities for the year 2019 versus €4.64m in 2018. Cash generated was negatively impacted by increased market development investments and one-time financial charges along with planned inventory increases of €2.00m tied to completed RVMs and long lead-time components in anticipation of Greece and Scotland market requirements.
The Company's bank financing drawn was €4.15m on 31/12/2019 versus €4.43m on 31/12/2018.
Shareholders' equity at 31/12/2019 of €24.35m decreased by €1.62m from year end 31/12/2018 based on the 2019 net loss offset by a positive translation reserve impact of €0.26m.
The Company is continuing its' extensive preparations for the Scottish DRS legislation. DRS regulations were announced in March 2020 in support of implementation of the law in 2022. Our UK and Scottish management team based out of our Edinburgh showroom is highly engaged in vendor qualifications and planning with major UK grocery chains and independent grocers. The Company has demonstrated the attractiveness and strength of our RVM technology through a number of successful pilots completed and currently operating. Envipco's management team is well positioned to succeed in this important market.
In early December 2019, Envipco opened our facility in Pallini, Greece. We expect continued positive development in this market.
The Company substantially increased its IP litigation costs to €0.80m during the year 2019 as part of several court proceedings. The Company previously received an unfavourable ruling on our patent being litigated. We have since reviewed the German courts report and have now filed an appeal of the court decision. We believe our appeal grounds are well founded and will be successful; accordingly, the Company expects to continue these proceedings.
As previously reported, the new CEO recruitment process has been concluded with Mr. Simon Bolton joining the Company with effect from 17 February 2020. Mr. Bolton will be based in Europe and will lead the establishment of a strong European team to execute the exciting growth potential tied to new DRS legislation.
Operating expenses excluding new market development costs for 2019 increased to €14.76m compared to €11.93m for 2018. The majority of this increase relates to former CEO separation agreement of €1.00m, North America constant currency impact of €0.33m, increased R&D expense of €0.52m and increased Holding expense for IP litigation and CEO recruitment of €0.48m.
Substantial new market development costs of €1.40m were incurred during 2019 compared to €0.48m in 2018. The majority of this cost was surrounding the impending Scottish DRS law and UK market development activities along with cost to establish facilities in Greece. The Company expects to continue to incur new market development costs in Europe around developing DRS opportunities both short and long term.
North American revenues for the year 2019 increased to €32.65m from €32.32m in 2018. On a constant currency basis, North America revenues declined 4.1% for the year 2019. The 2019 decline in revenue was attributable to lower RVM machine sales of €3.65m in 2019 compared €4.31m in 2018. The RVM sales decline is a result of lower new store construction and renovation during the year compared to 2018. The container throughput business volume was stable for the year with revenues of €29.01m compared to €29.52m in 2018 excluding any currency impact. The 2019 container throughput revenue declined as a result of lower commodity prices compared to 2018.
European revenues for the year 2019 increased 17.6% to €3.60m from €3.06m in 2018. For the year 2019, Sweden has performed very well with Quantum sales and service revenue increasing 141% to €3.05m compared to 2018. The 2019 Sweden improvements are a direct result of the success of the Quantum modular concept completed in 2018. The Greece and France markets had minimal RVMs and parts sales in year 2019 compared to sales of €1.40m in 2018. Leveraging our recently completed Greece facility investments and overall increased market activities, we expect meaningful RVM sales to Greece in 2020. Overall, we see strong short and long term growth potential in Europe with sustained Sweden momentum, continued growth in existing markets including Greece and France, and entry into new markets including Scotland/UK.
ROW revenue, which currently reflects the Australian market had no sales during 2019 and 2018. Our Australian distributor has been delayed in implementing RVM services to supplement current manual operations.
The group generated €0.81m cash from its operating activities for the year 2019 versus €4.64m during 2018. Cash flows used in investing activities were €3.37m for the year 2019 (2018: €3.80m). The debt increased during the year by €1.07m (2018: €0.00m) under the line of credit facility and repayments were €1.45m during the year 2019 compared to €1.30m in 2018. Subsequent to year end, the Company has executed a new \$6.00m term loan agreement with its' US banking relationship. The loan proceeds can be utilised for general purpose and European DRS market development expenses and associated inventory requirements. In April 2020 our US subsidiary has received a loan of \$1.80m under government assistance program, with 1% interest over two years with deferred interest and principal payments for first six months. Under this program, subject to certain conditions, a portion or all of the loan might be eligible for forgiveness.
A majority of our current RVM business is dependent upon legislation. The Company may be at risk if such legislation was cancelled, although we have seen no such cancellations in the area where we have operated over the last 20 years. Theoretically this can happen, but we see that even in such an unlikely scenario there will be a notice period which will help the Company plan for any transition. Equally the reverse can also happen as new legislation is implemented in more states and countries.
The Group strategy is to grow and win market share by delivering innovative market solutions at competitive prices along with superior service. The Company may be at risk from competition and new market uncertainties. These risks can be managed by adequate market research to ensure customer acceptance of its products. It also invests consistently in R&D to continually innovate and stay ahead of the competition.
Customers with whom we have long term contracts can go out of business which would have an impact on our costs due to lower volumes. To mitigate the impact, we closely monitor and control our variable costs.
Sharp fluctuation in foreign exchange risk or interest rate risk can impact the cash situation of the Company but is mitigated by proper cash and liquidity management. No hedging is applied to manage foreign exchange and interest rate risk.
Non-availability of lines of credit or restrictions on existing facilities due to breach of covenants or cash to continue to fund projects under a development stage may impact the long-term viability of the Company.
For details on financial risk management, refer to note 5 in the notes to the consolidated financial statements.
We manage our research and development expenditures across our entire product portfolio in accordance with our strategic priorities. We make decisions about whether or not to proceed with development projects on a project-byproject basis. In order to maintain and improve the competitiveness of our product and be able to address the new markets for RVMs in Europe Envipco invests heavily in Research and Development. Envipco has over the last years developed products that are unique in the RVM marketplace and established the Company as the innovation leader. The Quantum platform is the first and only bulk feed RVM with market success in particular in high volume outdoor installations, the Flex series of RVMs represents the most compact full-service machine in the market taking 2 or 3 different material fractions. Our major development project nearing completion is the delivery of a new technology core for our single feed RVMs to bring Envipco ahead of the competition in the full range of products. Research costs are recognised as an expense as incurred. Development costs are capitalised if certain conditions are met as further explained in note 3 of the consolidated financial statements.
At 31 December 2019, we had approximately 186 employees (2018: 180). Envipco recognises the benefits of diversity and is fully committed to providing equal opportunities and treatment for all. The Company has an open and inclusive culture in which diversity is considered to be an added value.
The health and well-being of its employees is an important aspect of Envipco's sustainability strategy. The Company participates through its partners, where possible, wellness programs for the benefits of its employees. Envipco and its employees must act with integrity, honesty and in compliance with the laws, as stipulated in the Company's Code of Conduct, which is available on the Company website.
Envipco interacts frequently with all its stakeholders including investors, employees, partners and local communities in both formal and informal settings.
Envipco is an active and engaged corporate citizen that regularly provides educational tours to school groups, environmental groups and political decision-makers focused on learning more about the recycling process. We offer scholarships and internships to students interested in pursuing environmentally-focused careers and participate in programmes designed to give workers a second chance.
Envipco is always implementing new ways to reduce our carbon footprint. We are a lean manufacturing Company that has improved our facilities with green materials and have several initiatives ongoing to move toward a zero-waste environment.
Envipco RVMs are essential to efficient recycling of beverages through deposit systems and are as such environmental products. All Envipco products are developed and manufactured according to environmental requirements like the Restriction of the Use of certain Hazardous Substances in Electrical and Electronic Equipment (RoHS), and designed for recyclability. In our design efforts we seek to minimise power usage both during operations (efficient compaction) and in idle mode.
A foundation, Stichting Employees Envipco Holding was formed in 2011 with the following Board members:
The New Foundation was set up in the past to establish an employee share based payment plan. No such plan is in place and the Foundation currently has no activities.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Common stock of €0.50 nominal value per share: | ||
| Opening and closing balance | 4,097,607 | 4,097,607 |
During the year 2018 the Company issued 260,000 ordinary shares via private placement. For more details please refer to note 20 of the notes to the consolidated financial statements. No shares have been issued in 2019.
The Group has been notified of or is aware of the following 3% or more interests at 31 December 2019 and 2018.
| 31 December | ||||||
|---|---|---|---|---|---|---|
| 2019 | 2018 | |||||
| Number of Shares |
Shareholding % |
Number of Shares |
Shareholding % |
|||
| A. Bouri/Megatrade International SA | 2,168,068 | 52.91 | 2,171,068 | 52.98 | ||
| G. Garvey | 521,513 | 12.73 | 521,513 | 12.73 | ||
| B. Santchurn/Univest Portfolio Inc | 155,480 | 3.79 | 155,480 | 3.79 | ||
| D. Poling/GD Env LLC | 200,000 | 4.88 | 200,000 | 4.88 | ||
| Otus Capital Management Ltd | 247,727 | 6.05 | 247,727 | 6.05 | ||
| Lazard Freres Gestion SAS | 222,532 | 5.43 | 222,532 | 5.43 |
As per Articles of Association of the Company, the Board comprises of executive and non-executive board members. The Board includes five non-executive and one executive board members. Mr. B. Santchurn left the Company in December 2019. The current Directors of the Company are as follows:
| Non-executive: | Executive: |
|---|---|
| Mr. Dick Stalenhoef |
|
| Mr. Guy Lefebvre |
|
| Mr. David D'Addario |
|
| Mr. Christian Crepet |
Mr. Alexandre Bouri Mr. Gregory Garvey (Chairman)
For further details please click on the link: https://www.envipco.com/investors\_bod in respect of gender, age, nationality, principal position, date of initial appointment and current term.
Based on EU law, the Company is considered to be a Public Interest Entity (in Dutch "Organisatie van Openbaar Belang" or "OOB") as it has issued financial instruments, which are listed on the regulated market of the Euronext Amsterdam and Brussels.
Based on article 2 of the EC directive 2006/43/EC Implementation Decree of 26 July 2008 (the "Decree") concerning audit of annual accounts, the Company has to comply with parts of the Dutch Corporate Governance Code.
The Dutch Corporate Governance Code of December 2016 effective 1 January 2017 (the "Code") was complied with except for the provisions mentioned below. The Code contains principles and best practice provisions for a managing board, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditing, disclosure, compliance with and enforcement of the Code.
The corporate governance code can be accessed athttp://commissiecorporategovernance.nl/information-in-english
Dutch companies admitted to trading on a registered stock exchange or, under certain circumstances, registered on a multilateral trading facility, whether in the Netherlands or elsewhere, are required under Dutch law to disclose in their annual reports whether or not they apply the provisions of the Code and, if and to the extent they do not apply, to explain the reasons why.
The Company acknowledges the importance of good corporate governance. Since 2011 the Company supports the Code (www.envipco.com) and has started to implement the relevant provisions of the Code subject to the exceptions set out below:
The Company does not comply with the following provisions of the Dutch corporate governance code:
II.2.14 The Company has not published on its website the main elements of the service agreements with the executive directors. In view of the size of the Company, the Board of Directors is of the opinion that publishing elements of the salary of executive directors in the financial statements is sufficient.
II.2.2.8 The Company does not have a formal evaluation process for non-executive board, various committees and for executive and non-executive members. In view of the size of the Company, the Board of Directors is of the opinion that this is not necessary.
The Directors confirmed that the Company, except for the above Articles is in compliance with the Code.
The Annual General Meeting of Shareholders must be held within six months after the end of each financial year. The notice convening any General Meeting of Shareholders shall contain an agenda indicating the items for discussion included therein. The notice for convening the General Meeting of Shareholders shall mention the registration date and the manner in which the persons with meeting rights at the General Meeting of Shareholders may procure their registration and the way they may exercise their rights. The registration date is the twenty-eighth day prior to the date of the General Meeting of Shareholders.
Decisions of the General Meeting of Shareholders are taken by a majority of three/fourths of the votes validly cast, except where Dutch law or the Company's Articles of Association provide for a special or greater majority.
Pursuant to the Implementing Decree of 5 April 2006 relating to Article 10 of Directive 2004/25/EC on takeover bids of 21 April 2004 of the European Parliament and the Council of the European Union, Envipco includes the following explanatory notes:
As at 31 December 2019 and 2018 Envipco had issued 4,097,607 ordinary shares. The Company issued 260,000 ordinary shares via private placement during 2018.
There are no physical share certificates issued, except for entries in the shareholders register. The Articles of Association do not provide for any limitation on the transferability of the ordinary shares.
Significant direct and indirect shareholdings are set out in this report under the section 'Substantial Shareholdings'.
Envipco currently does not hold any employee share scheme in which the control rights are not exercised directly by the employees.
The voting right is not subject to any limitation. All shares entitle the holder to one vote per share. No securities with special control rights have been issued. No agreement has been entered with any shareholder that could give rise to any limitation on the transfer of shares and/or voting rights.
Unless otherwise specified by the Articles, all resolutions at the General Meeting of Shareholders shall be passed by a majority of three/fourths of the votes cast.
The appointment, suspension and discharge of the members of the Board of Managing Directors and their remuneration are decided at the General Meeting of Shareholders as per Article 8 of the Articles of Association.
The issue of new shares shall be by a resolution of the General Meeting of Shareholders and subject to the provisions of Article 5 of the Articles of Association.
The Enterprise Chamber may at the request of the Company, any shareholder of the Company, for shares issued with the cooperation of the Company or a foundation or association with full legal capacity which articles promote the interests of such Company, shareholder, order a shareholder who has obtained 30% or more of the Company's voting rights or more to make a public offer in respect of all shares.
The above mentioned obligation for a person acting solely or together with others to make a public offer does not apply according to the Exemption Decree on Public Offers (Vrijstellingbesluit overnamebiedingen Wft) in cases where prior to, but no more than three months prior to, the acquisition of 30% or more of the Company's shares or voting rights, the General Meeting of the Shareholders has approved such acquisition with 95% of the votes cast by others than the acquirer and the person(s) acting with him/her.
After a public offer, pursuant to Section 2:359c of the Dutch Civil Code, a holder of at least 95% of the outstanding shares and voting rights, which has been acquired as a result of a public offer, has the right to require the minority shareholders to sell their shares to him/her.
As a Company dedicated to improving the rates at which the world recycles, Envipco works closely to help all of our clients reach their environmental goals. By helping beverage companies recover significant percentages of their bottles and cans, we have developed customised programs that promote sustainability. Envipco also proactively promotes its comprehensive recycling program and constantly explores new opportunities for greener operations.
Within the communities in which we operate, Envipco is an active and engaged citizen. We recognise our potential role as educators, regularly inviting school groups to tour our manufacturing facility to learn more about the process of recycling. We offer scholarships and internship programs to students interested in pursuing environmentally focused careers.
We have begun setting up the foundation of good corporate social responsibility principles which we intend to adopt as the Company grows. We plan to implement various initiatives to achieve a high level of employee satisfaction, optimising the use of both internal and external resources to have the most efficient carbon foot print while ensuring the adoption of a high code of conduct and ethics relating to all aspects of our business.
The Company subscribes to the highest standards of ethical business conduct and fair and honest dealings with all of its stakeholders: employees, customers, partners, suppliers, shareholders, investors and the community at large. The Code of Conduct sets forth standards to promote honest and ethical conduct, appropriate public disclosures and legal compliance and includes policies related to conflicts of interest, record keeping, use of Company property or resources, and policies regarding fraud, dishonesty or criminal conduct. This code applies to the Company and all its affiliates and provides a mandatory guide for every employee (including every officer) and member of the Board of Directors (BOD Members) that explains your role within the Company as it relates to the work we do and how we interact with one another and those with whom we do business. Full details of the policy is available at: https://www.envipco.com/sr\_pdf/Code-of-Conduct-2019.pdf
The executive board is responsible for establishing and maintaining adequate internal controls. The executive board members are involved in the day to day management. Both these members are responsible to implement the management board's decisions and strategy and are also accountable to the management board for their respective organisations.
Envipco's internal control system is designed to provide reasonable assurance to the Company's management board regarding the preparation and fair presentation of published financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). All internal control systems, no matter how well designed, have inherent limitations, and therefore can provide only reasonable assurance with respect to financial statement preparation and presentation. Management maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with Management's authorisation, assets are safeguarded, and financial records are reliable. Management periodically assesses the effectiveness of the Company's internal controls and believes these to be effective and reliable.
The Company's Management Board consisted of 2 executive and 5 non-executive directors during 2019. The nonexecutive directors shall elect a chairman of the Management Board from among themselves. The Management Board is charged with the management of the Company and is responsible for establishing the Group's strategy and general policies. The executive director is responsible for the day-to-day management of the Company.
In the opinion of the non-executive board, the independence requirements referred to in the best practice provision 2.1.7 to 2.1.9 inclusive have been fulfilled except for in relation to its chairman. There are 2 non-executive board members out of five who are not considered independent.
Currently the Company does not have any female members in the Management Board and does not meet the 30% target. The Company shall be making efforts to appoint female members to its Board. Such efforts for consideration at the June 2020 AGM have been negatively challenged by the COVID-19 travel restrictions.
The Company has established an audit committee which operates pursuant to the terms of reference adopted by the Board of Directors, which are published on the Company's website. The audit committee was established by the Board of Directors on 27 June 2011 and is comprised of three non-executive directors appointed by the Board of Directors. The terms of reference of the audit committee are included in the Board Regulations. The audit committee is chaired by the person appointed thereto by the Board of Directors, provided that this person: i) shall be independent (in the manner prescribed by the Dutch Corporate Governance Code, and set out in the Board regulations), ii) shall not be the chairman of the Board of Directors, nor a former executive director, and iii) shall have the necessary qualifications. The audit committee shall meet at least four times per year, or more frequently according to need. Currently, the audit committee consists of Mr. Stalenhoef as chairperson and Mr. Lefebvre.
Due to the frequent discussions of the audit committee with senior management within the Group and discussions with our external auditors, the committee is satisfied with its oversight on financial reporting, risk management and audit functions of the Group activities, even though no formal procedure is currently in place due to the frequent involvement of the audit committee members with the senior management. It has therefore not completely formalised this part of the governance code.
The Articles of Association of the Company provide for the number of directors to be determined by the Management Board. The remuneration and the terms and conditions of employment for each director are determined at the General Meeting of Shareholders.
The Company is represented by the Management Board or by one executive director.
Meetings of the Management Board are convened upon the request of a member of the Management Board. Resolutions of the Management Board are passed by an absolute majority of votes.
The Company's whistleblower policy can be accessed at its website: https://www.envipco.com/sr\_pdf/Whistleblower-Policy-2019.pdf
Per Article 9 Clause 9.8 of the Articles of Association, the Management Board shall require the approval of the General Meeting of the Shareholders for resolutions concerning a major change such as the amendment of the Articles of Association of the Company.
The General Meeting of Shareholders shall appoint the auditors of the Company.
Subsequent to year end, the Company's US subsidiary has executed a new \$6.00m term loan agreement, with 3.51% interest over five years with its main lender. In April 2020 our US subsidiary has received a loan of \$1.80m under government assistance program, with 1% interest over two years with deferred interest and principal payments for first six months. Under this program, subject to certain conditions, a portion or all of the loan might be eligible for forgiveness.
On 11 March 2020, the World Health Organisation declared the outbreak of coronavirus (COVID-19) pandemic. The US response to COVID-19 has the effect of temporarily suspending enforcement of redemption services in certain US states for retailers. Since mid-March 2020 the impact has been a significant decrease in revenue.
Redemption services however are designated as an essential business which reflects the importance of customers to be able to redeem deposits paid. We expect redemption services to pick-up again when the enforcement suspensions are lifted in the course of 2020. The Company expects this will start to occur in June 2020. The Company has already secured incremental financing in 2020 from a new term loan of EUR 5.4m. After the outbreak of COVID-19 the Company obtained funding under the Coronavirus Aid, Relief, and Economic Security (CARES) Act's Paycheck Protection Program of EUR 1.6m. Currently the Company has sufficient liquidity.
In case redemption service will be suspended for a prolonged period management will take measures to reduce cost levels to meet its covenant for the US activities and delay expenditures relating to the European expansion activities. Considering these measures, combined with the incremental financing obtained in 2020, management has prepared the financial statements based on the going concern assumption. The COVID-19 pandemic however remains a challenge for the global economy and at the date of these financial statements its effects remain subject to levels of uncertainty.
Under the current situation and subject to COVID-19 impact as explained above, the Company continues strengthening the North America performance, to invest in Research and Development, and to growth in the European markets of Sweden, Greece and France. Further growth is anticipated and tied to new DRS legislation becoming effective in a number of European markets. However, due to the ongoing situation with COVID-19, there might be some delays with our plans in potential European markets. As mentioned earlier, uncertainties relating to this COVID-19 situation are likely to impact the 2020 results as well as our investments.
In accordance with best practice II.1.5 of the Dutch corporate governance code of December 2016, the Board of Directors confirms that internal controls over financial reporting provide a reasonable level of assurance that the financial reporting does not contain any material inaccuracies and confirms that these controls functioned properly in the year under review and that there are no indications that they will not continue to do so. The financial statements fairly represent the Company's financial condition and the results of the Company's operations and provide the required disclosures.
It should be noted that the above does not imply that these systems and procedures provide absolute assurance as to the realisation of operational and strategic business objectives, or that they can prevent all misstatements, inaccuracies, errors, fraud and non-compliances with legislation, rules and regulations.
The Company's directors hereby declare that, to the best of their knowledge:
| w.s. Gregory Garvey Chairman |
w.s. Alexandre Bouri | w.s. Dick Stalenhoef | w.s. Guy Lefebvre |
|---|---|---|---|
| w.s. Christian Crepet |
w.s. David D'Addario |
12 May 2020
This Remuneration Report is the first report on remuneration from the Board of Directors reflecting the provisions of EU Shareholder Rights Directive that became effective in the Netherlands in 2019 ("SRD"). Our non-executive directors annually propose the remuneration of the individual executive members of our Board of Directors to the General Meeting of Shareholders. Customary benefits are provided to the management board members in line with respective industry and country practice.
The short-term compensation of the Management Board includes both fixed and variable compensation, which is dependent upon the area of individual responsibility, expertise, position experience, conduct and performance. The variable component of minimum 25% of base salary is discretionary and dependent upon specific performance criteria such as EBITDA and aligned with the long-term performance measure of the Company and reviewed on an annual basis. There is no possibility to reclaim variable compensation.
For 2019 the variable compensation was based on specific performance measures and goals including EBITDA of the US subsidiary, that were met to a certain extent and appropriate bonus based thereon was established.
No long-term compensation plan or share based payment compensation plan is in place.
The compensation for the non-executive directors is not formalised and is based on time spent and amounts charged. Not all non-executive directors claimed compensation for services provided.
The remuneration of the Management Board charged to the result in 2019 was €1,930,000 (2018: €624,000), which and can be specified as follows:
| in EUR thousands | Fixed Salary/fee |
Variable compensation |
Fringe benefits |
Pension cost |
Extraordinary compensation |
Total | Proportion of fixed and variable compensation |
|---|---|---|---|---|---|---|---|
| 2019 | |||||||
| B. Santchurn* | 409 | 274 | 36 | 4 | 1,070 | 1,793 | 25/75 |
| G. Garvey * | 54 | - | - | - | - | 54 | 100/0 |
| C. Crepet | 20 | - | - | - | - | 20 | 100/0 |
| T.J.M. Stalenhoef | 53 | - | - | - | - | 53 | 100/0 |
| G. Lefebvre | 10 | - | - | - | - | 10 | 100/0 |
| A. Bouri | - | - | - | - | - | - | |
| D. D'Addario | - | - | - | - | - | - | |
| Total | 546 | 274 | 36 | 4 | 1,070 | 1,930 | |
| 2018 | |||||||
| B. Santchurn* | 371 | 110 | 26 | 3 | - | 510 | 78/22 |
| G. Garvey* | 51 | - | - | - | - | 51 | 100/0 |
| C. Crepet | 11 | - | - | - | - | 11 | 100/0 |
| T.J.M. Stalenhoef | 42 | - | - | - | - | 42 | 100/0 |
| G. Lefebvre | 10 | - | - | - | - | 10 | 100/0 |
| A. Bouri | - | - | - | - | - | - | |
| D. D'Addario | - | - | - | - | - | - | |
| Total | 485 | 110 | 26 | 3 | - | 624 |
*B. Santchurn and G. Garvey are Executive Directors, Other members of the Board are Non-Executive Directors.
The fixed compensation is annually determined by the non-executive directors. The variable compensation is based on the realisation of set targets. In 2019 the variable pay-out for B. Santchurn was established based on certain specific criteria including EBITDA of our US subsidiary.
Pension entitlements consist of €4,000 (2018: €3,000). Fringe benefits consist of employer contributions of €36,000 (2018: €26,000).
In 2019 a severance payment of €1,070,000 was included in relation to the expiration of the agreement with the former CEO. Non-executive Directors obtain a fixed compensation based on time spent and charged, except for A. Bouri and D. D'Addario.
A loan to Mr. Christian Crepet, a director, of €20,000 given in 2012 with a balance of €1,317 on 31 December 2018 was repaid with interest at Euribor plus 1%, in 2019. A. Bouri, the majority shareholder, received €1,000 (2018: €3,000) as interest on the loan due him from the Company for an amount of €100,000, which was repaid during the year. See note 26 for related party transactions.
The pay ratio of the CEO in compensation with the average total employee benefit cost per employee as required under the Dutch corporate governance system was 27 in 2019 and 11 excluding the severance payment (2018: 8). The pay ratio is calculated as total benefits paid, excluding board compensation, to employee's average benefit expense per employee for the year.
