Annual Report • Mar 2, 2018
Annual Report
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| Financial highlights 2017 | 4 |
|---|---|
| Foreword CEO | 6 |
| IMCD at a glance | 8 |
| History | 9 |
| Global presence | 10 |
| Shareholder information | 12 |
| About IMCD | 16 |
| Introduction | 17 |
| Our market | 17 |
| Our business model | 19 |
| Our organisation | 20 |
| IMCD - Strategy | 22 |
| Values, business principles and culture | 23 |
| Strategy | 23 |
| Opportunities, Risks and Resilience | 25 |
| Sustainable stakeholder contribution | 25 |
| IMCD - Performance | 30 |
| Developments in 2017 | 31 |
| Financial performance | 32 |
|---|---|
| Non-€nancial information | 46 |
| Outlook 2018 | 53 |
| IMCD Governance | 54 |
| Function summary | 55 |
| Corporate governance | 57 |
| Risk management | 62 |
| Management Board statements | 70 |
| Report of the Supervisory Board | 72 |
| Financial statements | 78 |
| Contact | |
| IMCD N.V. | |
| Wilhelminaplein 32 | |
| 3072 DE Rotterdam | |
| P.O. Box 5802 | |
| 3008 AV Rotterdam | |
| Netherlands |
Phone: +31 10 290 86 84
IMCD ANNUAL REPORT 2017 3
| Results Revenue 1,907.4 1,714.5 Gross pro€t 428.7 381.6 Gross pro€t in % of revenue 22.5% 22.3% Operating EBITA1 161.7 147.8 Operating EBITA in % of revenue 8.5% 8.6% Conversion margin2 37.7% 38.7% Net result before amortisation / non-recurring items 110.1 102.6 Cash flow Free cash 'ow3 161.3 140.4 Cash conversion margin4 97.2% 92.3% Balance sheet Working capital 314.3 248.4 Total equity 729.2 722.1 Net debt 490.0 397.6 Net debt / Operating EBITDA ratio5 2.8 2.6 |
11% 12% 0.2% 9% (0.1%) (1.0%) |
|---|---|
| 7% | |
| 15% | |
| 4.9% | |
| 27% | |
| 1% | |
| 23% | |
| 0.2 | |
| Employees | |
| Number of full time employees end of period 2,265 1,863 |
22% |
| Shares | |
| Numbers of shares issued at year-end (x 1,000) 52,592 52,592 |
0% |
| Weighted average number of shares (x 1,000) 52,425 52,477 |
0% |
| Earnings per share (weighted) 1.47 1.39 |
6% |
| Cash earnings per share (weighted)6 2.06 2.01 |
3% |
| Proposed dividend per share 0.62 0.55 |
13% |
1 Result from operating activities before amortisation of intangibles and non-recurring items
2 Operating EBITA in percentage of Gross prot
3 Operating EBITDA excluding non-cash share based payment expenses, plus/less changes in working capital, less capital expenditures
4 Free cash ow in percentage of Operating EBITDA
5 Including full year impact of acquisitions
6 Result for the year before amortisation (net of tax)
When thinking about this message, a quote attributed to the famous American baseballer Yogi Berra came to mind: "It's like déjà vu all over again". Since our listing in 2014, this is our 4th Annual Report and for the fourth time I can report that IMCD can look back on another year of growth. Favourable economic circumstances helped of course. We need a back wind like everybody else, but we can only benet from it when our organisation is strong and when we have qualied and motivated staff. We recognise the importance of an open and transparent culture where employees and business partners are treated fairly. Entrepreneurship and freedom to operate combined with nancial discipline are key values within IMCD. As are strict compliance with any legal and regulatory requirements. We remain stubbornly globalist: a company like ours can only be successful by embracing diversity in the broadest sense.
EMEA had an exceptional year with strong growth, most of it organic. In Italy we acquired Neuvendis with business activities primarily focused on the construction industry. We welcome its strong and capable team. We continue to invest in technical facilities and formulation expertise and in Cologne we opened a new pharma lab to support our sales force and our customers.
In North America, we made an important step in executing our strategy by acquiring L.V. Lomas with head ofce in Toronto, Canada. Lomas is a leading distributor in Canada and the US. We started to integrate our activities in the region and we have formed centres of excellence for our key market segments. As a part of this, we invested in laboratory facilities in coatings, personal care and our already excellent food lab in Toronto will be further expanded. We work patiently to establish an organisation of the highest quality that can serve its principals and customers throughout the North American market.
The results in Asia-Pacic are as different as the diversity of this huge region. We have well established businesses like in Australia/New Zealand which continue to produce solid results and we have start ups, like Japan, in which we continue to invest. Our
activities in China and India are growing. In South-East Asia we experienced a more stagnating economic environment. We need more critical mass in some of these regions but we will diligently look for opportunities that will t into our strategy.
ICT is a backbone of our business. Since our foundation, we have given this absolute priority and our ICT infrastructure has enormously helped us to manage our activities. ICT is an integral part of our success for which our ICT department deserves a lot of credit. The expansion of our business requires further investment, as does digitalisation. We work on signicant projects to ensure that we remain a leader in this eld as well.
We are not known for spending too many words on forecasting. We diligently continue to execute our strategy, we focus on creating an exciting company for our staff, business partners and shareholders, not for the next quarter but for years to come. I thank all of them for their hard work and support and we will do everything we can to produce another year of growth.
Rotterdam, 1 March 2018 Piet van der Slikke
IMCD is a market leader in the marketing, sales and distribution of speciality chemicals and food ingredients. Listed at Euronext, Amsterdam (IMCD), IMCD realised revenues of EUR 1,907.4 million in 2017 with more than 2,200 employees in 46 countries on 6 continents.
IMCD HQ and IMCD regional HQ's 66 offices 83 warehouse locations 37 laboratories
IMCD was rst listed on Euronext Amsterdam on June 27, 2014 at an initial price of EUR 21.00 per share, resulting in a market capitalisation of EUR 1.1 billion. Since March 2015, IMCD shares are included in the Euronext Amsterdam Midcap Index and in July of that same year Euronext decided to launch options on IMCD. These options are traded in the Euronext Amsterdam Spotlight options segment. The total number of issued shares is 52.6 million and did not change during 2017. In September 2017, IMCD purchased 40,000 own shares to fund its long-term incentive plan, bringing the total number of own shares to 195,000.
In 2017, around 15 million IMCD shares were traded ("regular trading") on Euronext Amsterdam (2016: 14 million). In 2016 another 4 million shares were traded as a result of the nal sell down of Bain Capital, IMCD's major shareholder at the day of the listing in 2014. The average daily regular trading volume in 2017 was approximately 60,000 shares whereby during the year the share price rose by 29% from EUR 40.49 to a closing price at December 31, 2017 of EUR 52.43. By the end of 2017, IMCD's market capitalisation was EUR 2.8 billion (EUR 2.1 billion end of 2016).
Investor relations policy
IMCD values maintaining an active dialogue with its nancial stakeholders such as existing and potential shareholders, brokers and the (nancial) media. IMCD considers it very important to explain the IMCD business model and execution in order to give stakeholders the information they need to form an opinion on the Company. In 2017, the Company organised roadshows to investors in The Netherlands, London, Paris, Frankfurt and Brussels. Investor conferences were attended in Frankfurt and London. Also, a considerable number of meetings with (potential) investors took place in IMCD's ofce in Rotterdam. IMCD is currently covered by 10 international brokers.
Barring exceptional circumstances IMCD has a dividend policy with a targeted annual dividend in the range of 25% to 35% of adjusted net income (reported result for the year plus amortisation charges net of tax) to be paid out either in cash or in shares. A proposal will be submitted to the Annual General Meeting of Shareholders to pay a cash dividend of EUR 0.62 per ordinary share (2016: EUR 0.55), which means an increase of 13% compared to previous year. This dividend represents a pay-out ratio of 30% of adjusted net income (2016: 27% of adjusted net income).
In number of shares x 1,000
The register maintained by the Netherlands Authority for the Financial Markets (AFM) in connection with the disclosure of major holdings in listed companies exceeding 3% of the issued capital contains details of the following investors as at 31 December 2017. There are no known holdings of short positions visible in the AFM register.
| FMR, LLC | 9.99% |
|---|---|
| Ameriprise Financial Inc. | 5.10% |
| Dynamo Int. Gestao de Recursos Ltda. | 4.98% |
| Stichting Nieuw Oosteinde | 3.45% |
| Swedbank Robur Fonder AB | 3.14% |
| Smallcap World Fund, Inc. | 3.01% |
| BlackRock, Inc. | 3.00% |
| Euronext Amsterdam | IMCD |
|---|---|
| Euronext Amsterdam derivatives market | IMD |
| Reuters | IMCD |
| Bloomberg | IMCD.NA |
| The IMCD share | 2017 | 2016 |
|---|---|---|
| Highest price | 55.87 | 40.95 |
| Lowest price | 40.17 | 30.00 |
| Year-end price | 52.43 | 40.49 |
| Earnings per share (weighted) | 1.47 | 1.39 |
| Cash earnings per share (weighted) | 2.06 | 2.01 |
| Proposed dividend per share | 0.62 | 0.55 |
| Number of shares at year-end | ||
| (x 1,000) | 52,592 | 52,592 |
| Weighted average number of shares | ||
| (x 1,000) | 52,425 | 52,477 |
| 2 March 2018 | Full year 2017 results |
|---|---|
| 9 May 2018 | Q1 2018 Trading Update |
| Annual General Meeting | |
| Dividend announcement | |
| 11 May 2018 | Ex-dividend date |
| 14 May 2018 | Record date |
| 15 May 2018 | Payment date |
| 17 August 2018 | First half year 2018 results |
| 7 November 2018 | Q3 2018 Trading Update |
[email protected] www.imcdgroup.com/investor-relations
16 IMCD ANNUAL REPORT 2017
IMCD is a market leader in sales, marketing and distribution of speciality chemicals and food ingredients. Its result-driven professionals provide market focused solutions to suppliers and customers across EMEA, Asia-Pacic and Americas, offering a range of comprehensive product portfolios, including innovative formulations that embrace industry trends.
By partnering with IMCD, suppliers can innovate and simplify their business operations with our (tailormade) distribution solutions and technical expertise, whilst boosting their business development by making use of IMCD's global presence and direct access to markets and customers.
To its customers, IMCD can serve as a reliable 'onestop-shop' purchasing channel, offering a comprehensive portfolio of speciality chemicals, food and pharmaceutical ingredients, together with expert technical advice and formulatory support.
Speciality chemicals and food ingredients are used in almost every aspect of daily life, ranging from cosmetics, food, drinks, cars, detergents, paint and medication. The constant demand for product improvement and higher performance drives the requirement for innovative speciality chemicals.
The sales of speciality chemicals requires technical expertise, application know-how as well as marketing and sales competence. Chemicals suppliers often service their larger customers directly but utilise the skills and market coverage of a speciality distribution company to serve the small and mid-sized accounts. In effect, the speciality chemical distribution company acts as a cost-effective extension of the suppliers' sales and marketing 'arm'.
By working with a speciality distribution company, a supplier benets from having one loyal business partner as opposed to dealing directly with many small customers, thus simplifying their route-tomarket. In addition, the supplier may benet from the distributor's local market intelligence, know-how and customer coverage.
The most important characteristics of speciality chemicals and/or food ingredients versus commodity chemicals can be illustrated as follows:
Aside from a small number of regional distributors, the speciality chemicals distribution market is still highly fragmented with a lot of, often family owned, local distributors. In general, there is still a clear demand from major suppliers for pan-regional distributors who are capable of offering both business simplication and long-term growth. Due to these ongoing supplier demands, it is anticipated that there will be further consolidation within the sector with a continued focus on local excellence and expertise.
The following trends are expected to continue to have an impact on the rationalisation of the global speciality chemicals distribution industry.
There is a trend towards outsourcing of sales, marketing and distribution to a more limited number of third party distributors. The greater complexity in the breadth of speciality products, lower order volumes and specic customer requirements in the various end markets are expected to drive
outsourcing to a decreasing number of speciality chemicals distributors.
Suppliers in developed markets are generally looking for more structured pan-regional management of sales and distribution. By entering into a sole third party rights of distribution relationship with a preferred distribution partner for multiple countries or regions, suppliers are able to signicantly simplify and optimise their route-to-market.
In sophisticated markets, increasing regulation will require chemical distributors to obtain a certain minimum scale in order for them to be able to fully comply with the requirements at an affordable cost. In order to be compliant, smaller distributors may need to upgrade their facilities or to alter processes. Smaller, locally-oriented distributors that currently do not comply with the additional requirements generally are required to make comparatively large investments to comply, whereas larger distributors can more easily make such investments due to their scale.
In close cooperation with the key stakeholders in its value chain, IMCD strives for operational excellence in all aspects of its business operations. On the basis of the principles of product stewardship and open relationships with its business partners, IMCD aims to create long-term value for its stakeholders.
IMCD's core activity is in marketing and sales of speciality chemicals. IMCD offers its suppliers, reputable manufacturers of high quality speciality chemicals and ingredients, an outsourced yet integrated marketing, sales and distribution channel. Via its broad geographic reach and specialised sales network in local markets, IMCD provides its suppliers an extensive customer coverage. By building enduring relationships with its suppliers, IMCD seeks to simplify suppliers' business operations while supporting their business development and providing them with valuable market intelligence and technical expertise. Examples of simplication of suppliers' operation are the use of a single point of contact, coordinated inventory management and electronic processing of transactions.
At the other end of the speciality chemicals value chain, IMCD focuses on customers, typically manufacturing companies that require speciality chemicals for the production of, or inclusion in, their end products. By maintaining a large and diverse product portfolio, IMCD offers its customers suitable and complementary solutions for the customers specic requirements. IMCD aims to develop lasting customer relationships by providing customers with product quality assurance, technical advice, formulation support and highly specialised product knowledge specic to the speciality distribution market obtained from suppliers, from industry experience and in the IMCD laboratories.
In addition to its marketing and sales activities, IMCD provides distribution and other ancillary services. IMCD outsources its physical distribution and other ancillary activities, such as warehousing, bulk breaking, mixing, blending, packaging and labelling to professional third party logistics service providers.
To support its role as a leading speciality chemicals and food ingredients distributor, IMCD forms centres of excellence for its key market segments. In 2017, IMCD's operations included 37 laboratories in 20 countries. IMCD's focused laboratory technical teams build, maintain and expand relationships with both suppliers and customers, creating growth opportunities and delivering value. The primary functions of IMCD's laboratories include the following:
Workshops and training sessions are held within the facilities for the IMCD sales force, ensuring they stay abreast of market trends and developments and fully understand the functionality and characteristics of the products within the portfolio. This enables them to better understand issues that customers may face.
IMCD works in close collaboration with its customers' research and development departments, carrying out competitive matching, sharing new application opportunities and assisting them in formulating the most effective and innovative products.
Customer seminars to promote new market trends and products from within the IMCD portfolio IMCD organises workshops and seminars for its customers, either to introduce a new product, investigate a new trend in the market or to look into material alternatives for their production processes. Customers are given access to IMCD's laboratories to enable them to test product performance, run stability and application tests and experience the nished product with the support of IMCD's scientists and technical managers.
Supplier workshops to support product and application development Within the IMCD laboratories, suppliers are able to gain an understanding as to how their products
interact and function (in combination with other products from within the IMCD portfolio) as part of a nished formulation. With this understanding and market trend awareness, IMCD is able to assist the supplier to develop new product concepts for the future.
Technical expertise and sustainable innovation With 37 laboratories around the world and a continuous investment in high-end technical capabilities IMCD strives to ensure operational excellence and added value for both its business partners and the society as a whole.
It is IMCD's policy to analyse current market trends and proactively offer innovative solutions for the constantly developing and demanding markets in which it operates. In doing so, IMCD is committed to supporting a comprehensive representation of sustainable, bio-based and renewable products in its overall product portfolio offering.
IMCD's business operations are organised in a matrix structure along geographic lines and end-markets to enable integrated and coordinated distribution services on a broad geographical basis and to facilitate the exchange of commercial and technical expertise across the organisation. IMCD´s country management is responsible for the optimisation of the services to customers in the various market segments. In turn, each end market is managed accross the IMCD organisation by business group management.
| Life Sciences | End-markets | Products | Characteristics |
|---|---|---|---|
| Pharmaceuticals | • Pharmaceuticals formulation • Pharmaceuticals synthesis • Biotechnology • Laboratory |
• Excipients • Active ingredients • Speciality solvents |
• Insensitive to economic cycles • High levels of regulation |
| Personal Care | • Hair care • Skin care • Make-up • Toiletries |
• Additives • Actives • Functional ingredients |
• Innovative • Fast and dynamic formulation processes |
| Food & Nutrition | • Bakery • Beverage • Confectionery • Dairy • Nutrition • Savoury |
• Additives • Ingredients • Carriers • Dairy |
• Local tastes dictate formulation • Increasing regulation • Fragmented |
| Industrials | End-markets | Products | Characteristics |
|---|---|---|---|
| Coatings | • Adhesives • Construction • Industrial coatings & paints • Inks |
• Additives • Filters • Pigments |
• High dependence on automotive & construction industries |
| Lubricants | • Lubricants • Oil & gas • Greases |
• Additives • Base oils • Tacki€ers |
• Regulatory changes drive opportunity in Asia-Paci€c and other markets • High performance requirements • Consolidated market |
| Synthesis | • Industrial synthesis • Polymerisation |
• Monomers • Process chemicals • Solvents |
• Trend for 'green' chemistry (plant-based materials) • Volume trends follow downstream segments (construction, automotive, personal care, lubricants) |
| Plastics | • Food & speciality packaging • Wire & cable • Medical & healthcare • Bioplastics • Automotive & transportation • Sport & leisure • Electrical & electronics • Industry & consumer • Home appliances • Telecommunication |
• Additives • Compounds |
• Innovation in light weight and durable solutions • 'Green' and environmentally friendly formulations • Economically sensitive |
| Home Care and I&I |
• Laundry care • Dish wash • Cleaning & surface care • Automotive care • Air care |
• Surfactants • Builders • Functional additives |
• Focus on environmentally friendly formulations |
A prospering chemical industry has been a vital contributor to our health, welfare and prosperity.
IMCD strives to be the global sales channel partner of choice to which suppliers of speciality chemicals and food ingredients turn for rst class technical expertise and optimum logistic solutions that help them innovate, simplify and grow their business in a sustainable way.
IMCD has certain core values and principles that are essential to IMCD's business operations and are key to its ambition to deliver sustainable and protable growth. By giving people the freedom to act and empowering them to drive business forward, IMCD has established a dynamic and entrepreneurial culture. Integrity, transparency and compliance are IMCD's core business values that promote a climate of trust and respectful relationships with its business partners, investors and authorities. Through a continuous focus on operational excellence, the constant development of product know-how and technical expertise and further strengthening of its market position, IMCD can be trusted to be a reliable and transparent link in its partners' value chain.
IMCD's business principles, core values and ethics, to which all IMCD companies worldwide are equally and fully committed, are embedded in the Company's corporate culture and reected in IMCD's Code of Conduct, available at IMCD's website.
IMCD was formed in 1995 with a clear growth strategy developed by Piet van der Slikke, CEO and Hans Kooijmans, CFO.
IMCD originated from businesses located in the Netherlands, Belgium, France, Australia and New Zealand, that were brought together in 1995. The successful execution of its growth strategy over the last 22 years has led IMCD to become a global player in the sales, marketing and distribution of speciality chemicals and food ingredients, with a revenue of more than EUR 1.9 billion, over 2,200 employees, 37 laboratories and a presence in 46 countries on 6 continents in 2017.
The ongoing consolidation of the speciality chemicals distribution market, with outsourcing by chemical manufacturers to an increasingly selective number of sales channel partners, a demand for multi-territory distribution partnerships and the complexities of increased regulation, is the basis for continuation of IMCD's long-term growth strategy. IMCD aims to create long-term value for its stakeholders through pursuit of sustainable growth of its revenues and results, driven by organic growth and through strategic acquisitions. First and foremost, IMCD strives to grow the market share of products of the suppliers it represents. In addition, IMCD uses its market intelligence and expertise to identify strategic product gaps, possible acquisition targets and related opportunities across the different geographies.
As part of its strategy, IMCD maintains a diversied, resilient and asset light business model with an outsourced supply chain infrastructure, providing IMCD with the exibility to respond and adapt to changing circumstances and demands from both the market and society.
IMCD focusses on achieving growth through long term partnerships combined with market expertise, technical development and innovation. This strategy has yielded solid growth based on the following strengths:
IMCD's organic growth strategy has three main drivers:
Throughout IMCD, there is a coordinated and focused approach towards expanding market share of existing products and towards business development with the primary aim of expanding the product portfolio with both existing and new suppliers. IMCD aims to achieve organic revenue growth that is higher than market growth in general.
Acquisitions have historically been an important part of IMCD's growth and will remain a focus going forward to assist in building scale and efciencies, complementing its product portfolio and expanding its geographic and strategic market coverage.
IMCD benets from the highly fragmented distribution market and the continuing consolidation trend, largely driven by supplier demands to optimise their sales
channels. Since its formation, IMCD has acquired over 50 companies, providing the current presence in EMEA, Asia-Pacic and the Americas. IMCD has demonstrated its capacity to identify, execute and successfully integrate acquisitions. Finding suitable acquisition targets is an ongoing process with a high level of complexity related to ensuring that there is the right cultural and business t combined with a willingness of the target company to become part of IMCD.
IMCD's selective acquisition strategy is not determined by take-over budgets or revenue growth targets. IMCD's strict acquisition criteria focus, rst and foremost, on a strategic t providing a platform for further growth both geographically and in complementary product markets. The primary aim in all acquisitions is to support sustainable added value growth for IMCD's suppliers and customers. Barring exceptional circumstances, an acquired company should be able to contribute to IMCD's cash earnings per share from the date of acquisition.
IMCD's acquisition activities are driven centrally by an experienced management team supported by external advisors. Detailed and critical valuation and full scope due diligence is carried out in order to identify and assess any price impacts and potential risks. Transaction structures and purchase contracts
are tailored to mitigate identied and unidentied risks.
Integration of newly acquired companies is effected through a well-structured integration program providing for a swift transition to IMCD's internal reporting, control and compliance systems and ensuring an optimal realisation of operational and business synergies. Acquisitions are always subject to the availability of appropriate management attention and to IMCD's requirements for maintaining a strong balance sheet and limiting nancial and operational risks. Most acquisitions are nanced by IMCD's strong cash ow generation and its exible loan facilities.
Using its extensive network and in-depth market knowledge, IMCD will continue to pursue selected acquisition opportunities to further expand and enhance its business model in both developed and emerging markets.
Identifying, assessing and managing risks and opportunities, is a constant and integral part of IMCD's strategy execution and business operations.
IMCD continuously looks for acquisition opportunities that present a strategic t in line with IMCD's longterm growth strategy. IMCD continues to pursue growth in all regions with the aim to establish a (local) leading position in the distribution of speciality chemicals and food ingredients.
IMCD is actively exploring ways to optimise its services by using further digitalisation of its business processes. Concrete project plans were prepared in 2017 and projects commenced early in 2018.
The ability to respond and adapt to changing circumstances and demands from both the market and society is a prerequisite for IMCD's long-term strategy to create sustainable growth and value for its stakeholders.
IMCD operates in different, often fragmented market segments in multiple geographic regions, connecting many customers and suppliers across a very diverse product range. In general, results are impacted by macroeconomic conditions and developments in specic industries. Furthermore, results can be inuenced by, among other things, the ability to maintain and expand commercial relationships, the ability to introduce new products and start new customer and supplier relationships and the timing, scope and impact of acquisitions.
Diversity in product, market and geographical coverage helps to protect against the impact of specic market conditions such as product availability, local economic circumstances or application downturn. IMCD is nancially resilient, as a result of its wide geographical presence, the coverage of various market segments and its large number of suppliers, customers and products. Price uctuations of basic raw materials generally have a smaller impact, as the speciality products within IMCD's portfolios are highly functional, relatively low volume and are not easily replaced. IMCD's resilience is further enhanced by its outsourced supply chain infrastructure and asset light business model, which provides exibility to adjust to changes in the market environment and decreases IMCD's cost base and risk prole. IMCD's nancial resilience is backed by a capital structure that is focused on exibility, a strong balance sheet and limited nancial risks.
An overview of the key risks to IMCD's strategy execution and business operations and a description of how IMCD assesses and manages these risks, is given in the risk management paragraph of this Annual Report.
Through a market focused approach and investments in technical expertise, IMCD has grown to become a leading global speciality chemicals and food ingredients distributor. IMCD offers suppliers an outsourced yet fully integrated marketing, sales and distribution channel in an expanding number of territories, whilst providing them with valuable market
intelligence and technical support. Partnering with leading logistic service providers, IMCD ensures reliable services and tailored solutions for multiterritory distribution that meet all regulatory, quality, health, safety and sustainability demands.
Fostering and expanding its long-term relationships with leading chemical producers in the world, IMCD has built a comprehensive portfolio of speciality chemicals and food ingredients in a number of
strategic market sectors including Pharmaceuticals, Food & Nutrition, Plastics, Personal Care, Synthesis, Coatings, Lubricants, Home Care and I&I.
IMCD's technical experts deliver market focused solutions to suppliers and customers, providing tailored advice on formulation, production process and application, including innovative solutions that embrace industry trends and sustainability demands on the modern markets.
IMCD highly values the dialogue and engagement with its various stakeholders. The open partnerships with key stakeholders in IMCD's operational value chain, including suppliers, customers, supply chain partners and employees, are essential to IMCD's successful long-term growth and key to IMCD's business operations. Integrity, transparency and compliance are IMCD's core business values that promote trust and respectful relationships with investors and authorities. With responsibility and care for the environment and society IMCD aims to serve the longterm interests of all its stakeholders.
Through a continuous focus on operational excellence, the development of technical expertise and the further strengthening of its market position, IMCD is committed to being a responsible and transparent partner to its stakeholders aiming to achieve protable growth and to create long-term value.
IMCD´s stakeholders and its contribution thereto could be summarised as follows:
IMCD focuses on partnering with prestigious suppliers that offer leading and innovative products. The Company places high importance on further strengthening and developing long-term relationships with its supply partners by offering premium market penetration and intelligence to deliver long-term organic growth. In addition, suppliers can benet from the proven IMCD business model of expanding into multiple countries and regions.
IMCD is experienced in providing business simplication to its suppliers by coordinating multiterritory agreements and adopting a exible and cost effective and sustainable supply chain infrastructure. This includes offering a comprehensive range of value added services such as repacking and utilisation of both local and central warehousing.
IMCD's customers operate in a wide variety of end markets in the life science and industrial sectors, manufacturing a large array of products including paints, adhesives, inks, construction materials, plastic products, lubricants, tablets and capsules, cosmetics, fragrances, food and beverages.
IMCD has built a strong base of over 37,000 customers and a balanced portfolio of approximately 30,000 products. By working closely together with IMCD, customers ensure that they have a high level of technical and formulatory support to create market leading and innovative and sustainable products. IMCD also provides additional tailored services for customers, including local stocking, repacking, mixing and blending, and has a continuous focus on delivering a premium customer service to further develop close, long-term relationships.
IMCD's logistics and warehousing is, whenever possible, outsourced to best-in-class third party service providers enabling the Company to respond in a quick and exible way to any change in supplier, customer or market demand. Currently, most of IMCD's logistics and warehousing is operated by third party service providers.
This asset light business model allows IMCD to be adaptable, reliable and efcient, while offering bespoke simplied solutions to full the technical, commercial and quality requirements of its customers and suppliers alike. With central, regional and local warehouse locations across all operating territories, IMCD can deliver its products to most customers within a 24-hour time frame. All IMCD third party logistics service providers are monitored and audited by IMCD's dedicated HSEQ team with expert knowledge of control regulations and business standards for storage, handling and transport of speciality chemicals and ingredients.
IMCD's greatest asset is its people. The Company currently employs more than 2,200 people across 6 continents.
With a focus on face-to-face customer interaction, approximately two thirds of IMCD's employees are part of the technically and commercially skilled sales force that is able to understand customer needs and grow the business. These professionals possess a relevant technical background and are dedicated market specialists who focus exclusively on their respective elds, playing a vital role in maintaining and expanding the Company's relationships with its partners. The remainder of the staff are involved in ICT, supply chain management, HSEQ, nance and control, tax, legal and HR management.
Based on a well established shared business culture, facilitated through an integrated group wide ICT infrastructure, IMCD employees efciently collaborate and share their expertise throughout the organisation. Together they provide the solid platform from which the Company operates.
It is the Company's philosophy to encourage entrepreneurial spirit throughout IMCD and to create an efcient and fast-paced working environment to attract and retain ambitious and talented people. Through a continuous investment in local and international training and development programmes, the professional knowledge of IMCD's employees is kept up to date and to the highest standards. With clear responsibilities and accountability for results
within its business groups and regional organisations, IMCD aims to create long term employee commitment and a drive to excel.
IMCD's open and entrepreneurial business culture, with opportunities for personal development and career development, are considered the key components for employee satisfaction.
The chemical industry is important to virtually every other industry, as it produces products that are used in daily life. This makes the chemical industry one of the key inuencing forces on sustainability. In its role as an international chemical distributor and with a responsibility for delivering its suppliers products to the market, IMCD seeks to optimise its processes for the benet of the environment, society and its business.
IMCD believes that corporate social responsibility goes beyond compliance with law and regulations and beyond current protability and success. A sustainable global economy should combine longterm protability with social justice and environmental care. As a responsible distributor and importer of chemicals, IMCD cares for the safety and health of people and the environment. IMCD ensures compliance with applicable laws and regulations in the markets it serves and recognises the importance of responsible distribution within the life cycle of chemical products.
IMCD contributes to sustainability by focussing on continuous improvement in the areas it can inuence through its business activities. Key areas where IMCD sees a role for itself to stimulate sustainability practices are: product stewardship and the promotion of environmentally friendly formulations through the use of its technical expertise, optimalisation of supply chain processes (both in its own organisation as well as by partnering with its suppliers, customers and supply chain partners) and constant monitoring and improving in respect of compliance with the health, safety and quality standards applicable throughout its organisation. In addition, IMCD wants to contribute to local communities by encouraging its operating companies to engage and participate in local initiatives beneting the local communities that they are part of.
Integrity, transparency and compliance are IMCD's core business values that promote trust and respectful relationships with investors and authorities.
IMCD aims to deliver sustainable shareholder returns and being a solid business partner of providers of credit facilities. Reference is made to the shareholder information paragraph in this Annual Report.
IMCD seeks to maintain open, honest and constructive dialogues with the authorities. It endeavours to meet relevant legislative requirements and comply with all health, safety and environmental legal requirements, including import and export regulations and marketing and use restrictions, in all its operations and sales organisations. IMCD is committed to providing quality working conditions for its employees such that their health, safety and welfare at work are protected, and has established emergency response procedures to minimise the potential impact of emergencies and incidents on employees and the public.
Taxation is a subject of growing interest in the global society of which IMCD is part. IMCD pursues a principled and transparent tax strategy that aims to support IMCD's overall business strategy and objectives. IMCD's tax strategy is based on the key values and principles of its Code of Conduct that provides a framework for a business culture that stimulates honesty, transparency, sustainability, compliance, expertise and cultural diversity. The principles of IMCD's Code of Conduct are further embodied in IMCD's Management Instructions.
Acquisitions are a signicant part of IMCD's business strategy to achieve growth. Often alternative methods are available in order to achieve the same commercial result. The tax consequences of such transactions are considered and weighted before carrying out such a transaction to minimise the potential tax risk and tax cost before deciding on the best method.
The Company's genuine commercial activities lead the setting up of international structures and prots are declared and taxes are paid where the economic activity occurs. IMCD does not make use of tax havens for the avoidance of tax.
IMCD's tax principles require compliance with applicable tax rules and regulations in the jurisdictions in which IMCD operates. This means that IMCD strives to comply with the letter and spirit of the applicable tax laws. Where tax laws do not give clear guidance, prudence and transparency are the guiding principles while adhering to IMCD's Code of Conduct. Transfer pricing related issues are dealt with on an at arm's length basis in accordance with IMCD's Transfer Pricing Policy, which is consistent with the internationally accepted standards of the OECD guidelines for multinational companies.
IMCD seeks to maintain an open, honest and constructive dialog with tax authorities based on transparency, respect and trust. Tax compliance and reporting is managed locally with support and guidance from the corporate tax department and external tax counsel and is periodically monitored through IMCD's corporate Controlling department.
New international tax initiatives driven by the OECD BEPS project and the EU have or will result in changes in tax laws in many jurisdictions in which IMCD operates, for instance, the implementation of a Country-by-Country reporting obligation in Dutch tax law. The tax effects of the changes in legislations are expected to be minimal, but IMCD is continuously assessing the impact of those initiatives.
In accordance with its tax strategy, IMCD takes a conservative approach to tax risk, as it does to other risks in the business. Tax risks can arise from unclear laws and regulations as well as differences in interpretation. There is always some level of risk on taxation due to the complexity of taxes, including frequent changes in laws, variety and volume of different taxes that affect the Group's business and differences on the interpretation of regulations or at arm's length concepts meaning that tax authorities may take a different view. To manage its tax risks, the corporate tax department cooperates with all internal and external stakeholders to ensure it complies with these regulations with the overall objective to mitigate these risks while at the same time aims to be tax efcient in order to be cost effective.
Potential tax related risks are assessed by IMCD's Management Board and discussed with the Supervisory Board to ensure a sustainable and viable tax strategy that is compliant with IMCD's business principles and enhances long-term protability.
Business Group Personal Care supplies a complete range of speciality additives, actives and sensorial ingredients used in the formulation of products to clean, perfume, protect, maintain and enhance the healthy appearance of the body. These ingredients perform various functions from adding colour to a lipstick, improving the texture of a face cream and adding moisturising properties to a body lotion.
IMCD customers produce end-products that have become an important part of daily life, including cosmetics, dental care, deodorants, fragrances, hair care, skin care and toiletries.
For the year 2017, IMCD reports another year of growth. IMCD's alignment with industry leaders, its continuous business development and its excellent staff helped to further grow its market share. IMCD was able to attract and expand supplier relations, further grow the customer base and acquire and successfully integrate some interesting companies. The relationships with suppliers are strong. IMCD builds partnerships with them to increase sales and to develop their product brands and markets in a transparent way.
Macroeconomic market conditions showed a mixed picture in 2017. In EMEA and North Americas, market conditions were, in general, more favourable than in the previous year. In Asia-Pacic market conditions were as different as the diversity of this enormous region. Market conditions in Brazil remained challenging. IMCD's multi-market and geographical coverage, combined with a diversied supplier and product portfolio provided nancial resilience and enabled IMCD to nancially outperform its end markets.
