Novem Group S.A.

Novem Group S.A. 222100KIY63U7PV8N251 2023-03-31 222100KIY63U7PV8N251 2022-03-31 222100KIY63U7PV8N251 2021-04-01 2022-03-31 222100KIY63U7PV8N251 2022-03-31 222100KIY63U7PV8N251 2021-03-31 222100KIY63U7PV8N251 2022-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2021-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2021-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2021-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2021-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2022-04-01 2023-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2021-04-01 2022-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2022-04-01 2023-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2021-04-01 2022-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2021-04-01 2022-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2022-04-01 2023-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2022-04-01 2023-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2021-04-01 2022-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2023-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2023-03-31 ifrs-full:RetainedEarningsMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2023-03-31 ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember 222100KIY63U7PV8N251 2023-03-31 ifrs-full:CapitalReserveMember 222100KIY63U7PV8N251 2022-03-31 ifrs-full:IssuedCapitalMember 222100KIY63U7PV8N251 2022-04-01 2023-03-31 iso4217:EUR iso4217:EUR xbrli:shares xbrli:pure iso4217:EUR xbrli:shares NOVEM ANNUAL REPORT 2022/23 Established in 1947 5,488 employees worldwide 12 locations worldwide NOVEM AT A GLANCE The Novem Group operates from the German town of Vorbach and is the world leader in high-quality trim elements and decorative function elements in car interiors. The customers include all major premium carmakers worldwide. They appreciate the innovative technology, exclusivity and exquisite design of Novem’s products. NOVEM ANNUAL REPORT 2022/23 2 KEY RESULTS In accordance with the European Securities and Markets Authority (ESMA) guide- lines on Alternative Performance Measures (APMs), the Group provides a deﬁni- tion, the rationale for use and a reconciliation of APMs used. The Group uses the APMs shown in the following table. The deﬁnitions and required disclosures of all APMs are provided in the glossary of this Annual Report. All mentioned APMs are used to track the Group’s operating performance. It is neither required by nor presented in accordance with IFRS. It is also not a measure of ﬁnancial performance under IFRS and should not be considered as an alternative to other indicators of operating performance, cash ﬂow or any other measure of performance derived in accordance with IFRS. in € million FY 2021/22 FY 2022/23 Income statement Revenue 614.51 700.3 Adj. EBIT 80.9 81.7 Adj. EBIT margin (%) 13.2% 11.7% Adj. EBITDA 111.7 114.2 Adj. EBITDA margin (%) 18.2% 16.3% Cash ﬂow Capital expenditure 18.6 17.9 Capital expenditure as % of revenue 3.0% 2.6% Free cash ﬂow 65.0 84.5 1 Including revenue-related adjustments in € million 31 Mar 22 31 Mar 23 Balance sheet Trade working capital 41.0 53.3 Total working capital 127.3 124.0 Net ﬁnancial debt 165.6 123.0 Net leverage (x Adj. EBITDA) 1.5x 1.1x NOVEM ANNUAL REPORT 2022/23 3 ABOUT THIS REPORT Novem Group publishes both ﬁnancial and non‑ﬁnancial informa- tion in its Annual Report 2022/23. The ﬁnancial year of Novem Group S.A. ends on 31 March and therefore covers the period from 1 April 2022 to 31 March 2023. This Annual Report includes a Non‑ﬁnancial Report in accordance with the Non‑Financial Reporting Directive (NFRD), Luxembourg Law and with reference to the Global Reporting Initiative (GRI) Standards. The consolidated ﬁnancial statements of Novem Group S.A. and the stand‑alone ﬁnancial statements of Novem Group S.A. were audited by KPMG AG Wirtschaftsprüfungsgesellschaft (KPMG). EDITORIAL NOTE The report is only available in English and solely pub- lished in digital form. All references to people such as employees, shareholders, etc. in this report apply equally to all identities. NOVEM ANNUAL REPORT 2022/23 4 TABLE OF CONTENTS CONTENTS 1 TO OUR SHAREHOLDERS 4 CONSOLIDATED FINANCIAL STATEMENTS Letter from the CEO _______7 Report of the Supervisory Board_____9 Consolidated statement of comprehensive income _63 Novem and the capital market____11 Consolidated statement of ﬁnancial position __64 Consolidated statement of cash ﬂows____65 1 Consolidated statement of changes in equity___66 2 NON-FINANCIAL REPORT Notes to consolidated ﬁnancial statements__67 TO OUR SHAREHOLDERS Responsibility statement _________ 119 Organisation _______14 Setup and organisation of the Management Board _ 120 2 Compliance _______20 Independent auditor‘s report ____ 121 Supply chain ______23 NON-FINANCIAL Employees and society______25 REPORT 5 ANNUAL ACCOUNTS Energy and emissions_____29 3 Balance sheet______ 126 GROUP 3 GROUP MANAGEMENT REPORT Proﬁt and loss account_____ 127 MANAGEMENT REPORT Notes to the annual accounts ____ 128 4 Corporate structure and business activities__33 Responsibility statement ____ 136 Key events _______34 Independent auditor‘s report ____ 137 Business and general environment ____36 CONSOLIDATED FINANCIAL Financial performance ______38 STATEMENTS 6 ADDITIONAL INFORMATION Financial position ______42 5 Cash ﬂows_______45 Segment reporting ______46 Financial calendar_____ 142 ANNUAL Stand‑alone results of operations and ﬁnancial position of Contact _______ 142 ACCOUNTS Novem Group S.A. _______47 Imprint__________ 142 6 Risks and opportunities ______48 Glossary _______ 143 Corporate governance statement_____57 Disclaimer ______ 145 ADDITIONAL Subsequent events_____60 INFORMATION Outlook _______61 NOVEM ANNUAL REPORT 2022/23 5 Forged wood open pore 1 To our shareholders LETTER FROM THE CEO CONTENTS Ladies and gentlemen, the ongoing geopolitical situation of war in Europe has accompanied us throughout the past business year and continues to keep us on our toes. This situation confronts us with new challenges every day, ﬂanked by an energy crisis not experienced for a long time. Higher material and transport costs as well as volatile inﬂation rates additionally require us to constantly 1 ﬁnd new solutions. Despite the diﬃcult circumstances, we can look back on a successful TO OUR business year that was characterised by growth and proves our strategic SHAREHOLDERS positioning to be the right one. Thanks to the extraordinary commitment of 2 our employees, we managed to reach a remarkable result in the ﬁnancial year 2022/23: thus, we were again able to grow by 14% and achieve a consolidated revenue of €700 million. NON-FINANCIAL REPORT I am pleased that consistently pursuing our strategic goals has paid off. 3 Our emphasis remains on both winning new customers as well as grow- ing our business with premium brands, an approach that has resulted in positive developments in orders on hand and customer acquisition. While GROUP our focus remains on the premium car market, premiumisation in cars is MANAGEMENT another growth driver for Novem’s future. This trend shows volume brands REPORT increasingly equipping their ﬂagship models with premium trims, which 4 opens many doors. In the European market, Novem has won Opel as a new customer whose CONSOLIDATED ﬂagship Insignia, an e‑SUV, will be equipped by us, underlining the general FINANCIAL trend towards premiumisation. On top of that, Novem has acquired the STATEMENTS long‑range SUV called Gravity from Silicon Valley‑based EV start‑up Lucid 5 Motors. In Asia, Novem has secured the ﬁrst electric vehicle from FAW after winning the contract for the Hongqi luxury SUV platform. This conﬁrms our successful China strategy, resulting from the trust that customers place ANNUAL in Novem. More than three years ago, we started to establish a Program ACCOUNTS Management department including a Tech Centre at our Langfang site in 6 China as an independent engineering hub for customers in the Asian mar- ket. In addition to newly acquired platforms, premium car manufacturers who want to position themselves more strongly in China are also looked ADDITIONAL after there. INFORMATION Günter Brenner Günter Brenner NOVEM ANNUAL REPORT 2022/23 7 Chief Executive Oﬃcer Chief Executive Oﬃcer CONTENTS We see it as our duty to increasingly exercise our The research we have conducted into the materials for Especially in these times, it is important for us to know responsibility for the environment and society. For us, our trim elements to make these even more environ- that loyal and committed shareholders stand by the sustainability is a fundamental attitude with which we mentally compatible yields results towards suitability Novem Group. We truly appreciate your dedication act at all levels for the beneﬁt of the environment, as for series production. to the best of Novem. On behalf of the Management well as for the beneﬁt of our employees, our custom- Board and our employees, I would like to thank you ers and our suppliers. It is crucial for Novem’s success We have received the ﬁrst FSC certiﬁcation Preferred by for that. to ensure the health of our staff and to consistently Nature for the Langfang site meeting the requirements 1 adhere to workplace safety standards worldwide. We of the FSC standard with the Chain of Custody and We hope that we can continue to count on your trust began the process of ISO 45001 occupational health Controlled Wood system. At the Eschenbach site, we and support. Be sure that we will put all our energy and safety certiﬁcation in March 2022 and completed continued the reforestation we started last year and and passion into achieving our goals and meeting your TO OUR it successfully for the sites Vorbach including central planted 4,500 trees. In order to give back to nature what expectations. I look forward to further cooperation and SHAREHOLDERS oﬃce (Germany), Eschenbach (Germany), Langfang we draw from it, we will launch further sustainability exchange with you in the new ﬁnancial year. 2 (China) and Querétaro (Mexico). The site Pilsen (Czech initiatives. These measures and activities are summa- Republic) will follow at the beginning of 2024. rised in our Non‑ﬁnancial Report, which is part of this Kind regards, Annual Report. NON-FINANCIAL On our path to greater sustainability, we see some REPORT things as key to Novem’s future. As the production It is with cautious optimism that we assess Novem’s 3 of carbon-neutral cars is the ultimate prospect for future business prospects. Depending on the develop- all those involved in the process, we stay committed ment of the overall economic environment, we aim to greenhouse gas neutrality and are developing a to continue our proﬁtable growth with a mid‑term Günter Brenner GROUP detailed roadmap to achieve this in Germany by 2025, Adj. EBIT margin of 14 to 15%. We are committed Chief Executive Oﬃcer MANAGEMENT in Europe by 2030 and globally by 2035. To exercise our to these ﬁnancial targets and combine sustainable REPORT responsibility across our supply chains, we pay more growth with economic success. 4 attention than ever to ensuring that our suppliers meet high environmental, social and sustainability standards. CONSOLIDATED FINANCIAL “ STATEMENTS Our passion for high-end quality makes us a preferred 5 premium supplier worldwide. It pays off that we strive ANNUAL for growth in full awareness of our responsibility for ACCOUNTS 6 people and the environment. “ — Günter Brenner (CEO) ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 8 REPORT OF THE SUPERVISORY BOARD CONTENTS Dear shareholders, the ﬁnancial year ending 31 March 2023 was signiﬁcantly affected by the war in Ukraine and its direct and indirect effects on the automotive industry. The imposed international sanctions continued to stress the 1 supply chains still tensed by the late effects of the Covid‑19 pandemic and semiconductor shortages. Novem had to cope with signiﬁcant cost increases regarding energy and material supply as well as logistic TO OUR services. Accompanied by ongoing Covid‑19 restrictions in China and SHAREHOLDERS the continuous volatile call‑offs by OEMs, it was Novem’s aim to safe- 2 guard the Company‘s ability to act economically and to improve costs as far as possible. As a result of excellent management, Novem has once more proven its resilience and forward-looking strategy when NON-FINANCIAL facing adverse market conditions. REPORT 3 In the ﬁnancial year ending 31 March 2023, the Supervisory Board of Novem Group S.A. diligently fulﬁlled its tasks in accordance with the statutory requirements and the Articles of Association of Novem GROUP Group S.A. The Supervisory Board regularly advised and continuously MANAGEMENT monitored the work of the Management Board regarding strategic and REPORT operational decisions as well as governance topics and compliance. 4 When required by the Articles of Association, the Supervisory Board approved the actions of the Management Board after carefully review- ing them. In the ﬁnancial year ending 31 March 2023, the members CONSOLIDATED of the Supervisory Board were Dr. Stephan Kessel (Chairman), Mark FINANCIAL Wilhelms (Deputy Chairman), Natalie C. Hayday, Florian Schick and STATEMENTS Philipp Struth. 5 The Supervisory Board held a total of ﬁve meetings and made two circular resolutions during the ﬁnancial year ending 31 March 2023. ANNUAL In four of ﬁve of the Supervisory Board meetings, all members were ACCOUNTS present. In compliance with the social distancing requirements, some 6 of the meetings were held partly via conference calls. In the meetings, Dr. Stephan Kessel the Management Board wholly and regularly informed the Supervisory Chairman of the Supervisory Board Board about the status and performance of the Novem Group, includ- ADDITIONAL ing opportunities and risks, its market position, course of business as INFORMATION NOVEM ANNUAL REPORT 2022/23 9 CONTENTS well as relevant ﬁnancial data. The discussions were The Committee discussed all remuneration and nom- During the ﬁnancial year ending 31 March 2023, there based on regular and extensive reports in verbal and ination-related topics. It prepared the Remuneration were no conﬂicts of interest between the members of written form presented by the Management Board. Report in accordance with the Luxembourg Law of 1 the Supervisory Board and the Company. The Management Board and the Supervisory Board August 2020, the Second Shareholders’ Rights Directive maintained close contact also outside of the regular (SRD II, Directive (EU) 2017/828). The Remuneration On behalf of the Supervisory Board, I would like to thank meetings to exchange all important information related and Nomination Committee held three meetings via the Management Board of Novem Group S.A. for their to the Novem Group. This close collaboration also conference calls. All meetings of the Remuneration and remarkable performance throughout the last ﬁnancial 1 included strategy discussions as well as information Nomination Committee were attended by all members. year and their open and effective collaboration. I would on organisational development. As Christine Hollmann like to thank all employees for their outstanding contri- resigned from the Management Board on 8 August None of the members of the Supervisory Board butions to the Company’s success during challenging TO OUR 2022, the Supervisory Board appointed Mathias Rieger attended only half or fewer of the meetings of the times and, last but not least, our shareholders for their SHAREHOLDERS as a member of the Management Board effective as Supervisory Board and the committees to which they continuous support. 2 of 1 January 2023. belong. Luxembourg, 22 June 2023 During the reporting period, the members of the Audit The Supervisory Board examined the Company’s annual On behalf of the Supervisory Board of Novem Group S.A. NON-FINANCIAL and Risk Committee were Mark Wilhelms (Chairman), accounts, the consolidated ﬁnancial statements and REPORT Dr. Stephan Kessel and Natalie C. Hayday. Signiﬁcant the Group Management Report for the ﬁnancial year Yours sincerely, 3 questions related to auditing, accounting, risk manage- ending 31 March 2023. Representatives of the audi- ment, compliance and internal control systems were tor KPMG attended the meetings of the Audit and Risk especially reviewed by the Audit and Risk Committee. Committee on 11 August 2022, 23 November 2022, GROUP The Audit and Risk Committee monitored the effective- 9 February 2023 and 25 May 2023, at which the ﬁnan- MANAGEMENT ness of the internal control system, the risk manage- cial statements were examined. The representatives of Dr. Stephan Kessel REPORT ment system, the internal auditing system and the the auditor reported extensively on their ﬁndings, pro- Chairman of the Supervisory Board 4 compliance management system. The Audit and Risk vided a written presentation and were available to give Committee discussed the quarterly reports, the rela- additional explanations and opinions. The Supervisory tionship with investors as well as the audit assignment Board did not raise objections to the Company’s annual CONSOLIDATED to KPMG Luxembourg, including the focus areas of the accounts or to the consolidated ﬁnancial statements FINANCIAL audit. Furthermore, the Audit and Risk Committee mon- drawn up by the Management Board for the ﬁnancial STATEMENTS itored an examination of ﬁnancial and non‑ﬁnancial year ending 31 March 2023 and to the auditors’ pres- 5 information for the year ended 31 March 2022 by the entation. Furthermore, the Supervisory Board approved CSSF, which did not lead to any ﬁndings. In the ﬁnancial the Non‑ﬁnancial Report of Novem Group S.A. year ending 31 March 2023, the Committee held ﬁve ANNUAL meetings. In four of ﬁve meetings, all members were The Supervisory Board agreed to the proposal of the ACCOUNTS present. All meetings were held via conference calls. Management Board, recommended by the Audit and 6 Risk Committee, and approved the Company’s annual In the reporting period, the members of the Remunera- accounts and the consolidated ﬁnancial statements for tion and Nomination Committee were Dr. Stephan Kes- the ﬁnancial year 2022/23. The auditor issued unquali- ADDITIONAL sel (Chairman), Mark Wilhelms and Natalie C. Hayday. ﬁed audit opinions on 22 June 2023. INFORMATION NOVEM ANNUAL REPORT 2022/23 10 NOVEM AND THE CAPITAL MARKET CONTENTS Stock market bottlenecks and transport routes. Despite this positive development, China experienced a weak year, with Diﬃculties and upheavals marked the stock market MSCI China marking a downturn of around ‑22.0% in year 2022. The strains on the global economy already 2022 and moving sideways in the ﬁrst three months caused by Covid‑19 were exacerbated by Russia’s of 2023. invasion of Ukraine on 24 February 2022 and rising geopolitical concerns in Europe. Uncertainties about Of all the elements affecting the business environment 1 sanctions and thus supply chain issues as well as in 2022, the semiconductor shortage remained the big- surging energy prices weighed on the stock market. gest concern for the automotive industry, resulting in With inﬂationary pressures mounting, this led to the volatile call-offs. As this made it challenging to manage TO OUR highest inﬂation rates experienced for many years. In staﬃng and utilisation safely, ineﬃciencies arose. SHAREHOLDERS response, the Federal Reserve System (FED) began 2 cautiously raising interest rates at the beginning of the During the reporting period (1 April 2022 to 31 March year, a course that the European Central Bank (ECB) 2023), the broad MSCI World Index recorded a moder- also took shortly afterwards. However, with inﬂation ately large price decline of around -8.7%. With a loss NON-FINANCIAL proving to be sticky even into 2023, more forceful inter- of roughly ‑9.6%, the S&P500 index recorded an even REPORT est rate hikes resulted, leading to the highest interest higher loss during the same period. Looking at Europe 3 rates in about 15 years. While central banks showed as the most substantial market in terms of revenue a reasonably clear stance, the market did not appreci- for Novem, the EURO STOXX 50 recorded a whopping ate the remaining uncertainties and closed its worst increase of 10.1%. While the DAX at blue chip level GROUP stock market year since 2008. With the start of 2023, recorded a rise of 8.2% (4.7% without dividends) in MANAGEMENT lingering recession fears and emerging banking con- the reporting period, the associated small cap index REPORT cerns following the collapse of three US banks and the SDAX performed much worse with ‑8.7%. On the other 4 second-largest Swiss bank within days of each other, hand, the benchmark index DAXsubsector Auto Parts & this may not bode well for better stock market days. Equipment recorded an increase of 15.8% in the report- Surprisingly, the market seems to have largely factored ing period. CONSOLIDATED in most of the negative circumstances and showed a FINANCIAL strong recovery in the ﬁrst quarter of 2023, with tech- STATEMENTS Stock performance nology stocks performing particularly strongly. 5 Although Covid‑19 was no longer the leading issue in Novem started its ﬁnancial year 2022/23 with a share Europe and Americas, it still was in Asia, particularly price of €10.40 on 1 April 2022. The share then hit not ANNUAL China. The strict zero-Covid policy, with its severe only its low for the ﬁnancial year at €5.88 on 29 Sep- ACCOUNTS restrictions and eventual abrupt abolition, signiﬁcantly tember 2022, but also its all‑time low. From there, the 6 impacted economic and stock development in 2022. stock was able to breathe again and recovered strongly Dr. Johannes Burtscher When the eagerly awaited end of China’s strict zero- to mark its high at €10.85 on 9 March 2023. It closed Chief Financial Oﬃcer Covid policy ﬁnally came in December 2022, the global the ﬁnancial year at €9.80 on 31 March 2023. ADDITIONAL market saw ﬁrst encouraging signs of easing supply INFORMATION NOVEM ANNUAL REPORT 2022/23 11 CONTENTS Annual General Meeting of the AGM, Novem’s shareholders would receive a Since it is of the utmost importance to the IR team to dividend of €1.15 per share (ordinary plus special) for actively listen to shareholders and potential investors Novem’s ﬁrst Annual General Meeting (AGM) took the ﬁnancial year 2022/23. This would correspond to and take their feedback seriously, an evaluation of the place on 25 August 2022. Since Covid‑19 measures a payout ratio of 99.0% of the consolidated net proﬁt. meetings to date showed a lot of potential regarding in Luxembourg were extended until the end of 2022, the comparatively low trading volume. As part of an no physical presence of the shareholders was legally initiative to tackle this, Novem appointed a second Des- Investor Relations activities required. The effective participation and exercise of the ignated Sponsor and has seen ﬁrst satisfactory results 1 shareholders’ rights were guaranteed through distance ever since. Although the increase in trading volume is voting. In total, 92.3% of the voting share capital was Due to the ever‑changing market environment with inﬂa- an area that requires more patience, the IR team will represented at the AGM, which approved each agenda tionary pressures and supply chain bottlenecks, it was take the feedback into account and continue to work TO OUR item by a large majority. Amongst other things, the crucial for the Investor Relations (IR) team to maintain on improving the matter. Novem is particularly keen SHAREHOLDERS shareholders approved the dividend distribution of an ongoing open dialogue with capital market stakehold- to bring investors and analysts to its central oﬃce to 2 €0.40 per share for the ﬁnancial year 2021/22. ers. Ensuring equal treatment, timely information and experience the products and production processes continuity meant numerous one-on-one meetings and ﬁrst‑hand and to make the business model and poten- conference calls alongside the regular quarterly investor tial even more tangible. NON-FINANCIAL Dividend and analyst conferences. As a sign of increasing interest REPORT in the investment case, Hauck Aufhäuser initiated cover- 3 The Management Board, in agreement with the Super- age, joining four other active analysts. In addition, two SHARE DATA visory Board, will propose distributing an ordinary roadshows were conducted, one physically in London as of 31 March 2023 dividend of €0.40 per share (PY: €0.40) for the ﬁnancial and another digitally, to build long-term relationships and GROUP year 2022/23 to the AGM on 24 August 2023. Addi- further increase awareness of the share. Novem was MANAGEMENT tionally, the Management Board will propose a special also represented at two conferences meeting existing REPORT dividend of €0.75 per share. Subject to the approval shareholders and potentially interested parties in person. • Ticker symbol: NVM 4 • ISIN: LU2356314745 “ • WKN: A3CSWZ Novem delivered a strong performance CONSOLIDATED FINANCIAL • Frankfurt Stock Exchange STATEMENTS under challenging trading circumstances. • Market segment: Prime Standard 5 • Number of shares: 43,030,303 The results again proved its resilient • Dematerialised shares with no nominal value ANNUAL • Market capitalisation: €421,696,969 ACCOUNTS business model. “ • Highest price FY 2022/23: €10.85 6 • Lowest price FY 2022/23: €5.88 — Dr. Johannes Burtscher (CFO) • Closing price: €9.80 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 12 Premium synthetics 2 Non‑ﬁnancial Report ORGANISATION INNOVATIONS FOR FUNCTIONALITY AND SUSTAINABILITY CONTENTS Business model Companies of the Novem Group Integrating technical functions like wireless charging into high-quality genuine materials Founded in 1947, Novem can look back on a success • Novem Group S.A. is a real challenge, as the thinnest possible story lasting several decades. In this time, Novem has • Novem Group GmbH materials are needed. This is where our grown continuously, entering new markets and extend- • Novem Beteiligungs GmbH more than 75 years of experience and ex- ing its product and material portfolio. Today we are the • Novem Deutschland GmbH pertise in handling genuine materials come global market leader for high‑quality trim parts such • Novem Car Interior Design GmbH into play. Novem has developed an applica- 1 as centre consoles, beltlines or dashboards as well • Novem Car Interior Design Vorbach GmbH tion as part of the centre console that inte- as decorative functional elements in car interiors. In • Novem Car Interior Design Metalltechnologie GmbH grates wireless charging into a sustainable, 2022, we produced around 27.7 million components for • Novem Car Interior Design S.p.A. Bergamo decorative wooden surface while providing TO OUR a wide range of vehicles, especially in the premium car • Novem Car Interior Design k.s. front- and backlighting. SHAREHOLDERS segment. We manufacture our products for a growing • Novem Car Interior Design d.o.o. 2 customer base that includes the world’s leading pre- • Novem Car Interior Design, Inc. mium car manufacturers. • Novem Car Interior Design Mexico S.A. de C.V. • Novem Car Interior Design S. de R.L. NON-FINANCIAL Novem Group S.A. has been listed on the Frankfurt • Novem Car Interiors Design (China) Co., Ltd. REPORT Stock Exchange since 19 July 2021. 3 Economic stability and capacity for Novem locations worldwide transformation GROUP MANAGEMENT • Americas: 1,807 employees | Honduras, Mexico, The automotive industry is undergoing a fundamen- REPORT USA tal transformation. Electriﬁcation, autonomation 4 • Europe: 2,893 employees | Czech Republic, Ger- and digitalisation are changing the way vehicles are many, Italy, Slovenia designed, manufactured and used. Along with these • Asia: 788 employees | China developments, the concept of the vehicle interior is CONSOLIDATED also changing. New surfaces and spaces are emerging Centre console with sustainable lime wood FINANCIAL We manage our global network of production, logistics and with them the opportunity to redesign the interior. panelling and integrated wireless charging STATEMENTS and sales locations from our central oﬃce in Vorbach in Autonomous driving is also making this space increas- application 5 Bavaria, Germany. The parent company Novem Group ingly experiential, and consumers have ever higher S.A. is located in Contern, Luxembourg. We currently expectations of functionality and comfort. have 12 locations in Europe, Asia and Americas where ANNUAL we employ 5,488 people. Our international presence As the global industry leader, Novem wants to actively plays a key role here: with renewable and recycled raw ACCOUNTS helps us to be close to our customers and to distribute shape this change. We are responding to the transfor- materials, we are reducing our ecological footprint and 6 our products worldwide. mation of the industry with targeted investments to creating sustainable values for our customers. For prepare our employees and our locations for the chal- example, we are researching alternative materials such lenges ahead and to drive forward the development as bio-based synthetics, vegan adhesives and sustain- ADDITIONAL of new technologies and innovation. Sustainability able substrate. We are also developing new designs INFORMATION NOVEM ANNUAL REPORT 2022/23 14 CONTENTS that cater to our customers’ increasing demands for In ﬁnancial year 2021/22, Novem disclosed a part of Consequently, Novem does not report any taxonomy‑ functionality, sustainability and quality. Our spirit of its business activities, namely the manufacture of eligible turnover or related opex. The analysis of the research is reﬂected in the large number of patents interior or trim components and other parts intended capital expenditures in ﬁnancial year 2022/23 showed and utility models held by Novem. for use in electric vehicles, under economic activity 3.3 that no material investments made by Novem fall (manufacture of low carbon technologies for trans- under the EU taxonomy either. Further information on A solid economic foundation enables us to make invest- port). This attribution was made in accordance with the turnover, opex and capex can be found in chapter Con- ments that secure our future viability as a company. In widespread interpretation of the EU taxonomy for auto‑ solidated ﬁnancial statements of the Annual Report. 1 the ﬁnancial year 2022/23, the Novem Group achieved motive suppliers at the time. Consequently, the related sales of €700.3 million (PY: €614.6 million). turnover, capital expenditure (capex) and operational Novem welcomes the EU Commission’s announce- expenditure (opex) were reported as taxonomy-eligible ment to address the treatment of key components for TO OUR (see Non‑ﬁnancial Report as part of the Annual Report manufacturing activities in the low-carbon transport SHAREHOLDERS Addressing the EU taxonomy 2021/22 for further details). sector in future revisions of the regulation. 2 In accordance with the European Non‑Financial Report- For ﬁnancial year 2022/23, a working group initiated Since Novem is proactively addressing sustainability ing Directive (NFRD), companies are required to include at Group level consisting of specialists and executives regulation, the working group also assessed the Mini- NON-FINANCIAL taxonomy disclosures in their non‑ﬁnancial reporting from the Accounting, Controlling, Investor Relations mum Safeguards. The analysis showed that Novem REPORT as of 2021. This also applies to Novem. The EU taxon- and Central Quality & EHS (Environment, Health and is already well prepared to fulﬁl the requirements in 3 omy is a classiﬁcation system for economic activities Safety) departments reassessed all business activities the areas of taxation, anticorruption, fair competition aimed at achieving the goals of the Paris Agreement by at Novem together with a consultancy with regard to and human rights. With the changes in its supply chain means of transparency in the capital market. the requirements of the EU taxonomy. In doing so, all management, which will take place this year as part GROUP recent developments in the interpretation of the EU of the preparation for the German Supply Chain Due MANAGEMENT The Taxonomy Regulation with its corresponding taxonomy as well as oﬃcial statements from the EU Diligence Act (Lieferkettensorgfaltspﬂichtengesetz REPORT delegated acts sets threshold values for economic Commission have been taken into account. (LkSG)), Novem will even exceed the current status of 4 activities, particularly in CO2‑intensive sectors. These compliance with the Minimum Safeguards in any future mainly relate to two of the six environmental objec- In light of the change in information, Novem refrains EU taxonomy reporting. tives of the European Union (EU). Under the Regula- from re-designating sales made from components for CONSOLIDATED tion, an economic activity contributes substantially use in electric vehicles under activity 3.3. The main FINANCIAL Product safety and quality to the achievement of an environmental objective reason for this decision was the clariﬁcation by the STATEMENTS (taxonomy alignment) if the threshold values for this EU Commission that only OEMs are to report under 5 environmental objective are not exceeded, none of the activity 3.3. Our products are not components relevant to safety other environmental objectives is negatively affected in the vehicle. Nevertheless, we are committed to high by the economic activity (Do No Signiﬁcant Harm The attribution to activity 3.6 (manufacture of other low‑ standards of quality and safety along the entire value ANNUAL (DNSH)) and the Minimum Safeguards are met. This carbon technologies) was also thoroughly investigated, chain – from planning and manufacturing to the deliv- ACCOUNTS year, companies are required to report the extent of but Novem’s business activities do not exactly match ery to our customers. We aspire to the highest quality 6 taxonomy eligibility and alignment on the objectives cli- the deﬁnition. and therefore use high-end materials and modern pro- mate change mitigation and climate change adaptation. duction processes. Novem has a Quality Management System certiﬁed in conformity with IATF 16949 in place ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 15 CONTENTS at all its locations. This is how we consistently improve our processes and ensure that our products are in com- pliance with the high quality standards. All safety and quality aspects are controlled by Central Quality Management, which deﬁnes the guidelines applicable to all locations in the Group. Each location 1 has a dedicated Quality Manager that implements all central regulations. TO OUR In keeping with our commitment to quality, we pro- SHAREHOLDERS cess many of our products to a relatively high degree 2 by hand, thereby lending them particular exclusivity. By combining different materials such as wood, alu- minium, carbon and premium synthetics and by using NON-FINANCIAL renewable raw materials such as ﬂax (linen) and bam- REPORT boo, we create highly individual, innovative products. In 3 addition, at our Novem Interior World design centre, we work on ideas for new and sustainable surfaces. GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 16 CONTENTS Sustainability management Sustainability organisation of the Novem Group Social, environmental and sustainable economic responsibility will empower Novem and the entire auto- Sustainability mobile industry to move forward into the future. The Board Executive Board benchmark for this at Novem is provided by customer of the Novem Group goals and consumer aspirations, alongside key social 1 developments. Responsibility for sustainability The strategic responsibility for sustainability at Novem TO OUR lies with the Executive Board, which heads the Sustain- SHAREHOLDERS ability Board of the Novem Group. This body, compris- 2 ing representatives from the central divisions, decides Legal and Human Quality on the strategic direction in matters of sustainability. Purchasing Compliance Resources Management For this purpose, it is in constant exchange with the NON-FINANCIAL relevant specialist departments and is informed by all REPORT departments about sustainability-relevant matters on Coordination Responsibility for 3 a monthly basis. Responsibility for Responsibility for of group-wide social and environ- compliance employee concerns sustainability mental standards in activities the supply chain The sustainability agenda for our operational activities GROUP is managed by various departments: the EHS & Sustain- MANAGEMENT ability team, which is part of Central Quality Manage- REPORT ment, is responsible for coordinating global activities 4 on the topics of environment, health and safety. The Human Resources department deals with all the con- EHS & Sustainability cerns and requirements that affect the employees. CONSOLIDATED Compliance with social and environmental standards Operational controlling of sustainability and coordination FINANCIAL in the supply chain is the responsibility of Purchasing. STATEMENTS of sustainability activities of the Group 5 ANNUAL reports on aspects relating to sustainability ACCOUNTS 6 EHS coordination of the plants ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 17 CONTENTS Integration of stakeholders Suppliers and partners: supplier portal, membership of • Lüdenscheid Plastics Institute (Kunststoff‑Institut various networks, trade fairs and exhibitions Lüdenscheid) As a globally active enterprise, we are in continuous • Partner Circle of the University of Applied Sciences communication with numerous stakeholder groups. Politics: associations, direct communication with local (OTH) Amberg‑Weiden These include our existing and potential employees, representatives • Partner Duale Hochschule Gera-Eisenach customers and consumers, suppliers and partners as well as policymakers and members of the general pub- Press and media: reports, website, press releases, 1 Determination of material sustainability topics lic. We keep our employees constantly informed about social media all important developments in the Group. We also seek close cooperation with customers, consumers and Investors and analysts: investor relations website, To identify material topics in the area of sustainability, TO OUR our suppliers and partners. Besides using digital and publications, capital market presentations, confer- we carried out an analysis in 2020. In this context, we SHAREHOLDERS analogue media to facilitate communication, we also ences, investor relations newsletter, roadshows, calls evaluated a total of 13 topics in terms of their impact 2 take the opportunity to meet stakeholders in person at and meetings on people and the environment (inside-out perspective), events such as trade fairs and exhibitions. We maintain taking into account the views of our stakeholders. We dialogue with politicians and business leaders, espe- Memberships and partnerships (selection) extended this analysis in 2021 to include the perspec- NON-FINANCIAL cially within the scope of our membership of numerous tive of business relevance (outside‑in perspective). For REPORT associations and initiatives, and we engage in direct • German Association of the Automotive Industry this purpose, we conducted an online survey among 3 communication at a local level. (Verband der Automobilindustrie (VDA)) managers who are familiar with sustainability issues at • Association of the Wood Industry and Plastics Novem. We combined the results of these two analyses Our formats for dialogue with stakeholders Processing Bavaria/Thuringia (Verband der Holz‑ to obtain an initial assessment of the material topics. GROUP wirtschaft und Kunststoffverarbeitung Bayern/ MANAGEMENT Employees: employee newspaper inside, intranet Thüringen e.V.) In a ﬁnal stage, the results were discussed, validated REPORT NovemNET, Family Day, Open Day, website, social • BF/M Research Centre on Business Management and partially adapted by the managers involved. From 4 media, employee portal for Questions of Medium‑sized Companies (BF/M this, we derived a total of eight topics that can be clas- Betriebswirtschaftliches Forschungszentrum für siﬁed as material both with regard to our impact on the Applicants: cooperation with universities (e.g. OTH Fragen der Mittelständischen Wirtschaft e.V. (BF/M environment and society and in terms of their relevance CONSOLIDATED Amberg‑Weiden, University of Bayreuth), Code of Bayreuth)) to our business. These topics were validated by man- FINANCIAL Conduct, job advertisements, website, social media, • Federal Association for Supply Chain Manage- agement again at the beginning of 2023. STATEMENTS regional career fairs at institutes of higher education ment, Procurement and Logistics (Bundesverband 5 or as organised by supra-regional associations Materialwirtschaft, Einkauf und Logistik e.V. (BME)) • Plastics Information Europe (Kunststoff Informa- Customers and consumers: brochures, website, com- tion Verlagsgesellschaft mbH) ANNUAL pany presentations, corporate videos, roadshows • German‑speaking SAP User Group (Deutschspra- ACCOUNTS (attendance or digital), personal customer appoint- chige SAP Anwendergruppe e.V. (DSAG)) 6 ments, dispatch of design samples and catalogues, • VOICE – Federal Association of IT Users (VOICE – trade fairs and exhibitions (e.g. with other suppliers Bundesverband der IT‑Anwender e.V.) or partners), presentations at international specialist • ISELED (Intelligent Smart Embedded LED) Alliance ADDITIONAL conferences. • Driving Vision News (DVN) INFORMATION NOVEM ANNUAL REPORT 2022/23 18 CONTENTS Material non-ﬁnancial topics Non-ﬁnancial aspects Material non-ﬁnancial topics Chapter according to the Non-Financial Reporting Directive (NFRD) High‑quality Products and 1 Customer Satisfaction Business model Business model Economic Stability Transformation Capability TO OUR Combating corruption and Compliance Responsible corporate governance SHAREHOLDERS bribery 2 Procurement and Supply Chain Supplier management and sustainable procurement Human rights Management Human rights Supplier management and sustainable procurement Decent Working Conditions and Employee matters NON-FINANCIAL Human Rights Employees and society Social issues REPORT Occupational Health and Safety Employees and society Employee matters 3 Energy and Emissions Climate protection Environmental concerns GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 19 COMPLIANCE CONTENTS Responsible corporate governance suppliers and sub-suppliers to act in accordance with Elements of the Novem Code of Conduct the principles deﬁned therein. Any breach or violation Value‑based action is the foundation for our global of those principles can be reported by internal or exter- • Compliance with applicable laws on a local, national business activities. One of our four core values is nal persons via our web-based whistle-blower system, and international level responsibility. In concrete terms, this means that we which can be used to submit reports anonymously • General principles of conduct take responsibility for the impact of our business and in encrypted form. These are then examined by • Working conditions and human rights and always consider our stakeholders’ expectations. the Corporate Legal and Compliance department and, • Dealings with business partners and third parties 1 Conscious and ethically correct behaviour towards where necessary, result in corrective measures being • Competition and corruption employees, colleagues, business partners, society and taken in close coordination with the specialist units and • Protection of property the environment is an essential component of Novem’s the management under strict conﬁdentiality. We are • Data privacy and data security TO OUR system of values. Each and every individual is required not aware of any violations of the Code of Conduct • Protection of the environment SHAREHOLDERS to act responsibly, fairly and in accordance with the principles in this reporting year. • Communication and ﬁnancial responsibility 2 rules. Our commitment to universally valid human rights and Compliance recognised social standards constitutes the basis of NON-FINANCIAL The foundation of our actions our own corporate actions and our cooperation with REPORT suppliers and partners. Therefore, the Code of Con- Conduct in accordance with integrity and statutory 3 As a global player and a partner of leading automo- duct reﬂects the principles relating to human rights legislation forms the basis for our business operations. tive manufacturers in the premium segment, we are and decent working conditions in accordance with We have clearly formulated the ground rules for this subject to many different statutory regulations and the the United Nations Charter of Human Rights and the behaviour in our Code of Conduct. Novem upholds GROUP high standards prevailing in the automobile industry. International Labour Organisation Declaration on Fun- fair and undistorted competition involving compliance MANAGEMENT We are committed to complying with the regulations damental Principles and Rights at Work. Furthermore, with the relevant competition and antitrust regulations. REPORT in place and we take responsibility for our actions. Our the Code of Conduct adopts the content of various Each employee at Novem is responsible for acting in 4 Quality Management has been certiﬁed in conformity national regulations on conﬂict minerals as its guide- accordance with these principles. Our employees are with IATF 16949. This international standard based on line for a responsible procurement policy. The protec- supported and advised by the relevant supervisors. EN ISO 9001 combines existing general requirements tion of the environment is likewise part of our Code of CONSOLIDATED for Quality Management Systems in the automobile Conduct. As a result of the recent changes, our entire Novem manages the issue of compliance