The table below shows the year-on-year change in remuneration of the Board members. Also included is EBITDA for those years as well as the change in employee compensation.
| in EUR thousands | 2015 | 2016 | 2017 | 2018 | 2019 |
|---|---|---|---|---|---|
| Executive Members | |||||
| B. Santchurn | 12% | 10% | 10% | -18% | *42% |
| G. Garvey | -58% | 13% | -3% | -14% | 6% |
| Non-executive Members | |||||
| T.J.M. Stalenhoef | 6% | 6% | 11% | - | 26% |
| G. Lefebvre | - | - | - | - | - |
| A. Bouri | - | - | - | - | - |
| D. D'Addario | - | - | - | - | - |
| C. Crepet | -100% | - | 100% | 10% | 82% |
| EBITDA | -53% | 6% | -7% | 29% | -71% |
| Change in employee average compensation | 16% | 14% | -9% | 11% | 7% |
*Excluding severance payment.
| 31 December | |||||||
|---|---|---|---|---|---|---|---|
| 2019 | 2018 | ||||||
| Number of Shares |
Shareholding % |
Number of Shares |
Shareholding % |
||||
| Alexandre Bouri/Megatrade International SA | 2,168,068 | 52.91 | 2,171,068 | 52.98 | |||
| Gregory Garvey | 521,513 | 12.73 | 521,513 | 12.73 | |||
| B. Santchurn*/Univest Portfolio Inc. | 155,480 | 3.79 | 155,480 | 3.79 | |||
| C. Crepet | 7,012 | 0.17 | 7,012 | 0.17 | |||
| D. D'Addario | 80,451 | 1.96 | 80,451 | 1.96 | |||
| TJM Stalenhoef | 600 | 0.01 | 600 | 0.01 |
*Mr. B. Santchurn's term as executive director expired on 31 December 2019
Financial Statements
| in EUR thousands | Note | FY 2019 | FY 2018 |
|---|---|---|---|
| Revenue | (6) | 36,251 | 35,380 |
| Cost of revenue | (22,699) | (21,441) | |
| Gross Profit | 13,552 | 13,939 | |
| Selling and distribution expenses | (1,074) | (1,118) | |
| General and administrative expenses | (9, 13 & 14) | (13,762) | (10,486) |
| Research and development expenses | (1,323) | (801) | |
| Other income | (8) | 26 | 651 |
| Operating Profit (loss) | (2,581) | 2,185 | |
| Financial expense | (10) | (273) | (269) |
| Financial income | (10) | 93 | 3 |
| Net finance (cost) and or income | (180) | (266) | |
| Profit (loss) before tax | (2,761) | 1,919 | |
| Income taxes | (11) | 882 | (65) |
| Profit (loss) | (1,879) | 1,854 | |
| Other comprehensive income | |||
| Items that will be reclassified subsequently to profit and loss | |||
| Exchange differences on translating foreign operations | 265 | 809 | |
| Total other comprehensive income | 265 | 809 | |
| Total comprehensive income | (1,614) | 2,663 | |
| Profit attributable to: | |||
| Owners of the parent | (1,883) | 1,848 | |
| Non-controlling interest | 4 | 6 | |
| Total | |||
| Profit/(loss) for the period | (1,879) | 1,854 | |
| Total comprehensive income attributable to: | |||
| Owners of the parent | (1,619) | 2,657 | |
| Non-controlling interests | 5 | 6 | |
| (1,614) | 2,663 | ||
| Number of weighted average (exclude treasury shares) shares | |||
| used for calculations of EPS | 4,098 | 3,982 | |
| Earnings/(loss) per share for profit attributable to the ordinary equity holders of the parent during the period |
|||
| - Basic (euro) | (12) | (0.46) | 0.47 |
| - Fully diluted (euro) | (12) | (0.46) | 0.47 |
| Note | FY 2019 | FY 2018 | |
|---|---|---|---|
| in EUR thousands ASSETS |
|||
| Non-current assets | |||
| Intangible assets | (13) | 6,160 | 6,016 |
| Property, plant and equipment | (14) | 9,668 | 9,165 |
| Financial assets | (15) | 208 | 349 |
| Deferred tax assets | (16) | 2,934 | 1,819 |
| Total non-current assets | 18,970 | 17,349 | |
| Current assets | |||
| Inventory | (17) | 10,341 | 8,525 |
| Trade and other receivables | (18) | 9,960 | 10,021 |
| Cash and cash equivalents | (19) | 675 | 4,107 |
| Total current assets | 20,976 | 22,653 | |
| Total assets | 39,946 | 40,002 | |
| EQUITY | |||
| Share capital | (20) | 2,049 | 2,049 |
| Share premium | (20) | 51,703 | 51,874 |
| Translation reserves | (20) | 4,093 | 3,838 |
| Legal reserves | (20) | 5,700 | 5,529 |
| Retained earnings | (20) | (39,192) | (37,318) |
| Equity attributable to owners of the parent | 24,353 | 25,972 | |
| Non-controlling interests | 32 | 27 | |
| Total equity | 24,385 | 25,999 | |
| Liabilities | |||
| Non-current liabilities | |||
| Borrowings | (21) | 2,975 | 3,014 |
| Lease commitments | (21) | 366 | - |
| Other liabilities | (21) | 120 | 220 |
| Total non-current liabilities | 3,461 | 3,234 | |
| Current liabilities | |||
| Borrowings | (21) | 1,171 | 1,420 |
| Trade creditors | 6,569 | 6,406 | |
| Accrued expenses | (24) | 3,440 | 2,554 |
| Provisions | (22) | 314 | 77 |
| Lease commitments | 388 | - | |
| Tax and social security | 218 | 312 | |
| Total current liabilities | 12,100 | 10,769 | |
| Total liabilities | 15,561 | 14,003 | |
| Total equity and liabilities | 39,946 | 40,002 |
| Note | FY 2019 | FY 2018 | |
|---|---|---|---|
| in EUR thousands | |||
| Cashflow from operating activities | |||
| Operating results | (2,581) | 2,185 | |
| Adjustment for: | |||
| Amortisation | (13) | 1,187 | 1,028 |
| Depreciation | (14) | 2,488 | 2,336 |
| Changes in: | |||
| Changes in trade and other receivables | 61 | (269) | |
| Changes in inventories | (1,418) | (583) | |
| Changes in provisions | 244 | 94 | |
| Changes in trade and other payables | 1,312 | 135 | |
| Changes in other liabilities | (100) | - | |
| Cash generated from operations | 1,193 | 4,926 | |
| Interest received and paid | (189) | (223) | |
| Income taxes paid | (199) | (65) | |
| Net cash flow from operating activities | 805 | 4,638 | |
| Investing activities | |||
| Development expenditure, patents | (13) | (1,386) | (1,488) |
| Investments in property, plant & equipment | (14) | (1,982) | (2,307) |
| Net cash flow used in investing activities | (3,368) | (3,795) | |
| Financial activities | |||
| Proceeds from issuance shares | - | 2,711 | |
| Changes in borrowings – proceeds | (21) | 1,072 | - |
| Changes in borrowings – repayments | (21) | (1,450) | (1,298) |
| Changes in lease commitments | (527) | - | |
| Net cash flow from financing activities | (905) | 1,413 | |
| Net increase/(decrease) in cash and cash equivalents | (3,468) | 2,256 | |
| Opening position | 4,107 | 1,788 | |
| Foreign currency differences on cash and cash equivalents | 36 | 63 | |
| Closing position | 675 | 4,107 | |
| The closing position consists of: | |||
| Cash and cash equivalents | (19) | 675 | 4,107 |
| Total closing balance in cash and cash equivalents | 675 | 4,107 |
| in EUR thousands | Share Capital |
Share Premium |
Translation Reserve |
Legal Reserve |
Retained Earnings |
Total | Non Controlling Interests |
Total Equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2018 | 1,919 | 49,718 | 3,019 | 5,104 | (39,157) | 20,603 | 22 | 20,625 |
| Net profit/(loss) for the period | - | - | - | - | 1,848 | 1,848 | 6 | 1,854 |
| Other comprehensive income | ||||||||
| - Currency translation adjustment | - | - | 810 | - | - | 810 | (1) | 809 |
| Total comprehensive income for the period |
- | - | 810 | - | 1,848 | 2,658 | 5 | 2,663 |
| Issuance of shares | 130 | 2,581 | - | - | - | 2,711 | - | 2,711 |
| Legal reserve | - | (425) | - | 425 | - | - | - | - |
| Balance at 31 December 2018 | 2,049 | 51,874 | 3,829 | 5,529 | (37,309) | 25,972 | 27 | 25,999 |
| Changes in equity for 2019 | ||||||||
| Net profit/(loss) for the period | - | - | - | - | (1,883) | (1,883) | 4 | (1,879) |
| Other comprehensive income | ||||||||
| - Currency translation adjustment | - | - | 264 | - | - | 264 | 1 | 265 |
| Total comprehensive income for | ||||||||
| the period | - | - | 264 | - | (1,883) | (1,619) | 5 | (1,614) |
| Legal reserve | - | (171) | - | 171 | - | - | - | - |
| Balance at 31 December 2019 | 2,049 | 51,703 | 4,093 | 5,700 | (39,192) | 24,353 | 32 | 24,385 |
Notes to Consolidated Financial Statements
Envipco Holding N.V. is a public limited liability Company incorporated in accordance with the laws of The Netherlands, with its registered address at Arnhemseweg 10, 3817 CH Amersfoort, The Netherlands (Chamber of Commerce number: 33304225). The Company is a holding Company and is incorporated in Amsterdam.
Envipco Holding N.V. and Subsidiaries ("the Group" or "Envipco") are engaged principally in Recycling in which it develops, manufactures, assembles, leases, sells, markets and services a line of "reverse vending machines" (RVMs) mainly in the USA and Europe.
Under deposit redemption programs in the US, the Company is responsible for the operation of systems to redeem, collect, account for and dispose of used beverage containers. In connection with these programs, participating retailers lease or purchase RVMs from the Company. The Company then acts in a clearinghouse capacity to collect deposits and handling fees on redeemed containers from participating beverage distributors and to distribute deposit refunds and handling fees to participating retailers. Accordingly, deposits and handling fees as paid to the participating retailers are not included as revenue and expense in the consolidated financial statements. The Company earns its revenues through leasing and selling machines to retailers and other participants, and through various services provided to distributors and retailers, including container collection, disposition, and accounting services (See note 6).
These financial statements cover the year 2019, which ended at the balance sheet date of 31 December 2019.
On 11 March 2020, the World Health Organisation declared the outbreak of coronavirus (COVID-19) pandemic. The US response to COVID-19 has the effect of temporarily suspending enforcement of redemption services in certain US states for retailers. Since mid-March 2020 the impact has been a significant decrease in revenue.
Redemption services however are designated as an essential business which reflects the importance of customers to be able to redeem deposits paid. We expect redemption services to pick-up again when the enforcement suspensions are lifted in the course of 2020. The Company expects this will start to occur in June 2020. The Company has already secured incremental financing in 2020 from a new term loan of €5.40m. After the outbreak of COVID-19 the Company obtained funding under the Coronavirus Aid, Relief, and Economic Security (CARES) Act's Paycheck Protection Program of €1.60m. Currently the Company has sufficient liquidity.
In case redemption service will be suspended for a prolonged period management will take measures to reduce cost levels to meet its covenant for the US activities and delay expenditures relating to the European expansion activities. Considering these measures, combined with the incremental financing obtained in 2020, management has prepared the financial statements based on the going concern assumption. The COVID-19 pandemic however remains a challenge for the global economy and at the date of these financial statements its effects remain subject to levels of uncertainty.
The consolidated financial statements of the Company are part of the statutory financial statements of the Company. These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs) and with Section 2:362(9) of the Dutch Civil Code. These Financial Statements have been approved for issue by the Board of Directors on 12 May 2020 and are subject to adoption by the shareholders at the Annual General Meeting of Shareholders. All amounts are in thousands of euros unless stated otherwise.
This is the first set of the Group's annual financial statements in which IFRS 16 Leases has been applied. The related changes to significant accounting policies are described in note 3(a).
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity are disclosed in note 3.
Valuation of assets and liabilities and determination of the result takes place under the historical cost convention. Unless presented otherwise at the relevant principle for the specific balance sheet item, assets and liabilities are presented at amortised costs. Income and expenses are accounted for on accrual basis. Profit is only included when realised on the balance sheet date. Losses originating before the end of the financial year are taken into account if they have become known before preparation of the financial statements. Revenues from goods are recognised upon delivery. The cost of these goods is allocated to the same period. Revenues from services are recognised in proportion to the services rendered. The cost of these services is allocated to the same period.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
• In the principal market for the asset or liability or;
• In the absence of a principal market, in the most advantageous market for the asset or liability;
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
Except for the changes below, the Group has consistently applied the accounting policies set out in note 3 to all periods presented in these consolidated financial statements. The nature and effect of the changes are explained below.
The Group has initially applied IFRS 16 Leasesfrom 1 January 2019. A number of other new standards and amendments are also effective from 1 January 2019 but they do not have a material effect on the Group's financial statements. These new standards and amendments are as follows:
The Group applied IFRS 16 using the modified retrospective approach, under which the cumulative effect of initial application is recognised in retained earnings at 1 January 2019. Accordingly, the comparative information presented for 2018 is not restated – i.e. it is presented, as previously reported, under IAS 17 and related interpretations. The details of the changes in accounting policies are disclosed below. Additionally, the disclosure requirements in IFRS 16 have not generally been applied to comparative information.
A. Definition of a lease
Previously, the Group determined at contract inception whether an arrangement was or contained a lease under IFRIC 4 Determining whether an Arrangement contains a Lease. The Group now assesses whether a contract is or contains a lease based on the definition of a lease as included in IFRS 16.
On transition to IFRS 16, the Group elected to apply the practical expedient to grandfather the assessment of which transactions are leases. The Group applied IFRS 16 only to contracts that were previously identified as leases. Contracts that were not identified as leases under IAS 17 and IFRIC 4 were not reassessed for whether there is a lease under IFRS 16. Therefore, the definition of a lease under IFRS 16 was applied only to contracts entered into or changed on or after 1 January 2019.
B. As a lessee
As a lessee, the Group leases many assets including property, production equipment and IT equipment. The Group previously classified leases as operating or finance leases based on its assessment of whether the lease transferred significantly all of the risks and rewards incidental to ownership of the underlying asset to the Group. Under IFRS 16, the Group recognises right-of-use assets and lease liabilities for most of these leases – i.e. these leases are on-balance sheet.
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone price.
However, for leases of property the Group has elected not to separate non-lease components and account for the lease and associated non-lease components as a single lease component.
Leases classified as operating leases under IAS 17
Previously, the Group classified property leases as operating leases under IAS 17. On transition, for these leases, lease liabilities were measured at the present value of the remaining lease payments, discounted at the Group's incremental borrowing rate as at 1 January 2019. Right-of-use assets are measured at either:
The Group has tested its right-of-use assets for impairment on the date of transition and has concluded that there is no indication that the right-of-use assets are impaired.
The Group used a number of practical expedients when applying IFRS 16 to leases previously classified as operating leases under IAS 17. In particular, the Group:
The Group leases out its own property being mainly RVM machines. The Group has classified these leases as operating leases.
The Group is not required to make any adjustments on transition to IFRS 16 for leases in which it acts as a lessor, except for a sub-lease, which is not applicable for the Group.
D. Impact on financial statements
On transition to IFRS 16, the Group recognised additional right-of-use assets, and additional lease liabilities, recognising the difference (if any) in retained earnings. The impact on transition is summarised below.
| EUR '000 | Impact of adopting IFRS 16 at 1 January 2019 |
|---|---|
| Right-of-use assets – property, plant and equipment | 911 |
| Lease liabilities | 911 |
| Retained earnings | - |
When measuring lease liabilities for leases that were classified as operating leases, the Group discounted lease payments using its incremental borrowing rate at 1 January 2019. The weighted-average rate applied is 8%.
The reconciliation between the operating lease commitments as disclosed under IAS 17 in the Group's consolidated financial statements as at 31 December 2018 and the lease liabilities recognised at 1 January 2019 is as follows:
| EUR '000 | 1 January 2019 |
|---|---|
| Operating lease commitments at 31 December 2018 as disclosed under IAS 17 in the Group's consolidated financial statements |
1,339 |
| Adjustment amounts not included as at 31 December 2018 | (223) |
| Discounted using the incremental borrowing rate at 1 January 2019 | (151) |
| Finance lease liabilities recognised as at 31 December 2018 | 965 |
| – Recognition exemption for leases of low-value assets | (10) |
| – Recognition exemption for leases with less than 12 months of lease term at transition | (44) |
| – Extension options reasonably certain to be exercised | - |
| Lease liabilities recognised at 1 January 2019 | 911 |
| EUR '000 | 2019 |
|---|---|
| Increase in depreciation expense | 442 |
| Increase in interest expense | 68 |
| Decrease in operating expense | (527) |
| Tax impact | - |
| Net impact | (17) |
The impact on the cash flow statement is that an amount of €527,000 is now included as financing cash flow while it was previously included in operating cash flow.
New standards, amendments and interpretations issued but not effective for the financial year beginning 1 January 2019 and not adopted early by the Group:
A number of new standards are effective for annual periods beginning after 1 January 2019 and earlier application is permitted; however, the Group has not early adopted the new or amended standards in preparing these consolidated financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group's consolidated financial statements.
The Group's consolidated statement of cash flows is presented using the indirect method.
The funds in the cash flow statement consist of cash and cash equivalents. Bank overdrafts are included as a component of cash and cash equivalents when the overdrafts are repayable on demand and often fluctuate. Cash flows in foreign currencies are translated at an average rate.
Based on IFRS 10, the Company prepares consolidated financial statements where it controls an entity or entities, as defined under Subsidiaries below, and following the principles of control, it will consolidate an entity irrespective of the nature of the entity. If the Company has the power by way of actual or potential voting rights over an entity, then such entity's results will be consolidated. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single economic entity. InterCompany transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intra-group asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Subsidiaries are all entities (including single economic entities) where the Group has control over an investee, it is classified as a subsidiary. The Company controls an investee, if all three of the following elements are present:
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
InterCompany transactions and balances between Group companies are eliminated.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests. The consolidated balance sheets comprise the financial data of Envipco Holding N.V., Amersfoort, The Netherlands, and the following Group companies:
Envipco (UK) Limited – London, United Kingdom – 100% Envipco Automaten GmbH, Westerkappeln, Germany – 100% Envipco Pickup & Processing Services Inc., Delaware, U.S.A. – 99.85% Environmental Products Corporation, Delaware, U.S.A. – 99.85% Environmental Products Recycling Inc., Delaware, U.S.A. – 99.85% Envipco A.S., Oslo, Norway – 100% Envipco N.D. Inc., Delaware, U.S.A. – 99.85% Envipco Sweden A.B., Borlange, Sweden – 100% Envipco Hellas SA, Athens, Greece – 100% Envipco France SA, Paris, France – 100% Envipco Solutions SRL, Alba Iulia, Romania – 100%
Stichting Employees Envipco Holding (SEEH) is controlled by Envipco Holding N.V. The Board of Stichting Employees Envipco Holding consists of 2 members of the Management Board of Envipco Holding N.V. It is a foundation and its function is to administer an Employee Share Option scheme. Currently there are no activities of the Foundation.
The acquisition method of accounting is used to account for Business combinations by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income.
The segments are identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess its performance. The Group considers geography and products as its main segments. Management measures geographical segment performance based on the segment's operating result. Similarly, the respective assets and liabilities are allocated to the geographical segments. This coincides with the Group's internal organisational and management structure and its internal financial management reporting system. A business segment is a group of operations engaged in providing services or products that are subject to risks and returns that are different from those of other business segments.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Euros, which is the Company's functional and presentation currency. The subsidiaries that are included in the consolidation have the Euro, US Dollars, UK Sterling Pounds, Romanian Leu, Swedish Kroner and Norwegian Kroner as their functional currency. Transactions and cash flows in foreign currencies are translated into the functional currency at the rate prevailing when the transaction took place. Related exchange rate differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income.
Balance sheets of entities that have a functional currency other than the Euro are translated using the closing rates at each reporting date. The income statements of such entities are translated at the average rates during the period. The resulting exchange difference is recognised in the translation reserve. When a foreign entity is sold, such cumulative exchange difference is reclassified in the income as part of the gain or loss on sale. Translation gains and losses on inter-Company balances which are in substance a part of the investment in such Group Company are also recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Revenue arises mainly from the offering of pickup and processing, repairs and maintenance, sale of RVMs and leasing of RVMs. To determine whether to recognise revenue, the Group follows a 5-step process according to IFRS 15:
Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. When the Group acts as a principal revenue is recognised in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred. When the Group acts an agent with a performance obligation to arrange for the provision of the specified good or service by another party, then revenue is recognised in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. In the USA, under the Bottle Bill deposit system, one of the subsidiary's billing includes mandatory deposits on the beverage containers which once collected, are passed through to the operators of redemption sites where Envipco machines are used. These pass-through amounts are included in receivables and payables and are not recognised as revenues.
The Group's primary service offerings include repairs and maintenance, and pickup and processing. These services are provided on a time and material basis or as a fixed-price contract with contract terms generally ranging from less than one year to three years.
Revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered. Revenue from fixed-price contracts involving managed services is generally recognised in the period the services are provided using a straight-line basis over the term of the contract.
If circumstances arise that may change the original estimates of revenues, costs, or extent of progress toward completion, then revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which management becomes aware of the circumstances that give rise to the revision.
Revenue from product sales is generally recognised when the product is delivered to the client and when there are no unfulfilled obligations that affect the client's final acceptance of the arrangement. Delivery does not occur until products have been shipped, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Group has objective evidence that the criteria specified in the client acceptance provisions are either perfunctory or have been satisfied.
Revenues from product lease are recognised over the term of the lease on a straight-line basis, when classified as operational leases.
Cost of revenue includes all direct material and labour costs and those indirect costs related to contract performance, such as indirect labour, supplies, and depreciation costs. The Group performs ongoing profitability analysis of its service contracts in order to determine whether the latest estimates - revenues, costs and profits - require updating. If, at any time, these estimates indicate that a contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately and presented as losses on contracts under provisions.
The Group's finance income and finance costs include:
Interest income or expense is recognised using the effective interest method. Dividend income is recognised in profit or loss on the date that the Group's right to receive payment is established.
The 'effective interest rate' is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument to:
In calculating interest income and expense, the effective interest rate is applied to the gross carrying amount of the asset (when the asset is not credit-impaired) or to the amortised cost of the liability. However, for financial assets that have become credit-impaired subsequent to initial recognition, interest income is calculated by applying the effective interest rate to the amortised cost of the financial asset. If the asset is no longer credit-impaired, then the calculation of interest income reverts to the gross basis.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income on a straight-line basis over the period of the lease.
Leases where the Group has transferred substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased asset or the present value of the minimum lease payment. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income over the lease period using the effective interest method. Assets acquired under finance leases are depreciated over the shorter of their useful life or the lease term.
The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not restated. The Group has disclosed accounting policies under both IFRS 16 (for the current period) and IAS 17 (for the comparative period presented) in order for users to understand the current period as well as comparative information and changes in significant accounting policies. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately.
At inception of an arrangement, the Group determines whether the arrangement is or contains a lease. The Group has applied IFRS 16 using the modified retrospective approach and therefore the comparative information has not been restated and continues to be reported under IAS 17 and IFRIC 4. The details of accounting policies under IAS 17 and IFRIC 4 are disclosed separately.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. To assess whether a contract conveys the right to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
This policy is applied to contracts entered into, on or after 1 January 2019.
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of its relative stand-alone prices. However, for the leases of property, the Group has elected not to separate non-lease components and account for the lease and nonlease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the end of the lease term, unless the lease transfers ownership of the underlying asset to the Group by the end of the lease term or the cost of the right-of-use asset reflects that the Group will exercise a purchase option. In that case the rightof-use asset will be depreciated over the useful life of the underlying asset, which is determined on the same basis as those of property and equipment. In addition, the right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group's incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments to reflect the terms of the lease and type of the asset leased.
Lease payments included in the measurement of the lease liability comprise the following:
The lease liability is measured at amortised cost using the effective interest method. It is remeasured when there is a change in future lease payments arising from a change in an index or rate, if there is a change in the Group's estimate of the amount expected to be payable under a residual value guarantee, if the Group changes its assessment of whether it will exercise a purchase, extension or termination option or if there is a revised in-substance fixed lease payment.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
The Group presents right-of-use assets that do not meet the definition of investment property in 'property, plant and equipment' and lease liabilities in 'loans and borrowings' in the statement of financial position.
The Group recognises the lease payments associated with these leases on a straight-line basis over the lease term.
At inception or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each lease component on the basis of their relative stand-alone prices.
When the Group acts as a lessor, it determines at lease inception whether each lease is a finance lease or an operating lease.
To classify each lease, the Group makes an overall assessment of whether the lease transfers substantially all of the risks and rewards incidental to ownership of the underlying asset. If this is the case, then the lease is a finance lease; if not, then it is an operating lease. As part of this assessment, the Group considers certain indicators such as whether the lease is for the major part of the economic life of the asset.
When the Group is an intermediate lessor, it accounts for its interests in the head lease and the sub-lease separately. It assesses the lease classification of a sub-lease with reference to the right-of-use asset arising from the head lease, not with reference to the underlying asset. If a head lease is a short-term lease to which the Group applies the exemption described above, then it classifies the sub-lease as an operating lease.
If an arrangement contains lease and non-lease components, then the Group applies IFRS 15 to allocate the consideration in the contract.
The Group applies the derecognition and impairment requirements in IFRS 9 to the net investment in the lease. The Group further regularly reviews estimated unguaranteed residual values used in calculating the gross investment in the lease.
The Group recognises lease payments received under operating leases as income on a straight-line basis over the lease term as part of 'other revenue'.
Generally, the accounting policies applicable to the Group as a lessor in the comparative period were not different from IFRS 16 except for the classification of the sub-lease entered into during current reporting period that resulted in a finance lease classification.
For contracts entered into before 1 January 2019, the Group determined whether the arrangement was or contained a lease based on the assessment of whether:
In the comparative period, as a lessee the Group classified leases that transferred substantially all of the risks and rewards of ownership as finance leases. When this was the case, the leased assets were measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Minimum lease payments were the payments over the lease term that the lessee was required to make, excluding any contingent rent. Subsequent to initial recognition, the assets were accounted for in accordance with the accounting policy applicable to that asset.
Assets held under other leases were classified as operating leases and were not recognised in the Group's statement of financial position. Payments made under operating leases were recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received were recognised as an integral part of the total lease expense, over the term of the lease.
When the Group acted as a lessor, it determined at lease inception whether each lease was a finance lease or an operating lease.
To classify each lease, the Group made an overall assessment of whether the lease transferred substantially all of the risks and rewards incidental to ownership of the underlying asset. If this was the case, then the lease was a finance lease; if not, then it was an operating lease. As part of this assessment, the Group considered certain indicators such as whether the lease was for the major part of the economic life of the asset.
Deferred income tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a Business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
The Group is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the Company recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the Company's belief that its tax return positions are supportable, the Company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The Company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
The Group recognises deferred tax assets for loss carry-forwards and deductible temporary differences, estimating the amount of future taxable profit that will be probable, against which the loss carry-forwards and deductible temporary difference can be utilised (see note 16).
All intangible assets have finite lives based on their economic use except for Goodwill. The intangible assets with finite lives are amortised using the straight-line method. The useful life is estimated at 7 years.
General and administrative expenses in the consolidated statement of comprehensive income (page 20) include the amortisation charge for intangible assets.
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognised. Goodwill is tested annually for impairment. An impairment loss is recognised for the amount by which the goodwill of a cash generating unit exceeds its recoverable amount.
The recoverable amount is the higher of the cash generating unit's fair value less costs to sell and value in use. Impairment testing of goodwill is performed at the level of the cash generating units, which is the smallest identifiable group of assets to independently generate cash flows. For the group, the smallest cash generating units comprise the activities of one single country. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.
The Group is required to test, on an annual basis whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. More information including carrying values is included in note 13.
The amortisation for the patents, licenses and concessions is included in general and administrative expenses (see page 20).
Patents are acquired intangible assets and are measured initially at cost on the acquisition date. They are amortised using the straight-line method based on the estimated useful life of 7 years.
Concessions relating to RVM distribution rights in the USA Midwest market are recognised and amortised over the life of the contract.
Research and development expenses are included in general and administrative expenses (see page 20). Research costs are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the Group are recognised as intangible assets when the following criteria are met:
The capitalised development cost is amortised when the asset becomes available for use. Once the asset is completely developed, it is amortised over the estimated useful life, which is 7 years.
• A legal reserve is made for capitalised development costs (see pages 21 & 23).
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets that have not been put into use yet are tested for impairment at each reporting date irrespective of whether indicators of impairment exist. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
The Group amortises its intangible assets, except for Goodwill, over the contracted term or their expected useful lives which are as follows:
| Patents, licenses and concessions | 7 years with the exception of a concession, whose useful life is less than 7 years and as such is being amortised over the contracted |
|---|---|
| term. |
Capitalised development costs 7 years
The capitalisation and potential impairments of internally generated research and development is amongst others based on estimates of future recovery.
Property, plant and equipment are valued at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent expenditures that extend the asset's useful life are capitalised. Expenditures for repairs and maintenance are expensed when incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values, based on the estimated useful lives of such assets.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
Assets under construction will be depreciated once the assets are complete and available for use. Depreciation is based on the estimated useful lives of assets as follows:
| Buildings | 40 years |
|---|---|
| Plant and machinery | 4-7 years |
| Vehicles and equipment | 3-5 years |
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other highly liquid investments with original maturities of three months or less. The cash and cash equivalents are available on demand.
Trade receivables are recognised initially at fair value, which is generally the face value, and subsequently carried at amortised cost less provision for impairment. Impairment provisions for credit losses are recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Please refer to paragraph (s) Financial instruments initial recognition and subsequent measurement for further accounting policy elaboration in respect of the financial instruments.
The Group's US subsidiary uses a weighted average actual cost method (WAAC) for valuation of inventory. Product inventory is valued at the lower of cost or net realisable value based on a weighted average actual cost method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale.
Spare parts inventory is valued at the lower of historical cost, or net realisable value. Appropriate consideration is given to excessive inventory levels, product deterioration and other factors when establishing the net realisable value.
All RVM parts inventory is valued at the lower of cost and net realisable value. For repaired parts inventory, the estimated value has been assessed at 50% of cost.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
Amounts contributed by the shareholder(s) of the Company in excess of the nominal share capital, are accounted for as share premium. This also includes additional capital contributions by existing shareholders without the issue of shares or issue of rights to acquire shares of the Company.
Minority interests are valued at the proportionate share of third parties in the net value of the assets and liabilities of a consolidated entity, determined in accordance with the Company's measurement principles.
The Company records purchases of its own ordinary shares (treasury shares) under the cost method whereby the entire cost of the acquired shares is deducted from equity until the shares are cancelled, reissued or disposed of. Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity.
The group recognises provisions for liabilities of uncertain timing or amount including those for onerous leases, warranty claims, leasehold dilapidations and legal disputes. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. In the case of leasehold dilapidations, the provision takes into account the potential that the properties in question may be sublet for some or all of the remaining lease term.
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost. Please refer to paragraph (s) Financial instruments initial recognition and subsequent measurement for further accounting policy elaboration in respect of the financial instruments.
Employee benefits are charged to the profit and loss account in the period in which the employee services are rendered and, to the extent not already paid, as a liability on the balance sheet. If the amount already paid exceeds the benefits owed, the excess is recognised as a current asset to the extent that there will be a reimbursement by the employees or a reduction in future payments by the Company.
The Group subsidiaries sponsor employee benefit plans which cover substantially all of their employees. Such plan is referred to as defined contribution. A defined contribution plan is a plan under which the Group companies pay fixed contributions into a separate entity. Under defined contribution plans, the Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
For defined contribution plans, Envipco pays contributions to publicly or privately administered funds or insurance companies. Contributions are generally based on fixed amounts of eligible compensation and the cost for such plans is recognised based on employee service.