In 2017 IMCD further strengthened its technical capabilities with the addition of new regional application labs like a state of the art pharma lab in Germany and new coatings and personal care labs in the US. To support its role as a leading speciality chemicals and food ingredients distributor, IMCD operates 37 laboratories in 20 countries. IMCD's technical lab teams build, maintain and expand relationships with both suppliers and customers, creating growth opportunities and delivering value. Workshops and training sessions are held within the lab facilities for the IMCD sales force, ensuring they stay abreast of market trends and developments and fully understand the functionality and characteristics of the products within the portfolio.
With a view to further improving IMCD's operational performance there is an ongoing program to optimise and further harmonise the global sales processes, HSEQ, nance & control and logistics. An important part of this program relates to a permanent update of IMCD's ICT infrastructure and governance, aiming to
further optimise business processes and enhance ICT functionality and security.
Since IMCD's inception, it realised that ICT is a backbone of its business. ICT has helped IMCD to integrate acquired companies, to harmonise business processes and to manage and create visibility in day to day business performance. The strong ICT backbone is an integral part of IMCD's success. The expansion of the business combined with changes in the commercial environment as a result of digitalisation will lead to further investments in ICT. IMCD is well aware of these changes and is working on ICT related improvement projects to ensure that it will remain a leader in this eld.
Acquisitions have always been an important part of IMCD's growth strategy and will remain a focus going forward to assist in building scale and efciencies, complementing IMCD's product portfolio and expanding geographic and strategic market coverage. In 2017 IMCD acquired three businesses.
In June IMCD acquired Neuvendis SPA, based in Milan, Italy, which is focused on speciality chemicals, selling into the construction, coatings & paints, adhesives, plastics, inks and leather sectors. Neuvendis is an excellent t with IMCD's existing operations in Southern Europe.
In July IMCD acquired the speciality chemicals distribution business of Bossco Industries Inc. located in Houston, US. Bossco Industries was established in 1989 and is a distributor of speciality chemicals, supplying products and technical solutions to all major industrial market segments in the southwestern region of the United States. The business was fully integrated within IMCD US in the third quarter of 2017.
In August IMCD acquired the Canadian and US speciality chemicals and ingredients distributor L.V. Lomas. L.V. Lomas is an excellent t with the IMCD business model and immediately provides IMCD with a signicant presence in Canada and a further enhanced position in the US.
Established in 1960 and with activities at six locations in Canada and the US, including ofces in Toronto (Head Ofce), Montreal and Vancouver, L.V. Lomas is one of North Americas' leading distributors of speciality chemicals and food ingredients and is distinguished by its experienced and qualied professionals that provide its customers with advanced technical support and market intelligence. With its asset light business model and long-term relationships with leading global chemical and ingredient suppliers L.V. Lomas has an excellent t with IMCD's business model and strategy and signicantly strengthens IMCD's position in North America.
| EUR million | 2017 | 2016 | Change | Fx adj. change |
|---|---|---|---|---|
| Revenue | 1,907.4 | 1,714.5 | 11% | 12% |
| Gross pro€t | 428.7 | 381.6 | 12% | 13% |
| Gross pro€t in % of revenue | 22.5% | 22.3% | 0.2% | |
| Operating EBITA | 161.7 | 147.8 | 9% | 11% |
| Operating EBITA in % of revenue | 8.5% | 8.6% | (0.1%) | |
| Cash conversion margin | 97.2% | 92.3% | 4.9% | |
| Cash earnings per share | 2.06 | 2.01 | 3% |
In 2017 IMCD achieved 11% revenue growth (+12% on a constant currency basis) and 12% gross prot growth (+13% on a constant currency basis). Operating EBITA increased by 9% to EUR 162 million (+11% on a constant currency basis) whereby the Operating EBITA margin was more or less stable at 8.5%.
Cash generation was strong in 2017 resulting in a cash conversion margin of 97.2%. Weighted cash earnings per share increased from EUR 2.01 in 2016 to EUR 2.06 in 2017.
| EUR million | Growth | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2017 | in % total | 2016 | in % total | Organic | Acquisition | Foreign exchange |
Total | ||
| EMEA | 1,141.7 | 59.9% | 1,053.6 | 61.4% | 6.8% | 2.4% | (0.8%) | 8.4% | |
| Asia-Paci€c | 314.9 | 16.5% | 316.9 | 18.5% | 0.2% | - % | (0.9%) | (0.6%) | |
| Americas | 450.7 | 23.6% | 344.0 | 20.1% | (0.6%) | 31.8% | (0.2%) | 31.0% | |
| Total | 1,907.4 | 100.0% | 1,714.5 | 100.0% | 4.1% | 7.8% | (0.7%) | 11.3% |
Revenue increased from EUR 1,715 million to EUR 1,907 million, an increase of 11% compared to 2016. This increase was the balance of organic growth (4%), the rst-time inclusion of acquisitions (8%) and a negative contribution of foreign exchange differences (-1%).
Organic revenue growth of 4% was a balance of strong performance in EMEA and a attish development in the other regions where IMCD is active. Diverse market dynamics in the different regions and market segments had an impact on organic growth. In EMEA improving economic market conditions helped. In other regions underlying GDP growth and chemical demand was modest or even negative resulting in challenging market conditions.
Furthermore, in a number of countries local currencies weakened versus the Euro, resulting in negative foreign exchange differences (-1%).
The overall organic revenue growth was the balance of local macroeconomic circumstances, a further strengthening of the product portfolio by adding new supplier relations, expanding relations with existing suppliers and an increase of customer penetration by adding new products and selling more products to existing and new customers.
Acquisitions completed in 2016 (Mutchler, US and C&S and Feza, both in EMEA) and acquisitions made in 2017 had a positive impact on revenue of 8%.
| EUR million | Growth | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| 2017 | in % Revenue |
2016 | in % Revenue |
Organic Acquisition |
Foreign exchange |
Total | ||||
| EMEA | 274.2 | 24.0% | 248.8 | 23.6% | 8.4% | 2.9% | (1.1%) | 10.2% | ||
| Asia-Paci€c | 65.2 | 20.7% | 63.9 | 20.1% | 3.6% | - % | (1.6%) | 2.1% | ||
| Americas | 89.4 | 19.8% | 68.9 | 20.0% | (1.3%) | 30.8% | 0.1% | 29.6% | ||
| Total | 428.7 | 22.5% | 381.6 | 22.3% | 5.8% | 7.5% | (1.0%) | 12.3% |
Gross prot, dened as revenue less cost of materials and inbound logistics, increased from EUR 382 million in 2016 to EUR 429 million in 2017, an increase of 12%. This increase was the balance of organic growth (6%), the rst time inclusion of acquisitions (7%) and a negative contribution of foreign exchange differences (-1%).
Gross prot in % of revenue increased from 22.3% in 2016 to 22.5% in 2017. The gross prot in % of revenue improved in EMEA and Asia-Pacic and slightly decreased in the Americas, mainly as a result of acquisitions made. Gross prot margins showed the normal level of differences in margins per region, margins per product and margins per product market combination. Differences in the regions are caused by local market circumstances, product mix, product availability, currency uctuations and the impact of newly acquired businesses.
The increase of the gross prot % is the result of the rst-time inclusion of acquired companies, local market circumstances, currency exchange rate changes and the usual uctuations in the product mix.
Operating EBITA is dened as the result from operating activities before amortisation of intangible assets and non-recurring income and expenses. It is one of the key performance indicators used for controlling the performance of the operating activities. The bridge between result from operating activities and operating EBITA is as follows:
| Operating EBITA | 161.7 | 147.8 |
|---|---|---|
| Non-recurring items | 2.3 | 2.1 |
| Amortisation of intangible assets | 34.2 | 38.2 |
| Result from operating activities | 125.2 | 107.5 |
| EUR million | 2017 | 2016 |
Technical expertise in Personal Care
With the personal care market seeing a growing demand for bespoke beauty products, our customers need to develop formulations that are tailored to the uniqueness of each consumer.
To support them, the IMCD Personal Care technical team used their understanding of the skin to carefully select, from the portfolios of our suppliers, the most suitable ingredients for different skin types. Using their formulation expertise, technical specialists in IMCD's application laboratories then developed three light and fresh formulations for greasy skin, three comfortable and nourishing formulations for dry skin, and three protecting formulations for sensitive skin to demonstrate how customers could approach the trend for personalised products.
IMCD ANNUAL REPORT 2017 35
Operating EBITA increased by 9% to EUR 161.7 million compared to EUR 147.8 million in 2016 (+11% on a constant currency basis).
The growth in operating EBITA of EUR 13.9 million was a combination of organic growth, the rst-time inclusion of acquisitions and a negative impact of exchange differences (-2%).
Because of the integration of acquisitions into existing IMCD organisations it is impractical to make a precise split between organic and acquisition EBITA growth.
The operating EBITA in % of revenue slightly decreased from 8.6% in 2016 to 8.5% in 2017. In EMEA the EBITA margin further improved from 9.6% in 2016 to 9.9% in 2017. In Asia Pacic the EBITA margin was stable at 8.9%, despite start-up costs related to new activities. In the Americas there was a decrease in EBITA margin from 9.2% in 2016 to 7.9% in 2017. This decrease was mainly due to the impact of the acquisition of L.V. Lomas in 2017.
The conversion margin, dened as operating EBITA as a percentage of gross prot slightly decreased from 38.7% in 2016 to 37.7% in 2017. The impact of rst time inclusion of acquired companies was the main driver of this decrease.
Technical expertise in Coatings
Steel bridges, cars, buses, trains and trucks all need coatings that protect against corrosion. With the very toxic anti-corrosion pigment lead chromate phased out of the market, zinc chromate has been used for the last 20 years. However, due to their ecotoxicological properties, zinc-based anti-corrosion pigments are now also under threat.
Technical experts in IMCD's Coatings labs have developed waterborne corrosion protection primers, based on binders and additives from our world-leading suppliers. These primers have been created using heavy-metal-free natural minerals, showing similar or even better corrosion protection properties compared to zinc-based systems.
IMCD distinguishes the following operating segments:
| EUR million | |||||
|---|---|---|---|---|---|
| 2017 | in % Revenue | 2016 | in % Revenue | ||
| EMEA | 112.6 | 9.9% | 100.8 | 9.6% | |
| Asia-Paci€c | 28.1 | 8.9% | 28.3 | 8.9% | |
| Americas | 35.5 | 7.9% | 31.6 | 9.2% | |
| Holding companies | (14.5) | - | (13.0) | - | |
| Total | 161.7 | 8.5% | 147.8 | 8.6% |
The developments by operating segments are described in the following sections.
| EUR million | 2017 | 2016 | Change | Fx adj. change |
|---|---|---|---|---|
| Revenue | 1,141.7 | 1,053.6 | 8% | 9% |
| Gross pro€t | 274.2 | 248.8 | 10% | 11% |
| Gross pro€t in % of revenue | 24.0% | 23.6% | 0.4% | |
| Operating EBITA | 112.6 | 100.8 | 12% | 13% |
| Operating EBITA in % of revenue | 9.9% | 9.6% | 0.3% | |
| Conversion margin | 41.1% | 40.5% | 0.6% |
The operations in EMEA showed another year with a strong performance. The combination of more positive macroeconomic market circumstances and a strong IMCD EMEA organisation resulted in 8% revenue growth. This increase was a combination of 7% organic growth, the rst-time inclusion of acquisitions (2%) and a negative impact of exchange differences (-1%).
The acquisition impact was the (full year) result of three acquisitions done in this segment in 2016 and 2017. In September 2016 IMCD acquired the business and certain assets of Chemicals and Solvents (EA) Ltd. (C&S) in Kenya. In full year 2016
C&S generated about EUR 5 million revenue with 26 employees.
In December 2016 IMCD acquired Feza Kimya in Istanbul, Turkey, a leading distributor selling into the coatings, plastics, rubber, lubricants and detergent sectors. In 2017 Feza Kimya has been successfully integrated into the existing IMCD Turkey organisation. In 2016, Feza generated revenue of EUR 8 million with 23 employees.
End of June 2017 IMCD acquired Neuvendis based in Milan, Italy. Neuvendis is one of the leading market players in the distribution of speciality chemicals in Italy, which is focussed on selling speciality chemicals to the construction, coatings & paints, adhesives, plastics, inks and leather sectors. In 2016, Neuvendis generated revenue of EUR 26 million with 20 employees.
Gross prot increased from EUR 248.8 million in 2016 to EUR 274.2 million in 2017, an increase of 10%. This increase was the balance of organic growth (8%), rst time inclusion of acquisitions (3%) and a negative contribution of foreign exchange differences (-1%). Relationships with suppliers remained strong. IMCD was able to add interesting new supplier relations and to further expand the relationships with existing suppliers in new territories and with additional business lines. Organic growth further included the usual changes in the product and customer mix.
During the year various initiatives were taken to further strengthen the IMCD market position and internal organisation. In various business cases there were activities to further streamline the commercial and logistical set up.
IMCD continued to invest in technical facilities and formulation expertise. As an example, in 2017 a new state of the art pharma lab was opened in Cologne in order to assist customers with formulation and
testing. Further, these lab facilities are used to train the IMCD sales force and to help them to get a deep understanding of the product specications and applications.
Gross prot margin improved from 23.6% in 2016 to 24.0% in 2017, primarily as a result of changes in the product mix.
Operating EBITA increased by 12% to EUR 112.6 million compared to EUR 100.8 million in 2016 (+13% on a constant currency basis). It is fair to state that most of this growth was organic. Operating EBITA in % of revenue rose from 9.6 % in 2016 to 9.9% in 2017.
The conversion margin further improved from 40.5% in 2016 to 41.1% in 2017. Gross prot margin improvement, combined with strict cost control were the main drivers of this increase.
The number of employees in EMEA increased by 7% (+6% excluding Neuvendis); at 2017 year-end IMCD employed 1,133 FTEs in EMEA, compared to 1,057 at the end of 2016. The additional staff were hired to ll vacancies, strengthen the technical expertise and to cater for future growth.
| EUR million | 2017 | 2016 | Change | Fx adj. change |
|---|---|---|---|---|
| Revenue | 314.9 | 316.9 | (1%) | 0% |
| Gross pro€t | 65.2 | 63.9 | 2% | 4% |
| Gross pro€t in % of revenue | 20.7% | 20.1% | 0.6% | |
| Operating EBITA | 28.1 | 28.3 | (1%) | 1% |
| Operating EBITA in % of revenue | 8.9% | 8.9% | 0.0% | |
| Conversion margin | 43.2% | 44.4% | (1.2%) |
In Asia-Pacic, market circumstances were characterised by substantial differences between the countries. Australia and New Zealand, representing more than 50% of IMCD's revenue in this region, reported modest GDP growth compared to countries like India and China. However, IMCD's well established business in Australia/New Zealand had another good
year, producing solid results and healthy cash ows. Our activities in India and China, although small compared to the size of the markets, are developing well and growing nicely. In South East Asia we experienced a more stagnating economic environment and some headwind compared to 2016. In 2017 we further invested in the start-up activities in Japan, Thailand and Vietnam to build and strengthen IMCD's presence in Asia Pacic.
Revenue in this region was more or less at in 2017 compared to 2016. Gross prot increased by 4% forex adjusted whereby the gross prot margin increased from 20.1% in 2016 to 20.7% in 2017. This increase was primarily due to a strong focus on margin improvement, changes in the product portfolio and adding new supplier relationships.
Investments related to the start-up activities combined with further investments in the quality of IMCD's sales force affected operating EBITA. In 2017 reported operating EBITA was EUR 28.1 million, EUR
0.2 million lower than the 2016 outcome. Forex adjusted EBITA 2017 showed an increase of 1% compared to 2016. The number of employees in the Asia-Pacic region increased by 7% to 511 compared to 479 as at year-end 2016.
Operating EBITA in % of revenue remained stable at 8.9% in 2017. The conversion margin decreased from 44.4% in 2016 to 43.2% in 2017. The conversion margin decrease was mainly the result of additional own costs to further strengthen the existing organisations and start-up costs of new operations in the region.
| EUR million | 2017 | 2016 | Change | Fx adj. change |
|---|---|---|---|---|
| Revenue | 450.7 | 344.0 | 31% | 31% |
| Gross pro€t | 89.4 | 68.9 | 30% | 29% |
| Gross pro€t in % of revenue | 19.8% | 20.0% | (0.2%) | |
| Operating EBITA | 35.5 | 31.6 | 12% | 13% |
| Operating EBITA in % of revenue | 7.9% | 9.2% | (1.3%) | |
| Conversion margin | 39.7% | 45.8% | (6.1%) |
Revenue in Americas grew by 31% which was a combination of organic growth (-1%) and the rst time inclusion of acquired companies (+32%). Despite a
substantial weakening of exchange rates in this region in the second half of 2017, the average
Business Group Home Care and I&I (Industrial and Institutional) offers a range of speciality chemicals used in the manufacture of products used to clean, amongst other thing, clothes, dishes, cars and oors.
End products come in the form of the powder, liquid, tablets, capsules and wipes and can be used around the home in washing machines and dishwashers or in industrial sites such as hospitals or factories. Detergent chemicals perform a variety of functions from digesting dirt and removing stains, killing bacteria, softening and perfuming fabrics, brightening colours in clothes and producing sparkling shiny nishes to surfaces.
exchange rate during this year was close to the 2016 average.
It is IMCD's strategy to build a strong North American organisation. In line with this ambition IMCD acquired two companies in this region in 2017.
In July IMCD acquired the speciality chemicals distribution business of Bossco Industries Inc., located in Houston, Texas. This acquisition, supplying products and technical solutions to all major industrial market segments in the southwestern region of the United States, further strengthened IMCD US and the ability to offer national coverage to its principal partners. Bossco generated revenue of USD 11 million in 2016.
In August 2017 IMCD acquired L.V. Lomas with activities at six locations in Canada and the US, including ofces in Toronto (Head Ofce), Montreal and Vancouver, L.V. Lomas is one of North Americas leading distributors of speciality chemicals and food ingredients and is distinguished by its experienced and qualied professionals that provide its customers with advanced technical support and market intelligence. This acquisition is an excellent t with the IMCD business model and immediately provides IMCD with a signicant presence in Canada and a further enhanced position in the US.
In 2016, the acquired business of L.V. Lomas generated revenue of C\$ 383 million and realised a normalised EBITDA of C\$ 18 million with approximately 280 employees.
In 2017 IMCD started to integrate its activities in the North American market and to further invest in technical centres of excellence for key market segments. As a part of this, IMCD invested in laboratory facilities for coatings and personal care.
Further, the already excellent food lab in Toronto will be further expanded. IMCD works hard and diligently to establish an organisation of the highest quality that can serve its principals and customers throughout the North American market.
After a slow start, industrial output in the North American markets rebounded in the course of 2017 across a diverse set of chemical consuming industries. Hurricane Harvey caused widespread, though temporary, disruptions to the heart of the American chemical industry in the third quarter. As a result, the overall growth of the chemical market was modest in 2017.
In the rst half of 2017 the Brazilian market seemed to have stabilised on the relatively low activity level that IMCD experienced during 2016. Overall the economic environment was weak resulting in falling demand from customers and low industrial production. Especially, IMCD's industrial activities in Brazil had a difcult time. The pharmaceutical activities of IMCD Brasil were less affected and performed in line with expectations. In the second half of 2017 the Brazilian economy was gaining some momentum despite political uncertainty.
Gross prot of operating segment Americas increased from EUR 68.9 million in 2016 to EUR 89.4 million in 2017, an increase of 30%. This increase was the balance of organic growth (-1%), the rst time inclusion of acquired companies (31%) and a small negative contribution of foreign exchange differences.
Gross prot margin decreased from 20.0% in 2016 to 19.8% in 2017. This decrease was the balance of the rst time inclusion of acquired companies with on average lower gross margin %, partly offset by margin improvement and changes in the product mix.
Operating EBITA increased by 13%, forex adjusted, to EUR 35.5 million compared to EUR 31.6 million in 2016. It is fair to assume that most of the growth is the result of the (full year) impact of acquisitions made in 2016 and 2017. The operating EBITA margin decreased to 7.9% (9.2% in 2016). The conversion margin decreased from 45.8% in 2016 to 39.7% in 2017 mainly due to the rst time inclusion of the L.V. Lomas acquisition.
The number of employees in the Americas increased from 285 at the end of 2016 to 572 FTEs including 270 employees of L.V. Lomas.
| EUR million | 2017 | 2016 | Change | Fx adj. change |
|---|---|---|---|---|
| Operating EBITA | (14.5) | (13.0) | (12%) | (13%) |
Operating EBITA of Holding Companies represents costs related to the central head ofce in Rotterdam and the regional head ofces in Singapore and New Jersey, US.
At year-end 2017, 49 FTEs were employed in the Holding Companies, compared to 42 at year-end 2016.
Operating costs increased by EUR 1.5 million to EUR 14.5 million in 2017. This increase reects the growth of IMCD and as a consequence the need to strengthen the support functions in both Rotterdam and the regional head ofces. Furthermore, in 2016 there was an amendment of the Dutch employee benet plan. This amendment resulted in a one-off cost saving of EUR 1.0 million in 2016.
The bridge between Operating EBITA, one of the key performance indicators used for controlling the performance of the operating activities, the result from operating activities (an IFRS term) and result for the year is as follows:
| EUR million | 2017 | 2016 |
|---|---|---|
| Operating EBITA | 161.7 | 147.8 |
| Amortisation of intangible assets | (34.2) | (38.2) |
| Non-recurring income and expenses | (2.3) | (2.1) |
| Result from operating activities | 125.2 | 107.5 |
| Net €nance cost | (15.1) | (12.8) |
| Share of pro€t of equity-accounted investees, net of tax | (0.1) | 0.0 |
| Result before income tax | 110.0 | 94.8 |
| Income tax expenses | (32.7) | (21.8) |
| Result for the year | 77.3 | 73.0 |
Amortisation of intangible assets are non-cash costs mainly related to the amortisation of supplier relations, distribution rights and other intangibles. Amortisation of intangibles decreased from EUR 38.2 million in 2016 to EUR 34.2 million in 2017. Main reason of the decrease is a one-off amortisation related to a re-assessment of expected future cash ows of IMCD Brasil's supplier base resulting in a noncash impairment loss in 2016 of EUR 5.7 million.
Non-recurring items of EUR 2.3 million (2016: EUR 2.1 million) include costs of EUR 1.4 million related to realised and non-realised acquisitions and costs related to one-off adjustments to the organisation of EUR 0.9 million.
The net nance costs comprise of the following items:
| EUR million | 2017 | 2016 |
|---|---|---|
| Interest income on loans and receivables | 0.5 | 0.5 |
| Interest expenses on €nancial liabilities | (11.8) | (10.9) |
| Changes in the fair value of derivative €nancial instruments | 0.4 | 0.3 |
| Amortisation of €nance costs | (1.6) | (1.6) |
| Interest costs re employee bene€ts | (0.2) | (0.1) |
| Foreign currency exchange results | (2.4) | (1.0) |
| Net finance costs | (15.1) | (12.8) |
Net nance costs in 2017 amounted to EUR 15.1 million compared to EUR 12.8 million in 2016. Main driver of this EUR 2.3 million increase in costs were additional interest costs on nancial liabilities (EUR +0.9 million) and foreign currency exchange results reected as nance costs (EUR +1.4 million).
Furthermore, net nance costs include noncash items like amortisation of nance costs related to renancing of EUR 1.6 million (2016: EUR 1.6 million).
In 2017 income tax expenses increased from EUR 21.8 million in 2016 to EUR 32.7 million in 2017, an increase of EUR 10.9 million or 50%. This increase could be specied as follows:
| EUR million | 2017 | 2016 |
|---|---|---|
| Regular income tax expenses | (36.8) | (33.9) |
| Adjustments for prior years | (2.0) | - |
| (De-)recognition of previously (un)recognised tax losses | 0.6 | 6.2 |
| Tax credits related to amortisation of intangible assets | 3.6 | 5.9 |
| Reduction in tax rates | 1.9 | - |
| Income tax expenses | (32.7) | (21.8) |
The so called "regular" tax expenses increased from EUR 33.9 million in 2016 to EUR 36.8 million in 2017, an increase of 9%. Regular tax in percentage of result before income tax and amortisation (EUR 144.2 million in 2017 and EUR 132.9 million in 2016) remained stable at 26%.
The increase in income tax expenses is a combination of increased protability combined with a number of one-off tax items. The most important one-off tax item having a positive impact on 2016 tax expenses was the recognition of tax losses resulting in a reduction of 2016 tax costs with EUR 6.2 million compared to a reduction of EUR 0.6 million in 2017. The recognition of previously unrecognised tax losses in the Netherlands was the main contributor to this tax reduction in 2016 (EUR 4.7 million). The reduction in tax rate in the US, resulting in an EUR 1.9 million noncash release of a deferred tax provision was more or less offset by an EUR 2.0 million prior year tax adjustment following a local tax audit.
Further details of the tax calculation can be found in the notes to the consolidated nancial statements.
EUR 110.1 million in 2017 (+7%). The main drivers of this increase were the increase of operating EBITA partly offset by higher nancing and tax costs.
Net result before amortisation and non-recurring items increased from EUR 102.6 million in 2016 to
| Net result before amortisation / non-recurring items | 110.1 | 102.6 |
|---|---|---|
| Tax losses unrecognised (tax amount) | - | (4.7) |
| Non-recurring income and expenses | 2.3 | 2.1 |
| Tax credits related to amortisation | (3.6) | (5.9) |
| Amortisation of intangible assets | 34.2 | 38.2 |
| Result for the year | 77.3 | 73.0 |
| EUR million | 2017 | 2016 |
Business Group Lubricants offers a range of speciality chemicals that are used to enhance both the performance and longevity of lubricants and greases.
The main function of lubricants is reducing friction between surfaces but also are used for transmitting forces or heating, cooling and protecting surfaces.
Lubricants and greases are commonly used in the automotive (e.g. engine oils, transmission and hydraulic uids) and industrial (e.g. marine lubricants, metal working oils and process oils) market sectors.
cash earnings per share, calculated as earnings per share before amortisation (net of tax) increased from EUR 2.01 in 2016 to EUR 2.06 in 2017 (+3%).
Weighted earnings per share increased from EUR 1.39 in 2016 to EUR 1.47 in 2017 (+6%). Weighted
| EUR million | 2017 | 2016 |
|---|---|---|
| Result for the year | 77.3 | 73.0 |
| Amortisation of intangible assets | 34.2 | 38.2 |
| Tax credits related to amortisation of intangible assets | (3.6) | (5.9) |
| Result for the year before amortisation (net of tax) | 107.9 | 105.3 |
| Weighted average number of shares (x million) | 52.4 | 52.5 |
| Cash earnings per share (weighted) | 2.06 | 2.01 |
The Company has a dividend policy with a target future annual dividend in the range of 25% to 35% of adjusted net income to be paid out either in cash or in shares. Adjusted net income is dened as the reported result for the year plus non-cash amortisation charges (net of tax). The outcome could be adjusted for material non-recurring items.
In 2017 the adjusted net income was EUR 107.9 million or EUR 2.06 per share (weighted).
For 2017, a dividend of EUR 0.62 per share in cash will be proposed to the Annual General Meeting which would mean an increase of 13% compared to 2016 (2016: EUR 0.55). Approval at the Annual General Meeting would result in IMCD paying EUR 33 million or 30% (2016: 27%) of the net result 2017 adjusted for non-cash amortisation charges (net of tax). The main rationale for the determination of the proposed dividend payment is a combination of maintaining room for further acquisition growth combined with reasonable leverage levels facilitating IMCD's long term growth strategy.
The development of the dividend per share and the dividend as a percentage of the adjusted net income since IMCD's listing in 2014 is as follows:
Business Group Pharmaceuticals offers a wide range of speciality chemicals used in the manufacture of medicinal products that can be found in any pharmacy, nutritional supplement or at home in a medicine cabinet. End-products come in the form of the powders, liquids and syrups, tablets, capsules, inhalers and nasal sprays, to name but a few.
Pharmaceutical chemicals can be the building blocks of the drug, the drug itself or the ingredients that help to make it into the end-product. Many have a function to help the drug do its work after administration, by disintegrating the product in the stomach or helping transport the drug to the affected area and relieving symptoms.
| EUR million | 2017 | 2016 |
|---|---|---|
| Operating EBITA | 161.7 | 147.8 |
| Depreciation | 4.3 | 4.3 |
| Operating EBITDA | 166.0 | 152.1 |
| Share based payments | 2.5 | 1.4 |
| Inventories | (16.9) | (12.5) |
| Trade and other receivables | (13.3) | (16.7) |
| Trade and other payables | 26.1 | 21.2 |
| Change operational working capital | (4.1) | (7.9) |
| Capital expenditure | (3.1) | (5.2) |
| Free cash flow | 161.3 | 140.4 |
| Cash conversion margin | 97.2% | 92.3% |
Free cash ow increased by 15% from EUR 140.4 million in 2016 to EUR 161.3 million in 2017. The cash conversion margin, dened as free cash ow as a percentage of operating EBITDA, improved by 4.9% to 97.2% in 2017, driven by further growth of operating EBITDA combined with lower investment in operational working capital. The investment in operational working capital in 2017, excluding additional working capital as a result of acquisitions made, amounts to EUR 4.1 million.
The increase in operational working capital levels includes the impact of currency depreciations of EUR 14.1 million.
IMCD's asset light business model resulted in relatively low capital expenditure compared to the size of the overall operations and amounted to EUR 3.1 million in 2017 compared to EUR 5.2 million in 2016. Capital expenditure was mainly related to investments in the ICT infrastructure, ofce furniture and technical, warehouse and ofce equipment.
| 31 December | 31 December | |
|---|---|---|
| EUR million | 2017 | 2016 |
| Property, plant and equipment | 18.8 | 20.9 |
| Intangible assets | 948.9 | 907.6 |
| Financial assets | 27.6 | 29.8 |
| Non-current assets | 995.3 | 958.2 |
| Net working capital | 314.3 | 248.4 |
| Provisions and deferred tax liabilities | (90.5) | (87.0) |
| Total capital employed | 1,219.1 | 1,119.6 |
| Equity | 729.2 | 722.1 |
| Net debt | 490.0 | 397.6 |
| Total financing | 1,219.1 | 1,119.6 |
Working capital is dened as inventories, trade and other receivables less trade payables and other payables. At the end of 2017 the absolute amount of working capital was EUR 314.3 million compared to EUR 248.4 million at year-end 2016. The increase of EUR 65.9 million is a combination of increased business activity leading to higher working capital levels (EUR 17.2 million), impact of exchange rate differences on year-end balance sheet positions (EUR -14.1 million) and acquisitions (EUR 62.8 million). Monitoring working capital positions is a permanent focus of management attention and there are various processes and tools in place to optimise working capital.
IMCD aims to maintain a capital structure that offers exibility and enables IMCD to cover its potential nancial requirements and to execute its growth and acquisition strategy. A central team at the head ofce in Rotterdam largely manages liquidity and interest risks. Net debt amounted to EUR 490.0 million at year-end 2017, compared to EUR 397.6 million at year-end 2016. The increase in net debt is predominantly the balance of positive and healthy
cash ows from operating activities set off by cash outows as a result of acquisition related payments of EUR 169 million and a dividend payment of EUR 29 million.
Furthermore, net debt includes approximately EUR 3 million deferred contingent considerations related to acquisitions made (2016: EUR 61 million).
Today's loan structure is based on an amendment to IMCD's EUR 500 million syndicated banking facilities agreed in October 2016. The amendment comprised an extension of the term of the existing credit facility to 2021. Further, this amendment resulted in a term facility of EUR 200 million and a revolving facility of EUR 300 million. In addition, the amended terms include a xed leverage covenant of 3.5 with an acquisition spike, whereby the leverage may be increased twice to 4.0 during the remaining life of the facilities.
The EUR 200 million term loans are fully drawn. About 61% was raised in Euro's, 17% in Australian Dollars, 12% in British Pounds and 10% in US Dollars. The interest rate surcharge on top of EURIBOR or LIBOR depends on overall leverage and varies between 1.25
and 2.75 (actual average surcharge end of 2017: 1.40%; end of 2016: 1.40%).
The EUR 300 million revolving facility can be drawn in various currencies. At the end of 2017 EUR 178 million of this revolving credit facility was drawn. On top of the revolving credit facility the loan documentation caters for some additional facilities to make use of local nancing possibilities.
At the end of 2017 approximately 50% of the syndicated long term nancial indebtedness of the group was hedged against the risk of interest rate increases.
Following the amendment of the syndicated banking facilities, a debt capital market issuance ("Schuldscheindarlehen") of EUR 100 million and USD 90 million with a tenor of 5 and 7 years was closed in 2016. This Schuldscheindarlehen is fully drawn. Of the EUR 100 million facilities, EUR 30 million has a xed interest coupon of 1.200% (5 years) and 1.581% (7 years). The remainder of EUR 70 million has a oating coupon. The interest rate surcharge on top of EURIBOR for the oating coupon is xed on 1.200% (5 years) and 1.450% (7 years). Of the USD 90 million facilities USD 25 million has a xed interest coupon of 3.106% (5 years). The remainder of USD 65 million has a oating coupon. The interest rate surcharge on top of LIBOR for the oating coupon is xed on 1.800% (5 years).
The loan documentation related to these external interest-bearing loans includes interest cover and maximum leverage conditions. The interest cover condition requires an EBITDA to net interest ratio of at least 4.0 times and will increase to 4.25 for December 2018 and the years thereafter (for the Schuldscheindarlehen the interest cover is xed at 4.0 times). The leverage condition requires a maximum leverage ratio of 3.5 (or 4.0 when using the acquisition spike). The reported leverage ratio (net debt/operating EBITDA ratio including full year impact of acquisitions) at the end of December was 2.8 times EBITDA (31 December 2016: 2.6). The actual leverage at the end of 2017, calculated on the basis of the denitions used in the IMCD loan documentation, was 2.7 times EBITDA (2.3 times
EBITDA end of 2016), which is well below the required maximum of 3.5 times EBITDA.
The interest cover, calculated based on the denitions used in the loan documentation, is 16.3 times EBITDA (31 December 2016: 13.9) which is well above the required minimum of 4.0 times EBITDA.
The equity attributable to holders of ordinary shares increased by EUR 7.1 million to EUR 729.2 million (31 December 2016: EUR 722.1 million). This increase is the balance of the addition of the net prot for the year of EUR 77 million, other comprehensive income of negative EUR 42 million and dividend payments in cash of EUR 29 million. The increase of equity resulted in a solid ratio at year-end whereby net equity covers 44.1% of the balance sheet total (31 December 2016: 48.7%).
In September IMCD purchased 40,000 own shares (EUR 2.0 million) to fund its long-term incentive plan.
IMCD is committed to conducting its business ethically and responsibly and wants to create sustainable value for its stakeholders that are directly involved in its own operations as well as for the market and societies that it operates in. IMCD believes that corporate social responsibility goes beyond compliance with law and regulations and beyond current protability and success. A sustainable global economy should combine longterm protability with social justice and environmental care.