through the FINANCIAL industry. value chain is committed to ensuring compliance with Corporate Legal and Compliance department, which STATEMENTS all environmental regulations and further measures for reports directly to the Management Board. Compli- 5 We have deﬁned how we live up to our responsibility continuous improvement of environmental and energy ance Management provides support for adherence to throughout the Group in our Code of Conduct, which eﬃciency. ethical conduct in conformity with statutory regulations deﬁnes key statutory regulations, ethical principles, in the course of routine day-to-day business and also ANNUAL values and ideals, along with internal and external ensures integrity at organisational level. For this pur- ACCOUNTS guidelines for integrity of conduct. It applies equally pose, Compliance Management works closely with the 6 to all the employees, management staff and execu- specialist departments and operational business units. tive managers working at the Novem Group, as well Furthermore, local compliance partners are available as to the Supervisory Boards elected at the individual to provide advice at all locations throughout the world. ADDITIONAL companies. We also expect our business partners, Employees and external business partners alike can INFORMATION NOVEM ANNUAL REPORT 2022/23 20 CONTENTS Risk management report any breaches or infringements of these princi- The Management Board at Novem is responsible for ples by telephone, email or via the web-based whistle- compliance with tax obligations. Based on the alloca- blower system on our website www.novem.com. Novem deals with any and all risks that may exist tion of business activity, this responsibility is part of the or arise from and for its business activities within remit of the Vice President Accounting and Tax. Con- Our Compliance Policy gives our employees concrete the framework of its central risk management in the tinuous communication and consultation take place guidelines for acting in accordance with the rules and Controlling department. We intend to continuously with all the stakeholder groups with an interest in this regulations. This document can be accessed at any improve this risk management to match the growth matter. Novem is regularly audited by the tax authori- 1 time on the intranet. In the reporting year, we provided of the Group, for example, by also integrating sustain- ties in various jurisdictions. There is a regular exchange further training on the content of the Code of Con- ability aspects. This involves analysing matters such of information with the responsible local and national duct, on the issue of anti-bribery as well as on IT and as transitory risks resulting from new statutory legisla- tax authorities. Within the Group, we constantly identify TO OUR information security and data privacy, each with high tion and regulations on climate protection, such as the and assess tax risks on the basis of management and SHAREHOLDERS participation rates of well beyond 90%. We continue introduction of a CO2 tax or a ban on diesel vehicles controlling systems. The Vice President Accounting 2 to provide all relevant employees with annual training in large cities. We also take technological innovations and Tax reports to the Management Board on important on these topics. We are not aware of any incidence of into account. From today’s perspective, there are no tax issues and projects on a monthly basis. If complex corruption in the reporting year. ESG-related (Environmental, Social, Governance) risks decisions must be made, expert reports and opinions NON-FINANCIAL or opportunities associated with Novem’s own busi- are obtained from outside the company. We shall make REPORT At regular intervals, we conduct workshops with the ness activities, business relationships or products and the area of Corporate Tax even more eﬃcient by further 3 specialised departments to provide ongoing training services that could have a signiﬁcant negative impact developing process-oriented checks and balances. on selected compliance-relevant topics. This business on the non‑ﬁnancial aspects in accordance with the year, we held regular training sessions on competition NFRD. In the business year 2022/23, we integrated GROUP Data protection and information security and antitrust law for the relevant employees of the Pur- the EcoVadis IQ application into our Supplier Quality MANAGEMENT chasing, Sales, Quotation Management and Research Management system. We intend to use this tool for REPORT and Development departments. These trainings help ESG risk assessment for our own business area as well Data protection and the conﬁdentiality of information 4 to sensitise our employees with regard to dealing with as the downstream value chain, among other things, to are ﬁxed elements of our corporate principles. We con- partners and suppliers with integrity and in compliance fulﬁl the obligations of the German Supply Chain Due sistently comply with the relevant laws and regulations with the law. Diligence Act (LkSG). on data protection whenever we collect, store, process CONSOLIDATED or transfer personal data and information. FINANCIAL As a matter of principle, we record potential corrup- STATEMENTS Taxes tion risks as part of our compliance risk management The protection of conﬁdential and secret data is abso- 5 and assess them in terms of probability and damage lutely essential, particularly in cooperation with our consequences. In the reporting year, we also launched As we operate globally, we are confronted with a wide business partners. When we exchange conﬁdential compliance risk workshops and analyses, ﬁrst at our range of complex tax regulations in the many countries information with customers and suppliers of Novem, ANNUAL central oﬃce and then at all locations worldwide. The we do business in. The Novem Group and its compa- we conclude appropriate non-disclosure agreements ACCOUNTS ﬁrst round of these workshops is expected to be com- nies have both unrestricted and restricted tax liability to protect the secrecy of this information. To live up 6 pleted by mid‑2023. The ﬁndings of the workshops will in various countries. Complying with the applicable tax to its responsibility, Novem has a dedicated IT and be integrated into the group-wide compliance manage- laws and meeting the associated tax obligations is part information security team that is made up of repre- ment system in the future. of our fundamental principles. sentatives from IT Security and Compliance. We have ADDITIONAL also established a central notiﬁcation oﬃce at Novem INFORMATION NOVEM ANNUAL REPORT 2022/23 21 CONTENTS for IT issues and malfunctions relevant to security. The Novem Group is also supported by an external Data Protection Oﬃcer. To safeguard the necessary IT and information secu- rity, Novem has established a certiﬁed information security management system in accordance with the 1 TISAX Standard (Trusted Information Security Assess- ment Exchange). This is based on the DIN EN ISO 27001 standard. In this context, we have implemented TO OUR and tested technical and organisational measures. SHAREHOLDERS These are reviewed, improved and renewed continu- 2 ously. After recertiﬁcation in Vorbach in the previous reporting period, we also successfully carried out the planned certiﬁcation in Atlanta (USA), Langfang NON-FINANCIAL (China) and Querétaro (Mexico) in conformity with REPORT TISAX in ﬁnancial year 2022/23; this will remain valid 3 until November 2025. Beyond that, we also continue to internally assess all plants and locations regarding IT and information security. GROUP MANAGEMENT Each employee has an obligation to deal responsibly REPORT with personal data in compliance with the relevant 4 statutory regulations and to protect conﬁdential infor- mation. We have therefore summarised all provisions under data protection legislation and regulations on IT CONSOLIDATED and information security in relevant guidelines. Online FINANCIAL training sessions are used to provide our employees STATEMENTS with information on the topics of data protection and 5 IT and information security at regular intervals. In the reporting year, well beyond 90% of employees with PC workstations at the European locations took part in ANNUAL online training on data protection. ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 22 SUPPLY CHAIN CONTENTS Supplier management and sustainable Environmental and social standards improved the share of local sourcing by four percent- procurement age points to 44% compared to last year; the ﬁgure is 66% in the case of auxiliary and process materials. The Novem supplier network extends across many In view of the wide variety of materials we use, our countries, which often have differing requirements in value chain is highly diverse. It is therefore all the more environmental and social matters. Naturally, we always Guidelines for procurement important that we build stable, trusting and long-term comply with national legislation in these areas. Wher- relationships with our partners. This is the basis for ever our internal rules transcend the relevant statutory 1 purchasing materials that meet our demanding qual- The Novem Code of Conduct deﬁnes basic require- regulations, we apply our higher standards. We have ity requirements. Close partnerships also enable us ments that we apply to cooperation with our suppli- established the social and environmental requirements to respond rapidly to changing and more stringent ers, such as the prohibition of child labour, respect for applicable to our suppliers in the group-wide Novem TO OUR requirements. human rights, commitment to freedom of association procurement conditions, the Supplier Manual and the SHAREHOLDERS and compliance with environmental regulations. In the Code of Conduct. All Novem employees receive annual 2 reporting year, we were not aware of any infringements training on the Code of Conduct, which includes human The supply chain at Novem of these requirements throughout the Novem supplier rights in our value chain. network. In the course of supplier management, we NON-FINANCIAL Novem maintains a global network of around 420 sup- review compliance with the Code of Conduct on a Novem requires all new suppliers of series materi- REPORT pliers for the procurement of production materials. This random basis. Suspected breaches can be reported to als to conﬁrm compliance with the Code of Conduct 3 includes small family-run companies as well as large our Central Compliance Management either by internal and Supplier Manual. In line with these requirements, corporations. During the reporting year, we purchased personnel or by external parties. Business partners, new suppliers can only be integrated into the system goods valued at €344 million for production. The larg- suppliers and third parties can also submit reports via if they have made a commitment to compliance with GROUP est product groups in terms of sales include untreated, our web-based whistle-blower system. If infringements the Code of Conduct. Environmental management is MANAGEMENT galvanised and painted plastic parts, electrical compo- of the Code of Conduct are substantiated, Novem also an important aspect when selecting new suppliers. REPORT nents, surface materials, granules, aluminium panels requires immediate compliance and reserves the right Certiﬁcation of speciﬁc suppliers in conformity with 4 and veneers. These account for around 82% of the total to apply sanctions as appropriate (e.g. new business ISO 14001 and ISO 50001 has therefore been deﬁned procurement volume. on hold), even including termination of the business as an objective. Relevant suppliers are determined relationship. each year on the basis of an assessment of the manu- CONSOLIDATED Purchasing at Novem is carried out centrally on the facturing processes for the supplied products. FINANCIAL basis of product groups. In addition, local Purchasing We describe concrete, group-wide standards for our STATEMENTS departments also provide support in the procurement supplier relationships in our Supplier Manual. These The certiﬁcation is included in the annual supplier 5 of goods. The procurement strategy at Novem provides include quality, environmental and health protection assessment. Currently, 88% of the largest suppliers for sourcing the necessary materials for series produc- and compliance with the principles set out in our Code of series materials in terms of purchasing volume tion from national suppliers wherever possible. This of Conduct. Against this background, we expect our comply with the ISO 14001 standard and 57% comply ANNUAL enables us to reduce the risk of delivery bottlenecks, suppliers to have an energy management system with the ISO 50001 standard. Failure on the part of a ACCOUNTS avoid long transport routes and promote the local in place, implement the EU Chemicals Regulation supplier to comply with this requirement has a nega- 6 economy. However, the high requirements placed on (REACH), conﬁrm the exclusion of conﬂict minerals tive impact on the supplier assessment in accordance our products by our customers mean that this is only and use reusable packaging. with IATF 16949. As of ﬁnancial year 2021/2022, the feasible to a certain extent in some countries. Novem evaluation of suppliers of relevant product groups will ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 23 CONTENTS also take into account whether they have a certiﬁed occupational health and safety management system in place in accordance with the ISO 45001 standard. In 2022, we successfully continued to evaluate our suppliers by EcoVadis platform. 74% of our suppliers based on the annual turnover had been evaluated by 1 the end of ﬁnancial year 2022/23. Our original target to evaluate 90% of suppliers by June 2024 is still valid. The Corporate Social Responsibility (CSR) assessment TO OUR is incorporated into the general supplier assessment. SHAREHOLDERS 2 We have implemented the EcoVadis IQ tool as part of our risk‑based approach as required by the German Supply Chain Due Diligence Act (LkSG). We consider NON-FINANCIAL the risk of human rights violations in our supply chains REPORT to be very low since the majority of our suppliers are 3 renowned and globally active certiﬁed companies in the automotive industry. GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 24 EMPLOYEES AND SOCIETY CONTENTS Decent working conditions in the HR goals on a management level to increase the were no business locations where the right to freedom focus on this ﬁgure and to ensure we pay more atten- of association and collective bargaining was infringed Our most important asset is our employees with their tion to the reasons why employees decide to leave us. or put at risk. knowledge, their motivation and their commitment. This information is gained through exit interviews and The health and safety of our employees is our top analysis with superiors. Where recommendable, we are The form of direct and indirect participation of employ- priority. Our commitment to this objective is set out also applying an instrument that allows us to detect ees at Novem varies depending on country and loca- in our corporate policy. We offer all our employees the risk of employees leaving at an early stage. The tion. In Germany, the Works Constitution Act regulates 1 at Novem a working environment based on fairness ﬁndings are used to deﬁne further actions to prevent the corporate co-determination of employees. We also and trust, irrespective of the location. Our overarching undesired ﬂuctuation. cooperate on the basis of mutual trust with the indi- personnel strategy is therefore based on the univer- vidual local works councils at each location. The eco - TO OUR sally applicable corporate values of the Novem Group: nomic situation of the business is regularly discussed SHAREHOLDERS Employees by region and gender at the Novem Responsibility, Excellence, Innovation and Commitment. on the Economics Committee. Potential changes for 2 Group the workforce are always discussed with the works Our way of working together across all locations is council. We inform our employees in good time of deﬁned in our Code of Conduct. To safeguard the any operational changes that may impact them by FY FY FY NON-FINANCIAL 2020/21 2021/22 2022/23 standards and principles for personnel work in the posting notiﬁcations on the bulletin board and on our REPORT interests of the Group, human resources at Novem intranet NovemNET. In the case of time-limited collec- Total for Europe 3,010 2,969 2,893 3 are managed both by the central oﬃce as well as tive bargaining agreements and company agreements, Of which female 43% 44% 44% decentrally so that all employees can be offered the we approach the respective contractual party in good Of which male 57% 56% 56% best possible support and development at a local level. time to initiate the conclusion of new agreements as Total for Americas 1,958 1,842 1,807 GROUP Every employee has a deﬁned local contact whom they necessary. MANAGEMENT Of which female 42% 44% 46% can consult for their issues and concerns. We promote REPORT international communication through an annual world- Of which male 58% 56% 54% We are also committed to cooperating with employee 4 wide HR Conference, which was unable to take place representatives at our international locations, for exam- Total for Asia 749 729 788 in 2022 due to the pandemic but is planned for 2023. ple, with the local unions in Bergamo (Italy), Querétaro Of which female 37% 35% 36% (Mexico) and Žalec (Slovenia). Our approach is guided Of which male 63% 65% 64% CONSOLIDATED At our locations across the world, a total of 5,488 by mutual respect and trust, and we work towards FINANCIAL Total worldwide 5,717 5,540 5,488 people were employed at the end of the ﬁnancial year arriving at solutions to issues and challenges that STATEMENTS 2022/23. During this period, we were able to recruit a adequately accommodate the interests of all parties 5 total of 1,161 new employees. involved. Dialogue and communication The undesired ﬂuctuation rate among employees was ANNUAL Attractive employer around 3.5% for the central oﬃce in the reporting year Our common purpose includes our commitment to col - ACCOUNTS (PY: 3.2%). To keep this ﬂuctuation at a low level, we are lective freedom of association. We therefore promote 6 increasing our efforts to develop up-and-coming junior close cooperation with employee representatives at the We offer our employees a working environment that staff and are focusing our human resources work on various levels. Taking account of employees’ interests also rewards their performance in ﬁnancial terms. We further training for managers. Furthermore, the unde- is anchored in our Code of Conduct and applies equally provide performance-based compensation systems ADDITIONAL sired ﬂuctuation rate in the central oﬃce was included across all our locations. Over the reporting period, there worldwide by means of bonus systems that we have INFORMATION NOVEM ANNUAL REPORT 2022/23 25 CONTENTS Health and safety Number of employees on parental leave established in the individual countries. In Germany, around 90% of all employees are remunerated under collective bargaining agreements. Furthermore, there We protect the health and safety of our employees FY FY FY are non-payscale components that take account of through a comprehensive health and safety manage- 2020/21 2021/22 2022/23 the individual operational situations in the various ment system. The topics of workplace safety and Number of employees departments. health protection throughout the Novem Group are 1,309 1,329 1,271 in Germany managed by the central EHS Team, which is integrated 1 Of which female Our compensation package is complemented by within Central Quality Management. In addition, each 12 14 31 on parental leave additional beneﬁts. In Germany, we fund the company site has an EHS Oﬃcer that implements the central Of which male pension plan for our employees. Furthermore, we objectives and goals. 25 40 36 on parental leave TO OUR offer them capital‑forming beneﬁts under the collec- SHAREHOLDERS Total 37 54 67 tive bargaining agreement. We also take account of Novem has deﬁned multilocational processes in the 2 the changing needs of our employees and support a guideline for health and safety in order to comply with healthy work-life balance for combining career and With our attractive conditions, we aim to retain our staff statutory requirements for health and safety. Novem family. We therefore support ﬂexible working models and attract new employees. This is increasingly impor- has introduced a certiﬁed occupational health and NON-FINANCIAL and offer individual solutions in consultation with our tant in view of the challenges on the labour market: safety system in conformity with ISO 45001 in the REPORT employees. demographic change and the associated shortage of ﬁnancial year 2022/23. In 2022, the German locations 3 skilled workers are also having an impact on Novem – in Vorbach and Eschenbach as well as the production Likewise, at our international locations, we provide especially when it comes to ﬁlling vacant positions. It is sites in Langfang (China), Querétaro (Mexico) and our employees with remuneration packages that fre- becoming particularly diﬃcult to ﬁnd specialists, espe- Žalec (Slovenia) were successively certiﬁed; the pro- GROUP quently extend beyond the local statutory regulations. cially in the ﬁelds of engineering and IT. To address new duction site in Pilsen (Czech Republic) is scheduled to MANAGEMENT For example, Novem enables numerous employees in talents under these conditions, we are extending our follow in 2023. All production sites worldwide are to be REPORT Mexico and Honduras to obtain health and life insur- personnel marketing activities to social media as part certiﬁed by 2025. 4 ance. Novem also offers employees in these two coun- of a pilot project. In September 2022, we launched our tries ﬁnancial beneﬁts such as vacation and Christmas Instagram account, which gives insights into working Safety in the workplace bonuses in addition to the statutory requirements. at Novem, the beneﬁts we provide our employees and CONSOLIDATED how we understand teamwork. This is, on the one hand, FINANCIAL a platform to show and remind our own employees We aim to comply with the legal requirements for STATEMENTS what Novem is providing. On the other hand, this allows health and safety. Furthermore, we want to contribute 5 us to better reach younger target groups, such as train- to improving systems and take appropriate action to ees, participants in dual study degree programmes and prevent accidents from occurring. At Novem, we focus career starters. From September 2022 until the end of on the correct handling of hazardous substances such ANNUAL the ﬁnancial year 2022/23, we created 66 posts and as paints, coatings and ﬁnishes. ACCOUNTS gained more than 470 followers. 6 The basis for hazard- and accident-free work is our risk assessment process. This is holistically designed and thus covers all the key steps: hazards are determined, ADDITIONAL the level of risk is assessed and protective measures INFORMATION NOVEM ANNUAL REPORT 2022/23 26 CONTENTS Health promotion are deﬁned on this basis. The method is strictly regu- We also provide our employees with training on occu- lated and takes national, international and Novem- pational safety matters at regular intervals. We make speciﬁc requirements into account. This ensures an use of digital training methods and practical instruc- In addition to workplace safety, we also actively pro- overall view of the workplace while at the same time tion sessions at relevant potential hazard points. The mote the health of our employees. A central component guaranteeing the highest possible level of safety. It training sessions are prepared and carried out by the of this is our integrated Company Healthcare Manage- can therefore be applied to all Novem locations and is relevant EHS departments, partly in cooperation with ment (CHM), which extends beyond the statutory correspondingly implemented everywhere. We review the specialist departments. Our employees in admin- requirements. It comprises numerous measures for 1 and update the risk assessments at regular intervals, istration at the Group’s central oﬃce receive annual basic medical care and preventive health care. for example, when new work resources are introduced, safety brieﬁngs. new conditions come into force in the workplace, in All Novem employees have access to an occupational TO OUR response to accidents or in order to assess existing We ensure that all third-party subcontractors can work health service. Each of our locations has its own com- SHAREHOLDERS protective measures. as safely as possible at Novem locations. A leaﬂet pany doctor, for example, who carries out all functions 2 provides them with information about all applicable under the workplace safety laws and participates in We consistently involve all our employees in matters location‑speciﬁc regulations, with instructions on tours of inspection to assess ergonomic conditions. related to workplace safety. Employees must imme- workplace and plant safety, ﬁre prevention and envi- The locations of Tegucigalpa (Honduras) and Querétaro NON-FINANCIAL diately inform their supervisors of work-related risks ronmental protection. At the same time, we expect our (Mexico) have a medical service that also carries out REPORT or hazardous situations. As part of the occupational suppliers to comply with all the statutory and country- the functions of basic medical care. At the German sites 3 safety committee meetings held on a quarterly basis speciﬁc regulations and plant‑speciﬁc rules at Novem. and at many locations abroad, ﬂu and Covid‑19 vac- at our German locations, we provide an opportunity for cinations are also offered directly on-site through the employee and employer representatives to discuss cur- occupational healthcare service. GROUP rent issues relating to health and safety. Similar meet- MANAGEMENT ings are also held at our international locations. REPORT Indicators for health and safety at the Novem 4 Group per 1 million hours FY FY FY CONSOLIDATED worked 2020/21 2021/22 2022/23 FINANCIAL STATEMENTS Number of occupa- tional accidents with 92 72 77 5 a period of absence LTIF (Lost Time Injury 8.1 6.8 7.0 Frequency) ANNUAL Number of fatal oc- ACCOUNTS 0 0 0 cupational accidents 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 27 CONTENTS Equal opportunity and diversity Commitment to society We are also committed to enthusing young women for technical vocations and study courses, for example, in We support a work environment that promotes diver- wood technology or mechanical engineering. As part of Novem sees itself as part of society. Consequently, we sity and guarantees equal opportunities and equal this initiative, Novem participated in Girls’ Day in 2022 also want to shoulder responsibility beyond the bound- treatment, irrespective of ethnic background, skin and will take part again in 2023. We can also report a aries of our Group and play our part in contributing to colour, gender, disability, beliefs, religion, nationality, balanced gender ratio among the participants in our the sustainable development of the communities at sexual orientation or social origin. These principles are dual study degree programmes. our locations for the future. We make our contribution 1 deﬁned in our Code of Conduct. to a sustainable society above all in the form of cash Inclusion also plays an important role at Novem. Dur- and in-kind donations, but we are also actively involved The Novem Group is opposed to all forms of discrimi- ing the year under review, we exceeded the statutory with the communities we operate in. The donation TO OUR nation. Every superior is urged to be the ﬁrst point of quota in Germany for employing people with disabilities and sponsoring volume for the ﬁnancial year 2022/23 SHAREHOLDERS contact for possible cases of discrimination. Internal by around 20% (PY: 20%). In Vorbach, we continue to amounted to approximately €40,000. In accordance 2 and external notiﬁcations and infringements can also enable cooperation with the social services organisa- with our business principles, all activities were evalu- be reported in conﬁdence using the installed whistle‑ tion Lebenswerk in Bayreuth. People with disabilities ated and approved by the Management Board. blower system or by email to Corporate Legal and are employed at our plant, which promotes their social NON-FINANCIAL Compliance. Furthermore, any employee affected can participation. Our donations and sponsoring focus on the promo- REPORT consult the relevant works council. No cases of dis- tion of local and regional facilities, associations and 3 crimination became known at Novem in the reporting organisations at the individual sites where the Group year 2022/23. is located. Our mission is to strengthen social, cultural and community life. The donations are typically carried GROUP We support the principle of equal opportunities and out as ﬁnancial payments. We support organisations MANAGEMENT equal treatment. We pay our employees the same such as the SOS Children’s Village, the Red Cross, hospi- REPORT remuneration for equivalent work irrespective of gender. tals and public organisations in the local communities 4 Across the world in 2022/23, the proportion of women such as nurseries, ﬁre brigades and football clubs. In on the highest level of management at Novem, which the ﬁnancial year 2022/23, for example, we supported reports directly to the Management Board, was around the outdoor youth facility Waldjugend Eschenbach in CONSOLIDATED 25% (PY: 29%). The share of women on the Manage- reforesting a section of forest near Eschenbach by FINANCIAL ment Board was 25% until August 2022; however, it planting 4,500 trees over an area of more than 10,000 STATEMENTS decreased thereafter to 0% after a change in personnel. sqm. 5 The share of women on the Supervisory Board is 20%. ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 28 ENERGY AND EMISSIONS CONTENTS Climate protection and furthermore all relevant regulatory environmental When any new infrastructure is put in place or the risks that impact our business. We monitor interna- manufacturing process is upgraded, modern and In our corporate policy, we deﬁne environmental protec- tional and national environmental legislation as well eﬃcient technology is a top priority. This includes, for tion, energy-saving and careful use of resources as part as customer‑speciﬁc requirements, for example, along example, the installation of energy‑eﬃcient heating of our self‑image. For us, the eﬃcient use of energy in with other regulations in order to preclude possible vio- systems, air‑heating pumps and LED lighting. We also combination with the reduction of our greenhouse gas lations (Sustainability organisation of Novem). implemented numerous new measures in the ﬁnancial emissions is essential. year 2022/23, which resulted in the following reduction 1 in energy consumption (in kWh): Energy consumption Group-wide responsibility for environmental concerns rests with the EHS Team, which is part of the Central • Bergamo plant: Reduction of exhaust gas combus- TO OUR Quality Management department. Each location also As a manufacturing company, the various stages in our tion by ‑10% through optimisation of shift models SHAREHOLDERS has one or more EHS managers responsible for imple- production processes consume a considerable amount (‑12,848 kWh) 2 menting and monitoring central regulations and site- of energy. Most energy is used in surface manufacture, • Langfang plant: revision of the piping system in speciﬁc measures. They are appointed by the facility injection moulding, pressing and milling operations. exhaust gas combustion (‑168,000 kWh) management and in agreement with the central EHS Electricity and natural gas are the main energy sources • Querétaro plant: Optimisation of system on/off NON-FINANCIAL Management at the Novem Group. Group-wide targets used. times in production (‑170,990 kWh) REPORT are also set annually by the central EHS department • Pilsen plant: Extension of open-space cold water- 3 in cooperation with the Management Board, on the All energy management systems at our German cooling system (‑399,878 kWh) basis of which the Novem locations deﬁne their own facilities are certiﬁed in conformity with the ISO 50001 • Tegucigalpa plant: Optimisation of exhaust gas environmental targets and action plans. standard. To further extend our management sys- combustion resulting in reduction of required ﬁlter GROUP tem, we included our plant in Žalec (Slovenia) in the capacity (‑141,254 kWh), adjustment of the shift MANAGEMENT All Novem production sites worldwide have certiﬁed ISO 50001 certiﬁcation in the ﬁnancial year 2021/22. model (‑225,000 kWh) REPORT environmental management systems in conformity Novem also has an energy audit system at the Euro- • Žalec plant: compressor replacement (‑209,670 4 with ISO 14001. This also extends to the identiﬁcation pean sites Bergamo (Italy) and Pilsen (Czech Republic) kWh), technical optimisation of the water-based of potential negative impacts. To record these through- in conformity with ISO 16247. paint booths (‑76,608 kWh) out the individual stages, we have carried out a manda- • Vorbach plant: Optimisation of the supply and CONSOLIDATED tory impact assessment at all our sites every year since In cooperation with the EHS coordinators at the plants, exhaust air system in the laboratory area (‑118,342 FINANCIAL 2009 in order to derive appropriate group‑wide targets our central energy manager constantly reviews our kWh) STATEMENTS and measures. For each individual category of relevant overall energy consumption and the associated savings • Eschenbach plant: Reduction of oil consumption 5 environmental impact – including waste, water and potential. At our sites in Vorbach and Eschenbach, we through targeted shutdown in the summer months emissions, for example – the severity and probability use an external energy data recording system for this (‑18,963 kWh), optimisation of system on/off times of occurrence are assessed along with the applicable purpose. In the course of implementing the ISO 50001 in production (‑11,284 kWh) ANNUAL legal framework. standard, this system was also installed at our location ACCOUNTS in Žalec. Further extension is planned at more plants for Conventional lighting was replaced by LED technology 6 The respective EHS coordinator reports the environ- the coming business year. Our site in Mexico uses the in all plants (‑605,890 kWh). mental impacts to the respective plant manager and Schneider metering system, in accordance with federal the central EHS manager on a regular basis. We also regulations. ADDITIONAL actively monitor ESG-related risks and opportunities INFORMATION NOVEM ANNUAL REPORT 2022/23 29 CONTENTS Energy consumption within the Novem Group to start reporting the deﬁned Scope 3 emissions for by energy source the respective sites from ﬁnancial year 2023/24. The accounting will be carried out in accordance with the Corporate Accounting and Reporting Standard of the in kWh FY 2020/21 FY 2021/22 FY 2022/23 Greenhouse Gas Protocol. Based on the results of the Consumption of non-renewable fuels (oil and gas) 30,470,022 28,904,293 29,226,510 assessments, reduction potentials are to be identiﬁed Electricity, heat and cooling energy and steam purchased for and measures for reducing emissions are to be deﬁned. 110,972,929 116,629,474 116,770,473 consumption, individually (electricity and district heating) 1 Our aim is to obtain the Climate Neutral Company label Total energy consumption 141,442,951 145,533,767 145,996,983 for the German sites by 2025. In the future, we intend to apply the accounting methodology used at the German TO OUR sites to other sites as well. SHAREHOLDERS Energy intensity at the Novem Group Since 2019, we have been using environmental foot- 2 print software from Sphera to determine our annual In the reporting year, our Scope 1 and Scope 2 emis- emissions. We record all the relevant climate gases2 sions increased by 7.2% above the levels of the previous FY 2020/21 FY 2021/22 FY 2022/23 to determine CO2 equivalent values (CO2e). This cal- reporting year. This is largely due to the normalisation NON-FINANCIAL culation is based on the requirements of the Green- of business after the pandemic. The Scope 1 emissions Total consump- REPORT 141,442,951 145,533,767 145,996,983 tion (in kWh) house Gas (GHG) Protocol. A distinction is drawn of the Novem Group amounted to 11,559 t CO2e. This 3 here between direct (Scope 1), indirect (Scope 2) and is mainly due to the more accurate recording of emis- Produced com- 26,822,984 28,562,299 29,037,179 ponents other indirect greenhouse gas emissions (Scope 3). sions data of the refrigerants. Furthermore, a slight Scope 1 emissions at Novem result, for example, from increase in production output and business travel also Energy inten- GROUP sity ratio (kWh/ 5.3 5.1 5.0 the combustion of fuels at our sites and from the fuel inﬂuenced the effect on Scope 1 emissions. There was MANAGEMENT component) consumption of our own ﬂeet of company cars. The also an increase of 5.5% in Scope 2 emissions com- REPORT overwhelming proportion of Scope 1 emissions at our pared to the previous year to a total of 67,269 t CO2e. 4 own production facilities is due to the use of natural gas This can be attributed on the one hand to the Ukraine Greenhouse gas emissions and heating oil. Our Scope 2 emissions are attributable war and the resulting changes in global energy supply, to energy production at our electricity suppliers. The and on the other hand to the signiﬁcant expansion of CONSOLIDATED We cause greenhouse gas emissions as a result of energy other indirect emissions – in the category of Scope 3 our production output and the associated increase in FINANCIAL consumption at our production facilities. Emissions are – are due to activities in the supply chain related to demand for electrical energy. STATEMENTS also generated within our value chain in the course of activities such as the production of raw materials or 5 our upstream and downstream activities. By continuously the manufacture of intermediate products. Currently, Our efforts are intended to meet the increasing require- reducing our emissions, we aim to reach greenhouse gas we systematically record only Scope 1 and Scope 2 ments of our customers that we expect in future. In neutrality in our German sites by 2025, in our European emissions from our prioritised emission sources. Since view of this situation, Novem is currently reviewing ANNUAL sites by 2030 and worldwide by 2035, and in doing so, 2022/23, we have started recording deﬁned Scope 3 the various opportunities for effectively reducing its ACCOUNTS help meet the target set by the Paris Agreement1. emissions from the German sites in Vorbach and emissions. These include, amongst others, sourcing 6 Eschenbach with an external partner. We are planning green electricity. We are also currently testing a new system to calculate our emissions in our logistics chain, 1 The Agreement of the UN Climate Change Conference (COP21) in Paris is a legally binding international treaty that obliges all nations the results of which will allow us to plan more eﬃcient to substantially reduce greenhouse gas emissions to limit the glo- 2 These include CO2, CH4, N2O, HFCs, PFCs, SF6, NF3 and all other ADDITIONAL transport routes. bal temperature increase to 1.5°C above pre‑industrial levels. volatile compounds from their chemical constituents. INFORMATION NOVEM ANNUAL REPORT 2022/23 30 CONTENTS Scope 1 – direct GHG emissions at the Novem In order to continuously reduce our emissions, we are Group planning effective climate protection measures at our locations, which will be deﬁned within this ﬁnancial year. These measures could include converting our heating in tonnes FY 2020/21 FY 2021/22 FY 2022/23 system to renewable energy and installing photovoltaic Natural gas 5,598 5,484 5,652 power plants. We also intend to offset greenhouse gas emissions by promoting regional and supra-regional Heating oil 2,575 2,193 2,162 1 environmental projects. We used the reporting period LPG - 391 272 to examine the global market of environmental and Refrigerants - 577 2,018 green power projects for suitable cooperation partners. Fuels (company car ﬂeet) incl. ﬂights 533 1,159 1,456 TO OUR SHAREHOLDERS Total Scope 1 emissions 8,705 9,803 11,559 2 Scope 2 – indirect GHG emissions at the NON-FINANCIAL Novem Group REPORT 3 in tonnes of CO2 equivalents FY 2020/21 FY 2021/22 FY 2022/23 Power1 61,255 63,762 67,269 Total Scope 2 emissions 61,255 63,762 67,269 GROUP MANAGEMENT 1 The market‑based method was applied for this calculation; value for FY 2022/2023 by location‑based method: 68,565 t CO2 equivalents. REPORT 4 Scope 1 & 2 – Greenhouse gas emission intensity at the Novem Group CONSOLIDATED FINANCIAL STATEMENTS FY 2020/21 FY 2021/22 FY 2022/23 Total GHG emissions (in tonnes) 69,960 73,565 78,828 5 Produced components 26,822,984 28,562,299 29,037,179 GHG emission intensity (t CO2 equivalent/component) 0.00261 0.00258 0.00271 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 31 Bamboo open pore 3 Group Management Report CORPORATE STRUCTURE AND BUSINESS ACTIVITIES CONTENTS Novem Group S.A., Luxembourg, formerly Car Interior For more than 70 years, the Group has successfully Premium synthetics enable versatile design and pro- Design (Luxembourg) S.à r.l., hereafter also referred to used wood as raw material, which has helped the cessing options. A variety of optical effects can be as the “Company”, is a public limited liability company Group become the world leader in ﬁne woods through achieved through creative processing techniques. Mod- (Société Anonyme) incorporated in Luxembourg and high quality and natural processing. With the help of ern injection moulding processes such as 2K technol- governed by Luxembourg Law. The registered oﬃce is new technologies, material combinations and surface ogy ensure excellent proﬁling and customer‑oriented 19, rue Edmond Reuter, L‑5326 Contern, Grand Duchy ﬁnishes, there is a steady and consistent reﬁnement adjustment. of Luxembourg. of the processing of this raw material. Trims made of 1 veneers are synonymous with exclusivity, as the natural Using novel materials such as rattan, linen or ﬁbreglass, Novem Group S.A. is the parent company of the Novem growth and individual grain of the wood as raw material the Group creates a new atmosphere in the vehicle inte- Group (hereinafter also referred to as “Novem” or the are unique. rior. In combination with light, this is how the Group TO OUR “Group”). To ensure and maintain proximity to custom- trendsetting designs are created. SHAREHOLDERS ers, the Group has a global presence with 12 locations The processing of lightweight metal aluminium is 2 in China, Czech Republic, Germany, Honduras, Italy, carried out through production processes that pre- The special material properties not only directly inﬂu- Luxembourg, Mexico, Slovenia and USA. The ﬁnancial serve the feel of this material. The trims are printed, ence the design and atmosphere of the interior, but are year of the Group is a 12‑month period from 1 April until painted, brushed, polished, galvanised or anodised also speciﬁcally selected according to the criteria of NON-FINANCIAL 31 March of the following year. using advanced processes. This creates surfaces that sustainability, reduced weight and economy. REPORT convey a feeling of sporty elegance and modernity in 3 As the global market leader in high-end interiors, the the vehicle interior. Due to expert knowledge in handling different materials, Company and its subsidiaries operate as a developer, the Group is able to meet customer requirements at the supplier and system supplier for trim parts and decora- Carbon is seen as the material of the future. Due to its desired level, as in the past. In order to continuously GROUP tive functional elements in vehicle interiors. The prod- lightweight, it is particularly suitable for fast, dynamic evolve further in terms of interior design, the Group MANAGEMENT ucts combine valuable raw materials with the latest and energy‑eﬃcient driving. Furthermore, as a mate- always uses materials in an innovative manner. This is REPORT technology and processing. The customers include rial made of carbon ﬁbres, carbon entails the attrib- also underlined by the certiﬁcation of the Group plants 4 all major premium carmakers worldwide. The Group utes of impact resistance and temperature resistance. according to IATF 16949 as well as DIN EN ISO 14001 has an extensive exclusive product portfolio of instru- Through high quality lacquering, priming and polishing and DIN EN ISO 5001. This ensures environmentally ment panels, impact-resistant trim parts in the centre processes, its premium ﬁnishing creates special 3D friendly production for the customer, combined with CONSOLIDATED console, door trims, beltlines and decorative functional effects giving an impression of depth. up‑to‑date quality and environmental requirements. FINANCIAL elements in the car interior. Premium materials are STATEMENTS used to ensure high quality standards. The surfaces 5 are versatile, ranging from ﬁne woods, aluminium and carbon to premium synthetics or leather, and present a different feel depending on the selection. ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 33 KEY EVENTS CONTENTS Novem’s second year as a listed company was shaped As the war in Ukraine affected the prices of commodi- announced a drastic overhaul of its previous approach by a persistently challenging market environment, ties and goods worldwide and in particular in the EU, by lifting the strict zero-Covid policy and thus most of impacted by multiple factors, including the Ukraine war, this led to high inﬂation rates far from the targets its restrictions. Overall, this is seen as a positive devel- inﬂationary pressures and ineﬃciencies. Nonetheless, published by the central banks (e.g. ECB +2.0%). While opment, but the number of positive cases and deaths Novem was able to demonstrate its resilient business the US Federal Reserve reacted to this development in rapidly soared as a result. model through operational ﬂexibility and adaptability. March 2022 with signiﬁcant steps, it took the ECB until the end of July 2022 to increase the prime rate. The dis- The European market in particular faced a signiﬁcant 1 Although the Ukraine war had no direct impact on crepancy in timing and different expectations regarding shortage of carbon fabrics past summer. The issue Novem, it did indirectly through second-round effects. inﬂation rates in the US and EU led to a strong develop- was a missing chemical solution to produce the carbon Tightened restrictions in export control processes, ment of the US Dollar compared to other currencies, thread. Even though there was very limited availability, TO OUR political and economic sanctions against Russian enti- eventually resulting in a US Dollar to Euro below‑par Novem managed to secure the required quantities to SHAREHOLDERS ties and huge barriers for importing or exporting goods situation. The last time such a value was reached dates fulﬁl the customer demands by using different sources 2 between and through the war zones and the European back to 2002. With increases in the interest rate and a and qualifying alternative products. Although the sup- Union or other third countries led to massive supply maintaining high inﬂation in the EU, the Euro regained ply chain has improved somewhat, the situation is still chain disruptions and rising transport costs. On top strength and Euro to US Dollar traded above par again. far from an average availability level. NON-FINANCIAL of that, a shortage of truck drivers in the EU area led REPORT to further aggravation of the transport situation. As The challenging market environment mentioned above The easing of Covid‑19 restrictions positively affected 3 a result of restrictions on gas supplies from Russia stressed the entire automotive industry throughout the business relationships with OEMs. Personal meetings to the EU, energy prices have increased signiﬁcantly, year. This led to perceptible price increases for certain made it possible to acquire new customers. A milestone with the highest impact seen in Germany. However, the goods and for some suppliers even to insolvency pro- of the ﬁnancial year 2022/23 was the award of the ﬁrst GROUP introduction of a price cap by the German government ceedings, which also affected Novem’s ﬁnancial perfor- order from Lucid Motors in the history of Novem. The MANAGEMENT brought some easing. Also, the supply of strategic raw mance. Through continuous cost improvements and nomination of the high‑end electric, long‑range SUV, REPORT materials has been restricted and therefore became passing on certain additional costs, Novem managed Gravity, marks an important cornerstone for further 4 more expensive. One of the main issues was the short- to partially mitigate the impact. A signiﬁcant improve- cooperation with the Silicon Valley‑based EV start‑up. age of electronic components and semiconductors, ment of these mostly unpredictable circumstances Furthermore, Novem was able to expand its presence which led to production diﬃculties and had a major within the supply chains is currently not to be expected. in the Stellantis group through the ﬁrst‑time nomination CONSOLIDATED impact on the supply chain. Supply bottlenecks and of Opel. Adding premium trims to its ﬂagship model FINANCIAL inﬂationary pressures subsequently impacted call‑offs, While the situation regarding Covid‑19 has normalised Insignia is a prime example of the overall trend towards STATEMENTS which remained volatile and continued to lead to inef- in Europe and Americas, the effects were still clearly premiumisation in cars. In addition, the permitted or 5 ﬁciencies in managing staff and production utilisation. noticeable in Asia. Throughout the year, China’s strict simpliﬁed entry into Japan and Korea enabled business In order to optimally incorporate scarce resources into zero‑Covid policy repeatedly showed its consequences relations on the Asian market to be further intensiﬁed, production, the OEMs focused primarily on manufac- with closed ports, limited availability of transport with the aim of even further expanding the Novem ANNUAL turing premium vehicles, which proved advantageous resources and high ﬂuctuations in delivery times and portfolio in this market in the long term. ACCOUNTS for Novem due to its premium focus. However, the customs clearances. The resulting price increases 6 reduced production numbers directly impacted the not only for transportation but also for gas and other As Novem’s business requires a high level of technical Group’s annual sales. Due to the increased energy and purchased materials led to lower demand across the know-how, investments in technology, new materials raw material costs, it was unavoidable for Novem to whole market. Nonetheless, price increases seem to and innovation are crucial for long-term growth. In ADDITIONAL pass on part of the additional costs to the OEMs. settle back to normal levels. In December 2022, China this respect, an even closer cooperation in the ﬁeld of INFORMATION NOVEM ANNUAL REPORT 2022/23 34 CONTENTS in-mould electronics and thus functionally integrated Atlanta, Langfang and Querétaro, Novem has already trim components was initiated through a Design and successfully passed the needed TISAX certiﬁcation. Innovate licence with TactoTek. With this technology, The certiﬁcation process is currently running for the light and function can be integrated into surfaces made next sites in Eschenbach, Pilsen and Žalec. In paral- of wood, fabrics or premium synthetics, opening up new lel, Novem is improving its emergency management opportunities for interactive trim parts. Another coop- procedures to have valid and realistic plans in case of eration in the area of innovation advancement with Bury a major security incident or other emergency and crisis 1 makes it possible to develop the integration of wire- situations. To protect against identity breaches and less charging behind authentic materials for customers fulﬁl additional TISAX requirements, Novem started ready for series production. Following the successful enforcing multi-factor authentication for all mobile TO OUR market launch of the ﬁller technology, the commission- users. The users can choose between three differ- SHAREHOLDERS ing of a new fully automated sensor‑supported 1K ﬁller ent factors to secure the login on their notebook. In 2 plant aims at massive eﬃciency increases in function- addition, several measures have been implemented to alising surfaces such as symbols for touch, anti-slip achieve higher IT security. applications and seamless design symbols. NON-FINANCIAL In November 2022, Novem achieved the FSC (Forest REPORT During the ﬁnancial year 2022/2023, all plants of the Stewardship Council®) certiﬁcation for the production 3 Novem Group were successfully recertiﬁcated regard- facility in China. The implemented processes ensure ing the IATF 16949 certiﬁcate (International Automo- that only special purchased certiﬁed veneers are used tive Task Force). Content of the IATF is a summary throughout the production for a speciﬁc customer. The GROUP of several quality management systems. Holding the veneers are from controlled growing areas. To further MANAGEMENT latest certiﬁcates is a mandatory requirement for con- advance the topic of sustainability in our products, a REPORT tracts with customers from the automotive industry. dedicated sustainability development team has been 4 appointed to meet the increasing requirements for CO2 Another crucial accreditation for Novem as an automo- reduction. Furthermore, Novem continued its engage- tive supplier is the TISAX certiﬁcation. To ensure all ment regarding regional sustainability activities. In CONSOLIDATED Novem locations follow and implement the deﬁned IT December 2022, a Novem team planted 4,500 trees on FINANCIAL and information security standards, Novem started to 10,000 square metres. The tree varieties were selected STATEMENTS roll out a global ISMS (Information Security Manage- according to the highest criteria and a long lifespan of 5 ment System) with uniform technical measures and up to 140 years. With this event, Novem underlines its organisational procedures. At the ﬁrst locations in commitment to sustainability. ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 35 BUSINESS AND GENERAL ENVIRONMENT CONTENTS World economy the rise in inﬂation is the loss of purchasing power of 9.5% and China with 6.8% recorded strong year‑on‑year private households and a burden on the economic growth. Following Russia’s invasion of Ukraine, many The impact of the Covid‑19 pandemic (especially development of Germany and many other European international automakers withdrew from Russia. As a China’s zero-Covid strategy) and the Russian invasion countries. The effects of rising key interest rates can result of the withdrawal, car production in Russia fell of Ukraine on 24 February 2022 has determined supply already be seen in the granting of housing loans to pri- by about 64%. Around 82.3 million cars were produced problems in 2022, as the availability of raw materials vate households. After a record month in March last worldwide in calendar year 2022, which marks an as well as semiconductors has increasingly worsened. year, the ﬁgure of housing loans granted in the ﬁrst increase of 6.9% compared to 2021.1 1 At the international level, Russia and Ukraine make an three months of 2023 posted a sharp decline of ‑50% essential contribution to the supply of raw materials compared to last year. Another existing problem was China’s zero-Covid policy and energy and play a decisive role in subdued eco- due to the spread of the Omicron variant. Many Euro- TO OUR nomic growth. The zero-Covid strategy has contributed Meanwhile, the core inﬂation rate, which is calculated pean companies sell and produce in China, and German SHAREHOLDERS to long waiting times in the world’s ports and to many excluding volatile components like energy and food car manufacturers are also affected. As a result, many 2 bottlenecks, thus affecting the security of the supply prices, has also risen sharply over the course of last Original Equipment Manufacturers (OEMs) had to stop of raw materials and intermediate products in calen- calendar year. It is still above the central bank’s inﬂation production due to the lockdown and the strong spread. dar year 2022. In the summer months, the zero‑Covid target almost everywhere. NON-FINANCIAL strategy, a heat wave and a struggling real estate sector Electric cars are one of the current trends in the auto- REPORT in China weighed on the economy. As a result, demand Despite many diﬃculties in 2022, global gross domes- motive industry as an alternative to the classic com- 3 for goods and services has fallen and the economy has tic product (GDP) increased by 3.2% compared to the bustion engine. The number of new registrations of weakened. By contrast, the impact on production in the previous calendar year. GDP grew by 3.5% in the Euro- electric cars has risen rapidly in the last years. In 2023, US and the Euro area was largely small. zone, 1.0% in Japan, 2.1% in the USA and 3.1% in China. sales are expected to increase by 35.0% to 14 million GROUP electric cars. Car manufacturers assume that demand MANAGEMENT Moreover, the consequences were already noticeable for electric vehicles will continue to rise over the next REPORT Automotive markets shortly after the outbreak of the war. A shortage of years and are adjusting their strategy accordingly. 4 raw materials, supplier products and a lack of energy imports from Russia led to signiﬁcant price increases The 2022 calendar year continued to be marked by dis- Forecast for global economic development in all sectors of the economy. ruptions in global supply chains due to the Covid‑19 CONSOLIDATED 2023/2024 pandemic and semiconductor shortages, which also FINANCIAL The inﬂation rate rose sharply over the course of impacted the automotive industry. As a result, produc- STATEMENTS calendar year 2022, peaking at 10.4% in Germany tion was reduced or even discontinued in some areas. The war between Russia and Ukraine continues to 5 in October 2022. As a result of rising inﬂation rates, weigh on the global economy and brings great geopo- central banks have counteracted by raising their key The German market was able to recover compared to litical uncertainty. The world market prices of many raw interest rates signiﬁcantly. The Federal Reserve System the previous year, rising by 10.7% to 3.7 million pas- materials have risen sharply due to the war but are now ANNUAL (FED) gradually raised the key interest rate in the USA senger cars produced for the year. The recovery is falling again and improving. The result was a further ACCOUNTS from 0.50% to 3.25% by September. The interest rate positive, but to get to the pre-crisis level of the year reduction in inﬂation, which is expected to continue. 6 was further raised and reached 5.25% in May 2023. 2019, however, there is still a lack of approximately 26%. After the import of Russian natural gas was sharply The ECB has adjusted its key interest rate to 3.75% in reduced, the alternative was to source it from other seven steps. The last interest rate adjustment of 0.25% The markets in Europe and Japan were able to maintain ADDITIONAL was announced on 4 May 2023. The consequence of the previous year’s production level, while the USA with 1 According to GlobalData as per May 2023 INFORMATION NOVEM ANNUAL REPORT 2022/23 36 CONTENTS European countries instead, which was much more According to SVR estimates, Germany’s gross domestic expensive. Due to its heavy dependence on natural product will increase by 0.2% in 2023 and 1.3% in 2024. gas from Russia, Germany continues to be affected Since wages are not growing as fast as other inﬂation‑ by higher energy prices. However, this does not only related costs, the share of real labour expenses in total affect Germany, as in general many countries in the costs has become signiﬁcantly smaller. If high inﬂa- Eurozone are dependent on Russian energy imports. tion leads to higher collective bargaining agreements and thus higher wage costs, this will continue to spiral 1 China has turned away from the zero-Covid policy, upwards. Moreover, persistently high inﬂation has a which means that supply bottlenecks and the economy negative impact on businesses and jobs. For the cur- are no longer inhibited but, on the contrary, supported. rent year, GDP in the Eurozone is expected to grow by TO OUR Affected companies in the manufacturing sector, which 0.9% and by 1.5% in 2024. For the global economy, a SHAREHOLDERS have been burdened by supply chain bottlenecks and forecast of the SVR for GDP is issued with growth of 2 disruptions and already have a high order backlog, can 2.2% in 2023 and 2.7% in 2024. now process them, which can have a stabilising effect on growth. A major challenge is that many consider NON-FINANCIAL Germany as an internationally uncompetitive business REPORT location due to increased electricity and gas prices, the 3 shortage of skilled workers and the tax burden. The German Council of Economic Experts (SVR) expects GROUP an overall inﬂation rate of 6.6% for 2023 and 3.0% for MANAGEMENT 2024, which roughly matches the 2.0% price stability REPORT demanded by the ECB. The goal of price stability and 4 a decline in inﬂation back to 2.0% is to be achieved through key interest rate hikes. In order to restore price stability, a slide into recession must be avoided. CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 37 FINANCIAL PERFORMANCE CONTENTS in € million FY 2021/22 FY 2022/23 Change % change Revenue 614.6 700.3 85.7 13.9% Increase or decrease in ﬁnished goods and work in process 29.5 ‑7.5 ‑37.0 <‑100.0% Total operating performance 644.1 692.8 48.7 7.6% Other operating income 20.1 25.8 5.7 28.6% Cost of materials ‑328.0 ‑354.7 -26.7 8.1% 1 Personnel expenses ‑158.5 ‑168.6 ‑10.2 6.4% Depreciation, amortisation and impairment ‑31.4 ‑32.5 ‑1.1 3.5% Other operating expenses ‑73.5 ‑82.4 ‑8.9 12.1% TO OUR SHAREHOLDERS Operating result (EBIT) 72.9 80.5 7.6 10.4% Finance income 3.4 3.6 0.2 5.2% 2 Finance costs ‑25.8 ‑13.1 12.7 ‑49.3% Financial result -22.4 -9.5 12.9 -57.5% NON-FINANCIAL Income taxes ‑16.1 ‑15.7 0.4 ‑2.5% REPORT Deferred taxes 9.7 ‑5.2 ‑14.9 <‑100.0% 3 Income tax result -6.5 -20.9 -14.5 >100.0% Proﬁt for the period attributable to the shareholders 44.0 50.0 6.0 13.7% GROUP MANAGEMENT Differences from currency translation 9.2 0.2 ‑9.0 ‑97.6% REPORT Items that may subsequently be reclassiﬁed to consolidated proﬁt or loss 9.2 0.2 -9.0 -97.6% 4 Actuarial gains and losses from pensions and similar obligations (before taxes) 2.0 8.6 6.6 >100.0% Taxes on actuarial gains and losses from pensions and similar obligations ‑0.5 -2.2 ‑1.7 >100.0% Items that will not subsequently be reclassiﬁed to consolidated proﬁt or loss 1.5 6.3 4.9 >100.0% CONSOLIDATED FINANCIAL Other comprehensive income/loss, net of tax 10.7 6.6 -4.1 -38.4% STATEMENTS Total comprehensive income/loss for the period attributable to the shareholders 54.6 56.6 1.9 3.5% 5 Earnings per share attributable to the equity holders of the parent (in €) basic 1.041 1.16 0.12 11.4% ANNUAL diluted 1.041 1.16 0.12 11.4% ACCOUNTS 1 Adjusted according to IAS 8.42 as the calculation of the number of average weighted shares was different. 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 38 CONTENTS Revenue Change in ﬁnished goods and work in were again negatively affected by ineﬃciencies due process to volatile customer call-offs. As a percentage of total Total revenue of €700.3 million in ﬁnancial year 2022/23 operating performance, personnel expenses developed sharply increased by €85.7 million or 13.9% compared Change of ﬁnished goods and work in process favourably and decreased by ‑0.3 percentage points to last year. Based on prior year (constant) exchange decreased by €‑37.0 million (<‑100%) from €29.5 mil- year‑on‑year to 24.3% (PY: 24.6%), primarily attributable rates, revenue would have been lower by ‑4.4% or €‑31.0 lion in ﬁnancial year 2021/22 to €‑7.5 million in ﬁnancial to increased revenue. million. This currency impact was primarily inﬂuenced year 2022/23 resulting from lower tooling inventories 1 by the strong US Dollar and Chinese Renminbi. On a (€‑34.0 million), work in process (€‑1.7 million) as well Depreciation, amortisation and impairment segmental basis, revenue in 2022/23 was generated in as proﬁt in stock elimination (€‑1.0 million) and stock Europe (€332.9 million), followed by Americas (€264.1 of ﬁnished goods (€‑0.3 million). TO OUR million) and Asia (€103.3 million). Novem reported depreciation, amortisation and impair- SHAREHOLDERS ment of €‑32.5 million in ﬁnancial year 2022/23, an 2 Other operating income increase of 3.5% or €‑1.1 million compared to previous Revenue development ﬁnancial year. The increase was driven by depreciation Other income rose by €5.7 million from €20.1 million on buildings (€‑1.0 million), other equipment (€‑0.4 NON-FINANCIAL in ﬁnancial year 2021/22 to €25.8 million in ﬁnancial million) and depreciation on machinery (€‑0.2 million); in € million FY 2021/22 FY 2022/23 % change REPORT year 2022/23. The increase was primarily caused by partly offset by accelerated depreciation (€+0.5 million) Revenue Series 565.0 618.2 9.4% 3 higher currency translation gains (€+3.8 million) and due to the impairment related to the property in Kulm- Revenue Tooling 49.6 82.1 65.4% other income (€+2.0 million). bach in ﬁnancial year 2021/22. Revenue 614.6 700.3 13.9% GROUP MANAGEMENT Cost of materials Other operating expenses REPORT Revenue Series 4 Cost of materials increased from €‑328.0 million in Other operating expenses rose from €‑73.5 million in Revenue Series developed favourably in ﬁnancial year ﬁnancial year 2021/22 to €‑354.7 million in ﬁnancial the ﬁnancial year 2021/22 by €‑8.9 million to €‑82.4 2022/23 and recorded at €618.2 million, up 9.4% com- year 2022/23, resulting in a year‑on‑year change of million in the current ﬁnancial year. This increase was CONSOLIDATED pared to last year (PY: €565.0 million). Revenue Series 8.1%. The cost of materials to output (total operating mainly due to higher outgoing freights, lower release of FINANCIAL generated 88.3% of total revenue and remained the key performance) ratio increased by 0.3 percentage points accruals for other debtors as well as foreign currency STATEMENTS pillar of the business. to 51.2% in ﬁnancial year 2022/23 (PY: 50.9%) as a translation losses and bad debt expenses. 5 result of the unfavourable impact of higher raw mate- rial prices as well as energy and transport expenses. Finance income and costs Revenue Tooling ANNUAL ACCOUNTS Personnel expenses Revenue Tooling contributed €82.1 million to total The ﬁnancial result amounted to €‑9.5 million for ﬁnan- 6 revenue in ﬁnancial year 2022/23 (PY: €49.6 million). cial year 2022/23, compared to last year’s amount of This leads to a year‑on‑year increase of 65.4% or €32.5 Personnel expenses amounted to €‑168.6 million in €‑22.4 million. million driven by a different project phasing. ﬁnancial year 2022/23, up €‑10.2 million or 6.4% com- ADDITIONAL pared to ﬁnancial year 2021/22. Personnel expenses INFORMATION NOVEM ANNUAL REPORT 2022/23 39 CONTENTS Finance income slightly increased from €3.4 million in ﬁnancial year 2021/22 by €0.2 million or 5.2% to €3.6 million in the current ﬁnancial year. The positive devia- tion was predominantly attributable to interest income. Finance costs in ﬁnancial year 2022/23 recorded at €‑13.1 million (PY: €‑25.8 million), a decrease of 1 ‑49.3% or €12.7 million compared to previous year. The post‑IPO reﬁnancing structure resulted in lower inter- est expenses and accordingly lower ﬁnancing costs, TO OUR while higher losses from currency translation driven by SHAREHOLDERS hedging and cash pooling mitigated the positive effect 2 to some extent. NON-FINANCIAL Income tax result REPORT 3 Income tax result increased by €‑14.5 million (>100.0%) from €‑6.5 million prior ﬁnancial year to €‑20.9 million in ﬁnancial year 2022/23. The increase was driven by GROUP deferred taxes (€‑14.9 million), while lower income MANAGEMENT taxes (€0.4 million) partially offset the negative impact. REPORT The signiﬁcant change in deferred taxes is primarily 4 caused by a one‑off tax asset recognition in ﬁnancial year 2021/22. CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 40 CONTENTS Adjustments Adj. EBIT in € million FY 2021/22 FY 2022/23 Change % change Revenue 614.51 700.3 14.0% 85.8 Adj. EBIT represents the operating result adjusted EBIT 72.9 80.5 7.6 10.4% for exceptional non recurring items. As such, Novem 1 EBIT margin 11.9% 11.5% adjusts certain one off effects to better show the underlying operating performance of the Group. The Restructuring - - - - adjustments made follow a pre‑deﬁned and transpar- Material quality claims ‑0.1 - ‑100.0% 0.1 TO OUR ent approach and form part of the regular monthly SHAREHOLDERS Onerous contracts 3.1 - ‑3.1 ‑100.0% closing and reporting routines. 2 Covid‑19 costs 1.4 0.3 ‑76.4% ‑1.1 Transaction costs 2.1 - ‑2.1 ‑100.0% Adjustments Others 1.5 0.9 ‑38.3% ‑0.6 NON-FINANCIAL REPORT Exceptional items 8.0 1.3 -6.8 ‑84.1% Adjustments in the ﬁnancial year 2022/23 included Discontinued operations - - - - 3 €0.3 million Covid‑19 related costs and €0.5 million severance payments as well as €0.4 million Others. Adjustments 8.0 1.3 -6.8 -84.1% Adj. EBIT 80.9 81.7 1.0% 0.8 GROUP In the ﬁnancial year 2022/23, adjustments were con- Adj. EBIT margin 13.2% 11.7% MANAGEMENT siderably lower than prior year by €-6.8 million mainly REPORT Depreciation and amortisation 30.9 32.5 5.2% 1.6 driven by onerous contracts and transaction costs 4 in ﬁnancial year 2021/22 as well as lower Covid‑19 Adj. EBITDA 111.7 114.2 2.4 2.2% expenses. Adj. EBITDA margin 18.2% 16.3% 1 Including revenue-related adjustments CONSOLIDATED The Adj. EBIT margin of 11.7% for the ﬁnancial year FINANCIAL 2022/23 was 1.5 percentage points below prior year’s STATEMENTS margin of 13.2% resulting from higher input costs. 5 Therefore, the Adj. EBITDA margin of 16.3% was also behind prior year’s ﬁgure of 18.2%. ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 41 FINANCIAL POSITION CONTENTS Assets Equity and liabilities in € million 31 Mar 22 31 Mar 23 Change % change in € million 31 Mar 22 31 Mar 23 Change % change Share capital 0.4 0.4 0.0 0.0% Intangible assets 3.1 2.4 ‑0.7 ‑21.6% Capital reserves 539.6 539.6 ‑0.0 0.0% Property, plant and equipment 184.9 185.1 0.2 0.1% Retained earnings/accumulated 1 Trade receivables 47.5 46.3 ‑1.2 ‑2.5% ‑482.8 ‑443.4 39.4 -8.2% losses Other non‑current assets 12.6 10.3 ‑2.3 ‑18.6% Currency translation reserve 10.4 10.6 0.2 2.1% Deferred tax assets 18.8 8.3 ‑10.5 ‑55.8% TO OUR Total equity 67.7 107.3 39.6 58.5% SHAREHOLDERS Total non-current assets 267.0 252.5 -14.5 -5.4% Pensions and similiar obligations 34.9 27.0 -7.8 ‑22.4% 2 Inventories 129.4 116.3 ‑13.1 ‑10.1% Other provisions 3.2 1.4 ‑1.8 ‑56.7% Trade receivables 37.7 47.5 9.8 26.1% Financial liabilities 247.7 248.2 0.5 0.2% Other receivables 28.6 38.0 9.4 32.9% Other liabilities 29.8 33.3 3.5 11.8% NON-FINANCIAL Deferred tax liabilities 3.6 0.6 ‑3.0 -82.2% REPORT Other current assets 13.7 18.2 4.6 33.4% Total non-current liabilities 319.1 310.6 -8.6 -2.7% Cash and cash equivalents 117.0 165.5 48.5 41.5% 3 Tax liabilities 13.8 19.1 5.3 38.0% Assets held for sale 0.8 - ‑0.8 ‑100.0% Other provisions 48.0 46.7 ‑1.3 -2.7% Total current assets 327.0 385.5 58.5 17.9% GROUP Financial liabilities 1.4 1.2 ‑0.3 ‑18.0% Assets 594.0 638.0 44.0 7.4% MANAGEMENT Trade payables 70.4 60.6 ‑9.8 ‑13.9% REPORT Other liabilities 73.7 92.7 19.0 25.8% 4 Total current liabilities 207.3 220.2 12.9 6.2% Equity and liabilities 594.0 638.0 44.0 7.4% CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 42 CONTENTS Total assets Non-current liabilities Working capital Total assets amounted to €638.0 million as of 31 March Non‑current liabilities decreased from €319.1 million as in € million 31 Mar 22 31 Mar 23 % change 2023, an increase of 7.4% compared to the end of last of 31 March 2022 by ‑2.7% or €‑8.6 million to €310.6 Inventories 67.4 64.1 ‑4.9% ﬁnancial year 2021/22 (31 March 2022: €594.0 million). million as of 31 March 2023. The decrease is mainly Trade 35.2 43.7 24.0% attributable to the valuation effect of pensions and receivables similar obligations of €-7.8 million due to the increased Trade payables ‑61.6 ‑54.5 ‑11.5% 1 Non-current assets interest rate. Trade working 41.0 53.3 29.8% capital Non‑current assets decreased from €267.0 million as TO OUR Tooling net 74.4 55.5 ‑25.4% Net ﬁnancial debt of 31 March 2022 by ‑5.4% to €252.5 million as of 31 SHAREHOLDERS Contract assets 11.9 15.3 28.6% March 2023. This movement resulted primarily from 2 Total working a decline in deferred tax assets of €‑10.5 million or 127.3 124.0 -2.6% in € million 31 Mar 22 31 Mar 23 % change capital ‑55.8%, a decrease in other non‑current assets (€‑2.3 Liabilities to million) and lower trade receivables (€‑1.2 million). 249.1 249.4 0.1% banks NON-FINANCIAL Total working capital amounted to €124.0 million as REPORT Liabilities from of 31 March 2023, down ‑2.6% compared to 31 March 1.3 - ‑100.0% derivatives (-) Current assets 3 2022. This subtle change was largely driven by higher Lease liabilities 34.9 39.1 12.1% trade receivables and lower trade payables, with an Gross ﬁnancial Current assets increased to €385.5 million compared offsetting effect in the tooling net position. The most 282.6 288.5 2.1% debt GROUP to the previous balance sheet date (€327.0 million), signiﬁcant change in tooling net was attributable to a MANAGEMENT Cash and cash up €58.5 million or 17.9%. This change was mainly decrease in tooling inventories of €‑10.2 million. Total ‑117.0 ‑165.5 41.5% REPORT equivalents driven by a higher cash position (€+48.5 million) and working capital in % of revenue thus decreased to 4 Net ﬁnancial debt 165.6 123.0 -25.8% an increase in trade receivables (€+9.8 million) due 17.7% (31 March 2022: 20.7%). to higher revenue at the end of the ﬁnancial year. The increase in other receivables of €9.4 million was due Gross ﬁnancial debt as of 31 March 2023 amounted CONSOLIDATED Equity to higher outstanding Mexican VAT balances and their to €288.5 million (31 March 2022: €282.6 million) and FINANCIAL capitalised inﬂation effect. Through non‑recourse fac- thus posted an increase of €5.9 million or 2.1%. Com- STATEMENTS toring Novem sold trade receivables of €54.1 million As of 31 March 2023, the equity position of €107.3 mil- pared to previous year, this change is mainly attribut- 5 as of 31 March 2023, exceeding the volume of €47.8 lion improved from €67.7 million at the end of the last able to higher lease liabilities of €4.2 million. Cash and million as of 31 March 2022 by €6.3 million. Lower ﬁnancial year 2021/22 due to the proﬁt generated in cash equivalents increased sharply by €48.5 million inventories with €‑13.1 million or ‑10.1% had the largest ﬁnancial year 2022/23 and despite an offsetting effect compared to the ﬁnancial year 2021/22, leading to a ANNUAL counterbalancing impact. from the dividend payment of €17.2 million in August net ﬁnancial debt of €123.0 million (31 March 2022: ACCOUNTS 2022. Currency translation differences to Euro had a €165.6 million). 6 minor impact and increased by €0.2 million (+2.1%). ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 43 CONTENTS Net leverage in € million 31 Mar 22 31 Mar 23 Net ﬁnancial debt 165.6 123.0 LTM Adj. EBITDA 111.7 114.2 Net leverage ratio 1.5x 1.1x 1 The net leverage ratio is deﬁned as net ﬁnancial debt divided by Adj. EBITDA for the last 12 months. The ratio TO OUR signiﬁcantly improved from 1.5x Adj. EBITDA at the end SHAREHOLDERS of the ﬁnancial year 2021/22 to 1.1x Adj. EBITDA as 2 of 31 March 2023 and fell to its lowest level since the post‑IPO reﬁnancing. NON-FINANCIAL REPORT Current liabilities 3 Current liabilities amounted to €220.2 million on the reporting date of 31 March 2023, up 6.2% or €12.9 GROUP million compared to the end of the last ﬁnancial year MANAGEMENT 2021/22. The increase was attributable to higher tax REPORT liabilities of €5.3 million and other liabilities of €19.0 4 million due to received advanced payments for unﬁn- ished tools and a provision for outstanding tooling invoices. This development was partly offset by lower CONSOLIDATED trade payables of €‑9.8 million or ‑13.9%. FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 44 CASH FLOWS CONTENTS in € million FY 2021/22 FY 2022/23 Change % change Cash ﬂow from operating activities 80.5 98.3 17.8 22.1% Cash ﬂow from investing activities -15.5 -13.8 1.7 -11.0% Cash ﬂow from ﬁnancing activities -124.9 -35.5 89.3 -71.5% Net increase (+)/decrease (-) in cash and cash equivalents -59.8 49.0 108.8 <-100.0% Effect of exchange rate ﬂuctuations on cash and cash equivalents 1.5 ‑0.5 ‑2.0 <‑100.0% 1 Cash and cash equivalents at the beginning of the reporting period 175.3 117.0 ‑58.3 ‑33.3% Cash and cash equivalents at the end of the reporting period 117.0 165.5 48.5 41.5% TO OUR SHAREHOLDERS 2 Cash ﬂow from operating activities Cash ﬂow from ﬁnancing activities Cash ﬂow from operating activities developed positively Cash out‑ﬂow for ﬁnancing activities showed the larg- NON-FINANCIAL from €80.5 million by €17.8 million to €98.3 million in est deviation. Following a total of €‑124.9 million in REPORT the ﬁnancial year 2022/23. The development can be the previous year, cash ﬂow from ﬁnancing activities 3 explained by considerably lower stock levels (€+43.9 decreased by €89.3 million to €‑35.5 million in ﬁnancial million) and provisions (€+10.8 million) compared to year 2022/23. This change was largely driven by the the same reporting period last year. The change of new ﬁnancing structure and thus lower interest paid of GROUP trade receivables by €‑29.4 million to €‑9.4 million as €4.5 million due to the improved interest rate structure MANAGEMENT well as the reduced trade payables by €‑18.2 million in with an offsetting effect from the dividend distribution REPORT ﬁnancial year 2022/23 had offsetting effects. of €‑17.2 million. 4 Cash ﬂow from investing activities CONSOLIDATED FINANCIAL Cash out‑ﬂow for investing activities reached €‑13.8 STATEMENTS million in the ﬁnancial year 2022/23 (PY: €‑15.5 million), 5 resulting in a change of €1.7 million mainly attributable to the sale of the production premises in Kulmbach for a purchase price of €0.8 million and slightly lower ANNUAL investments in property, plant and equipment of €0.5 ACCOUNTS million. 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 45 SEGMENT REPORTING CONTENTS Europe Americas Asia External revenue in Europe increased from €317.8 mil- External revenue in Americas increased from €221.7 External revenue in Asia increased from €75.0 mil- lion in the ﬁnancial year 2021/22 to €332.9 million in million in the ﬁnancial year 2021/22 to €264.1 million lion to €103.3 million in the ﬁnancial year 2022/23 the ﬁnancial year 2022/23 and exceeded prior year by in the same period of 2022/23 and outperformed prior and exceeded prior year by 37.6% or €28.2 million. Of 4.8% or €15.1 million. year by 19.1% or €42.4 million. The currency translation this amount, €3.9 million was attributable to currency impact amounted to €27.1 million. translation. 1 Europe accounted for 47.5% of total revenue in the ﬁnancial year 2022/23 (PY: 51.7%). Revenue from Americas equalled 37.7% of total rev- Asia contributed 14.7% of total revenue in the ﬁnancial enue in the ﬁnancial year of 2022/23 (PY: 36.1%). year of 2022/23 (PY: 12.2%). TO OUR Europe generated €23.1 million Adj. EBIT in the ﬁnan- SHAREHOLDERS cial year 2022/23 and was thus ‑37.8% lower compared Adj. EBIT generated in Americas reached €44.2 million Asia’s Adj. EBIT came in at €14.5 million for the ﬁnancial 2 to the same reporting period last year (PY: €37.1 mil- in the ﬁnancial year 2022/23 and was thus 60.0% higher year of 2022/23, representing a year‑on‑year decline of lion). Adj. EBIT margin decreased to 6.0% from 10.4% than last year (PY: €27.6 million). Consequently, the Adj. ‑10.5% (PY: €16.2 million). Adj. EBIT margin fell from last year. EBIT margin increased from 9.6% in the previous year 16.2% last year to 11.8%. NON-FINANCIAL to 13.0%. REPORT The region’s operating performance drop was predomi- The decline in Asia was mainly driven by ineﬃciencies 3 nantly driven by increased material prices and inﬂation- Contrary to the other two regions, Americas could in connection with China’s zero-Covid policy and a ary energy expenses as well as ongoing ineﬃciencies strengthen its operating performance compared to negative impact from an unfavourable product mix. resulting from volatile customer call-offs. prior year, primarily attributable to higher revenue and GROUP a positive impact from a favourable product mix. MANAGEMENT REPORT 4 in € million FY 2021/22 FY 2022/23 % change in € million FY 2021/22 FY 2022/23 % change in € million FY 2021/22 FY 2022/23 % change External revenue 317.81 332.9 4.8% External revenue 221.7 264.1 19.1% External revenue 75.0 103.3 37.6% CONSOLIDATED Revenue between Revenue between Revenue between FINANCIAL 40.9 51.5 25.9% 66.7 74.8 12.1% 24.9 18.7 ‑24.7% STATEMENTS segments segments segments Total revenue 358.7 384.4 7.2% Total revenue 288.4 338.9 17.5% Total revenue 99.9 122.0 22.1% 5 Adj. EBIT 37.1 23.1 ‑37.8% Adj. EBIT 27.6 44.2 60.0% Adj. EBIT 16.2 14.5 ‑10.5% Adj. EBIT margin 10.4% 6.0% Adj. EBIT margin 9.6% 13.0% Adj. EBIT margin 16.2% 11.8% ANNUAL 1 Including revenue-related adjustments ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 46 STAND-ALONE RESULTS OF OPERATIONS AND FINANCIAL POSITION OF NOVEM GROUP S.A. CONTENTS In accordance with the provisions of Article 1720‑1 (3) The proﬁt for the ﬁnancial year 2022/23 amounted to The Company’s capital and reserves decreased slightly of the Luxembourg Company Law, the Company opted €16.2 million (PY: €1.1 million). to €681.8 million (31 March 2022: €682.5 million). to present one annual report including the consolidated management report and the management report on The amounts owed to credit institutions carried €250.0 1 Financial position the annual accounts as one annual report only. For the million (31 March 2022: €250.0 million). In the course stand-alone annual accounts of Novem Group S.A., of the private placement and stock exchange listing please refer to chapter Annual accounts. Total assets and total liabilities amounted to €933.6 in ﬁnancial year 2021/22, Novem Group S.A. entered TO OUR million each (31 March 2022: €935.9 million). into a facilities agreement comprising a term loan with SHAREHOLDERS a principal amount of €250.0 million and an undrawn 2 Results of operations Fixed assets essentially comprised shares in aﬃliated revolving credit facility of €60.0 million. As part of undertakings, which remained unchanged at €674.2 the replacement of the former bond of Novem Group The Company’s other income amounted to €1.6 million million (31 March 2022: €674.2 million) and a share- GmbH, the principal amount was transferred with the NON-FINANCIAL (PY: €5.9 million) and resulted from services provided holder loan with a principal amount of €250.0 million incorporation of a shareholder loan from Novem Group REPORT to other Novem Group entities based on the service (31 March 2022: €250.0 million). S.A. to Novem Group GmbH. 3 agreement. The prior ﬁnancial year contained a one‑ time effect from the reimbursement of transaction In the course of the private placement and stock In the course of the private placement and stock costs for the private placement and stock exchange exchange listing in July 2021, the contribution of the exchange listing in the prior ﬁnancial year, the contri- GROUP listing (capital market transactions). past shareholder (intercompany) loan increased the bution of the shareholder loans increased the capital MANAGEMENT shares in aﬃliated undertakings. The contribution in and the term loan was incorporated as part of the REPORT The external charges of €1.0 million (PY: €5.2 million) kind of a former intercompany loan to Novem Group reﬁnancing. 4 included mainly advisory and audit fees and a smaller GmbH was incorporated as part of the reﬁnancing. This amount of legal fees. loan reﬂects with its principal amount the external bank facility. The loans given to Novem Group GmbH were CONSOLIDATED The income from participating interests of €18.0 million used to replace the former bond. FINANCIAL (PY: €0) derived from the dividend distribution. STATEMENTS Current assets amounted to €6.4 million (31 March 5 The interest income of €6.6 million (PY: €12.3 million) 2022: €8.0 million) and included mainly the incorpo- derived from intercompany loans to another Novem rated intercompany loan as part of the reﬁnancing, Group entity. The total interest expenses of €6.4 mil- receivables from the service agreement and the Com- ANNUAL lion (PY: €10.2 million) occurred from interest expenses pany’s cash position. ACCOUNTS and fees to banks in loan-related terms. 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 47 RISKS AND OPPORTUNITIES CONTENTS Risk and opportunity management and eﬃciency of the system are continuously adapted followed at all times or effectively detect and prevent to new circumstances to provide a holistic picture of violations of the applicable laws by one or more of Within its global footprint, Novem is exposed to dynamic the situation at all times. the employees, consultants, agents or partners. As a conditions and thus faces several opportunities and result, Novem could be subject to penalties and mate- risks. These include political and sector‑speciﬁc risks, rial adverse consequences on the business, ﬁnancial Legal risks the risk of ensuring appropriate liquidity, currency risks, condition or results of operations if the Group failed to ﬁnancial risks, business process risks, research and prevent any such violations. 1 development risks, litigation risks, loss of know-how The Group’s companies are and could become involved and IT risks. Realising any of these risks could have a in legal, administrative and arbitration proceedings. Members of governing bodies, employees, author- material and adverse effect on business, ﬁnancial con- These proceedings or potential proceedings could ised representatives or agents may intentionally or TO OUR dition and results of operations. Sustainable success involve, in particular in the United States, substantial unintentionally violate applicable laws and internal SHAREHOLDERS is ensured through active risk management and the claims for damages or other payments. Based on a standards and procedures, in particular in relation to 2 ability to anticipate market trends and developments judgment or a settlement agreement, Novem could anti-corruption, money-laundering, anti-trust and sanc- correctly. Operational management is responsible for be obligated to pay substantial damages. The litiga- tions compliance, as well as compliance with laws identifying and exploiting opportunities. The aim is to tion costs and those of third parties could also be and regulations regarding sales practices, products NON-FINANCIAL identify opportunities in a timely manner and to take signiﬁcant. and services, environment, ﬁnance, employment and REPORT appropriate measures to utilise them. Novem states general corporate and criminal law. However, there can 3 in its long-term strategy the high relevance of identi- Doing business on a worldwide basis requires Novem be no certainty that the internal controls, procedures, fying risks and opportunities arising from operations to comply with the laws and regulations of various compliance systems and risk management systems at an early stage, assessing them appropriately and jurisdictions. The international operations are subject will be able to identify such violations, ensure that GROUP mitigating them by speciﬁc measures. Compliance to applicable anti-corruption laws and regulations and they are reported in a timely manner, evaluate them MANAGEMENT with economic, social and environmental standards is economic sanctions programs. Such programs may correctly or take the appropriate countermeasures and REPORT deep-rooted in the corporate philosophy. The Manage- restrict business dealings with certain sanctioned that they will be adequate for an enterprise of Novem’s 4 ment Board makes use of various tools and control countries. As a result of doing business in foreign scale and complexity. systems to prevent and, in case of the occurrence of an countries, Novem is exposed to a risk of violating event, minimise the impact on the Group. Amongst the anti-corruption laws and sanctions regulations applica- There can further be no certainty that any countermeas- CONSOLIDATED key components are continuous and detailed internal ble in those countries where Novem, partners or agents ures Novem implements will be appropriate to reduce FINANCIAL reporting and controlling processes as a focus of risk operate. Worldwide operations increase the risk of vio- the corresponding business risks effectively, that STATEMENTS management, which aim to identify risks to assets, lations of anti-corruption laws or similar laws. Some breaches of law, regulations or internal controls have 5 income or liquidity as early as possible and to take of the countries in which Novem operates still lack a not occurred in the past or that their discovery would appropriate and effective steps to manage risks and developed legal system with high standards regarding not result in signiﬁcant liability or reputational dam- seize opportunities. By monitoring the market and all anti-corruption and similar laws and are perceived to age for the Group. Moreover, in light of continuously ANNUAL stakeholders, continuous optimisation and adaptation have high levels of corruption. evolving legal and regulatory requirements and internal ACCOUNTS to current challenges are guaranteed. Novem’s busi- developments such as corporate reorganisations, there 6 ness opportunities and risks are recorded, analysed While there are policies and procedures in place that can be no certainty that the risk management systems, and evaluated through active multi-tiered planning, are designed to promote compliance with applicable internal controls and compliance systems and related information and control processes. The effectiveness anti-corruption laws and sanctions, there can be no governance structures will adequately identify and ADDITIONAL assurance that the policies and procedures will be address all relevant requirements. INFORMATION NOVEM ANNUAL REPORT 2022/23 48 CONTENTS Financial risks Novem has to comply with different regulatory regimes Even if Novem enters into certain further hedging across the world that change frequently and are con- arrangements in the future, there can be no assurance tinuously evolving and becoming more stringent, in Novem operates worldwide and is therefore exposed that hedging will be available on commercially reason- particular with respect to environmental regulations, to ﬁnancial risks arising from exchange rate changes. able terms. In addition, if the Group were to use any chemicals and hazardous materials, as well as health The primary exposure is to the Euro to US Dollar, US hedging transactions in the future in the form of deriva- and safety regulations. This also applies to air, water Dollar to Mexican Peso and Euro to Chinese Renminbi tive ﬁnancial instruments, such transactions may result and soil pollution regulations and to waste legislation exchange rates. Currency exchange ﬂuctuations could in mark-to-market losses. 