In some of the Group's services contracts, the Group bills the client prior to performing the services resulting in the recognition of deferred income on the consolidated balance sheet. However, there are no contracts where deferred income is material to the financial statements.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets, except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
In the periods presented the corporation does not have any financial assets categorised as FVOCI. The classification is determined by both:
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within administrative expenses.
A financial asset and a financial liability are offset when the entity has a legally enforceable right to set off the financial asset and financial liability and the Company has the firm intention to settle the balance on a net basis, or to settle the asset and the liability simultaneously. If there is a transfer of a financial asset that does not qualify for derecognition in the balance sheet, the transferred asset and the associated liability are not offset.
(i) Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and other receivables fall into this category of financial instruments as well as interest-bearing loans bonds that were previously classified as held-to-maturity under IAS 39.
Financial assets that are held within a different business model other than 'hold to collect' or 'hold to collect and sell' are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses – the 'expected credit loss (ECL) model'. This replaces IAS 39's 'incurred loss model'. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assesses impairment of trade receivables on a collective basis. As they possess shared credit risk characteristics they have been grouped based on the days past due.
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group's financial liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
The Group's financial liabilities include borrowings, trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.
The management assessed that cash and cash equivalents, trade and other receivables, trade and other payables, and other current liabilities approximate to their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the interest-bearing loans and borrowings is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
• Long-term fixed-rate borrowings are evaluated by the Group based on parameters such as interest rates and the risk characteristics of the financed project.
The fair value of the interest-bearing loans and borrowings is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities, being sensitive to a reasonably possible change in the forecast cash flows or the discount rate. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. Key judgements and accounting estimates relate to the following:
The Group's capital consists of its net equity and long-term loans. Management monitors and assesses the capital requirements for the Group and ensures that enough funding is available to meet the working capital requirements and also for the future business development. To raise funding, the Group considers both committed credit lines and equity contributions.
One of the Group's subsidiaries has to comply with certain financial covenants under its loan agreement, details of which are given in note 21. The Group's current funding requirements have been met from operations and from the committed credit lines.
The Group has exposure to Credit, Liquidity and Market risks on the financial instruments used by it. The Board of Directors has the overall responsibility to monitor and manage these risks.
Credit risk arises from the possibility of asset impairment occurring because counterparties are not able to meet their obligations in transactions mainly involving trade receivables and can increase due to COVID-19 outbreak and impact on the global economy. The Group has exposure to credit risk and is dependent on three major customers (see table below) for its receivables, in 2019 for 32% of its receivables and in 2018, 28% of receivables. In the normal course of business, the Group provides credit to clients, provides credit evaluations of these clients, and maintains an impairment provision for credit losses. Cash and cash equivalents are held with reliable counterparties.
| 2019 Accounts receivable |
2018 Accounts receivable |
|
|---|---|---|
| Concentration of credit risk | ||
| Customer 1 | 15% | 15% |
| Customer 2 | 9% | 9% |
| Customer 3 | 8% | 4% |
| Others | 68% | 72% |
| Total | 100% | 100% |
USA operations manage its gross receivables through a system of deposit accounting where Envipco acts as a clearing house for services provided and not on RVM sales but disburses payable funds to customers only after collections have been made from its receivables. European and USA operations have receivables from RVM sales, which are managed closely for collections.
The credit rating of customer 1 is determined by Fitch at AA.
The carrying amount of financial assets represents the maximum credit exposure. This maximum exposure to credit risk for trade receivables at the reporting date by geographic region was:
| in EUR thousands | €'000 Current |
€'000 31-60 Days |
€'000 61-90 Days |
€'000 >90 Days |
€'000 TOTAL |
|---|---|---|---|---|---|
| 2019 | |||||
| Europe | 660 | - | - | - | 660 |
| United States | 6,301 | 1,269 | 124 | 126 | 7,820 |
| Total | 6,961 | 1,269 | 124 | 126 | 8,480 |
| 2018 | |||||
| Europe | 1,101 | - | - | - | 1,101 |
| United States | 5,939 | 1,471 | 209 | 123 | 7,742 |
| Total | 7,040 | 1,471 | 209 | 123 | 8,843 |
Management manages credit risk by reviewing the creditworthiness of counterparties on a regular basis and will set credit limits. No credit insurance is taken-out. Due to the limited number of customers the Group determines the ECLs of trade receivables on an individual basis.
Liquidity risk arises from the possibility that the Group may encounter difficulty in meeting its obligations as they fall due or inability to draw under re-finance credit facilities.
The Group's policy is to ensure, as far as possible, that it will have sufficient liquidity to meet its obligations in a timely manner. The executive directors follow liquidity risk management focused on maintaining sufficient cash, enforcing strict credit policy and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available.
Liquidity is managed closely by pursuing receivable collections in the USA and also by keeping the committed credit lines in place. The following are the Group's contractual maturities of financial liabilities based on contractual undiscounted payments including short term leases:
| €'000 | €'000 | €'000 | €'000 | €'000 | |
|---|---|---|---|---|---|
| in EUR thousands | In 1 Year | 1-2 Years | 2-5 Years | > 5 Years |
TOTAL |
| 2019 | |||||
| Borrowings | 1,171 | 1,521 | 186 | 1,268 | 4,146 |
| Lease commitments | 366 | 304 | 84 | - | 754 |
| Trade creditors | 6,569 | - | - | - | 6,569 |
| Total liabilities | 8,106 | 1,825 | 270 | 1,268 | 11,469 |
| 2018 | |||||
| Borrowings | 1,419 | 1,549 | 134 | 1,332 | 4,434 |
| Trade creditors | 6,406 | - | - | - | 6,406 |
| Total liabilities | 7,825 | 1,549 | 134 | 1,332 | 10,840 |
Market risk arises from the fact that the value of financial instruments may be positively or negatively affected by fluctuating prices on the financial markets. Market risk includes currency risk, fair value interest rate risk, and price risk.
Currency risk is the risk that the value of a financial instrument will fluctuate due to exchange rate fluctuations. Exposure to currency risks arises primarily when receivables and payables are denominated in a currency other than the operating Company's local currency. In addition, the Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. The Group manages its currency risk by closely monitoring the currency fluctuations and does not hedge its currency risk.
A 5% strengthening of US Dollar against the Euro would have increased the profit after tax by €77,000 (2018: €46,000) and would result in net increase in equity of €77,000 (2018: €46,000) and a 5% decline in US Dollar against the Euro would have had an equal but opposite effect on the basis that all other variables remain constant.
The Group's interest rate risk arises from selected long-term borrowings. Such borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group tries to minimise its interest rate by negotiating both fixed and variable interest rates for the borrowings. The Group has no interest rate swaps to hedge interest rate risk. The Group evaluated its exposure to interest rate risk based on its long-term debt (see note 21) and concluded that a reduction in interest rate by 0.25% would have increased the profit after tax by €7,000 (2018: €7,000) and an increase in interest rate by 0.25% would have decreased the profit after tax by €7,000 (2018: €7,000).
The Group does not have an exposure to price risk.
The Company has no financial assets and financial liabilities that are measured at fair value. The fair value for financial assets and financial liabilities not measured at fair value is a reasonable approximation of fair value except for borrowings that are further explained in note 21.
Further, for the current year the fair value disclosure of lease liabilities is also not required.
Envipco considers geography as its main segments. Management measures geographical segment performance based on the segment's profit. Similarly, the respective assets and liabilities are allocated to the geographical segments. The segments are identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess its performance. The Group's main continuing operations relate to its core activity of Recycling. This activity has a single main operating segment – RVMs. The RVM business segment includes operations in the USA and Europe due to RVM sales, and services. The other unallocated amounts include the Holding Company and rest of the non-active Group entities. Segment information for continuing operations is presented by geographical areas where a segment is based.
Segment information of the reportable segments is detailed below:
| 2019 | 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| in EUR thousands | Europe | North America |
Rest of World |
Total | Europe | North America |
Rest of World |
Total |
| Revenues | ||||||||
| Recycling – RVM | ||||||||
| Sale of goods | 3,171 | 3,646 | - | 6,817 | 2,756 | 4,310 | - | 7,066 |
| Service revenue | 427 | 19,243 | - | 19,670 | 306 | 18,850 | - | 19,156 |
| Leasing revenue | - | 9,764 | - | 9,764 | - | 9,158 | - | 9,158 |
| Total | 3,598 | 32,653 | - | 36,251 | 3,062 | 32,318 | - | 35,380 |
| Total assets | ||||||||
| Recycling – RVM | 5,522 | 27,595 | - | 33,117 | 3,700 | 28,216 | - | 31,916 |
| Other unallocated amounts | 6,829 | - | - | 6,829 | 8,086 | - | - | 8,086 |
| Total | 12,351 | 27,595 | - | 39,946 | 11,786 | 28,216 | - | 40,002 |
| Segment Profit (loss) | ||||||||
| Recycling – RVM | (2,805) | 3,548 | - | 743 | (1,000) | 4,858 | - | 3,858 |
| Other unallocated amounts | (2,622) | - | - | (2,622) | (2,004) | - | - | (2,004) |
| Total | (5,427) | 3,548 | - | (1,879) | (3,004) | 4,858 | - | 1,854 |
| Total liabilities | ||||||||
| Recycling – RVM | 1,339 | 13,572 | - | 14,911 | 650 | 12,218 | - | 12,868 |
| Other unallocated amounts | 650 | - | - | 650 | 1,135 | - | - | 1,135 |
| Total | 1,989 | 13,572 | - | 15,561 | 1,785 | 12,218 | - | 14,003 |
| Property, Plant & Equipment & Intangibles Additions |
||||||||
| Recycling – RVM | 289 | 2,840 | - | 3,129 | 96 | 2,231 | - | 2,327 |
| Other unallocated amounts | 1,364 | - | - | 1,364 | 1,469 | - | - | 1,469 |
| Total | 1,653 | 2,840 | - | 4,493 | 1,565 | 2,231 | - | 3,796 |
| Depreciation & Amortisation | ||||||||
| Recycling – RVM | 21 | 2,467 | - | 2,488 | 27 | 2,309 | - | 2,336 |
| Other unallocated amounts | 1,187 | - | - | 1,187 | 1,028 | - | - | 1,028 |
| Total | 1,208 | 2,467 | - | 3,675 | 1,055 | 2,309 | - | 3,364 |
The Group initially applied IFRS 16 at 1 January 2019, which requires the recognition of right-of-use assets and liabilities for lease contracts that were previously classified as operating leases. As a result, the Group recognised €911,000 of right-of-use-assets and €911,000 of lease liabilities from those lease contracts. The assets and liabilities are included in the Recycling - RVM segments under Europe and North America as at 31 December 2019. The Group has applied IFRS 16 using the modified retrospective approach, under which comparative information is not restated.
The revenues and non-current assets of the Company's country of domicile i.e. Netherlands were respectively €0,000 (2018: €0,000) and €5,922,000 (2018: €5,777,000).
See table above for Revenue details where contract (lease) revenues and performance obligations for sale of goods have been disclosed as part of the Group's revenue recognition policies. Contract balances, if any, at year end are included in trade receivables (see note 18).
The fee paid to the Group's auditors for the following services relating to the calendar year is included in general expenses and can be specified as follows:
| KPMG Accountants N.V. |
Other KPMG Network |
Total 2019 |
Grant Thornton Accountants en Adviseurs B.V. |
Other Grant Thornton Network |
Total 2018 |
|
|---|---|---|---|---|---|---|
| €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
| Audit fee of financial statements | 145 | 129 | 274 | 105 | 154 | 259 |
| Other audit engagement | - | - | - | - | - | - |
| Tax-related advisory services | - | - | - | - | - | - |
| Other non-audit services | - | - | - | - | - | - |
| Total | 145 | 129 | 274 | 105 | 154 | 259 |
KPMG Accountants N.V. is the auditor in 2019 and Grant Thornton Accountants en Adviseurs B.V., was the auditor in 2018 to the Company and its subsidiaries.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Other income | 26 | 651 |
| Total | 26 | 651 |
Other income in 2019 amounted to €26,000 (2018: €31,000); and a one-time contract settlement of €620,000 in 2018.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Salaries and wages | *11,943 | 9,549 |
| Other employee benefits | 1,268 | 1,356 |
| Social Security expenses | 882 | 706 |
| Pension expenses | 54 | 52 |
| Total | 14,147 | 11,663 |
| Average number of employees | ||
| North America | ||
| Production/Supply chain | 28 | 28 |
| Research and Development | 11 | 11 |
| Sales and Service | 80 | 77 |
| General Administration | 27 | 27 |
| Management | 4 | 4 |
| Europe | ||
| Production/Supply chain | 14 | 12 |
| Research & Development | 7 | 7 |
| Sales & Service | 7 | 5 |
| General Administration | 4 | 7 |
| Management | 4 | 2 |
| Total | 186 | 180 |
*Including €1,070,000 of severance for the former CEO
The expense is included in the following line items in the financial statements:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Cost of revenue | 4,896 | 4,172 |
| General and administrative expenses | 6,141 | 4,688 |
| Selling and distribution expenses | 1,031 | 1,009 |
| Research and development expenses | 2,079 | 1,794 |
| Total employee benefit expense | 14,147 | 11,663 |
The remuneration of the Management Board charged to the result in 2019 was €1,930,000 (2018: €624,000), which and can be specified as follows:
| in EUR thousands | Fixed Variable Fringe Pension Salary/fee compensation benefits cost |
Extraordinary compensation |
Total | |||
|---|---|---|---|---|---|---|
| 2019 | ||||||
| B. Santchurn* | 409 | 274 | 36 | 4 | 1,070 | 1,793 |
| G. Garvey * | 54 | - | - | - | - | 54 |
| C. Crepet | 20 | - | - | - | - | 20 |
| T.J.M. Stalenhoef | 53 | - | - | - | - | 53 |
| G. Lefebvre | 10 | - | - | - | - | 10 |
| A. Bouri | - | - | - | - | - | - |
| D. D'Addario | - | - | - | - | - | - |
| Total | 546 | 274 | 36 | 4 | 1,070 | 1,930 |
| 2018 | ||||||
| B. Santchurn* | 371 | 110 | 26 | 3 | - | 510 |
| G. Garvey* | 51 | - | - | - | - | 51 |
| C. Crepet | 11 | - | - | - | - | 11 |
| T.J.M. Stalenhoef | 42 | - | - | - | - | 42 |
| G. Lefebvre | 10 | - | - | - | - | 10 |
| A. Bouri | - | - | - | - | - | - |
| D. D'Addario | - | - | - | - | - | - |
| Total | 485 | 110 | 26 | 3 | - | 624 |
*B. Santchurn and G. Garvey are Executive Directors, Other members of the Board are Non-Executive Directors.
The salary/fee of B. Santchurn consists of a fixed salary of €449,000 (2018: €400,000) and a bonus of €274,000 (2018: €110,000). In 2019 a severance payment of €1,070,000 was included. The salary/fee of G. Garvey consists of €54,000 (2018: €51,000). Non-executive Directors obtain a fixed compensation based on time spent and amounts charged. A. Bouri and D. D'Addario did not receive compensation.
A loan to Mr. Christian Crepet, a director, of €20,000 given in 2012 with a balance of €1,317 on 31 December 2018 was repaid with interest at Euribor plus 1%, in 2019. A. Bouri, the majority shareholder, received €1,000 (2018: €3,000) as interest on the loan due him from the Company for an amount of €100,000 which was repaid during the year. See note 26 for related party transactions.
The financial expenses are fully in respect of borrowings and financial lease commitments. Financial income relates to interest received.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Interest and similar expenses | (273) | (226) |
| Exchange losses | - | (43) |
| Interest and similar income | 15 | 3 |
| Exchange gains | 78 | - |
| Net finance (cost) and or income | (180) | (266) |
Envipco operates in several jurisdictions with varied local statutory income tax rates. This causes a difference between the average statutory income tax rate and The Netherlands tax rate of 25%. The following table reconciles income taxes based on the Group's weighted average statutory income tax rate and the Group's income tax benefit from continuing operations:
| in EUR thousands | 2019 | 2018 | ||
|---|---|---|---|---|
| €'000 | €'000 | |||
| Profit/(loss) before tax | (2,761) | 1,919 | ||
| Taxation (charge)/credit – statutory rate | 25% | 690 | 25% | (480) |
| Tax (charge) credit for different statutory tax rates on foreign subsidiaries |
198 | - | ||
| Non-deductible expenses | ||||
| Effect of unused losses and temporary differences of a prior year for which previously no deferred |
||||
| tax asset had been recognised * | 1,565 | 480 | ||
| Effect of current year losses for which no deferred tax asset has been recognised |
(1,372) | - | ||
| State tax | (199) | (65) | ||
| Effective income tax | 32% | 882 | -3% | (65) |
*Effect of unused losses and temporary differences of a prior year for which previously no deferred tax asset (DTA) had been recognised is a result of management's estimate that these assets will be recovered in the near future. No deferred tax assets have been recognised yet for losses in most of the European businesses that are starting up.
| in EUR thousands | 2019 | 2018 |
|---|---|---|
| €'000 | €'000 | |
| Current | ||
| USA | (199) | (65) |
| Netherlands | - | - |
| Total | (199) | (65) |
| Deferred | ||
| USA | 1,081 | - |
| Netherlands | - | - |
| Total | 882 | - |
None of the items of other comprehensive income is included in income taxes. See note 16.
The deferred tax income was favourably impacted by a credit of approximately €1.1m in 2019 due to recognition of deferred tax asset for previously unrecognised US losses in 2019. No deferred tax asset has been recognised for losses in the international business.
Available tax losses totaling €21,292,000 (2018: €25,525,000), expire as follows: €2,840,000 in 2021, €3,585,000 in 2022, €1,344,000 in 2023, €2,574,000 in 2024, €8,389,000 from 2025 through 2031, €1,384,000 in 2034 and €1,176,000 in 2035. Tax losses where no deferred tax has been recognised amounted to €7,788,000 (2018: €16,572,000).
The numerator for both basic and fully diluted net result per ordinary share (earnings per share or EPS) is net result attributable to holders of ordinary shares. The denominator for basic EPS is the number of ordinary shares outstanding during the year, excluding ordinary shares held as treasury shares. The fully diluted EPS is same as the basic EPS.
The net result per ordinary share has been calculated according to the following schedule:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Total Operations | Total Operations | |
| Numerator | ||
| Earnings/(loss) used in basic and diluted EPS | (1,879) | 1,854 |
| Denominator | ||
| '000 | '000 | |
| Weighted average number of shares used in basic and | ||
| diluted EPS | 4,098 | 3,982 |
Basic and diluted earnings per share for 2019 have been calculated using the weighted-average number of current ordinary shares of 4,097,607 and 3,981,744 for 2018.
| in EUR thousands | Goodwill | Patents, Licenses & Concessions |
Development Costs |
Total |
|---|---|---|---|---|
| At 1 January 2018 | ||||
| Cost | 148 | 1,096* | 7,398* | 8,642* |
| Accumulated amortisation | - | (801)* | (2,293)* | (3,094)* |
| Net carrying amount | 148 | 295 | 5,105 | 5,548 |
| Changes to net carrying amount in 2018 | ||||
| Additions | - | 87 | 1,401 | 1,488 |
| Disposals | - | (3) | - | (3) |
| Amortisation | - | (74) | (977) | (1,051) |
| Currency translation differences | 7 | 27 | - | 34 |
| Total changes in 2018 | 7 | 37 | 424 | 468 |
| At 31 December 2018 | ||||
| Cost | 155 | 1,207* | 8,799* | 10,161* |
| Accumulated amortisation and impairment | - | (875)* | (3,270)* | (4,145)* |
| Net carrying amount | 155 | 332 | 5,529 | 6,016 |
| Changes to net carrying amount in 2019 | ||||
| Additions | - | 53 | 1,282 | 1,335 |
| Amortisation | - | (76) | (1,111) | (1,187) |
| Currency translation differences | 3 | (7) | - | (4) |
| Total changes in 2019 | 3 | (30) | 171 | 144 |
| At 31 December 2019 | ||||
| Cost | 158 | 1,253 | 10,081 | 11,492 |
| Accumulated amortisation and impairment | - | (951) | (4,381) | (5,332) |
| Net carrying amount | 158 | 302 | 5,700 | 6,160 |
All development cost is internally generated.
See note 21 for security of assets.
*The 2018 amounts for costs and accumulated amortisation of patents, licenses and development costs have been restated for comparative purposes by €1,124,000 because costs that were fully amortised that had no future economic benefits had not been removed in previous years. This did not have an impact on the 2018 net carrying amount.
The expense is included in the following line items in the financial statements:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| General and administrative expenses | 1,187 | 1,051 |
| Total amortisation and depreciation expenses | 1,187 | 1,051 |
Goodwill as per 31 December 2019 and 2018 relates to goodwill of one Cash Generating Unit in the RVM segment in the US, which was tested for any impairment, based on its value in use, by using present value of discrete cash flows for next three years and the present value of the terminal cash flow with the following assumptions: pre-tax WACC discount rate of 7.94%, working capital requirement at 10% of revenue and terminal cash flow growth rate of 2.5%. Sensitivities related to the value in use calculation would imply that a 1% increase in the discount rate or using a 0% growth rate would not have resulted in an impairment.
All concessions are being amortised with a useful life of 7 years.
All capitalised development costs relate to internally developed assets in respect of new product range namely Quantum Indoor, e-Portal, Quantum Modular and New Recognition Systems for the existing and new markets. All materials, labour and overhead costs directly attributable to these projects have been capitalised. €1,282,000 (2018: €1,401,000) of the development costs was capitalised in 2019. Fully developed assets are amortised over their expected useful lives, which is 7 years, evaluated on a periodic basis. The largest individual asset included in the development cost has a book value of €2,871,000 due to consolidation of similar projects (2018: €1,240,000).
Key projects under development during 2019 included New Recognition System-Single Feed, New Recognition System-Bulk Feed and Quantum Modular Core.
| Reverse Vending |
Land & Buildings |
Plant & Machinery |
Vehicles & Equipment |
Total |
|---|---|---|---|---|
| 26,071 | ||||
| (16,887) | ||||
| 9,184 | ||||
| 2,307 | ||||
| (431) | ||||
| (2,315) | ||||
| 419 | ||||
| (20) | ||||
| 24,020 | 2,156 | 775 | 1,415 | 28,366 |
| (17,114) | (506) | (511) | (1,071) | (19,202) |
| 6,906 | 1,650 | 264 | 344 | 9,164 |
| 6,906 | 1,650 | 264 | 344 | 9,164 |
| - | 291 | 219 | 401 | 911 |
| 6,906 | 1,941 | 483 | 745 | 10,075 |
| 1,765 | 227 | 210 | 84 | 2,286 |
| (407) | 3 | (49) | (16) | (469) |
| (2,188) | (61) | (128) | (111) | (2,488) |
| 144 | 29 | 6 | 6 | 185 |
| 79 | - | - | - | 79 |
| (607) | 198 | 39 | (37) | (407) |
| 31,358 | ||||
| 6,299 | 2,139 | 522 | 708 | (21,690) 9,668 |
| Machines 22,033 (15,088) 6,945 2,089 (422) (2,026) 320 (39) 25,601 (19,302) |
2,080 (451) 1,629 - - (55) 76 21 2,706 (567) |
676 (379) 297 97 6 (132) (4) (33) 1,161 (639) |
1,282 (969) 313 121 (15) (102) 27 31 1,890 (1,182) |
IFRS 16 right of use assets recognised at 1 January 2019 included investments in Land & Buildings, Plant & Machinery and Vehicles & Equipment.
See note 21 for security of assets.
The expense is included in the following line items in the financial statements:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Cost of revenue | 2,228 | 2,075 |
| General and administrative expenses | 245 | 226 |
| Selling and distribution expenses | 11 | 7 |
| Research and development expenses | 4 | 7 |
| Total amortisation and depreciation expenses | 2,488 | 2,315 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Schedule of movement of deposits with vendors | ||
| At beginning of period | 349 | 72 |
| Additions | - | 277 |
| Releases | (141) | - |
| At end of period | 208 | 349 |
| €'000 | 31 December 2019 | |||||
|---|---|---|---|---|---|---|
| Net balance at 31 Dec 2018 |
(Charge)/ credit profit & loss |
(Charge)/ credit equity |
Net balance |
Deferred tax assets |
Deferred tax liabilities |
|
| Property, plant and equipment | (675) | (413) | (14) | (1,102) | - | (1,102) |
| Inventory | 555 | (137) | (5) | 413 | 413 | - |
| Tax losses carried forward | 1,914 | 1,531 | 50 | 3,495 | 3,495 | - |
| Other | 26 | 99 | 3 | 128 | 128 | - |
| Total | 1,820 | 1,080 | 34 | 2,934 | 4,036 | (1,102) |
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax relates to the same fiscal authority. The deferred tax liabilities are offset against deferred tax assets in the same fiscal unity.
The deferred tax credit was recognised during the year due to the tax re-evaluation of future profits of a Group's subsidiary and is further explained in note 11.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Finished Goods | 3,293 | 1,803 |
| Raw materials and parts | 8,992 | 8,004 |
| Work in progress | 42 | 477 |
| Provisions for obsolescence | (1,986) | (1,759) |
| Total | 10,341 | 8,525 |
In 2019 inventory usage amounting to €19,274,000 (2018: €12,879,000) has been included in the cost of revenue.
Finished goods are valued at lower of cost and net realisable value. Cost includes material cost, direct labour and overheads. Raw material and parts are valued at lower of cost and net realisable value. Cost includes purchase cost and cost of bringing the part to its present location. Work in progress is valued including direct material cost and a proportion of direct labour and overheads.
Estimates of net realisable value of inventory are based on the most reliable evidence available at the time the estimates are made. The carrying amount of the inventory carried at fair value less costs to sell is nil. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. As such, estimates are continuously evaluated and it is common that in the normal course of business, circumstances that previously caused inventories to be written down below cost no longer exist resulting in reversals of write-downs.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Beginning of period | 1,759 | 1,699 |
| Addition to/release of provision | 192 | (20) |
| Exchange gains/(losses) | 35 | 80 |
| End of period | 1,986 | 1,759 |
The increase/ (decrease) in provisions relating to raw materials is affected through cost of revenue. Total book value of items included in the provision is €3,972,000 (2018: €3,518,000).
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Trade receivables | 8,480 | 8,843 |
| Other receivables | 457 | 285 |
| Prepaid expenses | 347 | 129 |
| Loan receivables - affiliate | 676 | 764 |
| Total | 9,960 | 10,021 |
A loan receivable to an affiliate under common control of the majority shareholder as of 31 December 2019 amounted to €676,000 (2018: €764,000), with an interest rate of Euribor plus 2.5% and is repayable on 31 December 2020. Other receivables include a €50,000 (2018: €50,000) loan to a German subsidiary employee
Estimates of the recoverability of trade receivables are based on the most reliable evidence available at the time the estimates are made. As these estimates are continuously evaluated, it is common that in the normal course of business, circumstances that previously caused trade receivables to be impaired no longer exist resulting in reversals of impairment charges. Trade receivables are shown net of bad debt provisions of €299,000 and €777,000 at the end of years 2019 and 2018 respectively.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Beginning of period | 777 | 600 |
| Additions | - | 102 |
| Release/utilisation of provisions | (494) | (117) |
| Currency translation adjustment | 16 | 192 |
| End of period | 299 | 777 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Cash at bank and in hand | 675 | 4,107 |
| Cash and cash equivalents | 675 | 4,107 |
| Ordinary Shares | ||
|---|---|---|
| 2019 | 2018 | |
| Number of authorised shares | 8,000,000 | 8,000,000 |
| Authorised share capital | €4,000,000 | €4,000,000 |
| Number of outstanding shares on 1 January | 4,097,607 | 3,837,607 |
| Number of outstanding shares on 31 December | 4,097,607 | 4,097,607 |
| Issued share capital on 31 December | €2,048,803.50 | €2,048,803.50 |
| Nominal value | €0.50 | €0.50 |
During 2018 the Company issued 260,000 ordinary shares via private placement.
For full detailed movements in share premium reserve please refer to the consolidated statement of changes in equity on page 23.
Movement in legal reserve is in respect of the capitalised development costs of €171 (see note C for Separate Financial Statements).
At the Company's Annual General Meeting of the Shareholders it will be proposed to include the 2019 loss to retained earnings.
Group entities, whose functional currency is other than Euro, the Group's reporting currency, are translated using closing rates for balance sheets and average rates for income statements. The resulting difference is recognised as translation reserve in equity and is non-distributable.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Borrowings | 2,975 | 3,014 |
| Total | 2,975 | 3,014 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Lease commitments | 366 | - |
| Total | 366 | - |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Other liabilities | 120 | 220 |
| Total | 120 | 220 |
Lease commitments arose as a result of having recognised IFRS 16 right-of-use assets.
Other non-current liabilities include a loan of €120,000 (2018: €120,000) payable to Mr. Gregory Garvey, a related party. There are no conditions, interest or maturity period for this loan.