IMCD's non-nancial and sustainability agenda is set by the Management Board. The topics that have been determined to be relevant to IMCD are monitored at a group level, by the appropriate directors and employees responsible for legal affairs, human resources, HSEQ and supply chain. IMCD's group companies are responsible for local implementation of relevant practices within the policy framework set by the Management Board and are encouraged to take on an active role.
In 2018, IMCD will further develop its group-wide approach and policies relating to certain non-nancial topics and sustainability, as well as reporting on the Company's performance on these topics.
IMCD is proud of its people and culture and considers this by far the most valuable asset. IMCD operates in a highly technical and specialised world of Chemicals & Ingredients as a professional services organisation where highly educated key people in a at organisational structure can make the difference for suppliers, customers and each other. To get the very best out of its employees IMCD not only needs to hire very capable individuals but also needs to provide them with the freedom to operate. Good people always have choices, it is on IMCD to keep them challenged and motivated.
Most of its employees come to IMCD with strong previous knowledge of and experience in speciality chemicals or food ingredients and work in Sales, Marketing and Product Management or in Technical Development/application. Commercial employees make up the vast majority of IMCD's organisation. In 2017, 64% of the IMCD staff worked in a supplier or customer facing role and that focus is valuable to the group; it makes the difference between good and
great. IMCD has a network of application development laboratories in all its regions and opened ve new labs in 2017, in the US for Personal Care and Coatings, in Germany a new Pharma lab and new Food & Nutrition labs in Australia and China. IMCD continues to invest in its technical expertise to better serve customers and suppliers.
Underlining the commitment to continue the development of its talent and organisation, in 2017 IMCD appointed a Group Head of HR and introduced the Leadership Pipeline methodology to better identify and assess IMCD's up and coming talent and management succession bench strength. IMCD prefers to recruit and promote its senior leaders from within the organisation and considers home grown leaders crucial for driving business growth and future acquisitions.
IMCD's culture can be best described as client focused, decentralised, entrepreneurial, with freedom to act, open and transparent with short decisionmaking lines. IMCD has only few management layers in between the CEO and customer facing staff and is hungry for success externally. Since IMCD conducts business on two sides with suppliers and customers IMCD also observes in its best people a certain humility or genuine desire to support its counterparties. In major countries, such as France and Canada, IMCD currently is or has been recognised externally as a Great Place To Work (GPTW).
IMCD's employee attrition levels have been rather constant. In 2017, total turnover, for all reasons, was 11,7% worldwide. Per job function the highest turnover was in highly mobile support staff (ICT/ HSEQ/HR/Finance) with 15.0% globally. The attrition rate for sales employees remained constant at 10.9% which is lower than the Company's average. IMCD's biggest region EMEA has the lowest attrition with 7.3% despite the strong business results, growth and a changing labour market that is waking up after many years of oversupply. The labour market balance in EMEA is starting to shift in favour of the employee but IMCD believes that its freedom to act, open and
entrepreneurial business culture, its employer brand, play an important role in keeping IMCD's position as one of the most attractive employers in the Chemical Distribution sector.
The growth and development of the Company is not only reected in the nancial gures, but also in the composition of its workforce. IMCD employed 2,265 FTEs as at year-end 2017 (2016: 1,863). The increase of 402 FTEs is primarily the result of th acquisitions of L.V Lomas (Canada), Neuvendis (Italy) and Bossco (US) with more than 312 new people joining IMCD. Excluding acquisitions, the number of FTE counts increased by 90 which reects our organic growth. After the L.V. Lomas acquisition, every fourth employee is now based in the Americas region (from 15% in 2016).
From a diversity perspective, the female / male ratio was 1.09. IMCD employs 1,181 females versus 1,084 males which is for an organisation operating in the highly technical Chemicals & Ingredients world a testament for IMCD's commitment to diversity. IMCD has female Managing Directors leading businesses in Turkey, Vietnam, the Philippines and Indonesia and likes to promote talented females from within. IMCD's age prole remained more or less the same with 62% of the employee workforce in between 30 and 50 years of age (2016: 64%). It also reects that IMCD mainly hires knowledgeable and experienced staff who can add value to its customers and suppliers immediately.
The chemical industry is important to virtually every other industry as it produces products that are used in daily life. This makes the chemical industry one of the key inuencing forces on sustainability.
In its role as an international chemical distributor and with a responsibility for delivering its suppliers' products to the market, IMCD seeks to optimise its processes for the benet of the environment, society and business. IMCD therefore implements and encourages the following practices in its own organisation.
As a responsible distributor and importer of chemicals, IMCD cares for the safety and health of people and the environment. IMCD ensures compliance with applicable laws and regulations in the markets it serves and recognises the importance of responsible distribution within the life cycle of chemical products.
IMCD fully endorses the objectives of the Regulation EC 1907/2006 concerning the Registration, Evaluation, Authorisation and Restriction of Chemicals (REACH). The main objectives of REACH are to determine the hazards of chemicals and to assess the risks related to the application of chemicals in order to protect human health and the environment. REACH also encourages the chemical industry to innovate and either to replace substances of very high concern by suitable alternative ones, or use them in a way in which risks are adequately controlled. Applicable across the whole chemical industry chain, REACH entered into force on 1 June 2007 and will be completely operational in 2018. IMCD cooperates with (co-)producers, suppliers, and customers to fully and successfully implement REACH objectives.
Where relevant and required, all substances imported into the European Union by IMCD, have been appropriately registered and/or pre-registered for identication and application assessment purposes. In case a substance registration by IMCD is required on behalf of a non-EU producer, IMCD cooperates with external consultants to fully meet the REACH registration requirements laid down by ECHA (European Chemicals Agency).
IMCD analyses new technologies and market trends and is dedicated to support sustainable, bio-based and renewable products to be adequately represented in its overall product offering. In doing so, IMCD strives to offer new formulation and application solutions to its customers that will meet green, healthy and other sustainability demands on the modern markets.
Using its laboratories and technical centres, IMCD's scientists and technical managers freely share their technical expertise and product formulation, process and application knowledge to support sustainable innovation by both its suppliers and customers. In its laboratories and/or technical centres, IMCD does not carry out research or tests involving animals.
Chemical distribution is a highly complex and multifaceted business comprising purchase, storage and tailored logistics solutions. IMCD supports the reduction of product life cycle greenhouse gas emissions and continuously explores further ways to reduce the carbon footprint with its suppliers, customers and supply chain partners. IMCD uses the Green Tender method developed by Connekt, to carefully select logistic partners with a focus on sustainable activities and capabilities.
In 2017, IMCD focussed on implementing an updated and harmonised supply chain policy that improves consistency and enforces stringent performance measures throughout the group. This policy provides the foundations for ongoing process improvement.
IMCD's centralised supply chain team and local supply chain experts are committed to ensure the most efcient routing, the optimal volume mileage ratio and the implementation of sustainable transport modes, wherever possible. In this respect, IMCD partnered with several of its principal suppliers in 2017 to re-designing their logistics set-up, which resulted in more cost-effective models, faster market access and a reduction of carbon footprint.
In addition to optimising supply chain processes, IMCD also participates in external initiatives, networks and platforms with a focus on sustainable logistics, including the Lean & Green initiative; Europe's leading program for sustainable logistics. As reported last
Technical expertise in Food & Nutrition
The European Food Safety Authority recently issued advice to reduce acrylamide where possible. This is a natural by-product that typically occurs in a range of everyday foods during the cooking process and that has been found to carry potential health risks.
Partnering with a fine bakery manufacturer, IMCD's application specialists offered an innovative enzyme solution to successfully reduce the levels of acrylamide in an existing cookie recipe. IMCD supported the manufacturer in developing an improved, healthier and tastier product with significantly less acrylamide compared to that found in home-made cookies.
year, IMCD was the rst chemical distributor to win a Lean & Green and Lean & Green Star award, for demonstrating 20% CO² reduction in a 5-year period in the Benelux and Italy. In 2017, IMCD Spain joined the program as well, being one of the 15 founding companies in Spain that together form the Spanish Lean & Green Commission. IMCD Spain is in the process of determining its carbon footprint and drafting an action plan to reduce its CO² emission by 20% over the next 5 years. IMCD supports its other subsidiaries to join the Lean & Green initiative as well.
IMCD supports the use of green energy in its ofces. IMCD also encourages the recycling of used ofce materials and is committed to minimising paper consumption. The Company is committed to meeting relevant legislative requirements, as well as requirements agreed to with customers and suppliers, for environment, waste treatment and disposal. To this extent, IMCD has established a waste disposal policy to promote the recycling of waste materials that is intended to ensure that all waste generated by the operations are properly identied and sent for licensed disposal, in accordance with relevant legislative requirements. The policy applies to supply chain related materials and Company ofce related waste.
Minimising waste by aligning and optimising infrastructure and logistic processes is also part of IMCD's integration process for new acquisitions.
In addition, IMCD's laboratories have modern liquid and fume waste management in place and local ofces are developing incentive programs to promote more efcient ways of travelling.
Being a responsible partner for all its stakeholders, Health, Safety, Environment and Quality (HSEQ) are of key importance to IMCD and essential for safe and reliable business operations. IMCD endeavours to comply with health, safety and environmental legal requirements, including import and export regulations and marketing and use restrictions in all its operations and sales organisations.
The Company's HSEQ commitments to employees, environment and society are set out in IMCD's HSEQ requirements and policies, implemented worldwide. In 2017, IMCD focussed on updating and harmonising its HSEQ policy and guidelines. A revised policy with clear guiding principles was implemented successfully throughout the group. An important part thereof concerns the implementation of an annual HSEQ risk analysis for each IMCD subsidiary, with a direct reporting line to the Group HSEQ Director. In addition, IMCD's regional HSEQ coordinators must set up and report on annual HSEQ plans and annual internal audits are performed to verify the effectiveness of the HSEQ policy, procedures and instructions.
IMCD furthermore has standard operating procedures in place on the collection of information with regard to the sale of new products, including regulatory compliance, the creation and dissemination of safetyrelated data, guidance on safe handling, customeruse screening in the context of sensitive products and supplier evaluation.
To ensure effectiveness, IMCD's regional HSEQ coordinators meet at least annually, but also more often in smaller groups throughout the year when needed. At these meetings, they discuss goals for the following year and regulatory developments, share best practices, information and data, discuss standard procedures and implementation of new practices. IMCD's HSEQ Director also visits subsidiaries periodically to discuss more specic issues on a local level with regional HSEQ coordinators.
Responsible Care and Responsible Distribution Most of IMCD's operating companies take part through local associations in the 'Responsible Care' or 'Responsible Distribution' programs of the organisation of the International Council of Chemical Associations (ICCA). These operating companies have stated that they are committed to (the) sustained development and observance of the guidelines laid down in the global program covering the following eight guiding principles:
The commitment to these guidelines and policies is assessed by independent third party experts applying the relevant regional assessment systems. Independent experts also review and document the relevant operating Company's environmental performance and safe handling of chemicals.
IMCD requires third party service providers to comply with its health and safety policy. In order to evaluate compliance, IMCD visits its third party service providers at least once prior to engagement and reviews their performance through site visits and questionnaires on a periodic basis, the frequency of which is based on the types and quantities of products stored or transported by that third party service provider. IMCD requests quality management certications (ISO 9001, ISO 14001, Responsible Care, among others) from its third party service
providers. In addition, the Company has instituted procedures in order to conrm with third party service providers that they comply with applicable health, safety and environmental legal requirements.
IMCD encourages its operating companies to take an active role in carefully selected external sustainability initiatives where it is believed it can make the most effective contribution in its role as a chemical distributor. With respect to 2017, IMCD can report the following relevant developments.
IMCD remains a proud participant in the Together for Sustainability (TfS) initiative; an important program founded in 2011 by six multinational chemical companies. TfS aims to develop and implement a global audit program that uses set criteria to assess and improve sustainability practices within the supply chains of the chemical industries. Previously, IMCD India and IMCD China were both awarded the Bronze Recognition Level by EcoVadis for their sustainability management. In October 2017, IMCD Germany was awarded Silver Level Recognition and in November 2017 IMCD France was awarded an outstanding Gold Level Recognition by EcoVadis. Assessments for Italy, Norway, Sweden, and the Philippines are underway and results thereof are expected in 2018. Furthermore, good progress was made with the preparations for an EcoVadis assessment on IMCD group level. IMCD expects to report on the outcome on these assessments in its 2018 annual report.
IMCD is also a proud member of the Roundtable of Sustainable Palm Oil (RSPO). The RSPO is a non-prot organisation that unites stakeholders from seven sectors of the palm oil industry, aiming to develop and implement global standards for sustainable palm oil. IMCD Italy and IMCD Benelux were the rst entities to join the RSPO initiative in 2014 and are RSPO certied by independent accredited bodies for the RSPO Supply Chain Standards. Thereafter, IMCD applied for a group level RSPO membership, which it obtained in 2015. Between 2015 and end of 2017, the number of group subsidiaries that joined in IMCD group membership increased to 12 and now include in addition to Italy and Benelux - IMCD entities in the Netherlands, UK, Spain, France, Australia, Poland,
Switzerland, New Zealand, Germany and Austria (through which IMCD services a wide range of market sectors across the South East European region).
IMCD cares about the communities in which it is located. As a diversied international business that is present in 46 countries on 6 continents, IMCD cannot offer its support to just one chosen cause. Instead, IMCD opts to support a number of local initiatives to make a difference to its immediate communities. With respect to 2017, the following projects provide good examples of IMCD's local involvement.
In the reporting year 2017, IMCD's head ofce in Rotterdam continued its support for De Nieuwe Poort. De Nieuwe Poort is a community centre and social enterprise, aiming to be a platform for reection, inspiration and connection in local communities. It also provides training and (work) experience for people with a distance to the labour market (amongst others refugees, people returning to the labour market after long-term unemployment and people with physical or mental disabilities). In 2016, IMCD's CEO Piet van der Slikke participated in a series of inspirational speeches by leading Dutch board members organised by De Nieuwe Poort.
In Brazil, IMCD engaged in the local "Vida Limpa" (Clean Life) program and donated 8759 kg of recycling materials that was generated from its
operations. The project serves both an environmental and social goal, as the funds that are generated through the recycling-program are used to strengthen local community's resilience.
In South Africa, IMCD initiated and/or supported several projects to support and improve social conditions of the local community. IMCD is particularly proud of its involvement in the Techno Girl program (a collaboration between the South African Department for Women, Children and People with Disabilities and UNICEF). The program provides for a corporate mentorship and STEM (Science, Technology, Engineering and Mathematics) skill development initiative for young females in underprivileged schools. IMCD supports a next generation of young energetic scientists and mentored four school girls, whilst introducing them to various career paths and options within IMCD SA.
IMCD furthermore supported Hearts of Hope in South Africa, a local organisation that provides a safe home to orphaned and/or vulnerable children. Over the past years IMCD fostered the needs of one of the children in their care and can now happily report that after three years, he has now been adopted by a new family. IMCD SA also contributed to Stop Hunger Now in 2017, by supplying packed meals for distribution to people living in poverty.
Business Group Synthesis offers a range of process chemicals, intermediates and speciality
The resultant building blocks are then further reacted or formulated within both the regulated (pharmaceuticals, agrochemicals, cosmetics) and industrial (coatings, plastics, textiles)
The Synthesis Business Group is a differentiator of IMCD, with a special focus on the reaction
In Germany, IMCD supported the education of children by participating in the 7th Cologne edition of the Run & Ride for Reading, which events aims to raise funds to improve the reading skills of kids and to awake their desire for books and reading.
IMCD is committed to conducting its business in an ethical, integer and responsible manner. As part thereof, IMCD recognises its responsibility under the United Nation's Universal Declaration of Human Rights to respect human rights affected by its activities, as well as its responsibility to ensure that IMCD's business operations and employees do not contribute, neither directly nor indirectly, to human rights violations. We expect our (business) partners to do the same and support that they adhere to and implement similar standards in their organisation. This core principle is embedded in IMCD's Code of Conduct, available on its website.
IMCD has installed an Internal Alert Procedure, available on its website, that enables and protects IMCD employees worldwide to report any irregularities or deviations in IMCD operations regarding, amongst other, IMCD's business principles as described in the Code of Conduct. In the reporting year of 2017, IMCD did not learn of any violation of human rights within its corporate group.
IMCD's key commitment and core principle is to provide an environment that promotes trust, condence and respect of its employees, suppliers, customers, local and international stakeholders, media, governmental authorities and industry and society organisations. On the basis of this ethos, IMCD has created a culture where integrity and transparency are essential to the way IMCD does business and where unethical behaviour will not be tolerated.
In the IMCD Code of Conduct, available at the Company's website, IMCD's business principles, core values and ethics, to which all IMCD companies worldwide are equally and fully committed, are described. Internal policies and a continuous compliance training program are in place aiming to
establish expectations and awareness of ethical business practices and to ensure compliance with, inter alia, applicable trade restrictions, anti-trust and anti-bribery laws, market abuse rules and other compliance regulations.
The Company uses software to screen business partners against various sanctions related lists and has established a 24-hour emergency service line, facilitated by external experts, for the reporting of any incidents. Any irregularities or deviations in IMCD operations regarding, amongst other, IMCD's business principles as described in the Code of Conduct, can also be reported through IMCD's Internal Alert Procedure. In the reporting year of 2017, IMCD did not learn of any violation in respect of its stringent anti-corruption and/or anti-bribery policies within its corporate group.
IMCD operates in different, often fragmented market segments in multiple geographic regions, connecting many customers and suppliers across a very diverse product range. In general, results are impacted by macroeconomic conditions and developments in specic industries.
Furthermore, results can be inuenced from period to period by, amongst other things, the ability to maintain and expand commercial relationships, the ability to introduce new products and start new customer and supplier relationships and the timing, scope and impact of acquisitions. IMCD's consistent strategy and resilient business model has led to successful expansion over the years and IMCD remains focused on achieving earnings growth by optimising its services and further strengthening its market positions.
IMCD sees interesting opportunities to increase its global footprint and expand its product portfolio both organically and by acquisitions.
54 IMCD ANNUAL REPORT 2017
IMCD's Management Board has two members:
P.C.J. (Piet) van der Slikke (1956, Dutch nationality)
H.J.J. (Hans) Kooijmans (1961, Dutch nationality)
IMCD's Executive Committee has six members: the two members of the Management Board and four Directors.
Next to the members of the Management Board, the members of the Executive Committee are (from left to right):
| Frank Schneider | (1959, German nationality) | Managing Director IMCD Germany Business Group Director |
|---|---|---|
| Coatings | ||
| John Robinson | (1966, British nationality) | Business Group Director Pharmaceuticals |
| Gabriele Bonomi | (1962, Italian nationality) | Managing Director IMCD Italy Business Group Director |
| Personal Care | ||
| Marcus Jordan | (1974, British nationality) | President IMCD Holdings US |
1947, male, French nationality
1968, female, British and Dutch nationalities
J. (Janus) Smalbraak 1967, male, Dutch nationality
• Appointed as of 12 May 2016, current term expiring in 2020
Managing Director at Bain Capital
In his capacity as Managing Director at Bain Capital Mr. Plantevin holds several Supervisory Board and non-executive positions at e.g. entities of Autodistribution, Maisons du Monde, Diversey and Consolis Former Managing Director at Goldman Sachs International Former Supervisory Board member of Brenntag S.A., NXP and Trinseo
CFO AGRO Merchants Group Member of the Supervisory Board of Red Star Holding B.V. Former CFO and member of the Executive Board of Ceva Logistics Former CFO and member of the Executive Board of Maxeda DIY Group B.V. Former CFO and member of the Executive Board of Royal Grolsch N.V.
Non-executive director of Bunzl Plc Former member of the Board of Europcar Groupe S.A. Former CEO and chairman of the Management Board of Rexel S.A.
Senior partner at MaiAx Advisors Mrs. Van Nauta Lemke previously held various international management positions with Shell and Cargill Former associate with Mercer Management Consulting (US)
CEO of Pon Holdings Member of the board of RAI Vereniging Member of the advisory boards of Gilde Buy Out Fund and CVC Capital Former member of the Supervisory Board of Koninklijke Nedschroef
IMCD N.V. is a public company with limited liability (naamloze vennootschap) under Dutch law with a twotier board structure. IMCD is managed by a Management Board under the supervision of a Supervisory Board. The Management Board and the Supervisory Board are accountable to the General Meeting of IMCD's shareholders (General Meeting). The Management Board has chosen to work with an Executive Committee. The role, duties and composition of the Executive Committee are described hereafter.
IMCD's governance structure is subject to Dutch law and regulated by the Company's Articles of Association (available on the Company's website). The provisions of the Dutch Civil Code (DCC) that are commonly referred to as the 'large company regime' (structuurregime) do not apply to the Company.
The Dutch corporate governance code (the "Code") provides principles and guidance for the governance of Dutch listed companies, aimed at effective cooperation and good governance. IMCD fully endorses the objective of the Code to foster good governance by encouraging fair and transparent dealings on the part of management, Supervisory Board members and shareholders. In addition, IMCD is committed to a governance structure that best and effectively supports its business, that meets the needs of its stakeholders and that complies with all relevant rules and regulations. IMCD's corporate governance structure is designed in accordance with the Code and has been approved by the General Meeting on 26 June 2014.
On 8 December 2016, the revised Dutch Corporate Governance Code was published. With the publication of the 'Designation of the Code' by Decree on 7 September 2017, the statutory basis for the Code has also been provided for. In 2017, IMCD aligned its corporate governance structure with the revised Code's principles and best practices. With respect to
the nancial year 2017, IMCD reports on the basis of the revised Code.
The key aspects of IMCD's corporate governance structure and compliance with the revised Code will be discussed at the 2018 Annual General Meeting (AGM).
The Management Board manages the day-to-day operations of IMCD and is responsible for setting out and realising the Company's objectives and strategy. The Management Board has two members bearing collective responsibility and is supported by a fourmember Executive Committee that is responsible, among other things, for regional operations and certain general group level management activities. The Management Board members are appointed (and may be re-appointed) for a term of four years by the General Meeting pursuant to a binding nomination by the Supervisory Board. The General Meeting can overrule the binding character of the nomination by an absolute majority of the votes cast, representing at least one third of the issued share capital.
The Management Board represents the Company and acts in accordance with the Articles of Association and the Management Board Rules (available on the Company's website), which provide for a detailed description of the Management Board's responsibilities and functioning. Certain important resolutions of the Management Board identied in the Articles of Association require the approval of the Supervisory Board and/or the General Meeting.
The Management Board has been designated as the corporate body authorised to issue shares, 10% of the issued shares plus an additional 10% relating to acquisitions, grant rights to acquire shares and to limit or exclude pre-emptive rights pertaining to the issue of shares, subject to the prior approval of the Supervisory Board. By virtue of its authorisation by the General Meeting the Management Board is also authorised to purchase shares in the Company, up to a maximum of 10% of the issued shares and subject to the prior approval of the Supervisory Board. These designations and authorisations are given for a period of eighteen months and renewal is requested annually
at the AGM. No authorisation from the General Meeting is required for the acquisition of fully paid up shares for the purpose of transferring these shares to employees of the Company or of an IMCD group company pursuant to any employee share plan.
IMCD's Executive Committee has six members: the two members of the Management Board and four managing or business group directors. The (non-Management Board) members of the Executive Committee take on certain management activities at group level in addition to their specic managing director roles.
The (non-Management Board) members of the Executive Committee are appointed by the Management Board. The responsibilities of the Executive Committee include general strategy, group performance, realisation of operational and nancial objectives, people strategy and identication and management of risks connected to the business activities. The Management Board remains accountable for the actions and decisions of the Executive Committee and has ultimate responsibility for the Company's external reporting and reporting to the Company's shareholders.
The Supervisory Board engages with the members of the Executive Committee during its Supervisory Board meetings, as well as through informal contact outside of such meetings. In December 2017, all members of the Executive Committee were present during the Supervisory Board meeting, where, amongst other things, budget, strategy and risk management were discussed.
The Supervisory Board monitors and supervises the activities of the Management Board and the general course of business within IMCD. It also supports the Management Board with advice. In performing their duties, the Supervisory Board members are guided by the Company's interests and the enterprise connected therewith, taking into account the relevant interests of all stakeholders. The Supervisory Board bears collective responsibility and assesses its own performance.
The Supervisory Board must consist of at least ve members. The composition of the Supervisory Board is such that the combined experience, expertise and independence of its members enables the Supervisory Board to best carry out the variety of the Supervisory Board's responsibilities.
The Supervisory Board members are appointed by the General Meeting pursuant to a binding nomination by the Supervisory Board. The General Meeting may overrule the binding character of the nomination by an absolute majority of the votes cast, representing at least one third of the issued share capital. Members of the Supervisory Board are appointed for a term of four years and may be re-appointed for a second term of four years. Thereafter, two additional prolongations are possible of two years each, bringing the total period of appointment to a maximum of 12 years.
The Supervisory Board is supported by two committees:
Both committees are made up of two Supervisory Board members.
The Supervisory Board acts in accordance with the Articles of Association and the Supervisory Board Rules, which include the Supervisory Board Prole, the Resignation Rota and the Rules governing the Supervisory Board Committees. The Supervisory Board Rules are available on the Company's website.
IMCD recognises the importance of diversity within its Supervisory Board, Management Board and Executive Committee and believes that the Company's business activities benet from a wide range of skills and a
variety of different backgrounds. A diverse composition contributes to a well-balanced decisionmaking process and proper functioning of the respective board and/or committee. To this extent, in 2017, the Supervisory Board discussed and formalised its Diversity Policy, and extended it to also include the Management Board and Executive Committee. The Diversity Policy is available at the Company's website.
The objective of the Diversity Policy is to achieve that the Supervisory Board, the Management Board and the Executive Committee have a diverse composition of members, that ensures complementarity of knowledge, skills and experience, enabling each of the members to have a valuable contribution in carrying out the (variety of) respective board or committee's responsibilities. When considering vacancies, achieving and/or maintaining an appropriate balance in gender, age and geographic background or nationality are important aspects that will be taken into account as well. However, complementary expertise and experience, as well as (expected) team dynamics have priority in the selection and nomination process.
The Diversity Policy shall be implemented gradually. For the Supervisory Board and Executive Committee, the Diversity Policy will be taken into account in the selection and nomination process for each future vacancy. As to the composition of the Management Board, the Diversity Policy will be taken into account if and when the current members of the Management Board will be succeeded.
In 2017, no vacancies within the Supervisory Board, Management Board and/or Executive Committee occurred.
Shareholders of IMCD may exercise their rights through Annual and Extraordinary General Meetings of shareholders. The Annual General Meeting of shareholders (AGM) is held each year before July.
Extraordinary General Meetings of shareholders (EGM) are held as often as the Management Board and/or the Supervisory Board deem desirable. In
addition, one or more shareholders, who solely or jointly represent at least one-tenth of the issued capital, may request that a General Meeting is convened. Notice of General Meetings is given no later than 42 days before the day of the meeting through publication of a convocation notice on the website of IMCD.
Shareholders representing, either solely or jointly with other shareholders, at least 3% of the issued share capital of IMCD, may request the Company to put an item on the agenda provided that the Company has received the request no later than on the sixtieth day prior to the day of the General Meeting.
Each shareholder may attend General Meetings, address the General Meeting and exercise voting rights pro rata to its shareholding, either in person or by proxy. Shareholders may exercise these rights if they are the holders of shares on the record date, which is the twenty eighth day before the day of the General Meeting, and if they or their proxy have notied the Company of their intention to attend the General Meeting. Subject to certain exceptions set forth by law or the Articles of Association, resolutions of the General Meeting are passed by an absolute majority of votes cast.
The powers of the General Meeting are specied in the Articles of Association and include, among other things, adoption of IMCD's nancial statements, appointment and dismissal of Supervisory Board and Management Board members and the allocation of prot, insofar as this is at the disposal of the General Meeting. Resolutions to amend the Articles of Association or to dissolve the Company may only be taken by the General Meeting upon a proposal of the Management Board with the approval of the Supervisory Board.
The authorised capital of the Company comprises a single class of registered shares. All shares are traded via the giro-based securities transfer system and are registered under the name and address of Euroclear. All issued shares are fully paid up and each share confers the right to cast a single vote in the General Meeting. Shares held by IMCD are nonvoting shares and do not count when calculating the amount to be distributed on shares or the attendance at a General Meeting. IMCD purchases shares to hedge its obligations arising from conditionally awarded performance shares under IMCD's long term incentive plan.
IMCD respects the one share/one vote principle and did not have any anti-takeover or control mechanisms in place in 2017.
With its Remuneration Policy, IMCD aims to attract, motivate and retain highly qualied members of the Management Board with a balanced and competitive remuneration package that is focused on sustainable results and is aligned with the Company's strategy for long-term creation of value. Pursuant to the remuneration policy, the remuneration packages of the Management Board members consist of xed and variable components, including a long term incentive plan (for the annual award of conditional performance shares) approved by the General Meeting. The remuneration policy is available on the Company's website. The remuneration of the individual members of the Management Board (including the awarding of shares) is determined by the Supervisory Board, with due observance of the remuneration policy.
The current Management Board remuneration policy was adopted by the General Meeting upon the proposal of the Supervisory Board in 2014. In 2017, the remuneration packages of the members of the Management Board have been reviewed by the Remuneration Committee through an external benchmark excersise. As a result thereof, an amended remuneration policy will be put before the General Meeting for approval during the 2018 AGM.
In compliance with the Code, the service agreements with the Management Board members contain provisions related to severance arrangements, claw back and public offering consequences. Annually, the Supervisory Board reports on the implementation of the remuneration policy in its Remuneration Report, which is published at the Company's website.
The General Meeting determines the remuneration of the members of the Supervisory Board. The Supervisory Board periodically submits proposals to the General Meeting in respect of the remuneration of the chairman, the vice chairman and the other members of the Supervisory Board. The remuneration of the Supervisory Board may not be made dependent on the Company's results. None of the members of the Supervisory Board may receive shares, options for shares or similar rights to acquire shares as part of their remuneration.
Business Group Food & Nutrition offers a range of speciality food ingredients and additives diets. These specialised products are used to improve the taste, visual appeal and texture of food, as well as adding preservative properties and health and safety benets.
With dedicated food technical centres, IMCD's local sales and technical teams provide application expertise and recipe know-how to support manufacturers and customers operating in many market segments including bakery, savoury, dairy, edible oils and fats, confectionery, beverages and nutrition.
All legal acts in which there are conicts of interest with members of the Management Board must be agreed on at arm's length terms and must be approved by the Supervisory Board. Each Management Board member or Supervisory Board member is required to immediately report any potential direct or indirect personal conict of interest to the chairman of the Supervisory Board, providing all relevant information. If the chairman of the Supervisory Board determines that there is a conict of interest, a member of the Management Board or the Supervisory Board is not permitted to take part in any discussion or decision making that involves a subject or transaction relating to the conict of interest.
During 2017, there were no transactions reported and/or identied involving (potential) conicts of interests with Management Board members or Supervisory Board members, nor were there any transactions with shareholders owning more than 10% of the shares.
IMCD implemented measures to comply with the provisions of the Financial Markets Supervision Act and the EU Market Abuse Regulation intended to prevent market abuse, such as insider trading, tipping and market manipulation. In addition, the Company maintains rules regarding the reporting and regulation of transactions in IMCD shares or other IMCD nancial instruments. The IMCD Insider Trading Rules were updated in 2016 and are applicable to members of the Management Board, the Executive Committee, the Supervisory Board and other designated IMCD insiders. The IMCD Insider Trading Rules are available on the Company's website.
In 2016 the Company established a Disclosure Committee to manage the disclosure of inside information and to ensure compliance with regulatory requirements regarding all disclosures and lings to be made to the Dutch Authority for the Financial Markets, Euronext Amsterdam N.V. and any other relevant stock exchange or supervisory authority. The Disclosure Committee met several times in 2017 and periodically reports to the Audit Committee.
In 2017 IMCD complied with the principles and best practices of the Code with the exception of the following deviations.
As a consequence of the initial four years term appointment of all Supervisory Board members at IMCD's listing in 2014, the Supervisory Board's original resignation rota provided for the same reappointment and retirement dates for all Supervisory Board members. Following the resignation and new appointments of two Supervisory Board members at the AGM of 12 May 2016, the adjusted resignation rota, available at the Company's website, avoids the retirement of a majority of the Supervisory Board members at the same time. In deviation of best practice provision 2.2.4 of the Code, this retirement schedule still does not avoid a situation in which multiple Supervisory Board members retire at the same time. Over time, the Company envisages to bring the number of multiple same time resignations down with adjusted terms for new Supervisory Board appointments and re-appointments. First results are foreseen for 2018, when three proposals for ( re-) nomination are put before the General Meeting for approval during the 2018 AGM. Upon approval, the number of Supervisory Board members resigning at the same time is brought down to a maximum of two.
The Supervisory Board strives for a diverse composition and balance in terms of, amongst other things, gender and age but does not strictly follow the recommendation of best practice provision 2.1.5 of the Code to formulate an explicit target on diversity in terms of gender or age. The overriding principle for the Company remains that the Supervisory Board should have a diverse composition of members with a valuable contribution in terms of experience and knowledge of the speciality chemicals distribution industry in the regions in which the Company is active or other relevant business knowledge.
Although the Company pays close consideration to gender diversity in the proles of new Management Board and Supervisory Board members in accordance with article 2:166 section 2 of the Dutch Civil Code, IMCD does not strictly follow the
recommendation for an explicit target on gender diversity and has not established concrete targets in this respect.
In deviation of best practice provision 2.3.2 of the Code and as agreed by the General Meeting the Company does not have a Selection and Appointment Committee. The Supervisory Board as a whole carries out the activities of a Selection and Appointment Committee and refers specic tasks to the most appropriate delegation of Supervisory Board members.
The Corporate Governance Declaration is available at www.imcdgroup.com/investor-relations.
In achieving its objectives, IMCD faces risks and uncertainties, including those due to macroeconomic conditions, regional and local market developments and internal factors. IMCD strives to identify and control those risks and uncertainties as early as possible. Risk management is an essential element of IMCD's corporate governance and is embedded in the company's business processes.
Although the company recognises the risks and uncertainties associated with its business activities, IMCD believes that the broad diversity of its business in terms of product portfolio, geographies, suppliers, end market sectors and customers can lessen the impact of local and regional economic changes. However, if adverse circumstances are pronounced and/or long-lasting, they can have a signicant impact on the company's business and results of operations. IMCD is affected by demand uctuations and other developments in the broader economy and weak economic conditions may have a material adverse effect on the group.
The IMCD risk management policy is aimed at optimisation of the balance between maximisation of business opportunities within the framework of the company's strategy, while managing the risks involved.
IMCD's risk appetite differs per risk category and per type of risk. The risk appetite per risk category is as follows:
| Strategic | Moderate |
|---|---|
| Operational | Low |
| Financial | Low |
| Compliance | Low |
Although IMCD benets from its geographical, market, client and product portfolio spread, IMCD's well-structured risk management process is designed to manage the residual risks in a transparent and controlled manner. IMCD's comprehensive controlling and risk management systems, including supporting tools, are continuously monitored by the Supervisory Board, Management Board, Corporate Control, Internal Audit and by regional and local management, improved when required and adjusted to changes in internal and external conditions.