1 and regulation, all of which have recently become more cause losses if assets denominated in currencies with stringent through new laws. a falling exchange rate lose value, while at the same Liquidity and credit risks time liabilities denominated in currencies with a ris- TO OUR Moreover, Novem globally faces increasing require- ing exchange rate appreciate. In addition, ﬂuctuations SHAREHOLDERS ments regarding matters of corporate responsibility in foreign exchange rates could increase or reduce Working capital requirements can vary, depending 2 management and transparency, not only with respect ﬂuctuations in the prices of materials, since Novem in part on the level, variability and timing of custom- to expectations from internal stakeholders, customers, purchases some of the raw materials with foreign ers’ vehicle production, the number of new platform investors and the general public but also concerning currencies. As a result of these factors, ﬂuctuations in launches and the payment terms with customers and NON-FINANCIAL legal requirements. exchange rates and, in particular, a signiﬁcant apprecia- suppliers. Liquidity could also be adversely impacted REPORT tion of the Euro against other major currencies could if suppliers were to suspend normal trade credit terms 3 In addition, for the manufacturing facilities and opera- affect the results of operations. and require payment in advance or on delivery. If the tions, Novem requires various permits and has to available cash ﬂows from operating activities are not comply with the requirements speciﬁed therein. In the External and internal transactions involving the deliv- suﬃcient to fund ongoing cash needs, Novem would GROUP past, adjusting to new requirements has necessitated ery of products and services to and/or by third parties be required to look to cash balances and availability MANAGEMENT signiﬁcant investments and the Group assumes that result in cash in‑ﬂows and out‑ﬂows, denominated in for borrowings, including under the senior facilities REPORT further signiﬁcant investments in this regard will be currencies other than the Euro or the functional cur- agreement dated 18 June 2021, to satisfy those needs. 4 required in the future. rency of the respective subsidiary dealing with such There can be no assurance that Novem, its suppliers cash ﬂow. To the extent that cash out‑ﬂows are not or customers will continue to have access to these or The vehicle approval process (homologation) and the offset by cash in‑ﬂows resulting from operational other sources of liquidity. This may increase the risk CONSOLIDATED implementation of increasingly stringent emission and business in such currency, the remaining net foreign that the Group cannot produce products or will have FINANCIAL consumption regulations are becoming increasingly currency exposure is not neutralised. to pay higher input prices which may not be recovered STATEMENTS complex and time-consuming and may vary by country. in selling prices. 5 While the Group hedges a portion of the exposure to Furthermore, any additional requirements restricting the exchange rate of the Euro to the US Dollar, Novem Novem’s suppliers typically seek to obtain credit insur- or limiting car traﬃc with an aim at reducing green- currently does not hedge all foreign exchange risks. ance for deliveries of raw materials and components ANNUAL house gas or other emissions could lead to a mate- In addition, a number of the consolidated companies to Novem. If, for any reason, the suppliers were not ACCOUNTS rial decrease in car sales and consequently adversely report in currencies other than the Euro, which requires able to obtain such credit insurance, or not at com- 6 affect demand for the Group’s products and services. Novem to convert the respective ﬁnancial information mercial terms, they may not be able to offer the same into Euro when preparing the consolidated ﬁnancial payment terms that the Group has historically received, statements. which could signiﬁcantly increase working capital ADDITIONAL requirements. INFORMATION NOVEM ANNUAL REPORT 2022/23 49 CONTENTS Any signiﬁcant change in the needs for or the avail- ﬁnancial result and earnings. The Group constantly treatment for such arrangements. If any applicable tax ability of working capital ﬁnancing or credit insurance monitors the ﬁnancial markets in order to identify authorities were to successfully challenge the tax treat- may have a material adverse effect on liquidity. To potential impacts in a timely manner and to determine ment or characterisation of any of the intercompany strengthen the working capital structure, Novem prac- any need for action. loans or transactions, it could result in the disallowance tices a silent and non-recourse factoring program with of deductions, a limitation on the ability to deduct inter- a limit of €65,000 thousand. In case of liquidity short- est expenses, the imposition of withholding taxes, the Tax risks ages, Novem possesses further facilities of €64,000 application of signiﬁcant penalties and accrued interest 1 thousand. on intercompany loans or internal deemed transfers, Novem is subject to taxation in, and to the tax laws the application of signiﬁcant penalties and accrued and regulations of, multiple jurisdictions as a result of interest or other consequences. TO OUR Interest rate risks the international scope of the operations and corporate SHAREHOLDERS and ﬁnancing structure. The Group is also subject to Pillar 2 foresees the implementation of an effective min- 2 Novem faces moderate interest rate risks, which mainly intercompany pricing laws, including those relating to imum taxation for large multinational groups. In order derive from obligations based on reference interest the ﬂow of funds amongst companies pursuant to, for to raise the effective tax burden of low-taxed group rates. Such variable interests affect the factoring example, purchase agreements, licensing agreements companies to a uniform minimum tax level worldwide, a NON-FINANCIAL program as well as the senior facility agreement. The or other arrangements. Adverse developments in these separate supplementary tax (top-up tax) is levied in the REPORT two decisive reference interest rates are the 3‑month laws or regulations, or any change in position by the amount of the difference between the global minimum 3 Euribor relating to factoring fees for EUR‑receivables relevant authority regarding the application, administra- tax rate of 15% and the lower effective tax rate. This and interest expenses for the senior facility agree- tion or interpretation of these laws or regulations in any applies to legal entities and permanent establishments ment and the SOFR, which represents the base rate applicable jurisdiction, could adversely affect Novem’s of all multinational groups with consolidated annual rev- GROUP for factoring fees resulting from USD‑receivables. business, results of operations and ﬁnancial condition. enues exceeding €750 million. A signiﬁcant challenge MANAGEMENT The interest rate hikes by the European Central Bank, Furthermore, the effective tax rate varies in each juris- is the availability and sourcing of data. Much of the REPORT which started in July 2022, led to a material increase diction where Novem conducts business. Changes in data relevant to the new regulation is not captured in 4 in ﬁnancial expenses arising from the senior facility the mix of earnings between jurisdictions with lower other reportings, such as country-by-country reporting agreement. Nevertheless, a further 10% increase in tax rates and those with higher tax rates could have a or linked to the ﬁnancial statements. In order to collect both reference rates from today would have no mate- material adverse effect on proﬁtability. this information eﬃciently, new processes and com- CONSOLIDATED rial impact regarding the senior facility agreement and prehensive adjustments to the information from group FINANCIAL the factoring program. In addition, the tax authorities in any applicable juris- accounting are necessary. This can only be achieved STATEMENTS diction may disagree with the positions Novem has through close international cooperation between the tax 5 The interest rate risk regarding pension obligations taken or intends to take regarding the tax treatment or and accounting departments. Global minimum taxation is also moderate as their share of total assets only characterisation of any transactions, including the tax will come into effect in EU countries in 2024. amounts to approximately 5%. treatment or characterisation of indebtedness, exist- ANNUAL ing and future intercompany loans and guarantees or Novem could accrue unanticipated tax expenses in ACCOUNTS the deduction of interest expenses. The Group could relation to previous tax assessment periods which 6 Financial market opportunities also fail, whether inadvertently or through reasons have not yet been subject to a tax audit or are currently beyond its control, to comply with tax laws and regula- subject to a tax audit. It cannot be ruled out that ongo- Favourable developments in interest rates and tions relating to the tax treatment of various ﬁnancing ing and/or future tax audits may lead to an additional ADDITIONAL exchange rates can have a positive impact on Novem’s arrangements, which could result in unfavourable tax tax expense and/or payment. INFORMATION NOVEM ANNUAL REPORT 2022/23 50 CONTENTS Customs risks and opportunities rules of origin provisions (e.g. increase of regional value Extreme risks from acts of war can no longer be ruled content) and requirements for a minimum percentage out in the future and may also inﬂuence Novem’s The sales volume of Novem’s products and services of manufacturing being made with labour above a cer- further development. This could lead to a tightening depends upon the general global economic situation. tain minimum wage. Novem has substantial operations of export controls, political and economic sanctions Particular risks to the economic environment, inter- in Mexico, currently supplying customers located in against countries as well as entities and massive bar- national trade and demand for the Group’s products the United States under a preferred tariff system. The riers to importing and exporting goods. Also, the supply may arise from growing protectionist sentiment in imposition of additional import restrictions, non-tariff of strategic raw materials could be restricted and thus 1 key markets and the introduction of further tariff and trade barriers and/or tariffs could adversely affect the become more expensive. The termination of existing non-tariff barriers or similar measures due to increas- ability to supply customers in the United States or else- trade agreements could signiﬁcantly disrupt supply ing protectionist tendencies. where. In addition, new import restrictions, non-tariff chains and lead to immediate shortages of crucial TO OUR trade barriers and/or tariffs could result in higher prices parts and components needed to manufacture cars SHAREHOLDERS Since the beginning of 2018, the previous US admin- for vehicles, which could, in turn, harm the demand and other vehicles. An example of this is the war in 2 istration announced a series of potential measures for vehicles and thereby indirectly Novem’s products. Ukraine, where all these disruptions became apparent. relating to international trade that, individually or in In addition, the results of operations could also be aggregate, could have a material adverse impact on the affected by retaliatory measures from Europe, China Despite various trade barriers and unpredictable events, NON-FINANCIAL global economy, international trade, or the automotive or other countries imposing tariffs on the United States. such as the Russia‑Ukraine war, the implementation of REPORT industry. The US administration enacted a number of new free trade agreements between the EU and other 3 measures aimed at restricting the access of Chinese A global pandemic, like Covid‑19, can lead to problems third countries (such as Canada, Japan, Vietnam and companies to the US market. Therefore, they began to such as shortage of cargo space, extreme delays and Singapore in the past years) and efforts to build new impose tariffs on certain products originating in China, ﬂuctuations in delivery times and customs clearance, trade relations could reduce existing tariff barriers as GROUP including a 25% tariff on automotive trim parts and a among others. This poses the risk of price increases, well as non-tariff measures. MANAGEMENT 7.5% on imports of aluminium. The Chinese government the normalisation of which can be unpredictable. Ris- REPORT retaliated by imposing tariffs on several US products. ing prices not only for transportation but also for gas 4 Research and development risks and Even though the United States and China entered into and other purchased materials can negatively affect opportunities an Economic and Trade Agreement in January 2020 as overall market demand and therefore Novem’s results a ﬁrst step, the trade conﬂict between the two countries of operations. CONSOLIDATED has not been resolved until today. But the agreement Future success depends on the ability to anticipate FINANCIAL in January 2022 on the import of steel and aluminium In addition, the increase in regional or international market trends as well as technological changes and STATEMENTS products from the EU into the US within the frame- trade barriers, including anti-dumping tariffs and the to develop and bring to the market new and improved 5 work of a tariff quota and the resulting elimination of withdrawal of countries from bilateral and multilateral products in a timely manner. The automotive market, in additional tariffs will enable a positive development for trade agreements could have a negative impact on particular, is characterised by progressive development international trade between the EU and the US and is a the global economic environment and can thus lead towards more driver and passenger comfort features, ANNUAL ﬁrst effort towards minimising trade barriers. to lower demand for the Group’s products. The automo- digital user experience and assistance systems. ACCOUNTS tive industry supply chain has developed over decades 6 The US administration also replaced the North Ameri- and relies on existing trade arrangements to provide There can be no assurance that Novem will be suc- can Free Trade Agreement (NAFTA) with the new for cross-border supplies of raw materials, automotive cessful in developing new products or systems or United States‑Mexico‑Canada Agreement (USMCA) in parts and other components. in bringing them to market in a timely manner or at ADDITIONAL July 2020. The new USMCA includes more stringent all. Further, it cannot be guaranteed that products or INFORMATION NOVEM ANNUAL REPORT 2022/23 51 CONTENTS technologies developed by others will not render offer- materials or changes in industry and customer require- Some of Novem’s competitors, in particular in the ings obsolete or non-competitive or that customers ments may render one or more of the current offerings Asian market, have in the past engaged, and may in will not substitute the Group’s products with compet- obsolete, excessively costly or otherwise unmarketable. the future continue to engage, in highly competitive ing products. Additionally, there is no certainty that the strategies, such as predatory pricing or mergers and market will accept Novem’s innovations, competitors If there is a shift away from the use of materials or tech- acquisitions, to gain market share. While Novem cur- will not be able to produce non-patented products more nologies in which Novem is investing, the costs may not rently has a strong market position in the market for inexpensively from other sources or that the Group will be fully recovered, including, for example, the costs and premium decorative interior trim elements, if consoli- 1 be able to adjust cost structure in the event of contrac- expenses incurred in connection with the development dation continues in the automotive components sec- tion of demand. Should Novem fail to develop appropri- of or investment in such material or technology. Novem tor, the Group may have to compete against growing ate strategies as a response to these or other market may be placed at a competitive disadvantage if other competitors who beneﬁt from increased economies of TO OUR trends and should fail to enhance existing products, materials or technologies emerge as industry-leading. scale or are part of large integrated groups and who SHAREHOLDERS develop new products or keep pace with developing One of the most important future challenges is sus- may have greater ﬁnancial and other resources or a 2 market trends or technology, growth opportunities tainability, where OEMs already demand a high degree broader global footprint. Such competitors may also could be lost or the Group could lose the opportunity of recycled raw materials and a precise action plan be less margin sensitive than Novem and attempt to to win new platforms from existing customers. Fur- towards CO2‑neutrality. The focus on sustainability increase their market share through pricing below cost. NON-FINANCIAL thermore, if Novem devotes resources to the pursuit of of the business is seen as essential for the long-term In addition, suppliers that do not currently compete with REPORT new technologies and products that fail to be accepted success of the Group. Additionally, private users Novem could expand their product portfolios to include 3 in the marketplace or that fail to achieve high process increasingly use modes of transportation other than products that compete directly with ours. Changes in robustness, all or part of these engineering and devel- the private automobile, especially in connection with the product focus of larger suppliers could also result in opment expenses may be lost. growing urbanisation and car sharing. The increased such suppliers establishing relationships with custom- GROUP use of car sharing concepts and new city-based car ers that reduce or entirely replace Novem’s business MANAGEMENT A trend to highly integrated products on the OEM side, rental schemes could reduce dependency on private with those customers. Given the Group’s strong market REPORT including mechanical and electronic components, can automobiles and demand for customised premium position, OEMs have in the past awarded and may in 4 lead to a trend where only full system suppliers will be vehicles. On the other hand, the trend towards shared the future award certain platforms to competitors to Tier‑1 suppliers. Novem’s business requires a high level mobility can lead to a need for more premium interiors diversify their supplier portfolio, which has resulted of technical expertise for the design, development and as a differentiation method for mobility providers. or may result in the loss of nominations in the future CONSOLIDATED manufacture of products. Novem invests in technology, and which may limit the potential for future growth of FINANCIAL new materials and innovation, which the Group believes Novem’s market share. STATEMENTS Customer and market risks and will be critical to long-term growth and furthermore 5 opportunities needs to continually adapt its expertise in response The ﬁnancial condition of customers is affected by to technological innovations, industry standards and the sales of their vehicles, which may be impacted by customer requirements or preferences. Novem’s products are highly competitive in respect of several factors, including general economic conditions. ANNUAL price, quality, delivery performance, innovation, prod- In particular, purchases of the customers’ products ACCOUNTS The ability to anticipate changes in technology and uct design, engineering capability and service, facing may be limited by their customers’ inability to obtain 6 market trends and to successfully develop and intro- signiﬁcant competition in all regions within each major adequate ﬁnancing for such purchases or by decreas- duce new and enhanced products or manufacturing product category. ing customer demand for light vehicles in general. processes on a timely basis will be a signiﬁcant factor ADDITIONAL in the ability to remain competitive. New technologies, INFORMATION NOVEM ANNUAL REPORT 2022/23 52 CONTENTS The Group may not fully or accurately assess the cred- customers, which could, among others, increase delivery of raw materials, components or energy can itworthiness of customers. In particular, the ﬁnancial the bargaining power of current and future custom- also result in increased costs of manufacturing prod- condition of and demand for Novem’s products from ers. Mergers of customers with entities that are not ucts. Novem does not actively hedge against the risk of OEM customers have been and continue to be affected Novem’s customers could also materially impact the rising prices of raw materials or energy. Contracts with by the consequences of the Covid‑19 pandemic and ﬁnancial position and results of operations. customers do not include pass-through mechanisms the Russia‑Ukraine war. Signiﬁcantly lower global pro- regarding inﬂationary price increases on raw materials duction levels, tightened liquidity and increased cost Market‑speciﬁc opportunities primarily relate to con- or energy prices and if Novem is not able to compen- 1 of capital have in the past combined to cause ﬁnancial sumer spending trends concerning the automotive sate for such price increases or undertake cost-saving distress amongst many OEMs and other customers as industry. The trend for interior design is to view the car measures elsewhere in operations, they could have a well as suppliers in the automotive industry and could more as a wellness oasis on wheels. Interior design material adverse impact on the ﬁnancial results. TO OUR have a similar impact in the future. and details are setting standards and decisively inﬂu- SHAREHOLDERS encing consumer behaviour. Novem’s objective is to 2 Logistics risks Although Novem supplies products to almost all lead- stabilise and maintain its attained growth and to gener- ing premium OEMs, the Group depends on certain large ate future, proﬁtable growth. Management pays close customers for a signiﬁcant proportion of revenue. In attention to how the automotive market responds to Complex supply and delivery chains make logistics pro- NON-FINANCIAL the ﬁnancial year 2022/23, the three largest customers developments in consumer conﬁdence. The Group’s cesses in Novem’s industry very vulnerable to disrup- REPORT represented approximately 75% of revenue. The loss product and service range put Novem in a good posi- tions. As a result, Novem has experienced temporary 3 of all or a substantial portion of the revenue with any tion to beneﬁt from expected future trends. Its global decreases in orders from customers due to supply large-volume customers could have a material adverse presence allows it to shift activities in markets in order chain disruptions in the past and expects this to con- impact on Novem’s business, ﬁnancial condition and to realise its cost-cutting potential and further enhance tinue in the future. GROUP results of operations. This risk could also materialise its proximity to the customer. MANAGEMENT if the content per vehicle awarded to Novem were to In general, supply chain disruptions may result from REPORT decrease or if a lower amount of content per vehicle many reasons, including closures of supplier facili- 4 Material and supplier risks than expected is awarded. While Novem generally has ties or critical manufacturing facilities due to strikes, beneﬁtted from an increasing content per vehicle in the mechanical breakdowns, electrical outages, ﬁre and past, there have also been platforms with a decreasing Prices of certain raw materials and the energy the explosions, as well as logistical complications resulting CONSOLIDATED content per vehicle. Group relies on are linked to commodity markets and from weather or other natural disasters, mechanical FINANCIAL thus subject to ﬂuctuation. The primary raw materials failures, border controls, health checks and delayed STATEMENTS In addition, the market for premium vehicles is signiﬁ- and components used in the products are chrome and customs processing or due to limitation of travel in 5 cantly consolidated with a limited number of premium plastic parts, wood, aluminium, granulates, glue and logistics caused by the Covid‑19 or another pandemic. OEMs primarily based in Europe. The amount of busi- synthetic materials. The prices of such raw materials The Covid‑19 pandemic has harmed the Group’s supply ness with Asian‑based OEMs generally lags that of the have ﬂuctuated signiﬁcantly in recent years and have chain, for example, as a result of production suspen- ANNUAL largest customers in Europe, partly due to the existing further increased in the last year. In addition, Novem sions at suppliers or additional border or import checks. ACCOUNTS relationships between these Asian‑based OEMs and uses large amounts of energy in the manufacturing While Novem has not experienced material diﬃculties 6 their preferred suppliers. process, the price of which is also subject to signiﬁ- in maintaining the supply chain, the Group had to take cant volatility. Such volatility in the prices of these com- countermeasures such as using air freight instead Consolidation amongst customers could result in modities could increase the costs of manufacturing of sea freight and increasing inventory, which in turn ADDITIONAL an increasingly concentrated client base of large products. In addition, supply shortages or delays in the negatively impacted proﬁtability. INFORMATION NOVEM ANNUAL REPORT 2022/23 53 CONTENTS Personnel risks and opportunities In recent years, Novem has broadened its supplier base The business could be adversely impacted by strikes, to include new suppliers in local markets, particularly labour disputes and natural disasters. the United States, Mexico, Canada and Asia, that have Novem’s success depends on attracting and retaining not yet proven their ability to meet the Group’s require- managing directors, executive oﬃcers, senior manage- Novem operates a large, global business with 5,488 ments consistently. The lack of even a small single sub- ment, key employees and other skilled and unskilled employees as of 31 March 2023. The labour force in component or raw material necessary to manufacture personnel. The loss of key employees, including man- the automotive industry, including Novem’s, is highly one of the products, for whatever reason, could force agement, directors, executives and other skilled person- unionised, especially in Europe and Mexico. Over 1 Novem to cease production, possibly for a prolonged nel, could have a material adverse effect on the Group’s the past several years, the Group’s industry and the period. Similarly, a potential quality issue could force market position. Due to intense competition within the industries in which Novem’s customers operate have Novem to halt deliveries while validating the products. industry, there is a risk of losing qualiﬁed employees to experienced strikes, lockouts, refusals to work or plant TO OUR Even where products are ready to be shipped or have competitors or being unable to ﬁnd a suﬃcient number seizures. Although in the recent past the Group has SHAREHOLDERS been shipped, delays may arise before they reach the of appropriate new employees. Considerable expertise not experienced, and at present is not experiencing any 2 customer. If Novem ceases timely deliveries, the Group could be lost or access thereto gained by competitors. major labour disputes, the relationships with employ- has to absorb its own costs for identifying and solv- ees and unions at various locations could deteriorate ing the cause of the problem, as well as expeditiously There is no assurance that the Group will be success- in the future and the Group could experience strikes, NON-FINANCIAL producing and shipping replacement products. ful in retaining its executives and employees in key further unionisation efforts or other types of conﬂicts REPORT positions or in attracting new employees with cor- with labour unions or employees. Refusals to work or 3 If Novem is unable to deliver products to the custom- responding qualiﬁcations. Although Novem tries to work downtime experienced by customers or other ers on time, the customers may be forced to cease retain the commitment of qualiﬁed executives and key suppliers could result in delays, decreased productiv- production and may seek to recoup losses, which could employees through performance-based remuneration ity or closures of assembly facilities where the Group’s GROUP be signiﬁcant. Thus, any supply chain disruption could systems, there is a risk that any such individuals will products are needed for assembly. MANAGEMENT cause the complete shutdown of an assembly line of leave the Group, including as a result of collective bar- REPORT one of Novem’s customers, which could expose the gaining on terms that may be considered below-market Although Covid‑19 is still present, Novem’s hygiene 4 Group to material claims for compensation. standard by employees. concept has proven itself, which is why the employees have not been affected heavily by the virus. At all times, In addition, the Group is exposed to the risk of lower The manufacture of many of the Group’s products Novem was able to maintain production and deliver the CONSOLIDATED order volumes from customers due to a disruption to requires signiﬁcant technical skills and expertise. The products to the customers. FINANCIAL their supply chain, which is unrelated to Novem’s prod- success of the operations and growth strategy will STATEMENTS ucts. For example, OEMs still face a global semicon- therefore also depend on attracting and retaining The labour market has also changed. It is becoming 5 ductor shortage, resulting in lower production volumes skilled and qualiﬁed personnel maintaining high quality increasingly challenging to ﬁnd the employees needed and temporary production suspensions at many OEMs, standards globally. The labour markets for production to ﬁll vacancies. including some of Novem’s customers. staff in some regions where Novem is active, such as ANNUAL the Czech Republic, Germany, Mexico or Slovenia, are Increasing labour costs due to inﬂation in certain ACCOUNTS Rising prices in the supply chain could also be caused characterised by very low unemployment rates and low-cost countries in which the Group operates, such 6 by the requirements of the German Supply Chain Due strong historic employment growth, resulting in intense as China, the Czech Republic, Honduras, Mexico or Diligance Act (LkSG), which must be implemented by competition for qualiﬁed personnel and an increased Slovenia, may erode the proﬁt margins and compro- 1 January 2024. turnover rate. mise price competitiveness. Recent wage increases ADDITIONAL have increased average wage expenses per employee. INFORMATION NOVEM ANNUAL REPORT 2022/23 54 CONTENTS Quality risks and opportunities Although Novem undertakes various incentive pro- to levels the Group considers economically reasonable. grams to improve the productivity of employees, as Still, the insurance coverage could prove insuﬃcient in well as cost-effective automation initiatives designed As a supplier of premium decorative interior trim prod- individual cases. to reduce labour costs, these measures may be insuf- ucts, one of the determining factors for Novem’s cus- ﬁcient to offset increases in personnel costs or the tomers in purchasing components and systems is the Furthermore, Novem manufactures many products Group may be unable to manage these increases in high quality of products and manufacturing processes. pursuant to customer speciﬁcations and quality the future effectively. A decrease in the actual or perceived quality of prod- requirements. If the products manufactured and deliv- 1 ucts and processes could damage Novem’s image and ered do not meet the requirements stipulated by the Personnel development and apprenticeship programs reputation as well as those of the products. In addition, customers at the agreed date of delivery, production are a speciﬁc chance to retain a high standard and defective products could result in loss of sales, loss of the relevant products is generally discontinued until TO OUR knowledge within Novem’s workforce. of customers and loss of market acceptance or could the cause of the product defect has been identiﬁed SHAREHOLDERS damage the Group’s reputation and market perception. and remedied. Furthermore, Novem’s customers could 2 The development of employees is a key issue. This is all potentially claim damages for breach of contract, even about giving people the skills to pursue entrepreneurial At some locations, certain product certiﬁcations with if the cause of the defect is remedied at a later point goals while simultaneously combining this with the regard to speciﬁcations and quality standards are con- in time. In addition, failure to perform with respect to NON-FINANCIAL speciﬁc development aspirations of individual needs. sidered a necessity or premise for the acceptance of quality requirements could negatively affect the market REPORT Alongside the annual employee appraisal interviews, products by customers and markets. As such, Novem acceptance of the Group’s other products and market 3 regular feedback talks are held at Novem. As part of must obtain and maintain the relevant certiﬁcations reputation in various market segments. their discussions, supervisors and their employees to be nominated as a supplier as well as for an ongo- identify the necessary areas for action and therefore ing business relationship. Maintaining such standards, Environmental, health and safety risks GROUP create individually tailored programmes. which are regularly reviewed by customers, is essential MANAGEMENT to building long-term customer relationships. REPORT Novem believes that the responsibility for independ- Many of the sites at which Novem operates have been 4 ent career development is with individual employees. As a manufacturer, Novem is subject to product liability used for industrial purposes for many years, leading Supervisors and Human Resources see themselves lawsuits and other proceedings alleging violations of to contamination risks and resulting in site restoration as facilitators by making instruments, training courses due care, violation of warranty obligations (implied obligations. In addition, under federal and state environ- CONSOLIDATED and feedback talks available. These include, amongst and expressed), treatment errors, safety provisions mental laws and regulations (including state property FINANCIAL others, development meetings that enable Novem to and claims arising from breaches of contract or ﬁnes transfer laws), the Group could be held responsible STATEMENTS identify employees’ career-progression aspirations and imposed by government or regulatory authorities. Given for the remediation of offsite areas impacted by its 5 agree on a plan of action. Through continuous learning, the large amounts of products manufactured and dis- sites and operations, natural resource damages, and/ the Group prepares its employees for future challenges. tributed to a variety of customers in the automotive or third-party claims (e.g. for bodily injury or property Thinking ahead and strengthening the development of sector, Novem is from time to time faced with liability damage). Regulatory authorities could assert claims ANNUAL individuals is a key strategy for Novem to shape future claims related to actual or potentially deﬁcient charges against Novem, as the current or former owner or ten- ACCOUNTS talents. of products and may therefore be held liable in cases ant (operator) of the affected sites or as the party that 6 of death, bodily injury or damage to property caused caused or contributed to the contamination, for the by a defective product manufactured by the Group. The investigation or remediation or containment of such risks arising from such warranty and product liability soil or groundwater contamination or other environ- ADDITIONAL lawsuits, proceedings and other claims are insured up mental media (e.g. surface waters), including related INFORMATION NOVEM ANNUAL REPORT 2022/23 55 CONTENTS to Novem’s use of non-owned treatment, storage and consumers, i.e. vehicle users. The initial price for an external communications. Any failure in the operation disposal sites or order the Group to dispose of or treat emission certiﬁcate has been set at €25 per ton of CO2 of these IT systems could result in material adverse contaminated soil excavated or water encountered for 2021 and is expected to step up to approximately consequences, including disruption of operations, loss in the course of construction. Novem could also be €55 to €65 per ton of CO2 in 2026. The new system has of information or an unanticipated increase in costs. liable to the owners or occupants of sites leased, sites already resulted in higher fuel prices in Germany and In addition, from time to time, the Group is required to the Group sells, or other impacted properties. Costs is expected to have a further signiﬁcant impact in the make investments to maintain and/or upgrade the IT typically incurred in connection with such claims are future, which could in turn have a negative effect on the systems and networks and such investments may be 1 generally diﬃcult to predict. Also, if any contamination demand for vehicles in Germany. signiﬁcant. were to become a subject of public discussion, there is a risk that the reputation or relations with customers Growing pressure to reduce greenhouse gas emissions The risk of computer viruses, cyber-attacks and security TO OUR could be harmed. from mobile sources could reduce automobile sales, breaches is further increased as a growing number of SHAREHOLDERS thereby reducing demand for products and ultimately employees work remotely. A signiﬁcant or large‑scale 2 Greenhouse gas emissions have increasingly become revenue. malfunction or interruption of one or more IT systems the subject of substantial international, national, could adversely affect the ability to keep operations regional, state and local attention. Greenhouse gas The nature of operations subjects Novem to various running eﬃciently or at all and affect product availabil- NON-FINANCIAL emission laws and regulations have been promulgated statutory and regulatory compliance and litigation risks ity. Furthermore, it is possible that a malfunction of REPORT in some of the jurisdictions in which Novem operates, under health, safety and employment laws. There can data security measures or a cyber-attack could enable 3 and additional greenhouse gas requirements are in vari- be no assurance that there will be no accidents or unauthorised persons to access sensitive business or ous stages of development. In addition, the US Environ- incidents suffered by employees, contractors or other personal data, including information on the Group’s mental Protection Agency (EPA) has issued regulations third parties on the Group’s sites. If any accidents or intellectual property or business strategy or those of GROUP limiting greenhouse gas emissions from mobile and incidents occur, Novem could be subject to prosecu- customers. Such failure could cause economic loss MANAGEMENT stationary sources pursuant to the US Clean Air Act. tion and litigation, which could result in ﬁnes, penalties for which Novem could be liable and may expose the REPORT The ﬁnal Carbon Pollution Standards for new, modiﬁed and other sanctions and could cause damage to the Group to governmental investigations, disciplinary 4 and reconstructed power plants reﬂect the degree of reputation. actions and ﬁnes. A failure of the IT systems could emission limitation achievable through the application also cause damage to Novem’s reputation, which could of the best system of emission reduction that the EPA The implementation and maintenance of management harm the business. CONSOLIDATED has determined has been adequately demonstrated for systems for environment, health and safety are required FINANCIAL each type of unit. Novem’s customers may seek price to fulﬁl legal and customer obligations. Ongoing audits STATEMENTS reductions to account for their increased costs result- from third parties must conﬁrm the effectiveness of 5 ing from greenhouse gas requirements. these systems to validate these certiﬁcates and thus be considered as a supplier. As one of the measures intended to meet national ANNUAL climate targets, Germany recently expanded its ACCOUNTS IT risks national CO2 pricing and trading system to include 6 emissions from burning fossil fuels by vehicles. The system entails mandatory emission certiﬁcates that Novem relies heavily on centralised, standardised must be acquired by sellers of fossil fuels and the information technology systems and networks to ADDITIONAL costs of which are expected to be passed on to end support business processes, as well as internal and INFORMATION NOVEM ANNUAL REPORT 2022/23 56 CORPORATE GOVERNANCE STATEMENT CONTENTS The Company is a Luxembourg public limited company case applied accordingly to a public limited company The internal control systems and risk management (Société Anonyme) and as such is subject to the cor- (Société Anonyme) with a two-tier governance system for the establishment of ﬁnancial information are porate governance regime as set forth in particular in under Luxembourg Law. described in the section Risk and opportunity man- the Companies’ Law. agement. According to the Articles of Association, the The Company’s Supervisory Board or its Audit and Management Board must be composed of at least two As the Company’s shares are listed on a regulated mar- Risk Committee arranges for the Company’s external members, whereas the Supervisory Board must be ket, the Company is further subject to the provisions of auditors to inform it and note in the Audit Report if, composed of at least three. The Supervisory Board has 1 the Shareholder Rights Law. during the performance of the audit, the external audi- set up the following committees in accordance with tors identify any facts that indicate an inaccuracy in the Articles of Association: the Audit and Risk Com- Being a Luxembourg public limited company, with its adhering to the recommendations in C.10, D.3, D.9 or mittee and the Nomination and Remuneration Com- TO OUR shares exclusively listed on a regulated market in Ger- D.11 of the GCGC, in each case applied accordingly to mittee. The Audit and Risk Committee is responsible SHAREHOLDERS many, the Company is neither required to adhere to the a public limited company (Société Anonyme) with a for the consideration and evaluation of the auditing 2 Luxembourg corporate governance regime applicable two‑tier governance system under Luxembourg Law. and accounting policies and the Company’s ﬁnancial to companies admitted to the regulated market in controls and systems. The Remuneration Committee is Luxembourg nor to the German corporate governance For the avoidance of doubt, the Company is subject responsible for making recommendations to the Super- NON-FINANCIAL regime applying to stock corporations organised in to Luxembourg Law with respect to the accounting visory Board and the Management Board on the terms REPORT Germany. principles relating to its ﬁnancial statements and there- of appointment and the beneﬁts of the members of the 3 fore does not fall within the application of the German Management Board of the Company. Further details The Company has set up its own corporate governance Commercial Code (Handelsgesetzbuch). As a result, on the composition and purpose of these committees structure in order to address its own speciﬁc needs recommendation D.3 of the GCGC was followed by the and the Supervisory Board are described in the sec- GROUP and interests and has, for such purpose, adopted and Company to the extent possible. tion Report of the Supervisory Board as well as in the MANAGEMENT chosen to abide by its own corporate governance rules, section Setup and organisation of the Management REPORT as further described below, rather than to voluntarily By virtue of European and Luxembourg Law, Novem Board regarding the Management Board. The Annual 4 apply either of the Luxembourg or Germany govern- Group is obliged to report on non‑ﬁnancial and diversity General Meeting shall be held at such time as speci- ance regimes, and to set up its corporate governance information relating to it. Novem’s Non‑ﬁnancial Report ﬁed by the Management Board and/or the Supervisory structure. will be published together with this Annual Report, i.e. Board in the convening notice. CONSOLIDATED on 29 June 2023. In accordance with Article 7bis of FINANCIAL As the German corporate governance code (GCGC) the Shareholder Rights Law, the Company must further The Management Board and Supervisory Board may STATEMENTS does not apply to the Company, it does not have to draw up a Remuneration Policy for the Supervisory convene extraordinary general meetings as often as 5 issue a declaration of conformity with the GCGC under Board and the Management Board of Novem Group the Company’s interests so require. An extraordinary section 161 of the German Stock Corporation Act S.A. reﬂecting the principles and measurement for the general shareholders’ meeting must be convened upon (Aktiengesetz). remuneration of the members of such boards. The the request of one or more shareholders who together ANNUAL Company must as well publish a Remuneration Report, represent at least one-tenth of the Company’s share ACCOUNTS Solely for purposes of section 4.1.1.1 of the Guide to which will be published separately from this Annual capital. 