Environmental Products Corporation (EPC) has borrowing facility from a third-party lender for \$6,457,000. The following loans have been drawn:
| Nominal interest rate | Year of maturity | Face Value | Carrying amount | |
|---|---|---|---|---|
| Line of credit (LOC) | 5.5% | 2021 | \$3,000 | €1,068 |
| Term loan | FHLB classic rate plus 2.5% | 2020 | \$2,175 | €203 |
| Mortgage facility | 5.5% | 2024 | \$2,240 | €1,614 |
| Term loan | FHLB 48/48 rate plus 2.5% | 2021 | \$4,000 | €1,261 |
The line of credit (LOC) of \$3,000,000 is capped based on eligible accounts receivables and repayable after 2 years with interest, \$2,175,000 as a Term Loan, repayable within 4 years with interest at FHLB classic rate plus 2.5% and \$2,240,000 as a Mortgage facility, repayable (based on a 20 year amortisation) within 10 years including interest at 5.50% with a balloon payment in year 2024. A loan of \$4,000,000 was secured in May 2017 repayable over 4 years with interest at FHLB 48/48 amortising rate plus 2%. The LOC is renewable annually for a term of 2 years. These loans are collateralised by a fixed and floating charge on all assets of the USA subsidiary and guaranteed by the Company. Net borrowing costs deducted were €1,000 (2018: €4,000).
The debt covenants for the USA subsidiaries have been met during the year and in 2018.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Beginning of period | 4,434 | 5,498 |
| Increase | 1,072 | - |
| (Decrease) | (1,450) | (1,359) |
| Translation effect | 90 | 295 |
| End of period | 4,146 | 4,434 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Current | 1,171 | 1,420 |
| Due between 1 to 5 years | 2,975 | 3,014 |
| Total borrowings | 4,146 | 4,434 |
| Nominal interest rate |
2019 Carrying amount |
Fair Value |
2018 Carrying amount |
Fair value | |
|---|---|---|---|---|---|
| Line of credit (LOC) | 5.5% FHLB classic |
€1,068 | €1,068 | €0 | €0 |
| Term loan | rate plus 2.5% | €203 | €202 | €674 | €672 |
| Mortgage facility | 5.5% FHLB 48/48 rate |
€1,614 | €1,697 | €1,654 | €1,761 |
| Term loan | plus 2.5% | €1,261 | €1,246 | €2,106 | €2,136 |
| Total | €4,146 | €4,213 | €4,434 | €4,569 |
Increases and decreases reconcile to cash flow statement on page 22. For lease liabilities reference is made to note 25.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Provisions | 314 | 77 |
| Total | 314 | 77 |
These are required by our German subsidiary for warranty for the repair and maintenance of compactor sales and are adequate for expected usage.
| 2019 | 2018 | ||
|---|---|---|---|
| €'000 | €'000 | ||
| Beginning of period | 77 | 236 | |
| Additions | 176 | 24 | |
| Release/utilisation | - | (183) | |
| End of period | 253 | 77 |
| 2019 | 2018 | ||
|---|---|---|---|
| €'000 | €'000 | ||
| Beginning of period | - | - | |
| Additions | 61 | - | |
| Release/utilisation | - | - | |
| End of period | 61 | - |
Group companies provide pension benefits for their employees. The way these benefits are provided varies according to the legal, fiscal and economic conditions of each country. Such benefits are provided under defined contribution plans. For the year ended 31 December 2019, expenses relating to defined contribution plans amounted to €54,000 (2018: €52,000).
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Payroll and vacation accruals | 1,580 | 348 |
| Other accrued expenses | 1,860 | 2,206 |
| Total | 3,440 | 2,554 |
Severance accrual of €1,070,000 for the former CEO has been included in payroll and vacation accruals in 2019.
The future minimum lease payments under non-cancellable operating leases as of 31 December 2018 were as follows:
| 2018 | |
|---|---|
| €'000 | |
| Within 1 year | 369 |
| Between 2 to 5 years | 970 |
| Total | 1,339 |
The leases relate to plant and equipment, office machines and vehicles. Rent expenses for the year ended 31 December 2018 were approximately €553,000.
The future minimum lease receivable under non-cancellable RVM operating leases as of 31 December 2019 and 2018 were as follows:
| 2019 | 2018 | ||
|---|---|---|---|
| €'000 | €'000 | ||
| Within 1 year | 2,328 | 2,823 | |
| Between 2 to 5 years | 2,982 | 4,033 | |
| Total | 5,310 | 6,856 |
Lease revenues from RVMs for the year ended 31 December 2019 were approximately €4,221,000 (2018: €3,928,000).
Several Group companies are parties to various legal activities which are incidental to the conduct of their businesses.
During April 2016, Envipco was granted a patent by the German patent office after filing for a utility model in 2007. This specific IP covers a method for how security labels are created and interpreted; which we believe is being allegedly used by several parties in Germany in compliance with the German deposit system. Envipco is currently seeking enforcement proceedings against potential infringers. The Company previously received an unfavourable ruling on our patent being litigated. We have since reviewed the German courts report and have now filed an appeal of the court decision. No reliable estimate can be made of the outcome at this moment and no receivable has been recognised. However, the Company remains positive about the outcome.
Transactions and relations with an affiliate are explained in note 18. €1,000 of interest was charged to the income statement on the average outstanding loans payable in 2019 with interest at euribor plus 2% (2018: €3,000) to Mr. Alexandre Bouri, the majority shareholder. A payable to Mr. Bouri at year end was €0 (2018: €100,000).
The balance receivable at year end from an affiliate under common control of the majority shareholder was €676,000 (2018: €764,000) with interest at euribor plus 2.5% and repayable on 31 December 2020.
Other liabilities include a loan of €120,000 (2018: €120,000) payable to Mr. Gregory Garvey, a related party (See note 21). There are no conditions, interest or maturity period for this loan.
The key management personnel comprised of the Management Board (refer to Note 9 for further details regarding transactions with related parties as well). A loan was granted to Mr. Christian Crepet, a director, in 2012 for €20,000 with a balance of €1,317 was repaid with interest at Euribor plus 1% during the year ended 31 December 2019.
The Company's US subsidiary obtained incremental financing in 2020 from a new term loan of €5.40m and funding under the Coronavirus Aid, Relief, and Economic Security (CARES) Act's Paycheck Protection Program €1.60m and has sufficient liquidity.
On 11 March 2020, the World Health Organisation declared the outbreak of coronavirus (COVID-19) pandemic. For the consideration of the impact we refer to the going concern paragraph.
| Separate Statement of Financial Position | 66 |
|---|---|
| Separate Statement of Profit or Loss |
67 |
| Notes to Separate Financial Statements |
68 |
(After appropriation)
| Note | 2019 | 2018 | |
|---|---|---|---|
| in EUR thousands Assets |
|||
| Fixed assets | |||
| Intangible assets | (C) | 5,922 | 5,777 |
| Financial fixed assets | (D)/(H) | 22,966 | 20,228* |
| 28,888 | 26,005 | ||
| Current assets Trade and other receivables |
(E) | 838 | 831 |
| Cash and cash equivalents | (F) | 174 | 1,476 |
| Total assets | 29,900 | 28,312 | |
| Equity and liabilities | |||
| Shareholders' equity | (B)/(G) | ||
| Share capital | 2,049 | 2,049 | |
| Share premium | 51,703 | 51,874 | |
| Translation reserve | 4,093 | 3,829 | |
| Legal reserve | 5,700 | 5,529 | |
| Retained earnings | (39,192) | (37,309) | |
| 24,353 | 25,972 | ||
| Non-current liabilities | |||
| Loans from subsidiaries | (I) | 2,909 | 1,397 |
| Other non-current liabilities | (J) | 757 | 220* |
| Current liabilities | |||
| Creditors and other liabilities | (K) | 1,881 | 723* |
| Total equity and liabilities | 29,900 | 28,312 |
*Amounts have been restated for comparative purposes, refer to note A.
The notes on pages 68 to 75 are an integral part of these separate financial statements.
| in EUR thousands | Note | 2019 | 2018 |
|---|---|---|---|
| General and administrative expenses | (L) | (2,684) | (2,005) |
| Research and development expenses | (339) | (62) | |
| Other income | (M) | 1,221 | 1,180 |
| Operating profit (loss) | (1,802) | (887) | |
| Finance expenses | (N) | (52) | (3) |
| Finance income | (N) | 63 | 6 |
| Profit (loss) before tax | (1,791) | (884) | |
| Tax on result from ordinary activities | (O) | - | - |
| Share of result from participating interests | (P) | (92) | 2,732 |
| Profit (loss) | (1,883) | 1,848 |
The notes on pages 68 to 75 are an integral part of these separate financial statements.
For general information about the Company and its principal activities, we refer to note 1 of the consolidated financial statements. Refer to note H for an overview of the Company's subsidiaries.
The Company financial statements have been prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code. In accordance with Article 2:362 subsection 8 of the Civil Code, the Company has elected to apply the valuation of the accounting policies used in the consolidated financial statements to the separate Company financial statements. The financial statements are presented in Euros, which is the Company's functional currency. All amounts are in thousands unless stated otherwise.
In addition, Consolidated Group companies (financial fixed assets) are valued based on their net equity, determined using the Group accounting policies. In case the net equity of a Group Company is negative, the Company nets the negative equity value with the intercompany loans which are determined to be part of the net investment as far as this is possible. For the remaining part of the negative equity, the Company records a provision for as far as the Company assesses that it has a legal or constructive obligation to reimburse the Group companies' losses.
The Company makes use of the option to eliminate intragroup expected credit losses against the book value of loans and receivables from the Company to participating interests, instead of elimination against the equity value / net asset value of the participating interests.
The share in the result of participating interests consists of the share of the group in the results of these participating interests, determined on the basis of the accounting principles of the group. Results on transactions, where the transfer of assets and liabilities between the group and the non-consolidated participating interests and mutually between nonconsolidated participating interests themselves, are not recognised as they can be deemed as not realised.
During 2019, the Group discovered that losses from subsidiaries with negative asset value had been erroneously recorded in provisions and other creditors, instead of credited to loan receivables from subsidiaries in its prior year separate financial statements. The loan receivables were incorrectly not accounted for as long-term investment that in substance form part of the net investment in the subsidiary. As a consequence, provisions, other creditors and loans to subsidiaries have been overstated. The errors have been corrected by restating each of the affected financial statement line items for prior periods. The impact of the restatement was a decrease in loans to subsidiaries of €738,000, a decrease in provisions of €587,000 and a decrease in other creditors by €151,000. The restated amounts for 2018 are as follows: loans to subsidiaries of €1,847,000, provisions of €0 and other creditors of €723,000. There is no impact on the Group's statement of profit or loss and no impact on the Group's statement of cash flows for the years ended 31 December 2019 and 2018.
Refer to the statement of changes in equity and note 20 of the consolidated financial statements for Shareholders' equity of the separate financial statements.
| Patents & licenses |
Development costs |
Total | |
|---|---|---|---|
| In EUR thousands At 1 January 2018 |
|||
| Cost | 698* | 7,398* | 8,096 |
| Accumulated amortisation and impairment | (467)* | (2,293)* | (2,760) |
| Net carrying amount | 231 | 5,105 | 5,336 |
| Changes to net carrying amount in 2018 | |||
| Additions | 68 | 1,401 | 1,469 |
| Amortisation | (51) | (977) | (1,028) |
| Total changes in 2018 | 17 | 424 | 441 |
| At 31 December 2018 | |||
| Cost | 766* | 8,799** | 9,565 |
| Accumulated amortisation and impairment | (518)* | (3,270)** | (3,788) |
| Net carrying amount | 248 | 5,529 | 5,777 |
| Changes to net carrying amount in 2019 | |||
| Additions | 31 | 1,282 | 1,313 |
| Amortisation | (57) | (1,111) | (1,168) |
| Total changes in 2019 | (26) | 171 | 145 |
| At 31 December 2019 | |||
| Cost | 797 | 10,081 | 10,878 |
| Accumulated amortisation and impairment | (575) | (4,381) | (4,956) |
| Net carrying amount | 222 | 5,700 | 5,922 |
* The 2018 amounts for costs and accumulated amortisation of patents and licenses have been restated for comparative purposes by €202,000 due to an error. This did not have an impact on the 2018 net carrying amount.
** The 2018 amounts have been restated, refer to note 13 of the consolidated financial statements.
Major projects capitalised during the year included New Recognition Systems – Single Feed €909,000 (2018: €510,000), Modular and Modular Core €142,000 (2018: €783,000) and New Recognition Systems-Bulk Feed €105,000 (2018: €29,000). See also note 13 for capitalised development costs of the Company.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Investment in subsidiaries | 21,812 | 18,381 |
| Loans to subsidiaries | 1,154 | 1,847 |
| Total Financial Fixed Assets | 22,966 | 20,228 |
Movements in financial fixed assets were as follows:
| Investment in subsidiaries |
Loans to subsidiaries |
|
|---|---|---|
| €'000 | €'000 | |
| Balance at 1 January 2019 | 18,381 | 1,847 |
| Investments and loans provided | 688 | 1,241 |
| Results of the group companies for the year | (92) | - |
| Exchange differences | 264 | - |
| Movement of negative participations to loans | 1,934 | (1,934) |
| Movement of negative participations to provision | 637 | - |
| End of year | 21,812 | 1,154 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Other receivables | 764 | 831 |
| Receivables from subsidiaries | 74 | - |
| Total | 838 | 831 |
Other receivables include €676,000 (2018: €764,000) that relates to a loan to an affiliate under common control of the majority shareholder which is extended in the year and repayable on 31 December 2020, with interest at Euribor plus 2.5%. €50,000 (2018: €50,000) relates to a loan to a German subsidiary employee. €20,000 is in respect of VAT receivable (2018: €17,000), €3,000 is prepaid insurance (2018: €0) and other receivables amount €15,000 (2018: €0). The 2018 receivables also included a loan of €1,317 to a director, Mr. Christian Crepet, which was repaid during the year December 2019.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Cash at bank and in hand | 174 | 1,476 |
| Cash and cash equivalents | 174 | 1,476 |
Refer to Consolidated statement of changes in equity (page 23) and note 20 Shareholders' equity of the Company's consolidated financial statements for further information regarding the Company's shareholders' equity.
According to Book 2 of the Netherlands Civil Code, the Company is required to restrict part of its equity from distribution to shareholders, by forming a legal reserve equal to the amount it has capitalised for development costs. The equity enclosed in this legal reserve is not at the disposal of the General Meeting of Shareholders. Therefore, this amount cannot be distributed to shareholders until the capitalised development costs have been recognised in the profit and loss account. The capitalised development costs as at 31 December 2019 amounted to €5,700,000 (2018: €5,529,000). A legal reserve equaling these amounts has been created in both the years by decreasing the share premium reserve with these respective amounts. In the consolidated statement of changes in equity and note 20 of the consolidated financial statements the legal reserve is included in the share premium reserve.
No dividends were declared or paid by the Company for the year.
No dividend was paid in 2019. The Board of Directors proposes that the loss for the financial year 2019 amounting to €1,883,000 will be charged to the retained earnings. The financial statements reflect this proposal.
The Netherlands Civil Code stipulates that the Company can only make payments to the shareholder and other parties entitled to the distributable profit insofar as (1) the Company can continue to pay its outstanding debts after the distribution (the so-called distribution test), and (2) the shareholder's equity exceeds the legal reserves and statutory reserves under the articles of association to be maintained (the so-called balance sheet test). If not, management of the Company shall not approve any distribution.
Envipco (UK) Limited – London, United Kingdom – 100% Envipco Automaten GmbH, Westerkappeln, Germany – 100% Envipco Pickup & Processing Services Inc., Delaware, U.S.A. – 99.85% Environmental Products Corporation, Delaware, U.S.A. – 99.85% Environmental Products Recycling Inc., Delaware, U.S.A. – 99.85% Envipco A.S., Oslo, Norway – 100% Envipco N.D. Inc., Delaware, U.S.A. – 99.85% Envipco Sweden A.B., Borlange, Sweden – 100% Envipco Hellas SA, Athens, Greece – 100% Envipco France SA, Paris, France – 100% Envipco Solutions SRL, Alba Iulia, Romania – 100%
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Beginning of period | 1,397 | 451 |
| Additions | 1,512 | 946 |
| End of period | 2,909 | 1,397 |
Loans from subsidiaries include current balances that have been rolled over by the Company annually and will not be repaid in the short term. No interest has been charged in 2019. The Company has formalised the agreements in 2020 and has presented these as non-current in the balance sheet in accordance with the revised maturity.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Provision against investments | 637 | - |
| Other liabilities | 120 | 220 |
| Total | 757 | 220 |
Other liabilities include a loan of €120,000 (2018: €120,000) payable to Mr. Gregory Garvey, a related party. There are no conditions, interest or maturity period for this loan. The Company determines that a constructive obligation exists to reimburse for all of the subsidiaries' losses and therefore records a provision for the entire amount of the subsidiaries' negative equity after netting with the intercompany loans.
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Creditors | 121 | 270 |
| Accrued expenses | 423 | 453 |
| Payables to subsidiaries | 1,337 | - |
| Total | 1,881 | 723 |
General and administrative expenses include the following:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Legal charges | 769 | 541 |
| Compliance and other costs | 747 | 436 |
| Depreciation and amortisation of intangible | ||
| fixed assets | 1,168 | 1,028 |
| Total | 2,684 | 2,005 |
Wages and salaries is included in general and administrative expenses are the following:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Wages & Salaries | 54 | 42 |
| Total | 54 | 42 |
The staffing level (average number of staff) can be divided into the following staff categories:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| General and administrative | 1 | 1 |
| Total number of employees | 1 | 1 |
During the 2019 financial year the average number of staff employed in the Company converted to equivalents, amounted to 1 person (2018: 1 person).
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Management fee | 613 | 590 |
| Royalty fee | 608 | 590 |
| Total | 1,221 | 1,180 |
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Interest and similar expenses | (52) | (3) |
| Interest and similar income | 14 | 3 |
| Exchange gains/(losses) | 49 | 3 |
| Total | 11 | 3 |
The tax on the result from ordinary activities, amounting to a credit of €0 (2018: €0) can be specified as follows:
| 2019 | 2018 | |
|---|---|---|
| €'000 | €'000 | |
| Result before taxes | (1,883) | 1,848 |
| Income tax using the appropriate tax rate in the Netherlands @ 25% | 471 | (462) |
| Participation exemption | (23) | 683 |
| Current year losses for which no deferred tax asset was recognised and changes in unrecognised temporary differences |
(448) | (221) |
| Effective taxes | - | - |
Tax losses where no deferred tax has been recognised amounted to €7,788,000 (2018: €6,014,000).
Transactions and relations with the shareholders and affiliates are explained in notes 18 and 26 of the consolidated financial statements.
Net research and development costs invoiced by Germany and USA were €1,496,000 (2018: €1,401,000) to the Company. The Group companies charge interest on intercompany loans. No interest is charged on the intercompany current account balances. The Company also charges a management fee to its subsidiaries.
During the year 2019 the Company received funds of €0 (2018: €1,550,000) from one its US subsidiaries as return of capital.
The Company provided a Guarantee of \$6,457,000 in 2019 and \$8,083,000 in 2018 to the USA subsidiary's lender, TD Bank N.A., for the credit facilities.
The Group has exposure to the following risks from its use of financial instruments:
In the notes to the consolidated financial statements information is included about the Group's exposure to each of the above risks, the Group's objectives, policies and processes for measuring and managing risk, and the Group's management of capital.
These risks, objectives, policies and processes for measuring and managing risk, and the management of capital apply also to the separate financial statements of the Company.
The fair values of most of the financial instruments recognised on the statement of financial position, including trade and other receivables, cash and cash equivalents and current liabilities, is approximately equal to their carrying amounts. The fair value of the loans due to and from group companies cannot be determined with sufficient certainty. For further information, please refer to note D - Financial fixed assets and note I - Loans from subsidiaries.
Details of the post balance sheet events are given on page 64 of the notes to the consolidated financial statements.
Amersfoort, 12 May 2020
w.s. Mr. Gregory Garvey (Chairman)
w.s. Mr. Alexandre Bouri w.s. Mr. David D'Addario w.s. Mr. Guy Lefebvre
w.s. Mr. Dick Stalenhoef w.s. Mr. Christian Crépet
In Article 15 of the Company statutory regulations the following has been presented concerning the appropriation of result:
The General Meeting of Shareholders may only decide not to distribute the amounts referred to in the preceding sentence if and to the extent that it can be demonstrated and that the Company's liquidity position does not allow this.
To: the General Meeting of Shareholders of Envipco Holding N.V.
In our opinion:
We have audited the financial statements 2019 of Envipco Holding N.V. ('the Company or Envipco') based in Amsterdam. The financial statements include the consolidated financial statements and the separate financial statements.
The consolidated financial statements comprise:
The separate financial statements comprise:
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report.
We are independent of Envipco in accordance with the 'Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten' (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the 'Verordening gedrags- en beroepsregels accountants' (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Unqualified
Based on our professional judgement we determined the materiality for the financial statements as a whole at EUR 350,000. The materiality is determined with reference to the relevant benchmark being revenue (1.0%). We consider revenue as the most appropriate benchmark
because the Company is in a growth stage and the main stakeholders at this state of the life cycle are primarily focused on the growth in revenue. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the Board of Directors that unadjusted misstatements in excess of EUR 17,500 which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Envipco is at the head of a group of components. The financial information of this group is included in the financial statements of Envipco.
Our group audit mainly focused on significant components that are (i) of individual financial significance to the group, or (ii) that, due to their specific nature or circumstances, are likely to include significant risks of material misstatement of the group financial statements.
We have:
By performing the procedures mentioned above at group components, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group's financial information to provide an opinion about the financial statements.
Our procedures as described above can be summarized as follows:
Audit of specific items
Audit of specific items
Covered by additional procedures at group level
In accordance with the Dutch Standards on Auditing we are responsible for obtaining reasonable assurance that the financial statements taken as a whole are free from material misstatement, whether caused by fraud or error. In determining the audit procedures we will make use of the evaluation of management in relation to fraud risk management (prevention, detections and response), including ethical standards to create a culture of honesty.
In our process of identifying fraud risks we assessed fraud risk factors, which we discussed with the Board of Directors. Fraud risk factors are events or conditions that indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud. In our risk assessment we made use of a forensic specialist.
We communicated identified fraud risks throughout our team and remained alert to any indications of fraud throughout the audit. This included communication from the group to component audit teams of relevant fraud risks identified at group level.
We identified and addressed the following fraud risks that were relevant to our audit:
Our audit procedures included an evaluation of the design and implementation of internal controls relevant to mitigate these fraud risks and supplementary substantive audit procedures. This included inquiries of management and detailed testing of high risk journal entries amongst others relating to revenue and an evaluation of key estimates and judgement by management with respect to the estimates as described in the key audit matters 'inaccurate capitalization of development costs' and 'the valuation of deferred tax assets'. Furthermore, in relation to the correct recognition of revenues for the period prior to the financial year-end, we carried out inspection and testing of documentation such as agreements with customers and shipping documents.
As part of our evaluation of any instances of fraud, we inspected the incident register/whistle blowing reports.
We communicated our audit response to management and the Board of Directors. Our audit procedures differ from a specific forensic fraud investigation, which investigation often has a more in-depth character.
For details on our audit procedures and observations regarding revenue recognition in respect of incorrect cut-off at period, we refer to the key audit matter on this topic as included in this auditor's report.
We do note that our audit is based on the procedures described in line with applicable auditing standards and are not primarily designed to detect fraud.
We have evaluated facts and circumstances in order to assess laws and regulation relevant to the Company.
We identified laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general and sector experience, through discussions with the Board of Directors, and discussed the Company's policies and procedures regarding compliance with laws and regulations.
We communicated identified laws and regulations within our audit team and remained alert to any indications of non-compliance throughout the audit. This included communication from the group to component audit teams of relevant laws and regulations identified at group level. The potential effect of these laws and regulations on the financial statements varies considerably:
We identified the following areas of laws and regulations as those most likely to have such an effect: competition legislation, employment legislation, health and safety regulation, contract legislation, environmental regulation and recycling legislation.
Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to inquiry of the Board of Directors and inspection of board minutes and regulatory and legal correspondence, if any. Through these procedures, we did not identify any additional actual or suspected non-compliance other than those previously identified by the company in each of the above areas. We considered the effect of actual or suspected noncompliance as part of our procedures on the related financial statement items.
Our procedures to address compliance with laws and regulations did not result in the identification of a key audit matter.
We do note that our audit is not primarily designed to detect non-compliance with laws and regulations and that management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to errors or fraud, including compliance with laws and regulations.
The more distant non-compliance with indirect laws and regulations (irregularities) is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.
Initial audit engagements involve considerations in addition to those applied in recurring audits. During initial audit engagements we need to gain sufficient knowledge about the Company, its business, control environment and application of accounting principles in order to perform our initial audit risk assessment and planning of audit activities.
A transition plan, including independence clearance, was prepared prior to the start of the audit. We started our transitional procedures to gain an understanding of Envipco and its business including its control environment and accounting policies. We have been in close contact with the predecessor auditor and have performed reviews on their audit files at all levels throughout the group. During 2019 we have had regular meetings with management, performed site visits in the US and Germany, and assessed key audit matters at an early stage.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Board of Directors. The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
Revenue is recognized when the performance obligations have been fulfilled. The Company has various revenue streams with different performance obligations. These include service revenue, revenue from sale of goods and leasing revenue. We have identified a presumed risk of fraud on the existence of revenue due to targets to be realized. This fraud risk especially relates to the sales of RVM machines sold at year-end (cut-off) considering the high value of these machines.
Our procedures included, amongst others:
Based on the results of our procedures performed we consider the accounting for revenue regarding the sale of goods to be satisfactory.
The Company has significant capitalized development costs related to the development of (new) products. The capitalization of development costs is considered to be a key audit matter, because capitalization needs to be performed in accordance with the recognition criteria in IAS 38. That amongst other requires judgement on the cost that can be capitalized and conditions that should be met. Inaccurate capitalizing of developments costs is therefore considered to be a significant risk of error.
Our procedures included, amongst others:
assessment of the adequacy of the disclosures made by the Company in this area and the Company's compliance with EU-IFRS accounting policies.
Based on the procedures performed on the capitalization of development costs we consider that the accounting for capitalization is satisfactory and in accordance with the EU-IFRS. Furthermore we determined that the related disclosure meets the requirements of EU-IFRS.
The Company has significant deferred tax asset positions (DTA) in the US. These are subject to the recognition criteria in IAS 12. We identified a risk of error due to the judgement and uncertainty involved in management's forecasts of future taxable income to support the recognition of these deferred tax asset positions.
Our procedures included, amongst others:
The results of our procedures regarding the evaluation of management's judgements and estimates are satisfactory. We determined that the related disclosure in note 16 meets the requirements of EU-IFRS.
As part of the preparation of the financial statements, management is responsible to assess the possible effects of COVID-19 on the company's liquidity and related ability to continue as a going concern and appropriately disclose the results of its assessment in the financial statements. The COVID-19 pandemic is an unprecedented challenge for humanity and for the economy globally, and at the date of the financial statements its effects are subject to significant levels of uncertainty. Management prepared a financial and liquidity risk analysis addressing amongst others future compliance with financing covenants as well as the financing and cash requirements to ensure continuation of the company's operations.
We considered the uncertainties arising from COVID-19 in planning and performing our audit. Our procedures included:
We found management's assumptions and aforementioned disclosures to be acceptable. However, an audit cannot predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to COVID-19.
In addition to the financial statements and our auditor's report thereon, the annual report contains other information.
Based on the following procedures performed, we conclude that the other information:
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
The Board of Directors is responsible for the preparation of the other information, including the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We were engaged by the General Meeting of Shareholders as auditor of Envipco Holding N.V. on 12 August 2019, as of the audit for the year ending on 31 December 2019.
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audits of public-interest entities.
The Board of Directors is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the Board of Directors is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Directors is responsible for assessing Envipco Holdings N.V.'s ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Directors should prepare the financial statements using the going concern basis of accounting unless the Board of Directors either intends to liquidate Envipco Holding N.V. or to cease operations, or has no realistic alternative but to do so. The Board of Directors should disclose events and circumstances that may cast significant doubt on the Company's ability to continue as a going concern in the financial statements.
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.
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 financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
A further description of our responsibilities for the audit of the financial statements is included in the appendix of this auditor's report. This description forms part of our auditor's report.
Amstelveen, 14 May 2020
KPMG Accountants N.V.
L.A. Ekkels RA
Appendix: Description of our responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:
We are solely responsible for the opinion and therefore responsible to obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the group to express an opinion on the financial statements. In this respect we are also responsible for directing, supervising and performing the group audit.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements
regarding statutory audits of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report.