IMCD's risk management and control systems are established to identify and analyse the risks faced by the group at various levels, to determine and implement appropriate risk controls, and to monitor risks and the way the risks are controlled.
Key activities within IMCD's risk management and control systems are:
The Management Board, under supervision of the Supervisory Board, has overall responsibility for the IMCD risk management and control systems. Management of regional holding and operating companies are responsible for operational performance and for managing the associated local risks.
The elements of IMCD's risk management system are the following:
identication of risks via risk self-assessments, coordinated by corporate Controlling and corporate Health Safety and Quality (HSEQ)
The Management Board is responsible for establishing and maintaining adequate internal risk management and control systems. Such systems are developed to manage risks, but cannot provide absolute certainty that human errors, losses, fraud and infringements of laws and regulations will be prevented. Management has assessed whether IMCD's risk management and control systems provide reasonable assurance that the nancial reporting does not contain any material misstatements.
Based on the approach outlined above, the Management Board is of the opinion that, to the best of its knowledge, the internal risk management and control systems are adequately designed and operated effectively in the year under review and hence provide reasonable assurance that the nancial statements are free of material misstatements.
In the following section, the main risks and the way IMCD manages these risks are described. The main risks and their importance are disclosed below.
| Risk | Category | Likelihood | Impact |
|---|---|---|---|
| Decline in customer demand | Strategic | Moderate | Moderate |
| Supplier dependency | Strategic | Moderate | Moderate |
| Acquisition and integration risk | Strategic | Moderate | Moderate |
| Dependency on key personnel | Operational | Moderate | High |
| Cybercrime and continuity of ICT | Operational | Moderate | High |
| Health / safety / environmental incidents | Operational | Low | High |
| Non-compliance with laws and regulations | Compliance | Low | High |
| Anti-corruption and bribery | Compliance | Low | High |
| Volatility of foreign currencies | Financial | High | Low |
| Credit risk | Financial | Moderate | Low |
| Liquidity risk | Financial | Low | Moderate |
| Interest rate risk | Financial | Moderate | Low |
Technical expertise in Pharmaceuticals
IMCD Pharma's Nutraceutical experts work with industry partners to raise the bar for the quality of herbal extracts. Through continued analytical work, they seek to identify herbal adulteration in the market.
Thinking big at a local level, each IMCD affiliate has active membership with the local industry association. In the UK, IMCD partners with the Health Food Manufacturers Association (HFMA) to set quality standards for commonly adulterated herbal materials. This detailed knowledge of the market and ongoing commitment to quality ensures we create awareness and clarity for customers right through to the end consumer.
| Strategic | ||
|---|---|---|
| Risk | Risk description | Risk measures |
| Decline in customer | IMCD's business depends on its customers' | The broad diversity of IMCD's business in terms |
| demand | demand for chemicals used in the manufacture of a wide array of products, which in turn is driven by the demand of consumers and other end users for the products made by IMCD's customers. To a large extent, demand levels depend on macroeconomic conditions on a global level. An improvement or deterioration in levels of economic activity and consumer demand tends to be re'ected in the overall level of production and consumption of chemicals. |
of product portfolio, geographies, suppliers, end market sectors and customers can lessen the impact of local and regional economic changes. However, if these changes are pronounced and/or long lasting, they can have a signi€cant impact on the company's business and results of operations. |
| Supplier dependency | IMCD is dependent on its suppliers to develop and supply the product portfolio that it markets, sells and distributes. Shortages in supply of certain products or non competitiveness of product lines could negatively affect operating results. The termination of a major supplier relationship could have a material adverse effect on the Company's product portfolio, sales volumes, revenues and pro€t margins. Maintaining close relationships with supply partners is essential for IMCD to be able to achieve its growth strategy. |
By acting in an open and transparent way towards its suppliers and with a focus on growing suppliers' product brands, IMCD seeks to maintain long-standing relationships. |
| Acquisition and | Execution of IMCD's strategy will require the | IMCD tries to limit these risks by means of |
| integration risk | continued pursuit of acquisitions and investments and will depend on the company's ability to identify suitable acquisition candidates and investment opportunities. Acquisitions and investments involve risks, including assumptions about revenues and costs being inaccurate, unknown liabilities and customer or key employee losses at the acquired businesses, potentially leading to impairment losses on intangible assets recognised. Moreover, a successful acquisition |
diligent identi€cation of targets, strict selection criteria, including the determination of the cultural and organisational €t within the company. This is followed by a structured execution, including determining the structure of the transaction, a thorough due diligence and the contract and integration process. Acquisition activities are driven centrally by an experienced management team supported by external consultants. |
| is dependent on the swift integration of the acquiree within the company, both on an organisational and cultural level. |
| Operational | ||||
|---|---|---|---|---|
| Risk | Risk description | Risk measures | ||
| Dependency on key | IMCD relies signi€cantly on the skills and | IMCD limits these risks by providing an inspiring | ||
| personnel | experience of its managerial staff and technical | and entrepreneurial working environment, | ||
| and sales personnel. A loss of these individuals | offering international career opportunities, | |||
| or the failure to recruit suitable managers and | performance based incentive schemes and long | |||
| other key personnel, both for expanding the | term succession planning. In addition, in order to | |||
| group's operations and for replacing people | secure the valuable relationships with key | |||
| who leave IMCD, could have a material adverse | suppliers and key customers, these relationships | |||
| effect on the performance of the group. | are maintained by commercial teams rather than | |||
| individual commercial staff members. | ||||
| Cybercrime and ICT | IMCD relies upon its information technology | IMCD continuously invests in hardware and | ||
| continuity | infrastructure and upon certain critical | software in order to cope with the needs and | ||
| information and communication technology | requirements of its business, coordinated and | |||
| systems for operating and managing its | monitored by its central ICT team. IMCD | |||
| business. IMCD's ICT infrastructure and | maintains and continuously enhances a wide | |||
| systems are subject to damage and | range of security measures including access | |||
| interruption from different sources, including | and authorisation controls, data back-up and | |||
| natural disasters, software viruses, malware | system recovery mechanisms. | |||
| and power failures. In order to cope with | ||||
| rapidly changing ICT requirements, resulting | In addition, IMCD is in the process of the rollout | |||
| from changed and increased business needs, | of the ICT governance improvement program, | |||
| changes in legislation but also new acquisitions | aiming to further optimise business processes | |||
| and integration programs, IMCD requires a | and enhance ICT security. An example of such a | |||
| stable and agile ICT environment. Increased | measure was performed by means of requesting | |||
| risk of cybercrime leads to an emphasis on | a specialised third party to execute a penetration | |||
| improving cybersecurity, but also on raising | test to determine whether the security and | |||
| awareness amongst employees and focus on | continuity of the ICT environment is suf€ciently | |||
| prevention of social engineering. | safeguarded. No material vulnerabilities were | |||
| observed. |
Business Group Plastics offers speciality additives and compounds for the production of plastic, rubber, composite and polyurethane end-products. The speciality chemical additives promoted by IMCD enhance the performance of basic plastic materials to improve properties such as colour stability, ame retardance, scratch resistance or to add specic colour properties including matt or gloss effect.
In addition, IMCD offers end-compounds which are used to directly manufacture high quality nished or semi-nished items ranging from chairs, computers, phones, car interiors, medical equipment, electrical cabling, household appliances and packaging.
| Operational | ||
|---|---|---|
| Risk | Risk description | Risk measures |
| Health / safety / | Marketing, sales and distribution of speciality | The majority of IMCD's subsidiaries have |
| environmental | chemicals, food and pharmaceutical | implemented certi€ed quality systems and make |
| incidents | ingredients entails exposures to health, safety | use of monitoring systems for recording and |
| and environmental risks which could potentially | analysing any non-conformities in order to | |
| lead to reputational and €nancial damage. | further optimise its business processes. In 2017 | |
| Examples of such exposures are: | the Corporate HSEQ policy was implemented to | |
| improve and harmonise HSEQ procedures and | ||
| • Employees and logistic service providers which are not properly trained and informed |
guidelines globally. | |
| on the treatment of the products | IMCD has outsourced the majority of its logistic | |
| • Products are illegally used as drugs or | operations to reputable third party logistic | |
| weapon precursors | service providers, which are carefully selected | |
| • Lack of quality management | and continually monitored by the supply chain | |
| • Missing permits and noti€cations | team to ensure that quality standards and | |
| • Product disposal is not properly controlled, | performance are optimised. | |
| leading to pollution and environmental | ||
| damage | Employees, customers and logistics service | |
| providers are provided with adequate safety | ||
| instructions and operating procedures for | ||
| handling chemical products. | ||
| Yearly training programmes are established and | ||
| executed to ensure that both employees and | ||
| logistic service providers are aware of recent | ||
| and future developments and changes in laws | ||
| and regulations. |
| Compliance | ||
|---|---|---|
| Risk | Risk description | Risk measures |
| Non-compliance with | Being present in various countries across the | IMCD has set up an internal competition |
| laws and regulations | globe, IMCD is exposed to local and | compliance framework and trains its employees |
| international legal and compliance risk. It is | by means of a compliance program to observe | |
| IMCD's main principle to comply with all | national and international antitrust laws. By doing | |
| applicable national and international laws and | so, IMCD makes its employees aware of | |
| regulations (including local tax laws and | potential con'icts with competition law and | |
| regulations). | actively helps them to avoid any potential | |
| adverse consequences of competition law | ||
| infringements. | ||
| IMCD neither engages in nor supports the use of | ||
| forced labour, bonded or involuntary labour or | ||
| child labour. IMCD therefore complies with the | ||
| standards of the International Labour | ||
| Organisation and the minimum age requirements | ||
| in all countries in which IMCD conducts | ||
| business. | ||
| Taxes are paid where the economic activity | ||
| occurs. In cases when there is insuf€cient local | ||
| knowledge with respect to tax cases, the | ||
| Company makes use of external advisors to | ||
| ensure compliance with local tax requirements. | ||
| Anti-corruption and | Non-compliance to anti-corruption and bribery | Reference is made to the Corporate Governance |
| bribery | laws could lead to €nes, potential prosecution | section on how these risks are mitigated. |
| of employees and substantially harming the | ||
| Company's reputation. |
| Financial | ||
|---|---|---|
| Risk | Risk description | Risk measures |
| Volatility of foreign currencies |
IMCD is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of the company. |
IMCD uses forward exchange contracts to hedge currency risks, most of these contracts with a maturity of less than one year. Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash 'ows generated by the underlying operations, providing an economic hedge without derivatives being entered into. In respect of other monetary assets and liabilities denominated in foreign currencies, the company's policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at |
| spot rates when necessary to address short term imbalances. |
||
| Credit risk | IMCD's exposure to credit risk is in'uenced mainly by the individual characteristics of each customer. However, IMCD also considers the demographics of the customer base, including the default risk of the industry and country in which customers operate, as these factors may have an in'uence on credit risk. There is no signi€cant geographical concentration or concentration at individual customer level of credit risk. |
IMCD has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company's standard payment and delivery terms and conditions are offered. IMCD's review includes the use of external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represents the maximum open amount. These limits are reviewed periodically, at a minimum once a year. Customers that fail to meet the Company's benchmark creditworthiness may transact with IMCD only on a prepayment basis. |
| Liquidity risk | Liquidity risk is the risk that IMCD encounters dif€culty in meeting the obligations associated with its €nancial liabilities that are settled by delivering cash or another €nancial asset. |
IMCD's approach to managing liquidity is to ensure, as far as possible, that it will always have suf€cient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the IMCD's reputation. Typically IMCD ensures that it has suf€cient cash on demand to meet expected operational expenses for the next twelve months, including the servicing of €nancial obligations. |
| Interest rate risk | IMCD is exposed to interest rate risk with respect to its €nancial assets and liabilities, either from €xed rate or variable rate instruments. |
IMCD adopts a policy of ensuring that at least a large element of its exposure to changes in interest rates on long term senior bank loans is on a €xed-rate basis, taking into account assets with exposure to changes in interest rates. This is achieved by entering into interest rate swap contracts. |
The Management Board of IMCD N.V. hereby declares, in accordance with article 5:25c of the Dutch Financial Supervision Act, that to the best of its knowledge:
In accordance with best practice provision 1.4.3. of the 2016 Corporate Governance Code, the Management Board of IMCD N.V. furthermore states that:
Rotterdam, 1 March 2018
Management Board: Piet van der Slikke Hans Kooijmans
Whether used in construction, painting, printing or sticking, Business Group Coatings delivers speciality ingredients for the manufacture of a variety of products. Serving customers in the adhesives, decorative & industrial paints, inks and construction industries, IMCD's portfolio of products add colour, enhance durability and increase protection.
Coatings end-products can be found in almost all aspects of day-to-day life; from decorative indoor paints to car components held together by adhesives; from brickwork waterproong to paper & ink in books; and from road markings to protective coatings on bridges.
IMCD achieved another year of good operational results. The Company's long-term growth strategy was executed successfully and resulted in signicant added value for the Company and its stakeholders, accomplishing both organic growth and growth by acquisitions. With the acquisition of the Canadian speciality chemicals and food ingredients distributor L.V. Lomas in August 2017, IMCD strengthened its position in North America and has an excellent base to pursue further growth of its activities in the region.
IMCD's solid long-term growth strategy, which delivered sustainable value to the Company and its stakeholders throughout the years, and its execution were discussed with the Supervisory Board on several occasions. In these discussions with the Management Board it was conrmed that this strategy remains the basis for IMCD's future ambitions.
To enable IMCD to continue its long-term growth strategy in a controlled manner, the Company worked diligently to further strengthen its internal organisation and enhance central corporate support functions. Throughout 2017, good progress was achieved in this area.
In close consultation with the Supervisory Board it was decided to introduce an independent internal audit function. The recruitment process started in March and the independent auditor started in August 2017. The internal auditor has an independent role within in IMCD's organisation and has direct access to the Audit Committee and its Chairman. A rst draft of the internal audit structure was presented to the Audit Committee in November 2017. An internal audit charter and an audit plan for 2018 will be presented at the beginning of 2018.
The strengthening of the internal organisation and central corporate support functions has the Supervisory Board's full support and is considered important to facilitate IMCD's growth ambitions in line with its long-term strategy. The Supervisory Board sees to it that this topic is on the agenda of the
Management Board and progress is discussed regularly throughout the year.
IMCD N.V.'s Supervisory Board consists of ve members, the composition of which remained unchanged in 2017. The particulars of the current Supervisory Board members and their Supervisory Board committee memberships are set out on page 58.
In carrying out their duties all Supervisory Board members are well aware of, and abide by, the conict of interest provisions of the Supervisory Board Rules and their personal statutory and duciary duties to act independently and in the interest of the Company and its stakeholders.
Throughout 2017, all Supervisory Board members qualied as independent within the meaning of best practice provision 2.1.8 of the Dutch Corporate Governance Code. IMCD did not grant any loans, advances, guarantees, shares or option to its Supervisory Board members. Their remuneration is not dependent on the results of IMCD. No Supervisory Board members held any shares or options on shares in IMCD and no transactions involving a (potential) conict of interest occurred for Supervisory Board members in 2017.
The Supervisory Board is of the opinion that the size and composition of the Supervisory Board in 2017 fullled the specications laid down in Supervisory Board prole and was appropriate in view of the nature and size of IMCD and its activities.
Pursuant to best practice provision 2.1.5 of the new Dutch Corporate Governance Code, the Supervisory Board discussed and formalised its Diversity Policy in 2017. The Diversity Policy was expanded to include the Management Board and Executive Committee and is available at the Company's website.
The overriding principle for the composition and diversity of the Supervisory Board remains unchanged; the Supervisory Board strives to achieve and maintain a professional diversity that ensures
complementarity of knowledge, skills and experience, enabling each of its members to have a valuable contribution in carrying out the (variety of the) Supervisory Board's responsibilities. In addition, the Supervisory Boards strives for diversity in planned resignations of its members. When considering vacancies, achieving and/or maintaining an appropriate balance in gender, age and geographic background are important aspects to take into account, however, complementary expertise and experience are a rst priority in the selection and nomination process.
At the end of the upcoming AGM on 9 May 2018, the current terms of the Chairman, Mr. Michel Plantevin, the Vice-Chairman and Chairman of the Audit Committee, Mr. Arjan Kaaks, and the Chairman of the Remuneration Committee, Mr. Jean-Charles Pauze will expire. The undesired simultaneous expiration of terms of the majority of Supervisory Board members is the consequence of IMCD's IPO in 2014, which asked for (re-)appointment of all members of the Supervisory Board at the same time.
The Supervisory Board considers it important to maintain the expertise and knowledge accumulated within its current composition and therefore nominated both Mr. Plantevin and Mr. Kaaks for reappointment in their current roles. In line with best practice provision 2.2.2 of the Dutch Corporate Governance Code, Mr. Kaaks is nominated for a second term of four years. Mr. Plantevin is nominated for a third term of one year, which term deviates from the two year term referred to in best practice provision 2.2.2. in order to further diversify the resignation schedule of the Supervisory Board, so that it can be brought in line with best practice provision 2.2.4 of the Code.
Mr. Stephan Nanninga is nominated to full the vacancy that remains after the resignation of Mr. Pauze. Mr. Nanninga has the Dutch nationality and holds a law degree from Erasmus University Rotterdam and an MBA from Delft University of Technology. Having held various positions at Intergamma, Technische Unie (part of Sonepar), CHR and Royal Dutch Shell, Mr. Nanninga joined SHV Holdings NV in 2007 where he served as Chief
Executive from 2014 to 2016. As of 2017, he is executive director on the board of Dutch Star Companies One and serves as non-executive director at Bunzl Plc.
Further information on the nominations is included in the explanatory notes to the AGM convocation, published at the Company's website.
In 2017, the Supervisory Board met ve times with both members of the Management Board present and independently held regular consultations by telephone and email. In January, three Supervisory Board members visited the IMCD Benelux ofces and food laboratory in Mechelen, Belgium, which included meetings with the IMCD Benelux management team and staff.
As part of the continuous Supervisory Board training program, the Supervisory Board was informed of developments in relevant legislation, which in 2017 included the new Dutch Corporate Governance Code, as now applicable to IMCD for the rst full year. The Supervisory Board received presentations on the specic developments in IMCD's pharmaceutical and coatings business groups. In addition, the development and execution of the HR strategy was an important topic for the Supervisory Board that was discussed with the new Global HR director in November. The Supervisory Board meeting in December was attended by all members of the Executive Committee and included a discussion on IMCD's budget, strategy and risk management, market circumstances and developments in IMCD's product business groups.
Regular items on the Supervisory Board agenda were the development of results, the balance sheet, acquisition projects and evaluations thereof and reports on any matters related to material risks, claims or compliance issues. The Management Board reported to the Supervisory Board on the Company's strategy (for long-term value creation) and the risks associated with it, on the functioning of the Company's risk management and control systems and on IMCD's company culture. The budget for 2018, market developments and competitor analysis, (senior) management development and succession, investor relations, ICT management (including specic ICT related projects for the upcoming years) and IMCD's environmental, social and governance (ESG) prole and activities were also discussed. In their absence the Supervisory Board discussed and decided on the performance appraisal and related remuneration of the individual Management Board members. A self-assessment of the composition and functioning of the Supervisory Board, its members and its committees was carried out and was evaluated and discussed during a closed meeting of the Supervisory Board.
In 2017 the Supervisory Board gave due consideration to a number of potential acquisitions and approved the acquisitions of Bossco Industries Inc. in the US, Neuvendis Spa. in Italy and L.V. Lomas in Canada and the US.
The division of tasks and responsibilities and the working method of the Supervisory Board and its committees are described in more detail in the Corporate Governance chapter. In all its activities the Supervisory Board pays close attention to an efcient implementation of IMCD's corporate governance structure, ensuring that the needs of all IMCD's stakeholders are met in a manner that is transparent, effective and suitable to IMCD's operations. On the basis of these principles, the Supervisory Board reviewed and discussed the annual report and the nancial statements for 2017 with all parties involved in the preparations thereof. These discussions allow the Supervisory Board to conclude that the annual report provides a solid basis for the Supervisory Board's accountability for its supervision in 2017.
The attendance rate for the plenary meetings of the Supervisory Board in 2017 was as follows.
| Mr. Michel Plantevin (Chairman) | 100% (5/5) |
|---|---|
| Mr. Arjan Kaaks (Vice-Chairman) | 100% (5/5) |
| Mr. Jean-Charles Pauze | 80% (4/5) |
| Mrs. Julia van Nauta Lemke | 100% (5/5) |
| Mr. Janus Smalbraak | 80% (4/5) |
The attendance rate for (each of) the meetings of the Audit Committee and Remuneration Committee in 2017 was 100%. All members of the Supervisory Board committees were present during all meetings convened.
The Supervisory Board installed two committees, an Audit Committee and a Remuneration Committee.
The Audit Committee held ve meetings in 2017, with both its members, the CFO, the Director Corporate Control and representatives of the External Auditor, Deloitte Accountants B.V., attending. Minutes of all meetings were submitted to the Supervisory Board. As preparation for the regular Supervisory Board meetings, the Audit Committee meetings discussed IMCD's accounting policies and valuation methods as used in its quarterly, semi-annual and annual nancial reporting. Particular attention was also given to IMCD's renancing, its tax strategy and its ICT infrastructure, governance and related risks.
IMCD's Group ICT Manager attended the Audit Committee's meeting in July 2017 where ICT controls, ICT strategy (including projects, project plans and budget), an ICT SWOT analysis and cyber security were discussed in more depth. IMCD's Group Tax Director attended the Audit Committee meeting in November 2017, where IMCD's tax position (including the continuing execution of IMCD's tax strategy, relevant developments in international taxation, tax audits and overall tax risk management) were discussed.
IMCD appointed an Internal Auditor in the course of 2017. The Audit Committee was kept updated on the recruitment process and met with the Internal Auditor in a separate meeting, after which it advised positively in respect of the appointment. Upon his appointment, the Internal Auditor attended the meeting of the Audit Committee in November 2017, where a draft internal audit structure was presented and discussed. The Internal Auditor has direct access to the members of the Audit Committee, through attendance of the Audit Committee meetings as well
as one-on-one meetings with the Chairman of the Audit Committee, if so desired.
One Audit Committee meeting was dedicated to the assessment of the scope and effectiveness of IMCD's risk management and control systems and related internal review and monitoring activities. This meeting was attended by both Audit Committee members, the CFO, IMCD's Director Corporate Control and the External Auditor. The Director Corporate Control was responsible for, inter alia, reviewing and monitoring of IMCD's control systems and in his internal audit function, until appointment of the independent internal auditor, reports to the Audit Committee. On the basis of the assessment of the Audit Committee and taking into account the Management Board's evaluation and the external auditor's assessment, within the scope of its audit, the Supervisory Board concluded that all required and desirable internal control elements were effectively assumed within the agenda, program and tasks of the corporate team.
The Remuneration Committee convened two times in 2017 (in March and December), with the newly appointed HR Director attending one meeting, and held regular consultations to discuss and formulate proposals for the remuneration of the individual members of the Management Board, the related performance targets in 2017 and proposed amendments for 2018 and subsequent years. In addition, the remuneration policy and its implementation, taking into account possible outcomes of the variable remuneration components as well as internal pay ratio's, were evaluated to establish whether the new proposed Management Board remuneration structures and levels provide for balanced and sufciently competitive remuneration packages that focus on sustainable results and are aligned with IMCD's long term growth strategy.
The Remuneration Committee presented its ndings and proposals to the Supervisory Board and prepared the Supervisory Board's remuneration report for 2017.
The members of IMCD's Management Board, Mr. Piet van der Slikke (CEO) and Mr. Hans Kooijmans (CFO), were (re-)appointed at IMCD's listing in 2014. Consequently, their current term in ofce will expire at the end of the 2018 AGM. The Supervisory Board is happy to report that both members of the Management Board have indicated to seek reappointment. The Supervisory Board is of the opinion that it is in IMCD's and its stakeholders' best interest that the Management Board continues to lead IMCD in its current composition and therefore, nominated Mr. Piet van der Slikke and Mr. Hans Kooijmans to be reappointed for another term of four years at the 2018 AGM.
In 2017 the remuneration of each of the Management Board members was determined by the Supervisory Board with due observance of the remuneration policy as adopted by the General Meeting in 2014. The Supervisory Board determined the performance appraisal and the related variable Management Board remuneration. Also, the Supervisory Board determined the performance conditions and metrics for the short term and long term incentive plans for 2017, including non-nancial targets (as rst introduced in 2016).
In preparation of the re-appointment of the Management Board members and accompanying renewal of their contract, an evaluation of the remuneration policy and package(s) took place. This led to the conclusion that the remuneration packages for both members of the Management Board needed to be amended in order to remain competitive. The Supervisory Board proposes to adjust the remuneration packages of the Management Board members, which proposal will be put before the shareholders for approval at the 2018 AGM.
The Supervisory Board's remuneration report on 2017 as published at the Company's website, contains further details on how the remuneration policy was implemented in 2017 and the proposed amendment for 2018 and subsequent years. The
Supervisory Board notes that the basic principles of the remuneration policy will remain the same: the Management Board remuneration packages consist of a xed and variable salary component and are set around the median of remuneration levels payable within a peer group of comparable companies. In its proposal for adjustment, the Supervisory Board increased the weight of the long-term incentive plan compared to the short-term cash bonus, in order to better reect the importance of long-term value creation for IMCD and its stakeholders and to further align Management Board's interests in this respect.
Detailed information on the costs for the actual remuneration of the Management Board and Supervisory Board in 2017 is set forth in note 50 to the nancial statements.
The nancial statements for the nancial year 2017 have been prepared by the Management Board and were audited by Deloitte Accountants B.V. The nancial statements and the outcome of the audit performed by the external auditor were discussed by the Supervisory Board in the presence of the external auditor in December 2017 and February and March 2018. The nancial statements 2017 were endorsed by all Management Board and Supervisory Board members and are, together with Deloitte's auditor's report, included in the Other information (page 160) of this annual report. The Management Board will present the nancial statements 2017 and its report at the Annual General Meeting. The Supervisory Board recommends the Annual General Meeting to adopt the nancial statements 2017, including a proposed dividend of EUR 0.62 in cash per share.
In addition, the Supervisory Board recommends that the members of the Management Board and Supervisory Board be discharged from liability in respect of their respective management and supervisory activities performed in 2017.
The Supervisory Board is responsible for engaging and supervising the performance of the external auditor. Deloitte Accountants B.V. (Deloitte) was
appointed as IMCD's external auditor for the nancial year 2017 and 2018 at the Annual General Meeting on 10 May 2017. The Audit Committee and the Management Board reported to the Supervisory Board on Deloitte's envisaged audit plan for 2017, the relationship with and functioning of Deloitte as external auditor, as well as on other audit and nonaudit services provided by Deloitte to IMCD. Deloitte conrmed its independence from IMCD in accordance with the professional standards applicable to Deloitte.
The Supervisory Board extends its gratitude and appreciation to the members of the Management Board and all employees of IMCD for their continuous efforts and dedication shown in 2017.
Rotterdam, 1 March 2018
Supervisory Board: Michel Plantevin Arjan Kaaks Jean-Charles Pauze Julia van Nauta Lemke Janus Smalbraak
78 IMCD ANNUAL REPORT 2017
| Consolidated statement of €nancial position as at 31 December 2017, before pro€t appropriation | 80 |
|---|---|
| Consolidated statement of pro€t or loss and comprehensive income for the year ended 31 December 2017 | 82 |
| Consolidated statement of changes in equity for the year ended 31 December 2017 | 84 |
| Consolidated statement of cash 'ows for the year ended 31 December 2017 | 86 |
| Notes to the Consolidated €nancial statements for the year ended 31 December 2017 | 87 |
| Company €nancial statements | |
| Company balance sheet as at 31 December 2017, before pro€t appropriation | 148 |
| Company income statement for the year ended 31 December 2017 | 149 |
| Notes to the Company €nancial statements for the year ended 31 December 2017 | 150 |
| List of group companies as per 31 December 2017 | 157 |
| Other information | 159 |
| Provisions in the Articles of Association governing the appropriation of pro€t | 159 |
| Provision regarding the appropriation of pro€t | 159 |
| Independent auditor's report | 160 |
| Other information not forming part of the €nancial statements | 168 |
| Nine years summary | 168 |
| 31 December | 31 December | |
|---|---|---|
| EUR 1,000 Note |
2017 | 2016 |
| Assets | ||
| Property, plant and equipment 16 |
18,827 | 20,895 |
| Intangible assets 17 |
948,859 | 907,558 |
| Equity-accounted investees 19 |
- | 13 |
| Other €nancial assets 20 |
3,438 | 3,583 |
| Deferred tax assets 21 |
24,199 | 26,182 |
| Non-current assets | 995,323 | 958,231 |
| Inventories 22 |
265,826 | 204,210 |
| Trade and other receivables 23 |
331,709 | 264,532 |
| Cash and cash equivalents 24 |
61,383 | 56,502 |
| Current assets | 658,918 | 525,244 |
| Total assets | 1,654,241 | 1,483,475 |
| 31 December | 31 December | |
|---|---|---|
| EUR 1,000 Note |
2017 | 2016 |
| Equity 25 |
||
| Share capital | 8,415 | 8,415 |
| Share premium | 657,514 | 657,514 |
| Reserves | (53,330) | (12,030) |
| Retained earnings | 39,320 | (4,799) |
| Unappropriated result | 77,262 | 72,959 |
| Equity attributable to owners of the Company | 729,181 | 722,059 |
| Total equity | 729,181 | 722,059 |
| Liabilities | ||
| Loans and borrowings 26 |
367,451 | 382,665 |
| Employee bene€ts 27 |
16,716 | 10,097 |
| Provisions 28 |
4,219 | 1,164 |
| Deferred tax liabilities 21 |
69,583 | 75,772 |
| Total non-current liabilities | 457,969 | 469,698 |
| Loans and borrowings 26 |
344 | 383 |
| Other short term €nancial liabilities 26 |
183,547 | 71,026 |
| Trade payables 29 |
213,437 | 170,619 |
| Other payables 29 |
69,763 | 49,690 |
| Total current liabilities | 467,091 | 291,718 |
| Total liabilities | 925,060 | 761,416 |
| Total equity and liabilities | 1,654,241 | 1,483,475 |
| EUR 1,000 Note |
2017 | 2016 | |
|---|---|---|---|
| Revenue | 8 | 1,907,354 | 1,714,500 |
| Other income | 9 | 4,795 | 3,506 |
| Operating income | 1,912,149 | 1,718,006 | |
| Cost of materials and inbound logistics | 22 | (1,478,686) | (1,332,883) |
| Cost of warehousing, outbound logistics and other services | (52,994) | (49,898) | |
| Wages and salaries 10, 11 |
(122,535) | (106,157) | |
| Social security and other charges | 10 | (34,196) | (27,422) |
| Depreciation of property, plant and equipment | 16 | (4,346) | (4,303) |
| Amortisation of intangible assets | 17 | (34,249) | (38,183) |
| Other operating expenses | 12 | (59,983) | (51,653) |
| Operating expenses | (1,786,989) | (1,610,499) | |
| Result from operating activities | 125,160 | 107,507 | |
| Finance income | 13 | 958 | 794 |
| Finance costs | 13 | (16,072) | (13,551) |
| Net finance costs | (15,114) | (12,757) | |
| Share of pro€t of equity-accounted investees, net of tax | 19 | (61) | 10 |
| Result before income tax | 109,985 | 94,760 | |
| Income tax expense | 14 | (32,723) | (21,801) |
| Result for the year | 77,262 | 72,959 | |
| Gross pro€t1 | 428,668 | 381,617 | |
| Gross pro€t in % of revenue | 22.5% | 22.3% | |
| Operating EBITA2 | 6 | 161,659 | 147,751 |
| Operating EBITA in % of revenue | 8.5% | 8.6% |
1 Revenue minus cost of materials and inbound logistics
2 Result from operating activities before amortisation of intangibles and non-recurring items
| EUR 1,000 | Note | 2017 | 2016 |
|---|---|---|---|
| Result for the year | 77,262 | 72,959 | |
| De€ned bene€t plan actuarial gains/(losses) | 27 | 14 | (1,641) |
| Related tax | 14 | (17) | 351 |
| Items that will never be reclassified to profit or loss | (3) | (1,290) | |
| Foreign currency translation differences related to foreign operations | (42,518) | 21,042 | |
| Effective portion of changes in fair value of cash 'ow hedges | (190) | (408) | |
| Related tax | 14 | 959 | (310) |
| Items that are or may be reclassified to profit or loss | 13 | (41,749) | 20,324 |
| Other comprehensive income for the period, net of income tax | (41,752) | 19,034 | |
| Total comprehensive income for the period | 35,510 | 91,993 | |
| Result attributable to: | |||
| Owners of the Company | 77,262 | 72,959 | |
| Total comprehensive income attributable to: | |||
| Owners of the Company | 35,510 | 91,993 | |
| Weighted average number of shares | 15 | 52,424,550 | 52,476,981 |
| Basic earnings per share | 15 | 1.47 | 1.39 |
| Diluted earnings per share | 15 | 1.52 | 1.42 |
| Unappro‐ | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share | Share | Translation | Hedging | Reserve | Other | Retained | priated | Total | ||
| EUR 1,000 | Note | capital | premium | reserve | reserve | own shares | reserves | earnings | result | equity |
| Balance as at | ||||||||||
| 1 January 2017 | 25 | 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | (4,799) | 72,959 | 722,059 |
| Appropriation of | ||||||||||
| prior year's result | - | - | - | - | - | - | 44,119 | (44,119) | - | |
| 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | 39,320 | 28,840 | 722,059 | ||
| Result for the year | - | - | - | - | - | - | - | 77,262 | 77,262 | |
| Total other | ||||||||||
| comprehensive | ||||||||||
| income | - | - | (41,559) | (190) | - | (3) | - | - | (41,752) | |
| Total | ||||||||||
| comprehensive | ||||||||||
| income for the | ||||||||||
| year | - | - | (41,559) | (190) | - | (3) | - | 77,262 | 35,510 | |
| Cash dividend | 25 | - | - | - | - | - | - | - | (28,840) | (28,840) |
| Issue of shares | ||||||||||
| minus related costs | 25 | - | - | - | - | - | - | - | - | - |
| Share based | ||||||||||
| payments | 25 | - | - | - | - | - | 2,456 | - | - | 2,456 |
| Purchase own | ||||||||||
| shares | 25 | - | - | - | - | (2,004) | - | - | - | (2,004) |
| Total | ||||||||||
| contributions by | ||||||||||
| and distributions | ||||||||||
| to owners of the | ||||||||||
| Company | - | - | - | - | (2,004) | 2,456 | - | (28,840) | (28,388) | |
| Balance as at | ||||||||||
| 31 December | ||||||||||
| 2017 | 8,415 | 657,514 | (40,875) | (176) | (7,193) | (5,086) | 39,320 | 77,262 | 729,181 |
| Accu‐ | Unappro‐ | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share | Share | Translation | Hedging | Reserve | Other | mulated | priated | Total | ||
| EUR 1,000 | Note | capital | premium | reserve | reserve | own shares | reserves | de€cit | result | equity |
| Balance as at | ||||||||||
| 1 January 2016 | 25 | 8,415 | 657,514 | (19,891) | 265 | (3,118) | (7,652) | (43,550) | 61,848 | 653,831 |
| Appropriation of | ||||||||||
| prior year's result | - | - | - | - | - | - | 38,751 | (38,751) | - | |
| 8,415 | 657,514 | (19,891) | 265 | (3,118) | (7,652) | (4,799) | 23,097 | 653,831 | ||
| Result for the year | - | - | - | - | - | - | - | 72,959 | 72,959 | |
| Total other | ||||||||||
| comprehensive | ||||||||||
| income | - | - | 20,575 | (251) | - | (1,290) | - | - | 19,034 | |
| Total | ||||||||||
| comprehensive | ||||||||||
| income for the | ||||||||||
| year | - | - | 20,575 | (251) | - | (1,290) | - | 72,959 | 91,993 | |
| Cash dividend | 25 | - | - | - | - | - | - | - | (23,097) | (23,097) |
| Issue of shares | ||||||||||
| minus related costs | 25 | - | - | - | - | - | - | - | - | - |
| Share based | ||||||||||
| payments | 25 | - | - | - | - | - | 1,403 | - | - | 1,403 |
| Purchase own | ||||||||||
| shares | 25 | - | - | - | - | (2,071) | - | - | - | (2,071) |
| Total | ||||||||||
| contributions by | ||||||||||
| and distributions | ||||||||||
| to owners of the | ||||||||||
| Company | - | - | - | - | (2,071) | 1,403 | - | (23,097) | (23,765) | |
| Balance as at | ||||||||||
| 31 December | ||||||||||
| 2016 | 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | (4,799) | 72,959 | 722,059 |
| EUR 1,000 Note |
2017 | 2016 |
|---|---|---|
| Cash flows from operating activities | ||
| Result for the period | 77,262 | 72,959 |
| Adjustments for: | ||
| • Depreciation of property, plant and equipment 16 |
4,346 | 4,303 |
| • Amortisation of intangible assets 17 |
34,249 | 38,183 |
| • Net €nance costs excluding currency exchange results 13 |
12,678 | 11,797 |
| • Currency exchange results 13 |
2,436 | 960 |
| • Cost of share based payments 11 |
2,456 | 1,403 |
| • Share of pro€t of equity-accounted investees, net of tax 19 |
61 | (10) |
| • Income tax expense 14 |
32,723 | 21,801 |
| 166,211 | 151,396 | |
| Change in: | ||
| • Inventories 22 |
(16,872) | (12,466) |
| • Trade and other receivables 23 |
(13,317) | (16,654) |
| • Trade and other payables 29 |
26,111 | 21,239 |
| • Provisions and employee bene€ts 27, 28 |
(417) | (2,356) |
| Cash generated from operating activities | 161,717 | 141,159 |
| Interest paid | (13,027) | (9,590) |
| Income tax paid | (34,739) | (31,384) |
| Net cash from operating activities | 113,950 | 100,185 |
| Cash flows from investing activities | ||
| Payments for acquisition of subsidiaries, net of cash acquired 7, 30 |
(168,879) | (17,286) |
| Acquisition of intangible assets 17 |
(9,727) | (1,140) |
| Acquisition of property, plant and equipment 16 |
(3,087) | (5,317) |
| Proceeds from disposals of (in)tangible assets 16, 17 |
- | 146 |
| Acquisition of other €nancial assets | 313 | (2,601) |
| Net cash used in investing activities | (181,380) | (26,198) |
| Cash flows from financing activities | ||
| Proceeds from issue of share capital net of related costs 25 |
- | - |
| Dividends paid 25 |
(28,840) | (23,097) |
| Purchase of own shares 25 |
(2,004) | (2,071) |
| Payment of transaction costs related to loans and borrowings 26 |
- | (1,875) |
| Movements in bank loans and other short term €nancial liabilities 26 |
(1,200) | (68,354) |
| Proceeds from issue of current and non-current loans and borrowings 26 |
173,451 | 181,132 |
| Repayment of loans and borrowings | (45,430) | (161,517) |
| Net cash from financing activities | 95,977 | (75,782) |
| Net increase in cash and cash equivalents | 28,547 | (1,795) |
| Cash and cash equivalents as at 1 January 24 |
56,502 | 56,550 |
| Effect of exchange rate 'uctuations | (23,666) | 1,747 |
| Cash and cash equivalents as at 31 December 24 |
61,383 | 56,502 |
IMCD N.V. (the 'Company') is a company domiciled in the Netherlands and registered in The Netherlands Chamber of Commerce Commercial register under number 21740070. The address of the Company's registered ofce is Wilhelminaplein 32, Rotterdam. The consolidated nancial statements of the Company as at and for the year ended 31 December 2017 comprise the Company and its subsidiaries (together referred to as the 'Group' and individually as 'Group entities'). The Company is acting as the parent company of the IMCD Group, a group of leading companies in sales, marketing and distribution of speciality chemicals and pharmaceutical and food ingredients. The Group has ofces and warehouses in Europe, Asia Pacic, Africa and in North and Latin America.