6 the DAX Equity Indices of STOXX Ltd., the Company Report on the Novem IR website on 25 July 2023. The declares that it does not deviate from recommenda- Remuneration Policy can already be accessed on the Each share entitles the holder to one vote. tions C.10, D.3, D.9 and D.11 of the GCGC, in each Novem IR website. ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 57 CONTENTS The right of a shareholder to participate in a General D) The Articles of Association of the Company do not G) Powers of the Management Board: Meeting and to exercise the voting rights attached to contain any restrictions on voting rights. their shares are determined with respect to the shares • The Company is managed by a Management held by such shareholder on the 14th day before the E) There are no agreements with shareholders which Board under the supervision of the Supervisory General Meeting. are known to the Company and may result in restric- Board. tions on the transfer of securities or voting rights • The Management Board is vested with the Each shareholder can exercise their voting rights in within the meaning of the Transparency Directive. broadest powers to perform or cause to be 1 person, through a proxy holder or in writing (if provided performed any actions necessary or useful in for in the relevant convening notice). F) Rules governing the appointment and replacement connection with the purpose of the Company. of Management Board members and the amend- • All powers not expressly reserved by the Com- TO OUR The information required pursuant to Article 10.1 of ment of the Articles of Association: panies’ Law or by the Articles of Association to SHAREHOLDERS Directive 2004 / 25 / EC on takeover bids which has the General Meeting or the Supervisory Board 2 been implemented by Article 11 of the Takeover Law is • The members of the Management Board are fall within the authority of the Management set forth here below under Disclosure Regarding Article appointed by the Supervisory Board, or in the Board. 11 of the Luxembourg Law on Takeovers of 19 May 2006. case of a vacancy, by way of a decision adopted • Certain measures are subject to the prior NON-FINANCIAL by a majority of the remaining Management approval of the Supervisory Board on the terms REPORT Board members for the period until the next set out in the Articles of Association and the Disclosures pursuant to Article 11 of the 3 Supervisory Board Meeting. Rules of Procedure of the Management Board. Luxembourg Law on Takeovers of 19 May • Management Board members are appointed for • The Management Board may appoint one or 2006 a term not exceeding six years and are eligible several persons, including but not limited to GROUP for re-appointment. members of the Management Board or share- MANAGEMENT • Management Board members may be removed holders, at the exclusion of any member of the REPORT A) For information regarding the structure of capital, at any time with or without cause by the Super- Supervisory Board, who shall have full authority 4 reference is made to section 3.8 of the consolidated visory Board by a simple majority of the votes. to act on behalf of the Company in all matters ﬁnancial statements. • Resolutions to amend the Articles of Association pertaining to the daily management and affairs may be adopted in the manner foreseen by the of the Company. CONSOLIDATED B) The Articles of Association of the Company do not Companies’ Law, i.e. by a majority of two‑thirds • The Management Board is also authorised to FINANCIAL contain any restrictions on the transfer of shares of the votes validly cast, without counting the appoint one or several persons, either members STATEMENTS of the Company. abstentions, if the quorum of half of the share of such board or not, at the exclusion of any 5 capital is met. If the quorum requirement of half member of the Supervisory Board, for the pur- C) According to the voting rights notiﬁcations received of the share capital of the Company is not met poses of performing speciﬁc functions at every until 31 March 2023, the following shareholders at the Annual General Meeting, the sharehold- level within the Company. ANNUAL held more than 5% of total voting rights attached to ers may be re-convened to a second General • The Management Board may also appoint com- ACCOUNTS Novem shares: COFRA Holding (indirect: 33,505,583 Meeting. No quorum requirements apply with mittees to which it may delegate some of its 6 voting rights attached to shares or 77.87% of total respect to such second General Meeting and tasks and the members of which may, but do voting rights) and AVGP Limited, St. Helier, Jersey the resolutions are adopted by a majority of not have to be members of the Management (direct: 2,409,424 voting rights attached to shares two-thirds of the votes validly cast, without Board, at the exclusion of any member of the ADDITIONAL or 5.60% of total voting rights). counting the abstentions. Supervisory Board. INFORMATION NOVEM ANNUAL REPORT 2022/23 58 CONTENTS • The Management Board is authorised to issue shares in the Company under the Articles of Association, which set the authorised capital of the Company, including the issued share capital at €520,000, represented by 52,000,0000 shares. Such authorisation has been granted for a period of ﬁve years beginning on 30 June 1 2021. During such period the Management Board, with the consent of the Supervisory Board, may issue new shares under the author- TO OUR ised share capital, limit or cancel any preferen- SHAREHOLDERS tial subscription rights. 2 • The Articles of Association of the Company allow for a redemption of shares within the limits of the law, however, there is currently NON-FINANCIAL no buyback authorisation to the Management REPORT Board in place. 3 H) The Company is, given the nature of its business and its ﬁeld of activity, party to agreements which GROUP would take effect, alter or terminate upon a change MANAGEMENT of control of the company following a takeover bid, REPORT as is usual in the sector in which it operates. 4 I) There are no agreements between the Company and its Management Board members or employ- CONSOLIDATED ees providing for compensation if they resign or FINANCIAL are made redundant without valid reason or if their STATEMENTS employment ceases because of a takeover bid. 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 59 SUBSEQUENT EVENTS CONTENTS There were no events or developments that could have materially affected the measurement and presentation of the Group’s assets and liabilities as of 31 March 2023 other than disclosed in note 5.15 of the consolidated ﬁnancial statements. 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 60 OUTLOOK CONTENTS Given the diﬃcult trading conditions, macroeconomic volatility and ongoing concerns about the war in Ukraine, uncertainty remains high. Amid this, strained supply chains, sharply increased input costs and inﬂa- tion are affecting overall economic growth. As for the economic outlook, global car production 1 also faces the above challenges, ultimately leading to volatile call‑offs and ineﬃciencies. Nevertheless, recent market data suggests solid growth in light vehicle pro- TO OUR duction for 2023/24 as supply chains are expected SHAREHOLDERS to ease over time, partly due to the end of China’s 2 zero-Covid policy. To cope with the challenging market environment, Novem will continue to closely monitor developments and take all necessary precautions to NON-FINANCIAL adapt to the situation. REPORT 3 Due to the many unpredictable factors and remaining uncertainties, providing a reasonable outlook is not possible. On the back of its proven resilience, however, GROUP the Group conﬁrms its mid‑term guidance and expects MANAGEMENT a stable development of key performance indicators in REPORT the year ahead. 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 61 Carbon open pore 4 ﬁnancial statements Consolidated CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME for the ﬁnancial year ended 31 March 2023 CONTENTS in € thousand Note FY 2021/22 FY 2022/23 Revenue 4.1 614,628 700,304 Increase or decrease in ﬁnished goods and work in process 29,471 -7,491 Total operating performance 644,100 692,813 Other operating income 4.2 20,071 25,817 Cost of materials 4.3 -327,998 -354,689 1 Personnel expenses 4.4 -158,483 -168,645 Depreciation, amortisation and impairment 4.5 -31,372 -32,467 TO OUR Other operating expenses 4.6 -73,454 -82,377 SHAREHOLDERS Operating result (EBIT) 72,864 80,452 2 Finance income 4.7 3,380 3,555 Finance costs 4.7 -25,821 -13,087 NON-FINANCIAL Financial result -22,440 -9,532 REPORT Income taxes 4.8 -16,131 -15,728 3 Deferred taxes 4.8 9,679 -5,209 Income tax result -6,452 -20,937 GROUP Proﬁt for the period attributable to the shareholders 43,972 49,983 MANAGEMENT REPORT Differences from currency translation 3.8 9,177 224 4 Items that may subsequently be reclassiﬁed to consolidated proﬁt or loss 9,177 224 Actuarial gains and losses from pensions and similar obligations (before taxes) 3.9 1,978 8,572 CONSOLIDATED Taxes on actuarial gains and losses from pensions and similar obligations -487 -2,229 FINANCIAL STATEMENTS Items that will not subsequently be reclassiﬁed to consolidated proﬁt or loss 1,491 6,343 5 Other comprehensive income/loss, net of tax 10,668 6,567 Total comprehensive income/loss for the period attributable to the shareholders 54,640 56,551 ANNUAL Earnings per share attributable to the equity holders of the parent (in €) ACCOUNTS basic 4.9 1.04¹ 1.16 6 diluted 4.9 1.04¹ 1.16 1 Adjusted according to IAS 8.42 as the calculation of the number of average weighted shares was different. ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 63 CONSOLIDATED STATEMENT OF FINANCIAL POSITION as of 31 March 2023 CONTENTS Assets Equity and liabilities in € thousand Note 31 Mar 22 31 Mar 23 in € thousand Note 31 Mar 22 31 Mar 23 Intangible assets 3.1 3,100 2,429 Share capital 3.8 430 430 Property, plant and equipment 3.2 184,905 185,116 Capital reserves 3.8 539,630 539,594 1 Trade receivables 3.4 47,541 46,329 Retained earnings/accumulated losses 3.8 -482,826 -443,414 Other non-current assets 3.7 12,619 10,276 Currency translation reserve 3.8 10,422 10,646 Deferred tax assets 4.8 18,845 8,332 Total equity 67,656 107,256 TO OUR SHAREHOLDERS Total non-current assets 267,009 252,482 Pensions and similiar obligations 3.6 34,871 27,044 2 Inventories 3.3 129,388 116,306 Other provisions 3.11 3,172 1,373 Trade receivables 3.4 37,671 47,510 Financial liabilities 3.12 247,683 248,220 Other receivables 3.5 28,584 37,999 3.13 NON-FINANCIAL Other liabilities 3.14 29,753 33,273 REPORT Other current assets 3.7 13,667 18,235 3.16 Cash and cash equivalents 3.6 116,967 165,474 3 Deferred tax liabilities 4.8 3,635 648 Assets held for sale 760 - Total non-current liabilities 319,113 310,558 Total current assets 327,036 385,524 Tax liabilities 3.10 13,805 19,056 GROUP Assets 594,045 638,006 MANAGEMENT Other provisions 3.11 47,974 46,693 REPORT Financial liabilities 3.12 1,404 1,151 4 Trade payables 3.15 70,384 60,597 3.13 Other liabilities 3.14 73,708 92,694 CONSOLIDATED 3.16 FINANCIAL STATEMENTS Total current liabilities 207,275 220,191 5 Equity and liabilities 594,045 638,006 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 64 CONSOLIDATED STATEMENT OF CASH FLOWS for the ﬁnancial year ended 31 March 2023 CONTENTS in € thousand Note FY 2021/22 FY 2022/23 in € thousand Note FY 2021/22 FY 2022/23 Proﬁt for the period 43,972 49,983 Cash received (+) from loans 247,649 - Income tax expense (+)/income (-) 4.8 16,131 15,728 Cash in-ﬂow (+)/out-ﬂow (-) from 48,827 - shareholders of the parent company Financial result (+)/(-) net 21,674 7,126 Cash repayments (-) of bond/cash received (+) 5.6 -400,000 - Depreciation, amortisation and impairment (+) 4.5 31,372 32,467 from issuance of bond Other non-cash expenses (+)/income (-) 884 -9,134 Cash paid (-) for subsidies/grants -4 -4 1 Increase (-)/decrease (+) in inventories -30,741 13,201 Cash paid (-) for lease liabilities 3.13 -8,366 -9,797 Increase (-)/decrease (+) in trade receivables 19,967 -9,438 Interest paid (-) -12,994 -8,533 TO OUR Increase (-)/decrease (+) in other assets 2,896 -3,184 Dividends paid (-) 3.8 - -17,212 SHAREHOLDERS Increase (-)/decrease (+) in deferred taxes -10,118 5,245 Cash ﬂow from ﬁnancing activities -124,889 -35,546 2 Increase (-)/decrease (+) in prepaid expenses/ Net increase (+)/decrease (-) in cash and cash 1,022 1,921 -59,840 49,000 deferred income equivalents Increase (+)/decrease (-) in provisions -8,075 2,675 Effect of exchange rate ﬂuctuations on cash and NON-FINANCIAL 1,508 -493 cash equivalents REPORT Increase (+)/decrease (-) in trade payables 8,158 -10,048 Cash and cash equivalents at the beginning of 3 Increase (+)/decrease (-) in other liabilities 702 10,431 175,299 116,967 the reporting period Gain (-)/loss (+) on disposals of non-current Cash and cash equivalents at the end of the 20 74 116,967 165,474 assets reporting period GROUP Cash received (+) from/cash paid (-) for -17,330 -8,721 MANAGEMENT income taxes REPORT Cash ﬂow from operating activities 80,536 98,326 4 Cash received (+) from disposals of property, 7 795 plant and equipment Cash paid (-) for investments in intangible -443 -288 CONSOLIDATED assets FINANCIAL STATEMENTS Cash paid (-) for investments in property, plant -18,147 -17,646 and equipment 5 Interest received (+) 4.7 3,095 3,361 Cash ﬂow from investing activities -15,487 -13,779 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 65 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the ﬁnancial year ended 31 March 2023 CONTENTS Other retained earnings/ Currency Capital accumulated translation in € thousand Note Share capital reserves losses reserve Equity Balance as of 01 Apr 21 62 21,891 -528,289 1,245 -505,091 Proﬁt or loss for the year 43,972 43,972 Other comprehensive income or loss 3.8 1,491 9,177 10,668 1 Comprehensive income or loss for the year 45,463 9,177 54,640 Issue of new shares 368 48,459 48,827 TO OUR Contribution of shareholder loan 469,280 469,280 SHAREHOLDERS Balance as of 31 Mar 22 430 539,630 -482,826 10,422 67,656 2 Balance as of 01 Apr 22 430 539,630 -482,826 10,422 67,656 Proﬁt or loss for the year 49,983 49,983 NON-FINANCIAL Other comprehensive income or loss 3.8 6,343 224 6,567 REPORT Comprehensive income or loss for the year 56,327 224 56,551 3 Other capital-related transactions -36 -36 Contribution of shareholder loan GROUP Dividends -17,212 -17,212 MANAGEMENT REPORT Reclassiﬁcations 298 298 4 Balance as of 31 Mar 23 430 539,594 -443,414 10,646 107,256 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 3.8 3.8 3.8 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1 General information 1.1 Reporting entity Novem Group S.A . was originally formed as a private company (société à responsabilité limitée) for an unlimited period of time under the laws of Luxembourg on 12 July 2011 pursuant to a deed of incorporation published in the Mémorial, Recueil des Sociétés et Associations C on 28 September 2011, number 2306. At that time, the Company’s legal name was Car Interior Design (Luxembourg) S.à r.l. On 30 June 2021, the extraordinary General Share- holders’ Meeting converted the Company’s corporate form from a private limited liability company (société à responsabilité limitée) to a public company limited by shares ( société anonyme ). As a consequence, the shares (parts sociales) were also converted and became actions with no nominal value. The Company’s corporate name was amended to Novem Group S.A. Novem Group S.A. (hereinafter also referred to as the “Company”) is domiciled in Contern , Luxembourg, and is registered in the commercial register of Luxembourg under register ﬁle number B 162.537. The Company’s registered oﬃce is at 19, rue Edmond Reuter, 5326 Contern , Luxembourg. The Group’s principal place of business is Vorbach, Germany . The Company’s ﬁnancial year is from 1 April to 31 March of the following year (12‑month period). The consoli- dated ﬁnancial statements include Novem Group S.A. and its subsidiaries (hereinafter also referred to as “Novem” or the “Group”). Novem operates as a developer, supplier and system supplier for trim parts and decorative functional ele- ments in vehicle interiors in the premium sector. The products combine valuable raw materials with the lat- est technology and processing. Typically, the products are used as instrument panels, impact-resistant trim parts in the centre console, door trims, beltlines and decorative functional elements in the car interior. The consolidated ﬁnancial statements were authorised for issue by the Management Board on 22 June 2023. Under Luxembourg Law, the consolidated ﬁnancial statements are approved by the shareholders at their Annual General Meeting. The oﬃcial version of the accounts is the ESEF ver- sion available with the Oﬃcially Appointed Mechanism (OAM) tool. 1.2 Basis of preparation and presentation method These consolidated ﬁnancial statements have been prepared on the basis of historical costs. This excludes derivative ﬁnancial instruments and trade receivables that are sold under factoring agreements. These are measured at fair value through proﬁt or loss. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transac- tion between market participants at the measurement date. The fair value can either be directly observable or otherwise be estimated using a valuation technique. When measuring fair value using a valuation technique, it has to be categorised into one of the following levels depending on the available observable parameters and the signiﬁcance of these parameters for measurement as a whole: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date. • Level 2 inputs are inputs other than quoted market prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, or can be derived indirectly from other prices. • Level 3 inputs are unobservable inputs for the asset or liability. The Group recognises reclassiﬁcations between differ- ent levels at the end of the reporting period in which the change occurred. The Group classiﬁes assets and liabilities as current if they are expected to be realised or settled within 12 months after the reporting date. If assets and liabilities have both a current and non-current component, they are broken down into their maturity components and reported as current and non-current assets or liabilities in accordance with their accounting classiﬁcation. These consolidated ﬁnancial statements are presented in Euro, the Company’s functional currency. All amounts are rounded to the nearest thousand Euro unless oth- erwise indicated. Totals in tables were calculated on the basis of exact ﬁgures and rounded to the nearest thousand Euro. For computational reasons, there may be rounding differences to the exact mathematical values in tables and references (monetary units, per- centages, etc.). The Group has consistently applied the accounting and consolidation policies to all periods presented in these consolidated ﬁnancial statements. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 67 The consolidated statements of proﬁt or loss and other comprehensive income have been prepared using the nature of the expense method. The consolidated ﬁnancial statements as of 31 March 2023 have been prepared in accordance with the Inter- national Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), as adopted by the European Union (EU). The term IFRS includes all applicable International Account- ing Standards (IAS) as well as all interpretations and amendments by the International Financial Reporting Standards Interpretations Committee (IFRS IC) – for- merly the International Financial Reporting Interpreta- tions Committee (IFRIC). Novem Group S.A. has prepared the consolidated ﬁnancial statements as of 31 March 2023 on a going concern basis. From the current perspective, there are no risks to the continued existence of the Company. In its assessment, management considered the proﬁt for the last years as well as the strong cash positions. The management also considered the positive cash in‑ﬂow from operating activities. Reference is also made to section 3.6 and section 3.8. 1.3 Effects of new ﬁnancial reporting standards The IASB has issued or revised a number of reporting standards and interpretations that will not become effective until a future date. These new standards and interpretations will not be applied by the Group before they become effective in the EU. The following table shows the new or amended stand- ards, including their effects expected from ﬁrst‑time adoption. If the Group does not expect any effects on the consolidated ﬁnancial statements from ﬁrst‑time adoption, this is due to the fact that the transactions, other events or conditions affected by the new IFRSs do not currently exist within the Group. Potential impact on the Effective date New standards or amendments consolidatedﬁnancial statements Annual periods beginning on Amendments to IAS 8: Changes in Accounting Estimates and negligible or after 1 January 2023 Errors: Deﬁnition of Accounting Estimates Annual periods beginning on Amendments to IAS 1 and IFRS Practice Statement 2: negligible or after 1 January 2023 Disclosure of Accounting Policies Annual periods beginning on IFRS 17 Insurance Contracts: Replacement of IFRS 4 and no impact or after 1 January 2023 Amendments to IFRS 17 Annual periods beginning on Amendments to IAS 12 Income Taxes: Deferred Tax related to negligible or after 1 January 2023 Assets and Liabilities arising from Single Transaction Annual periods beginning on Amendment to IAS 12 Income Taxes: Pillar 2 model rules negligible or after 1 January 20231 Annual periods beginning on Amendments to IAS 1: Classiﬁcation of Liabilities as Current or negligible or after 1 January 20241 Non-current (with Covenants) Annual periods beginning on Amendments to IFRS 16: Clariﬁcation how a seller‑lessee negligible or after 1 January 20241 subsequently measures sale and leaseback transactions Annual periods beginning on Amendment to IAS 7 and IFRS 7: Supplier ﬁnance negligible or after 1 January 20241 arrangements Deferred indeﬁnitely Amendments to IFRS 10 and IAS 28: Sale or Contribution of negligible Assets between an Investor and its Associate or Joint Venture 1 EU endorsement still pending NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 68 The Group observed all standards and interpretations adopted by the International Accounting Standards Board (IASB) and the EU that are mandatory as of 1 January 2022. The following table shows the new or amended standards effective in 2022. Applying the new standards has not signiﬁcantly impacted these ﬁnancial statements. Impact on the Effective date New standards or amendments consolidatedﬁnancial statements Annual periods beginning on Annual Improvements 2018‑2020 Narrow‑scope amendments negligible or after 1 January 2022 to IFRS 1, IFRS 9, IFRS 16 and IAS 41 Annual periods beginning on Amendments to IAS 37: Provisions, Contingent Liabilities and or after 1 January 2022 Contingent Assets Onerous Contracts – Costs of Fulﬁlling a negligible Contract Annual periods beginning on Amendments to IAS 16: Property, Plant and Equipment negligible or after 1 January 2022 Proceeds before Intended Use Annual periods beginning on Amendments to IFRS 3 Business Combinations: Reference to negligible or after 1 January 2022 the Conceptual Framework 1.4 Consolidated entities and basis of consolidation Consolidated entities In addition to Novem Group S.A., the consolidated ﬁnancial statements include all subsidiaries that can be controlled by the Group. According to IFRS 10, a company controls an entity when it has the power over the entity, is exposed 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 consolidated ﬁnancial statements include Novem Group S.A. as well as 13 international subsidiaries. Registered oﬃce Ownership interest in % Novem Group GmbH Vorbach, Germany 100 Novem Beteiligungs GmbH1 Vorbach, Germany 100 Novem Car Interior Design GmbH1 Vorbach, Germany 100 Novem Car Interior Design Metalltechnologie GmbH1 Vorbach, Germany 100 Novem Car Interior Design Vorbach GmbH1 Vorbach, Germany 100 Novem Deutschland GmbH Vorbach, Germany 100 Novem Car Interiors (China) Co., Ltd. Langfang, China 100 Novem Car Interior Design k.s. Pilsen, Czech Republic 100 Novem Car Interior Design S.de R.L. Tegucigalpa, Honduras 100 Novem Car Interior Design S.p.A. Bergamo, Italy 100 Novem Car Interior Design S.A. de C.V. Querétaro, Mexico 100 Novem Car Interior Design d.o.o. Žalec, Slovenia 100 Novem Car Interior Design Inc. Detroit, USA 100 1 Entities included in the consolidated ﬁnancial statements according to IFRS that have exercised the exemption clauses under §264 (3) HGB. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 69 Basis of consolidation Subsidiaries are entities controlled by Novem Group S.A., Luxembourg. A company controls an investee when it is exposed to, or has rights to, variable returns from its involvement with the investee and the ability to use its power over the investee to affect the amount of the Company‘s returns. In assessing control, all facts and circumstances are considered. This particularly includes the purpose and structure of the investee. For example, changes to decision-making rights can mean that the relevant activities are no longer directed through voting rights, but instead, other agreements, such as contracts, give another party or parties the current ability to direct the relevant activities. The assessment of control requires taking into account all facts and circumstances in the management‘s judgment. Acquisitions of subsidiaries in the course of business combinations are accounted for using the acquisition method pursuant to IFRS 3. On initial consolidation, the identiﬁable assets acquired and the liabilities assumed are measured at their acquisition‑date fair values. The fair values of property, plant and equipment and employee beneﬁts and similar obligations are deter- mined on the basis of expert opinions, while the fair values of ﬁnancial instruments, as well as inventories, are based on available market information. The fair value of signiﬁcant intangible assets is measured using adequate valuation techniques based on estimated future cash ﬂows or multiples. Acquisition‑related costs are expensed as incurred. For each business combination, the Group decides on an acquisition‑by‑acquisition basis whether to recognise the acquisition date components of non‑ controlling interests in the acquiree at fair value or based on the proportionate share of the acquiree’s net assets. Goodwill is the positive difference between the con- sideration transferred and the fair value of the iden- tiﬁable assets acquired and the liabilities assumed in a business combination. If the measured amount is negative, the difference is recognised directly in proﬁt or loss after reexamination. Goodwill is not amortised but tested for impairment at least annually – or more frequently if required – and, if necessary, written down to the residual value after deduction of the impairment loss. Subsidiaries are fully consolidated from the date of acquisition, i.e. from the date the group entity obtains control. They are deconsolidated as soon as the group entity loses control. If control is lost at a later date, proﬁt or loss is recognised in the consolidated ﬁnancial statements for the part of the reporting year during which the Group entity had control. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. Intercompany proﬁt or loss on trade receivables that have not yet been realised from the Group‘s perspective is eliminated in the consolidated ﬁnancial statements. Receivables, payables, provisions, revenue, expenses and income between group entities are eliminated. Dif- ferences resulting from the elimination of intercompany payables and receivables (genuine elimination differ- ences) are presented under other operating expenses. Taxes were deferred as required on temporary differ- ences arising from consolidation measures in accord- ance with IAS 12. If necessary, the ﬁnancial statements of group enti- ties are adapted to the accounting policies of Novem Group S.A. The ﬁnancial statements of the group enti- ties Novem Car Interiors (China) Co., Ltd., China, and Novem Car Interior Design S.A. de C.V., Mexico, whose reporting date is 31 December, are adapted to the par- ent company‘s reporting date. The deviating reporting dates compared to the parent company result from the respective national legislation. 1.5 Foreign currency translation The consolidated ﬁnancial statements are prepared in accordance with the functional currency concept. The consolidated ﬁnancial statements are presented in Euros, the parent company‘s functional currency. In addition, the functional currency of each subsidiary is determined. The items contained in the ﬁnancial state- ments of the respective subsidiary are then translated into the functional currency of the parent company. Transactions in foreign currencies are translated into Euros at the exchange rate applicable on the transac- tion date. In subsequent reporting periods, monetary assets and liabilities denominated in foreign currency are translated at the closing rate. Any resulting gains and losses are recognised in consolidated proﬁt or loss. Non-monetary assets and liabilities are translated into Euros at the exchange rate applicable on the trans- action date. Assets and liabilities of foreign subsidiaries whose functional currency is not the Euro are translated into Euros at the closing rate on each reporting date. Equity items are translated at historical exchange rates. The income statements and statements of cash ﬂows are translated into Euros at the applicable average NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 70 exchange rates for the period. The resulting foreign currency translation differences are presented in the translation currency reserve in accumulated other com- prehensive income. The Group used the following major exchange rates for currency translation: Currency Closing rate Average rate EUR 1 equals 31 Mar 22 31 Mar 23 2021/22 2022/23 CNY 0.14115 0.13343 0.13425 0.13958 CZK 0.04101 0.04266 0.03949 0.04118 HNL 0.03678 0.03728 0.03571 0.03895 MXN 0.04526 0.05099 0.04237 0.04892 USD 0.90082 0.91954 0.86178 0.95743 NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 71 2 Accounting policies 2.1 Use of judgments and estimates In preparing the ﬁnancial statements in accordance with IFRS, management has made judgments and estimates that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Due to unforeseeable developments beyond the con- trol of management, the actual ﬁgures may differ from these estimates. Estimates and underlying assump- tions are reviewed on an ongoing basis. Revisions to estimates are recognised in accordance with IAS 8 in the period in which they occur and in each subsequent period affected by the revisions. The most important forward-looking assumptions and other major sources of estimation uncertainty on the reporting date that have a signiﬁcant risk of result- ing in a material adjustment to the carrying amounts of assets and liabilities in the next ﬁnancial year are explained below. Measuring the fair value of ﬁnancial instruments If the fair values of ﬁnancial assets and ﬁnancial liabili- ties cannot be measured using quoted prices in active markets, they are determined by applying valuation techniques, including the discounted cash ﬂow method. The inputs used in the model are based – to the extent possible – on observable market data. If such data is unavailable, fair value is determined to a considerable extent based on judgment. Judgments concern such inputs as liquidity risk, credit risk and volatility. Changes in the assumptions for these inputs may affect the recognised fair values of ﬁnancial instruments. Please refer to section 5.2 for an overview of the ﬁnancial instruments measured at fair value. Impairment of non-ﬁnancial assets Management assesses at the end of each reporting period whether there is any objective evidence that assets are impaired. Any intangible assets not yet available for use as of the reporting date in the form of capitalised development costs are also tested for impairment annually. Further tests are conducted when there is objective evidence of impairment. Other non‑ ﬁnancial assets or cash‑generating units are tested for impairment when there is evidence that the carrying amount is not recoverable. The recoverable amount of an asset or a cash-generating unit is the higher of fair value less costs to sell and value in use. The measure- ment of fair value less costs to sell is based on available data from binding sales transactions between inde- pendent business partners for similar assets or observ- able market prices less costs directly attributable to the sale of the asset. The discounted cash ﬂow method is used to measure the value in use. Cash ﬂows are derived from the budget for the next ﬁve years, which does not include restructuring measures to which the Group has not yet committed and material future invest- ments that will increase the proﬁtability of the tested cash-generating unit. The recoverable amount depends on the discount rate used in the discounted cash ﬂow method as well as the expected future cash in‑ﬂows and the growth rate used for extrapolation purposes. Capitalisation of development costs When capitalising development costs, management‘s estimates regarding the technical and economic fea- sibility of the development projects are considered in the recognition decision. This is usually the case when an internal development project has reached a speciﬁc milestone in the existing project management model. Measurement of the capitalised development costs depends on assumptions regarding the amount and period of expected future cash ﬂows as well as discount rates to be applied. For more details, please see section 3.1. Net realisable value of inventories Inventories are stated at the lower of cost and net real- isable value. The measurement of net realisable value requires assumptions by management, particularly on the development of sales prices and costs still to be incurred until sale. Please refer to section 3.3 for further information. Loss allowances on receivables Estimates regarding the amount and necessary scope of loss allowances on receivables sometimes require subjective assessments with regard to the creditworthi- ness of customers. These are therefore subject to the inherent uncertainty of judgment. Please refer to sec- tion 3.4 and section 5.4 for further information. Deferred tax assets on tax loss carry-forwards Deferred tax assets are recognised for tax loss car- ryforwards to the extent that it is considered likely that the related tax beneﬁts will be realised through future taxable proﬁts based on management‘s proﬁt forecasts for the group entities. The determination of deferred tax assets requires signiﬁcant judgment by management with regard to the expected occurrence and amount of future taxable income as well as future tax. Please refer to section 4.8 for further information. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 72 Provisions Signiﬁcant estimates are required in the determination of provisions related to pensions and other obligations, contract losses, warranty costs and legal proceedings. Please refer to section 2.11 and section 2.13 for further information. Determination of the term of leases with extension/ termination options The Group determines the term of its leases based on the non-cancellable period of the lease as well as the periods arising from the option to extend the lease, provided it is reasonably certain that it will exercise this option, or the periods arising from the option to terminate the lease provided it is reasonably certain that it will not exercise this option. The Group has con- cluded several leases that include extension and/or termination options. It exercises judgment in determin- ing whether it is reasonably certain that the option to extend or terminate the lease will or will not be exer- cised. That is, it considers all relevant criteria that cre- ate an economic incentive for it to exercise either the extension or termination option. After the commence- ment date, the Group re-determines the lease term if there is a signiﬁcant event or change in circumstances that is within its control and has an effect on whether or not it will exercise the option to extend or terminate the lease (e.g. major leasehold improvements or material adjustment of the underlying asset). Please refer to section 5.10 for details on potential future lease payments for periods after the date of exercising the extension and termination options that are not taken into account in the lease term. Revenue recognition For the purpose of revenue recognition, it is necessary to identify all distinct performance obligations within a contract with a customer. The assessment of whether a performance obligation is distinct requires judgments by management. Moreover, determining and allocating the transaction price to distinct performance obligations of a contract requires assumptions and estimates by manage- ment. This particularly concerns scenarios in which a stand-alone selling price for a good or service is not directly observable, and must therefore be estimated or cases in which the transaction price includes variable components. In addition, management must assess whether there is participation in the development costs of automobile manufacturers in exchange for goods or services transferred by customers to the Group, which is customary in the automotive industry. Should this not be the case, estimates of the future contract volume under the contracts with customers involving such participation are necessary. Furthermore, determining whether a performance obligation is satisﬁed at a point in time or over time also requires management judgment. This particularly concerns the assessment of whether the criteria for recognition of revenue over time are satisﬁed in the individual case. Please refer to section 2.15 and sec- tion 2.7 for further information. Climate change Increasing expectations from stakeholders require explaining how climate-related matters are considered in preparing the ﬁnancial statements to the extent they are material. Climate change and potential future developments on the entity, including the sustainability of its current business model, are for sure important but not expected to have a signiﬁcant impact on the ﬁnancial reporting judgments and estimates so far, consistent with the assessment that climate change is also not expected to have a signiﬁcant impact on the Group’s going concern assessment nor viability of the Group. There are certainly potential risks (e.g. limita- tions on car traﬃc with the aim of reducing greenhouse gases potentially affecting the overall demand), but also clear opportunities (e.g. expansion of the product portfolio with bio-based, recycled or upcycled decors) which may change in the future both in terms of mate- riality and likelihood of occurrence and may have a corresponding impact on judgments and estimates. Still, these have been classiﬁed as not material for this year’s ﬁnancial statements. Any trends and develop- ments are continuously monitored and investigated in order to identify any effects on the business model at an early stage. This involves analysing matters such as transitory risks resulting from new statutory legisla- tion and regulations on climate protection, such as the introduction of a CO2 tax or a ban on diesel vehicles in large cities. We also take technological innovations into account. Underlying, the Group actively contributes to reducing the footprint of production by converting manufactur- ing processes to CO2‑neutral with modern and eﬃcient technology. Sustainability is also reﬂected in product innovations and concepts, which potentially can even create a competitive advantage with customers in awarding new projects. Russia-Ukraine war While management sees no direct impact from the Ukraine war on Novem, indirect consequences could NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 73 be observed. The indirect impact mainly resulting from political and economic sanctions against Russian enti- ties and huge barriers for importing or exporting goods between and through the war zones and the European Union or other third countries led to massive supply chain disruptions and rising transport costs. Since the beginning of the war on 24 February 2022, manage- ment has regularly reviewed the implications of the changing geopolitical and macroeconomic conditions and has not identiﬁed a going concern or signiﬁcant issue, beyond the general scope of impact, on the performance and ﬁnancial position of the Group as of today. Management continues to monitor the current developments and their potential impact on the Group. 2.2 Intangible assets Purchased intangible assets Intangible assets acquired for valuable consideration are recognised at cost. If they have a determinable useful life, these intangible assets are amortised on a straight-line basis over these useful lives. Straight-line amortisation begins when the asset is in the condition necessary for it to be capable of operating in the man- ner intended by management. After initial recognition, intangible assets are recognised at cost less accumu- lated amortisation and any accumulated impairment losses. Amortisation and impairment losses are rec- ognised in proﬁt or loss. Identiﬁable intangible assets acquired in a business combination are recognised at fair value at the acqui- sition date. Subsequent expenditure is capitalised only when it increases the future economic beneﬁts embodied in the speciﬁc asset to which it relates. All other expenses are recognised as expenses in the period they are incurred. The useful lives of software and licenses are estimated at two to ﬁve years. Amortisation methods and useful lives are reviewed at each reporting date and adjusted as necessary. Internally generated intangible assets Expenditures relating to development projects are rec- ognised as intangible assets pursuant to IAS 38 if the following can be demonstrated: 1. the technical feasibility of completing the intangible asset so that it will be available for use or sale; 2. the intention to complete the intangible asset and use or sell it; 3. the ability to use or sell the intangible asset; 4. how the intangible asset will generate probable future economic beneﬁts; 5. the availability of adequate technical, ﬁnancial and other resources to complete the development and to use or sell the intangible asset; and 6. the ability to measure reliably the expenditure attrib- utable to the intangible asset during its develop- ment. The cost of an internally generated intangible asset is the sum of expenditure incurred from the date when the intangible asset ﬁrst meets the abovementioned recognition criteria. If the above criteria are not satisﬁed, the development expenditure is recognised immediately in proﬁt or loss in line with the treatment of research expenditure. In order to continuously assess the need to capitalise development expenditure, ongoing development pro- jects are monitored at a central level and broken down into multi-stage project phases. If the aforementioned requirements are fulﬁlled by a particular project phase, the associated expenditure is capitalised as internally generated intangible assets. Capitalised development expenditure is amortised on a straight-line basis over its useful life of three to seven years. The useful life is determined based on the estimated use of the technologies in line with technical progress or on the basis of the speciﬁc application of the development on current platforms. Amortisation methods and useful lives are reviewed at each report- ing date and adjusted as necessary. Internally generated intangible assets are tested for impairment when facts or changes in circumstances indicate that their carrying amount may not be recover- able. Intangible assets from development projects not yet available for use are tested for impairment annually. 2.3 Property, plant and equipment Property, plant and equipment, except from right‑of‑use assets under leases (IFRS 16), are measured at cost less any accumulated depreciation and any accumu- lated impairment losses. The cost of an item of property, plant and equipment comprises its purchase price and any costs directly attributable to bringing the asset to the condition nec- essary for it to be capable of operating in the manner intended. Rebates, discounts or bonuses are deducted from the purchase price. The cost of internally gener- ated assets includes all costs directly attributable to NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 74 the production process as well as proportionately attributable production overheads. Borrowing costs are usually not recognised as part of cost. However, if they are directly attributable to the acquisition, construction or production of a qualifying asset, they are capitalised pursuant to IAS 23. Repair and maintenance costs are recognised in proﬁt or loss as incurred if they generate no additional economic beneﬁts. To the extent relevant, cost includes the estimated costs of site dismantlement, removal and restoration of the asset. Depreciation is calculated to write off the cost of items of property, plant and equipment less their estimated residual values using the straight-line method over their useful lives and is generally recognised in proﬁt or loss. Land is not depreciated. The estimated useful lives of property, plant and equipment for current and comparative periods are as follows: Useful lives of property, plant and equipment Buildings 10 to 33 years Furniture and ﬁxtures, oﬃce equipment 3 to 13 years IT equipment 4 years Leasehold improvements 10 years 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. These gains and losses are recognised in other operating income or other oper- ating expenses. The residual values, useful lives and depreciation meth- ods of assets are reviewed at the end of each ﬁnancial year and adjusted as necessary. 