We provide the Board of Directors 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 Board of Directors, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Envipco Holding NV Arnhemseweg 10 3817 CH Amersfoort The Netherlands
www.envipco.com
Annual Report | 2018
--this document is signed digitally-- -- for identification purposes only --
| Chief Executive Officer's Statement | 3 |
|---|---|
| Report of the board of directors | 4 |
| Financial Statements | |
| Consolidated statement of comprehensive income | 18 |
| Consolidated balance sheet | 20 |
| Consolidated cash flow statement | 22 |
| Consolidated statement of changes in equity | 23 |
| Notes to the consolidated financial statements | 24 |
| Separate company balance sheet | 63 |
| Separate company income statement | 64 |
| Notes to the separate company financial statements | 65 |
| Other information | 74 |
| Auditor's report | 76 |
2018 marked a turning point in our industry. Increasing public awareness of the environmental, health and societal concerns associated with plastic pollution, as evidenced by searing articles such as National Geographic's editorial "Planet or Plastic?" and the launch of the UN's "Beat Plastic Pollution" campaign, have all highlighted the need for Envipco's products and created a unique opportunity for us to capitalize on. The European Union (EU) has enacted legislation requiring all its member states to recover 77% of plastics and other packaging waste and to use 25% recycled content in new packaging effective 2025. These target rates will be reset by 2030 to achieve 90% and 35% respectively. As I mentioned earlier this year, "we are now at a tipping point, where explosive growth of our industry is expected within the next 5 years. I am convinced that the introduction of Deposit Refund Schemes (DRS) is the best way to meet recycling targets as set by the EU." These EU markets would require over 200,000 RVMs, more than double the current world market size.
I believe that Envipco is very well positioned to take advantage of these developments. We have advanced our readiness to enter these new/evolving markets in Europe in the past year. Our target is to capture a sizeable market share in each of these new markets. We focused our business development activities on the most imminent markets at the moment, in particular in Scotland, Great Britain, Portugal and some Balkan and Mediterranean countries which are the most advanced in adapting DRS. We have recruited a Managing Director and are in the process of setting up an operational center in the UK. We also invested in adapting and completing our product portfolio, including our unique modular Quantum bulk feed RVMs, to anticipate the needs of these new markets.
The potential of new DRS in Europe makes it imperative that Envipco undertakes the necessary activities and investments to ensure that we are well prepared. We are planning significant investments in R&D and market development, accordingly we are expanding and securing our supply chain and ramping up manufacturing plants to meet expected demands in a timely manner. We have raised capital by issuing new shares in a private placement in October 2018, to fund new market development expenses, including setting up local organisations and infrastructure.
Other notable achievements over the year include the dual listing of Envipco on the Euronext Amsterdam Stock Exchange in June; success at the high-profile Thessaloniki International Fair in Greece showcasing our technology to the Balkan countries; the award of a 300 RVM frame order in Greece and our growing market share. Our Swedish operation is progressing fairly well and is expected to grow, especially with the introduction of our new Quantum Indoor and Outdoor Modular Bulk Feed RVMs, which provide several benefits and flexibility. With significant interests being shown by retail customers we expect more placements during 2019.
I am very pleased with the overall strong performance during 2018, having generated a net profit of €1.85 million and an EBITDA of €5.48 million. We are well positioned for growth in the existing and new European markets.
All these achievements would not be possible without the efforts of our global Envipco community. As years come and go there is comfort in knowing that Envipco is supported by hardworking and dedicated employees, a strong and experienced management team, suppliers, valued customers, and supportive shareholders who no doubt will ensure continued success in the future. Innovation, Focus and Execution supported by Superior implementations and customer satisfactions, remain our mantra.
My sincere thanks to all.
B. Gool Santchurn
Envipco Holding N.V. is a public limited liability company incorporated in accordance with the laws of The Netherlands. Envipco Holding N.V. and its subsidiaries listed on page 29 consist of the Group (hereafter the Group).
Our mission is to become the most respected global company that develops and operates automated solutions to recover used beverage containers, while creating high value for our shareholders, customers, partners and employees. We believe these objectives can be achieved by our strategy to grow and win market share by delivering innovative technologies, while providing superior service at competitive prices.
The Group's principal activity is the design, development and operation of automated solutions to recover used beverage containers which includes:
The Group's key developments during 2018 were as follows:
| 2018 | 2017 | |
|---|---|---|
| Continuing operations | ||
| Revenues | €35.38m | €34.05m |
| Gross Profit | €13.94m | €12.12m |
| Gross profit margin | 39.40% | 35.59% |
| Net profit (loss) before taxes | €1.92m | €0.66m |
| Net profit (loss) after taxes after minority | €1.85m | €(2.54)m |
| EBITDA | €5.48m | €4.25m |
| Earnings (loss) per share | €0.47 | €(0.69) |
| Equity | ||
| Shareholder's equity | €25.97m | €20.60m |
| Liquidity ratio (current assets / current liabilities) | 2.11 | 1.84 |
| Total assets | €40.00m | €35.05m |
Revenues for the year 2018 increased by 3.9% to €35.38m from €34.05m in 2017. On a constant currency basis, revenues for the year 2018 increased by 8.2% compared to 2017, mainly due to increase in the redemption volumes.
Gross profit for the year 2018 increased 15.0% to €13.94m from €12.12m in 2017. On a constant currency basis, gross profit increased by 19.8%. This improvement was largely driven by the North American business with increased volumes of the throughput program services and also by increased RVM sales. Gross profit margin improved to 39.4% for the year 2018 compared to 35.6% in 2017, due to continued and improved efficiencies and sourcing.
Operating expenses excluding new market development expenses for the full year 2018 increased 5.6% to €11.93m compared to €11.30m in 2017 due largely to compliance costs €0.45m and other provisions of €0.18m.
Operating profit for the year 2018 increased 163.9% to €2.19m from €0.83m in 2017. On a constant currency basis this improvement was 215.8% for 2018. The operating profit in 2018 was favorably impacted by the onetime settlement payment of €0.62m reported in Q2 of this year. The full year 2018 operating profit was negatively impacted by €0.48m of new market development expense incurred in Europe during Q3 and Q4.
EBITDA for the full year 2018 increased 28.9% to €5.48m from €4.25m in 2017. On a constant currency basis, the improvement for the full year 2018 over 2017 was 36.3%. Adjusting to exclude the one-time payment, but including new market development expense, the full year 2018 EBITDA would have been €4.86m representing a 20.9% improvement over 2017 on a constant currency basis.
Net profit increased to €1.85m from a loss of €2.54m in 2017, which included tax expenses of €3.20m mainly due to changes in the company's deferred tax assets. Earnings per share improved 168.1% to €0.47 for the full year 2018 compared to earnings per share of €(0.69) in 2017.
Shareholders' equity increased to €25.97m at 31/12/2018 compared to €20.60m at 31/12/2017 as a result of the full year 2018 earnings of €1.85m, a positive translation reserve of €0.82m and the net proceeds of the issuance of 260,000 new shares in October 2018.
The company has improved its net working capital to €11.99m at 31/12/2018 and has adequate working capital with borrowing availability of approximately €1.96m under its financing arrangement.
North America revenues for the full year 2018 increased 7.2% to €32.32m compared to €30.14m for 2017. In the fourth quarter of 2018, revenues increased by 14.9% to €7.81m compared to €6.80m in 2017. In local USD
currency, North American Revenues increased 12.2% in 2018 compared to 2017. North America's program services revenues increased 10.3% for the full year 2018 over 2017 on higher container throughput in local currency. RVM sales for the full year 2018 were up 26.6% over 2017 in local currency.
North America operating profit (excluding the onetime settlement gain) in local currency, increased 57.4% for the full year 2018 over 2017 and increased 186.2% for the fourth quarter of 2018 over 2017. North America EBITDA (excluding the one-time
settlement gain) in local currency, increased 28.5% for the full year 2018 over 2017.
The North America business continues to perform well with market share gains under long-term contracts, overall container volume increases, renewed RVM sales and sustained operational efficiencies. The company expects continued strong performance in 2019 albeit with some moderation in the growth of program services tied to container throughput volume.
Europe revenues for the full year 2018 decreased by 21.7% to €3.06m compared to €3.91m in 2017. For Q4 2018, revenues decreased 69.1% to €0.55m compared to €1.78m in Q4 2017. European RVM sales in Q4 2018
were down as expected compared to strong performance of Q3 2018 and also compared to a particularly strong Q4 2017.
Quantum sales to Sweden slowed for the first nine months of 2018 compared to 2017. This slowdown was partly intentional as the engineering and manufacturing processes to move to a total modular concept were being implemented in our German manufacturing facility. The modular
concept provides for more flexible configurations, increased material bin storage options, improved transport and installation handling and enhanced service capabilities. Two new Quantum installations in Sweden were completed in Q4 2018. Implementation of the Quantum modular concept has been a success both internally and from our customers' perspective. The company has strong expectations for Sweden in 2019 based on a good order book.
Recently enacted European Union (EU) legislation opens up opportunities in new European markets. These EU markets reflect a potential of doubling the current world market size. Envipco is well positioned and aims to capture a sizeable market share in each of these new markets.
Scotland is leading the charge with legislation expected by the 3rd quarter of 2019 and implementation by 2020. In preparation, we have recruited a UK Managing Director and are in the process of setting up an operational center, including a showroom in Edinburgh to support sales and marketing activities, as well as pilot tests. The Scottish RVM market is estimated to be around 4500 RVMs. The rest of the UK is also considering such schemes, which would create the world's largest market for RVMs but is not expected to be implemented before 2022 - we are closely monitoring developments.
Malta recently announced the introduction of a DRS, with expected implementation date by early 2020. Although relatively small, our Flex platform is well-suited for this market. Turkey, Portugal and Romania have
also announced legislation to take effect from 2021. Several other European countries are evaluating DRS and are at different stages of the consultation process.
We expect solid growth in the European market for 2019 considering our Greece and France order backlogs along with new Quantum sales momentum. Over the longer-term and tied to the prospects of new DRS markets, we expect significant growth in our European market.
ROW revenue, which currently reflects the Australian market had no sales during 2018 and 2017. Our Australian distributor has been delayed
in implementing RVM services to supplement current manual operations.
The Company is continuing IP enforcement activities related to its German patent that covers a method for how container security labels are created and interpreted. Legal cost for the full year 2018 was €0.54m compared to €0.68m for 2017. The Company expects to continue to incur cost on this matter, pending certain court hearings and followed by decisions, expected during 2019.
The company sees a very positive outlook for the business considerate of strengthening North America performance, continued market execution in our established European markets of Sweden, Greece and France and most importantly the significant potential for growth tied to new DRS legislation in a number of European markets.
The group generated €4.64m cash from its operating activities for the year 2018 versus €3.18m during 2017. Cash flows used in investing activities were €3.80m for the year 2018 (2017: €3.72m). The 2018 outflows were funded mostly by cash generated from operations during the year along with €2.71m generated from the sale of new shares and €1.97m from sale of treasury shares in 2017. Net debt repayments were €1.30m during the year 2018 compared to net borrowings of €0.90m in 2017.
A majority of our current RVM business is dependent upon legislation. The Company may be at risk if such legislation was cancelled, although we have seen no such cancellations in the area where we have operated over the last 20 years. Theoretically this can happen, but we see that even in such an unlikely scenario there will be a notice period which will help the Company plan for any transition. Equally the reverse can also happen as new legislation is implemented in more states and countries.
The Group strategy is to grow and win market share by delivering innovative market solutions at competitive prices along with superior service. The Company may be at risk from competition and new market uncertainties. These risks can be managed by adequate market research to ensure customer acceptance of its products. It also invests consistently in R&D to continually innovate and stay ahead of the competition.
Customers with whom we have long term contracts can go out of business which would have an impact on our costs due to lower volumes. To mitigate the impact we closely monitor and control our variable costs.
Sharp fluctuation in foreign exchange risk can impact the cash situation of the Company but is mitigated by proper cash management.
Non-availability of lines of credit or cash to continue to fund projects under a development stage may impact the long-term viability of the Company.
For details on financial risk management, refer to note 5 in the notes to the consolidated financial statements.
A foundation, Stichting Employees Envipco Holding was formed in 2011 with following Board members:
| Summary as of 31 December 2018 of Issued Share Capital | 2017 | |
|---|---|---|
| Common stock of €0.50 nominal value per share: | ||
| Opening and Closing balance | 4,097,607 3,837,607 |
During the year the Company issued 260,000 ordinary shares via private placement. Stichting Employees Envipco Holding held 240,000 treasury shares of the Company at a nominal value of €0.50, which were sold during 2017.
For more details please refer to note 20 of the notes to the consolidated financial statements.
The Group has been notified of or is aware of the following 3% or more interests at 31 December 2018 and 2017.
| 31 December | ||||
|---|---|---|---|---|
| 2018 | 2017 | |||
| Number of | Number of | |||
| Shares | Percentage | Shares | Percentage | |
| A Bouri/Megatrade International SA | 2,171,068 | 52.98% | 2,558,568 | 66.67% |
| G Garvey/EV Knot LLC | 521,513 | 12.73% | 234,013 | 6.10% |
| B Santchurn/Univest Portfolio Inc | 155,480 | 3.79% | 155,480 | 4.05% |
| Douglas Poling/GD Env LLC | 200,000 | 4.88% | 200,000 | 5.21% |
| Otus Capital Management Ltd | 247,727 | 6.05% | - | - |
| Lazard Freres Gestion SAS | 222,532 | 5.43% | - | - |
As per Articles of Association of the Company, the Board comprises of executive and non-executive board members. The Board includes five non-executive and two executive board members:
Mr Gregory Garvey (Chairman) Mr Bhajun Santchurn Mr Alexandre Bouri Mr Christian Crépet Mr Dick Stalenhoef Mr Guy Lefebvre Mr David D'Addario
For further details please click on the link: https://www.envipco.com/investors-media/Board-of-Directors.php
| 31 December | |||||
|---|---|---|---|---|---|
| 2018 | 2017 | ||||
| Number of | Number of | ||||
| Shares | Percentage | Shares | Percentage | ||
| A Bouri/Megatrade International SA | 2,171,068 | 52.98% | 2,558,568 | 66.67% | |
| G Garvey/EV Knot LLC | 521,513 | 12.73% | 234,013 | 6.10% | |
| B Santchurn/Univest Portfolio Inc | 155,480 | 3.79% | 155,480 | 4.05% | |
| C Crepet | 7,012 | 0.17% | 6,456 | 0.17% | |
| D D'Addario | 80,451 | 1.96% | 80,451 | 2.10% | |
| TJM Stalenhoef | 600 | 0.01% | 600 | 0.02% | |
The Board of Directors is comprised of five non-executive and two executive directors. The total remuneration was €624,000 in 2018, as compared to 2017 of €742,000 for the prior year (see note 9).
There is an employment contract in place for Mr. Bhajun Santchurn. A loan was granted to Mr. Christian Crepet, a director in 2012 for €20,000 which has been repaid during the year 31 December 2018 (see note 26).
According to the Dutch Civil Code, our General Meeting of Shareholders has adopted a remuneration policy in respect of the remuneration of our Board of Directors, which is published on our website. Our non-executive directors propose the remuneration of the individual executive members of our Board of Directors to the General Meeting of Shareholders.
Senior executives apply to the CEO and other senior management executives for their respective performance appraisals as part of the remuneration policy. Salary and other employment terms for the senior executives shall be competitive with local markets to retain the best talents. Salary includes both fixed and variable factors which are dependent upon the area of individual responsibility, expertise, position experience, conduct and performance. The variable component is dependent upon specific performance criteria. The Chairman of the Board appointed the CEO whose goals and remuneration package and any changes are proposed to the Board for approval. The remuneration of other senior executives including any changes is agreed by the CEO and the respective executive.
The Dutch Corporate Governance Code of December 2016 effective 1 January 2017 (the "Code") was complied with. The Code contains principles and best practice provisions for a managing board, supervisory boards, shareholders and general meetings of shareholders, financial reporting, auditing, disclosure, compliance with and enforcement of the Code.
The corporate governance code can be accessed at http://commissiecorporategovernance.nl/information-inenglish
Dutch companies admitted to trading on a registered stock exchange or, under certain circumstances, registered on a multilateral trading facility, whether in the Netherlands or elsewhere, are required under Dutch law to disclose in their annual reports whether or not they apply the provisions of the Code and, if and to the extent they do not apply, to explain the reasons why.
The Company acknowledges the importance of good corporate governance. Since 2011 the Company supports the Code (www.envipco.com) and has started to implement the relevant provisions of the Code subject to the exceptions set out below:
The Company does not comply with the following provisions of the Dutch corporate governance code:
The Annual General Meeting of Shareholders must be held within six months after the end of each financial year. The notice convening any General Meeting of Shareholders shall contain an agenda indicating the items for discussion included therein. The notice for convening the General Meeting of Shareholders shall mention the registration date and the manner in which the persons with meeting rights at the General Meeting of Shareholders may procure their registration and the way they may exercise their rights. The registration date is the twenty-eighth day prior to the date of the General Meeting of Shareholders.
Decisions of the General Meeting of Shareholders are taken by a majority of three/fourths of the votes validly cast, except where Dutch law or the Company's Articles of Association provide for a special or greater majority.
Pursuant to the Implementing Decree of 5 April 2006 relating to Article 10 of Directive 2004/25/EC on takeover bids of 21 April 2004 of the European Parliament and the Council of the European Union, Envipco includes the following explanatory notes:
As at 31 December 2018 and 2017 Envipco had issued 4,097,607 and 3,837,607 ordinary shares respectively. Stichting Employees Envipco Holding held 240,000 shares of the Company at a nominal value of €0.50, which were sold during the year 2017. The Company issued 260,000 ordinary shares via private placement during 2018.
There are no physical share certificates issued, except for entries in the shareholders register. The Articles of Association do not provide for any limitation on the transferability of the ordinary shares.
Significant direct and indirect shareholdings are set out in this report under the section 'Substantial Shareholdings'.
Envipco currently does not hold any employee share scheme in which the control rights are not exercised directly by the employees.
The voting right is not subject to any limitation. All shares entitle the holder to one vote per share. No securities with special control rights have been issued. No agreement has been entered with any shareholder that could give rise to any limitation on the transfer of shares and/or voting rights.
Unless otherwise specified by the Articles, all resolutions at the General Meeting of Shareholders shall be passed by a majority of three/fourths of the votes cast.
The appointment, suspension and discharge of the members of the Board of Managing Directors and their remuneration are decided at the General Meeting of Shareholders as per Article 8 of the Articles of Association.
The issue of new shares shall be by a resolution of the General Meeting of Shareholders and subject to the provisions of Article 5 of the Articles of Association.
The Enterprise Chamber may at the request of the Company, any shareholder of the Company, for shares issued with the cooperation of the Company or a foundation or association with full legal capacity which articles promote the interests of such company, shareholder, order a shareholder who has obtained 30% or more of the Company's voting rights or more to make a public offer in respect of all shares.
The above mentioned obligation for a person acting solely or together with others to make a public offer does not apply according to the Exemption Decree on Public Offers (Vrijstellingbesluit overnamebiedingen Wft) in cases where prior to, but no more than three months prior to, the acquisition of 30% or more of the Company's shares or voting rights, the General Meeting of the Shareholders has approved such acquisition with 95% of the votes cast by others than the acquirer and the person(s) acting with him/her.
After a public offer, pursuant to Section 2:359c of the Dutch Civil Code, a holder of at least 95% of the outstanding shares and voting rights, which has been acquired as a result of a public offer, has the right to require the minority shareholders to sell their shares to him/her.
As a Company dedicated to improving the rates at which the world recycles, Envipco works closely to help all of our clients reach their environmental goals. By helping beverage companies recover significant percentages of their bottles and cans, we have developed customised programs that promote sustainability. Envipco also proactively promotes its comprehensive recycling program and constantly explores new opportunities for greener operations.
Within the communities in which we operate, Envipco is an active and engaged citizen. We recognise our potential role as educators, regularly inviting school groups to tour our manufacturing facility to learn more about the process of recycling. We offer scholarships and internship programs to students interested in pursuing environmentally focused careers.
We have begun setting up the foundation of good corporate social responsibility principles which we intend to adopt as the Company grows. We plan to implement various initiatives to achieve a high level of employee satisfaction, optimising the use of both internal and external resources to have the most efficient carbon foot print while ensuring the adoption of a high code of conduct and ethics relating to all aspects of our business.
The executive board is responsible for establishing and maintaining adequate internal controls. The executive board members are involved in the day to day management. Both these members are responsible to implement the management board's decisions and strategy and are also accountable to the management board for their respective organisations.
Envipco's internal control system is designed to provide reasonable assurance to the Company's management board regarding the preparation and fair presentation of published financial statements in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union (EU). All internal control systems, no matter how well designed, have inherent limitations, and therefore can provide only reasonable assurance with respect to financial statement preparation and presentation. Management maintains a comprehensive system of controls intended to ensure that transactions are executed in accordance with Management's authorisation, assets are safeguarded, and financial records are reliable. Management periodically assesses the effectiveness of the Company's internal controls and believes these to be effective and reliable.
The Company's Management Board consists of 2 executive and 5 non-executive directors. The non-executive directors shall elect a chairman of the Management Board from among themselves. The Management Board is charged with the management of the Company and is responsible for establishing the Group's strategy and general policies. The executive directors are responsible for the day-to-day management of the Company.
Currently the Company does not have any female members in the Management Board. The Company shall be making efforts to appoint female members to its Board at the expiry of current term of the existing members.
The Company has established an audit committee which operates pursuant to the terms of reference adopted by the Board of Directors, which are published on the Company's website. The audit committee was established by the Board of Directors on 27 June 2011 and is comprised of three non-executive directors appointed by the Board of Directors. The terms of reference of the audit committee are included in the Board Regulations. The audit committee is chaired by the person appointed thereto by the Board of Directors, provided that this person: i) shall be independent (in the manner prescribed by the Dutch Corporate Governance Code, and set out in the Board regulations), ii) shall not be the chairman of the Board of Directors, nor a former executive director, and iii) shall have the necessary qualifications. The audit committee shall meet at least four times per year, or more frequently according to need. Currently, the audit committee consists of Mr. Stalenhoef as chairperson and financial expert, Mr. Garvey and Mr. Lefebvre.
Due to the frequent discussions of the audit committee with senior management within the Group and discussions with our external auditors, the committee is satisfied with its oversight on financial reporting, risk management and audit functions of the Group activities, even though no formal procedure is currently in place due to the frequent involvement of the audit committee members with the senior management. It has therefore not completely formalised this part of the governance code.
The Articles of Association of the Company provide for the number of directors to be determined by the Management Board. The remuneration and the terms and conditions of employment for each director are determined at the General Meeting of Shareholders.
The Company is represented by the Management Board or by one executive director.
Meetings of the Management Board are convened upon the request of a member of the Management Board. Resolutions of the Management Board are passed by an absolute majority of votes.
Per Article 9 Clause 9.8 of the Articles of Association, the Management Board shall require the approval of the General Meeting of the Shareholders for resolutions concerning a major change such as the amendment of the Articles of Association of the Company.
The General Meeting of Shareholders shall appoint the auditors of the Company. Envipco will appoint a new auditor, which will be presented at the shareholders' meeting for approval.
Details of the post balance sheet events are given on page 62 of the notes to the consolidated financial statements.
In accordance with best practice II.1.5 of the Dutch corporate governance code of December 2016, the Board of Directors confirms that internal controls over financial reporting provide a reasonable level of assurance that the financial reporting does not contain any material inaccuracies and confirms that these controls functioned properly in the year under review and that there are no indications that they will not continue to do so. The financial statements fairly represent the Company's financial condition and the results of the Company's operations and provide the required disclosures.
It should be noted that the above does not imply that these systems and procedures provide absolute assurance as to the realisation of operational and strategic business objectives, or that they can prevent all misstatements, inaccuracies, errors, fraud and non-compliances with legislation, rules and regulations.
The Company's directors hereby declare that, to the best of their knowledge:
w.s. Gregory Garvey w.s. Alexandre Bouri w.s. Dick Stalenhoef w.s. Guy Lefebvre Chairman
w.s. Bhajun Santchurn w.s. Christian Crepet w.s. David D'Addario
26 April 2019
Financial Statements
Envipco Annual Report | 2018 Page | 17
--this document is signed digitally-- -- for identification purposes only --
| Note | 2018 | 2017 | |||
|---|---|---|---|---|---|
| Revenue Cost of revenue Leasing depreciation Gross profit |
(6) | 35,380 (19,415) (2,026) |
13,939 | 34,049 (19,743) (2,188) |
12,118 |
| Selling expenses General and administrative expenses Other income/(expenses): - Miscellaneous |
(7) (7&9) |
(1,118) (11,287) |
(1,174) (10,123) |
||
| income/(expenses) | (8) | 651 | 9 | ||
| Operating result | 2,185 | 830 | |||
| Financial expense Financial income Exchange gains/(losses) |
(10) (10) |
(226) 3 (43) |
(299) 3 128 |
||
| Result before taxes | 1,919 | 662 | |||
| Income taxes | (11) | (65) | (3,201) | ||
| (65) | (3,201) | ||||
| Net results | 1,854 | (2,539) | |||
| Other comprehensive income | |||||
| Items that will be reclassified subsequently to profit and loss Exchange differences on |
|||||
| translating foreign operations Other movements |
819 (10) |
(2,279) (7) |
|||
| Total other comprehensive income | 809 | (2,286) | |||
| Total comprehensive income | 2,663 | (4,825) |
| Note | 2018 | 2017 | |
|---|---|---|---|
| (in thousands of euros) | |||
| Profit attributable to : | |||
| Owners of the parent | |||
| Profit/(loss) for the period | 1,848 | (2,540) | |
| 1,848 | (2,540) | ||
| Non-controlling interest | |||
| Profit/(loss) for the period | 6 | 1 | |
| 6 | 1 | ||
| Total | |||
| Profit/(loss) for the period | 1,854 | (2,539) | |
| 1,854 | (2,539) | ||
| Total comprehensive income attributable to : |
|||
| Owners of the parent | 2,657 | (4,826) | |
| Non-controlling interest | 6 | 1 | |
| 2,663 | (4,825) | ||
| Number of weighted average shares used for calculation | |||
| of EPS (exclude treasury shares) | |||
| - Basic |
(12) | 3,981,744 | 3,655,315 |
| - Diluted |
(12) | 3,981,744 | 3,655,315 |
| Earnings/(loss) per share for profit | |||
| attributable to the ordinary equity | |||
| holders of the parent during the year | |||
| Basic (euro) | 0.47 | (0.69) | |
| Fully diluted (euro) | 0.47 | (0.69) |
| Note | 2018 | 2017 | |||
|---|---|---|---|---|---|
| Assets Non-current assets Intangible assets Property, plant and equipment Financial assets Deferred tax assets |
(13) (14) (15) (16) |
6,016 9,165 349 1,819 |
5,548 9,184 72 1,737 |
||
| Total non-current assets Current assets |
17,349 | 16,541 | |||
| Inventory Trade and other receivables |
(17) (18) |
8,525 10,021 |
7,044 9,677 |
||
| Cash and cash equivalents | (19) | 4,107 | 1,788 | ||
| Total current assets | 22,653 | 18,509 | |||
| Total assets | 40,002 | 35,050 |
| Note | 2018 | 2017 | |||
|---|---|---|---|---|---|
| Equity Share capital Share premium and legal reserves Retained earnings Translation reserves |
(20) | 2,049 57,403 (37,318) 3,838 |
1,919 54,822 (39,157) 3,019 |
||
| Equity attributable to owners of the parent |
25,972 | 20,603 | |||
| Non-controlling interest | 27 | 22 | |||
| Total equity | 25,999 | 20,625 | |||
| Liabilities Non-current liabilities Borrowings Other liabilities Total non-current liabilities Current liabilities Borrowings Trade creditors Accrued expenses Provisions Tax and social security |
(21) (21) (21) (24) (22) |
3,014 220 1,420 6,406 2,554 77 312 |
3,234 | 4,142 217 1,356 6,236 1,755 236 483 |
4,359 |
| Total current liabilities | 10,769 | 10,066 | |||
| Total liabilities Total equity and liabilities |
14,003 40,002 |
14,425 35,050 |
|||
| Note | 2018 | 2017 | |||
|---|---|---|---|---|---|
| Cash flow from operating activities | |||||
| Operating result Adjustments for: |
2,185 | 830 | |||
| Depreciation and amortisation | (13/14) | 3,364 | 3,287 | ||
| Interest received Interest paid |
3 (226) |
3 (299) |
|||
| Changes in trade and other receivables | (269) | (320) | |||
| Changes in inventories | (583) | 136 | |||
| Changes in provisions Changes in trade and other payables |
94 135 |
(31) (605) |
|||
| Cash generated from operations | 4,703 | 3,001 | |||
| Income taxes (payment)/refund | (65) | 177 | |||
| Net cash flow from | |||||
| operating activities | 4,638 | 3,178 | |||
| Investing activities Investment in intangible fixed assets |
(13) | (1,488) | (1,142) | ||
| Investment in property, plant & equipment | (14) | (2,307) | (2,573) | ||
| Net cash flow used in | |||||
| investing activities | (3,795) | (3,715) | |||
| Financing activities | |||||
| Proceeds from sale of shares Changes in borrowings – proceeds |
(21) | 2,711 - |
1,969 3,548 |
||
| Changes in borrowings – repayments | (21) | (1,298) | (4,447) | ||
| Net cash flow | |||||
| from financing activities | 1,413 | 1,070 | |||
| Net increase/(decrease) in cash and cash | |||||
| equivalents | 2,256 | 533 | |||
| Opening position as at 1 January | 1,788 | 1,416 | |||
| Foreign currency differences on cash and cash equivalents |
58 | (134) | |||
| Foreign currency differences and other changes | 5 | (27) | |||
| Closing position as at 31 December | 4,107 | 1,788 | |||
| The closing position consists of: | |||||
| Cash and cash equivalents | (19) | 4,107 | 1,788 | ||
| 4,107 | 1,788 |
| Share capital |
Share premium |
Legal Reserve |
Retained earnings |
Translation reserve |
Total | Non controlling interests |
Total equity |
|
|---|---|---|---|---|---|---|---|---|
| Balance at 1 January 2017 | 1,919 | 48,237 | 4,616 | (36,618) | 5,298 | 23,452 | 29 | 23,481 |
| Changes in equity for 2017 | ||||||||
| Net profit/(loss) for the year Other comprehensive income for the |
- | - | - | (2,540) | - | (2,540) | 1 | (2,539) |
| year -Currency translation adjustments |
- | - | - | - | (2,279) | (2,279) | - | (2,279) |
| -Other movements | - | - | - | 1 | - | 1 | (8) | (7) |
| Total comprehensive income for the year |
- | - | - | (2,539) | (2,279) | (4,818) | (7) | (4,825) |
| Sale of treasury shares Legal reserve |
- - |
1,969 (488) |
- 488 |
- - |
- - |
1,969 - |
- - |
1,969 - |
| Balance at 31 December 2017 | 1,919 | 49,718 | 5,104 | (39,157) | 3,019 | 20,603 | 22 | 20,625 |
| Changes in equity for 2018 | ||||||||
| Net profit/(loss) for the year Other comprehensive income for the year |
- | - | - | 1,848 | - | 1,848 | 6 | 1,854 |
| -Currency translation adjustments -Other movements |
- | - | - - |
- (9) |
819 | 819 (9) |
- (1) |
819 (10) |
| Total comprehensive income for the year |
- | - | - | 1,839 | 819 | 2,658 | 5 | 2,663 |
| Sale of shares Legal reserve |
130 - |
2,581 (425) |
- 425 |
- - |
- - |
2,711 - |
- - |
2,711 - |
| Balance at 31 December 2018 | 2,049 | 51,874 | 5,529 | (37,318) | 3,838 | 25,972 | 27 | 25,999 |
Please refer to note 20 for changes in share capital and reserves.