The consolidated nancial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code.
The consolidated nancial statements were authorised for issue by all members of the Management Board and the Supervisory Board on 1 March 2018.
The consolidated nancial statements are prepared on a going concern basis and on the historical cost basis, except for the following material items in the statement of nancial position:
These consolidated nancial statements are presented in EUR, which is the Company's functional currency. All nancial information presented in EURO has been rounded to the nearest thousand, unless stated otherwise.
The preparation of nancial statements in conformity with IFRSs requires management to make judgements, estimates and assumptions 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 in the period in which the estimates are revised and in any future periods affected.
Information about judgements made in applying accounting policies that have the most signicant effect on the amounts recognised in the consolidated nancial statements are included in the following notes:
• Note 7 and 32: whether the Group has de facto control over an investee.
Information about assumptions and estimation uncertainties that have a signicant risk of resulting in a material adjustment in the nancial year are included in the following notes:
A number of the Group's accounting policies and disclosures require the measurement of fair values for both nancial and non nancial assets and liabilities.
The Group has a structured control framework with respect to the measurement of fair values. This includes a dedicated team that has responsibility for overseeing all signicant fair value measurements, including Level 3 fair values, reporting directly to the CFO.
Management regularly reviews signicant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then management assesses the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which such valuations should be classied.
When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows:
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is signicant to the entire measurement.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
Further information about the assumptions made in measuring fair values is included in the following notes:
The Group has consistently applied the accounting policies set out in note 3 to all periods presented in these consolidated nancial statements. Standards and amendments to standards, including any consequential amendments to other standards, with a date of initial application of 1 January 2017 did not have a material impact on the nancial statements of the Group.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated nancial statements, and have been applied consistently by Group entities, except as explained in note 2.e, which addresses changes in accounting policies.
The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in prot or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classied as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in prot or loss as nance income or costs.
Written put options to acquire a non-controlling interest are accounted for by the anticipated-acquisition method. The fair value of the consideration payable is included in nancial liabilities; future changes in the carrying value of the put option are recognised in prot or loss.
The Group measures goodwill at the acquisition date as:
Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The nancial statements of subsidiaries are included in the consolidated nancial statements from the date that control commences until the date that control ceases.
The Group's interests in equity-accounted investees comprise interests in associates. Associates are those entities in which the Group has signicant inuence, but not control, over the nancial and operating policies.
Interests in associates are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated nancial statements include the Group's share of the prot or loss and OCI of equity-accounted investees, until the date on which signicant inuence ceases.
Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated nancial statements. Unrealised gains arising from transactions with equity-accounted investees are eliminated against the investment to the extent of the Group's interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.
Transactions in foreign currencies are translated into the respective functional currencies of Group entities at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the period, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated into the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognised in prot or loss, except for differences arising on the retranslation of nancial liabilities designated as qualifying cash ow hedges, which are recognised in other comprehensive income.
The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated into EURO at exchange rates at the reporting date. The income and expenses of foreign operations are translated into EURO at an average rate for the month in which the transactions occurred. However, if exchange rates uctuate signicantly, the use of the average rate for a period is inappropriate and exchanges rates at the dates of transaction are used.
Foreign currency differences on the translation of foreign operations to the functional currency of the group are recognised in other comprehensive income, and accumulated in the translation reserve, except to the extent that the translation difference is allocated to non-controlling interests.
When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely in the foreseeable future, foreign exchange gains and losses arising from such a monetary item are considered to form part of a net investment in a foreign operation and are recognised in other comprehensive income and are presented in the translation reserve in equity.
The Group initially recognises loans and receivables and deposits on the date that they are originated. All other nancial assets (including assets designated at fair value through prot or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a nancial asset when the contractual rights to the cash ows from the asset expire, or it transfers the rights to receive the contractual cash ows on the nancial asset in a transaction in which substantially all the risks and rewards of ownership of the nancial asset are transferred. Any interest in transferred nancial assets that is created or retained by the Group is recognised as a separate asset or liability.
Financial assets and liabilities are offset and the net amount presented in the statement of nancial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.
The Group has the following non-derivative nancial assets:
• loans and receivables
Loans and receivables are nancial assets with xed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.
Loans and receivables comprise cash and cash equivalents, and trade and other receivables.
Cash and cash equivalents comprise cash balances and call deposits with original maturities of three months or less.
The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other nancial liabilities are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.
The Group derecognises a nancial liability when its contractual obligations are discharged, cancelled or expired.
The Group classies non-derivative nancial liabilities into the other nancial liabilities category. Such nancial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these nancial liabilities are measured at amortised cost using the effective interest method.
Other nancial liabilities comprise loans and borrowings, other short term nancial liabilities, and trade and other payables.
Bank overdrafts that are repayable on demand and form an integral part of the Group's cash management are included as a component of cash and cash equivalents.
Ordinary shares are classied as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
When shares recognised as equity are repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classied as treasury shares and are presented in the reserve own shares. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or decit on the transaction is presented within share premium.
The Group holds derivative nancial instruments to hedge its foreign currency and interest rate risk exposures.
On initial designation of the hedge, the Group formally documents the relationship between the hedging instrument(s) and hedged item(s), including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to be 'highly effective' in offsetting the changes in the fair value or cash ows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125%. For a cash ow hedge of a forecast transaction, the transaction
should be highly probable to occur and should present an exposure to variations in cash ows that could ultimately affect reported prot or loss.
Derivatives are recognised initially at fair value at trading date; attributable transaction costs are recognised in prot or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.
When a derivative is designated as the hedging instrument in a hedge of the variability in cash ows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect prot or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity.
Any ineffective portion of changes in the fair value of the derivative is recognised immediately in prot or loss.
When the hedged item is a non-nancial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassied to prot or loss in the same period that the hedged item affects prot or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassied in prot or loss.
When a derivative nancial instrument is not designated in a hedge relationship that qualies for hedge accounting, all changes in its fair value are recognised immediately in prot or loss.
Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. Cost may also include transfers from equity of any gain or loss on qualifying cash ow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.
If major components of an item of property, plant and equipment have different useful lives, these components are accounted for separately.
Gains and losses on disposal of an item of property, plant and equipment are determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment and are recognised in prot or loss.
Subsequent expenditure is capitalised only when it is probable that the future economic benets associated with the expenditure will ow to the Group. The costs of the day-to-day servicing of property, plant and equipment are recognised in prot or loss as incurred.
Depreciation is based on the cost of an asset less its residual value. Signicant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.
Depreciation is recognised in prot or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.
The estimated useful lives for the current and comparative years are as follows:
| Buildings | : 20 - 40 years |
|---|---|
| Reconstructions and improvements | : 5 - 12 years |
| Hard- and software | : 3 - 5 years |
| Other non-current tangible assets | : 3 - 5 years |
Depreciation methods, useful lives and residual values are reviewed at each nancial year end and adjusted if appropriate.
Goodwill arising on the acquisition of subsidiaries is included in intangible assets. Goodwill is measured at cost less accumulated impairment losses.
At acquisition date, the supplier relations are recognized at fair value based on the excess earnings method. For all material supplier bases the initial valuation has been performed by an external valuator. Subsequent measurement is based on costs less amortisation. The estimation of the useful life of each supplier base is based on a cut-off calculation that excludes future years from the remaining useful life that account for less than 5% of the total present value of the excess earnings.
In addition to supplier relations, other intangible assets include Intellectual property rights, distribution rights, brand names, and non-compete rights. Other intangible assets acquired as part of business combinations are measured on initial recognition at their fair value on the date of acquisition. Intangible assets acquired separately are measured at cost. Subsequently, intangible assets which have nite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.
Subsequent expenditure is capitalised only when it increases the future economic benets embodied in the specic asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in prot or loss as incurred.
Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised in prot or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.
The estimated useful lives for the current and comparative years are as follows:
| IMCD brand name | : inde€nite |
|---|---|
| Intellectual property rights | : 7 years |
| Supplier relations acquired through | : 10 - 20 years |
| business combinations | |
| Other distribution, non-compete rights and | : (initial) contract term |
| order books | |
Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.
Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average method and includes expenditure incurred in acquiring the inventories, conversion costs and other costs incurred in bringing them to their existing location and condition. Cost also may include transfers from equity of any gain or loss on qualifying cash ow hedges of foreign currency purchases of inventories.
Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.
A nancial asset not carried at fair value through prot or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired.
A nancial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash ows of that asset that can be reliably estimated.
Objective evidence that nancial assets are impaired can include the default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers or observable data indicating that there is a measurable decrease in expected cash ows from a group of nancial assets.
The Group considers evidence of impairment for receivables at both a specic asset and collective level. All individually signicant receivables are assessed for specic impairment. All individually signicant receivables found not to be specically impaired are then collectively assessed for any impairment that has been incurred but not yet identied. Receivables that are not individually signicant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.
An impairment loss in respect of a nancial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash ows discounted at the asset's original effective interest rate. Losses are recognised in prot or loss and reected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised.
When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through prot or loss.
An impairment loss in respect of an equity accounted investee is measured by comparing the recoverable amount of the investment with its carrying amount.
An impairment loss is recognised in prot or loss, and is reversed if there has been a favourable change in the estimates used to determine the recoverable amount.
The carrying amounts of the Group's non-nancial assets, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and other intangible assets that have indenite useful lives or that are not yet available for use, the recoverable amount is estimated at reporting date.
An impairment loss is recognised if the carrying amount of an asset or its related cash generating unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell.
In assessing value in use, the estimated future cash ows are discounted to their present value using a pre-tax discount rate that reects current market assessments of the time value of money and the risks specic to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inows from continuing use that are largely independent of the cash inows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benet from the synergies of the combination.
The Group's corporate assets do not generate separate cash inows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.
Impairment losses are recognised in prot or loss. Impairment losses recognised in respect of CGUs are allocated rst to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only to the extent that the asset's carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.
A dened contribution plan is a post-employment benet plan under which an entity pays xed contributions to a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to dened contribution pension plans are recognised as an employee benet expense in prot or loss in the periods during which services are rendered by employees. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
A dened benet plan is a post-employment benet plan other than a dened contribution plan. The Group's net obligation in respect of dened benet pension plans is calculated separately for each plan by estimating the amount of future benet that employees have earned in return for their service in the current and prior periods; that benet is discounted to determine its present value.
The obligation arising from these dened benet plans are determined on the basis of projected unit credit method. The calculation of the dened benet obligations is performed by qualied actuaries on an annual basis.
Remeasurements of the net dened benet liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if any, excluding interest), are recognised immediately in OCI. The Group determines the net interest expense (income) on the net dened benet liability (asset) for the period by applying the discount rate used to measure the dened benet obligation at the beginning of the annual period to the then-net dened benet liability (asset), taking into account any changes in the net dened benet liability (asset) during the period as a result of contributions and benet payments. Net interest expense and other expenses related to dened benet plans are recognised in prot or loss.
When the benets of a plan are changed or when a plan is curtailed, the resulting change in benet that relates to past service or the gain or loss on curtailment is recognised immediately in prot or loss. The Group recognises gains and losses on the settlement of a dened benet plan when the settlement occurs.
The Group's net obligation in respect of long term employee benets is the amount of future benet that employees have earned in return for their service in the current and prior periods. That benet is discounted to determine its present value.
The calculation of the other long term employee benets is performed using the projected unit credit method. Any actuarial gains and losses are recognised in prot or loss in the period in which they arise.
Termination benets are expensed at the earlier of when the Group can no longer withdraw the offer of those benets and when the Group recognises costs for restructuring. If benets are not expected to be settled wholly within 12 months of the end of the reporting period, then these benets are discounted.
The grant date fair value of equity-settled share based payment awards granted to employees is recognised as personnel expenses, with a corresponding increase in equity, over the vesting period of the awards. The grant date fair value is generally equal to the share price at grant date, adjusted for:
The amount recognised as an expense is adjusted to reect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
Short term employee benet obligations are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short term cash bonus or prot-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.
A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outow of resources will be required to settle the obligation. Provisions are determined by discounting the expected future cash ows at a pre-tax rate that reects current market assessments of the time value of money and the risks specic to the liability. The unwinding of the discount is recognised as nance cost.
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating costs are not provided for.
Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the signicant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably.
If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue recognised.
The timing of the transfers of risks and rewards varies depending on the individual terms of the sales agreement. Usually the transfer occurs when the product is received at the customer's location.
When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.
Finance income comprises interest income on funds invested and gains on hedging instruments that are recognised in prot or loss. Interest income is recognised using the effective interest method.
Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions and contingent consideration, impairment losses recognised on nancial assets (other than trade receivables) and losses on hedging instruments that are recognised in prot or loss.
Finance income and expenses includes results of changes of the fair value of contingent considerations classied as nancial liabilities.
Borrowing costs that are not directly attributable to the acquisition of a qualifying asset are recognised in prot or loss using the effective interest method.
Foreign currency gains and losses are reported on a net basis as either nance income or nance cost depending on whether foreign currency movements are in a net gain or net loss position.
Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in prot or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date and any adjustment to tax payable in respect of previous years. Current tax payable also includes any tax liability arising from the declaration of dividends.
Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for nancial reporting purposes and the amounts used for taxation purposes.
Deferred tax is not recognised for:
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted or substantively enacted at the reporting date.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable prots will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benet will be realised.
An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group's other components. The segmentation used by the Group is based on geography, organisation and management structure and commercial interdependencies.
Segment results that are reported to the CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company's headquarters), head ofce expenses, and income tax assets and liabilities and are presented in a separate reporting unit 'Holding companies'.
The reporting segments used are dened as follows:
A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2017 and have not been applied in preparing these consolidated nancial statements. Those which may be relevant to the Group are set out below.
The Group does not plan to adopt these standards early.
IFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaces existing revenue recognition guidance, including IAS 18 'Revenue', IAS 11 'Construction Contracts' and IFRIC 13 'Customer Loyalty Programmes'. The standard is effective for annual periods beginning on or after 1 January 2018.
Revenue is currently recognised when the product is received at the customer's location and the related risks and rewards of ownership have been transferred. Under IFRS 15, revenue will be recognised when the customer obtains control of the goods. Based on analysis carried out no key impacts of the implementation of IFRS 15 were identied compared with current revenue recognition applied by the Group.
For commissions earned by the Group, the Group has determined that it acts in the capacity of an agent. Under IFRS 15, the assessment will be based on whether the Group controls the specic goods before transferring to the end customer, rather than whether it has exposure to signicant risks and rewards associated with the sale of goods. The Group has performed an assessment on these transactions and does not expect that IFRS 15 will have a material impact on its consolidated nancial statements.
The Group will implement IFRS 15 using the modied approach. Based on the limited impact as described above the Group does not expect that the implementation of IFRS 15 will have material impact on individual nancial statement line items.
IFRS 9 Financial instruments, effective date 1 January 2018, supersedes IAS 39 'Financial instruments: Recognition and Measurement'. IFRS 9 includes revised guidance on the classication, measurement and initial recognition of nancial instruments, including a new expected credit loss model for calculating impairment on nancial assets and more lenient general hedge accounting requirements. It also carries forward the guidance on recognition and derecognition of nancial instruments from IAS 39.
The Group has determined the impact of this new standard on the consolidated nancial statements. The outcomes are as follows:
The Group does not expect that the changes in classication and measurement requirements of IFRS 9 will have a signicant impact on its balance sheet or equity. All nancial assets and liabilities will be classied on the same bases as currently adopted under IAS 39.
IFRS 9 requires the Group to recognise loss allowances for expected credit losses for nancial assets measured at cost (loans and trade receivables), lease receivables, contract assets, loan commitments and nancial guarantee contracts to which the impairment requirements from IFRS 9 apply.
The Group will apply the simplied approach and assess lifetime expected losses on all trade receivables. The Group has determined an expected impact on equity amounting to EUR 0.1 million, being the additional impairment loss on trade receivables when applying the lifetime expected loss model.
The Group determined that all existing hedge relationships that are currently designated in effective hedging relationships will continue to qualify for hedge accounting under IFRS 9.
As IFRS 9 does not change the general principles of how an entity accounts for effective hedges, applying the hedging requirements of IFRS 9 will not have a signicant impact on Group's nancial statements.
IFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. IFRS 16 replaces current leases guidance including IAS 17 'Leases' and the related interpretations when it becomes effect. The standard is effective for annual periods beginning on or after 1 January 2019. The Group will not use early adoption options permitted under the standard.
The Group is assessing the impact of IFRS 16 on its consolidated nancial statements. So far, the most signicant impact identied is that the Group will recognise new assets and liabilities for its operating leases of ofces, certain warehouse facilities and company cars. In addition, the nature of expenses related to those leases will now change as IFRS 16 replaces the straightline operating lease expense with a depreciation charge for right-of-use assets and interest expense on lease liabilities.
As a lessee, the Group can either apply the standard using a retrospective approach or a modied retrospective approach with optional practical expedients. The lessee applies the election consistently to all of its leases. The Group currently plans to apply IFRS 16 initially on 1 January 2019, using the modied retrospective approach ("cumulative catch-up approach") with the optional practical expedient to measure the right to use assets initially at an amount equal to lease obligation.
The Group intends to apply the following optional exemptions:
The Group has made the following policy choices:
The Group has not yet decided whether it will apply the optional portfolio application for certain leases.
The Group intends to apply the following practical transition expedients:
The Group has not yet quantied the impact of the adoption of IFRS 16 on its reported assets and liabilities. The Group did quantify the nominal lease obligation for contracts currently reported as operational leases or not as leases at all, which should be reported as leases under the new standard as of 1 January 2019, taking into account the Group's policy choices, optional exemptions and transition expedients discussed above.
Nominal lease obligations under the new standard to the extent currently not reported as nancial leases are as follows:
| EUR 1,000 | Land and buildings | Cars | Machinery & equipment | Hardware & software | Other assets | Total |
|---|---|---|---|---|---|---|
| 2018 | 10,896 | 3,640 | 224 | 135 | 30 | 14,925 |
| 2019 | 9,314 | 2,561 | 171 | 129 | 21 | 12,196 |
| 2020 | 7,388 | 1,335 | 82 | 125 | 5 | 8,935 |
| 2021 | 5,902 | 352 | 39 | - | 4 | 6,297 |
| 2022 | 3,713 | 12 | 2 | - | - | 3,727 |
| >2022 | 4,645 | - | - | - | 4,645 | |
| Total | 41,858 | 7,900 | 518 | 389 | 60 | 50,725 |
If the new standard would have been applicable, the net discounted value of these obligations would have been reported as a nancial liability. On the other hand the related right to use the underlying asset would be reported at initial fair value minus depreciation.
The above nominal lease obligation deviates from the obligation disclosed in note 31, mainly due to a different treatment of short term leases and extension options in lease contracts.
The Group expects to disclose more detailed quantitative information in the nancial statements of 2018. The Group expects that adoption of IFRS 16 will not impact its ability to comply with the maximum leverage threshold loan covenant described in note 26.
IMCD has applied the following amendments to standards, with a date of initial application of 1 January 2017:
Application of these amendments did not have a signicant impact.
The non-recurring items in 2017 and 2016 mainly consist of costs incurred for acquiring businesses, costs related to one-off adjustments to the organisation and income as a result of the recognition of deferred tax assets in the Dutch scal entity.
The non-recurring income and expenses were recognised in prot or loss and are summarised as follows:
| EUR 1,000 Note |
2017 | 2016 |
|---|---|---|
| Personnel expenses and other operating expenses 10, 12 |
(2,250) | (2,061) |
| Impact on result before income tax | (2,250) | (2,061) |
| Recognition of deferred tax assets 14, 21 |
- | 4,706 |
| Impact on result for the year | (2,250) | 2,645 |
A number of the Group's accounting policies and disclosures require the determination of fair value, for both nancial and non nancial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based the methods described below. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specic to that asset or liability and in note 30 Financial Instruments.
The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an at arm's length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of plant, equipment, xtures and ttings is based on the market approach and cost approaches using quoted market prices for similar items when available and replacement cost when appropriate. Depreciated replacement cost estimates reect adjustments for physical deterioration as well as functional and economic obsolescence.
The fair value of other intangible assets acquired in a business combination is based on the discounted cash ows expected to be derived from the use and eventual sale of the assets.
The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business less the estimated costs of completion and sale, and a reasonable prot margin based on the effort required to complete and sell the inventories.
The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
The fair value of interest rate swaps is based on quotes acquired from nancial institutions. Fair values reect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and counterparty when appropriate.
Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash ows, discounted at the market rate of interest at the reporting date. For nance leases the market rate of interest is determined by reference to similar lease agreements.
The fair value of contingent considerations is calculated using the income approach based on the expected payment amounts and their associated probabilities (i.e. probability-weighted). Contingent considerations with a term longer than one year are discounted to present value.
The fair value of the plan assets is based on the actuarial assumptions determined by certied actuaries.
The IMCD risk management policy is aimed at optimising the balance between maximisation of business opportunities within the framework of the Group´s strategy, while managing the risks involved.
Although the Group benets from geographical, market, client and product portfolio spread, the Group's well structured risk management process should manage its residual risks in a transparent and controlled manner.
The Group's risk management and control systems are established to identify and analyse the risks faced by the Group at various levels, to set appropriate risk controls, and to monitor risks and the way the risks are controlled.
Key activities within the Group´s risk management and control systems are:
The elements of IMCD's risk management system are the following:
The Management Board, under supervision of the Supervisory Board, has overall responsibility for the IMCD risk management and control systems. Management of regional and operating companies are responsible for local operational performance and for managing the associated local risks.
The Group has exposure to the following nancial risks:
This note presents information 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. Further quantitative disclosures are included throughout these consolidated nancial statements.
Credit risk is the risk of nancial loss to the Group if a customer or counterparty to a nancial instrument fails to meet its contractual obligations, and arises principally from the Group's receivables from customers.
The Group's exposure to credit risk is inuenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group's customer base, including the default risk of the industry and country in which customers operate, as these factors may have an inuence on credit risk. There is no geographical concentration of credit risk nor signicant credit risk on individual customer level.
The Group has established a credit policy under which each new customer is analysed individually for creditworthiness before the Group's payment and delivery terms and conditions are offered. The Group's review includes the use of external ratings, when available, and in some cases bank references. Purchase limits are established for each customer, which represent the maximum open amount. These limits are reviewed periodically.
Customers that fail to meet the Group's benchmark creditworthiness may transact with the Group only on a prepayment basis.
At the reporting date, there were no signicant concentrations of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each nancial asset.
The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables. The main components of this allowance are a specic loss component that relates to individually signicant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identied. The collective loss allowance is determined based on historical data of payment statistics for similar nancial assets.
To mitigate the counter party risk with nancial institutions the Group has the policy to make use of nancial institutions which are investment grade. The Group's main nancial institutions are systemically important and are under close supervision by their respective nancial regulatory bodies.
Liquidity risk is the risk that the Group will encounter difculty in meeting the obligations associated with its nancial liabilities that are settled by delivering cash or another nancial asset. The Group's approach to manage liquidity is to ensure, as far as possible, that it will always have sufcient cash to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group's reputation.
Typically the Group ensures that it generally has sufcient cash on demand to meet expected operational expenses for the next twelve months, including the servicing of nancial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted.
In addition, the Group maintains the following lines of credit:
The following are the contractual maturities of non-current nancial liabilities, including estimated interest payments.
| EUR 1,000 | Carrying amount |
Contractual cash 'ows |
6 months or less |
6-12 months |
1 - 2 years | 2 - 5 years | >5 years | |
|---|---|---|---|---|---|---|---|---|
| Non-derivative financial liabilities |
||||||||
| Syndicate bank loans | AUD | 32,063 | 35,987 | 518 | 521 | 1,034 | 33,914 | - |
| Syndicate bank loans | EUR | 116,170 | 126,541 | 858 | 863 | 1,711 | 123,109 | - |
| Syndicate bank loans | GBP | 23,157 | 24,960 | 225 | 226 | 449 | 24,060 | - |
| Syndicate bank loans | USD | 18,095 | 20,114 | 285 | 287 | 568 | 18,974 | - |
| Schuldscheindarlehen | EUR | 99,565 | 106,540 | 449 | 878 | 1,332 | 63,273 | 40,608 |
| Schuldscheindarlehen | USD | 74,699 | 84,644 | 1,184 | 1,208 | 2,401 | 79,851 | - |
| Contingent consideration | IDR | 2,339 | 2,339 | - | - | - | - | 2,339 |
| Other liabilities | USD | 7 | 7 | - | - | 7 | - | - |
| Other liabilities | EUR | 1,160 | 1,160 | - | - | 247 | 913 | - |
| Other liabilities | PLN | 196 | 196 | - | - | 106 | 90 | - |
| 367,451 | 402,488 | 3,519 | 3,983 | 7,855 | 344,184 | 42,947 |
Estimated interest payments are based on the EURIBOR and LIBOR rates and margins prevailing at 31 December 2017. Further details of the non-derivative nancial liabilities can be found in note 26.
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group's income or the value of its holdings of nancial instruments. Group management focuses on managing and controlling market risk exposures within acceptable parameters, while optimising the operating result.
The Group buys derivatives, and also incurs nancial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by Group Management. Generally the Group seeks to use hedging instruments to manage volatility in prot or loss.
The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily the Euro (EURO), United States of America Dollar (USD) and the Pound Sterling (GBP).
The currencies in which these transactions primarily are denominated are EUR, USD and GBP.
The Group uses forward exchange contracts to hedge its currency risk, mainly by using contracts having a maturity of less than one year from the reporting date.
Interest on borrowings is denominated in the currency of the borrowing. Generally, borrowings are denominated in currencies that match the cash ows generated by the underlying operations of the Group, primarily EUR, but also GBP, AUD and USD. This provides an economic hedge without derivatives being entered into. No hedge accounting is applied in these circumstances.
In respect of other monetary assets and liabilities denominated in foreign currencies, the Group's policy is to ensure that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.
The Group's net exposure to foreign currency risk based on notional and hedged amounts of monetary assets and liabilities as at 31 December 2017 was as follows:
| EUR 1,000 | USD | GBP | AUD | ZAR | BRL | INR | IDR | CAD | TRY | Other | Total |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Non current assets | 33 | - | - | - | - | 147 | 2,361 | 229 | - | 322 | 3,092 |
| Current assets | 79,805 | 14,955 | 25,581 | 11,455 | 13,161 | 9,508 | 6,815 | 24,560 | 9,399 | 38,681 | 233,920 |
| Non current liabilities | (126,518) | (23,191) | (32,027) | - | (1,021) | (1,573) | (2,338) | - | - | 0 | (186,668) |
| Current liabilities | (45,156) | (10,114) | (11,741) | (6,421) | (8,789) | (2,237) | (1,034) | (20,269) | (735) | (16,745) | (123,241) |
| Net statement of currency risk | |||||||||||
| exposure | (91,836) | (18,350) | (18,187) | 5,034 | 3,351 | 5,845 | 5,804 | 4,520 | 8,664 | 22,258 | (72,897) |
The risk exposure above includes the mitigating effects of hedged net liability positions in USD to the amount of EUR 10.6 million (2016: EUR 6.1 million).
The following signicant exchange rates applied during the year:
| Average rate | Reporting date spot rate | ||||
|---|---|---|---|---|---|
| 2017 | 2016 | 2017 | 2016 | ||
| USD | 0.8859 | 0.9057 | 0.8338 | 0.9487 | |
| GBP | 1.1442 | 1.2269 | 1.1271 | 1.1680 | |
| AUD | 0.6782 | 0.6731 | 0.6516 | 0.6851 | |
| ZAR | 0.0666 | 0.0618 | 0.0675 | 0.0692 | |
| BRL | 0.2766 | 0.2615 | 0.2520 | 0.2909 | |
| INR | 0.0136 | 0.0135 | 0.0131 | 0.0140 | |
| IDR | 0.0001 | 0.0001 | 0.0001 | 0.0001 | |
| CAD | 0.6813 | 0.6835 | 0.6649 | 0.7048 | |
| TRY | 0.2443 | 0.3019 | 0.2215 | 0.2695 |
A 10% strengthening of the EUR, as indicated below, against the USD, GBP, AUD, ZAR, BRL, INR, IDR, CAD and TRY at 31 December 2017 would have increased/(decreased) equity and prot or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the reporting date. The analysis assumes that all other variables, in particular interest rates, remain constant and ignores any impact of forecasted sales and purchases.
| Equity | Pro€t or loss | Equity | Pro€t or loss | |
|---|---|---|---|---|
| 2017 | 2017 | 2016 | 2016 | |
| USD | (17,918) | 2,106 | (11,255) | 827 |
| GBP | (464) | (211) | 3 | (209) |
| AUD | (3,395) | (2) | (3,020) | (261) |
| ZAR | (2,970) | (18) | (2,666) | (25) |
| BRL | (3,574) | - | (7,081) | - |
| INR | (2,520) | - | (2,250) | - |
| IDR | (1,723) | (580) | (2,088) | (620) |
| CAD | (10,034) | (56) | - | - |
| TRY | (1,673) | - | (1,599) | - |
A 10% weakening of the EUR against the above currencies at 31 December 2017 would have had the equal but opposite effect on the amounts shown above, on the basis that all other variables remain constant.
The Group adopts a policy of ensuring that a substantial part of its exposure to changes in interest rates on long term syndicated senior bank loans is on a xed rate basis, taking into account assets with exposure to changes in interest rates. This is achieved by entering into interest rate swap contracts.