Envipco Holding N.V. is a public limited liability company incorporated in accordance with the laws of The Netherlands, with its registered address at Arnhemseweg 10, 3817 CH Amersfoort, The Netherlands (Chamber of Commerce number: 33304225). The company is incorporated in Amsterdam. Envipco Holding N.V. and Subsidiaries ("the Group" or "Envipco") are engaged principally in Recycling in which it develops, manufactures, assembles, leases, sells, markets and services a line of "reverse vending machines" (RVMs) in the USA, Europe, Australia and the Far East.
In 2018 the Group has adopted new guidance for the recognition of revenue from contracts with customers according to IFRS 15, Revenue Recognition. This guidance was applied using a modified retrospective ('cumulative catch-up') approach. There is no effect of this new guidance on the Group financial statements.
Further, the Group has adopted new guidance for accounting for financial instruments This guidance was applied using the transitional relief allowing the entity not to restate prior periods. No material differences arose from the adoption of IFRS 9 in relation to classification, measurement, and impairment, and no change in retained earnings was required.
These Financial Statements have been approved for issue by the Board of Management on 26 April 2019 and are subject to approval by the shareholders at the Annual General Meeting of Shareholders. All amounts are in thousands of euros unless stated otherwise.
Under deposit redemption programs, the Company is responsible for the operation of systems to redeem, collect, account for and dispose of used beverage containers. In connection with these programs, participating retailers lease or purchase RVMs from the Company. The Company then acts in a clearinghouse capacity to collect deposits and handling fees on redeemed containers from participating beverage distributors and to distribute deposit refunds and handling fees to participating retailers. Accordingly, deposits and handling fees as paid to the participating retailers are not included as revenue and expense in the consolidated financial statements. The Company earns its revenues through leasing and selling machines to retailers and other participants, and through various services provided to distributors and retailers, including container collection, disposition, and accounting services.
The consolidated financial statements of Envipco have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (hereafter: IFRS) and are compliant with IFRS.
The Group measures financial instruments, at fair value at each balance sheet date. 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. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:
The principal or the most advantageous market must be accessible by the Group.
The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:
For assets and liabilities that are recognised in the financial statements on a recurring basis, the Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.
Valuation of assets and liabilities and determination of the result takes place under the historical cost convention. Unless presented otherwise at the relevant principle for the specific balance sheet item, assets and liabilities are presented at amortised costs. Income and expenses are accounted for on accrual basis. Profit is only included when realised on the balance sheet date. Losses originating before the end of the financial year are taken into account if they have become known before preparation of the financial
statements. Revenues from goods are recognised upon delivery. The cost of these goods is allocated to the same period. Revenues from services are recognised in proportion to the services rendered. The cost of these services is allocated to the same period.
The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group's accounting policies. The areas involving a higher degree of judgment or complexity are disclosed in note 3.
The Company has adopted the following new standards with a date of initial application of 1 January 2018: IFRS 9 Financial instruments IFRS 15 Revenue from Contracts with Customers IFRS 9 Financial instruments IFRS 9 replaces IAS 39 'Financial Instruments: Recognition and Measurement'. It makes changes to the previous guidance on the classification and measurement of financial assets and introduces an 'expected credit loss' model for the impairment of financial assets. IFRS 9 also contains new requirements on the application of hedge accounting. IFRS 9 has been applied by the Group with effect 1 January 2018.
There is no material impact on the Group's balance sheet or equity from applying the classification and measurement requirements of IFRS 9. Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to cash flows representing solely payments of principal and interest, and shown at amortised cost which is consistent with IAS39. IFRS 9 requires the Group to record expected credit losses on all of its loans and trade receivables, either on a 12-month or lifetime basis. The Group applies the simplified approach and records lifetime expected losses on all trade receivables.
IFRS 15 Revenue from Contracts with Customers IFRS 15 'Revenue from Contracts with Customers' and the related 'Clarifications to IFRS 15 Revenue from Contracts with Customers' (hereinafter referred to as 'IFRS 15') replace IAS 18 'Revenue', IAS 11 'Construction Contracts', and several revenue-related interpretations. The new Standard has been applied by the Group retrospectively without restatement. On the date of initial application of IFRS 15, 1 January 2018, there was no impact to retained earnings of the Group. In accordance with the transition guidance, IFRS 15 has only been applied to contracts that are incomplete as at 1 January 2018.
IFRS 15 establishes a single comprehensive model for entities to use in accounting for revenue from contracts with customers. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e., when "control" of the goods or services underlying the particular performance obligation is transferred to the customer.
The majority of the Group's revenue is derived from service revenue, sale of RVM's and leasing revenue. For service revenue control is transferred to the customer both in time and over time. For goods shipped to customers, control transfers to the customer when the product is delivered and accepted. For lease revenue the control is transferred over the leasing period.
Adoption of IFRS 15 has had no effect on when revenue is recognised at Envipco.
At the date of authorisation of these financial statements, several new, but not yet effective, Standards, amendments to existing Standards, and Interpretations have been published by the IASB. None of these Standards, amendments or Interpretations have been adopted early by the Group.
Management anticipates that all relevant pronouncements will be adopted for the first period beginning on or after the effective date of the pronouncement. New Standards, amendments and Interpretations neither adopted nor listed below have not been disclosed as they are not expected to have a material impact on the Group's financial statements.
IFRS 16 Leases will replace IAS 17 'Leases' and three related Interpretations. It completes the IASB's long running project to overhaul lease accounting. Leases will be recorded in the statement of financial position in the form of a right-of-use asset and a lease liability. There are two important reliefs provided by IFRS 16 for assets of low value and short-term leases of less than 12 months. IFRS 16 is effective from periods beginning on or after 1 January 2019. Early adoption is permitted; however, the Group have decided not to early adopt.
Management is in the process of assessing the full impact of the Standard. So far, the Group:
• has decided to make use of the practical expedient not to perform a full review of existing leases and apply IFRS 16 only to new or modified contracts. As some leases will be modified or renewed in 2019, the Group has reassessed these leases and concluded they will be recognised on the statement of financial position as a right-of-use asset;
• believes that the most significant impact will be that the Group will need to recognise a right of use asset and a lease liability for the office and production buildings currently treated as operating leases. At 31 December 2018 the future minimum lease payments amounted to EUR 6,856. This will mean that the nature of the expense of the above cost will change from being an operating lease expense to depreciation and interest expense;
• concludes that there will not be a significant impact to the finance leases currently held on the statement of financial position;
• is implementing a new IT system that will facilitate to record lease contracts;
The Group is planning to adopt IFRS 16 on 1 January 2019 using the Standard's modified retrospective approach. Under this approach the cumulative effect of initially applying IFRS 16 is recognised as an adjustment to equity at the date of initial application. Comparative information is not restated.
Choosing this transition approach results in further policy decisions the Group need to make as there are several other transitional reliefs that can be applied. These relate to those leases previously held as operating leases and can be applied on a lease-by-lease basis. The Group is currently assessing the impact of applying these other transitional reliefs.
IFRS 16 has not made any significant changes to the accounting for lessors, and therefore the Group does not expect any changes for leases where they are acting as a lessor.
The Group's consolidated statement of cash flows is presented using the indirect method.
The funds in the cash flow statement consist of cash and cash equivalents. Bank overdrafts are included as a component of cash and cash equivalents when the overdrafts are repayable on demand and often fluctuate. Cash flows in foreign currencies are translated at an average rate.
Based on IFRS 10, the Company prepares consolidated financial statements where it controls an entity or entities, as defined under Subsidiaries below, and following the principles of control, it will consolidate an entity irrespective of the nature of the entity. If the Company has the power by way of actual or potential voting rights over an entity, then such entity's results will be consolidated. The consolidated financial statements present the results of the Company and its subsidiaries ("the Group") as if they formed a single economic entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date control ceases.
All transactions and balances between Group companies are eliminated on consolidation, including unrealised gains and losses on transactions between Group companies. Where unrealised losses on intragroup asset sales are reversed on consolidation, the underlying asset is also tested for impairment from a Group perspective. Amounts reported in the financial statements of subsidiaries have been adjusted where necessary to ensure consistency with the accounting policies adopted by the Group.
Profit or loss and other comprehensive income of subsidiaries acquired or disposed of during the year are recognised from the effective date of acquisition, or up to the effective date of disposal, as applicable.
The Group attributes total comprehensive income or loss of subsidiaries between the owners of the parent and the non-controlling interests based on their respective ownership interests.
Subsidiaries are all entities (including single economic entities) where the Group has control over an investee, it is classified as a subsidiary. The company controls an investee, if all three of the following elements are present:
The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date that control ceases.
Inter-company transactions and balances between Group companies are eliminated.
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.
The consolidated balance sheets comprise the financial data of Envipco Holding N.V., Amersfoort, The Netherlands, and the legal seats of the following Group companies:
Envipco (UK) Limited – London, United Kingdom – 100% Envipco Automaten GmbH, Westerkappeln, Germany – 100% Envipco Pickup & Processing Services Inc., Delaware, U.S.A. – 99.85% Environmental Products Corporation, Delaware, U.S.A. – 99.85% Environmental Products Recycling Inc., Delaware, U.S.A. – 99.85% Envipco A.S., Oslo, Norway – 100% Envipco N.D. Inc., Delaware, U.S.A. – 99.85% Envipco Sweden A.B., Borlange, Sweden – 100% Envipco Hellas SA, Athens, Greece – 100% Envipco France SA, Paris, France – 100% Envipco Solutions SRL, Alba Iulia, Romania – 100% Stichting Employees Envipco Holding (SEEH) is controlled by EHNV. The Board of Stichting Employees Envipco Holding consists of 2 members of the Management Board of Envipco Holding N.V. It is a foundation and its function is to administer an Employee Share Option scheme, if applicable.
In 2017, the Company sold 240,000 treasury shares which were held by Stichting Employees Envipco Holding and realised the proceeds.
The acquisition method of accounting is used to account for Business combinations by the Group. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. The excess of the consideration transferred, amount of any non-controlling interest in the acquired entity, and acquisition date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net assets of the subsidiary acquired, the difference is recognised directly in the income.
The segments are identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess
its performance. The Group considers geography and products as its main segments. Management measures geographical segment performance based on the segment's operating result. Similarly the respective assets and liabilities are allocated to the geographical segments. This coincides with the Group's internal organisational and management structure and its internal financial management reporting system. A business segment is a group of operations engaged in providing services or products that are subject to risks and returns that are different from those of other business segments.
Items included in the financial statements of each of the Group's entities are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The consolidated financial statements are presented in Euros, which is the Company's functional and presentation currency. The subsidiaries that are included in the consolidation have the Euro, US Dollars, UK Sterling Pounds, Romanian Leu, Swedish Kroner and Norwegian Kroner as their functional currency. Transactions and cash flows in foreign currencies are translated into the functional currency at the rate prevailing when the transaction took place. Related exchange rate differences from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income.
Balance sheets of entities that have a functional currency other than the Euro are translated using the closing rates at each reporting date. The income statements of such entities are translated at the average rates during the period. The resulting exchange difference is recognised in other comprehensive income in equity. When a foreign entity is sold, such cumulative exchange difference is reclassified in the income as part of the gain or loss on sale. Translation gains and losses on inter-company balances which are in substance a part of the investment in such Group company are also recognised in other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
Revenue arises mainly from the offering of pickup and processing, repairs and maintenance, sale of RVM's and leasing of RVM's. To determine whether to recognize revenue, the Group follows a 5-step process according to IFRS 15:
Revenue is recognised either at a point in time or over time, when (or as) the Group satisfies performance obligations by transferring the promised goods or services to its customers. When the Group acts as a principal revenue is recognised in the gross amount of consideration to which it expects to be entitled in exchange for the specified good or service transferred. When the Group acts an agent with a performance obligation to arrange for the provision of the specified good or service by another party, then revenue is recognised in the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the specified goods or services to be provided by the other party.
The Group recognises contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Group satisfies a performance obligation before it receives the consideration, the Group recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. In the USA, under the Bottle Bill deposit system, one of the subsidiary's billing includes mandatory deposits on the beverage containers which once collected, are passed through to the operators of redemption sites where Envipco machines are used. These pass-through amounts are included in receivables and payables and are not recognised as revenues.
The Group's primary service offerings include repairs and maintenance, and pickup and processing. These services are provided on a time and material basis or as a fixed-price contract with contract terms generally ranging from less than one year to three years.
Revenue from time and material contracts is recognised at the contractual rates as labour hours are delivered. Revenue from fixed-price contracts involving managed services is generally recognised in the period the services are provided using a straight-line basis over the term of the contract.
If circumstances arise that may change the original estimates of revenues, costs, or extent of progress toward completion, then revisions to the estimates are made. These revisions may result in increases or decreases in estimated revenues or costs, and such revisions are reflected in income in the period in which management becomes aware of the circumstances that give rise to the revision.
Revenue from product sales is generally recognised when the product is delivered to the client and when there are no unfulfilled obligations that affect the client's final acceptance of the arrangement. Delivery does not occur until products have been shipped, risk of loss has transferred to the client and client acceptance has been obtained, client acceptance provisions have lapsed, or the Group has objective evidence that the criteria specified in the client acceptance provisions are either perfunctory or have been satisfied.
Revenues from product lease are recognised over the term of the lease, which are classified as operational leases.
Cost of revenue includes all direct material and labour costs and those indirect costs related to contract performance, such as indirect labour, supplies, and depreciation costs. The Group performs ongoing profitability analysis of its service contracts in order to determine whether the latest estimates - revenues, costs and profits - require updating. If, at any time, these estimates indicate that a contract will be unprofitable, the entire estimated loss for the remainder of the contract is recorded immediately and presented as losses on contracts under provisions.
Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases, net of any incentives received from the lessor, are charged to the income on a straight-line basis over the period of the lease.
Leases where the Group has transferred substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease's inception at the lower of the fair value of the leased asset or the present value of the minimum lease payment. The corresponding rental obligations, net of finance charges, are included in borrowings. The interest element of the finance cost is charged to the income over the lease period using the effective interest method. Assets acquired under finance leases are depreciated over the shorter of their useful life or the lease term.
Deferred income tax is provided in full, using the balance sheet liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a Business combination that at the time of the transaction affects neither accounting nor taxable profit nor loss, it is not accounted for. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will be available, against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
All intangible assets have finite lives based on their economic use except for Goodwill. The intangible assets with finite lives are amortised using the straight-line method. The useful life is estimated at 7 years.
General and administrative expenses in the consolidated statement of comprehensive income (page 18) include the amortisation charge for intangible assets.
Goodwill is an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. Goodwill is tested annually for impairment. An impairment loss is recognised for the amount by which the goodwill of a cash generating unit exceeds its recoverable amount.
The recoverable amount is the higher of the cash generating unit's fair value less costs to sell and value in use. Impairment testing of goodwill is performed at the level of the cash generating units, which is the smallest identifiable group of assets to independently generate cash flows. For the group, the smallest cash
generating units comprise the activities of one single country. Gains and losses on the disposal of an entity include the carrying amount of goodwill related to the entity sold.
(b) Patents, licenses and concessions
The amortisation for the patents, licenses and concessions is included in general and administrative expenses (see page 18).
Patents are acquired intangible assets and are measured initially at cost on the acquisition date. They are amortised using the straight-line method based on the estimated useful life of 7 years.
Concessions relating to RVM distribution rights in the USA Midwest market are recognised and amortised over the life of the contract.
(c) Research and development
Research and development expenses are included in general and administrative expenses (see page 18). Research costs are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique products controlled by the Group are recognised as intangible assets when the following criteria are met:
The capitalised development cost is amortised when the asset becomes available for use. Once the asset is completely developed, it is amortised over the estimated useful life, which is 7 years.
Intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
Property, plant and equipment are valued at historical cost less accumulated depreciation and impairment losses. Historical cost includes expenditures that are directly attributable to the acquisition of the asset. Subsequent expenditures that extend the asset's useful life are capitalised. Expenditures for repairs and maintenance are expensed when incurred.
Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual values, based on the estimated useful lives of such assets.
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset's carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and value in use.
Assets under construction will be depreciated once the assets are complete and available for use.
Depreciation is based on the estimated useful lives of assets as follows:
| Buildings | 40 years |
|---|---|
| Plant and machinery | 4-7 years |
| Vehicles and equipment | 3-5 years |
Cash and cash equivalents include cash in hand, deposits held at call with banks, and other highly liquid investments with original maturities of three months or less. The cash and cash equivalents are available on demand.
Trade receivables are recognised initially at fair value, which is generally the face value, and subsequently carried at amortised cost less provision for impairment. Impairment provisions for credit losses are recognised when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables.
The Group's US subsidiary uses a weighted average actual cost method (WAAC) for valuation of inventory. Product inventory is valued at the lower of cost or net realisable value based on a weighted average actual cost method. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Spare parts inventory is valued at the lower of historical cost, or net realisable value. Appropriate consideration is given to excessive inventory levels, product deterioration and other factors when establishing the net realisable value.
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction, net of tax, from the proceeds.
The Company records purchases of its own ordinary shares (treasury shares) under the cost method whereby the entire cost of the acquired shares is deducted from equity until the shares are cancelled, reissued or disposed of.
Where such shares are subsequently sold or reissued, any consideration received, net of any directly attributable incremental transaction costs and the related income tax effects, is included in equity.
The group recognises provisions for liabilities of uncertain timing or amount including those for onerous leases, warranty claims, leasehold dilapidations and legal disputes. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. In the case of leasehold dilapidations, the provision takes into account the potential that the properties in question may be sublet for some or all of the remaining lease term.
Trade payables and other short-term monetary liabilities are initially recognised at fair value and subsequently carried at amortised cost.
The Group subsidiaries sponsor employee benefit plans which cover substantially all of their employees. Such plan is referred to as defined contribution. A defined contribution plan is a plan under which the Group companies pay fixed contributions into a separate entity. Under defined contribution plans, the Group has no legal or constructive obligations to pay further contributions if the fund does not hold sufficient assets to pay all employees the benefits relating to employee service in the current and prior periods.
For defined contribution plans, Envipco pays contributions to publicly or privately administered funds or insurance companies. Contributions are generally based on fixed amounts of eligible compensation and the cost for such plans is recognised based on employee service.
In some of the Group's services contracts, the Group bills the client prior to performing the services resulting in the recognition of deferred income on the consolidated balance sheet.
Financial assets and financial liabilities are recognised when the Group becomes a party to the contractual provisions of the financial instrument. Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and substantially all the risks and rewards are transferred. A financial liability is derecognised when it is extinguished, discharged, cancelled or expires.
Classification and initial measurement of financial assets, except for those trade receivables that do not contain a significant financing component and are measured at the transaction price in accordance with IFRS 15, all financial assets are initially measured at fair value adjusted for transaction costs (where applicable).
Financial assets, other than those designated and effective as hedging instruments, are classified into the following categories:
In the periods presented the corporation does not have any financial assets categorised as FVOCI. The classification is determined by both:
All income and expenses relating to financial assets that are recognised in profit or loss are presented within finance costs, finance income or other financial items, except for impairment of trade receivables which is presented within administrative expenses.
Subsequent measurement of financial assets
(i) Financial assets at amortised cost
Financial assets are measured at amortised cost if the assets meet the following conditions (and are not designated as FVTPL):
● they are held within a business model whose objective is to hold the financial assets and collect its contractual cash flows.
● the contractual terms of the financial assets give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding.
After initial recognition, these are measured at amortised cost using the effective interest method. Discounting is omitted where the effect of discounting is immaterial. The Group's cash and cash equivalents, trade and other receivables fall into this category of financial instruments as well as interestbearing loans bonds that were previously classified as held-to-maturity under IAS 39.
Financial assets that are held within a different business model other than 'hold to collect' or 'hold to collect and sell' are categorised at fair value through profit and loss. Further, irrespective of business model financial assets whose contractual cash flows are not solely payments of principal and interest are accounted for at FVTPL. All derivative financial instruments fall into this category, except for those designated and effective as hedging instruments, for which the hedge accounting requirements apply. Assets in this category are measured at fair value with gains or losses recognised in profit or loss. The fair values of financial assets in this category are determined by reference to active market transactions or using a valuation technique where no active market exists.
Impairment of financial assets
IFRS 9's impairment requirements use forward-looking information to recognise expected credit losses – the 'expected credit loss (ECL) model'. This replaces IAS 39's 'incurred loss model'. Instruments within the scope of the new requirements included loans and other debt-type financial assets measured at amortised cost and FVOCI, trade receivables, contract assets recognised and measured under IFRS 15 and loan
commitments and some financial guarantee contracts (for the issuer) that are not measured at fair value through profit or loss.
Recognition of credit losses is no longer dependent on the Group first identifying a credit loss event. Instead the Group considers a broader range of information when assessing credit risk and measuring expected credit losses, including past events, current conditions, reasonable and supportable forecasts that affect the expected collectability of the future cash flows of the instrument.
In applying this forward-looking approach, a distinction is made between:
-financial instruments that have not deteriorated significantly in credit quality since initial recognition or that have low credit risk ('Stage 1') and;
-financial instruments that have deteriorated significantly in credit quality since initial recognition and whose credit risk is not low ('Stage 2').
-'Stage 3' would cover financial assets that have objective evidence of impairment at the reporting date. '12-month expected credit losses' are recognised for the first category while 'lifetime expected credit losses' are recognised for the second category. Measurement of the expected credit losses is determined by a probability-weighted estimate of credit losses over the expected life of the financial instrument.
Trade and other receivables and contract assets
The Group makes use of a simplified approach in accounting for trade and other receivables as well as contract assets and records the loss allowance as lifetime expected credit losses. These are the expected shortfalls in contractual cash flows, considering the potential for default at any point during the life of the financial instrument. In calculating, the Group uses its historical experience, external indicators and forward-looking information to calculate the expected credit losses using a provision matrix. The Group assesses impairment of trade receivables on a collective basis. As they possess shared credit risk characteristics they have been grouped based on the days past due.
Classification and measurement of financial liabilities
As the accounting for financial liabilities remains largely the same under IFRS 9 compared to IAS 39, the Group's financial liabilities were not impacted by the adoption of IFRS 9. However, for completeness, the accounting policy is disclosed below.
The Group's financial liabilities include borrowings, trade and other payables. Financial liabilities are initially measured at fair value, and, where applicable, adjusted for transaction costs unless the Group designated a financial liability at fair value through profit or loss. Subsequently, financial liabilities are measured at amortised cost using the effective interest method except for derivatives and financial liabilities designated at FVTPL, which are carried subsequently at fair value with gains or losses recognised in profit or loss (other than derivative financial instruments that are designated and effective as hedging instruments).
All interest-related charges and, if applicable, changes in an instrument's fair value that are reported in profit or loss are included within finance costs or finance income.
Set out below is a comparison, by class, of the carrying amounts and fair instruments, other than those with carrying amounts that are reasonable approximations of fair value.
| Carrying amount | Level 1 | |
|---|---|---|
| 2018 | 2017 | |
| Financial assets | € | € |
| Trade receivables | 10,021 | 9,677 |
| Total | 10,021 | 9,677 |
| Carrying amount | Level 1 | |
| 2018 | 2017 | |
| Financial liabilities | € | € |
| Trade payables | 6,406 | 6,236 |
| Interest-bearing loans and borrowings | 4,534 | 5,595 |
| Total | 10,940 | 11,831 |
The management assessed that cash and cash equivalents, trade and other receivables, trade and other payables, and other current liabilities approximate to their carrying amounts largely due to the short-term maturities of these instruments.
The fair value of the interest-bearing loans and borrowings is included at the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following methods and assumptions were used to estimate the fair values:
• Long-term fixed-rate borrowings are evaluated by the Group based on parameters such as interest rates and the risk characteristics of the financed project.
The fair value of the interest-bearing loans and borrowings is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities, being sensitive to a reasonably possible change in the forecast cash flows or the discount rate. Management regularly assesses a range of reasonably possible alternatives for those significant unobservable inputs and determines their impact on the total fair value.
Estimates and judgments are continually evaluated and are based on historical experience and other factors, including estimates and assumptions concerning the future that are believed to be reasonable under the circumstances. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. The main areas for which the use of different estimates and assumptions could cause material adjustment to the carrying amounts of assets and liabilities are discussed below.
The Group reviews outstanding legal cases following developments in the legal proceedings and at each reporting date, in order to assess the need for provisions and disclosures in its financial statements. Among the factors considered in making decisions on provisions are the nature of litigation, claim or assessment, the legal process and potential level of damages in the jurisdiction in which the litigation, claim or assessment has been brought, the progress of the case (including the progress after the date of the financial statements but before those statements are issued), the opinions or views of legal advisers, experience on similar cases and any decision of the Group's management as to how it will respond to the litigation, claim or assessment.
The Group is subject to income tax in several jurisdictions and significant judgment is required in determining the provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. As a result, the company recognises tax liabilities based on estimates of whether additional taxes and interest will be due. These tax liabilities are recognised when, despite the company's belief that its tax return positions are supportable, the company believes that certain positions are likely to be challenged and may not be fully sustained upon review by tax authorities. The company believes that its accruals for tax liabilities are adequate for all open audit years based on its assessment of many factors including past experience and interpretations of tax law. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact income tax expense in the period in which such determination is made.
The Group recognises deferred tax assets for loss carry-forwards and deductible temporary differences, estimating the amount of future taxable profit that will be probable, against which the loss carry-forwards and deductible temporary difference can be utilised (see note 16).
The Group is required to test, on an annual basis whether goodwill has suffered any impairment. The recoverable amount is determined based on value-in-use calculations. The use of this method requires the estimation of future cash flows and the choice of a discount rate in order to calculate the present value of the cash flows. More information including carrying values is included in note 13.
All RVM parts inventory is valued at the lower of cost and net realisable value. For repaired inventory, the estimated value has been assessed at 50% of cost.
The Group amortises its intangible assets, except for Goodwill, over the contracted term or their expected useful lives which are as follows:
| Notes to Consolidated Financial Statements for the year ended 31 December Notes to Company Only Financial Statement |
|
|---|---|
| Patents , licenses and concessions | 7 years with the exception of a concession, whose useful life is less than 7 years and as such is being amortised over the contracted term. |
| Capitalised development costs | 7 years |
The capitalisation and potential impairments of internally generated research and development is amongst others based on estimates of future recovery.
The Group estimates useful lives of its assets as follows:
| Buildings | 40 years |
|---|---|
| Plant and machinery | 4-7 years |
| Vehicles and equipment | 3-5 years |
The Group's capital consists of its net equity and long-term loans. Management monitors and assesses the capital requirements for the Group and ensures that enough funding is available to meet the working capital requirements and also for the future business development. To raise funding, the Group considers both committed credit lines and equity contributions.
One of the Group's subsidiaries has to comply with certain financial covenants under its loan agreement, details of which are given in note 21. The Group's current funding requirements have been met from operations and from the committed credit lines.
The Group has exposure to Credit, Liquidity and Market risks on the financial instruments used by it. The Board of Directors has the overall responsibility to monitor and manage these risks.
Credit risk arises from the possibility of asset impairment occurring because counterparties are not able to meet their obligations in transactions mainly involving trade receivables. While the Group's trade receivables are mostly exposed to credit risk, the exposure to concentrations of credit risk is limited due to the diverse geographic areas and industries covered by its operations. The Group has exposure to credit risk and is dependent on three major customers (see table below) for its sales and receivables in 2018 for 40% of its revenues and 28% of its receivables and in 2017, 39% of its revenues and 29% of receivables. In the normal course of business, the Group provides credit to clients, provides credit evaluations of these clients, and maintains an impairment provision for credit losses. Cash and cash equivalents are held with reliable counterparties.
| 2018 | 2017 | ||||
|---|---|---|---|---|---|
| Revenue Accounts |
Revenue | Accounts | |||
| receivable | receivable | ||||
| Concentration of credit | |||||
| risk | |||||
| Customer 1 | 25% | 15% | 25% | 15% | |
| Customer 2 | 9% | 9% | 10% | 7% | |
| Customer 3 | 6% | 4% | 4% | 7% | |
| Others | 60% | 72% | 61% | 71% | |
| Total | 100% | 100% | 100% | 100% |
USA operations manage its gross receivables through a system of deposit accounting where Envipco acts as a clearing house for services provided and not on RVM sales but disburses payable funds to customers only after collections have been made from its receivables. European and USA operations have receivables from RVM sales, which are managed closely for collections.
The credit rating of customer 1 is determined by Fitch at AA.
The carrying amount of financial assets represents the maximum credit exposure. This maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was:
| €'000 | €'000 | €'000 | €'000 | €'000 | ||
|---|---|---|---|---|---|---|
| Current | 31-60 | 61-90 Days | >90 Days | TOTAL | ||
| Days | ||||||
| 2018 | Europe | 1,271 | - | - | 845 | 2,116 |
| United States | 5,831 | 1,471 | 209 | 394 | 7,905 | |
| 7,102 | 1,471 | 209 | 1,239 | 10,021 | ||
| 2017 | Europe | 1,016 | - | - | 871 | 1,887 |
| United States | 5,090 | 1,492 | 258 | 950 | 7,790 | |
| 6,106 | 1,492 | 258 | 1,821 | 9,677 |
Liquidity risk arises from the possibility that the Group may encounter difficulty in meeting its obligations as they fall due. The Group's policy is to ensure, as far as possible, that it will always have sufficient liquidity to meet its obligations in a timely manner. The executive directors follow prudent liquidity risk management by maintaining sufficient cash, enforcing strict credit policy and the availability of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the underlying businesses, the Group aims to maintain flexibility in funding by keeping committed credit lines available. Liquidity is managed closely by pursuing receivable collections in the USA and also by keeping the committed credit lines in place.
The following are the Group's contractual maturities of financial liabilities:
| €'000 | €'000 | €'000 | €'000 | €'000 | ||
|---|---|---|---|---|---|---|
| In 1 | 1-2 | 2-5 | > 5 | |||
| Year | Years | Years | Years | TOTAL | ||
| 2018 | Europe | |||||
| Operational leases & payables | 1,562 | - | - | 220 | 1,782 | |
| United States | ||||||
| Operational leases & payables | 8,163 | 554 | 207 | 198 | 9,122 | |
| Bank debt & finance leases | 1,419 | 1,553 | 134 | 1,332 | 4,438 | |
| Total liabilities and future non-cancellable | ||||||
| leases (rents) | 11,144 | 2,107 | 341 | 1,750 | 15,342 | |
| Future non-cancellable leases (rents) | (381) | (554) | (207) | (197) | (1,339) | |
| 10,763 | 1,553 | 134 | 1,553 | 14,003 | ||
| 2017 | Europe | |||||
| Operational leases & payables | 1,804 | - | - | 217 | 2,021 | |
| United States | ||||||
| Operational leases & payables | 7,350 | 571 | 168 | - | 8,089 | |
| Bank debt & finance leases | 1,342 | 2,375 | 424 | 1,357 | 5,498 | |
| Total liabilities and future non-cancellable | ||||||
| leases (rents) | 10,496 | 2,946 | 592 | 1,574 | 15,608 | |
| Future non-cancellable leases (rents) | (444) | (571) | (168) | - | (1,183) | |
| 10,052 | 2,375 | 424 | 1,574 | 14,425 |
Market risk arises from the fact that the value of financial instruments may be positively or negatively affected by fluctuating prices on the financial markets. Market risk includes currency risk, fair value interest rate risk, and price risk.
Currency risk is the risk that the value of a financial instrument will fluctuate due to exchange rate fluctuations. Exposure to currency risks arises primarily when receivables and payables are denominated in a currency other than the operating company's local currency. In addition, the Group operates internationally and is exposed to foreign exchange risk arising from various currency exposures, primarily with respect to the US dollar. The Group manages its currency risk by closely monitoring the currency fluctuations and does not hedge its currency risk.
A 5% strengthening of US Dollar against the Euro would have increased the profit after tax by €46,000 (2017: €75,000) and would result in net increase in equity of €46,000 (2017: €75,000) and a 5% decline in US Dollar against the Euro would have had an equal but opposite effect on the basis that all other variables remain constant.
The Group's interest rate risk arises from selected long-term borrowings. Such borrowings issued at variable rates expose the Group to cash flow interest rate risk. The Group tries to minimize its interest rate risk on these borrowings by negotiating a fixed interest rate for the borrowings and by applying hedging on interest rate swaps. The Group has no interest rate swaps. However, the Group evaluated its exposure to interest rate risk based on its long-term debt (see note 21) and concluded that a reduction in interest rate by 0.25% would have increased the profit after tax by €7,000 (2017: €11,000) and an increase in interest rate by 0.25% would have decreased the profit after tax by €7,000 (2017: €11,000).
The Group does not have an exposure to price risk.
Envipco considers geography and products as its main segments. Management measures geographical segment performance based on the segment's operating result. Similarly the respective assets and liabilities are allocated to the geographical segments. The segments are identified on the basis of internal reports about components of the entity that are regularly reviewed by the chief operating decision maker in order to allocate resources to the segments and to assess its performance. The Group's main continuing operations relate to its core activity of Recycling. This activity has a single main operating segment – RVMs. The RVMs business segment includes operations in the USA due to RVM sales, and services and in Germany due to compactor sales. The non-operating segments include the Holding company and rest of the nonactive Group entities. Segment information for continuing operations is presented by geographical areas where a segment is based.
Segment information of the main operating segments is detailed below:
| (in thousands of euros) | 2018 | 2017 | ||||||
|---|---|---|---|---|---|---|---|---|
| Europe | North America |
Rest of World |
Total | Europe | North America |
Rest of World |
Total | |
| Revenues | ||||||||
| Recycling – RVM | ||||||||
| Sale of goods | 2,756 | 4,310 | - | 7,066 | 3,906 | 6,360 | - | 10,266 |
| Service revenue | 306 | 18,850 | - | 19,156 | - | 14,783 | - | 14,783 |
| Leasing revenue | - | 9,158 | - | 9,158 | - | 9,000 | - | 9,000 |
| Non-operating segments | ||||||||
| Total | 3,062 | 32,318 | - | 35,380 | 3,906 | 30,143 | - | 34,049 |
| 2018 | 2017 | |||||||
| North | Rest of | North | Rest of | |||||
| Europe | America | World | Total | Europe | America | World | Total | |
| Gross assets | ||||||||
| Recycling - RVM | 3,700 | 28,216 | - | 31,916 | 2,106 | 26,430 | - | 28,536 |
| Non-operating segments | 8,086 | - | - | 8,086 | 6,514 | - | - | 6,514 |
| Total | 11,786 | 28,216 | - | 40,002 | 8,620 | 26,430 | - | 35,050 |
| 2018 | 2017 | |||||||
| North | Rest of | North | Rest of | |||||
| Europe | America | World | Total | Europe | America | World | Total | |
| Segment Results | ||||||||
| Recycling - RVM | (1,000) | 4,852 | - | 3,852 | (651) | (428) | - | (1,079) |
| Non-operating segments | (2,004) | - | - | (2,004) | (1,460) | - | - | (1,460) |
| Total | (3,004) | 4,852 | - | 1,848 | (2,111) | (428) | - | (2,539) |
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| North | Rest of | North | Rest of | |||||
| Europe | America | World | Total | Europe | America | World | Total | |
| Gross Liabilities | ||||||||
| Recycling – RVM | 650 | 12,218 | - | 12,868 | 1,058 | 12,403 | - | 13,461 |
| Non-operating segments | 1,135 | - | - | 1,135 | 964 | - | - | 964 |
| Total | 1,785 | 12,218 | - | 14,003 | 2,022 | 12,403 | - | 14,425 |
| 2018 | 2017 | |||||||
|---|---|---|---|---|---|---|---|---|
| North | Rest of | North | Rest of | |||||
| Property, Plant & Equipment and Intangibles Additions |
Europe | America | World | Total | Europe | America | World | Total |
| Recycling - RVM | 96 | 2,231 | - | 2,327 | 23 | 2,577 | - | 2,600 |
| Non-operating segments | 1,469 | - | - | 1,469 | 1,384 | - | - | 1,384 |
| Total | 1,565 | 2,231 | - | 3,796 | 1,407 | 2,577 | - | 3,984 |
| 2018 | 2017 | |||||||
| Europe | North America |
Rest of World |
Total | Europe | North America |
Rest of World |
Total | |
| Depreciation & Amortisation | ||||||||
| Recycling – RVM | 27 | 2,309 | - | 2,336 | 12 | 2,457 | - | 2,469 |
| Non-operating segments | 1,028 | - | - | 1,028 | 818 | - | - | 818 |
| Total | 1,055 | 2,309 | - | 3,364 | 830 | 2,457 | - | 3,287 |
The revenues and non-current assets of the Company's country of domicile i.e. Netherlands were respectively €0,000 (2017: €0,000) and €26,743,000 (2017: €21,886,000).
RVM segment leasing depreciation of €2,026,000 (2017: €2,188,000) in North America is included in cost of revenue.
There were non-cash expenses other than depreciation and amortisation such as provisions (see note 22).
There were no associates or joint ventures where equity accounting was required.
Selling expenses consist of costs associated with market development, marketing and promotions and trade shows.
General and administrative expenses include depreciation expenses for an amount of €1,244,000 (2017: €1,028,000), research and development costs of €801,000 incurred by the US and German subsidiaries (2017: €1,455,000), payments made under operating leases of €553,000 (2017: €569,000), and bad debt written back of €15,000 (2017: charge €236,000).
The fee paid to the Group's auditors for the following services relating to the calendar year is included in general expenses and can be specified as follows:
Grant Thornton Accountants en Adviseurs B.V.to the company and subsidiaries
| Grant Thornton Other Grant |
Grant Thornton | Other Grant | ||||
|---|---|---|---|---|---|---|
| Accountants en | Thornton | Total | Accountants en | Thornton | Total | |
| Adviseurs B.V | Network | 2018 | Adviseurs B.V | Network | 2017 | |
| €'000 | €'000 | €'000 | €'000 | €'000 | €'000 | |
| Audit fee of financial statements | 105 | 154 | 259 | 101 | 126 | 227 |
| Other audit engagement | - | - | - | - | - | - |
| Tax-related advisory services | - | - | - | - | - | - |
| Other non-audit services | - | - | - | - | - | - |
| 105 | 154 | 259 | 101 | 126 | 227 |
Other income in 2018 included a one-time contract settlement for €620,000 and other income of €31,000 (2017: €9,000).
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Salaries | 9,367 | 9,643 |
| Social security expenses | 540 | 455 |
| Pension expenses | 52 | 48 |
| 9,959 | 10,146 | |
| 2018 | 2017 | |
| Average number of employees | ||
| North America | ||
| Production/Supply Chain | 28 | 21 |
| Research & Development | 11 | 11 |
| Sales & Service | 77 | 77 |
| General Administration | 27 | 27 |
| Management | 4 | 5 |
| Europe | ||
| Production/Supply Chain | 12 | 13 |
| Research & Development | 7 | 6 |
| Sales & Service | 5 | 2 |
| General Administration | 7 | 7 |
| Management | 2 | 1 |
| Total | 180 | 170 |
The remuneration of the Management Board charged to the result in 2018 was €624,000 (2017: €742,000) and can be specified as follows:
| Social | ||||
|---|---|---|---|---|
| (in thousands of euros) | Salary/fee | cost | Pension | Total |
| 2018 | ||||
| B. Santchurn | 481 | 26 | 3 | 510 |
| C. Crepet | 11 | - | - | 11 |
| G. Garvey | 51 | - | - | 51 |
| T.J.M. Stalenhoef | 42 | - | - | 42 |
| G. Lefebvre | 10 | - | - | 10 |
| A. Bouri | - | - | - | - |
| D. D'Addario | - | - | - | - |
| Total | 595 | 26 | 3 | 624 |
| 2017* | ||||
| B. Santchurn C. Crepet |
593 10 |
25 - |
3 - |
621 10 |
| G. Garvey | 59 | - | - | 59 |
| T.J.M. Stalenhoef | 42 | - | - | 42 |
| G. Lefebvre | 10 | - | - | 10 |
| A. Bouri | - | - | - | - |
| D. D'Addario | - | - | - | - |
| Total | 714 | 25 | 3 | 742 |
* Some numbers have been restated for comparative purposes.
A loan to Mr. Christian Crepet, a director, of €20,000 given in 2012 with a balance of €11,000 on 31 December 2017 has been repaid with interest at euribor plus 1%, during 31 December 2018. A. Bouri, the majority shareholder, received €3,000 (2017: €3,000) as interest on the loan due him from the company.
The financial expense and income are fully in respect of borrowings.
Envipco operates in several jurisdictions with varied local statutory income tax rates. This causes a difference between the average statutory income tax rate and The Netherlands tax rate of 25%. The following table reconciles income taxes based on the Group's weighted average statutory income tax rate and the Group's income tax benefit from continuing operations:
Reconciliation between the company's effective tax rate and the statutory income tax rate in The Netherlands, which currently is 25%, can be specified as follows:
| 2018 | 2017 | |||
|---|---|---|---|---|
| €'000 | €'000 | |||
| Profit/(loss) before tax | 1,919 | 662 | ||
| Taxation (charge)/credit - statutory rate | 25% | (480) | 25% | (165) |
| Tax (charge) credit for different statutory tax rates on foreign subsidiaries |
- | - | ||
| Effect of unused losses for which no deferred tax asset has been recognised |
480 | 165 | ||
| Effect of derecognising deferred tax asset for which previously no tax has been recognised (USA) |
(65) | (3,201) | ||
| Effective income tax | -3% | (65) | -483% | (3,201) |
None of the items of other comprehensive income is included in income taxes. See note 16.
Current and deferred tax income/ (expense)
| 2018 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|
| €'000 | €'000 | €'000 | €'000 | |
| This Period | Total | This period | Total | |
| Current | ||||
| - USA | (65) | (65) | (3,201) | (3,201) |
| - Netherlands | - | - | - | - |
| Total | (65) | (65) | (3,201) | (3,201) |
The deferred tax income was favourably impacted by a credit of approximately €0.49m in 2018 due to tax legislation introduced in the USA but no adjustment was made as it was immaterial, and an unfavourable charge of approximately €3.20m in 2017 by tax loss carry-forwards resulting from expected profits in future years of a Group's US subsidiary.
Available tax losses totaling €25,525,000 (2017: €32,531,000), expire as follows: €484,000 in 2019, €4,386,000 in 2020, €2,703,000 in 2021, €3,530,000 in the years 2022, €9,259,000 from 2023 through 2031, €2,281,000 in 2034 and €2,882,000 in 2035. Tax losses where no deferred tax has been recognised amounted to €16,572,000. The US subsidiary has substantial NOLs, but its anticipated profits over the next 3 years is not sufficient to absorb all of the NOLs at a tax rate of 21%. The remainder of the NOLs remain with the Parent company, which is not a profit centre. As such the Parent's NOLs cannot be utilised to record a Deferred Tax Asset.
The numerator for both basic and fully diluted net result per ordinary share (earnings per share or EPS) is net result attributable to holders of ordinary shares. The denominator for basic EPS is the number of ordinary shares outstanding during the year, excluding ordinary shares held as treasury shares. The fully diluted EPS is same as the basic EPS.
The net result per ordinary share has been calculated according to the following schedule:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Total | Total | |
| Operations | Operations | |
| Numerator | ||
| Earnings/(loss) used in basic and diluted EPS | 1,854 | (2,539) |
| '000 | ||
| 3,655 | ||
| Denominator Weighted average number of shares used in basic and diluted EPS |
'000 3,982 |
Basic and diluted earnings per share for 2018 have been calculated using the weighted-average number of current ordinary shares of 3,981,744 and 3,655,315 for 2017.
| Patents, | ||||
|---|---|---|---|---|
| (in thousands of euros) | licenses & | Development | ||
| Goodwill | concessions | costs | Total | |
| At 1 January 2017 | ||||
| Cost | 169 | 866 | 7,149 | 8,184 |
| Accumulated amortization | - | (617) | (2,533) | (3,150) |
| Net carrying amount | 169 | 249 | 4,616 | 5,034 |
| Changes to net carrying amount in 2017 | ||||
| Additions | - | 129 | 1,255 | 1,384 |
| Disposals | - | (15) | - | (15) |
| Amortisation | - | (66) | (766) | (832) |
| Currency translation differences | (21) | (2) | - | (23) |
| Total changes in 2017 | (21) | 46 | 489 | 514 |
| At 31 December 2017 | ||||
| Cost | 148 | 978 | 8,404 | 9,530 |
| Accumulated amortisation and impairment | - | (683) | (3,299) | (3,982) |
| Net carrying amount | 148 | 295 | 5,105 | 5,548 |
| Changes to net carrying amount in 2018 | ||||
| Additions | - | 87 | 1,401 | 1,488 |
| Disposals | - | (3) | - | (3) |
| Amortisation | - | (74) | (977) | (1,051) |
| Currency translation differences | 7 | 27 | - | 34 |
| Total changes in 2018 | 7 | 37 | 424 | 468 |
| At 31 December 2018 | ||||
| Cost | 155 | 1,089 | 9,805 | 11,049 |
| Accumulated amortisation and impairment | - | (757) | (4,276) | (5,033) |
| Net carrying amount | 155 | 332 | 5,529 | 6,016 |
No impairment charges were recognised on any goodwill during the period. All goodwill as per 31 December 2018 and 2017 relates to goodwill of one Cash Generating Unit in the RVM segment, which was tested for any impairment, based on its value in use, by using present value of discrete cash flows for next three years and the present value of the terminal cash flow with the following assumptions: cost of capital 10.81%, working capital requirement 10% of revenue and terminal cash flow growth rate of 2.5%. Recoverable amount of goodwill is €2,795,000.
All concessions are being amortised with a useful life of 7 years.
All capitalised development costs relate to internally developed assets in respect of new product range namely Quantum Indoor, e-Portal, Quantum Modular and New Recognition Systems for the existing and new markets. All materials, labour and overhead costs directly attributable to these projects have been capitalised. €1,401,000 (2017: €1,255,000) of the development costs was capitalised in 2018. Fully developed assets are amortised over their expected useful lives, which is 7 years, evaluated on a periodic basis. The largest individual asset included in the development cost has a book value of €1,240,000 (2017: €1,567,000). Management reviewed the capitalised development costs as of 31 December 2018 and decided that no impairment was necessary.
Key projects under development during 2018 included New Recognition System-Single Feed, Quantum Modular Core and the e-Portal New Reward Platform/e-Port.
| Reverse | |||||
|---|---|---|---|---|---|
| (in thousands of euros) | Vending | Land & | Plant & | Vehicles & | |
| machines | Buildings | Machinery | equipment | Total | |
| At 1 January 2017 | |||||
| Cost | 21,154 | 2,584 | 766 | 1,165 | 25,669 |
| Accumulated depreciation | (12,900) | (666) | (364) | (697) | (14,627) |
| Net carrying amount | 8,254 | 1,918 | 402 | 468 | 11,042 |
| Changes to net carrying amount in 2017 | |||||
| Additions | 2,477 | 17 | 43 | 63 | 2,600 |
| Disposals/transfers to inventory | (598) | - | - | (27) | (625) |
| Depreciation | (2,188) | (57) | (141) | (108) | (2,494) |
| Currency translation | (1,000) | (249) | (7) | (83) | (1,339) |
| Reclassification cost | - | (272) | (126) | 164 | (234) |
| Reclassification depreciation | - | 272 | 126 | (164) | 234 |
| Total changes in 2017 | (1,309) | (289) | (105) | (155) | (1,858) |
| At 31 December 2017 | |||||
| Cost | 22,033 | 2,080 | 676 | 1,282 | 26,071 |
| Accumulated depreciation | (15,088) | (451) | (379) | (969) | (16,887) |
| Net carrying amount | 6,945 | 1,629 | 297 | 313 | 9,184 |
| Changes to net carrying amount in 2018 | |||||
| Additions | 2,089 | - | 97 | 121 | 2,307 |
| Disposals/transfers to inventory | (422) | - | 6 | (15) | (431) |
| Depreciation | (2,026) | (55) | (132) | (102) | (2,315) |
| Currency translation | 320 | 76 | (4) | 27 | 419 |
| Reclassification cost | - | - | - | - | |
| Reclassification depreciation | - | - | - | - | - |
| Total changes in 2018 | (39) | 21 | (33) | 31 | (20) |
| At 31 December 2018 | |||||
| Cost | 24,020 | 2,156 | 775 | 1,415 | 28,366 |
| Accumulated depreciation | (17,114) | (506) | (511) | (1,071) | (19,202) |
| Net carrying amount | 6,906 | 1,650 | 264 | 344 | 9,164 |
| 2018 | 2017 €'000 |
|---|---|
| - | |
| 219 | |
| - | (147) |
| 72 | |
| €'000 72 277 349 |
| (16) Deferred tax assets | 2017 | 2017 | 2017 | 2017 | 2017 |
|---|---|---|---|---|---|
| €'000 | €'000 | €'000 | €'000 | €'000 | |
| (Charge)/ | (Charge)/ | ||||
| credit | credit | ||||
| profit & | |||||
| Asset | Liability | Net | loss | Equity | |
| Recognised tax asset for unused losses | 1,737 | - | 1,737 | (3,201) | - |
| At 31 December | 1,737 | - | 1,737 | (3,201) | - |
| 2018 | 2018 | 2018 | 2018 | 2018 | |
| €'000 | €'000 | €'000 | €'000 | €'000 | |
| (Charge)/ | (Charge)/ | ||||
| credit | credit | ||||
| profit & | |||||
| Asset | Liability | Net | loss | Equity | |
| Recognised tax assets for unused losses | 1,819 | - | 1,819 | (65) | - |
| At 31 December | 1,819 | - | 1,819 | (65) | - |
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax relates to the same fiscal authority.
One of the Group subsidiaries has not recognised additional deferred tax assets of approximately €0.49m in 2018 based on its next three year's projected profits of €8.95m. Consequently, it will have remaining tax losses of €16.57m where no deferred tax has been recognised. An exchange difference of €82 explains the change in Deferred Tax Asset recognised from 2017 to 2018.
Current and deferred tax income/ (expense)
| 2018 | 2018 | 2017 | 2017 | |
|---|---|---|---|---|
| €'000 | €'000 | €'000 | €'000 | |
| This Period | Total | This period | Total | |
| Current | ||||
| - USA | (65) | (65) | (3,201) | (3,201) |
| Total | (65) | (65) | (3,201) | (3,201) |
The deferred tax expense was recognized during the year due to the tax rate change and re-evaluation of future profits of a Group's subsidiary.
| 8,525 | 7,044 | |
|---|---|---|
| Provision for obsolescence | (1,759) | (1,699) |
| Work in process | 477 | - |
| Raw material and parts | 8,004 | 7,219 |
| Finished goods | 1,803 | 1,524 |
| €'000 | €'000 | |
| 2018 | 2017 |
In 2018 inventory usage amounting to €12,879,000 (2017: €13,369,000) has been included in the cost of revenue.
Finished goods are valued at lower of cost and net realisable value. Cost includes material cost, direct labour and overheads. Raw material and parts are valued at lower of cost and net realisable value. Cost includes purchase cost and cost of bringing the part to its present location. Work in progress is valued including direct material cost and a proportion of direct labour and overheads.
Estimates of net realisable value of inventory are based on the most reliable evidence available at the time the estimates are made. The carrying amount of the inventory carried at fair value less costs to sell is nil. These estimates take into consideration fluctuations of price or cost directly relating to events occurring after the end of the period to the extent that such events confirm conditions existing at the end of the period. As such estimates are continuously evaluated and it is common that in the normal course of business, circumstances that previously caused inventories to be written down below cost no longer exist resulting in reversals of write-downs.
| Schedule of movement of provision for obsolescence |
2018 | 2017 | |
|---|---|---|---|
| €'000 | €'000 | ||
| At beginning of period | 1,699 | 1,783 | |
| Release of provision | (20) | (229) | |
| Exchange gains/(losses) | 80 | 145 | |
| At end of period | 1,759 | 1,699 |
The increase/ (decrease) in provisions relating to raw materials is effected through cost of revenue. Total book value of items included in the provision is €3,518,000 (2017: €3,398,000).
| (18) Trade and other receivables | 2018 | 2017 |
|---|---|---|
| €'000 | €'000 | |
| Trade receivables | 8,843 | 7,861 |
| Other receivables | 285 | 646 |
| Prepaid expenses | 129 | 479 |
| Loan receivable – affiliate | 764 | 691 |
| Trade and other receivables | 10,021 | 9,677 |
A loan to an affiliate under common control of the majority shareholder is due as of 31 December 2018 of €764,000 (2017: €691,000) and is repayable without interest or a fixed maturity period.
Estimates of the recoverability of trade receivables are based on the most reliable evidence available at the time the estimates are made. As these estimates are continuously evaluated, it is common that in the normal course of business, circumstances that previously caused trade receivables to be impaired no longer exist resulting in reversals of impairment charges. Trade receivables are shown net of bad debt provisions of €777,000 and €600,000 at the end of years 2018 and 2017 respectively.
| Schedule of movement of bad debts | 2018 | 2017 | |
|---|---|---|---|
| €'000 | €'000 | ||
| At beginning of period | 600 | 369 | |
| Additions | 102 | 276 | |
| Release of provision | (117) | - | |
| Translation adjustment | 192 | (45) | |
| At end of period | 777 | 600 |
| (19) Cash and cash equivalents | 2018 | 2017 | |
|---|---|---|---|
| €'000 | €'000 | ||
| Cash at bank and in hand | 4,107 | 1,788 | |
| Cash and cash equivalents | 4,107 | 1,788 |
| 2018 | 2017 | |
|---|---|---|
| Ordinary Shares | Ordinary Shares | |
| Number of authorised shares | 8,000,000 | 8,000,000 |
| Authorised share capital | € 4,000,000 | € 4,000,000 |
| Number of outstanding shares | ||
| on 1 Jan | 3,837,607 | 3,837,607 |
| Number of shares on 31 Dec | 4,097,607 | 3,837,607 |
| Issued share capital | € 2,048,803.50 | € 1,918,803.50 |
| Nominal value | € 0.50 | € 0.50 |
During the year the Company issued 260,000 ordinary shares via private placement. Stichting Employees Envipco Holding held 240,000 treasury shares of the Company at a nominal value of €0.50, which were sold during 2017. There is one vote for each ordinary share.
For full detailed movements in share premium reserve please refer to the consolidated statement of changes in equity on Page 23.
Movement in legal reserve is in respect of the capitalised development costs per note D of the notes to the Company Only Financial Statements.
At the Company's Annual General Meeting of the Shareholders it will be proposed to include the 2018 net result to retained earnings.
Group entities, whose functional currency is other than Euro, the Group's reporting currency, are translated using closing rates for balance sheets and average rates for income statements. The resulting difference is recognised as translation reserve in equity and is non-distributable.