At the reporting date the interest rate prole of the Group's interest-bearing nancial instruments was:
| Carrying amount | ||||
|---|---|---|---|---|
| EUR 1,000 | 2017 | 2016 | ||
| Fixed rate instruments | ||||
| Financial assets | - | - | ||
| Financial liabilities | (50,617) | (53,437) | ||
| (50,617) | (53,437) | |||
| Variable rate instruments | ||||
| Financial assets | 61,383 | 56,502 | ||
| Financial liabilities | (500,725) | (400,637) | ||
| (439,342) | (344,135) |
The Group does not account for any xed rate nancial asset and liability at fair value through prot and loss.
Note 26 details the variable interest rates applicable for the non-current loans. The Group uses an interest rate swap contract for interest rate hedging purposes with a notional amount of EUR 100 million. The interest rate swap contract matures in June 2019. A change of 100 base points in interest rates at the reporting date would have increased/(decreased) prot or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant.
| Pro€t or loss | Pro€t or loss | |||
|---|---|---|---|---|
| 100 base points | 100 base points | 100 base points | 100 base points | |
| EUR 1,000 | increase 2017 | decrease 2017 | increase 2016 | decrease 2016 |
| Variable rate instruments | 1,445 | (1,469) | 2,452 | (2,519) |
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Group's processes, personnel, technology and infrastructure and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group's operations.
The Group's objective is to manage operational risk so as to balance the avoidance of nancial losses and damage to the Group's reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity.
The primary objective when managing capital is to safeguard the Group's ability to continue as a going concern. The Company does not have an explicit return on capital policy. There have been no changes in the capital management policies during the year. Capital is considered by the Company to be equity as shown in the statement of nancial position.
The Group's net debt and adjusted equity at the reporting date are as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Total liabilities | 925,060 | 761,416 |
| Less: Cash and cash equivalents | (61,383) | (56,502) |
| Net liabilities | 863,677 | 704,914 |
| Total equity | 729,181 | 722,059 |
| Less: Amounts accumulated in equity relating to cash 'ow hedges | 176 | (14) |
| Adjusted equity | 729,357 | 722,045 |
In presenting information on the basis of operating segments, segment revenue is based on the geographical location of the Group´s operations. Segment assets are based on the geographical location of the assets with the exception of assets related to holding companies, which are presented in a separate reporting unit.
Transactions between companies within an operating segment have been eliminated; transactions between operating segments are based on arm's length principle.
A key performance indicator for controlling the results of the operating segments is Operating EBITA.
Operating EBITA is dened as the sum of the result from operating activities, amortisation of intangible assets, and non-recurring items. Non-recurring items include:
While the amounts included in Operating EBITA are derived from the Group's nancial information, it is not a nancial measure determined in accordance with adopted IFRS and should not be considered as an alternative to operating income or result from operating activities as a sole indication of the Group's performance or as an alternative to cash ows as a measure of the Group's liquidity. The Company currently uses Operating EBITA in its business operations to, among others, develop budgets, measure its performance against those budgets and evaluate the performance of its operations.
The bridge from Result from operating activities to Operating EBITA is as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Result from operating activities | 125,160 | 107,507 |
| Amortisation of intangible assets | 34,249 | 38,183 |
| Non-recurring items | 2,250 | 2,061 |
| Operating EBITA | 161,659 | 147,751 |
The non-recurring income and expenses included in the result from operating activities of 2017 and 2016 mainly relate to costs of acquisitions of businesses and one-off adjustments to the organisation.
Operating expenses of non-operating companies are reported in the segment Holding companies. Inter-segmented amounts receivable and amounts payable are not considered in the value of the total assets and total liabilities of each segment.
The results of the operating segments are as follows:
| EMEA | ||
|---|---|---|
| EUR 1,000 | 2017 | 2016 |
| Revenue | 1,141,679 | 1,053,557 |
| Gross pro€t | 274,157 | 248,824 |
| Operating EBITA | 112,592 | 100,808 |
| Result from operating activities | 95,639 | 84,431 |
| Total Assets | 770,586 | 735,995 |
| Total Liabilities | 284,660 | 256,276 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Revenue | 314,942 | 316,921 |
| Gross pro€t | 65,166 | 63,852 |
| Operating EBITA | 28,121 | 28,328 |
| Result from operating activities | 23,350 | 22,726 |
| Total Assets | 265,105 | 260,706 |
| Total Liabilities | 66,663 | 56,222 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Revenue | 450,733 | 344,022 |
| Gross pro€t | 89,381 | 68,941 |
| Operating EBITA | 35,494 | 31,584 |
| Result from operating activities | 22,739 | 14,813 |
| Total Assets | 378,536 | 241,469 |
| Total Liabilities | 79,203 | 49,133 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Operating EBITA | (14,548) | (12,969) |
| Result from operating activities | (16,568) | (14,463) |
| Total Assets | 240,014 | 245,306 |
| Total Liabilities | 494,534 | 399,786 |
Reported revenue per segment relates to revenue with third parties, hence no inter-segment revenues are included. IMCD and its operating segments have a diverse customer base of about 37,000 customers in many countries and of various sizes. IMCD and its segments do not rely on a single customer or a single group of customers for its operations. With a supplier base of more than 1,700 suppliers and product portfolio of about 30,000 products, the same applies with regard to the reliance on a single supplier or a single group of suppliers and a single product or range of products.
The Group completed three acquisitions during the nancial year.
On 28 June 2017, IMCD acquired 100% of the shares of Neuvendis Spa (Neuvendis), based in Milan, Italy. Neuvendis is one of the leading market players in the distribution of speciality chemicals in Italy, selling into the construction, coatings & paints, adhesives, plastics, inks and leather sectors. In 2016, Neuvendis generated a revenue of EUR 27 million with 20 employees.
On 3 July 2017, IMCD acquired the business of Bossco Industries Inc (Bossco), a speciality chemicals distributor located in Houston (Texas), US. The business activities of Bossco are fully integrated into IMCD's existing operations in the US. Bossco generated a revenue of USD 11 million in 2016.
On 31 August 2017, IMCD acquired 100% of the shares of L.V. Lomas (Lomas). Lomas is one of North America's leading distributors of speciality chemicals and food ingredients. The acquisition of Lomas will provide IMCD a presence in Canada in all relevant core markets and will further strengthen IMCD's organisation in the US. With approximately 280 employees, the distribution business of Lomas generated a revenue of CAD 383 million in 2016. The acquisition is nanced by available cash and existing bank facilities.
The three aforementioned transactions added EUR 107.6 million of revenue and EUR 2.1 million of net prot to the Group's results in 2017.
If all acquisitions had occurred on 1 January 2017, management estimates that consolidated revenue would have been EUR 2,131.4 million and consolidated result for the year would have been EUR 82.9 million. In determining these amounts, management has assumed that the fair value adjustments, determined provisionally, that arose on the date of acquisition would have been the same if the acquisition had occurred on 1 January 2017.
The total consideration related to the aforementioned transactions, transferred in cash in 2017, amounts to EUR 119.6 million.
The recognised amounts of assets acquired and liabilities assumed on the basis of provisional purchase price allocation at the acquisition dates, are as follows:
| EUR 1,000 | Note | Lomas | Other acquisitions |
Total |
|---|---|---|---|---|
| Property, plant and equipment | 16 | 4,192 | 95 | 4,288 |
| Intangible assets | 17 | 13,815 | 9,060 | 22,875 |
| Deferred tax assets | 21 | 756 | 94 | 850 |
| Other €nancial assets | 1,360 | - | 1,360 | |
| Inventories | 39,978 | 4,766 | 44,744 | |
| Trade and other receivables | 42,344 | 11,516 | 53,860 | |
| Cash and cash equivalents | 7,244 | 9 | 7,253 | |
| Loans and borrowings | (45,430) | - | (45,430) | |
| Other short term €nancial liabilities | - | (3,266) | (3,266) | |
| Employee bene€ts and other provisions | 27, 28 | (9,520) | (977) | (10,497) |
| Deferred tax liabilities | 21 | (607) | (1,652) | (2,259) |
| Trade and other payables | (29,528) | (6,270) | (35,798) | |
| Total net identifiable assets | 24,605 | 13,375 | 37,980 |
The intangible assets recognised relate to supplier relationships, distribution rights and order books acquired.
The gross contractual value of the trade and other receivables acquired amounts to EUR 54.3 million of which EUR 11.8 million relates to Neuvendis and EUR 42.5 million to Lomas.
The purchase price allocation is on a provisional basis, as nal agreement still has to be reached on certain provisions and accruals included in the purchase price allocation . Based on the information currently available we do not anticipate signicant adjustments to the purchase price allocation.
The composition of the total net identiable assets recognised and liabilities assumed is as follows:
Goodwill recognised as a result of the acquisitions in the nancial year is as follows:
| EUR 1,000 | Note | Lomas | Other acquisitions |
Total |
|---|---|---|---|---|
| Total considerations | 93,669 | 25,957 | 119,626 | |
| Less: Fair value of identi€able net assets | 24,605 | 13,375 | 37,980 | |
| Goodwill | 17 | 69,064 | 12,582 | 81,646 |
Goodwill recognised as a result of the acquisitions in the nancial year relate to Neuvendis, Bossco and Lomas. The goodwill is attributable mainly to the skills and technical talent of the workforce, the commercial relationships, the international network and the synergies expected to be achieved from integrating the acquired companies into the Group's existing distribution business.
Amortisation expenses related to the goodwill paid to the sellers of Bossco is deductible for corporate income tax purposes. Amortisation of goodwill related to Neuvendis and Lomas is not eligible for deduction from taxable income.
The Group incurred acquisition related costs of EUR 1,407 thousand (2016: EUR 1,010 thousand) predominantly related to external legal fees and due diligence costs for completed and non-completed acquisitions. The legal fees and due diligence costs have been included in other operating expenses in the Group's consolidated statement of comprehensive income.
| 1,907,354 | 1,714,500 | |
|---|---|---|
| Commissions | 9,338 | 8,667 |
| Sales of goods | 1,898,016 | 1,705,833 |
| EUR 1,000 | 2017 | 2016 |
Management considered the following factors in distinguishing between sales of goods and commissions. In the case of commissions:
• the Group does not take title of the goods and has no responsibility in respect of the goods sold
• all customer related credit risk is borne by the supplier of the goods
The breakdown of revenue by geographical market is as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Netherlands | 54,730 | 52,750 |
| Rest of EMEA | 1,086,949 | 1,000,807 |
| EMEA | 1,141,679 | 1,053,557 |
| Asia-Paci€c | 314,942 | 316,921 |
| Americas | 450,733 | 344,022 |
| 1,907,354 | 1,714,500 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Other income | 4,795 | 3,506 |
| 4,795 | 3,506 |
Other income mainly refers to logistic and other services charged separately to customers.
| EUR 1,000 Note |
2017 | 2016 | |
|---|---|---|---|
| Wages and salaries | 11 | 122,535 | 106,157 |
| Social security contributions | 22,735 | 19,299 | |
| Contributions to de€ned contribution plans | 4,863 | 3,207 | |
| Expenses related to de€ned bene€t plans | 27 | 464 | (1,338) |
| Expenses related to termination and other long term employee bene€t plans | 27 | 996 | 879 |
| Other personnel expenses | 5,138 | 5,375 | |
| 156,731 | 133,579 |
The personnel expenses 2017 include non-recurring severance costs of EUR 0.7 million (2016: EUR 0.3 million).
The average number of employees in the nancial year by region and by function, measured in full time equivalents, is as follows:
| FTE | 2017 | 2016 |
|---|---|---|
| The Netherlands (excluding Dutch Holding companies) | 64 | 66 |
| Rest of EMEA | 1,031 | 958 |
| EMEA | 1,095 | 1,024 |
| Asia-Paci€c | 495 | 478 |
| Americas | 429 | 263 |
| Holding companies | 45 | 41 |
| 2,064 | 1,806 | |
| FTE | 2017 | 2016 |
|---|---|---|
| Management and administration | 321 | 280 |
| Sales | 1,317 | 1,173 |
| ICT/HSEQ/Warehouse/Other | 426 | 353 |
| 2,064 | 1,806 |
As from 1 January 2015 the Group established a long term incentive plan (LTIP) for the Management Board, the Executive Committee and certain senior managers. Under this equity settled LTIP, performance shares are awarded based on certain performance conditions. Aims of the LTIP are long term value creation, motivation and sharing of success and retention of key employees.
The performance conditions applicable for the Management Board are:
The performance period starts yearly on 1 January and lasts three nancial years. After vesting, the unconditional shares are subject to a holding period of two years and become unrestricted ve years after grant date.
The performance conditions for the Executive Committee and for senior managers are solely internal performance conditions and include:
The performance period starts yearly on 1 January and lasts one year. The shares become unconditional after a service period of three years.
The number of performance shares granted in 2017 is as follows:
| Number of shares |
Based on share price |
|
|---|---|---|
| Shares granted to the Management Board | 11,300 | 39.51 |
| Shares granted to Executive Committee and certain senior managers | 34,790 | 39.51 |
The number of performance shares granted in 2017 is based on a target performance (100 per cent) with an upward and downward potential for the Management Board and the Executive Committee. The expected total number of performance shares is 185,577 with vesting dates in 2018, 2019 and 2020.
The weighted average share price and the number of performance shares are as follows:
| 2017 | 2016 | |||
|---|---|---|---|---|
| Weighted average | Weighted average | |||
| share price | Number of shares | share price | Number of shares | |
| Outstanding as at 1 January | 33.57 | 132,470 | 29.34 | 80,616 |
| Forfeited during the year | - | (3,184) | - | - |
| Exercised during the year | - | - | - | - |
| Granted during the year | 45.35 | 46,090 | 33.57 | 54,583 |
| Performance adjustment | - | 10,201 | - | (2,729) |
| Outstanding as at 31 December | 185,577 | 132,470 |
The weighted average share price of granted shares is equal to the share price at grant date adjusted for the expected retention and expected dividends, based on the Company's dividend policy, during the vesting period. In addition, the weighted average share price of shares granted to the Management Board is adjusted for market related performance conditions and for the impact of the restriction period.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Shares granted | 2,456 | 1,403 |
The other operating expenses are as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Accommodation and other rental costs | 13,296 | 12,068 |
| Other of€ce expenses | 10,981 | 9,205 |
| Car expenses | 7,886 | 7,092 |
| Other personnel related expenses | 12,340 | 9,962 |
| Professional service fees | 7,499 | 6,564 |
| Credit sales expenses | 940 | 846 |
| Insurance costs | 2,244 | 1,938 |
| Other operating expenses | 4,797 | 3,978 |
| 59,983 | 51,653 |
The other operating expenses include an amount of EUR 1.6 million (2016: EUR 1.5 million) related to non-recurring items. The non-recurring items in 2017 and 2016 mainly relate to professional service fees incurred during acquisition projects and subsequent integration processes.
The following nance income and nance costs are recognised in prot or loss:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Interest income on loans and receivables | 515 | 496 |
| Change in fair value of contingent considerations | - | 18 |
| Change in fair value of derivative €nancial instruments | 443 | 280 |
| Currency exchange results | - | - |
| Finance income | 958 | 794 |
| Interest expenses on €nancial liabilities measured at amortised cost | (13,427) | (12,486) |
| Interest expenses on provisions for pensions and similar obligations | (199) | (105) |
| Change in fair value of contingent considerations | (10) | - |
| Change in fair value of derivative €nancial instruments | - | - |
| Currency exchange results | (2,436) | (960) |
| Finance costs | (16,072) | (13,551) |
| Net finance costs recognised in profit or loss | (15,114) | (12,757) |
Finance income and expenses recognised in other comprehensive income are as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Foreign currency translation differences of foreign operations | (42,518) | 21,042 |
| Effective portion of changes in fair value of cash 'ow hedges | (190) | (408) |
| Tax on foreign currency translation differences and changes in fair value of cash 'ow hedges recognised | ||
| in other comprehensive income | 959 | (310) |
| Finance income recognised in other comprehensive income, net of tax | (41,749) | 20,324 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Current tax expense | ||
| Current year | 37,078 | 31,772 |
| Adjustment for prior years | 1,983 | (15) |
| 39,061 | 31,757 | |
| Deferred tax expense | ||
| Reduction in tax rate | (1,867) | (15) |
| Origination and reversal of temporary differences | (3,900) | (3,775) |
| Recognition of previously unrecognised tax losses | (184) | (6,012) |
| Recognition of current year tax losses | (387) | (775) |
| Derecognition of previously recognised tax losses | - | 621 |
| (6,338) | (9,956) | |
| Total income tax expense | 32,723 | 21,801 |
The adjustment for prior years predominantly relates to additional taxation expenses which were incurred following a local tax audit.
The impact of the reduction of the income tax rate in the US resulted in a (non-cash) gain of EUR 2.0 million.
The reported tax expenses include an amount of minus EUR 5.5 million (2016: EUR 2.7 million) related to temporary differences regarding amortisation of intangible assets.
The income tax expenses 2016 include a benet of EUR 6.0 million resulting from the recognition of previously unrecognised tax assets. EUR 4.7 million of this benet relates to the recognition of deferred tax assets of the Dutch scal entity. The recognition of deferred tax assets was the consequence of an expected change in the protability and a revised estimation of the expected duration of the Dutch tax entity.
| 2017 | 2016 | |||||
|---|---|---|---|---|---|---|
| Before tax | Tax bene€t/ | Net of tax | Before tax | Tax bene€t/ | Net of tax | |
| EUR 1,000 | (expense) | (expense) | ||||
| Foreign currency translation | ||||||
| differences for foreign | ||||||
| operations | (42,518) | 959 | (41,559) | 21,042 | (467) | 20,575 |
| Cash 'ow hedges | (190) | - | (190) | (408) | 157 | (251) |
| De€ned bene€t plan actuarial | ||||||
| gains/(losses) | 14 | (17) | (3) | (1,641) | 351 | (1,290) |
| (42,694) | 942 | (41,752) | 18,993 | 41 | 19,034 |
The reconciliation between the Company's domestic income tax rate and related tax charge and the effective income tax rate and related effective income tax charge is as follows:
| 2017 | 2016 | ||||
|---|---|---|---|---|---|
| EUR 1,000 | % | EUR 1,000 | % | EUR 1,000 | |
| Pro€t for the year | 77,262 | 72,959 | |||
| Total income tax expense | 29.8 | 32,723 | 23.0 | 21,801 | |
| Pro€t before income tax | 109,985 | 94,760 | |||
| Income tax using the Company's domestic tax rate | 25.0 | 27,496 | 25.0 | 23,690 | |
| Effect of tax rates in foreign jurisdictions | 3.5 | 3,820 | 4.0 | 3,744 | |
| Effect of change in tax rate | (1.7) | (1,867) | 0.0 | 15 | |
| Tax effect of: | |||||
| Non-deductible expenses | 2.0 | 2,162 | 2.3 | 2,156 | |
| Tax incentives and tax exempted income | (0.9) | (946) | (4.2) | (3,966) | |
| Utilisation of tax losses | - | - | 0.0 | (7) | |
| Recognition of previously unrecognised tax losses | (0.2) | (184) | (6.3) | (6,012) | |
| Derecognition of previously recognised tax losses | - | - | 0.7 | 621 | |
| Current year losses for which no deferred tax asset was recognised | 0.5 | 600 | 0.6 | 560 | |
| (De)recognition of previously (un)recognised temporary differences | (0.3) | (341) | 1.1 | 1,015 | |
| Under provided in prior years | 1.8 | 1,983 | 0 | (15) | |
| 29.8 | 32,723 | 23.0 | 21,801 |
The basic earnings per share of EUR 1.47 (2016: EUR 1.39) is determined by dividing the result for the year due to the owners of the Company of EUR 77.3 million (2016: EUR 73.0 million) by the weighted average number of shares in circulation amounting to 52.4 million (2016: 52.5 million). As at 31 December 2017, the number of ordinary shares outstanding was 52.5 million (31 December 2016: 52.5 million).
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Pro€t/(loss) for the year, attributable to the owners of the Company (basic) (A) |
77,262 | 72,959 |
| in thousand shares | Note | 2017 | 2016 |
|---|---|---|---|
| Issued ordinary shares as at 1 January | 25 | 52,592 | 52,592 |
| Increase from change in nominal value | 25 | - | - |
| Conversion from shareholders' loans | 25 | - | - |
| Effect of shares issued | 25 | - | - |
| Effect of purchase of own shares | 25 | (168) | (115) |
| Weighted average number of ordinary shares as at 31 December | (B) | 52,425 | 52,477 |
| Earnings per share (A/B) | 1.47 | 1.39 |
The calculation of the diluted earnings per share of EUR 1.52 (2016: EUR 1.42) has been based on the prot attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding after adjustment for the effect of all dilutive potential ordinary shares.
| EUR 1,000 | 2017 | 2016 | ||
|---|---|---|---|---|
| Pro€t/(loss) for the year, attributable to the owners of the Company (basic) | 77,262 | 72,959 | ||
| Share based payments, net of tax | 11 | 2,456 | 1,403 | |
| Pro€t/(loss) for the year, attributable to the owners of the Company (diluted) | (C) | 79,718 | 74,362 |
The total number of shares granted based on the Group's share based payment scheme are included in the calculation of the diluted weighted average number of shares.
| in thousand shares | Note | 2017 | 2016 |
|---|---|---|---|
| Weighted average number of ordinary shares (basic) as at 31 December | 25 | 52,425 | 52,477 |
| Effect of share based payments | 138 | 71 | |
| Weighted average number of ordinary shares (diluted) at 31 December | (D) | 52,563 | 52,548 |
| Diluted earnings per share (C/D) | 1.52 | 1.42 |
The movements for the nancial year are as follows:
| EUR 1,000 | Note | Land and buildings |
Machinery and equipment |
Hardware & Software |
Other assets |
Total |
|---|---|---|---|---|---|---|
| Cost Balance as at 1 January |
||||||
| 2017 | 11,772 | 6,188 | 17,886 | 13,258 | 49,104 | |
| Acquisitions through business | ||||||
| combinations Additions for the year |
7 | 2,355 416 |
1,633 440 |
300 1,446 |
- 879 |
4,288 3,181 |
| Disposals | (1,770) | (7) | (2,756) | (293) | (4,826) | |
| Effect of movements in | ||||||
| exchange rates | (1,097) | (338) | (414) | (313) | (2,162) | |
| Balance as at | ||||||
| 31 December 2017 | 11,676 | 7,916 | 16,462 | 13,531 | 49,585 | |
| Depreciation and | ||||||
| impairment losses | ||||||
| Balance as at 1 January | ||||||
| 2017 | 2,136 | 3,529 | 12,827 | 9,717 | 28,209 | |
| Depreciation for the year | 865 | 1,036 | 1,500 | 945 | 4,346 | |
| Disposals | (120) | (82) | (632) | (105) | (939) | |
| Effect of movements in | ||||||
| exchange rates | (186) | (165) | (295) | (212) | (858) | |
| Balance as at | ||||||
| 31 December 2017 | 2,695 | 4,318 | 13,400 | 10,345 | 30,758 | |
| Carrying amounts | ||||||
| As at 1 January 2017 | 9,636 | 2,659 | 5,059 | 3,541 | 20,895 | |
| As at 31 December 2017 | 8,981 | 3,598 | 3,062 | 3,186 | 18,827 | |
| EUR 1,000 | Note | Land and buildings |
Machinery and equipment |
Hardware & Software |
Other assets |
Total |
|---|---|---|---|---|---|---|
| Cost | ||||||
| Balance as at 1 January | ||||||
| 2016 | 10,364 | 5,655 | 16,097 | 13,243 | 45,359 | |
| Acquisitions through business | ||||||
| combinations | 311 | 124 | 19 | 194 | 648 | |
| Additions for the year | 170 | 750 | 3,311 | 1,086 | 5,317 | |
| Disposals | (161) | (601) | (1,232) | (1,068) | (3,062) | |
| Effect of movements in | ||||||
| exchange rates | 1,088 | 260 | (309) | (197) | 842 | |
| Balance as at | ||||||
| 31 December 2016 | 11,772 | 6,188 | 17,886 | 13,258 | 49,104 | |
| Depreciation and impairment losses |
||||||
| Balance as at 1 January | ||||||
| 2016 | 1,570 | 3,366 | 12,224 | 9,945 | 27,105 | |
| Depreciation for the year | 636 | 660 | 2,023 | 984 | 4,303 | |
| Disposals | (152) | (589) | (1,198) | (977) | (2,916) | |
| Effect of movements in | ||||||
| exchange rates | 82 | 92 | (222) | (235) | (283) | |
| Balance as at | ||||||
| 31 December 2016 | 2,136 | 3,529 | 12,827 | 9,717 | 28,209 | |
| Carrying amounts | ||||||
| As at 1 January 2016 | 8,794 | 2,289 | 3,873 | 3,298 | 18,254 | |
| As at 31 December 2016 | 9,636 | 2,659 | 5,059 | 3,541 | 20,895 | |
The movements for the nancial period are as follows:
| EUR 1,000 | Note | Goodwill | Intellectual property rights |
Distribution rights |
Brand names |
Supplier relations |
Other intangibles |
Total |
|---|---|---|---|---|---|---|---|---|
| Cost | ||||||||
| Balance as at 1 January 2017 | 522,564 | 100 | 12,755 | 25,000 | 489,679 | 13,979 | 1,064,077 | |
| Acquisitions through business | ||||||||
| combinations | 7 | - | - | - | - | 21,611 | 1,264 | 22,875 |
| Additions for the year | 81,646 | 6 | 8,728 | - | - | 4,674 | 95,054 | |
| Disposals | - | - | - | - | - | (4) | (4) | |
| Effect of movements in exchange | ||||||||
| rates | (22,232) | (2) | (30) | - | (24,083) | (404) | (46,751) | |
| Balance as at 31 December | ||||||||
| 2017 | 581,978 | 104 | 21,453 | 25,000 | 487,207 | 19,509 | 1,135,251 | |
| Amortisation and impairment losses |
||||||||
| Balance as at 1 January 2017 | 14,431 | 49 | 6,026 | - | 123,910 | 12,103 | 156,519 | |
| Amortisation for the year | - | 6 | 1,641 | - | 29,916 | 2,686 | 34,249 | |
| Impairment loss | - | - | - | - | - | - | - | |
| Disposals | - | - | - | - | - | (4) | (4) | |
| Effect of movements in exchange | ||||||||
| rates | - | - | (20) | - | (3,964) | (388) | (4,372) | |
| Balance as at 31 December | ||||||||
| 2017 | 14,431 | 55 | 7,647 | - | 149,862 | 14,397 | 186,392 | |
| Carrying amounts | ||||||||
| As at 1 January 2017 | 508,133 | 51 | 6,729 | 25,000 | 365,769 | 1,876 | 907,558 | |
| As at 31 December 2017 | 567,547 | 49 | 13,806 | 25,000 | 337,345 | 5,112 | 948,859 |
| Intellectual | Distribution | Brand | Supplier | Other | |||
|---|---|---|---|---|---|---|---|
| EUR 1,000 | Goodwill Note |
property rights | rights | names | relations | intangibles | Total |
| Cost | |||||||
| Balance as at 1 January 2016 | 505,207 | 66 | 11,730 | 25,000 | 468,736 | 13,164 | 1,023,903 |
| Acquisitions through business | |||||||
| combinations | 33 | - | 36 | - | 6,772 | 565 | 7,406 |
| Additions for the year | 6,569 | 33 | 1,107 | - | - | - | 7,709 |
| Disposals | - | - | - | - | - | - | - |
| Effect of movements in exchange | |||||||
| rates | 10,755 | 1 | (118) | - | 14,171 | 250 | 25,059 |
| Balance as at 31 December | |||||||
| 2016 | 522,564 | 100 | 12,755 | 25,000 | 489,679 | 13,979 | 1,064,077 |
| Amortisation and impairment losses |
|||||||
| Balance as at 1 January 2016 | 14,431 | 44 | 4,454 | - | 88,140 | 9,615 | 116,684 |
| Amortisation for the year | - | 6 | 1,654 | - | 27,995 | 2,366 | 32,021 |
| Impairment loss | - | - | - | - | 6,162 | - | 6,162 |
| Disposals | - | - | - | - | - | - | - |
| Effect of movements in exchange | |||||||
| rates | - | (1) | (82) | - | 1,613 | 122 | 1,652 |
| Balance as at 31 December | |||||||
| 2016 | 14,431 | 49 | 6,026 | - | 123,910 | 12,103 | 156,519 |
| Carrying amounts | |||||||
| As at 1 January 2016 | 490,776 | 22 | 7,276 | 25,000 | 380,596 | 3,549 | 907,219 |
| As at 31 December 2016 | 508,133 | 51 | 6,729 | 25,000 | 365,769 | 1,876 | 907,558 |
For the purpose of impairment testing, goodwill is allocated to the following cash generating units.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| EMEA | 283,670 | 274,306 |
| Asia-Paci€c | 84,037 | 85,929 |
| Americas | 199,840 | 147,898 |
| 567,547 | 508,133 |
A cash generating unit (CGU) represents the lowest level within the Group at which goodwill is monitored for internal management purposes. During 2017 Management has reassessed the cash generating units to which the goodwill is allocated as a result of increased integration of commercial and operational activities. This led to Management monitoring periodic results and goodwill at an operating segment level rather than at a local level.
The allocation of the cash generating units used for goodwill impairment testing in 2016 to the current cash generating units is as follows:
| EUR 1,000 | CGU 2017 | Value 2016 |
|---|---|---|
| EMEA excluding IMCD Kenya | EMEA | 272,221 |
| IMCD Kenya | EMEA | 2,085 |
| Asia-Paci€c excluding IMCD Indonesia, IMCD Singapore and IMCD Philippines | Asia-Paci€c | 76,767 |
| IMCD Indonesia | Asia-Paci€c | 2,631 |
| IMCD Singapore | Asia-Paci€c | 1,685 |
| IMCD Philippines | Asia-Paci€c | 4,846 |
| IMCD US (incl. MJS Sales) | Americas | 113,930 |
| Mutchler | Americas | 3,704 |
| IMCD Brasil | Americas | 7,157 |
| IMCD Brasil Pharma | Americas | 23,107 |
| 508,133 |
The recoverable amount per CGU is based on its value in use and is determined by discounting the future cash ows to be generated from the continuing use of the CGUs. The cash ow forecasts were derived from the budget for 2018 and the plan years 2019 and 2020 which are approved by management and extrapolated for the years 2021 and 2022. For the period after 2022 a growth rate equal to the average of the forecasted annual real GDP growth rate for the period 2022-2047 is considered.
The pre-tax weighted average cost of capital (WACC) is estimated per CGU and varies mainly due to differences in risk free rates. The risk-free rates are equal to the weighted average of the rate of return on local sovereign bonds or strips.
The key assumptions 2017 for each CGU are as follows:
| Pre-tax WACC | Terminal growth rate |
|
|---|---|---|
| EMEA | 11.8% | 1.6% |
| Asia-Paci€c | 14.2% | 3.1% |
| Americas | 11.6% | 2.1% |
| Total Group | 10.9% | 2.0% |
No impairment was necessary following impairment tests on all cash generating units within the Group, since the discounted future cash ows from the cash generating units exceed the value of the goodwill and other relevant net assets.
It is inherent in the method of computation used that a change in the assumptions may lead to a different conclusion. Therefore, a sensitivity analysis is performed based on a change in a key assumption while holding all other assumptions constant.
The following changes in assumptions are assessed:
Based on the sensitivity analysis performed it is concluded that any reasonable change in the key assumptions would not lead to an impairment.
The supplier relationships consist of supplier bases within the following regions and remaining useful lives (RUL):
| EUR 1,000 | 2017 | 2016 | |
|---|---|---|---|
| Supplier bases | RUL | ||
| EMEA | 4-13 | 155,394 | 164,264 |
| Asia Paci€c | 4-16 | 51,637 | 58,110 |
| Americas | 8-16 | 130,314 | 143,395 |
| 337,345 | 365,769 |
The remaining useful lives of supplier bases are assessed at each reporting date and adjusted if appropriate. Furthermore, triggering events for a possible impairment are evaluated annually by means of assessing the potential impact of available internal and external information sources.
Brand names relate to the IMCD brand. As no assumption can be made about the durability of its economic use, the brand name has an indenite useful life. The IMCD brand name is considered as a corporate asset and hence allocated to the individual CGUs for goodwill impairment testing purposes. The carrying amount of the brand name has been allocated to the CGUs as follows: EMEA: EUR 15.4 million, Asia-Pacic: EUR 4.6 million and Americas: EUR 5.0 million.
The non-current assets other than nancial instruments, deferred tax assets and post employment benet assets, comprise property, plant and equipment, intangible assets including goodwill and equity accounted investees. The aforementioned noncurrent assets by geographical location are as follows:
| Property, plant | ||
|---|---|---|
| EUR 1,000 | and equipment | Intangible assets |
| Netherlands | 1,448 | 386,366 |
| Rest of EMEA | 6,067 | 91,996 |
| EMEA | 7,515 | 478,362 |
| Asia-Paci€c | 2,865 | 132,420 |
| Americas | 8,447 | 338,077 |
| Total | 18,827 | 948,859 |
The equity accounted investee relates to the 49% share in SARL IMCD Group Algerie.
The following table analyses the carrying amount and share of prot and OCI of the equity interest.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Balance as at 1 January | 13 | 3 |
| Capital contributions | - | - |
| Result for the year | (61) | 10 |
| Addition to provision | 48 | |
| Balance as at 31 December | - | 13 |
The net assets of SARL IMCD Group Algerie consist of current assets amounting to EUR 200 thousand (2016: EUR 321 thousand) and current liabilities of EUR 330 thousand (2016: EUR 295 thousand). The loss from continuing operations in the nancial year amounted to EUR 124 thousand. The net prot for the year 2016 amounted to EUR 19 thousand. As at 31 December 2017 net equity value of SARL IMCD Group Algerie was minus EUR 48 thousand.
The other nancial assets relates to receivables with a remaining term exceeding one year and includes rent and other deposits.
The Group has unrecognised deferred tax assets of EUR 2.0 million (2016: 2.0 million), consisting of unrecognised deferred tax asset of entities in EMEA EUR 0.1 million (2016: EUR 0.1 million), entities in Asia-Pacic EUR 0.9 million (2016: EUR 1.1 million) and entities in Brazil EUR 1.0 million (2016: EUR 0.8 million).
In 2016 the Group recognised previously unrecognised deferred tax assets related to tax losses carried forward to the amount of EUR 6.0 million of which EUR 4.7 million relates to tax losses recognised as a consequence of gaining more assurance on the historical tax losses and expected change in future protability and duration of the Dutch scal entity. The recognised deferred tax assets of the Dutch scal entity will expire in the years 2020 to 2023. Deferred tax assets have been recognised to the extent that it is probable that future taxable prots will be available against which the unused tax losses can be utilised.
As at 31 December 2017, the group has unrecognised deferred tax liabilities to the amount of EUR 3.1 million (2016: EUR 2.9 million) for potential withholding tax liabilities related to investments in subsidiaries. The liabilities are not recognised because the Company controls the dividend policy of the subsidiaries and does not foresee reversal of the temporary differences in the foreseeable future.
Deferred tax assets and liabilities are attributable to the following:
| Assets | Liabilities | Net | ||||
|---|---|---|---|---|---|---|
| EUR 1,000 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| Property, plant and equipment | 178 | 125 | 1,162 | 1,238 | (984) | (1,113) |
| Intangible assets | 2 | 14 | 73,584 | 76,314 | (73,582) | (76,300) |
| Financial €xed assets | 18 | 24 | - | (259) | 18 | 283 |
| Trade debtors and other | ||||||
| receivables | 591 | 717 | 69 | 80 | 522 | 637 |
| Inventories | 1,522 | 1,176 | 176 | 388 | 1,346 | 788 |
| Share based payment reserve | 284 | - | - | - | 284 | - |
| Loans and borrowings | 345 | 101 | 21 | 639 | 324 | (538) |
| Employee bene€ts and other | ||||||
| provisions | 3,795 | 2,220 | 1,022 | 850 | 2,773 | 1,370 |
| Trade and other payables | 3,220 | 2,128 | 5 | 17 | 3,215 | 2,111 |
| Other items | 133 | 310 | 4 | 183 | 129 | 127 |
| Tax loss carry-forwards | 20,571 | 23,045 | - | - | 20,571 | 23,045 |
| Tax assets/(liabilities) | 30,659 | 29,860 | 76,043 | 79,450 | (45,384) | (49,590) |
| Set off of tax | (6,460) | (3,678) | (6,460) | (3,678) | - | - |
| Net tax assets/(liabilities) | 24,199 | 26,182 | 69,583 | 75,772 | (45,384) | (49,590) |
| EUR 1,000 | Balance as at 1 January 2017 |
Recognised in pro€t or loss |
Recognised directly in equity |
Recognised in other comprehensive income |
Acquired in business combinations (note 7) |
Other | Balance as at 31 December 2017 |
|---|---|---|---|---|---|---|---|
| Property, plant and | |||||||
| equipment | (1,113) | 144 | - | - | (123) | 108 | (984) |
| Intangible assets | (76,300) | 5,467 | - | - | (5,148) | 2,399 | (73,582) |
| Financial €xed assets | 283 | (241) | - | - | - | (24) | 18 |
| Trade debtors and other | |||||||
| receivables | 637 | (181) | - | - | 48 | 18 | 522 |
| Inventories | 788 | 48 | - | - | 94 | 416 | 1,346 |
| Share based payment | |||||||
| reserve | - | 284 | - | - | - | - | 284 |
| Loans and borrowings | (538) | 416 | - | 434 | - | 12 | 324 |
| Employee bene€ts and | |||||||
| other provisions | 1,370 | (235) | - | (122) | 1,983 | (223) | 2,773 |
| Trade and other payables | 2,111 | (76) | - | 5 | 1,263 | (88) | 3,215 |
| Other items | 127 | 141 | - | - | 474 | (611) | 131 |
| Tax losses carried | |||||||
| forward | 23,045 | 571 | - | - | - | (3,047) | 20,569 |
| Net tax assets/ | |||||||
| (liabilities) | (49,590) | 6,338 | - | 317 | (1,409) | (1,040) | (45,384) |
| EUR 1,000 | Balance as at 1 January 2016 |
Recognised in pro€t or loss |
Recognised directly in equity |
Recognised in other comprehensive income |
Acquired in business combinations |
Other | Balance as at 31 December 2016 |
|---|---|---|---|---|---|---|---|
| Property, plant and | |||||||
| equipment | (796) | (122) | - | - | 5 | (200) | (1,113) |
| Intangible assets | (74,055) | 2,727 | - | - | (1,994) | (2,978) | (76,300) |
| Financial €xed assets | 28 | 244 | - | - | - | 11 | 283 |
| Trade debtors and other | |||||||
| receivables | 592 | (1) | - | - | 24 | 22 | 637 |
| Inventories | 883 | (278) | - | - | 179 | 4 | 788 |
| Share based payment | |||||||
| reserve | 7 | (7) | - | - | - | - | - |
| Loans and borrowings | 7 | 50 | - | (567) | - | (28) | (538) |
| Employee bene€ts and | |||||||
| other provisions | 1,389 | (404) | - | 342 | 29 | 14 | 1,370 |
| Trade and other payables | 948 | 992 | - | 164 | 71 | (64) | 2,111 |
| Other items | (502) | 656 | - | - | - | (27) | 127 |
| Tax losses carried | |||||||
| forward | 20,212 | 6,166 | - | - | - | (3,333) | 23,045 |
| Net tax assets/ | |||||||
| (liabilities) | (51,287) | 10,023 | - | (61) | (1,686) | (6,579) | (49,590) |
The value of the inventory is as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Trade goods | 265,826 | 204,210 |
| 265,826 | 204,210 |
Cost of materials and inbound logistics included in the prot or loss of 2017 amounted to EUR 1,478.7 million (2016: EUR 1,332.9 million). Within this cost are write-downs of inventories to net realisable value of EUR 2.4 million (2016: EUR 2.3 million). The reversal of write-downs amounted to EUR 1.0 million (2016: EUR 0.5 million). The write-down of inventories is mainly due to inventories past their expiration dates or inventories which are not marketable. The write-down and reversal are included in cost of materials and inbound logistics.
All trade and other receivables are current.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Trade receivables | 311,487 | 250,412 |
| Other receivables | 20,222 | 14,120 |
| Trade and other receivables | 331,709 | 264,532 |
The composition of the other receivables is as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Derivatives used for hedging | - | 478 |
| Taxes and social securities | 5,488 | 5,438 |
| Receivables from employees | 167 | 168 |
| Prepaid expenses | 10,272 | 4,637 |
| Other receivables | 4,295 | 3,399 |
| Total other receivables | 20,222 | 14,120 |
The Group's exposure to currency risks related to trade and other receivables is disclosed in note 5.
The ageing of trade and other receivables at the reporting date was as follows:
| 2017 | 2016 | |||
|---|---|---|---|---|
| EUR 1,000 | Gross | Impairment | Impairment | |
| Current 0 - 30 days past due | 319,558 | 130 | 250,884 | 241 |
| Past due 30 - 60 days | 9,151 | 240 | 8,651 | 495 |
| Past due 60 - 90 days | 2,499 | 403 | 3,376 | 437 |
| More than 90 days | 7,141 | 5,867 | 8,113 | 5,319 |
| 338,349 | 6,640 | 271,024 | 6,492 |
The movement in the allowance for impairment in respect of trade and other receivables during the year was as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Balance at 1 January | 6,492 | 6,328 |
| Acquisitions through business combinations | 413 | 263 |
| Impairment loss recognised | 1,439 | 1,936 |
| Impairment loss reversed | (657) | (874) |
| Trade receivables written-off | (648) | (1,178) |
| Currency exchange result | (399) | 17 |
| 6,640 | 6,492 |
At 31 December 2017 the total impairment includes an amount EUR 3,426 thousand (2016: EUR 3,510 thousand) related to customers declared insolvent. The remainder of the impairment loss at 31 December 2017 relates to several customers who are expected to be unable to pay their outstanding balances, mainly due to economic circumstances. The Group believes that the unimpaired amounts that are past due by more than 30 days are still collectable, based on historic payment behaviour and analyses of the underlying customers' creditworthiness.
The maximum exposure to credit risk for trade and other receivables at the reporting date by geographic region was as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Carrying amount | ||
| EMEA | 193,475 | 170,733 |
| Asia-Paci€c | 54,137 | 48,919 |
| Americas | 84,097 | 44,880 |
| 331,709 | 264,532 |
The cash and cash equivalents are as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Cash and cash equivalents | 61,383 | 56,502 |
| Cash and cash equivalents in the statement of cash flows | 61,383 | 56,502 |
The cash and cash equivalent balances are available for use by the Group.
As at 31 December 2017, the authorised share capital comprised 150,000,000 ordinary shares of which 52,592,254 shares have been issued. The shares have a nominal value of EUR 0.16 each and all shares rank equally with regard to the Company's residual assets.
The shareholders are entitled to receive dividends and are entitled to one vote per share at meetings of the Company. Following the decision of the Annual General Meeting in 2017, the Company distributed a dividend in cash of EUR 28.8 million (2016: EUR 23.1 million).
The share premium as at 31 December 2017 amounted to EUR 657.5 million (31 December 2016: EUR 657.5 million).
The translation reserve comprises all foreign currency differences arising from the translation of the nancial statements of foreign operations, as well as from the translation of liabilities that hedge the Company's net investment in foreign subsidiaries.
The hedging reserve comprises the effective portion of the cumulative net change in the fair value of cash ow hedging instruments related to hedged transactions that have not yet occurred.
The reserve own shares comprises the cost of the Company's shares held by the Group to fund its long term incentive plan. At 31 December 2017, the Group held 195,000 of the Company's shares (At 31 December 2016: 155,000 shares).
Other reserves relate to the accumulated actuarial gains and losses recognised in the other comprehensive income.
| Attributable to owners of the Company | ||||
|---|---|---|---|---|
| Total other | ||||
| Translation | Hedging | Other | comprehensive | |
| EUR 1,000 | reserve | reserve | reserves | income |
| 2017 | ||||
| Foreign currency translation differences for foreign operations, net | ||||
| of tax | (41,559) | - | - | (41,559) |
| Effective portion of changes in fair value of cash 'ow hedges, net of | ||||
| tax | - | (190) | - | (190) |
| De€ned bene€t plan actuarial gains and losses net of tax | - | - | (3) | (3) |
| Total other comprehensive income | (41,559) | (190) | (3) | (41,752) |
| 2016 | ||||
| Foreign currency translation differences for foreign operations, net | ||||
| of tax | 20,575 | - | - | 20,575 |
| Effective portion of changes in fair value of cash 'ow hedges, net of | ||||
| tax | - | (251) | - | (251) |
| De€ned bene€t plan actuarial gains and losses net of tax | - | - | (1,290) | (1,290) |
| Total other comprehensive income | 20,575 | (251) | (1,290) | 19,034 |
This note provides information about the contractual terms of the Group's interest bearing loans and borrowings, which are measured at amortised cost. For more information about the Group's exposure to interest rate, foreign currency and liquidity risk, see note 5.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Bank loans | 363,749 | 377,483 |
| Other liabilities | 3,702 | 5,182 |
| 367,451 | 382,665 |
The terms and conditions of outstanding non-current loans were as follows:
| Nominal | Year of | Face value | Carrying amount | Face value | Carrying amount | ||
|---|---|---|---|---|---|---|---|
| EUR 1,000 | Curr | interest rate | maturity | 2017 | 2017 | 2016 | 2016 |
| Senior bank loans | AUD | 3.20% | 2021 | 32,364 | 32,063 | 34,027 | 33,640 |
| Senior bank loans | EUR | 1.40% | 2021 | 120,544 | 116,170 | 120,544 | 114,905 |
| Senior bank loans | GBP | 1.92% | 2021 | 23,387 | 23,157 | 24,235 | 23,940 |
| Senior bank loans | USD | 3.09% | 2021 | 18,122 | 18,095 | 20,619 | 20,584 |
| Schuldscheindarlehen (€x rate) | EUR | 1.20% | 2021 | 15,000 | 14,937 | 15,000 | 14,920 |
| Schuldscheindarlehen (€x rate) | EUR | 1.58% | 2023 | 15,000 | 14,931 | 15,000 | 14,920 |
| Schuldscheindarlehen ('oating rate) | EUR | 1.20% | 2021 | 45,000 | 44,811 | 45,000 | 44,761 |
| Schuldscheindarlehen ('oating rate) | EUR | 1.45% | 2023 | 25,000 | 24,886 | 25,000 | 24,866 |
| Schuldscheindarlehen (€x rate) | USD | 3.11% | 2021 | 20,845 | 20,749 | 23,717 | 23,597 |
| Schuldscheindarlehen ('oating rate) | USD | 3,19% | 2021 | 54,198 | 53,950 | 61,664 | 61,350 |
| Pro€t sharing arrangements | EUR | 1.53% | 2021 | 1,160 | 1,160 | 1,190 | 1,190 |
| Other interest bearing liabilities | 203 | 203 | 256 | 256 | |||
| Total interest-bearing liabilities | 370,823 | 365,112 | 386,252 | 378,929 | |||
| Total non- interest-bearing liabilities | 2,339 | 2,339 | 3,736 | 3,736 | |||
| Total non-current liabilities | 373,162 | 367,451 | 389,988 | 382,665 |
The Group is obliged to meet requirements from the covenants in connection with the interest bearing loan facilities. These requirements relate to ratios for interest cover and maximum leverage.
| 2017 | 2016 | |||
|---|---|---|---|---|
| Outcome | Covenant | Outcome | Covenant | |
| Reported leverage | 3.0 | 2.6 | ||
| Leverage including pro-forma results | 2.8 | 2.6 | ||
| Leverage loan documentation | 2.7 | max. 3.5 | 2.3 | max. 3.5 |
| Interest cover | 16.3 | min. 4.0 | 13.9 | min. 4.0 |
The actual reported leverage ratio as at 31 December 2017 was 3.0 times EBITDA (31 December 2016: 2.6 times EBITDA). Including the full year impact of acquisitions completed in 2016 and 2017, the leverage at the end of the nancial year is 2.8 times EBITDA (31 December 2016: 2.6 times EBITDA). The leverage ratio calculated on the basis of the denitions used in the loan documentation was 2.7 times EBITDA (31 December 2016: 2.3 times EBITDA) which is well below the dened maximum of 3.5 times EBITDA.
The actual interest cover covenant for the nancial year, based on the denitions used in the loan documentation, was 16.3 times EBITDA (2016: 13.9 times EBITDA) and was well above the required minimum of 4.0.
For details of the contractual maturities of nancial liabilities, reference is made to note 5.
The difference between the changes in bank loans in the nancial year (increase of EUR 155.8 mln) and the cash ows from nancing activities in the consolidated cash ow statement (cash inow of EUR 126.8 mln) comprises the loans and borrowings from business combinations (EUR 45.4 mln) which were repaid during the year, the effect of foreign exchange rates (EUR -15.3 mln) and other changes (EUR -1.1 mln).
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Loans and borrowings | 344 | 383 |
| Deferred and contingent considerations | 699 | 57,712 |
| Other short term €nancial liabilities | 182,848 | 13,314 |
| Other short term financial liabilities | 183,547 | 71,026 |
Other short term nancial liabilities include a revolving credit facility, bank overdrafts and other short term credit facilities, including discounted bills and discounted notes. The Group's total available revolving credit facility amounts to EUR 300 million. In 2017, the net usage of the revolving credit facility amounted to EUR 178.4 million. Drawdowns can be extended till the maturity date of the facility in 2021.
During 2017 the Group paid deferred considerations of EUR 56.5 million of which EUR 53.5 million relates to the deferred purchase price of MF Cachat.
The liabilities associated with employee benets consist of net dened benet liabilities (pension schemes), termination benets and other long term employee benets.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Net de€ned bene€t liability | 8,874 | 2,252 |
| Termination bene€ts and other long term employee bene€ts | 7,842 | 7,845 |
| Total employee benefit liabilities | 16,716 | 10,097 |
The Group supports dened benet plans in The Netherlands, The United Kingdom, Canada, Germany, Switzerland and Austria.
| De€ned bene€t | Fair value of | Net de€ned bene€t | ||||
|---|---|---|---|---|---|---|
| obligation | plan assets | liability/(asset) | ||||
| EUR 1,000 | 2017 | 2016 | 2017 | 2016 | 2017 | 2016 |
| Balance as at 1 January | 49,339 | 45,587 | 47,087 | 42,143 | 2,252 | 3,444 |
| Included in profit or loss | ||||||
| Current service cost | 470 | 1,232 | - | - | 470 | 1,232 |
| Past service credit | (6) | (2,570) | - | - | (6) | (2,570) |
| Settlements | - | - | - | - | - | - |
| Interest cost/(income) | 1,171 | 1,313 | 1,117 | 1,256 | 54 | 57 |
| 1,635 | (25) | 1,117 | 1,256 | 518 | (1,281) | |
| Included in OCI | ||||||
| Remeasurement; loss/(gain): | ||||||
| Actuarial loss/(gain) | 47 | 7,467 | - | - | 47 | 7,467 |
| Return on plan assets | ||||||
| excluding interest income | - | - | (166) | 5,358 | 166 | (5,358) |
| Asset ceiling | - | - | 790 | - | (790) | |
| Effect of movements in | ||||||
| exchange rates | (1,148) | (3,265) | (1,162) | (3,320) | 14 | 55 |
| (1,101) | 4,202 | (1,328) | 2,828 | 227 | 1,374 | |
| Other | ||||||
| Business combinations | 10,933 | 4,079 | 6,854 | - | ||
| Contributions paid by the | ||||||
| employer | - | - | 977 | 1,285 | (977) | (1,285) |
| Contributions paid by the plan | ||||||
| members | 259 | 180 | 259 | 180 | - | - |
| Bene€ts paid | (1,096) | (605) | (1,096) | (605) | - | - |
| 10,096 | (425) | 4,219 | 860 | 5,877 | (1,285) | |
| Balance as at | ||||||
| 31 December | 59,969 | 49,339 | 51,095 | 47,087 | 8,874 | 2,252 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Equity securities | 14,133 | 10,921 |
| Government bonds | 14,734 | 13,385 |
| Qualifying insurance policies | 22,440 | 22,575 |
| Other plan assets | 202 | 206 |
| Total plan assets | 51,509 | 47,087 |
Due to the asset ceiling applicable to the UK pension plan, in 2017 the actual fair value of the plan assets (EUR 51,5 million) exceeds the recognised plan assets (EUR 51.1 million) by EUR 0.4 million.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Current service costs | 470 | 1,232 |
| Past service costs | (6) | (2,570) |
| Settlements | - | - |
| Expense recognised in the line item 'Social security and other charges' | 464 | (1,338) |
| Interest cost | 54 | 57 |
| Expense recognised in the line item 'Finance costs' | 54 | 57 |
| Total expense recognised in profit or loss | 518 | (1,281) |
The curtailment (part of past service costs) recognised in 2016 was a result of the change of the pension contract in The Netherlands. This amendment resulted in a change in classication from a dened benet plan until 31 December 2016 to a dened contribution plan as of 1 January 2017. All obligations from the pension contract until 31 December 2016 remained in place and as such will be treated as dened benet plan in the future. However, no premiums will be due for this contract and the net dened benet liability is zero as from 31 December 2016.
Principal actuarial assumptions at the reporting date, expressed as weighted average:
| 2017 | 2016 | |
|---|---|---|
| Discount rate as at 31 December | 2.40% | 2.26% |
| Future salary increases | 2.92% | 3.11% |
| Future pension increases | 1.63% | 1.66% |
| Price in'ation | 2.25% | 2.40% |
Assumptions regarding future mortality are based on published statistics and mortality tables. The following tables have been used:
The Group expects EUR 1,238 thousand in contributions to be paid to its dened benet plans in 2018. The Canadian pension plans are partially unfunded. The duration of the funded obligation based on expected cash ows is 14 years, the unfunded plans have an expected duration of 15 years.
The dened benet plans in Austria, Germany and Switzerland relate to a limited number of (retired) employees. For that reason, sensitivity analyses for these plans are not provided. The three signicant dened benet plans are the schemes in the Netherlands, the United Kingdom and Canada.
The plan in The Netherlands has 84 members and was an average salary dened benet plan until 31 December 2016. The plan is nanced through an insurance policy. There are no specic material entity risks to which the plan is exposed and the plan assets are not invested in a single class of investments. From 2016 onwards no additional retirement benets accrue in the dened benet plan. The retirement benets related to employee services in 2017 and onwards accrued in a new pension plan, effective from 1 January 2017. As a result of the parameters in the new pension contract, it classies as a dened contribution plan.
The plan in The United Kingdom has 30 members and is a nal salary dened benet plan. The plan is nanced through a pension fund. The plan assets are not invested in a single class of investments.
The plan in Canada consists of three separate plans: a pension and supplementary retirement pension plan for certain (former) executive members (11 members) and non-pension post-retirement benet plan providing extended health, dental, life insurance and accidental death and dismemberment benets. The supplementary plan and non-pension plan are unfunded.
The obligations arising from the dened benet plans mentioned above are determined using the projected unit credit method. The projected unit credit method determines the expected benets to be paid after retirement, taking dynamic measurement parameters into account and spreading them over the entire length of service of the employees participating in the plan. For this purpose, an actuarial valuation is obtained every year. The actuarial assumptions for the discount rate, salary growth rate, pension trend and life expectancy, which are used to calculate the dened benet obligation are established on the basis of the respective economic circumstances.
The plan assets measured at fair value are deducted from the present value of the dened benet obligation (gross pension obligation). Plan assets are assets where the claim to said assets has, in principle, been assigned to the beneciaries. This results in a net liability or a net asset to be recognised.
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the dened benet obligations of the three signicant dened benet plans by the amounts shown below.
| EUR 1,000 | Increase | Decrease |
|---|---|---|
| Defined benefit plan The Netherlands | ||
| Discount rate (1% point movement) | 5,381 | (4,003) |
| Defined benefit plan The United Kingdom | ||
| Discount rate (1% point movement) | (3,945) | 5,185 |
| Future salary growth (1% point movement) | 676 | (676) |
| Future pension growth (1% point movement) | 3,719 | (3,043) |
| Future in'ation (1% point movement) | 4,058 | (3,832) |
| Future mortality (1 year) | (676) | 676 |
| Defined benefit plan Canada | ||
| Discount rate (1% point movement) | (1,413) | 1,765 |
| Future salary growth (1% point movement) | 38 | (25) |
| Future pension growth (1% point movement) | 433 | (319) |
| Future in'ation (1% point movement) | 433 | (319) |
| Future mortality (1 year) | (263) | 261 |
Although the analysis does not take account of the full distribution of cash ows expected under the plan, it does provide an approximation of the sensitivity of the assumptions shown.
The movements in the termination benets and other long term employee benets are as follows:
| EUR 1,000 Note |
2017 | 2016 |
|---|---|---|
| Liabilities as at 1 January | 7,845 | 6,840 |
| Assumed in business combinations 7 |
115 | 86 |
| Additions (excluding interest cost) | 996 | 879 |
| Interest cost | 54 | 48 |
| Withdrawals | (662) | (360) |
| Releases | - | - |
| Actuarial results | (227) | 322 |
| Effect of movement in exchange rates | (279) | 30 |
| Liabilities as at 31 December | 7,842 | 7,845 |
The termination and other long term employee benets comprises statutory imposed obligations for long or after-service benets.
The movements in provisions are as follows:
| EUR 1,000 | Note | 2017 | 2016 |
|---|---|---|---|
| Balance as at 1 January | 1,164 | 1,351 | |
| Assumed in business combinations | 7 | 3,528 | 255 |
| Provisions made during the year | 220 | 304 | |
| Provisions used during the year | (511) | (240) | |
| Provisions released during the year | (167) | (574) | |
| Effect of movement in exchange rates | (15) | 68 | |
| Balance as at 31 December | 4,219 | 1,164 |
The trade and other payables are as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Trade payables | 213,437 | 170,619 |
| 213,437 | 170,619 |
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Derivatives used for hedging | 1,802 | 1,459 |
| Taxes and social securities | 15,686 | 13,159 |
| Pension premiums | 1,007 | 1,198 |
| Current tax liability | 7,194 | 4,136 |
| Other creditors | 8,737 | 1,664 |
| Accrued interest expenses | 936 | 856 |
| Liabilities to personnel | 21,493 | 16,929 |
| Other accrued expenses | 12,908 | 10,289 |
| 69,763 | 49,690 |
At 31 December 2017, with the exception of some derivatives used for hedging, all trade and other payables have a term of less than one year. Interest swap contracts with a negative fair value of EUR 0.7 million (31 December 2016: negative EUR 1.2 million) expire in the year 2019.
The Group's exposure to currency risk related to trade and other payables is disclosed in note 5 .
The following table shows the carrying amounts and fair values of nancial assets and nancial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for nancial assets and nancial liabilities not measured at fair value if the carrying amount is a reasonable approximation of fair value.
| 31 December 2017 | Carrying amount | Fair value | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EUR 1,000 | Note | Held for trading |
Designated at fair value |
Fair value hedging instruments |
Held to maturity |
Loans and receivables |
Available for sale |
Other €nancial liabilities |
Total | Level 1 Level 2 Level 3 | Total | ||
| Financial assets | |||||||||||||
| measured at fair value | |||||||||||||
| Forward exchange | |||||||||||||
| contracts used for | 23 | - | - | - | - | - | - | - | - | - | - | - | - |
| hedging | |||||||||||||
| - | - | - | - | - | - | - | - | - | - | - | - | ||
| Financial assets not | |||||||||||||
| measured at fair value | |||||||||||||
| Trade and other receivables |
23 | - | - | - | - | 331,709 | - | - 331,709 | |||||
| Cash and cash | |||||||||||||
| equivalents | 24 | - | - | - | - | 61,383 | - | - | 61,383 | ||||
| - | - | - | - | 393,092 | - | - 393,092 | |||||||
| Financial liabilities | |||||||||||||
| measured at fair value | |||||||||||||
| Interest rate swaps used | |||||||||||||
| for hedging | 29 | - | - | 744 | - | - | - | - | 744 | - | 744 | - | 744 |
| Forward exchange | |||||||||||||
| contracts used for | 29 | - | - | 1,058 | - | - | - | - | 1,058 | - | 1,058 | - | 1,058 |
| hedging | |||||||||||||
| Contingent consideration | 26 | - | 3,038 | - | - | - | - | - | 3,038 | - | - | 3,038 | 3,038 |
| - | 3,038 | 1,802 | - | - | - | - | 4,840 | - | 1,802 | 3,038 | 4,840 | ||
| Financial liabilities not | |||||||||||||
| measured at fair value | |||||||||||||
| Other short term €nancial | |||||||||||||
| liabilities | 26 | - | - | - | - | 182,848 | - | - 182,848 | |||||
| Bank loans | 26 | - | - | - | - | 363,749 | - | - 363,749 | |||||
| Other loans and | |||||||||||||
| borrowings | 26 | - | - | - | - | 1,707 | - | - | 1,707 | ||||
| Trade payables | 29 | - | - | - | - | - | - | 213,437 213,437 | |||||
| Other payables | 29 | - | - | - | - | - | - | 67,961 | 67,961 | ||||
| - | - | - | - | 548,304 | - | 281,398 829,702 |
| 31 December 2016 | Carrying amount | Fair value | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EUR 1,000 | Note | Held for trading |
Designated at fair value |
Fair value hedging instruments |
Held to maturity |
Loans and receivables |
Available for sale |
Other €nancial liabilities |
Total | Level 1 Level 2 Level 3 | Total | ||
| Financial assets | |||||||||||||
| measured at fair value | |||||||||||||
| Forward exchange | |||||||||||||
| contracts used for | 23 | - | - | 478 | - | - | - | - | 478 | - | 478 | - | 478 |
| hedging | |||||||||||||
| - | - | 478 | - | - | - | - | 478 | - | 478 | - | 478 | ||
| Financial assets not | |||||||||||||
| measured at fair value | |||||||||||||
| Trade and other | |||||||||||||
| receivables | 23 | - | - | - | - | 264,054 | - | - 264,054 | |||||
| Cash and cash | |||||||||||||
| equivalents | 24 | - | - | - | - | 56,502 | - | - | 56,502 | ||||
| - | - | - | - | 320,556 | - | - 320,556 | |||||||
| Financial liabilities | |||||||||||||
| measured at fair value | |||||||||||||
| Interest rate swaps used | |||||||||||||
| for hedging | 29 | - | - | 1,188 | - | - | - | - | 1,188 | - | 1,188 | - | 1,188 |
| Forward exchange | |||||||||||||
| contracts used for | 29 | - | - | 271 | - | - | - | - | 271 | - | 271 | - | 271 |
| hedging | |||||||||||||
| Contingent consideration | 7, 29, 26 | - | 61,450 | - | - | - | - | - | 61,450 | - | - 61,450 | 61,450 | |
| - | 61,450 | 1,459 | - | - | - | - | 62,909 | - | 1,459 61,450 | 62,909 | |||
| Financial liabilities not | |||||||||||||
| measured at fair value | |||||||||||||
| Other short term €nancial | |||||||||||||
| liabilities | 26 | - | - | - | - | 13,314 | - | - | 13,314 | ||||
| Bank loans | 26 | - | - | - | - | 377,483 | - | - 377,483 | |||||
| Other loans and | |||||||||||||
| borrowings | 26 | - | - | - | - | 1,829 | - | - | 1,829 | ||||
| Trade payables | 29 | - | - | - | - | - | - | 170,619 170,619 | |||||
| Other payables | 29 | - | - | - | - | - | - | 48,231 | 48,231 | ||||
| - | - | - | - | 392,626 | - | 218,850 611,476 |
The following tables show the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the signicant unobservable inputs used.
| Type | Valuation technique | Significant | Inter-relationship between |
|---|---|---|---|
| unobservable | significant unobservable inputs | ||
| inputs | and fair value measurement | ||
| Contingent | Discounted cash flows: The valuation model considers the | • Forecast EBITDA | The estimated fair value would |
| consideration | present value of expected payment, discounted using a risk | margin | increase/(decrease) if: |
| adjusted discount rate. The expected payment is determined | • Risk-adjusted | ||
| by considering the possible scenarios of forecast EBITDA, the amount to be paid under each scenario and the probability of |
discount rate | • the EBITDA margins were higher/ (lower); or |
|
| each scenario. | • the risk-adjusted discount rates were lower/(higher). |
||
| Forward exchange | Market comparison technique: The fair values are based on | Not applicable | Not applicable |
| contracts and | broker quotes. Similar contracts are traded in an active | ||
| interest rate | market and the quotes re'ect the actual transactions in | ||
| swaps | similar instruments. |
| Type | Valuation | Significant |
|---|---|---|
| technique | unobservable | |
| inputs | ||
| Financial assets 1 | Discounted | Not applicable |
| cash 'ows | ||
| Financial liabilities 2 | Discounted | Not applicable |
| cash 'ows |
1 Financial assets include trade and other receivables and cash and cash equivalents.
2 Financial liabilities include syndicated senior bank loans, loans from shareholders, other loans and borrowings, other short term nancial liabilities, trade payables and other payables.
The following table shows a reconciliation from the opening balances to the closing balances for Level 3 fair values.
| Contingent | |
|---|---|
| EUR 1,000 | consideration |
| Balance as at 1 January 2017 | 61,450 |
| Assumed in a business combination | - |
| Paid contingent consideration | (56,506) |
| Gain included in pro€t or loss | (10) |
| Effect of movement in exchange rates | (1,896) |
| Balance as at 31 December 2017 | 3,038 |
| Balance as at 1 January 2016 | 66,217 |
| Assumed in a business combination | 4,535 |
| Paid contingent consideration | (11,393) |
| Gain included in pro€t or loss | (18) |
The net gain included in prot and loss of EUR 10 thousand (2016: EUR 18 thousand) is the result of remeasuring contingent considerations.
Effect of movement in exchange rates 2,109 31 December 2016 61,450
The fair value of contingent consideration is subject to two principle assumptions. The effects of reasonable changes to these assumptions, holding other assumptions constant, are set out below.
| 31 December 2017 | Pro€t or loss | ||
|---|---|---|---|
| EUR 1,000 | Increase | Decrease | |
| EBITDA margin (10% movement) | (31) | 31 | |
| Risk-adjusted discount rate (discount rate 1% point movement) | 1 | (1) |
Gross amounts of nancial assets and liabilities are offset on the basis of offsetting arrangements or are subject to enforceable master netting arrangements or similar agreements that do not meet the requirements for offsetting in the balance sheet.
| EUR 1,000 | Gross amount of €nancial assets and liabilities |
Offsetting | Gross carrying amounts in the balance sheet |
Enforceable master netting arrangements or similar arrangements |
31 December 2017 Net amount |
|---|---|---|---|---|---|
| Trade and other receivables | 334,924 | (3,215) | 331,709 | - | 331,709 |
| Cash and cash equivalents | 62,925 | (1,542) | 61,383 | - | 61,383 |
| Other €nancial assets | - | - | 3,438 | - | 3,438 |
| Trade payables | 213,931 | (494) | 213,437 | - | 213,437 |
| Other payables | 71,390 | (1,627) | 69,763 | - | 69,763 |
| Other short term €nancial liabilities | 185,089 | (1,542) | 183,547 | - | 183,547 |
Financial commitments, contracted for a number of years under leasehold, rental and operational lease agreements, amount in total to EUR 50.8 million (2016: EUR 52.4 million).
Obligations for future minimum long lease and rent payments mainly relate to ofces and warehouses; obligations for future minimum operating lease payments mainly relate to vehicles and other equipment, including ofce equipment.
These obligations, expressed in nominal amounts, are divided over the future years as follows:
| EUR 1,000 | 2018 | 2019 - 2022 | After 2022 | Total |
|---|---|---|---|---|
| Long lease and rent | 11,476 | 26,353 | 4,245 | 42,074 |
| Operational lease | 3,974 | 4,742 | - | 8,716 |
| 15,450 | 31,095 | 4,245 | 50,790 |
During the year an amount of EUR 15.3 million was recognised as an expense in prot or loss in respect of operating leases (2016: EUR 13.5 million).
On top of the above mentioned operating leases, the Group has off balance sheet commitments regarding software licenses of 12.8 million due within the next 5 years. No expenses have been recognised in prot or loss in respect of these licenses.
As at 31 December 2017, the Group has granted guarantees of EUR 1.5 million (31 December 2016: EUR 0.8 million) in total. Those guarantees consist of bank guarantees provided to customs and tax authorities of EUR 1.2 million (31 December 2016: EUR 0.4 million) and ofce rental guarantees of EUR 0.3 million (31 December 2016: EUR 0.3 million).
The Group is a party to a limited number of legal proceedings incidental to its business. As is the case with other companies in similar industries, the Company faces exposures from actual or potential claims and legal proceedings. Although the ultimate disposition of legal proceedings cannot be predicted with certainty, it is the opinion of the Company's management that the outcome of any claim which is pending or threatened, either individually or on a combined basis and considering the insurance cover available, will not have a material effect on the nancial position of the Company, its cash ows and result of operations.
The Group has related party relationships with its shareholders, subsidiaries, Management Board and Supervisory Board and postemployment benet plans. For an overview of the group companies, reference is made to the List of group companies as per 31 December 2017 on page 157.
The nancial transactions between the Company and its subsidiaries comprise nancing related transactions and operational transactions in the normal course of business. Transactions within the Group are not included in these disclosures as these are eliminated in the consolidated nancial statements.
The members of the Management Board and the Supervisory board are considered key management personnel as dened in IAS 24 'Related party disclosures'. For details on their remuneration, reference is made to note 50.
The Group owns 49% of the shares in SARL IMCD Group Algerie. At 31 December 2017 the Group has an outstanding receivables from SARL IMCD Group Algerie of EUR 262 thousand (2016: EUR 57 thousand).