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Borrowings | 3,014 | 4,142 |
| 2018 | 2017 | |
| €'000 | €'000 | |
| Other liabilities | 220 | 217 |
| 220 | 217 |
Other liabilities include a loan of Stichting Employees Envipco Holding of €120,000 (2017: €120,000).
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Environmental Products Corporation (EPC) has borrowing facility from a third party lender for \$11,415,000 of which a maximum of \$3,000,000 as a line of credit (LOC) is capped based on eligible accounts receivables and is repayable after 2 years with interest and \$2,175, 000 as a Term Loan, repayable within 4 years with interest at FHLB classic rate plus 2.5% and \$2,240,000 as a Mortgage facility, repayable (based on a 20 year amortisation) within 10 years including interest at 5.50% with a balloon payment in year 2024. A new loan of \$4,000,000 was secured in May 2017 repayable over 4 years with interest at FHLB 48/48 amortizing rate plus 2%. The LOC is renewable annually for a term 2 years. These loans are collateralised by a fixed and floating charge on all assets of EPC and guaranteed by the Company. Net borrowing costs deducted is €4,000 (2017: €17,000). |
3,014 | 4,142 |
| Total | 3,014 | 4,142 |
The debt covenants for the USA subsidiaries have been met during the year and in 2017. Total debt repayable inclusive of borrowing costs of €4,000 (2017: €17,000) is €4,438,000 (2017: €5,515,000).
| Future payments under long term borrowings | 2018 | 2017 |
|---|---|---|
| €'000 | €'000 | |
| Current | 1,420 | 1,356 |
| Due between 1 to 5 years | 3,014 | 4,142 |
| > 5 years | - | - |
| Total borrowings | 4,434 | 5,498 |
| Schedule of movement | 2018 | 2017 |
| €'000 | €'000 | |
| At beginning of period | 5,498 | 7,238 |
| Increase | - | 3,548 |
| (Decrease) | (1,359) | (4,447) |
| Translation effect | 295 | (841) |
| At end of period | 4,434 | 5,498 |
| (22) Provisions | ||
| 2018 | 2017 | |
| €'000 | €'000 | |
| Warranty provisions | 77 | 236 |
| 77 | 236 |
These are required by our German subsidiary for warranty for the repair and maintenance of compactor sales and are adequate for expected usage.
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Beginning of period | ||
| 236 | 267 | |
| Additions | 24 | - |
| Releases | (183) | (31) |
| End of period | 77 | 236 |
Group companies provide pension benefits for their employees. The way these benefits are provided varies according to the legal, fiscal and economic conditions of each country. Such benefits are provided under defined contribution plans. For the year ended 31 December 2018, expenses relating to defined contribution plans amounted to €52,000 (2017: €48,000).
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Payroll and vacation accruals | 348 | 560 |
| Other accrued expenses | 2,206 | 1,195 |
| 2,554 | 1,755 |
The future minimum lease payments under non-cancellable operating leases as of 31 December 2018 and 2017 were as follows:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Current | 369 | 443 |
| Between 2 to 5 years | 970 | 739 |
| 1,339 | 1,182 |
The leases relate to plant and equipment, office machines and vehicles. Rent expenses for the year ended 31 December 2018 were approximately €553,000 (2017: €569,000).
The future minimum lease payments receivable under non-cancellable RVM operating leases as of 31 December 2018 and 2017 were as follows:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Current | 2,823 | 2,898 |
| Between 2 to 5 years | 4,033 | 5,705 |
| 6,856 | 8,603 |
Lease revenues from RVMs for the year ended 31 December 2018 were approximately €3,928,000 (2017: €4,030,000).
Several Group companies are parties to various legal activities which are incidental to the conduct of their businesses.
During April 2016, Envipco was granted a patent by the German patent office after filing for a utility model in 2007. This specific IP covers a method for how security labels are created and interpreted; which we believe is being allegedly used by several parties in Germany in compliance with the German deposit system. Envipco is currently seeking enforcement proceedings against potential infringers.
Transactions and relations with an affiliate are explained in note 18. €3,000 of interest was charged to the income statement on the average outstanding loans payable in 2018 with interest at euribor plus 2% (2017: €3,000) to Mr. Alexandre Bouri, the majority shareholder. A payable to Mr. Bouri at year end was €100,000 (2017: €97,000). The balance receivable at year end from an affiliate under common control of the majority shareholder was €764,000 (2017: €691,000) with no interest or a fixed maturity period.
The key management personnel comprised of the Management Board (refer to Note 9 for further details regarding transactions with related parties as well). A loan was granted to Mr. Christian Crepet, a director, in 2012 for €20,000 with a balance of €11,000 was repaid with interest at euribor plus 1% during the year ended 31 December 2018.
Group companies enter into transactions with each other in the normal course of business. These transactions are eliminated in consolidation. Net research and development costs invoiced by Germany was €764,000 and USA was €637,000 (2017: Germany - €714,000 and USA - €541,000) to the Holding company, which was capitalised. R&D expensed by the US and German subsidiaries were €801,000 (2017: €1,455,000). The Group companies charge interest on intercompany loans. No interest is charged on the intercompany current account balances. The Holding Company also charges a management fee to its subsidiaries. Please refer to note Q of the Company Only Financial Statements for details of management fee and royalty fee.
The Holding company provided a Guarantee of \$11,415,000 in 2018 and \$11,740,000 2017 to the USA subsidiary's lender, TD Bank N.A., for the credit facilities.
The Company received funds during the year of €1,550,000 from one its US subsidiaries as return of capital.
| 2018 | 2017 | ||
|---|---|---|---|
| €'000 | €'000 | ||
| Goods and services | 6,384 | 8,006 | |
| Other charges and services | 1,180 | 1,153 | |
| Research and development | 1,401 | 1,427 | |
| 8,965 | 10,586 |
The Group companies had the following intra-group transactions:
Environmental Products Corporation (EPC), a US subsidiary, executed an agreement on 22 December 2009 for the evaluation and pilot of innovative recycling concepts in selected US non-deposit markets. The pilot employs new proprietary technology developed by Envipco for large scale collection of PET and aluminum beverage containers. According to IFRS11, the investment has been treated as a joint operation. The pilot was closed in 2015. The Group's share of the assets and liabilities at the balance sheet date amounted to €24,000 (2017: €23,000) having recognised 50% share of the remaining intangibles i.e. reimagine trademark.
There are no post balance sheet events.
There were no non-cash transactions other than depreciation and amortisation. See note 25 for commitments and contingencies, which are non-cash transactions.
| Note | 2018 | 2017 | ||
|---|---|---|---|---|
| Assets | ||||
| Fixed assets | ||||
| Intangible assets | (D) | 5,777 | 5,336 | |
| Investment in subsidiaries | (E)/(J) | 18,381 | 14,903 | |
| Loans to group companies | (F) | 2,585 | 1,627 | |
| 26,743 | 21,866 | |||
| Current assets | ||||
| Receivables | (G) | 831 | 876 | |
| Cash and cash equivalents | (H) | 1,476 | 295 | |
| 2,307 | 1,171 | |||
| Total assets | 29,050 | 23,037 | ||
| Equity and liabilities | ||||
| Shareholders' equity | (I) | |||
| Share capital | 2,049 | 1,919 | ||
| Share premium | 51,874 | 49,718 | ||
| Legal reserve | 5,529 | 5,104 | ||
| Retained earnings | (37,318) | (39,157) | ||
| Translation reserve | 3,838 | 3,019 | ||
| 25,972 | 20,603 | |||
| Non-current liabilities | ||||
| Loans from group companies | (K) | 1,397 | 451 | |
| Other non-current liabilities | (L) | 807 | 1,240 | |
| Current liabilities | ||||
| Creditors and other liabilities | 874 | 743 | ||
| Total equity and liabilities | 29,050 | 23,037 |
| Note | 2018 | 2017 | |||
|---|---|---|---|---|---|
| Revenues | - | - | |||
| Cost of revenue | - | - | |||
| Gross profit | - | - | |||
| Operating expenses | (M) | (2,067) | (2,890) | ||
| Other operating income | (N) | 1,180 | 1,424 | ||
| Operating result | (887) | (1,466) | |||
| Financial expenses | (3) | (3) | |||
| Financial income | 3 | 3 | |||
| Exchange gains/(losses) | 3 | 158 | |||
| Financial gains and losses | (O) | 3 | 158 | ||
| Results before tax | (884) | (1,308) | |||
| Tax on result from ordinary activities | (P) | - | - | ||
| Share of result from participating interests | (Q) | 2,732 | (1,231) | ||
| Net result | 1,848 | (2,539) |
The Company financial statements have been prepared in accordance with Part 9 of Book 2 of the Netherlands Civil Code. In accordance with Article 2:362 subsection 8 of the Civil Code, the Company has elected to apply the valuation of the accounting policies used in the consolidated financial statements to the separate Company financial statements. All amounts are in thousands of euros unless stated otherwise.
In addition, Consolidated Group companies (financial fixed assets) are valued based on their net equity, determined using the Group accounting policies. In case the net equity of a Group company is negative, the Company records a provision for as far as the Company assesses that it has a legal or constructive obligation to reimburse the Group companies' losses. This provision shall be deducted from receivables of the Group company if these receivables are part of the net investment in the Group company.
Refer to Note I Shareholders' equity of the separate Company financial statements.
The remuneration of the Management Board charged to the result in 2018 was €624,000 (2017: €742,000) and can be specified as follows:
| Social | ||||
|---|---|---|---|---|
| (in thousands of euros) | Salary/fee | cost | Pension | Total |
| 2018 | ||||
| B. Santchurn | 481 | 26 | 3 | 510 |
| C. Crepet | 11 | - | - | 11 |
| G. Garvey | 51 | - | - | 51 |
| T.J.M. Stalenhoef | 42 | - | - | 42 |
| G. Lefebvre | 10 | - | - | 10 |
| A.Bouri | - | - | - | - |
| D. D'Addario | - | - | - | - |
| Total | 595 | 26 | 3 | 624 |
| 2017* | ||||
| B. Santchurn | 593 | 25 | 3 | 621 |
| C. Crepet | 10 | - | - | 10 |
| G. Garvey | 59 | - | - | 59 |
| T.J.M. Stalenhoef | 42 | - | - | 42 |
| G. Lefebvre | 10 | - | - | 10 |
| A. Bouri | - | - | - | - |
| D. D'Addario | - | - | - | - |
| Total | 714 | 25 | 3 | 742 |
* Some numbers have been restated for comparative purposes.
The Company has no formal bonus arrangements in place; granting bonuses for Board members is at the discretion of the Board of Directors on an ad hoc basis. A loan to Mr. Christian Crepet, a director of €20,000. Please see Note G for details.
| (D) Intangible assets | |||
|---|---|---|---|
| (in thousands of euros) | Patents & licenses |
Development costs |
Total |
| At 1 January 2017 | |||
| Cost Accumulated amortisation and |
866 | 7,149 | 8,015 |
| impairment | (617) | (2,533) | (3,150) |
| Net carrying amount | 249 | 4,616 | 4,865 |
| Changes to net carrying amount in 2017 | |||
| Additions | 34 | 1,255 | 1,289 |
| Amortisation | (52) | (766) | (818) |
| Total changes in 2017 | (18) | 489 | 471 |
| At 31 December 2017 Cost |
900 | 8,404 | 9,304 |
| Accumulated amortisation and impairment |
(669) | (3,299) | (3,968) |
| Net carrying amount | 231 | 5,105 | 5,336 |
| Changes to net carrying amount in 2018 | |||
| Additions | 68 | 1,401 | 1,469 |
| Amortisation | (51) | (977) | (1,028) |
| Total changes in 2018 | 17 | 424 | 441 |
| At 31 December 2018 | |||
| Cost Accumulated amortisation and |
968 | 9,805 | 10,773 |
| impairment | (720) | (4,276) | (4,996) |
| Net carrying amount | 248 | 5,529 | 5,777 |
During the year research and development costs of €801,000 (2017: €1,455,000) incurred by the Company's US and German subsidiaries have been expensed.
Major projects capitalised during the year included New Recognition Systems – Single Feed €510,000 (2017: €3,000), Modular and Modular Core €783,000 (2017: €410,000) and e-Port & New Reward Platform and e-Portal €65,000 (2017: €301,000). See also note 13 for capitalised development costs of the Company. Management reviewed the capitalised development costs as of 31 December 2018 and determined that no impairment was necessary.
| (E) Investment in subsidiaries | 2018 €'000 |
2017 €'000 |
|---|---|---|
| At beginning of year | 14,903 | 19,259 |
| Investments / Return of capital | (1,550) | (1,103) |
| Results of the group companies for the year | 2,732 | (1,231) |
| Exchange differences | 819 | (2,279) |
| Increase of loans in subsidiaries | 1,477 | 257 |
| At end of year | 18,381 | 14,903 |
The above assets relate to the investments in Group companies.
| (F) Loans to group companies | 2018 | 2017 |
|---|---|---|
| €'000 | €'000 | |
| At beginning of year | 1,627 | 694 |
| Additions | 958 | 933 |
| At end of year | 2,585 | 1,627 |
| (G) Receivables | 2018 | 2017 |
|---|---|---|
| €'000 | €'000 | |
| At beginning of year | 876 | 866 |
| Additions | - | 21 |
| Repayments | (45) | (11) |
| At end of year | 831 | 876 |
The receivables include a loan to Mr. Christian Crepet, a director, of €20,000 with a balance €11,000, given in 2012 was repaid with interest at euribor plus 1% during the year 31 December 2018. Also, during 2013 a loan of €80,000 (outstanding €85,000) was granted to a director of an affiliate, under common control, with interest at euribor plus 1% originally repayable on 30 June 2018. This has now been assigned to the same affiliate under common control as of 31 December 2018, €17,000 is in respect of VAT receivable (2017: €13,000), €7,000 is prepaid insurance and a loan to a German subsidiary employee of €50,000 (2017: €70,000) with interest at euribor plus 1% repayable within 5 years. In 2018, €20,000 of this loan was repaid. The balance is a loan receivable of €764,000 (2017: €691,000) from an affiliate under common control of the majority shareholder and is repayable without interest or a fixed maturity date for repayment. A receivable from an affiliate in 2016 of €5,000 was extinguished in 2017.
| (H) Cash and cash equivalents | 2018 €'000 |
2017 €'000 |
|---|---|---|
| Cash at bank and in hand | 1,476 | 295 |
| Cash and cash equivalents | 1,476 | 295 |
At the General Meeting of the Shareholders, the Company's shareholders approved that the 2017 net results of the Company be transferred to the retained earnings.
Refer to Consolidated statement of changes in equity (page 23) and note 20 Shareholders' equity of the Company's consolidated financial statements for further information regarding the Company's shareholders' equity. Transactions and relations with the shareholders included €3,000 (2017: €3,000) of interest charged to the income statement on the average outstanding loans payable in 2017 with interest at euribor plus 2% to Mr. Alexandre Bouri, the majority shareholder. The balance payable at year end is €100,000 (2017: €97,000).
According to Book 2 of the Netherlands Civil Code, the Company is required to restrict part of its equity from distribution to shareholders, by forming a legal reserve equal to the amount it has capitalised for development costs. The equity enclosed in this legal reserve is not at the disposal of the General Meeting of Shareholders. Therefore, this amount cannot be distributed to shareholders until the capitalised development costs have been recognised in the profit and loss account. The capitalised development costs as at 31 December 2018 amounted to €5,529,000 (2017: €5,105,000). A legal reserve equaling these amounts has been created in both the years by decreasing the share premium reserve with these respective amounts. In the consolidated statement of changes in equity and note 20 of the consolidated financial statements the legal reserve is included in the share premium reserve.
The company has the following subsidiaries:
Envipco (UK) Limited – London, United Kingdom – 100% Envipco Automaten GmbH, Westerkappeln, Germany – 100% Envipco Pickup & Processing Services Inc., Delaware, U.S.A. – 99.85% Environmental Products Corporation, Delaware, U.S.A. – 99.85% Environmental Products Recycling Inc., Delaware, U.S.A. – 99.85% Envipco A.S., Oslo, Norway – 100% Envipco N.D. Inc., Delaware, U.S.A. – 99.85% Envipco Sweden A.B., Borlange, Sweden – 100% Envipco Hellas SA, Athens, Greece – 100% Envipco France SA, Paris, France – 100% Envipco Solutions SRL, Alba Iulia, Romania – 100%
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| At beginning of year | 451 | 742 |
| Additions | 946 | - |
| Repayments | - | (291) |
| At end of year | 1.397 | 451 |
There are no intercompany loan agreements and hence no interest is charged on outstanding balances for the years 2018 and 2017 nor is there a definite repayment period for them.
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Provision against investments | 587 | 1,023 |
| Other liabilities | 220 | 217 |
| 807 | 1,240 |
Refer to note 26 of the consolidated financial statements for transactions with related parties. There are no contingencies. See also transactions with related parties on page 72 for US bank Guarantee. The Company will extend any support to Envipco Germany to meet its funding requirements for 2019, as it has done in during the year.
During the year operating expenses of €2,067,000 (2017: €2,890,000) were incurred. This included amortisation cost of €1,028,000 (2017: €818,000), legal expenses of €541,000 (2017: €577,000), research and development expenses of €62,000 (2017: €1,004,000) and the balance was on account of compliance costs of the company, including the following:
| 2018 | 2017 | |
|---|---|---|
| Wages & salaries | €'000 | €'000 |
| Wages and salaries | 42 | 42 |
| 42 | 42 |
During the 2018 financial year the average number of staff employed in the Company converted to equivalents, amounted to 1 person (2017: 1 person)
| 2018 | 2017 | |
|---|---|---|
| General and administrative | 1 | 1 |
| Total number of employees | 1 | 1 |
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Amortisation of intangible fixed assets | 1,028 | 818 |
| 1,028 | 818 | |
| Other operating expenses | 2018 | 2017 |
| €'000 | €'000 | |
| Legal charges | 541 | 577 |
| Research and development expenses* | 62 | 1,004 |
| Compliance and other costs | 289 | 348 |
| 892 | 1,929 |
*Research and development expenses transferred by the German subsidiary were considerably lower compared to the previous year.
The fees charges by the auditor's organisation as well as by Grant Thornton Accountants en Adviseurs B.V., responsible for auditing the financial statements, can be specified as follows:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Audit of the financial statements | 105 | 101 |
| 105 | 101 | |
| (N) Other operating revenue | ||
| 2018 | 2017 | |
| €'000 | €'000 | |
| Management fee | 590 | 575 |
| Royalty fee | 590 | 578 |
| Other revenue | - | 271 |
| 1,180 | 1,424 | |
| (O) Financial income and expense | ||
| 2018 | 2017 | |
| €'000 | €'000 | |
| Interest and similar expenses | (3) | (3) |
| Interest and similar income | 3 | 3 |
| Exchange gains/(losses) | 3 | 158 |
| 3 | 158 |
The tax on the result from ordinary activities, amounting to a credit of €0 (2017: €0) can be specified as follows:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Result from ordinary business activities | 1,919 | 662 |
| Result before taxes | 1.919 | 662 |
| Income tax using the appropriate tax rate in the Netherlands @ 25% |
(480) | (165) |
| Tax effect of : Recognition of previously not recognised losses |
480 | 165 |
| Effective taxes | - | - |
| Envipco Annual Report 2018 | Page 71 |
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Environmental Product Corporation, | ||
| USA and Subsidiaries | 3,879 | 21 |
| Envipco Automaten GmbH | (1,060)) | (1,274) |
| Envipco Sweden AB | 131 | 29 |
| Envipco Hellas SA | 107 | - |
| Envipco France SA | (5) | - |
| Envipco AS, Norway | (3) | (4) |
| Envipco (UK) Limited | (317) | (3) |
| 2,732 | (1,231) |
Transactions and relations with the shareholders and affiliates are explained in notes 18 and 26 of the consolidated financial statements. €3,000 of interest was charged to the income statement on the average outstanding loans payable in 2018 with interest at euribor plus 2% (2017: €3,000) to Mr. Alexandre Bouri, the majority shareholder. A payable to Mr. Bouri at year end was the €100,000 (2017: €97,000). The balance receivable at year end from an affiliate under common control of the majority shareholder was €764,000 (2017: €691,000) and is repayable without interest or a fixed maturity period.
The key management personnel comprised of the Management Board (refer to Note 9 of the consolidated financial statements for further details). A loan was granted to Mr. Christian Crepet, a director, in 2012 for €20,000 with a balance of €11,000 was repaid with interest at euribor plus 1% during 31 December 2018. Group companies enter into transactions with each other in the normal course of business. These transactions are eliminated in consolidation. Net research and development costs invoiced by Germany and USA were €1,401,000 (2017: €1,255,000) to the Holding company. R&D expensed by the US and German subsidiaries were €801,000 (2017: €1,455,000). The Group companies charge interest on intercompany loans. No interest is charged on the intercompany current account balances. The Holding Company also charges a management fee to its subsidiaries.
During the year 2018 the Company received funds of €1,550,000 from one its US subsidiaries as return of capital.
The Holding company provided a Guarantee of \$11,415,000 and \$11,740,000 in 2018 and 2017 respectively to the USA subsidiary's lender, TD Bank N.A., for the credit facilities.
The Group companies had the following intra-group transactions:
| 2018 | 2017 | |
|---|---|---|
| €'000 | €'000 | |
| Goods and services | 6,384 | 8,006 |
| Other charges and services | 1,180 | 1,153 |
| Research and development | 1,401 | 1,427 |
| 8,965 | 10,586 |
There are no post balance sheet events.
The annual report 2017 was determined in the General Meeting of Shareholders held on 26 June 2018. The General Meeting of Shareholders has determined the appropriation of result in accordance with the proposal being made to that end.
Dividend distributions may only be paid out of the profit and equity as shown in the separate Company financial statements adopted by the General Meeting of Shareholders. Dividends may not be paid if the distribution would reduce shareholders' equity below the sum of the paid up and called up part of the issued share capital and any reserves which must be retained according to Dutch law or the Company's Articles of Association.
The Board of Management proposes the amount that shall be reserved from the profits as disclosed in the adopted annual accounts.
The Board of Directors proposes that the profit for the financial year 2018 amounting to €1,848,000 will be added to the retained earnings. The financial statements do reflect this proposal.
Amersfoort, 26 April 2019
w.s. Mr Gregory Garvey (Chairman)
w.s. Mr Alexandre Bouri w.s. Mr Bhajun Santchurn
w.s. Mr Dick Stalenhoef w.s. Mr David D'Addario
w.s. Mr Guy Lefebvre w.s. Mr Christian Crépet
In Article 15 of the Company statutory regulations the following has been presented concerning the appropriation of result:
If the amount calculated as described above is larger than the available profit, the amounts to be added shall be decreased pro rata.
position does not allow this. 8 The General Meeting of Shareholders is authorised to apply the dividend reserves for a different purpose after having obtained the prior approval of the all holders of shares of a particular class, on the understanding that the distribution shall be charged to the various reserves pro rata to the nominal
9 The Company may only make interim additions to the dividend reserves if the requirement in paragraph 2 has been met and provided that the prior approval of the General Meeting of Shareholders has been obtained.
Envipco Annual Report | 2018 Page | 74
amount of the shares of the relevant classes.
The auditor's report is set forth on the following page.
To: The shareholders and Board of Directors of Envipco Holding N.V.
Our opinion
We have audited the financial statements 2018 of Envipco Holding N.V., based in Amersfoort, as set out on pages 18 to 73. The financial statements comprise the consolidated financial statements and the company financial statements.
In our opinion:
The consolidated financial statements comprise:
The company financial statements comprise:
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are further described in the 'Our responsibilities for the audit of the financial statements' section of our report.
We are independent of Envipco Holding N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Based on our professional judgement we determined the materiality for the financial statements as a whole at € 601.000. The materiality is based on 1.7% of the revenue which we consider to be one of the principal considerations for members of the company in assessing the financial performance of the group. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the financial statements for qualitative reasons.
We agreed with the Board of Directors that misstatements in excess of € 30.000, which are identified during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
Envipco Holding N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of Envipco Holding N.V.
Our group audit mainly focused on significant group entities. We consider a component significant when:
Where the work was performed by component auditors, we determined the level of involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence has been obtained as a basis for our opinion on the consolidated financial statements as a whole. The group engagement team has visited the component teams.
By performing the procedures mentioned above at group entities, together with additional procedures at group level, we have been able to obtain sufficient and appropriate audit evidence about the group's financial information to provide an opinion on the consolidated financial statements.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have communicated the key audit matters to the Board of Directors. The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
| Key audit matter | Our audit strategy |
|---|---|
| Revenue recognition Revenue recognition has been identified as a key audit matter. Envipco group has multiple revenue streams and there are industry specific risks related to revenue recognition. |
The audit approach included, amongst others, considering the appropriateness of the group's revenue recognition policy, focusing on substantive procedures. We obtained an understanding of the |
| The unique nature of the key revenue earning business contains complexities which are inherent in the industry. These |
policies and procedures applied to revenue recognition, as well as compliance therewith, including an analysis of the effectiveness of controls related to revenue recognition |
| risk characteristics, in combination with the significance of revenue is the reason for identifying revenue recognition as a key audit matter. |
processes. Substantive procedures consisted of performing analytical review procedures, cut off procedures , transaction testing on a |
| Refer to Note 2, revenue recognition of the financial statements for disclosure on the revenue. |
sample of revenue, review of subsequent cash receipts for the receivables and journal entry testing. |
| The results of our procedures related to the accounting for revenue recognition are satisfactory. We consider the disclosure in note 2 of the financial statements as adequate. |
| Valuation of capitalized development costs Intangible assets include capitalised development cost. The capitalisation of development costs is considered to be a key audit matter as the companies expectations on the development of distinctive products is highly judgemental and can differ from the market acceptance, resulting in development costs for certain projects not being recovered which can result in an impairment. The recoverability of the development costs is dependent on managements ability to generate sales on the developed products in the future and therefore need to be considered for impairment. Refer to note 13, Intangible assets of the financial statements for disclosure on the development costs. |
The audit procedures included substantively testing of the additions to development costs to ensure that it is in line with the IAS38, Intangible assets. The audit procedures included consideration of whether the estimated useful lives remained appropriate and included challenging the reasonableness of the received forecasts from management in order to determine whether there was a triggering event for impairment. The results of our procedures related to the accounting for development costs are satisfactory. We consider the disclosures in note 13 of the financial statements as adequate. |
|---|---|
| Valuation of the inventory Inventory is valued at the lower of cost and net realisable value. The valuation of inventory is considered to be a key audit matter due to the judgements and estimates in the calculation of the inventory provision, this includes determining the long aged inventory (specifically RVM's). The inventory for the RVM business comprises the majority of the Groups inventory. The disclosure note relating to the inventory valuation is included in note 17 of the financial statements. |
The audit approach included substantive procedures on the inventory obsolescence comprising of specific testing on management methodology in determining the provision, inputs of the calculation and an analytical review on the inventory movements. The results of our procedures related to the valuation of inventory and the disclosures in note 17 are satisfactory. |
| The Company retained a tax advisor to assist with the computation of the tax position and offer tax advice. A tax comfort letter from was obtained from the tax advisor. |
|---|
| Additionally, the component auditor tax specialists reviewed the tax comfort letter and audited the tax position. With regard to the companies deferred tax assets we |
| evaluate the company's assumptions and estimates in relation to the likelihood of generating sufficient future taxable income based on the budgets. |
| We assessed the adequacy of the income tax disclosures and consider the disclosures in note 11 and 16 of the financial statements in relation to the deferred tax assets as adequate. |
In addition to the financial statements and our auditor's report thereon, the annual report contains other information that consists of:
Based on the following procedures performed, we conclude that the other information:
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise, we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
The Board of Directors is responsible for the preparation of the other information, including the Board of Directors report in accordance with Part 9 of Book 2 of the Dutch Civil Code and other information as required by Part 9 of Book 2 of the Dutch Civil Code.
We were engaged by the General Meeting of Shareholders of Envipco Holding N.V. on June 28, 2017, as the auditor for the year 2017 and have operated as statutory auditor since that financial year.
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit of public-interest entities.
Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the company's ability to continue as a going concern. Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of accounting unless management either intends to liquidate the company or to cease operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that may cast significant doubt on the company's ability to continue as a going concern in the financial statements.
The Board of Directors is responsible for overseeing the company's financial reporting process.
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our audit.
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 financial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit included among others:
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect, we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of financial information or specific items.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant findings in internal control that we identify during our audit. In this respect we also submit an additional report to the Board of Directors in accordance with Article 11 of the EU-Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this additional report is consistent with our audit opinion in this auditor's report.
We provide the Board of Directors 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 Board of Directors, we determine the key audit matters: those matters that were of most significance in the audit of the financial statements. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Amsterdam, April 29, 2019
Grant Thornton Accountants en Adviseurs B.V.
drs. P.N. van Vuure RA
Envipco Holding NV Arnhemseweg 10 3817 CH Amersfoort The Netherlands
www.envipco.com
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