The Group's main post-employment benet plans are the dened benet plans in The United Kingdom, Canada and The Netherlands.
In the nancial year, the contributions to the dened benet plans were EUR 977 thousand (2016: EUR 1,285 thousand). The outstanding payable to the dened benet plans as at the year-end 2017 is EUR 74 thousand (2016: EUR 76 thousand).
There were no material events after 31 December 2017 that would have changed the judgement and analysis by management of the nancial condition as at 31 December 2017 or the result for the year of the Group.
| 31 December | 31 December | |
|---|---|---|
| EUR 1,000 Note |
2017 | 2016 |
| Fixed assets | ||
| Participating interest in group company 39 |
890,378 | 911,311 |
| Deferred tax assets 40 |
17,604 | 20,438 |
| Total fixed assets | 907,982 | 931,749 |
| Current assets | ||
| Trade and other receivables 41 |
63 | 36 |
| Accounts receivable from subsidiary 42 |
661 | 840 |
| Cash and cash equivalents | 38 | 294 |
| Total current assets | 762 | 1,170 |
| Total assets | 908,744 | 932,919 |
| Shareholders' equity 43 |
||
| Issued share capital | 8,415 | 8,415 |
| Share premium | 657,514 | 657,514 |
| Translation reserve | (40,875) | 684 |
| Hedging reserve | (176) | 14 |
| Other reserves | (12,279) | (12,728) |
| Retained earnings | 39,320 | (4,799) |
| Unappropriated result | 77,262 | 72,959 |
| Total equity | 729,181 | 722,059 |
| Non-current liabilities 44 |
173,594 | 183,554 |
| Accounts payable to subsidiaries 45 |
4,279 | 25,478 |
| Other current liabilities 45 |
1,690 | 1,828 |
| Current liabilities | 5,969 | 27,306 |
| Total equity and liabilities | 908,744 | 932,919 |
| EUR 1,000 Note |
2017 | 2016 |
|---|---|---|
| Operating income 36 |
1,442 | 1,901 |
| Wages and salaries 37 |
(2,511) | (2,276) |
| Social security and other charges 37 |
(99) | (9) |
| Other operating expenses | (721) | (578) |
| Operating expenses | (3,331) | (2,863) |
| Net €nance costs | (4,274) | (1,845) |
| Share in results from participating interests, after taxation 39 |
86,390 | 74,153 |
| Result before income tax | 80,227 | 71,346 |
| Income tax expense 38 |
(2,965) | 1,613 |
| Result for the year | 77,262 | 72,959 |
The company nancial statements are part of the 2017 nancial statements of IMCD N.V. (the 'Company').
For setting the principles for the recognition and measurement of assets and liabilities and determination of the result for its company nancial statements, the Company makes use of the option provided in section 2:362 (8) of The Netherlands Civil Code. This means that the principles for the recognition and measurement of assets and liabilities and determination of the result (hereinafter referred to as principles for recognition and measurement) of the company nancial statements of the Company are the same as those applied for the consolidated EU-IFRS nancial statements. These consolidated EU-IFRS nancial statements are prepared according to the standards laid down by the International Accounting Standards Board and endorsed by the European Union (hereinafter referred to as EU-IFRS). Reference is made to the notes to the consolidated nancial statements.
Participating interests are valued on the basis of the equity method.
The share in results from participating interests, after taxation consists of the share of the Company in the results of these participating interests. Results on transactions, where the transfer of assets and liabilities between the Company and its participating interests and mutually between participating interests themselves, are not incorporated insofar as they can be deemed to be unrealised.
Other operating income predominantly relates to management service fees charged to IMCD Group B.V.
The personnel expenses 2017 comprise the wages and salaries including bonuses, cost related to the employee benet plan and social security expenses. Further details are provided in note 50.
In 2017 the Company did not recognise previously unrecognised deferred tax assets related to tax losses carried forward (2016: EUR 4.7 million). The Company utilised deferred tax assets to an amount of EUR 2.8 million in the nancial year (2016: EUR 3.1 million).
The movements of the participating interest in group companies can be shown as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Balance as at 1 January | 911,311 | 635,749 |
| Changes: | ||
| Investments in participating interests | - | 179,681 |
| Share in results from participating interest after taxation | 86,390 | 74,153 |
| Dividends declared | (55,525) | - |
| Movement hedging reserve | (190) | (251) |
| Exchange rate differences | (52,058) | 23,755 |
| Movement other reserves | 450 | (1,776) |
| Balance as at 31 December | 890,378 | 911,311 |
| Accumulated impairments at 31 December | - | - |
The Company, statutorily seated in Rotterdam, owns the Group through a 100% share in the issued capital of IMCD Finance B.V., statutorily seated in Rotterdam. In 2016 the Company made capital contributions of EUR 179.7 million to IMCD Finance B.V.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Balance as at 1 January | 20,438 | 18,805 |
| Changes: | ||
| Recognition and use of tax losses | (2,834) | 1,633 |
| Balance as at 31 December | 17,604 | 20,438 |
The deferred tax assets recognised during 2016 relate to tax losses carried forward by the Dutch scal entity headed by IMCD N.V.
The trade and other receivables primarily relate to prepaid insurance premiums.
The accounts receivable from subsidiary relates to a receivable from IMCD Group B.V. regarding management service fees.
| Issued | Unappro | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| share | Share | Translation | Hedging | Reserve | Other | Retained | priated | Total | |
| EUR 1,000 | capital | premium | reserve | reserve | own shares | reserves | earnings | result | equity |
| Balance as at 1 January | |||||||||
| 2017 | 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | (4,799) | 72,959 | 722,059 |
| Appropriation of prior year's | |||||||||
| result | - | - | - | - | - | - | 44,119 | (44,119) | - |
| 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | 39,320 | 28,840 | 722,059 | |
| Total recognised income and | |||||||||
| expense | - | - | - | - | - | - | - | 77,262 | 77,262 |
| Share based payments | - | - | - | - | - | 2,456 | - | - | 2,456 |
| Purchase own shares | - | - | - | - | (2,004) | - | - | - | (2,004) |
| Cash dividend | - | - | - | - | - | - | - | (28,840) | (28,840) |
| Movement in other reserves | - | - | (41,559) | (190) | - | (3) | - | - | (41,752) |
| Balance as at | |||||||||
| 31 December 2017 | 8,415 | 657,514 | (40,875) | (176) | (7,193) | (5,086) | 39,320 | 77,262 | 729,181 |
| Balance as at 1 January | |||||||||
| 2016 | 8,415 | 657,514 | (19,891) | 265 | (3,118) | (7,652) | (43,550) | 61,848 | 653,831 |
| Appropriation of prior year's | |||||||||
| result | - | - | - | - | - | - | 38,751 | (38,751) | - |
| 8,415 | 657,514 | (19,891) | 265 | (3,118) | (7,652) | (4,799) | 23,097 | 653,831 | |
| Total recognised income and | |||||||||
| expense | - | - | - | - | - | - | - | 72,959 | 72,959 |
| Share based payments | - | - | - | - | - | 1,403 | - | - | 1,403 |
| Purchase own shares | - | - | - | - | (2,071) | - | - | - | (2,071) |
| Cash dividend | - | - | - | - | - | - | - | (23,097) | (23,097) |
| Movement in other reserves | - | - | 20,575 | (251) | - | (1,290) | - | - | 19,034 |
| Balance as at | |||||||||
| 31 December 2016 | 8,415 | 657,514 | 684 | 14 | (5,189) | (7,539) | (4,799) | 72,959 | 722,059 |
| Ordinary shares | |||
|---|---|---|---|
| EUR 1,000 | 2017 | 2016 | |
| In issue at 1 January | 665,929 | 665,929 | |
| Conversion from shareholders' loans | - | - | |
| Issue of shares minus related cost | - | - | |
| In issue at 31 December - fully paid | 665,929 | 665,929 |
At 31 December 2017, the authorised share capital comprised 150,000,000 ordinary shares of which 52,592,254 shares have been issued. All shares have a par value of EUR 0.16 each and are fully paid.
The holders of ordinary shares are entitled to receive dividends and are entitled to one vote per share at meetings of the Company. All shares rank equally with regard to the Company's residual assets.
The translation reserve (legal reserve) comprises all exchange rate differences arising from the translation of the nancial statements of foreign operations as well as from the translation of liabilities that hedge the Company's net investment in foreign subsidiaries.
The hedging reserve (legal reserve) comprises the effective portion of the cumulative net change in the fair value of cash ow hedging instruments related to hedged transactions that have not yet occurred.
The reserve own shares comprises the cost of the Company's shares held by the Group. At 31 December 2017, the Group held 195,000 of the Company's shares (31 December 2016: 155,000 shares).
Other reserves relate to the accumulated actuarial gains and losses recognised in other comprehensive income.
At the Annual General Meeting the following appropriation of the result for 2017 will be proposed: an amount of EUR 32,607 thousand to be paid out as dividend (EUR 0.62 per share) and EUR 44,655 thousand to be added to the retained earnings.
The movement in the non-current liabilities during 2017 is as follows:
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Balance as at 1 January | 183,554 | - |
| Additions | - | 181,132 |
| Amortisation of transaction costs | 375 | (47) |
| Effect of movements in exchange rates | (10,335) | 2,469 |
| Balance as at 31 December | 173,594 | 183,554 |
The non-current liabilities consist of the carrying value of the debt capital market issuance ("Schuldscheindarlehen") with notional values of EUR 100 million and USD 90 million and the remainder of the capitalised nance costs of EUR 0.7 million related to the amendment of IMCD's syndicated banking facilities effected in 2016.
| EUR 1,000 | Curr | Carrying amount |
Contractual cash 'ows |
6 months or less |
6-12 months |
1 - 2 years | 2 - 5 years | >5 years |
|---|---|---|---|---|---|---|---|---|
| Schuldscheindarlehen | EUR | 99,565 | 106,540 | 449 | 878 | 1,332 | 63,273 | 40,608 |
| Schuldscheindarlehen | USD | 74,699 | 84,644 | 1,184 | 1,208 | 2,401 | 79,851 | - |
| Capitalised €nance costs | EUR | (670) | - | - | - | - | - | - |
| Total | 173,594 | 191,184 | 1,633 | 2,086 | 3,733 | 143,124 | 40,608 |
Further details of the Schuldscheindarlehen are provided in note 26 of the consolidated nancial statements.
The Company's current liabilities as at 31 December 2017 amounts to EUR 6.0 million (31 December 2016: EUR 27.3 million) and consists of a short term liability to IMCD Finance B.V. and other current liabilities.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| Accounts payable to subsidiaries | 4,279 | 25,478 |
| Other current liabilities | ||
| Creditors | 123 | 132 |
| Liabilities to personnel | 592 | 519 |
| Accrued interest expenses | 708 | 695 |
| Other accrued expenses | 267 | 482 |
| 1,690 | 1,828 | |
| Current liabilities | 5,969 | 27,306 |
The Company has exposure to the following risks:
In note 5 to the consolidated nancial 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 company nancial statements of IMCD N.V.
The Company forms part of a tax entity for corporate income tax together with other Dutch group companies. As a consequence, the company is jointly and severally liable for the corporate income taxes due by these tax entities.
With reference to Section 2:382a(1) and (2) of The Netherlands Civil Code, the following fees for the nancial year have been charged by Deloitte Accountants B.V. and other Deloitte member fees and afliates to the Company, its subsidiaries and other consolidated entities.
| Deloitte Accountants B.V. |
Other Deloitte member €rms and af€liates |
Total Deloitte | Deloitte Accountants B.V. |
Other Deloitte member €rms and af€liates |
Total Deloitte | ||
|---|---|---|---|---|---|---|---|
| EUR 1,000 | 2017 | 2016 | |||||
| Statutory audits of annual accounts |
486 | 835 | 1,321 | 436 | 702 | 1,138 | |
| Other assurance services | - | - | - | - | - | - | |
| Tax advisory services | - | - | - | - | - | - | |
| Other non-audit services | - | - | - | - | - | - | |
| 486 | 835 | 1,321 | 436 | 702 | 1,138 |
The members of the Management Board and the Supervisory board are considered key management personnel as dened in IAS 24 'Related party disclosures'. For details on their remuneration, reference is made to note 50.
The Company, as service provider, maintains a management service agreement with IMCD Group B.V. for services rendered by the Management Board to the group. The total management service fees charged in 2017 amounted to EUR 1,442 thousand (2016: EUR 1,621 thousand). All related party transactions were priced on an at arm's length basis.
The Management Board and Supervisory board members' compensation, including pension obligations as intended in Section 2:383(1) of The Netherlands Civil Code, which were charged in the nancial year to the Company and group companies is as follows:
| Share based | |||||||
|---|---|---|---|---|---|---|---|
| EUR 1,000 | Year | Salary | Bonus | payment | Pension | Other | Total |
| P.C.J. van der Slikke | 2017 | 515 | 300 | 444 | 42 | 46 | 1,347 |
| 2016 | 513 | 384 | 246 | 39 | 44 | 1,226 | |
| H.J.J. Kooijmans | 2017 | 378 | 222 | 326 | 38 | 41 | 1,005 |
| 2016 | 377 | 283 | 181 | 32 | 36 | 909 | |
| Total | 2017 | 893 | 522 | 770 | 80 | 87 | 2,352 |
| 2016 | 890 | 667 | 427 | 71 | 80 | 2,135 |
The total number of shares granted to P.C.J. van der Slikke and H.J.J. Kooijmans amounts to 33,205 respectively 24,415. The reported bonus and share based payment amounts include adjustments related to prior years. Further details of the Management Board compensation are provided in the Remuneration Report published at the Company's website.
| EUR 1,000 | 2017 | 2016 |
|---|---|---|
| M.G.P. Plantevin | 65 | 34 |
| A.J.T. Kaaks | 50 | 50 |
| J.C. Pauze | 48 | 63 |
| J. Van Nauta Lemke-Pears | 47 | 30 |
| J. Smalbraak | 40 | 27 |
| Total | 250 | 204 |
In addition to the aforementioned compensation, the Management Board and Supervisory Board members receive reimbursements for out-of-pocket expenses. Since these benets serve to cover actual costs incurred and are not considered to form part of the remuneration as such, they have not been included in the above totals.
There were no material events after 31 December 2017 that would have changed the judgement and analysis by management of the nancial condition at 31 December 2017 or the result for the year of the Company.
Rotterdam, 1 March 2018
P.C.J. van der Slikke M.G.P. Plantevin H.J.J. Kooijmans A.J.T. Kaaks
J.C. Pauze J. Van Nauta Lemke-Pears J. Smalbraak
The list of group companies is as follows (100% owned unless mentioned otherwise):
| IMCD Finance B.V. | Rotterdam | The Netherlands |
|---|---|---|
| IMCD Group B.V. | Rotterdam | The Netherlands |
| IMCD Participations II B.V. | Rotterdam | The Netherlands |
| Internatio Special Products B.V. | Rotterdam | The Netherlands |
| IMCD Benelux B.V. | Rotterdam | The Netherlands |
| Jan Dekker B.V. | Rotterdam | The Netherlands |
| IMCD Benelux N.V. | Mechelen | Belgium |
| CBG Chemie Beteiligungsgesellschaft mbH | Cologne | Germany |
| IMCD Deutschland GmbH & Co. KG | Cologne | Germany |
| Otto Aldag Handel GmbH | Cologne | Germany |
| IMCD France Investments S.A.S. | Paris | France |
| IMCD Holding France S.A.S. | Paris | France |
| IMCD France S.A.S. | Paris | France |
| IMCD UK Acquisitions Ltd. | Sutton | United Kingdom |
| IMCD Holding UK Ltd. | Sutton | United Kingdom |
| IMCD UK Investments Ltd. | Sutton | United Kingdom |
| IMCD UK Ltd. | Sutton | United Kingdom |
| IMCD Ireland Ltd. | Dublin | Ireland |
| IMCD South Africa Pty. Ltd. | Isando | South Africa |
| Chemimpo South Africa Pty. Ltd. | Randburg | South Africa |
| IMCD Switzerland AG | Zürich | Switzerland |
| IMCD Ticaret, Pazarlama ve Danişmanlik Limited Şirketi | Istanbul | Turkey |
| Feza Kimya İç ve Dış Ticaret Anonim Şirketi1 | Istanbul | Turkey |
| IMCD Rus LLC | Saint-Petersburg | Russia |
| IMCD Ukraine LLC | Kiev | Ukraine |
| IMCD Czech Republic s.r.o. | Prague | Czech Republic |
| IMCD Polska Sp.z.o.o. | Warsaw | Poland |
| Jan Dekker Polska Sp.z.o.o. | Warsaw | Poland |
| IMCD South East Europe GmbH | Vienna | Austria |
| IMCD Nordic Investments AB2 | Malmö | Sweden |
| IMCD Nordic AB | Malmö | Sweden |
| IMCD Sweden AB | Malmö | Sweden |
| IMCD Finland Oy | Helsingfors | |
| IMCD Danmark AS | Finland | |
| Helsingør | Denmark | |
| IMCD Norway AS | Ski | Norway |
| IMCD Baltics UAB | Vilnius | Lithuania |
| IMCD Italia S.p.A. | Milan | Italy |
| Neuvendis S.p.A.3 | Milan | Italy |
| IMCD Espanã Especialidadis Quimicas S.A. | Madrid | Spain |
| IMCD Portugal Produtos Quimicos Lda | Lisbon | Portugal |
| IMCD Maroc S.a.r.l. | Casablanca | Morocco |
| IMCD Manufacturing Tunisia S.a.r.l. | Tunis | Tunisia |
| IMCD Tunisia S.a.r.l. | Tunis | Tunisia |
| S.a.r.l. IMCD Group Algerie (49% of the shares) | Algiers | Algeria |
| IMCD Australasia Investments Pty. Ltd | Melbourne | Australia |
| IMCD Australasia Pty. Ltd. | Melbourne | Australia |
| IMCD Australia Ltd. | Melbourne | Australia |
| IMCD Additives Pty. Ltd.4 | Melbourne | Australia |
|---|---|---|
| Capitol Product Management Pty. Ltd.4 | Melbourne | Australia |
| Capitol Ingredients Australia Pty. Ltd.4 | Melbourne | Australia |
| Capitol Specialty Products Pty. Ltd.4 | Melbourne | Australia |
| IMCD New Zealand Ltd. | Auckland | New Zealand |
| IMCD Asia Paci€c Sdn Bhd | Shah Alam | Malaysia |
| IMCD Malaysia Sdn Bhd | Shah Alam | Malaysia |
| IMCD Asia Pte. Ltd. | Singapore | Singapore |
| IMCD Singapore Pte. Ltd. | Singapore | Singapore |
| IMCD (Thailand) Co., Ltd. | Bangkok | Thailand |
| IMCD (Shanghai) Trading Co. Ltd. | Shanghai | China |
| IMCD International Trading (Shanghai) Co. Ltd. | Shanghai | China |
| IMCD Plastics (Shanghai) Co. Ltd. | Shanghai | China |
| Internatio Special Products (Philippines) Corporation | Quezon City | Philippines |
| IMCD Philippines Corporation | Manila | Philippines |
| PT IMCD Indonesia (90.01% of shares) | Jakarta | Indonesia |
| PT Sapta Permata (90.01% of shares) | Surabaya | Indonesia |
| IMCD Holding Brazil Ltda. | São Paulo | Brazil |
| IMCD Brasil Comércio e Indústria de Produtos Quimicos Ltda. | São Paulo | Brazil |
| IMCD Brasil Farmacêuticos Importação, Exportação e Representações | ||
| Ltda5 | São Paulo | Brazil |
| IMCD Holdings US, Inc. | Jersey City | United States of America |
| IMCD US LLC | Cleveland | United States of America |
| MJS Sales Inc. | Cleveland | United States of America |
| Mutchler Inc.6 | Harrington Park, New Jersey | United States of America |
| IMCD Puerto Rico Inc.7 | Cayey | Puerto Rico |
| IMCD India Pte. Ltd. | Mumbai | India |
| IMCD Vietnam Company Ltd | Ho Chi Minh City | Vietnam |
| IMCD Kenya Ltd. | Nairobi | Kenya |
| IMCD Japan Godokaisha | Tokyo | Japan |
| L.V. Lomas Limited8 | Brampton | Canada |
| L.V. Lomas Inc.8 | Washington | United States of America |
| Internatio Special Products Egypt LLC9 | Cairo | Egypt |
| IMCD Chile SpA | Santiago de Chile | Chile |
| IMCD Argentina SRL | Buenos Aires | Argentina |
1 Merged with IMCD Ticaret, Pazarlama ve Danişmanlik Limited Şirketi March 2017
Article 22 of the Company's articles of association stipulates the following with regard to the appropriation of the prot: The Management Board, with the approval of the Supervisory Board, decides how much of the freely distributable prot will be reserved. The remaining prot shall be at the free disposal of the Annual General Meeting.
At the Annual General Meeting the following appropriation of the result for 2017 will be proposed: an amount of EUR 32,607 thousand to be paid out in cash as dividend (EUR 0.62 per share) and EUR 44,655 thousand to be added to the retained earnings.
To the Shareholders and the Supervisory Board of IMCD N.V.,
Our Opinion
We have audited the accompanying nancial statements 2017 of IMCD N.V. based in Rotterdam, The Netherlands. The nancial statements include the consolidated nancial statements and the accompanying Company nancial statements.
In our opinion:
The consolidated nancial statements comprise:
The accompanying Company nancial 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 nancial statements" section of our report.
We are independent of IMCD N.V. in accordance with the EU Regulation on specic requirements regarding statutory audit of public-interest entities, the Wet toezicht accountantsorganisaties (Wta, Audit rms 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 sufcient and appropriate to provide a basis for our opinion.
Based on our professional judgement we determined the materiality for the nancial statements as a whole at EUR 6.5 million. The materiality is based on 6% of earnings before tax taking into consideration certain non-recurring income and expenses. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the nancial statements for qualitative reasons.
Last year materiality was slightly lower as it was our rst year audit.
Component audits are performed using materiality levels determined by the judgement of the group audit team, considering materiality for the consolidated nancial statements as a whole and the reporting structure of the group. Component materiality did not exceed EUR 3.25 million.
We agreed with the Supervisory Board that misstatements in excess of EUR 0.325 million, which are identied during the audit, would be reported to them, as well as smaller misstatements that in our view must be reported on qualitative grounds.
IMCD N.V. is at the head of a group of entities. The nancial information of this group is included in the consolidated nancial statements of IMCD N.V.
Because we are ultimately responsible for the opinion, we are 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 components. The extent of the procedures have been determined based on size and a number of more qualitative circumstances. Examples of such circumstances are the nancial performance of the foreign entities and the maturity of markets these entities are operating in. Furthermore, we increased the extent of procedures for recent acquisitions. On this basis, we selected components for which an audit, specied audit procedures or review had to be carried out on the component nancial information.
This resulted in the coverage as presented below:
We have:
By performing the procedures mentioned above at components, together with additional procedures at group level, we have been able to obtain sufcient and appropriate audit evidence about the group's nancial information to provide an opinion about the consolidated nancial statements.
Key audit matters are those matters that, in our professional judgement, were of most signicance in our audit of the nancial statements. We have communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reection of all matters discussed.
IMCD grows its business through organic growth and acquisitions. As a result of growth through acquisitions and previous acquisitions of the Company by private equity, IMCD capitalized goodwill for EUR 582 million and EUR 553 million for other intangibles. These other intangibles are primarily, for EUR 487 million, comprised of supplier relations and related to IMCD's dependency on suppliers to develop and supply the product portfolio. This year goodwill and other intangibles increased mainly due to the acquisition of L.V. Lomas (see Key Audit Matter: Business combinations below).
We identied the valuation of these assets as a key audit matter because of the amounts involved, the importance of management estimates on key assumptions and the inherent risk of the assumed growth expectations. Management estimates are particularly relevant for the projections of future free cash ows of businesses acquired, for estimating inationary and autonomous growth as well as for the discount rates applied to calculate net present values of the future cash ows.
For the 2016 impairment test goodwill was allocated to a number of CGU's and individual acquisitions. In 2017 management re-allocated their goodwill to the three Cash-Generating Units: EMEA, Asia-Pacic and Americas.
This, as we understand, better reects the level of monitoring of the business by the Management Board. The company, as element of integration of their businesses, co-ordinates the supply chain and distribution network within each CGU.
Our audit focused on both testing the design and implementation of internal control measures on behalf of the executive board including the basis for the forecasts and estimates, segregation of duties in connection with preparation and assessment of the projections. We veried whether the projections are based on the internal budgets and forecasts that have been approved by the Supervisory Board. Furthermore we performed a number of substantive tests amongst which auditing the outcome of the estimates of last year (back testing), reviewing the support of the estimates based on the local and group wide recurring annual budgeting and mid-term operating plan processes. We challenged management on proper re-allocation of goodwill to the three segments EMEA, Asia-Pacic and Americas, impairment triggers and the calculation of the impairment on the supplier relations.
We put more emphasis to IMCD's performance in The Americas also considering recent acquisitions, macro-economic developments in Brazil, sensitivity noted in the impairment calculations and the level of management judgement involved.
We engaged rm specialists in benchmarking the inationary growth and discount rates applied with capital market's expectations. We also engaged our specialists in evaluating the calculation models benchmarking against comparable transactions.
We challenged management on the impairment triggers identied for the assessment of potential impairments for the other intangible assets.
Within the context of our audit and based on the materiality applied, we have concluded that the assumptions used in the impairment calculations are reasonable and within acceptable ranges and that the re-allocation of goodwill to the three Cash-Generating Units is reecting the internal level of monitoring goodwill. Furthermore, the re-allocation of goodwill to three CGU's and the sensitivity of the impairment test to changes in assumptions have been sufciently disclosed in Note 17 of the nancial statements.
IMCD has built a large portfolio of businesses. The entities are geographically spread and operating in a variety of established and emerging markets. The operating entities are of different size and scale and vary in maturity of operating and nancial processes. Some of the entities run on globally deployed ERP systems, whilst other operate legacy ERP systems.
We have assessed group-wide internal controls that have been implemented by the Management Board to monitor and manage the nancial and operating performance of the various operating units and have scoped our audit procedures responding to this situation.
In particular, we have conservatively allocated the materiality to the operating entities ("components") and we made a choice to increase our coverage of the components for local audit procedures (full audits or specied audit procedures). Additionally to this we have visited seven entities including the newly acquired business of L.V. Lomas, amongst which all quantitative and qualitative signicant operations, to understand the business dynamics, to plan the audits with the component auditors and review their audit procedures. As group auditor we performed audit procedures related to IT systems, valuation of goodwill and supplier relations, purchase price allocation for new acquisitions, sales and costs of goods sold, loans and borrowings and manual journal entries.
Based on the procedures performed centrally and those performed by the component audit teams, in the context of our audit and based on the materiality applied, we are of the opinion that the risks of material misstatement are sufciently addressed.
IMCD is globally deploying a standardized ERP solution for all operating entities. A substantial number of subsidiaries already implemented this system; though a number of more recent acquisitions are still running legacy IT systems.
We considered IMCD's IT landscape and controls over nancial reporting as basis of designing audit procedures that are appropriate for our audit.
In 2017, similar to 2016, we were not able to rely on automated data processing for certain processes. Alternatively, we gained the required level of assurance from additional activities including data analytics and verication and analyses of relations between movements in cash and goods, as well as supplier and customer conrmations on transactional and year-end positions. IT audit specialists have been deployed to assist us in making various data analyses.
During 2017 the Management Board has given high priority to a program aiming for further improvement in a number of processes in the area of reducing and better monitoring of access to and maintenance of the systems of automated data processing.
IMCD is continuously monitoring and enhancing the effectiveness of its internal control framework. Currently, the Company's management is upgrading its ERP solution and (subsequently) investing in measures that should enable to further rely on the IT environment and related general IT controls. Based on our procedures performed the risks of material misstatement we identied are sufciently addressed.
Business combinations
Accounting for this acquisition in accordance with IFRS 3 requires management to apply estimates to determine the fair value of the identiable assets and liabilities, and any resulting goodwill.
The allocation and valuation of goodwill of EUR 82 million and supplier base EUR 22 million and other intangible xed assets of EUR 1 million arising from the acquisitions were considered to be a key risk as the valuation is based on a number of assumptions such as discount rate and growth rate which are subject to signicant judgement.
We have performed audit procedures and assessed the 'Purchase Price Allocation' in line with the requirements of IFRS 3. Thereto we inspected the Share Purchase Agreements, and evaluated the identication of assets and liabilities acquired including the valuation of goodwill and other intangibles (supplier relations). The Management Board engaged an independent valuation expert.
We evaluated the identication of assets and liabilities acquired, and engaged Deloitte valuation experts to validate the valuations of assets including the supplier relations, and assumptions applied. We also validated the appropriateness of the related disclosures in note 7 of the nancial statements.
Based on our materiality and procedures performed, we are in the opinion that the recognition of assets from the acquisition of L.V. Lomas is in line with the requirements of IFRS 3, and that this acquisition is adequately disclosed in note 7 of the nancial statements.
These matters were addressed in the context of our audit of the nancial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
In addition to the nancial statements and our auditor's report, the annual accounts contain 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 nancial 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 nancial statements.
Management is responsible for the preparation of other information, the report of the Management Board in accordance with Part 9 of Book 2 of the Dutch Civil Code, and the other information as required by Part 9 of Book 2 of the Dutch Civil Code.
We were engaged by the Supervisory Board as auditor of IMCD N.V. on May 9, 2017, as of the audit for year 2017. Since 2016 we have operated as statutory auditor.
We have not provided non-audit services as referred to in Article 5(1) of the EU Regulation on specic requirements regarding statutory audit of public-interest entities.
Management is responsible for the preparation and fair presentation of the nancial 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 nancial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the nancial statements, management is responsible for assessing the Company's ability to continue as a going concern. Based on the nancial reporting framework mentioned, management should prepare the nancial 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 signicant doubt on the Company's ability to continue as a going concern in the nancial statements.
The Supervisory Board is responsible for overseeing the Company's nancial reporting process.
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufcient 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 have detected 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 inuence the economic decisions of users taken on the basis of these nancial statements. The materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identied misstatements on our opinion.
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 e.g.:
modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the Company to cease to continue as a going concern.
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 prole 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 nancial information or specic items.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and signicant audit ndings, including any signicant ndings in internal control that we identied 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 specic 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 Supervisory Board 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 Supervisory Board, we determine the key audit matters: those matters that were of most signicance in the audit of the nancial 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.
Eindhoven, 1 March 2018
Deloitte Accountants B.V.
J. Hendriks
| EUR million | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|---|---|
| RESULTS | |||||||||
| Revenue | 1,907.4 | 1,714.5 | 1,529.8 | 1,358.3 | 1,233.4 | 1,116.6 | 1,023.4 | 852.0 | 686.6 |
| Year on year revenue growth | 11% | 12% | 13% | 10% | 10% | 9% | 20% | 24% | |
| Gross pro€t | 428.7 | 381.6 | 332.8 | 287.6 | 261.3 | 237.9 | 218.0 | 182.0 | 146.0 |
| Gross pro€t in % of revenue | 22.5% | 22.3% | 21.8% | 21.2% | 21.2% | 21.3% | 21.3% | 21.4% | 21.3% |
| Result from operating activities | 125.2 | 107.5 | 91.2 | 82.4 | 73.4 | 69.7 | 48.4 | 50.1 | 34.5 |
| Operating EBITDA1 | 166.0 | 152.1 | 131.8 | 112.7 | 99.0 | 92.0 | 86.6 | 69.1 | 51.2 |
| Operating EBITA2 | 161.7 | 147.8 | 128.3 | 110.0 | 96.6 | 90.2 | 85.3 | 68.0 | 50.1 |
| Year on year Operating EBITA growth | 9% | 15% | 17% | 14% | 7% | 6% | 25% | 36% | |
| Operating EBITA in % of revenue | 8.5% | 8.6% | 8.4% | 8.1% | 7.8% | 8.1% | 8.3% | 8.0% | 7.3% |
| Conversion margin3 | 37.7% | 38.7% | 38.5% | 38.2% | 37.0% | 37.9% | 39.1% | 37.4% | 34.4% |
| Net result before amortisation / non-recurring items | 110.1 | 102.6 | 87.2 | 54.3 | 13.1 | (0.7) | 6.1 | 36.2 | 19.6 |
| CASH FLOW | |||||||||
| Free cash 'ow4 | 161.3 | 140.4 | 119.3 | 94.6 | 80.5 | 86.5 | 76.3 | 56.6 | 62.7 |
| Cash conversion margin5 | 97.2% | 92.3% | 90.5% | 83.9% | 81.3% | 94.0% | 88.1% | 81.9% | 122.4% |
| BALANCE SHEET | |||||||||
| Working capital | 314.3 | 248.4 | 227.8 | 179.7 | 150.7 | 121.0 | 105.9 | 90.4 | 61.2 |
| Total equity | 729.2 | 722.1 | 653.8 | 530.8 | (67.1) | (49.7) | (27.9) | 60.6 | 17.4 |
| Net debt | 490.0 | 397.6 | 437.5 | 266.6 | 823.5 | 724.6 | 671.6 | 256.5 | 256.6 |
| Net debt/Operating EBITDA ratio6 | 2.8 | 2.6 | 2.9 | 2.4 | 8.3 | 7.9 | 7.8 | 3.7 | 5.0 |
| EMPLOYEES | |||||||||
| Number of full time employees end of period | 2,265 | 1,863 | 1,746 | 1,512 | 1,452 | 1,108 | 979 | 937 | 798 |
| SHARES | |||||||||
| Number of shares issued at year-end (x 1,000) | 52,592 | 52,592 | 52,592 | 50,000 | |||||
| Weighted average number of shares (x 1,000) | 52,425 | 52,477 | 51,612 | 25,118 | |||||
| Earnings per share (weighted) | 1.47 | 1.39 | 1.20 | 0.79 | |||||
| Cash earnings per share (weighted)7 | 2.06 | 2.01 | 1.79 | 1.42 | |||||
| Proposed dividend per share | 0.62 | 0.55 | 0.44 | 0.20 |
1 Result from operating activities before depreciation of tangible assets and amortisation of intangible assets and non-recurring items
2 Result from operating activities before amortisation of intangibles and non-recurring items
3 Operating EBITA in percentage of Gross prot
4 Operating EBITDA excluding non-cash share based payment expenses, plus/less changes in working capital, less capital expenditures
5 Free cash ow in percentage of Operating EBITDA
6 Including full year impact of acquisitions
7 Result for the year before amortisation (net of tax)
Head office IMCD N.V. The Netherlands Phone: +31 10 - 290 86 84 Fax: +31 10 - 290 86 80
Concept and graphic design Campagne, Rotterdam, The Netherlands
Creation and publication software Tangelo Software B.V., Zeist, The Netherlands
Photography Image bank IMCD N.V.
www.imcdgroup.com
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