2.4 Impairment of assets Non-ﬁnancial assets According to IAS 36, non‑ﬁnancial assets with ﬁnite useful lives are assessed at the end of each reporting period to determine whether there is any indication that an asset may be impaired, e.g. particular events or market developments indicating a possible impair- ment. The carrying amounts of intangible assets with indeﬁnite useful lives as well as intangible assets not yet available for use are tested for impairment at the end of each reporting period. For impairment testing, assets that cannot be individu- ally assessed are grouped into the smallest identiﬁable group of assets generating cash in‑ﬂows through continuing use, which are largely independent of the cash in‑ﬂows from other assets or groups of assets (cash-generating units). Within the Group, the smallest identiﬁable group of assets is usually at the level of individual entities. If any such indication exists, or in cases where annual impairment testing is required, the recoverable amount of the asset is estimated. If the recoverable amount of an asset or corresponding cash-generating unit is less than its carrying amount, an impairment loss is recognised. The resulting difference between the car- rying amount and recoverable amount is recognised as an expense in proﬁt or loss. Measuring recoverable amount The recoverable amount of an asset or a cash-gener- ating unit is the higher of its fair value less costs to sell and its value in use. Value in use is measured by discounting the estimated future cash ﬂows expected to arise from the continuing use of an asset and its disposal at the end of its useful life. The discount rate is a pre‑tax rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the asset. For assets to which cash ﬂows cannot be directly allo- cated, the recoverable amount of the cash-generating unit to which the asset belongs is determined. Reversing an impairment loss An impairment loss recognised in prior periods for an asset is reversed if there has been a change in the estimates used to determine the asset’s recoverable amount, i.e. the expected recoverable amount has increased. However, the increased carrying amount of an asset attributable to a reversal of an impairment loss shall not exceed the carrying amount that would have been determined (net of amortisation or deprecia- tion) had no impairment loss been recognised for the asset in prior years. Financial assets The Group mainly recognises allowances for expected credit losses for: • trade receivables measured at amortised cost • contract assets NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 75 Loss allowances for trade receivables and contract assets are always measured at an amount equal to life- time expected credit losses (ECL). Lifetime expected credit losses are ECLs that result from all possible default events over the expected life of a ﬁnancial instrument. The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk. To assess whether the credit risk of a ﬁnancial asset since initial recognition has signiﬁcantly increased and to evaluate expected credit losses, the Group consid- ers reasonable and supportable information which is relevant and available without undue cost or effort. This covers both quantitative and qualitative information and analysis, which is based on past experience of the Group and in-depth assessments, including forward- looking information. The Group assumes that the credit risk on a ﬁnancial asset has increased signiﬁcantly when it is more than 30 days past due. The Group considers a ﬁnancial asset in default when it is unlikely that the borrower will be able to repay its loan commitment to the Group in full without the Group having to resort to measures such as sale of collateral (should it exist). Measurement of expected credit losses Expected credit losses are deﬁned as the weighted average of credit losses with the respective risks of a default occurring as the weights. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between all contractual cash ﬂows that are due to an entity in accordance with the contract and all cash ﬂows that the entity expects to receive). Expected credit losses are measured within the Group based on a classiﬁcation of trade receivables and assets by customer (see section 5.4 for further details). Presentation of impairment for expected credit losses in the statements of ﬁnancial position and consolidated statement of comprehensive income Impairment losses on trade receivables measured at amortised cost and on ﬁnancial assets are deducted from the gross carrying amount of the assets. The impairment for expected credit losses is presented in other operating expenses of the Consolidated state- ment of comprehensive income. Credit-impaired ﬁnancial assets At each reporting date, the Group assesses whether ﬁnancial assets carried at amortised cost are credit‑ impaired. A ﬁnancial asset is credit‑impaired when one or more events that have a detrimental impact on the estimated future cash ﬂows of the ﬁnancial asset have occurred. Evidence that a ﬁnancial asset is credit‑impaired also includes the following observable data: • signiﬁcant ﬁnancial diﬃculty of the issuer or the borrower • breach of contract, such as default • restructuring of a loan or credit by the Group which would not otherwise have been considered • if it is probable that the borrower will become insol- vent or enter into other bankruptcy proceedings • the disappearance of an active market for a security because of ﬁnancial diﬃculties Impairment The gross carrying amount of a ﬁnancial asset is fully or partially impaired if – according to an appropriate assessment – the Group does not assume that the ﬁnancial asset can be partly or wholly recovered. In this regard, the Group makes an individual assessment as to the point in time and amount of the impairment. 2.5 Leases At inception of a contract, the Group assesses whether a contract is, or contains, a lease. This is the case if the contract conveys the right to control the use of an identiﬁed asset for a period of time in exchange for con- sideration. To identify whether the contract includes the right to control the use of an identiﬁed asset, the Group uses the deﬁnition of a lease according to IFRS 16. At the commencement date or on modiﬁcation of a contract that contains a lease, the Group splits up the contractually agreed transaction price generally based on the relative stand-alone selling price and presents the lease and non‑lease components separately. For all classes of assets in the context of leases, however, the Group has decided – pursuant to IFRS 16.15 – not to separate non-lease components and instead to rec- ognise lease and non-lease components as a single lease component. At the commencement date, the Group recognises a right-of-use asset and a lease liability. The right-of-use asset is initially measured at cost commensurate with the initial measurement of the lease liability, adjusted by the payments made on or before the commence- ment date plus any initial direct costs and estimated costs for the dismantling or removal of the underlying NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 76 assets or the restoration of the underlying assets or site where the asset is located, less any received lease incentives. The right‑of‑use asset is subsequently depreciated using the straight-line method from the commence- ment date to the end of the lease term unless the lease transfers ownership of the underlying asset to the Group at the end of the lease term or the cost of the right‑of‑use asset reﬂects that the Group will exercise a purchase option. In that case, the right-of-use asset is depreciated over the useful life of the underlying asset, which is determined in line with the requirements for property, plant and equipment (refer in this regard to section 2.3). In addition, the right-of-use asset is con- tinually tested for impairment where necessary and adjusted by speciﬁed remeasurements of the lease liability. The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be read- ily determined, the Group‘s incremental borrowing rate. Generally, the Group uses its incremental borrowing rate as the discount rate. To determine its incremental borrowing rate, the Group obtains interest rates from a bank and makes corre- sponding adjustments to account for the lease condi- tions and type of asset. The lease payments contained in the measurement of the lease liability include: • ﬁxed payments, including de facto ﬁxed payments • variable lease payments which are linked to an index or (interest) rate, initially measured using the applicable index or (interest) rate at the commence- ment date • amounts which are expected to be paid, based on a residual value guarantee • the exercise price of a purchase option that the Group is reasonably certain to exercise, lease pay- ments for a renewal option if the Group is reason- ably certain to exercise this option, and payments of penalties for early termination of the lease unless the Group is reasonably certain that it will not ter- minate the lease early The lease liability is measured at the present value of the lease payments that are not paid at the commence - ment date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. It is remeas- ured when there is a change in future lease payments resulting from a change in an index or (interest) rate, when there is a change in the Group‘s estimate of the amounts expected to be payable under a residual value guarantee when the Group changes its assessment of whether it will exercise a purchase, renewal or termina- tion option or when there is a revised in‑substance ﬁxed lease payment. The amount of the remeasurement of the lease liability is recognised as an adjustment to the carrying amount of the right-of-use asset or, if this is reduced to zero, any remaining amount of the remeasurement is recognised in proﬁt or loss. The Group presents right-of-use assets for leases in property, plant and equipment and lease liabilities in other ﬁnancial liabilities. Furthermore, the Group has decided not to report right-of-use assets and lease liabilities for leases based on low-value assets as well as for short-term leases pursuant to IFRS 16.6. The Group recognises the lease payments associated with these leases in the Consolidated statement of comprehensive income as other operating expenses on a straight-line basis over the term of the lease. 2.6 Inventories Inventories are stated at the lower of cost and net real- isable value. Net realisable value is the estimated sell- ing price realisable in the ordinary course of business less necessary costs of completion and the expected costs until completion. Cost is determined using the weighted average cost method. The cost of ﬁnished goods and work in pro- cess includes, in addition to materials, production and special direct costs of production, also an appropriate share of overheads directly attributable to production as well as production-related depreciation. Production overheads are measured on the basis of normal capac- ity utilisation. 2.7 Other assets One‑off participations in the development costs of automobile manufacturers are recognised as assets by the Group. The exclusive position occupied vis‑à‑vis business partners means these payments are recouped through future serial business and the resulting revenue. Based on these contract conditions, payments are recognised continually as reducing rev- enue from the start of serial production and the asset NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 77 is correspondingly written down. The write-down is recognised in this regard as the ratio of goods already supplied to the expected total amount of goods to be provided. Furthermore, contract assets are created by producing customised serial parts, as there is no alternative use for these serial parts. In this regard, a legal claim exists for payment of the work rendered thus far should the customer terminate the contract. Consequently, control over these goods (pursuant to IFRS 15) is transferred over time, which is also why the corresponding revenue is to be recognised over time. If the Group has not yet received consideration in this regard for the transferred goods and at the same time there is no unconditional right to payment, the corresponding contract assets are recognised. 2.8 Cash and cash equivalents Cash and cash equivalents mainly include cash and other current highly‑liquid ﬁnancial investments with a term of not more than three months. Petty cash and cash in banks are stated at nominal value. 2.9 Assets held for sale Non-current assets or disposal groups that contain assets and liabilities are classiﬁed as held for sale if it is highly probable that their carrying amount will be recovered principally through a sale transaction rather than through continuing use. These assets or the disposal group are generally meas- ured at the lower of their carrying amount and fair value less costs to sell. Any impairment losses upon initial classiﬁcation as held for sale and any subsequent gains and losses on remeasurement are recognised in proﬁt or loss. Intangible assets and property, plant and equipment are no longer amortised or depreciated once they have been classiﬁed as held for sale. 2.10 Financial instruments Deﬁnition of initial recognition A ﬁnancial instrument is any contract that gives rise to a ﬁnancial asset of one entity and a ﬁnancial liability or equity instrument in another entity. Financial instru- ments are recognised as soon as the Group becomes a party to the ﬁnancial instrument contract. A ﬁnancial asset (unless it is a trade receivable without a sig- niﬁcant ﬁnancing component) or ﬁnancial liability is initially measured at fair value. In the case of an item not measured at fair value through proﬁt or loss, trans- action costs are added that are directly attributable to its acquisition or issue. A trade receivable without a signiﬁcant ﬁnancing component is initially measured at the transaction price. Offsetting Financial assets and liabilities are offset and the net amount presented in the statements of ﬁnancial posi- tion when, and only when, the Group currently has a legally enforceable right to set off the recognised amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously. Derivative ﬁnancial instruments The Group uses derivative ﬁnancial instruments to hedge currency risks resulting during the course of operations. Derivative products are measured at fair value upon ini- tial recognition. Derivatives are subsequently measured at fair value. Any changes therein are generally recog- nised in other operating expenses or other operating income. The Group does not apply hedge accounting according to IFRS 9. Financial assets All purchases and sales of ﬁnancial assets are recog- nised as of the trading day, i.e. on that date upon which the Group is obliged to acquire the assets. Financial assets with a remaining maturity of more than one year are classiﬁed as non‑current. On initial recognition, a ﬁnancial asset is classiﬁed and measured as follows: • ﬁnancial assets measured at amortised cost (FAAC) • debt instruments at fair value through other com- prehensive income (FVOCI debt instruments) • equity instruments measured at fair value through other comprehensive income (FVOCI equity instruments) • ﬁnancial assets recognised at fair value through proﬁt or loss (FAFVTPL) Financial assets are not reclassiﬁed subsequently to their initial recognition unless the Group changes its business model for managing the ﬁnancial assets. In this case, all affected ﬁnancial assets are reclassiﬁed on the ﬁrst day of the reporting period following the change in the business model. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 78 A ﬁnancial asset is measured at amortised cost (FAAC) if it meets both of the following conditions and is not designated as at FAFVTPL: • the ﬁnancial asset is held within a business model whose objective is to hold the ﬁnancial asset to col- lect the contractual cash ﬂows, and • the contractual terms of the ﬁnancial asset give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal amount outstanding A debt instrument is measured at FVOCI if it meets both of the following conditions and is not designated as at FAFVTPL: • the ﬁnancial asset is held within a business model whose objective is achieved by both collecting con- tractual cash ﬂows and selling ﬁnancial assets, and • the contractual terms of the ﬁnancial asset give rise on speciﬁed dates to cash ﬂows that are solely payments of principal and interest on the principal amount outstanding On initial recognition of an equity instrument that is not held for trading, the Group can irrevocably elect to pre- sent subsequent value changes in the investment‘s fair value in other comprehensive income. This decision is made on a case-by-case basis for each investment. All ﬁnancial assets not classiﬁed as measured at amortised cost or FVOCI are classiﬁed as FVTPL. This includes all derivative ﬁnancial assets and trade receiv- ables sold in the context of factoring agreements. Upon initial recognition, the Group may irrevocably classify a ﬁnancial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or signiﬁcantly reduces accounting mismatches that would otherwise arise. The Group makes an assessment of the objective of the business model in which a ﬁnancial asset is held at a portfolio level because this best reﬂects the way the business is managed and information is provided to management. The information considered includes the following: • the stated policies and objectives for the portfolio and the operation of those policies in practice. These include whether management‘s strategy focuses on earning contractual interest income, maintain- ing a particular interest rate proﬁle, matching the duration of the ﬁnancial assets to the duration of any related liabilities or expected cash out‑ﬂows or realising cash ﬂows through the sale of the assets • how the proﬁt/loss of the portfolio is assessed and reported to management • the risks that affect the performance of the busi- ness model (and the ﬁnancial assets held within that business model) and how those risks are managed • how the managers are remunerated – for instance, whether the remuneration is based on the fair value of the managed assets or on the collected contrac- tual cash ﬂows – and • the frequency, volume and timing of sales of ﬁnan- cial assets in prior periods and expectations about future sales activity Transfers of ﬁnancial assets to third parties in trans- actions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group‘s continuing recognition of the assets. Financial assets that are held for trading or are man- aged and whose performance is evaluated on a fair value basis are measured at FVTPL. For the purposes of this assessment, principal is deﬁned as the fair value of the ﬁnancial asset on initial recognition. Interest is deﬁned as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particu- lar period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a proﬁt margin. When assessing whether the contractual cash ﬂows are solely payments of principal and interest, the Group considers the contractual terms of the instrument. This includes assessing whether the ﬁnancial asset con- tains a contractual term that could change the timing or amount of contractual cash ﬂows such that it would no longer meet this condition. In making this assessment, the Group considers: • contingent events that would change the amount or timing of cash ﬂows • terms that may adjust the contractual interest rate, including variable-rate features • prepayment and extension features and • terms that limit the Group‘s claim to cash ﬂows from speciﬁed assets (e.g. non‑recourse features) The following is applicable for the subsequent meas- urement of ﬁnancial assets and the associated gains and losses: Financial assets at FVTPL are subsequently measured at fair value. Net gains and losses, including any inter- est or dividend income, are recognised in proﬁt or loss. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 79 For derivatives not designated as hedging instruments according to IFRS 9, see comments at the top of this section. Financial assets at amortised cost are measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses, as well as impairment losses, are recognised as other operating expenses or income. A gain or loss from derecognition is recognised in proﬁt or loss (in other operating income or other operating expenses). Debt instruments at FVOCI are subsequently meas- ured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment losses are recognised in other operating expenses or income (with the exception of income, which is shown under Net ﬁnance income). Other net gains or losses are recognised in OCI. Upon derecognition, accumulated other comprehensive income is reclassiﬁed to proﬁt or loss (in other operat- ing income or other operating expenses). Equity instruments at FVOCI are subsequently meas- ured at fair value. Dividends are recognised as income in proﬁt or loss unless the dividends clearly represent cover of a part of costs of the investment. Other net gains or losses are recognised in other comprehensive income and are never reclassiﬁed to proﬁt or loss. This category was not relevant within the Group thus far. The Group derecognises a ﬁnancial asset when the con- tractual rights to the cash ﬂows from the asset expire, or it transfers the rights to receive the contractual cash ﬂows in a transaction in which substantially all of the risks and rewards of ownership of the ﬁnancial asset are transferred. Assets are also derecognised when the Group neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control of the transferred asset. In order to recognise incoming payments in a timely fashion, the Group partially sells its trade receivables – mainly from automobile manufacturers and their sup- pliers – to a bank. Due to Novem’s continuing involve- ment, the trade receivables are to be derecognised except for the amount of the ﬁrst loss guarantee. The so-called Seller Guarantee is a limited default guaran- tee under which Novem is liable for up to 2% of the average monthly outstanding trade receivables in the total portfolio. This amount continues to be recognised as an asset and as a liability to banks. Financial liabilities Financial liabilities include especially trade payables, liabilities to banks, liabilities to shareholders and other liabilities. Financial liabilities are classiﬁed and measured at amortised cost or at fair value through proﬁt or loss (FLFVTPL). A ﬁnancial liability is classiﬁed as at FLFVTPL if it is classiﬁed as held for trading, it is a derivative or designated as FLFVTPL on initial recognition. IFRS 9 requires an entity to recognise a ﬁnancial asset or a ﬁnancial liability in its statement of ﬁnancial posi- tion when it becomes party to the contractual provi- sions of the instrument. At initial recognition, an entity measures a ﬁnancial asset or a ﬁnancial liability at its fair value plus or minus, in the case of a ﬁnancial asset or a ﬁnancial liability not at fair value through proﬁt or loss, transaction costs that are directly attributable to the acquisition or issue of the ﬁnancial asset or the ﬁnancial liability. Other ﬁnancial liabilities are subsequently measured at amortised cost using the effective interest method. Interest expenses and foreign currency translation differences are recognised in proﬁt or loss. Gains or losses (in other operating income or other operating expenses) from derecognition are also recognised in proﬁt or loss. The Group derecognises a ﬁnancial liability when its contractual obligations are discharged, cancelled or expire. The Group also derecognises a ﬁnancial liability when its terms are modiﬁed and the cash ﬂows of the modiﬁed liability are substantially different, in which case a new ﬁnancial liability based on the modiﬁed terms is recognised at fair value. Upon derecognition of a ﬁnancial liability, the differ- ence between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in proﬁt or loss (in other operating income or other operating expenses). Cost of initial public offering The transaction costs of an equity transaction are accounted for as a deduction from equity, but only to the extent that they are incremental costs directly attributable to the equity transaction that would other- wise have been avoided. The costs of an equity trans- action that is abandoned are recognised as an expense. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 80 2.11 Other provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obliga- tion whose amount can be estimated reliably, and it is probable that an out‑ﬂow of economic beneﬁts will be required to settle the obligation (probability of occur- rence is greater than 50%). Warranty obligations may arise on account of statutory stipulations, an agreement or ex-gratia arrangements. Provisions are recognised for expected claims arising from warranty obligations. Utilisation of the provision can be expected in particular if the warranty has not yet expired if warranty expenditure was incurred in the past or if there are speciﬁc signs of warranty cases. Depend- ing on the facts of the situation, the warranty risk is derived either using individual estimates or empiri- cal values from the past, for which a corresponding provision is recognised. The Group does not offer any further warranties beyond this in terms of additional maintenance and services. Thus, the warranties are Assurance Type Warranties, which – in accordance with IAS 37 – are to be recognised and which do not fall within the scope of IFRS 15. Provisions for restructuring expenses are recognised when the Group has set up and communicated a detailed formal plan for restructuring and has no real- istic possibility of withdrawing from these obligations. Provisions for onerous contracts are recognised when the expected beneﬁts from a contract are lower than the unavoidable cost of meeting the obligations under the contract. Should the recognition criteria for provisions not be sat- isﬁed, then a contingent liability is shown in the notes if certain conditions are met. Non-current provisions are recognised at present value. For this purpose, the expected future cash ﬂows are discounted using a pre‑tax discount rate that reﬂects current market expectations of the time value of money and the risks speciﬁc to the liability. The effects of movements in interest rates are shown under Finance income/costs. 2.12 Deferred liabilities Deferred liabilities refer to future expenditures, the amount and date of which are uncertain, however less uncertain than for provisions. These are liabilities relat- ing to received or supplied goods and services which have been neither paid nor invoiced. These also include current amounts owed to employees (such as bonuses and leave entitlements). Deferred liabilities are recog- nised in the amount of anticipated expenditures. 2.13 Employee beneﬁts There are deﬁned beneﬁt obligations within the Group. Pursuant to IAS 19, pension obligations are measured using the projected unit credit method on the basis of actuarial reports. The present value of beneﬁciaries‘ future claims is estimated using actuarial methods on the basis of the beneﬁts earned by staff in the cur- rent and preceding periods. The liability recognised in the consolidated statements of ﬁnancial position is the present value of the deﬁned beneﬁt obligations adjusted for any actuarial gains or losses not yet offset and less any past service cost not yet recorded. The discount rate is determined by the capital market and takes into account the expected maturity of the obliga- tion. The required actuarial calculations are made in the Group by external actuaries. If beneﬁts from the pension plan are expanded, then the share of vested additional beneﬁts from the employee‘s past years of service are recognised immediately in proﬁt or loss. Actuarial gains and losses from measuring the obliga- tion are – just like the difference between plan asset returns determined at the beginning of the period and plan asset returns actually realised – recognised in other comprehensive income and shown separately in the consolidated statement of comprehensive income. Expenses from the unwinding of discounts on deﬁned beneﬁt obligations as well as interest income from plan assets (net interest expense) are shown under Net ﬁnance income/costs. The service cost is taken into account in personnel expenses, although past service costs from plan amendments are recognised immedi- ately in proﬁt or loss. Payments to deﬁned contribution plans are recognised as an expense when employees have rendered the work entitling them to the beneﬁts. To the extent necessary, these are shown as a liability on the reporting date. 2.14 Proﬁt-sharing rights of members of management The Group established cash-settled share-based payment agreements for members of the Manage- ment Board. The Performance Share Plan is granted in annual tranches of virtual shares with a respective performance period of four years. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 81 According to IFRS 2, for cash‑settled share‑based payment transactions, the Group has to measure the liability incurred at the fair value of the liability. The fair value of the share-based payments of the Performance Share Plan has been measured at the end of each quar- ter by using a Monte-Carlo-Simulation. Any changes in the liability are recognised in proﬁt or loss. 2.15 Revenue recognition Revenue is recognised for all contracts with customers on the sale of goods or rendering of services according to the ﬁve‑step model speciﬁed under IFRS 15. The model speciﬁes that revenue as of a point in time (or over time) of transfer of control of the goods or services from the entity to the customer is to be recognised in that amount to which the entity is expected to be entitled. The Group usually concludes multiple-element con- tracts with customers which contain more than one performance obligation. In this regard, two or more agreements are generally combined as these are nego- tiated as a package with one single economic purpose. The agreements relate to the sale of trim and function elements, the provision of development services as well as construction of tools necessary for the production of the trim and function elements. Whereas in the case of the agreements for providing development services and the construction of tools, signing of the contract generally satisﬁes the criteria of an agreement pursu- ant to IFRS 15, a contract within the meaning of IFRS 15 is typically established for agreements for the delivery of serial parts only as of the date of initial delivery of serial parts. In the case of subsequent, later deliveries, this then involves contract modiﬁcations that are to be accounted for separately from the contracts. As part of multiple-element contracts, the Group has identiﬁed the following performance obligations: • the provision of development services and the sale of tools necessary for the production of serial parts • sale of serial parts • with respect to the sale of tools, the Group car- ries out maintenance of these tools, which will be invoiced separately to the OEM As mentioned in section 2.11, warranty obligations always constitute assurance-type warranties that are recognised according to IAS 37. The transaction price includes the fair value of the received or receivable consideration, taking into account rebates or volume discounts granted in the serial process, which – to the extent necessary – are estimated based on historical experience, as well as an appropriate allocation of one-off payments rendered upfront (e.g. participation in the development work of the OEM). When determining the transaction price, the promised consideration is adjusted for the interest effect of any potentially existing ﬁnancing component. To account for the time value of money (adjustment of promised consideration), the group uses a discount rate that would be reﬂected in a separate ﬁnancing transaction. In subsequent periods, interest income is recognised on an accrual basis using the effective interest method and presented as ﬁnance income. The expected-cost-plus-a-margin approach is used for estimating the stand-alone selling prices as part of allocating the transaction price to the individual performance obligations. For the one‑off payments to be paid by the Group, which grant the Group an exclusive position as sup- plier and which can be recouped through sales from the related agreement, see the comments in section 2.7. In terms of type of revenue recognition, it is necessary to differentiate between performance obligations that are fulﬁlled over time and those that are fulﬁlled at a point in time. Performance obligations that are satisﬁed at a point in time The Group is commissioned by customers to develop special tools, which are sold to the customer upon completion. In such constellations, the development work and subsequent sale of the tools constitute one single performance obligation. The associated revenue is recognised upon completion and sale of the tool to the customer, i.e. at a point in time. The point in time of revenue recognition from the sale of tools generally corresponds – depending on the respective customer contract and respective order – to the date of delivery or acceptance, as control of the good transfers as of this point in time to the customer and the Group has thus fulﬁlled its contractual perfor- mance obligation. Advance payments received from customers for tools are shown as contract liabilities under other liabilities. Performance obligations that are satisﬁed over time The Group is commissioned by the customer to manu- facture customised serial parts. An asset with no alter- native use generally arises when the serial part is highly customised for a particular customer. Furthermore, in NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 82 such cases, the Group has an enforceable right to pay- ment for services rendered to date. As a result, revenue for these serial parts is recognised over time and the contract asset for this is recognised, amounting to at least any costs of performance completed to date plus a reasonable proﬁt margin. The payment terms contractually agreed on with all customers (series and tools) are generally between 30 and 90 days. Revenue from service agreements is recognised over time in those periods in which the service is rendered. 2.16 Other income and expenses Other income comprises income out of all business activities which cannot be allocated to revenue. Other income, such as from realised exchange gains, is shown under Other operating income. Expenses are recognised when they arise or at the time they are incurred. Other expenses, such as from real- ised exchange losses, are shown under Other operating expenses. 2.17 Expenses for research and non-capitalised development services Expenses for research and non-capitalised develop- ment services are recognised in the period in which they were incurred. 2.18 Operating result (EBIT) Operating earnings (EBIT) are deﬁned as earnings before ﬁnance income, ﬁnance costs and income taxes. 2.19 Net ﬁnance income/costs The Group‘s ﬁnance income and ﬁnance costs include: • interest income • interest expenses • foreign currency gains and losses • expenses and income from measuring certain ﬁnancial instruments at fair value Interest income and expense are recognised on an accrual basis using the effective interest method. 2.20 Income taxes The tax assessment is generally made at the level of the individual circumstances, taking into account any interactions that may exist. If the recognition of the tax treatment is probable, the current and deferred taxes are recognised on this basis. If, on the other hand, rec- ognition is uncertain (not probable), the most probable amount that would be recognised for tax purposes is used, unless the expected value of different scenarios leads to more meaningful results. Full knowledge of the facts by the tax authorities is always assumed. The assumptions and decisions made are reviewed at each reporting date and, if necessary, adjusted on the basis of new ﬁndings. Current tax Current tax comprises the expected tax payable or receivable on the taxable income or loss for the ﬁnan- cial year, based on the tax rates applicable or shortly to become applicable on the reporting date, and any adjustment to tax payable for prior years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reﬂects uncertainty related to income taxes, if any. Cur- rent tax also includes any tax arising from dividends. Current tax assets and liabilities are only offset under certain conditions. Deferred taxes Deferred tax is recognised in respect of temporary dif- ferences between the carrying amounts of assets and liabilities in the statements of ﬁnancial position and the amounts used for taxation purposes. Deferred tax is not recognised for: • temporary differences on the initial recognition of assets and liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable proﬁt or loss • temporary differences related to investments in subsidiaries, associates and joint arrangements to the extent that the Group is able to control the timing of the reversal of the temporary differences and it is probable that they will not reverse in the foreseeable future and • taxable temporary differences arising on the initial recognition of goodwill NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 83 A deferred tax asset is recognised for unused tax losses, unused tax credits and deductible temporary differences to the extent that it is probable that future taxable proﬁts will be available against which they can be utilised. Future taxable proﬁts are determined based on the individual business plans of subsidiaries. Deferred tax assets are reviewed at each reporting date and reduced to the extent that it is no longer probable that the associated tax beneﬁts will be realised. Impair- ment losses are reversed if the probability of generating taxable earnings in the future increases. Unrecognised deferred tax assets are reassessed at each reporting date and recognised to the extent that it has become probable that future taxable proﬁt will allow the deferred tax asset to be recovered. 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. The measurement of deferred tax reﬂects the tax con- sequences that would follow from the manner in which the Group expects, at the reporting date, to recover or settle the carrying amount of its assets or liabilities. Deferred tax assets and deferred tax liabilities are off- set if certain conditions are fulﬁlled. 2.21 Contingent liabilities A contingent liability is a possible obligation to third par- ties that arises from past events and whose existence will be conﬁrmed only by the occurrence or non‑occur- rence of one or more uncertain future events not wholly within the control of the entity or a present obligation that arises from past events for which an out‑ﬂow of resources is not probable or the amount cannot be reli- ably estimated. Contingent liabilities pursuant to IAS 37 are generally not recognised. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 84 3 Notes to the consolidated statements of ﬁnancial position 3.1 Intangible assets The development of the Group’s carrying amounts of intangible assets is shown below for ﬁnancial years 2021/22 and 2022/23. Concessions, industrial property rights and similar rights and assets as well as licenses to such rights and assets acquired for a Internally generated in € thousand consideration intangible assets Intangible assets Cost As of 01 Apr 21 6,766 2,206 8,973 Currency differences 30 - 30 Additions 344 65 409 Disposals 4 - 4 Reclassiﬁcations 4 - 4 As of 31 Mar 22 7,148 2,271 9,420 As of 01 Apr 22 7,148 2,271 9,420 Currency differences - - - Additions 288 - 288 Disposals 7 - 7 Reclassiﬁcations - - - As of 31 Mar 23 7,430 2,271 9,702 Accumulated amortisation As of 01 Apr 21 5,155 202 5,356 Currency differences 16 - 16 Depreciation expenses 727 218 945 Disposals 4 - 4 As of 31 Mar 22 5,901 420 6,320 As of 01 Apr 22 5,901 420 6,320 Currency differences 2 - 2 Depreciation expenses 682 274 957 Disposals 7 - 7 As of 31 Mar 23 6,579 694 7,272 Carrying amount As of 31 Mar 22 1,247 1,851 3,100 As of 31 Mar 23 851 1,577 2,430 NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 85 Additions to intangible assets in the ﬁnancial year 2022/23 amounted to €288 thousand compared to €409 thousand in the ﬁnancial year 2021/22. Purchased intangible assets Purchased concessions, patents, licenses, trademarks and similar rights and assets mainly concern expenses for third parties in connection with the acquisition of application software. No impairment losses were recognised in the ﬁnancial year 2022/23 (PY: €57 thousand). Internally generated intangible assets Research costs and non-capitalisable development costs are expensed as incurred. The development expenses to be capitalised amounted to €1,577 thou- sand (PY: €1,851 thousand). This largely involves the development of processes for applying polyurethane systems for high-volume platforms, development in the area of trims with integrated lighting designs and lighting concepts in car interiors and the development of sensor elements. The Group differentiates between customer-based and non-customer-based (internal) development work in this regard. Internal development work that can be used across customers is recognised as internally generated intangible assets if the corresponding rec- ognition criteria are met and the assets are amortised over their expected useful life. No impairment losses were recognised for internally generated intangible assets in the ﬁnancial years 2021/22 and 2022/23. The Group recognised €1,288 thousand (PY: €1,931 thousand) in research and development expenses in the ﬁnancial year 2022/23. Amortisation of capitalised internal development projects amounted to €274 thou- sand (PY: €218 thousand). 3.2 Property, plant and equipment in € thousand 31 Mar 22 31 Mar 23 Land, leasehold rights and buildings, including 80,797 82,131 buildings on third-party land Thereof right-of-use 29,661 32,757 assets from leases Technical equipment and 84,212 82,135 machinery Thereof assets from 54 - leases Other equipment, operating 12,083 13,921 and oﬃce equipment Thereof right-of-use 4,173 6,160 assets from leases Advance payments and 7,814 6,929 assets under construction Property, plant and 184,905 185,116 equipment Property, plant and equipment include right‑of‑use assets due to the application of IFRS 16 (Leases). Please refer to section 5.10 for additional information on future lease payments. During the ﬁnancial year 2022/23, the Group invested €33,758 thousand (PY: €23,546 thousand) in property, plant and equipment. The additions included €4,894 thousand (PY: €3,978 thousand) from advance pay- ments and assets under construction. In addition to depreciation, there were impairment losses on property, plant and equipment amounting to €10 thousand (PY: €464 thousand) due to the reduc- tion in the purchase price of the production facility in Kulmbach, which can be allocated to the Europe region. The development of the Group’s carrying amounts of property, plant and equipment is shown below for the ﬁnancial years 2021/22 and 2022/23. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 86 Land, leasehold Advance rights and buildings, Technical Other equipment, payments and including buildings equipment and operating and assets under Property, plant in € thousand on third-party land machinery oﬃce equipment construction and equipment Cost As of 01 Apr 21 137,024 273,009 48,398 6,412 464,843 Currency differences 5,106 6,987 1,003 134 13,230 Additions 6,148 9,147 4,273 3,978 23,546 Disposals 1,976 4,961 2,305 69 9,311 Reclassiﬁcations 64 2,188 343 ‑2,600 -4 As of 31 Mar 22 146,366 286,370 51,712 7,855 492,303 As of 01 Apr 22 146,366 286,370 51,712 7,855 492,303 Currency differences 1,948 ‑1,481 362 ‑136 693 Additions 12,357 9,306 7,200 4,894 33,758 Disposals 4,657 5,912 4,759 37 15,365 Reclassiﬁcations 201 4,803 604 ‑5,608 - As of 31 Mar 23 156,215 293,086 55,118 6,969 511,388 Accumulated amortisation As of 01 Apr 21 56,193 185,952 35,374 535 278,054 Currency differences 1,870 4,879 773 1 7,523 Depreciation expenses 9,364 15,455 5,565 43 30,426 Thereof impairment losses 451 13 - - 464 Disposals 1,859 4,624 2,082 43 8,608 Reclassiﬁcations - 496 - ‑496 - As of 31 Mar 22 65,569 202,158 39,629 41 307,397 As of 01 Apr 22 65,569 202,158 39,629 41 307,397 Currency differences 1,160 ‑1,014 233 ‑1 378 Depreciation expenses 9,902 15,643 5,965 - 31,510 Thereof impairment losses 10 - - - 10 Disposals 2,547 5,837 4,630 - 13,014 Reclassiﬁcations - - - - - As of 31 Mar 23 74,084 210,950 41,198 40 326,272 Carrying amount As of 31 Mar 22 80,797 84,212 12,083 7,814 184,905 As of 31 Mar 23 82,131 82,135 13,920 6,929 185,116 3.3 Inventories in € thousand 31 Mar 22 31 Mar 23 Raw materials and 36,499 33,409 consumables Work in process 13,204 13,125 Finished goods and 17,664 17,530 merchandise Tools 61,141 50,955 Advance payments for tools 851 1,259 Advance payments for raw 29 28 materials Inventories 129,388 116,306 The majority of inventories consisted of tools as well as raw materials and consumables. Inventories that are expected to be turned over within 12 months amounted to €116,306 thousand (31 March 2022: €129,388 thousand). The write‑downs recog- nised on inventories amounted to €7,401 thousand in the ﬁnancial year 2022/23 (PY: €6,069 thousand). In the case of write-downs, marketability, age as well as all apparent storage and inventory risks are taken into account. Since there is no alternative use option for the ﬁnished parts on stock as of the reporting date, for which there are also ﬁrm purchase commitments by the OEMs, an adjustment was made to the inventories in the amount of €12,129 thousand (31 March 2022: €9,418 thousand) based on recognition of revenue over time under IFRS 15, together with the recognition of con- tract assets amounting to €14,124 thousand (31 March 2022: €11,466 thousand). NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 87 3.4 Trade receivables Trade accounts receivable include the following items: in € thousand 31 Mar 22 31 Mar 23 Trade receivables 86,326 95,448 Expected credit losses on ‑1,115 ‑1,609 trade receivables Trade receivables 85,211 93,839 Non-current 47,540 46,329 Current 37,671 47,510 Trade receivables are mainly receivables from con- tracts with customers. The increase in receivables was especially driven by higher business volumes and higher demand among OEMs. Factoring Two of the Group’s subsidiaries, Novem Car interior Design GmbH and Novem Car Interior Design Inc., par- ticipate in a revolving multi-seller securitisation vehicle for its trade receivables. In conjunction with a factoring agreement, receivables were sold to a bank at a purchase price of €54,022 thou- sand as of 31 March 2023 (31 March 2022: €47,805 thousand), of which €1,046 thousand (31 March 2022: €1,016 thousand) representing a limited Seller Guaran- tee (2% of the average outstanding nominal amount of the European sold receivables). The Seller Guarantee represents the Group’s maximum exposure to any losses in respect of trade receivables previously sold under the factoring program. These receivables were carried at fair value through proﬁt or loss until the date of their disposal. The Group concluded that it does not control, and there- fore should not consolidate, the securitisation vehicle. Taken as a whole, the Group does not have power over the relevant activities of the securitisation vehicle. Expected credit losses Trade receivables are written down in full or in part when there are indications that they are not recoverable. Fur- thermore, in accordance with IFRS 9, expected credit losses for trade receivables which are not measured at fair value through proﬁt or loss are calculated on a portfolio basis (refer here also to section 5.4). For this purpose, Novem groups the receivables by individual customers. The expected default rates are provided for each counterparty by an external rating agency. This individual probability of default per customer is applied uniformly throughout the Novem Group. Current exter- nal credit information and ratings that reﬂect the preva- lent expectations regarding the potential impact of global economic developments, e.g. Ukraine war, were used for the consolidated ﬁnancial statements as of 31 March 2023. An additional adjustment of the valuation allowance was thus not required under this model. The allowances for trade accounts receivables devel- oped as follows: in € thousand FY 2021/22 FY 2022/23 Loss Loss allowance allowance As of 01 Apr 1,535 1,115 Additions 102 515 Reversals ‑598 -27 Used - - Exchange rate effects 76 6 As of 31 Mar 1,115 1,609 3.5 Other receivables The Group’s other receivables comprise the following components: in € thousand 31 Mar 22 31 Mar 23 From VAT 23,609 33,695 From employees 379 539 From payroll tax 34 14 From advance payment 417 319 receivables Others 4,145 3,432 Other receivables 28,584 37,999 The majority were receivables from tax authorities. This is the result of regular offsetting and notiﬁcation of paid and received VAT. The amounts shown in the column Others include income tax receivables in the amount NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 88 of €2,459 thousand (PY: €3,019 thousand) and other operative receivables amounting to €973 thousand (PY: €1,126 thousand). 3.6 Cash and cash equivalents in € thousand 31 Mar 22 31 Mar 23 Cash on hand 43 34 Cash at banks 116,924 165,440 Cash and cash equivalents 116,967 165,474 Cash and cash equivalents are not subject to any restrictions. The amount corresponds to the value shown in the Consolidated statement of cash ﬂows. Cash and cash equivalents are concentrated at Novem Beteiligungs GmbH, which operates a group-wide cash pooling system. 3.7 Other non-current/current assets in € thousand 31 Mar 22 31 Mar 23 Current Non-current Total Current Non-current Total Prepaid expenses 289 13 302 800 14 814 Miscellaneous other assets - 304 304 600 351 951 Contract assets 11,853 - 11,853 14,669 - 14,669 Contribution to develop for later supply 1,525 12,302 13,827 2,166 9,911 12,077 contracts Other non-ﬁnancial assets 13,667 12,619 26,286 18,235 10,276 28,511 Other non‑ﬁnancial, non‑current assets of €10,276 thousand (31 March 2022: €12,619 thousand) include development contributions for later supply contracts. The presented other non‑ﬁnancial current assets amounting to €18,235 thousand (31 March 2022: €13,667 thousand) mainly include development contributions for later supply contracts as well as contract assets, i.e. acquired right to consideration for already satisﬁed performance obligations from con- tracts with customers as of the reporting date. Contract assets are reclassiﬁed as trade receivables as soon as there is an unconditional right to receive cash, which is obtained upon invoicing the customer for the quanti- ties actually delivered. In this regard, €11,783 thousand were reclassiﬁed in 2022/23 (31 March 2022: €12,017 thousand) from contract assets to trade receivables. Furthermore, the current assets included derivatives with a positive market value of €600 thousand resulting from forward exchange contracts entered into. The expected credit losses on contract assets (refer here also to section 5.4), which are shown within other operating expenses, developed as follows on Group level: in € thousand FY 2021/22 FY 2022/23 As of 01 Apr 30 30 Additions 3 2 Reversals ‑3 ‑20 Used - - As of 31 Mar 30 12 3.8 Equity Please refer to the Consolidated statement of changes in equity for detailed information on changes in con- solidated equity. Overall, the equity position improved from €67,656 thousand at the end of the last ﬁnancial year to €107,256 thousand, which mainly resulted from proﬁt for the year. Share capital As of 31 March 2023, the share capital of the Company amounted to €430 thousand (31 March 2022: €430 thousand) and is divided into 43,030,303 ordinary shares in a dematerialised form with no nominal value. All ordinary shares rank equally with regard to the Com - pany’s residual assets. Each share of the Company represents a par value of €0.01 in the Company’s share capital. All shares are fully paid. The authorised capital of the Company is set at €520,000 thousand divided into 52,000,000 shares with no nominal value. The Management Board is NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 89 authorised to increase the current issued capital up to the amount of the authorised capital, in whole or in part, from time to time during ﬁve years after IPO. Authorisation for repurchase of own shares On 30 June 2021, the extraordinary General Sharehold- ers’ Meeting of the Company resolved to authorise the Management Board to effect on one or several occa- sions repurchases and disposals of shares on the regulated market on which the Company’s shares are admitted for trading, or by such other means resolved by the Management Board during a period of ﬁve years from the date of the General Shareholders’ Meeting, for a maximum number corresponding to 20% of the ordi- nary shares of the Company, within a price range from a price per share not lower than 10% below the shares’ oﬃcial price reported in the trading session on the day before carrying out each individual transaction; to a price per share no higher than 10% above the shares’ oﬃcial price reported in the trading session on the day before carrying out each individual transaction. During the ﬁnancial year 2022/23, the Company did not buy any of its own shares. Capital reserves The capital reserves amounted to €539,594 thousand as of 31 March 2023 (31 March 2022: €539,630 thou- sand). Directly attributable transaction costs of €1,209 thousand (31 March 2022: €1,172 thousand) are rec- ognised and thus diminish the capital reserves. In this context, deferred tax assets amounted to €267 thou- sand (31 March 2022: €438 thousand) were recognised. Other retained earnings Retained earnings amounted to €‑443,414 thousand as of 31 March 2023 (31 March 2022: €‑482,826 thou- sand). Retained earnings comprise the past undistrib- uted net income and other comprehensive income of the companies included in the consolidated ﬁnancial statements. The negative amount primarily results from a recapitalisation and a related Group re-organi- sation in the ﬁnancial year 2019/20. Difference in equity from currency translation The statement of ﬁnancial position and of total com- prehensive income for all foreign subsidiaries whose functional currency is not the Euro are translated into Euro. The currency translation differences arising are recognised in other comprehensive income and reported in the Currency translation reserve in equity; they amounted to €10,646 thousand as of 31 March 2023 (31 March 2022: €10,422 thousand). The change resulted from differences in currency translation of €224 thousand (31 March 2022: €9,177 thousand). Dividend The Management Board, in agreement with the Supervi- sory Board, propose the distribution of an ordinary divi- dend of €0.40 per share (PY: €0.40) for the ﬁnancial year 2022/23 to the Annual General Meeting on 24 August 2023. Furthermore, the Management Board decided to propose an additional special dividend in the amount of €0.75 per share for the ﬁnancial year 2022/23. Subject to the approval of the Annual General Meeting, Novem’s shareholders would receive a total dividend of €1.15 per share (ordinary plus special) for the ﬁnancial year 2022/23. The total dividend would amount to €49,485 thousand (PY: €17,212 thousand), thus corresponding to a payout ratio of 99.0% (PY: 39.1%) of the consoli- dated net proﬁt. 3.9 Employee beneﬁts The Group grants its staff in and outside of German pen- sion and other post‑employment beneﬁt entitlements, which are either deﬁned‑contribution or deﬁned‑beneﬁt pension plans. In this regard, besides the ongoing con- tributions, the deﬁned contribution plans do not lead to any further payment obligations. The pension provi- sion for the deﬁned beneﬁt plans is generally calculated using the projected unit credit method. Under this pro- jected unit credit method, expected future increases in salaries and pensions are taken into account in addition to the pensions and vested entitlements known as of the reporting date. The present value of the obligation (Deﬁned Beneﬁt Obligation or DBO) is determined by discounting the future expected cash out‑ﬂows using a discount rate that is based on the returns on high- quality ﬁxed‑rate corporate bonds in the same currency. In doing so, the underlying corporate bonds are used to derive a yield curve and the related discount rate is determined using the term of the future obligations. Deﬁned beneﬁt plans The signiﬁcant deﬁned beneﬁts are in Germany and include staff’s entitlements to retirement beneﬁts in the case of disability or upon reaching retirement age – and also in the event of death in individual cases. The general commitment speciﬁes payments for a stand- ard basic sum, which rises by a ﬁxed amount for each year of service completed. Furthermore, there are vari- ous individual commitments in Germany based on ﬁnal salary. The beneﬁt entitlements applicable to Germany NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 90 encompassed deﬁned beneﬁt obligations amounting to €23,849 thousand as of 31 March 2023 (31 March 2022: €31,552 thousand) and thus accounted for 88.0% of the total obligation (31 March 2022: 90.0%). There are retirement beneﬁt obligations in Italy, Slovenia and Mexico with entitlement to capital sums based on stat- utory regulations. In addition, employees in Mexico are entitled to a statutory seniority provision termination beneﬁt, which functions in a similar way to the retire- ment indemnity and is also included with an amount of €350 thousand (31 March 2022: €273 thousand). The risks associated with the deﬁned beneﬁt plans essentially include the usual risks of deﬁned beneﬁt pension plans relating to possible changes to the dis- count rate and, to a lesser extent, inﬂation trends and longevity. In order to limit the risks of changing capital market conditions and demographic developments, the most recent general pension plan was closed to new entrants in Germany in 2015. The speciﬁc risks of salary-based obligations are minimal within the Group. The present value of the deﬁned beneﬁt obligations developed as follows: in € thousand FY 2021/22 FY 2022/23 Present value of the beneﬁt 34,644 34,871 obligations on 01 Apr Current service cost 1,123 826 Past service cost 1,260 - Interest expense 568 802 Employer‘s direct beneﬁt ‑811 ‑989 payments Actuarial gains (‑)/ ‑1,978 ‑8,572 losses (+) Thereof on account of changes to demographic 29 1 assumptions Thereof on account of changes to ﬁnancial ‑1,866 ‑8,279 assumptions Thereof on account of experience-based ‑141 ‑294 adjustments Effects of changes in 65 106 foreign exchange rates Present value of the beneﬁt 34,871 27,044 obligations on 31 Mar The employee beneﬁts expense for deﬁned beneﬁt plans recognised in proﬁt or loss consisted of the fol- lowing items: in € thousand FY 2021/22 FY 2022/23 Current service cost 1,123 826 Past service cost 1,260 - Service cost 2,383 826 Interest expense 568 802 Pension and similar obligations expense for 2,951 1,628 beneﬁt plans The pensions and similar obligations provision was as follows: in € thousand FY 2021/22 FY 2022/23 Present value of beneﬁt entitlements from beneﬁt 34,871 27,044 plans Financing status 34,871 27,044 Pension and similar obliga- 34,871 27,044 tions provision on 31 Mar The beneﬁts paid out in the ﬁnancial year 2022/23 amounted to €989 thousand (PY: €811 thousand). Pay- ments amounting to €1,049 thousand are expected for 2023/24, which are directly rendered by the employer. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 91 The pensions and similar obligations provision devel - oped as follows: in € thousand FY 2021/22 FY 2022/23 Pension and similar obliga- 34,644 34,871 tions provision on 01 Apr Pension expense 2,951 1,628 Actuarial gains (‑)/losses (+) recognised in other ‑1,978 ‑8,572 comprehensive income Employer‘s direct beneﬁt ‑811 ‑989 payments Effects of changes in 65 106 foreign exchange rates Pension and similar obliga- 34,871 27,044 tions provision on 31 Mar Actuarial gains and losses are recognised directly in other comprehensive income. They are part of retained earnings and will never be reclassiﬁed to the proﬁt or loss. The actuarial assumptions for calculating the Group’s pension and similar obligations are shown below: 31 Mar 22 31 Mar 23 Discount rate 2.3% 4.3% Salary trend/growth of 2.4% 2.7% pension expectancies Future pension growth 2.0% 2.2% Life expectancy from age 65 (in years) – Germany obligations Retiring today (member age 20.6 / 24.0 20.8 / 24.2 65) – male/female Retiring in 20 years (mem- 23.4 / 26.3 23.5 / 26.4 ber age 45) – male/female The ﬁnancial assumptions shown above are weighted averages. A discount rate of 4.1% was set for Germany (31 March 2022: 2.2%). For the remaining Eurozone countries, i.e. Italy and Slovenia, the discount rates used on 31 March 2023 were 4.2% and 4.0% respec- tively (31 March 2022: 2.0% for both). For Mexico, the discount rate of 9.4% was set on 31 March 2023 (31 March 2022: 8.5%). Heubeck’s 2018 G guideline tables were used as the demographic basis for calculations in Germany – the resulting life expectancy ﬁgures are shown above as of 31 March 2023 and 31 March 2022 for comparison. An increase or decrease in the discount rate by 25 basis points would impact the present value of the total ben- eﬁt entitlements as of 31 March 2023 as follows: in € thousand 31 Mar 23 Change in present value of the beneﬁt entitlements if the discount rate were to be 25 basis point ‑943 higher discount rate were to be 25 basis point 1,000 lower A decrease or increase in assumed life expectancy by one year would impact the present value of the ben- eﬁt entitlements in Germany1 as of 31 March 2023 as follows: in € thousand 31 Mar 23 Change in present value of the beneﬁt entitlements if the life expectancy were to be 1 year higher 942 life expectancy were to be 1 year lower ‑962 An increase or decrease in the pension progression by 25 basis points would impact the present value of the beneﬁt entitlements as of 31 March 2023 as follows: in € thousand 31 Mar 23 Change in present value of the beneﬁt entitlements if the pension progression were to be 25 basis 688 points higher pension progression were to be 25 basis ‑659 points lower The weighted average duration of the deﬁned beneﬁt obligations on 31 March 2023 is 15 years (31 March 2022: 17 years). Deﬁned contribution plans The amounts for the Group’s statutory pension insur- ance are treated as deﬁned contribution plans pursuant to IAS 19. Expenses amounting to €10,306 thousand 1 Since changes in life expectancy have no or minimal impact on capital commitments outside of Germany, the beneﬁt entitlements abroad are not taken into account. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 92 were reported in the ﬁnancial year 2022/23 (PY: €9,836 thousand) in Germany, Italy, the Czech Republic, Slove- nia, Luxembourg and the US. 3.10 Tax liabilities Income tax in € thousand Current liabilities Change in tax liabilities As of 01 Apr 21 14,887 14,887 Used ‑8,618 -8,618 Addition 7,386 7,386 Exchange rate difference 150 150 As of 31 Mar 22 13,805 13,805 As of 01 Apr 22 13,805 13,805 Used ‑2,171 -2,171 Addition 7,412 7,412 Exchange rate difference 10 10 As of 31 Mar 23 19,056 19,056 The Group is subject to income taxes in different juris- dictions. Therefore, key assumptions are necessary to consider the various tax legislations and determine the global income tax liability. The Group might be subject to tax risks attributable to previous tax assessment periods and might be subject to unanticipated tax expenses in relation to previous tax assessment periods that have not yet been subject to a tax audit or are currently subject to a tax audit. It cannot be ruled out that tax authorities may apply a different approach in ongoing and/or future tax audits from the one adopted by the Group, which may lead to an additional tax expense and/or payment, which could have a material and adverse effect on our business, ﬁnancial condition and results of operations. The Group recognises potential risks related to uncer- tain tax positions in accordance with IFRIC 23. 3.11 Other provisions The provisions cover all identiﬁable risks and other uncertain obligations. The provisions are shown in the following in each case broken down into non-current and current provisions. The non‑current provisions developed as follows: Obligations from Employee Other non- in € thousand sales beneﬁts Other risks current provision As of 01 Apr 21 3,422 1,402 345 5,169 Used - ‑15 ‑345 -360 Reversal - ‑9 - -9 Addition - ‑73 - -73 Discounting of provision - ‑20 - -20 Reclassiﬁcation to current provisions ‑1,555 - - -1,555 As of 31 Mar 22 1,867 1,305 - 3,172 As of 01 Apr 22 1,867 1,305 - 3,172 Used ‑1,600 ‑105 - -1,705 Reversal - - - - Addition - -67 - -67 Discounting of provision - -27 - -27 Reclassiﬁcation to current provisions - - - - As of 31 Mar 23 267 1,106 - 1,373 The non‑current provisions amounted to €1,373 thou- sand as of 31 March 2023 (31 March 2022: €3,172 thousand) and are expected to fall due between one and ﬁve years. Of this amount, €1,106 thousand (31 March 2022: €1,305 thousand) were fully attributable to provisions in the personnel area. These personnel-related obliga- tions relate to long-service awards, which are calculated using actuarial reports. The provisions attributable to the sales area primarily included risks arising from warranty claims. The usage of €1,600 thousand in the ﬁnancial year 2022/2023 was a quality claim. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 93 The development of current provisions is set out in the table below: Employee Obligations from Other current in € thousand beneﬁts sales Other risks provisions As of 01 Apr 21 2,018 36,500 15,384 53,902 Used ‑1,184 ‑8,756 ‑11,889 -21,829 Reversal - ‑6,779 ‑504 -7,283 Addition 818 16,934 2,884 20,636 Exchange rate difference 89 787 117 993 Reclassiﬁcation from non‑current provisions - 1,555 - 1,555 As of 31 Mar 22 1,741 40,241 5,992 47,974 As of 01 Apr 22 1,741 40,241 5,992 47,974 Used ‑1,267 ‑12,703 ‑3,320 -17,290 Reversal ‑51 -8,768 ‑2,263 -11,082 Addition 1,328 22,698 2,816 26,842 Exchange rate difference 102 128 19 249 Reclassiﬁcation from non‑current provisions - - - - As of 31 Mar 23 1,853 41,596 3,244 46,693 Current provisions as of 31 March 2023, which were recognised for uncertain obligations within one year, included in particular provisions from obligations from the personnel and sales areas as well as other risks of €46,693 thousand (31 March 2022: €47,974 thousand). The personnel-related obligations related largely to provisions for partial retirement beneﬁts, severance payments and performance-based obligations. The provisions attributable to the sales area included especially risks arising from warranty claims, price risks and not yet ﬁnalised customer debit notes. Management’s best estimate was used as a basis when measuring warranty provisions. These are esti- mated based on past experience with respect to the Group’s liability. Speciﬁc individual cases are also taken into account. The outstanding customer debit notes recognised in the consolidated ﬁnancial statements relating to price or quantity differences, as well as quality deﬁciencies, were based on assumptions or estimates made on account of ongoing customer negotiations or past experience with customers. The remaining risks primarily involved a number of discernible individual risks and uncertain liabilities that were accounted for at their probable settlement amounts. It is expected that all current provisions will be used during the course of the following ﬁnancial year. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 94 3.12 Financial liabilities in € thousand 31 Mar 22 31 Mar 23 Current Non-current Total Current Non-current Total Liabilities to banks 1,404 247,683 249,087 1,151 248,220 249,371 Financial liabilities 1,404 247,683 249,087 1,151 248,220 249,371 Total current and non‑current ﬁnancial liabilities amounted to €249,371 thousand as of 31 March 2023 (31 March 2022: €249,087 thousand). In June 2021, a new term loan agreement for €310,000 thousand in total (€250,000 thousand as a term loan and €60,000 thousand as a revolving credit facility) was entered into between Novem Group S.A. and an interna- tional syndicate of banks. Accordingly, the reﬁnancing was implemented as of 23 July 2021 by the drawdown of the term loan of €250,000 thousand and matures in July 2026. After the deduction of transaction costs and pro rata interest incurred, €248,220 thousand (31 March 2022: €247,683 thousand) of the liabilities to banks of €249,371 thousand (31 March 2022: €249,087 thou- sand) relate to the utilised term loan. The remaining amount of €1,151 thousand (31 March 2022: €1,404 thousand) mainly resulted from the Seller Guarantee derived from factoring as described in section 3.4. 3.13 Other ﬁnancial liabilities Other ﬁnancial liabilities are composed as follows: in € thousand 31 Mar 22 31 Mar 23 Other current ﬁnancial liabilities Lease liabilities 7,855 7,938 Other non-current ﬁnancial liabilities Lease liabilities 27,002 31,143 Loan (beneﬁts fund) 8 4 Other ﬁnancial liabilities 34,865 39,085 The liabilities to leases changed due to cash out‑ﬂow of €9,797 thousand in the ﬁnancial year 2022/23 (31 March 2022: €8,366 thousand). The changes to the lease liability occurred primarily from contract modiﬁ- cations and current leases as well as from a currency translation effect in the amount of €152 thousand. The lease liabilities of €39,081 thousand as of 31 March 2023 (31 March 2022: €34,857 thousand) are largely from leasing land and buildings (refer to section 5.10). 3.14 Other non-ﬁnancial liabilities Other non‑ﬁnancial liabilities breakdown as follows: in € thousand 31 Mar 22 31 Mar 23 Other current liabilities Employee-related liabilities 7,306 7,420 VAT 1,824 5,029 Other liabilities 3,563 4,643 Contract liabilities 23,100 31,562 Other current liabilities 35,793 48,654 Other non-current liabilities Other liabilities 1,148 360 Other non-current liabilities 1,148 360 Current non‑ﬁnancial liabilities amounted to €48,654 thousand as of 31 March 2023 (31 March 2022: €35,793 thousand). This item included especially contract liabili- ties in the form of advance payments received for tools, VAT liabilities as well as personnel‑related liabilities, which were recognised in the context of social secu- rity for social insurance contributions still outstanding. In addition, the OEM’s development contributions are shown under Other liabilities. Non‑current non‑ﬁnancial liabilities amounted to €360 thousand as of the reporting date (31 March 2022: €1,148 thousand). These pertain primarily to the OEMs’ development contributions. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 95 The following table shows the signiﬁcant changes in contract liabilities which always have a duration of less than one year: in € thousand FY 2021/22 FY 2022/23 Revenue recognised in the ﬁnancial year that was included in the carrying 13,390 8,405 amount of the contract liabilities at the beginning of the ﬁnancial year Increase in the ﬁnancial year on account of advance 20,999 16,867 payments for tools 3.15 Trade payables Trade payables comprise outstanding obligations from the exchange of the Group’s goods and services. Trade payables amounted to €60,597 thousand on the reporting date (31 March 2022: €70,384 thousand). The change was mainly driven by cash ﬂow management and the maturity of liabilities. 3.16 Deferred liabilities/accruals in € thousand 31 Mar 22 31 Mar 23 Personnel-related accruals 11,704 12,843 Outstanding invoices for 15,929 20,920 trade payables Costs related to the year-end audit and annual 1,780 1,815 ﬁnancial statements Other deferred liabilities 2,243 2,292 Deferred liabilities/accruals 31,656 37,870 Non-current 1,594 1,767 Current 30,062 36,103 Accruals are disclosed under Other liabilities. Accru- als are liabilities to pay for goods or services already received which have not been paid or invoiced by the supplier. These largely comprised outstanding obligations within the Group from the exchange of goods and services as well as on account of personnel-related accruals, which mainly include matters such as leave not yet taken, Christmas and holiday pay or performance-related salary components. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 96 4 Explanatory notes on the consolidated statements proﬁt or loss and other comprehensive income 4.1 Revenue In the ﬁnancial year 2022/23, Novem generated total revenue of €700,304 thousand (PY: €614,628 thou- sand), which marks a 13.9% increase compared to last year. The distribution of revenue among the locations is provided in Geographical information in section 5.9. As in previous years, the wood surface area accounted for the largest share of Novem’s success, followed by aluminium and premium synthetics. Revenue can be broken down by the surface areas mentioned below: in € thousand FY 2021/22 FY 2022/23 Wood 457,863 520,900 Aluminium 127,309 135,604 Premium synthetics 29,456 43,799 Revenue 614,628 700,304 Revenue Series developed positively in the ﬁnancial year 2022/23 and recorded at €618,226 thousand, up by 9.4% compared to the same reporting period last year (PY: €565,015 thousand). Revenue Series gener- ated 88.3% of total revenue (PY: 85.8%) and remained the key pillar of the business. Revenue Tooling, which comprises performance obli- gations for development work and the subsequent sale of tools as well as maintenance activities, contributed €82,077 thousand to total revenue for the ﬁnancial year 2022/23 (PY: €49,613 thousand). This corresponds to a year‑on‑year increase of 65.4% or €32,464 thousand, mainly attributable to a different project phasing. Rev- enue within the Group can be allocated to business areas as follows: in € thousand FY 2021/22 FY 2022/23 Revenue Series 565,015 618,226 Revenue Tooling 49,613 82,077 Revenue 614,628 700,304 This following breakdown of revenues also determines the type of revenue recognition, as revenue from Series and maintenance activities are considered to be goods and services transferred over time, while revenue from the development work and the subsequent sale of tools must be classiﬁed as goods and services transferred at a point in time. in € thousand FY 2021/22 FY 2022/23 Goods and services 567,7571 620,775 transferred over time Goods and services 46,8711 79,529 transferred at a point in time Revenue 614,628 700,304 1 Adjusted according to IAS 8.42 as an amount of revenue recognised over time has been disclosed as recognised at a point in time. There was also a corresponding adjustment of revenue in the amount of €1,510 thousand (PY: €2,732 thou- sand) on account of current contract terms, whereby, on the start of production (SOP) on some platforms, the revenue recognised is reduced in line with the units delivered and the asset for the development contribu- tion is reversed accordingly. Novem expects that revenue for its delivery obligations not (or only partially) fulﬁlled at the end of the ﬁnancial year will be recognised within a year and therefore applies the practical expedient in IFRS 15.121. 4.2 Other operating income in € thousand FY 2021/22 FY 2022/23 Income from the disposal of property, plant and equip- 29 13 ment and intangible assets Foreign currency translation 5,582 9,369 gains Income from charging out 3,358 5,337 to third parties Other income 11,102 11,097 Other operating income 20,071 25,816 Other operating income increased in the ﬁnancial year 2022/23 by €5,745 thousand from €20,071 thousand to €25,816 thousand year‑on‑year. Other operating income mainly included €9,369 thousand (PY: €5,582 thousand) currency translation effects as well as €5,337 thousand (PY: €3,358 thousand) income from charging out to third parties. Other income also included €7,985 thousand (PY: €8,440 thousand) income from reversal of provisions, €2,830 thousand (PY: €2,603 thousand) income from other periods as well as €282 thousand (PY: €56 thousand) insurance reimbursements. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 97 4.3 Cost of materials The cost of materials includes the expenses for raw materials, consumables and purchased goods/ser- vices. For further information on inventories, refer to section 3.3. in € thousand FY 2021/22 FY 2022/23 Cost of raw materials and consumables and of 305,588 329,364 purchased goods Cost of purchased services 22,410 25,325 Cost of materials 327,998 354,689 The reported cost of materials increased by 8.1% year-on-year. The increase contrasts with a growth in sales of 13.9%. Hence, the cost of materials to output (total operating performance) ratio increased slightly to 51.2% (PY: 50.9%). This development reﬂects the ongoing challenging situation on the world market and the associated price increases. 4.4 Personnel expenses The high level of vertical integration means personnel expenses in the Group account for a considerable por- tion of total expenses. The personnel expenses include social security, pension and other beneﬁts. Management’s compensation as well as those of staff in managerial positions is designed with variable com- ponents in differing proportions. The variable payments are based on fulﬁlling the Group’s revenue and earnings targets as well as on individual objectives. in € thousand FY 2021/22 FY 2022/23 Wages and salaries 130,071 140,378 Social security 25,086 26,476 Pension expense 3,326 1,791 Personnel expenses 158,483 168,645 The personnel expenses ratio (personnel expenses to total operating performance) decreased slightly compared to the previous year and equalled 24.3% (PY: 24.6%). The table below sets forth the number of employees (by headcount including headquarters and excluding leased workers, interns and students) we employed as of the dates indicated for each of the regions in which we operate: 31 Mar 22 31 Mar 23 Europe 2,969 2,893 Americas 1,842 1,807 Asia 729 788 Number of employees 5,540 5,488 4.5 Amortisation, depreciation and impairment losses in € thousand FY 2021/22 FY 2022/23 Intangible assets 931 957 Property, plant and 30,441 31,510 equipment Thereof impairment 464 10 losses Thereof right-of-use 7,953 8,982 assets from leases Amortisation, depreciation 31,372 32,467 and impairment losses Amortisation and depreciation of €32,467 thou- sand was recognised in the ﬁnancial year 2022/23 (PY: €31,372 thousand). Of this amount, €10 thousand (PY: €521 thousand) were attributable to impairment losses. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 98 4.6 Other operating expenses Other operating expenses include especially: in € thousand FY 2021/22 FY 2022/23 Order‑related expenses 18,045 23,714 Legal and advisory fees 11,594 11,051 Maintenance expenses 8,977 9,677 Personnel-related expenses 7,414 6,870 Leasing and rent expenses 3,300 3,247 Expenses for insurance, 4,171 3,644 feeds and contribution Other services 4,793 4,751 Expenses for environmen- 1,900 1,815 tal protection Expenses from foreign cur- 6,893 8,901 rency translation Expenses relating to other 1,040 1,484 periods Loss allowance on receiva- ‑163 1,269 bles and contract assets Other expenses 5,460 5,953 Other operating expenses 73,454 82,376 Other operating expenses increased in the ﬁnancial year 2022/23 by €9,263 thousand from €73,454 thou- sand to €82,717 thousand. Other operating expenses mainly include order-related expenses, which consist mostly of outgoing freight expenses amounting to €17,248 thousand (PY: €14,592 thousand), as well as legal and advisory fees in an amount of €11,051 thou- sand (PY: €11,594 thousand). The remaining expenses amounting to €6,294 thousand (PY: €5,460 thousand) primarily include IT, vehicle and oﬃce material costs. 4.7 Net ﬁnance income/costs The ﬁnancial result amounted to €9,532 thousand in the ﬁnancial year 2022/23 (PY: €22,440 thousand). Finance income in € thousand FY 2021/22 FY 2022/23 Interest income 3,095 3,361 Income from currency 285 194 translation Finance income 3,380 3,555 Finance income amounted to €3,555 thousand in the ﬁnancial year 2022/23 (PY: €3,380 thousand) and was largely attributable to interest income from customer tooling of €2,820 thousand (PY: €2,953 thousand). This item also included income from foreign currency trans- lation of €194 thousand (PY: €285 thousand). Finance costs in € thousand FY 2021/22 FY 2022/23 Interest paid to banks 2,974 6,710 Interest paid on sharehol- 7,389 - der loans Interest paid on bond 6,825 - Transaction costs directly attributable to the issue of a 5,757 613 ﬁnancial liability Interest expense from 588 829 discounting of provisions Interest expense arising 539 546 from leases Other interest expenses 698 1,790 Expenses from currency 1,051 2,600 translation Finance costs 25,821 13,088 The ﬁnance costs of €13,087 thousand in the ﬁnancial year 2022/23 (PY: €25,821 thousand) mainly arose from interest expenses for banks and from expenses from currency translation. The high deviation from the previous year is due to the interest payment for bonds (PY: €6,825 thousand) and the interest paid on share- holder loans (PY: €7,389 thousand), which were no longer incurred in the ﬁnancial year 2022/23. With the exception of the interest expense from the discounting of provisions, interest expenses were calculated using the effective interest method. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 99 4.8 Tax expense The income tax expense for the ﬁnancial years 2021/22 and 2022/23 can be broken down as follows: in € thousand FY 2021/22 FY 2022/23 Current taxes 14,393 13,927 Current taxes prior years 1,738 1,800 Deferred taxes ‑9,679 5,209 Taxes on income 6,452 20,937 The Group tax rate changed slightly year-on-year from 27.0% to 26.9%. The Group tax rate of 26.9% (PY: 27.0%) is based on a corporation tax rate of 15.0% and a soli- darity surcharge of 5.5% on the corporation tax as well as a trade tax rate of 11.1% (PY: 11.2%). Reconciliation of the income taxes in the ﬁnancial years 2022/23 and 2021/22, using a total tax rate of 26.9% (PY: 27.0%) (corporation tax and trade tax of the main country of operations being Germany) to the income tax expense shown in the statements of proﬁt or loss was as follows: in € thousand FY 2021/22 FY 2022/23 Proﬁt/loss before tax 50,424 70,920 Group tax rate (%) 27.0% 26.9% Tax expense at Group tax 13,622 19,085 rate Causes for additional amounts/shortfalls Non-deductible expenses 3,712 1,566 Tax-exempt income ‑1,941 ‑1,347 Tax income/expense ‑6,401 3,269 relating to other periods Tax rate differential ‑2,383 ‑1,873 Other effects ‑156 238 Disclosed expense for 6,452 20,937 income taxes The disclosed income tax expense of €20,937 thou- sand is higher than the expected income tax expense of €19,085 thousand that results from applying the Group tax rate of 26.9% to the Group’s consolidated proﬁt before income tax. The tax effect of non-deductible expenses consisted primarily of expenses that are non-deductible in the determination of the taxable proﬁts in Germany as well as effects resulting from the Mexican maquiladora structure. The tax effect relating to other periods was related to the tax audit for the ﬁnancial years 2015/16 till 2017/18 in Germany and a deferred tax adjustment in China. The tax effect reported as a tax rate differential reﬂects the difference between the Group tax rate of 26.9% rel- evant to the Group and the tax rates applicable to the individual subsidiaries in varying countries. Other effects amounting to €238 thousand comprised €705 thousand of not capitalised deferred tax assets on current year tax losses in Italy, Luxembourg and Slovenia and a counteracting effect of €427 thousand relating to the reversal of a valuation allowance on tax credits in the US. For the current ﬁnancial year, deferred tax assets were recognised for the interest carry‑forwards of €19,784 thousand (PY: €32,935 thousand). Tax losses carried forward, which can be applied indeﬁ- nitely, existed of €10,603 thousand in total in Italy, Lux- embourg and Slovenia. Deferred tax assets of €2,229 thousand have not been recognised because it is not probable in the short-term perspective that future tax- able proﬁts will be available against which the Group can use the beneﬁts therefrom. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 100 Deferred tax assets and liabilities result from temporary differences in the following items in the statements of ﬁnancial position and are broken down as follows: in € thousand FY 2021/22 FY 2022/23 Property, plant and equipment and 5,237 5,935 intangible assets Receivables and other 652 620 assets Tax interest carry 7,976 4,776 forward Liabilities 182 232 Provisions 12,233 6,119 Deferred income tax 26,280 17,682 assets (gross) Offset 7,435 9,350 Deferred income tax 18,845 8,332 assets Property, plant and equipment and 4,317 4,643 intangible assets Receivables and other 3,830 3,575 assets Liabilities 215 1,131 Provisions 2,708 650 Deferred income tax 11,070 9,998 liabilities (gross) Offset 7,435 9,350 Deferred income tax 3,635 648 liabilities Deferred income tax asset 15,210 7,684 (net) In accordance with IAS 12.81(f), deferred taxes on outside basis differences were not recognised in the current year and in the previous year and amount to €12,641 thousand (PY: €10,848 thousand). No income tax consequences arose from the distribution of divi- dends to the Company’s shareholders. In ﬁnancial year 2022/23, deferred taxes of €2,229 thousand (PY: €487 thousand) resulting from deﬁned beneﬁt plans were recognised in other comprehensive income and €36 thousand (PY: €379 thousand) directly in equity. Amounts recognised in other comprehensive income in € thousand FY 2021/22 FY 2022/23 Remeasurements of deﬁned 1,978 8,572 beneﬁt liability (before taxes) Tax expense ‑487 ‑2,229 Net of tax 1,491 6,343 To address concerns about uneven proﬁt distribution and tax contributions of large multinational corpora- tions, various agreements have been reached at global level, including an agreement by over 135 jurisdic- tions to introduce a global minimum tax rate of 15%. In December 2021, the Organisation for Economic Cooperation and Development (OECD) released a draft legislative framework, followed by detailed guidance released in March 2022, that is expected to be used by individual jurisdictions that signed the agreement to amend their local tax laws. Once changes to the tax laws in any jurisdictions in which the Group operates are enacted or substantively enacted, the Group may be subject to the top‑up tax. At the date when the ﬁnan- cial statements were authorised for issue, none of the jurisdictions in which the Group operates had enacted or substantively enacted the tax legislation related to the top-up tax. Management closely monitors the pro- gress of the legislative process in each jurisdiction the Group operates in. On 31 March 2023, the Group did not have suﬃcient information to determine the potential quantitative impact. 4.9 Earnings per share The earnings per share for the ﬁnancial year ended 31 March 2023 amounted to €1.16 (PY: €1.042). Earnings per share are calculated by dividing the proﬁt for the period attributable to shareholders of the parent by the weighted average numbers of shares issued in the reporting period. FY 2021/22 FY 2022/23 Proﬁt attributable to share- holders of the parent (in € 43,972 49,983 thousand) Number of weighted shares 42,158,572 43,030,303 Earnings per share basic (in €) 1.041 1.16 Earnings per share diluted (in €) 1.041 1.16 1 Adjusted according to IAS 8.42 as the calculation of the number of average weighted shares was different. 2 Adjusted according to IAS 8.42 as the calculation of the number of average weighted shares was different. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 101 5 Other disclosures 5.1 Working capital Trade working capital is, amongst others, a key per- formance indicator to track the Group’s operating performance. It is neither required by nor presented in accordance with IFRS as adopted by EU. It is also not a measure of ﬁnancial performance under IFRS as adopted by EU and should not be considered as an alternative to other indicators of operating perfor- mance, cash ﬂow or any other measure of performance derived in accordance with IFRS as adopted by EU. The following table shows the amounts of the working capital broken down by balance sheet class position: in € thousand 31 Mar 22 31 Mar 23 Inventories – non tooling 67,396 64,092 Receivables from third 35,238 43,703 parties Payables to third parties (-) 61,612 54,541 Trade working capital 41,023 53,253 Tooling net 74,392 55,492 Contract assets 11,883 15,281 Working capital 127,298 124,026 The following table shows the reconciliation of the working capital: in € thousand 31 Mar 22 31 Mar 23 Inventories 129,388 116,306 Tools ‑61,142 ‑50,955 Advanced payment for ‑850 ‑1,259 tools Inventories – non tooling 67,396 64,092 Receivables from third 85,211 93,839 parties Trade receivables > 1 year ‑47,541 ‑46,329 Trade receivables tooling ‑2,432 ‑3,807 Receivables from third 35,238 43,703 parties Trade payables < 1 year 70,384 60,597 Trade payables and -8,772 ‑6,056 services tooling Payables to third parties (-) 61,612 54,541 Trade working capital 41,023 53,254 Tooling inventories 61,141 50,955 Current tooling trade 2,432 3,807 receivables Non-current tooling trade 47,541 46,329 receivables Tooling related trade -8,772 ‑6,056 payables Advance payment tooling 851 1,259 Tooling received advanced ‑23,100 ‑31,562 payment current Other provisions ‑5,700 ‑9,241 Tooling net 74,392 55,491 Contract asset 11,853 15,269 ECL contract asset < 1 year 30 12 Contract asset 11,883 15,281 Working capital 127,298 124,026 Total working capital amounted to €124,026 thousand as of 31 March 2023 and was therefore nearly stable compared to 31 March 2022 with €127,298 thousand. The decrease of €3,272 thousand was driven by lower safety stock and tooling net. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 102 5.2 Financial instruments The following table shows the carrying amounts and fair values of the ﬁnancial instruments broken down by balance sheet class and category: in € thousand 31 Mar 22 31 Mar 23 Carrying Carrying Financial assets by classiﬁcation Category amount Fair value amount Fair value Trade receivables FAAC 81,785 81,785 88,711 88,711 Trade receivables within the scope of factoring FAFVTPL 3,426 3,426 5,128 5,128 agreements Seller Guarantee FVPL - - 1,046 1,046 Derivatives with positive market values FAFVTPL - - 600 600 Cash and cash equivalents FAAC 116,967 116,967 165,474 165,474 Financial liabilities by classiﬁcation Trade payables FLAC 70,384 70,384 60,597 60,597 Liabilities to banks (non‑derivative) FLAC 247,746 247,746 249,3711 251,152 Liabilities to banks (derivative) FLFVTPL 1,342 1,342 - - Summary by category FAAC 198,752 198,752 259,314 260,360 FAFVTPL 3,426 3,426 5,728 5,728 FVPL - - 1,046 1,046 FLAC 318,130 318,130 309,968 309,968 FLFVTPL 1,342 1,342 - - 1 Including the Seller Guarantee in the amount of €1,046 thousand. The fair value for liabilities to banks (non-derivative) was calculated by discounted cash ﬂows. The valuation model considers the present value of expected pay- ments, discounted using a risk-adjusted discount rate. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 103 The following table provides an overview of the clas- siﬁcation of ﬁnancial instruments presented above in the fair value hierarchy: 31 Mar 22 31 Mar 23 in € thousand Level 11 Level 22 Level 33 Level 11 Level 22 Level 33 Financial assets Trade receivables within the scope of factoring - 3,426 - - 5,128 - agreements Seller Guarantee - - - - 1,046 - Derivatives with positive market values - - - - 600 - Financial liabilities Derivative ﬁnancial instruments - 1,342 - - - - 1 Measurement of fair value based on quoted prices (non‑adjusted) for these or identical instruments on active markets. 2 Measurement of fair value based on inputs that are either directly (i.e. as prices) or indirectly (i.e. derived from prices) observable on active markets. 3 Measurement of fair value based on inputs that do not represent any observable market data. There were no transfers between the different levels of the fair value hierarchy in the ﬁnancial year 2022/23. Fair value is the price at which an orderly transaction to sell an asset or to transfer a liability would take place between market participants at the measurement date. The following methods and assumptions were used to estimate fair values in the ﬁnancial year: The invoice amount of receivables is used as a reason- able approximation for the fair value of trade receiva- bles in conjunction with factoring agreements. For trade receivables not subject to factoring arrange- ments and for cash and cash equivalents, given their maturity, it is assumed that the carrying amount is a reasonable approximation of fair value due to their predominantly short-term nature. Similarly, for trade payables and other ﬁnancial liabilities, it is assumed that the carrying amount is the fair value. The fair values of the derivative ﬁnancial instruments in the form of forward exchange contracts with banks are determined using the present value method based on market prices. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 104 The following table shows net gains and losses from ﬁnancial instruments by category: Fair value Currency Derivatives Seller Interest measurement translation Impairment with positive Guarantee in € thousand market values FY 2021/22 FAAC 3,095 - ‑1,311 ‑163 - - FLAC 22,944 - - - - - FLFVTPL - 1,3421 - - - - FY 2022/23 FAAC 3,361 - 468 1,269 - - FLAC 7,322 - - - - - FLFVTPL - - - - - - FVPL - - - - - 1,046 FAFVTPL - - - - 6002 - 1 In addition to the €1,342 thousand ﬁnancial liabilities from derivatives reported as of 31 March 2022, €1,209 thousand in realised losses were generated during the ﬁnancial year 2021/22. 2 In addition to the €600 thousand derivatives with positive market values reported as of 31 March 2023, €7,075 thousand in realised losses were generated during the ﬁnancial year 2022/23. Interest income and expense on ﬁnancial assets and liabilities accounted for at amortised cost is included in interest income on ﬁnancial assets and in interest expense on ﬁnancial debt (refer to section 4.7). 5.3 Share-based payments The Management Board members of Novem Group S.A. participate in a long-term incentive (Performance Share Plan) in the form of virtual shares. The Perfor- mance Share Plan is classiﬁed according to IFRS 2 as cash-settled share-based payment. The Performance Share Plan is granted in annual tranches of virtual shares with a respective perfor- mance period of four years. Deviating from this, the performance period of the tranche 2021 started on the day of the listing of Novem Group S.A. (IPO) and will end on 31 March 2025. The second tranche (tranche 2022) started at the beginning of ﬁnancial year 2022/23 and will end on 31 March 2026. The conditionally granted number of virtual shares at the beginning of the performance period is calculated for each tranche by dividing a contractually deﬁned individual target amount by the start share price of the share of Novem Group S.A. (arithmetic mean of the closing prices of the stock during the last 60 trading days prior to the start of the performance period). The ﬁnal number of virtual shares is determined by multiplying the total target achievement by the con- ditionally granted number of virtual shares. The total target achievement depends on the target achieve- ment of the two ﬁnancial ﬁgures relative Total Share- holder Return (70% weighting) and EBIT margin (30% weighting). Thereby, the target achievement of relative Total Shareholder Return and EBIT margin can range between 0% and 150%. In order to determine the payout in cash, the ﬁnal num- ber of virtual shares is multiplied by the end share price of the share of Novem Group S.A. (arithmetic mean of the closing prices of the stock during the last 60 trading days prior to the end of the performance period) plus the sum of the dividends disbursed during the perfor- mance period. The payout is capped at 200% of the contractually deﬁned individual target amount. The ﬁrst tranche of the Performance Share Plan was allocated to Management Board members of Novem Group S.A. for the ﬁnancial year 2021/22 and the num- ber of conditionally granted virtual shares amounted to 40,826, resulting in a provision of €170 thousand as of 31 March 2023 (31 March 2022: €69 thousand). The second tranche was awarded for the ﬁnancial year 2022/23 with a total number of 60,384 conditionally granted virtual shares, corresponding to a provision of €140 thousand as of 31 March 2023 (31 March 2022: €0). NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 105 These provisions have been included in Non-current deferred liabilities (refer to section 3.16). In total, the expenses for ﬁnancial year 2022/23 amounted to €241 thousand (PY: €69 thousand). The fair value of the Performance Share Plan to calcu- late expenses and provisions was determined by using a Monte-Carlo-Simulation. The expected volatility has been based on the average of the median volatility of SDAX companies (term‑congruent) and the historical volatility of Novem for the period available. The fair value and the inputs used in the assessment of the fair value as of 31 March 2023 were as follows: Valuation as of Tranche Tranche 31 March 2023 2021 2022 Performance period 19 Jul 21 – 1 Apr 22 – 31 Mar 25 31 Mar 26 Start share price €16.46 €11.25 Novem Group S.A. Remaining duration of 2.0 years 3.0 years performance period Expected annual volatility 45.8% 47.6% Risk-free annual interest 2.7% 2.5% rate Expected target achievement for internal 100% 100% target EBIT margin Fair value per virtual share €8.82 €8.85 For comparative purposes, the fair value and inputs used in the assessment of the fair value as of 31 March 2022 were as follows: Valuation as of Tranche 2021 31 March 2022 Performance period 19 Jul 21 – 31 Mar 25 Start share price €16.46 Novem Group S.A. Remaining duration of 3.0 years performance period Expected annual volatility 44.9% Risk-free annual interest 0.1% rate Expected target achievement for internal 100% target EBIT margin Fair value per virtual share €8.96 5.4 Risk reporting Management of ﬁnancial risks The Group is exposed to a wide range of risks and opportunities within the scope of its business activi- ties. Its business operations are focused on seizing opportunities and identifying and controlling the related risks early on. Group-wide risk management aims to identify risks based on operations as early as possible to take appropriate and effective steps to manage or avoid these risks. The Group is exposed to the following risks in particular: • liquidity risks • credit risk • ﬁnancial market risks (exchange rate risks and interest rate risks) The Group’s management has overall responsibility for establishing and overseeing the Group’s risk manage- ment system. The Finance department is responsible for developing and monitoring the risk management system and reports regularly on these matters to management. At the core of risk management is an internal report- ing system that continually optimises monitoring of all business-relevant key data and is adapted to current challenges. In addition, the business opportunities and risks are recorded, analysed and evaluated in a multi-tiered planning, information and control pro- cess, allowing changes to the business environment and deviations from plan to be recognised early and countermeasures introduced in advance. Additionally, important Alternative Performance Measures (metrics such as order intake, revenue, Adj. EBIT, EBITDA, staff- ing level, ﬂuctuation and quality data) are reported monthly and evaluated by management. Liquidity risks Liquidity risk is the risk that the Group will not be able to meet its ﬁnancial obligations as they fall due. Liquid- ity risks arise from current liabilities due to long-term rental agreements, interest and repayments. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 106 Funds are largely generated from operations and used to cover ﬁnancing needs. To ensure and monitor liquidity, the Corporate Treasury department permanently tracks, optimises and docu- ments the current cash ﬂows of all entities and has established a rolling 12‑month liquidity planning. The planning takes into account the maturities of ﬁnancial investments and ﬁnancial assets (e.g. receivables and other ﬁnancial assets) as well as expected cash ﬂows from the operating activities. Both the liquidity status (weekly) and the liquidity plan (monthly) are regularly reported to management, and if this results in changes in ﬁnancing needs, measures are initiated at an early stage. This approach allows the entire Group’s needs and those of individual group companies to be addressed optimally. The Group ensures compliance with the ﬁnancing requirements of its operating business and with ﬁnan- cial obligations by means of cash pooling agreements, intragroup loans and credit lines based on the respec- tive legal and tax regulations. As of 31 March 2023, the Group has a total of €60,000 thousand (31 March 2022: €60,000 thousand) in unused revolving credit facility from the term loan agreement to ensure liquidity. Additionally, the Group possesses a €4,000 thousand credit line drawn in the amount of €3,132 thousand as a guarantee facility. The following overview shows the contractually agreed terms of ﬁnancial liabilities, which represent expected future cash out‑ﬂows: Less than one Between one and More than ﬁve Financial in € thousand year ﬁve years years liabilities As of 31 Mar 22 Liabilities to banks (non‑derivative) 4,560 273,012 - 277,572 Liabilities to banks (derivative) 1,3421 - - 1,342 Trade payables 70,384 - - 70,384 Lease liabilities 8,280 19,667 8,807 36,754 As of 31 Mar 23 Liabilities to banks (non‑derivative) 12,594 274,001 - 286,595 Liabilities to banks (derivative) - - - - Trade payables 60,597 - - 60,597 Lease liabilities 7,938 20,482 10,661 39,081 1 The amount stated relates to the market value and results from the difference between the purchase of EUR in the amount of €69,896 thousand and the sale of USD in the translated amount of €68,554 thousand. The contractually agreed cash ﬂows related to non‑ derivative banks include a variable interest as well as the repayment amount of the loan. No cash ﬂows for derivative liabilities to banks are expected in the form of forward exchange contracts due to the positive devel- opment of the exchange rates. Based on the current state of knowledge, the cash out‑ﬂows presented are not expected to occur signiﬁcantly earlier or to con- siderably deviate in amount from the values shown in the table. Credit risk Credit risk is the risk of ﬁnancial losses if a customer or counterparty to a ﬁnancial instrument fails to meet its contractual obligations. Credit risk arises mainly from trade receivables, with the maximum credit risk corresponding to the carrying amount of the ﬁnancial assets. Impairment losses are also recorded for con- tract assets. The following tables give information on the carrying amounts of trade receivables and contract assets aris- ing from contracts with customers: in € thousand 31 Mar 22 31 Mar 23 Trade receivables 85,211 93,839 Contract assets 11,853 15,281 NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 107 Accumulated impairment losses on trade receivables and contract assets were as follows: in € thousand FY 2021/22 FY 2022/23 Trade receivables 1,115 1,609 Contract assets 30 12 Impairment losses 1,145 1,621 Trade receivables Credit risk relates in particular to a receivable being repaid late, partially or not at all. The Group uses a number of measures to minimise this risk. As part of receivables management, the Group continuously monitors open positions, conducts maturity analyses and contacts the customer at an early stage if pay- ment delays emerge. The highest priority is placed on monitoring early indicators. On the statements of ﬁnancial position, the residual risk for trade receivables is accounted for by calculating expected credit losses. In general, the Group’s exposure to credit risk is inﬂu- enced mainly by the individual characteristics of each customer. Trade receivables are spread essentially over the major manufacturers in the automotive industry, which, due to solid sector performance in Americas, Europe and Asia, is assessed as representing relatively low default risk for the Group. This assessment is based primarily on long-standing business relation- ships with most customers and the ratings of the major rating agencies. Historical default rates for these receivables are extremely low. In the event that one of the three largest customer defaults (currently assessed as unlikely), credit risk arising from open receivables as of 31 March 2023 would be between €5,688 thousand and €14,079 thousand (31 March 2022: €7,366 thou- sand and €15,373 thousand). Expected credit losses for trade receivables recognised at amortised cost are measured based on the lifetime expected credit losses. This involves the receivables being grouped according to the individual customers. For these customers, a one‑year default probability is determined via a credit agency. Expected credit losses per customer are calculated ultimately as the product of the gross carrying amount of the receivable, the customer’s probability of default (maturity-adjusted as required) and an appropriate insolvency ratio. The gross carrying amounts and related probabilities of default of customers for trade receivables measured at amortised cost are as follows: FY 2021/22 FY 2022/23 in € thousand Gross carrying amount Probability of default Gross carrying amount Probability of default 44,700 < 1% 59,8191 < 1% 3,492 1% < x < 2% 1,400 1% < x < 2% 27,530 2% < x < 5% 20,751 2% < x < 5% 10,604 > 5% 13,478 > 5% Trade receivables 86,326 95,448 1 Thereof trade receivables within the scope of factoring agreements amounting to €5,127 thousand (31 March 2022: €3,426 thousand) were measured at fair value through proﬁt or loss. No expected credit losses were recognised for this portion. Thereof Seller Guarantee within the scope of factoring agreement amounting to €1,046 thousand. No expected credit losses were recognised for this portion. Contract assets As of 31 March 2023, contract assets were recognised amounting to €13,689 thousand (31 March 2022: €11,883 thousand). These assets have arisen with the right to consideration acquired from contractual obliga- tions already satisﬁed. Contract assets are reclassiﬁed to trade receivables as soon as an unconditional right to payment arises, which is obtained by invoicing the customer for the quantities actually delivered. Expected credit losses for contract assets are meas- ured using the lifetime expected credit losses. This involves the contract assets being grouped according to the individual customers. For these customers, a one-year default probability is determined via a credit agency. Expected credit losses per customer are cal- culated ultimately as the product of the gross carrying amount of the contract asset, the customer’s probabil- ity of default (maturity‑adjusted as required) and an appropriate insolvency ratio. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 108 The gross carrying amounts and related probabilities of default of customers for contract assets are as follows: FY 2021/22 FY 2022/23 in € thousand Gross carrying amount Probability of default Gross carrying amount Probability of default 4,990 < 1% 10,746 < 1% 206 1% < x < 2% 1 1% < x < 2% 4,078 2% < x < 5% 2,792 2% < x < 5% 2,609 > 5% 150 > 5% Contract assets 11,883 13,689 Cash and cash equivalents As of 31 March 2023, the Group had cash and cash equivalents of €165,474 thousand (31 March 2022: €116,967 thousand). Thus, this amount repre- sents the maximum exposure to credit risk in terms of these assets. The cash and cash equivalents are held at banks with Fitch ratings of BBB to AAA. For reasons of materiality, no expected credit losses were recognised for cash and cash equivalents by the Group. Moreover, external ratings indicate that these assets have only low credit risk. Derivatives Derivatives are concluded with banks with a rating from Fitch Ratings of at least BBB+. As of 31 March 2023, all derivatives in the form of forward exchange contracts have a positive market value totalling €600 thousand. In comparison to the prior ﬁnancial year, the market value from derivatives was negative and amounted to €1,342 thousand. Finance market risks Finance market risks are the risks of changes in market prices, such as exchange rates or interest rates, that affect the Group’s earnings or the value of the ﬁnan- cial instruments it holds. The objective of managing ﬁnance market risks is to manage and control market risk exposure within an acceptable range while optimis- ing income. Exchange rate risk Foreign currency risks arise when Group companies set- tle transactions in currencies other than their functional currency. Through its subsidiaries, the Group has assets and liabilities outside the Eurozone. These assets and liabilities are denominated in local currencies. If the value of net assets is translated into Euro, exchange rate ﬂuc- tuations from one period to the next result in changes to these net asset values. Accordingly, the Corporate Treasury department undertakes actions to minimise the resulting foreign currency risks. The Group mainly has foreign currency exposure to Chinese Renminbi (CNY), Czech Koruna (CZK), Honduran Lempira (HNL), Mexican Peso (MXN) and US Dollar (USD), which arise from trade receivables/payables and from procurement. The Group counters its foreign currency risks through natural hedging, i.e. by raising the purchase volume in the foreign currency area or increasing local production. To further secure operating activities, the option of group netting foreign currency exposures within the Group is used. A further measure taken is to manage the volume of excess liquidity arising from the respective hedged items in foreign currency based on incremental FX spot transactions within a prescribed scope. A sharp appreciation of the Euro against currencies of other exporting countries could, however, negatively impact the Group’s competitiveness. A reasonably possible change in exchange rates would inﬂuence consolidated earnings due to the fair values of the monetary assets and liabilities. The following table is based on the exchange rates determined at the reporting date. It illustrates the effects of appreciation or depreciation of the main currencies to be considered (CNY, CZK, MXN, USD) of +10% or ‑10% against the respective functional currency. The overall result for each currency thus includes effects calculated based on the appreciation or depreciation of the Euro, where the functional currency corresponds to the currency stated in the table. in € thousand 31 Mar 22 31 Mar 23 Changes in foreign +10% ‑10% +10% ‑10% exchange rates (gain) CNY ‑124 119 ‑126 122 CZK 627 -627 31 ‑31 MXN ‑555 556 ‑522 522 USD 11,182 ‑12,970 9,170 ‑10,535 NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 109 To further reduce foreign currency risk from US Dollar exposures, the Group concluded a number of forward exchange contracts with UniCredit, HSBC and JP Mor- gan. Using these derivative instruments, the signiﬁcant part of the forecast net foreign currency exposures for the respective next 12 months is hedged in US Dollar. In this case, they are not presented as hedges: instead, the derivatives are measured at fair value through proﬁt or loss. Interest rate risks Net ﬁnance income/costs and ﬁnancial performance can be positively inﬂuenced by favourable interest rate and exchange rate developments. To allow prompt reactions to positive developments, the ﬁnancial mar- kets are monitored continuously. As of 31 March 2023, the Group’s interest‑bearing ﬁnancial instruments can be aggregated as follows with regard to the basic structure of the respective interest rate: in € thousand 31 Mar 22 31 Mar 23 Variable rate instruments 250,000 250,000 Financial liabilities Interest rate exposure 250,000 250,000 As of 31 March 2023, ﬁnancial liabilities with ﬁxed rates amount to zero. Interest rate risk exists for the syndicated loan as it is linked to the 3‑month Euribor. In view of the interest rate appreciation by the European Central Bank and the current outlook due to still high inﬂation rates, there are slight risks that interest rates may increase even more. Further moderate interest rate risks exist for pension obligations and the factoring program. The factoring program depends on the 3‑month Euribor relating to factoring fees for EUR‑receivables and the SOFR, which represents the base rate for factoring fees resulting from USD‑receivables. A 1% change in the reference interest rates would have no material impact regarding factoring fees. The interest rate risk regarding our pension obligations is also manageable as their share of total assets only amounts to approximately 5%. 5.5 Capital management The objective of the Novem Group’s capital manage- ment is to ensure the ability to continue as a going con- cern and to maintain a stable capital case to maintain investor, creditor and market conﬁdence. Opportunities to repay and reﬁnance liabilities and ﬁnance future business activities and future investments depend on how the total operating revenue of the Group develops and its ability to obtain suﬃcient liquidity. Due to the business model and the operations on global markets, the Group generates predictable and sustainable cash ﬂows under normal business conditions. The Group therefore manages its capital structure and makes necessary adjustments based on the prevailing busi- ness conditions. The Group has a total of €60,000 thousand in unused revolving credit facility. Additionally, the Group pos- sesses a €4,000 thousand credit line, which was drawn in the amount of €3,132 thousand as a guarantee facility. For monitoring the capital structure, the Group utilises, amongst others, the ratio of net ﬁnancial debt and Adj. EBITDA, which is also used as a covenant in the senior facilities agreement. Regular quarterly monitoring of the ﬁnancial ratios has been implemented. The Group does not expect a breach of this covenant. In order to maintain or adjust the capital structure, the Group may increase or decrease the dividends, issue new shares or return capital to the shareholders, and raise additional or reduce parts of the outstanding debt. 5.6 Consolidated statement of cash ﬂows The statement of cash ﬂows is prepared in accordance with IAS 7 and is broken down into cash ﬂows from operating, investing and ﬁnancing activities. In‑ﬂows and out‑ﬂows from operating activities are presented in accordance with the indirect method and those from investing and ﬁnancing activities by the direct method. Cash held comprises current available funds and cash equivalents less bank liabilities due on demand (cur- rent account liabilities). With proﬁt for the period as the starting point, the non-cash expenses and changes in net working capital are accounted for to calculate cash ﬂows from operating activities. Income tax payments of €8,721 thousand (PY: €17,330 thousand) are also recognised in cash ﬂows from operating activities. Investing activities comprise payments to acquire intangible assets, property, plant and equipment and ﬁnancial assets as well as proceeds from the sale of intangible assets, property, plant and equipment and ﬁnancial assets. Financing activities include the NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 110 repayment of bonds and borrowings. Interest pay- ments of €8,533 thousand (PY: €12,994 thousand) are also reﬂected in cash out‑ﬂows from ﬁnancing activities. The table below shows the details of changes in the Group’s ﬁnancial liabilities, which are classiﬁed in the Group’s consolidated statement of cash ﬂows as cash ﬂows from ﬁnancing activities: Liability from Liabilities to Liabilities to in € thousand bonds banks shareholders Lease liabilities Dividends As of 01 Apr 21 397,442 441 461,885 36,111 - Changes from ‑400,000 247,649 - ‑8,366 - ﬁnancing cash ﬂows Effect of changes in - - - ‑845 - foreign exchange rates Changes in fair values - 935 - - - Other changes 2,558 62 ‑461,885 7,957 - As of 31 Mar 22 - 249,087 - 34,857 - As of 01 Apr 22 - 249,087 - 34,857 - Changes from - - - ‑9,797 ‑17,212 ﬁnancing cash ﬂows Effect of changes in - - - 152 - foreign exchange rates Other changes - - - 13,869 - As of 31 Mar 23 - 249,087 - 39,081 -17,212 5.7 Operating segments Segment information is provided on the basis of the Group’s internal reporting in order to assess the type and ﬁnancial impact of the Group’s business activi- ties as well as the economic environment in which it operates. Transactions between the operating seg- ments based on transfer prices are determined accord- ing to arm’s length conditions typical for the market. The Group is structured into divisions, with business activities organised over the geographical sales regions of Europe, Americas and Asia. The Chief Operation Decision Maker (CODM) makes the assessment. The CODM within the meaning of IFRS 8 is the management of the parent company, as it regu- larly reviews the segments in terms of their proﬁtability and resource allocation using internal management reporting. The management of the parent company evaluates the performance of the operating segments based on a measure for segment earnings (performance indica- tor) designated as Adj. EBIT, as this provides the most relevant information for assessing the earnings of spe- ciﬁc segments in relation to other companies operating in these sectors. Adj. EBIT is EBIT adjusted by management primarily for business transactions of a one-off and non-recurring nature. The accounting policies for segment reporting are based on the IFRSs applied in these consolidated ﬁnancial statements. Segment reporting as determined by management is disclosed for the segments Europe, Americas and Asia. There are no further segments within the Group. Reportable segments Business activities Production, processing and Europe sale of high‑quality trims and decorative functional elements in vehicle interior Production, processing and Americas sale of high‑quality trims and decorative functional elements in vehicle interior Production, processing and Asia sale of high‑quality trims and decorative functional elements in vehicle interior NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 111 5.8 Reporting by region The Group is organised and managed at regional level. The three reportable operating segments of the Group are Europe, Americas and Asia. The product portfolio is broadly similar in these three regional segments. in € thousand Europe Americas Asia FY 2021/22 Revenue generated from 317,907 221,685 75,042 third parties1 FY 2022/23 Revenue generated from 332,932 264,091 103,280 third parties1 1 Breakdown of revenue according to parent company location (i.e. from the invoiced by perspective) In the ﬁnancial year 2022/23, between 28.4% and 47.0% (PY: 21.6% and 49.3%) in the three regions were attrib- utable to the respective most signiﬁcant customers. Overall, revenue of between 6.1% and 34.3% (PY: 6.2% and 38.1%) was generated with three major customers in all segments. Revenue was spread over the individual segments according to surfaces as follows: in € thousand Europe Americas Asia FY 2021/22 Wood 223,213 170,534 64,116 Aluminium 66,067 50,316 10,926 Premium 28,621 835 - synthetics FY 2022/23 Wood 226,558 204,538 89,804 Aluminium 71,347 51,992 12,265 Premium 35,027 7,561 1,211 synthetics Revenue was distributed among the individual seg- ments according to business areas as follows: in € thousand Europe Americas Asia FY 2021/22 Revenue Series 272,218 218,152 74,645 Revenue Tooling 45,683 3,533 397 FY 2022/23 Revenue Series 280,485 249,473 88,269 Revenue Tooling 52,447 14,619 15,011 The breakdown of revenue between the individual seg- ments according to the category of revenue recognition was as follows: in € thousand Europe Americas Asia FY 2021/22 Goods and servi- ces transferred 273,619 219,123 75,015 over time1 Goods and servi- ces transferred at 44,282 2,562 27 a point in time1 FY 2022/23 Goods and servi- ces transferred 281,786 250,557 88,432 over time Goods and servi- ces transferred at 51,146 13,535 14,848 a point in time 1 Adjusted according to IAS 8.42 as an amount of revenue recognised over time has been disclosed as recognised at a point in time. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 112 5.9 Reconciliation of information on reportable segments The following table shows further information on the Adj. EBIT performance indicator, which is used to assess the performance of the operating segments: Adjustments Europe Americas Asia in € thousand FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 Restructuring - - - - - - Material quality claims ‑104 - - - - - Onerous contracts 3,096 - - - - - Covid‑19 costs 916 ‑12 306 59 207 289 Transaction costs 2,093 - - - - - Others 1,111 825 409 114 - - Exceptional items 7,112 813 715 173 207 289 Discontinued operations - - - - - - Adjustments 7,112 813 715 173 207 289 For both ﬁnancial years 2021/22 and 2022/23, the most signiﬁcant effects were related to Europe. The ﬁnancial year 2022/23 contained severance payments in the amount of €520 thousand, project costs amount- ing to €295 thousand, refunds from Covid‑19 costs in the amount of €12 thousand, as well as €10 thousand accelerated depreciation. In 2021/22, a single provision for anticipated impending losses related to a speciﬁc platform in Vorbach amounting to €3,096 thousand and transaction costs in the amount of €2,093 thou- sand because of the stock market listing were the most signiﬁcant effects within Europe. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 113 Segment reporting Europe Americas Asia Total segments Other/consolidation Group in € thousand FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 FY 2021/22 FY 2022/23 External revenue 317,7971 332,932 221,685 264,091 75,042 103,281 614,524 700,304 - - 614,524 700,304 Revenue between 40,884 51,484 66,712 74,775 24,880 18,733 132,476 144,992 132,476 144,992 - - segments Total revenue 358,681 384,416 288,397 338,866 99,922 122,014 747,000 845,296 132,476 144,992 614,524 700,304 Adj. EBITDA 51,614 38,551 38,827 56,062 21,308 19,571 111,749 114,184 - - 111,749 114,184 Depreciation and 14,489 15,454 11,209 11,887 5,153 5,116 30,851 32,457 - - 30,851 32,457 amortisation Adj. EBIT 37,125 23,097 27,618 44,175 16,155 14,455 80,898 81,727 - - 80,898 81,727 Adjustments 7,112 813 715 173 207 289 8,034 1,275 - - 8,034 1,275 Operating Result (EBIT) 30,013 22,284 26,903 44,002 15,948 14,166 72,864 80,452 - - 72,864 80,452 1 Including revenue-related adjustments The amounts shown above in the Other/consolida- tion column include the elimination of transactions between the segments and speciﬁc items at group level that relate to the Group as a whole and cannot be allocated to the segments. Within the segment reporting in the three regions of Europe, Americas and Asia and in relation to rec- ognition of revenue over time according to IFRS 15, €3,422 thousand related to Europe, €8,010 thousand to the Americas region and €2,450 thousand to Asia (PY: €4,702 thousand to Europa, €5,024 thousand to the Americas region and €1,740 thousand to Asia). NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 114 Geographical information Revenue is spread over the different locations as follows: in € thousand FY 2021/22 FY 2022/23 Czech Republic 398 204 Germany 298,718 313,494 Italy 18,416 19,154 Slovenia 264 80 Europe 317,797 332,932 Honduras - 7 Mexico 375 436 USA 221,310 263,648 Americas 221,685 264,091 China 75,042 103,280 Asia 75,042 103,280 Revenue 614,524 700,304 Breakdown of revenue according to Novem company location (i.e.from the invoiced by perspective) The table below provides information on the breakdown of non‑current assets by Novem location: in € thousand 31 Mar 22 31 Mar 23 Czech Republic 24,344 24,565 Germany 42,743 45,140 Italy 1,430 952 Luxembourg 23 124 Slovenia 30,470 30,316 Europe 99,010 101,097 Honduras 9,995 8,565 Mexico 42,070 37,746 USA 3,262 7,132 Americas 55,327 53,443 China 33,668 33,005 Asia 33,668 33,005 Non-current assets 188,005 187,545 Non-current assets consist of intangible assets and property, plant and equipment. Reconciliation of Adj. EBITDA to earnings before taxes The following table shows the reconciliation of Adj. EBIT to EBIT and to earnings before taxes for the ﬁnancial years 2021/22 and 2022/23: in € thousand FY 2021/22 FY 2022/23 Adj. EBITDA 111,749 114,184 Depreciation and 30,851 32,457 amortisation Adj. EBIT 80,898 81,727 Adjustments 8,034 1,275 EBIT 72,864 80,452 Finance income 3,380 3,555 Finance costs 25,821 13,088 Earnings before taxes 50,423 70,919 Adj. EBIT include transactions with a one-off and non- recurring nature that occurred in the ordinary course of business. 5.10 Leases In the ordinary business, the Novem Group is the les- see in different leases of land and buildings as well as parts of operating and oﬃce equipment. The lease term for land and buildings is typically between one and 20 years. Leases of operating and oﬃce equip- ment usually have a term of between one and 20 years. The Group applied the practical expedient in IFRS 16.6 by not accounting for short-term leases (leases with a lease term of less than 12 months) and low‑value assets (underlying assets <5,000€/$, e.g. printers and NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 115 copiers) as right‑of‑use assets. For all leases, respec- tive lease term options (e.g. renewal options) are con- sidered. The majority of the current options to extend or terminate the leases can only be exercised by the Novem Group and not by the respective lessor. The future undiscounted lease payments from lease term options not yet exercised amount to €65,982 thousand. Some leases of land and buildings provide for addi- tional lease payments based on a change in the local price indices. Future cash out‑ﬂow from variable lease payments not incorporated into the measurement of the lease liabil- ity amount to €2,361 thousand (31 March 2022: €3,546 thousand). These relate mainly to leases of buildings. There are no leases in which the Novem Group S.A. acts as a lessor. Information on leases in which the Group is the lessee is presented below. Right-of-use assets Technical Other equipment, Land and equipment and operating and Right-of-use in € thousand buildings machinery oﬃce equipment assets Depreciation FY 2021/22 5,090 166 2,697 7,953 Additions to right-of-use assets 3,715 - 1,616 5,331 Carrying amount as of 31 Mar 22 29,661 54 4,173 33,888 Depreciation FY 2022/23 5,937 12 3,032 8,982 Additions to right-of-use assets 11,076 - 5,035 16,112 Carrying amount as of 31 Mar 23 32,757 - 6,160 38,917 Amounts recognised in proﬁt and loss and cash ﬂows in € thousand FY 2021/22 FY 2022/23 Interest expense for lease 559 546 liabilities Short-term lease expenses 2,267 1,771 Lease expenses for low value assets except short-term 820 1,180 leases for low value assets Expense for variable lease payments not included in 243 296 the measurement of lease liabilities Total cash out‑ﬂow for leases 11,666 12,817 As of 31 March 2023, the lease liabilities amounted to €39,081 thousand (31 March 2022: €34,857 thousand). Thereof €7,938 thousand are due within the next ﬁnan- cial year 2023/24. 5.11 Other ﬁnancial liabilities and contingent liabilities There were no signiﬁcant other ﬁnancial obligations occurring after the reporting date. There are just ﬁnan- cial obligations within the usual range resulting from the purchase commitment for €28,950 thousand on 31 March 2023. The total amount includes tooling busi- ness costs of €15,620 thousand and €13,330 thousand for series business (PY: Tooling €18,564 thousand and Series €14,056 thousand). Contingent liabilities constitute off-balance sheet contingent liabilities recognised for valuation as of the reporting date. It includes securities and guarantees assumed for third parties increased to €3,132 thou- sand on 31 March 2023 (PY: €2,670 thousand). This is mainly due to the guarantee against the Mexican tax oﬃce of about €2,706 thousand. The amount of the guarantee comprises Mexican VAT, for which the tax authorities rejected an appeal. Furthermore, tax risks are also included in contingent liabilities. The Group might be subject to tax risks attrib- utable to previous tax assessment periods and might be subject to unanticipated tax expenses in relation to previous tax assessment periods, which have not yet been subject to a tax audit or are currently subject to a tax audit. It cannot be ruled out that tax authorities may apply a different approach in ongoing and/or future tax audits from the one adopted by the Group, which may lead to an additional tax expense and/or payment. This could have a material and adverse effect on the busi- ness, ﬁnancial condition and results of operations. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 116 5.12 Related party transactions Holding company The direct holding company of the Group is Rokoko Automotive Holdings (Jersey) Limited , Jersey. During 2022/23, there were no transactions or outstanding balances with Rokoko Automotive Holdings (Jersey) Limited, Jersey. Related parties According to IAS 24, the Group has to disclose speciﬁc information about transactions between the Group and other related parties. Balances and transactions between the Group and its fully consolidated subsidiar- ies, which constitute related parties within the mean- ing of IAS 24, have been eliminated in the course of consolidation and are therefore not commented on in this note. The consolidated ﬁnancial statements do not include any associated companies that are accounted for using the equity method. In the ﬁnancial year 2022/23, no transactions occurred with direct and indirect shareholders. Throughout the last two ﬁnancial years 2021/22 and 2020/21, the Company incurred costs in connection with the private placement, listing and its preparation. Due to a cost sharing and indemnity agreement entered into with its direct and indirect shareholders, the costs incurred were invoiced to its shareholders (with the percentage of the secondary shares), so that these costs represent a pass‑through item (amounted to €8,032 thousand already settled). Related party transactions with other companies occurred in ﬁnancial year 2022/23 regarding the pur- chase of components such as base frames. Kunststoff Schwanden AG and the Group belong to the same group of companies pursuant to IAS 24.9b (i). The transaction volume with Kunststoff Schwanden AG was €118 thousand (PY: €145 thousand). The bal- ance as of 31 March 2023 amounted to €16 thousand (31 March 2022: €8 thousand). All outstanding balances and transactions with this related party are priced on an arm’s length basis and are to be settled in cash within two months. None of the balances are secured. No guarantees have been given or received. For the remuneration of and other transactions with key management personnel constitute related party transactions pursuant to IAS 24, please refer to sec- tion 5.3, section 5.13 and the Remuneration Report. The Remuneration Report will be published separately from this Annual Report on the Novem IR website on 25 July 2023. 5.13 Remuneration of key management personnel The key management personnel are the members of the Management and Supervisory Board of Novem Group S.A. The total remuneration paid to the Man- agement Board members is calculated as the sum of short‑term beneﬁts and pensions, as well as the fair value of the share‑based Performance Share Plan. For further information regarding the share-based Perfor- mance Share Plan, please refer to section 5.3. The Group is obliged by Luxembourg Law to draw up a Remuneration Policy as well as a Remuneration Report for the members of the Supervisory Board and Management Board of Novem Group S.A. The Remuneration Policy and Remuneration Report are prepared in accordance with Art. 7bis and Art. 7ter of the Luxembourg Law of 24 May 2011 on Shareholder Rights, as amended. The total remuneration of the Management Board dur- ing the reporting period was as follows: in € thousand FY 2021/221 FY 2022/23 Short-term employee 1,854 2,259 beneﬁts Post-employment 1,502 - beneﬁts Share-based payments 69 241 Remuneration 3,425 2,500 1 Remuneration displayed for Management Board members for full ﬁnancial year 2021/22. In deviation to this, the corresponding Remuneration Report provides information on the pro-rated com- pensation of the Management and Supervisory Board members of Novem Group S.A. since the IPO of Novem Group S.A., i.e. for the period from 19 July 2021 to 31 March 2022. The present value of the pension entitlements of the Management Board amounted to €3,946 thousand (31 March 2022: €5,502 thousand). The total remuneration paid to the Supervisory Board members, classiﬁed as short‑term beneﬁts, is calcu- lated as the sum of ﬁxed and committee compensation. For this period, the total remuneration for the members of the Supervisory Board amounted to €320 thousand (PY: €240 thousand). NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 117 5.14 Audit fees and services The following fees for the Group auditor only concern services directly related to the Group parent Novem Group S.A. and its subsidiaries. in € thousand FY 2021/22 FY 2022/23 Audit services 881 744 Other assurance services 1,515 109 Tax advisory services 501 - Fees 2,897 853 5.15 Subsequent events There were no events or developments that could have materially affected the measurement and presentation of the Group’s assets and liabilities as of 31 March 2023. NOVEM ANNUAL REPORT 2022/23 CONTENTS 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION 118 RESPONSIBILITY STATEMENT CONTENTS We, Günter Brenner (Chief Executive Oﬃcer), Dr. Johannes Burtscher (Chief Financial Oﬃcer), Mathias Rieger (Director Internal Audit) and Frank Schmitt (Director Consolidation), conﬁrm, to the best of our knowledge, that the consolidated ﬁnancial statements which have been prepared in accordance with the Inter- national Financial Reporting Standards as adopted by 1 the European Union, give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt or loss of the Novem Group S.A. and the undertakings included TO OUR in the consolidation taken as a whole and that the SHAREHOLDERS Group Management Report includes a fair review of the 2 development and performance of the business and the position of the Novem Group S.A. and the undertakings included in the consolidation taken as a whole, together NON-FINANCIAL with a description of the principal risks and uncertain- REPORT ties that they face. 3 Luxembourg, 22 June 2023 GROUP Novem Group S.A. MANAGEMENT Management Board REPORT 4 Günter Brenner Dr. Johannes Burtscher CONSOLIDATED FINANCIAL Mathias Rieger Frank Schmitt STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 119 SETUP AND ORGANISATION OF THE MANAGEMENT BOARD CONTENTS In the ﬁnancial year ending 31 March 2023, the Man- agement Board of Novem Group S.A. diligently fulﬁlled its tasks in accordance with the statutory requirements, the Articles of Association of Novem Group S.A. as well as the Rules of Procedure of the Management Board of the Company, approved by the Management Board and the Supervisory Board on 1 July 2021. It regularly 1 made decisions regarding strategic and operational topics. In the ﬁnancial year ending 31 March 2023, the members of the Management Board were Günter TO OUR Brenner (Chairman and CEO), Dr. Johannes Burtscher SHAREHOLDERS (CFO), Mathias Rieger (Director Internal Audit) and 2 Frank Schmitt (Director Consolidation). The Management Board held in total 14 regular meet- NON-FINANCIAL ings during the ﬁnancial year ending 31 March 2023. REPORT Eleven meetings were attended by all of the members 3 of the Management Board. In the meetings, the Man- agement Board regularly discussed the status and performance of the Group including risks and oppor- GROUP tunities, its market position, course of business as well MANAGEMENT as relevant ﬁnancial data. The discussions were based REPORT on regular and extensive reports in verbal and written 4 form presented by the relevant members of the Man- agement Board. The Management Board maintained close contact also outside of the regular meetings CONSOLIDATED to exchange all important information related to the FINANCIAL Novem Group. This close collaboration also included STATEMENTS strategy discussions as well as information on the 5 organisational development. During the ﬁnancial year ending 31 March 2023, there ANNUAL were no conﬂicts of interest between the members of ACCOUNTS the Management Board and the Company. 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 120 INDEPENDENT AUDITOR‘S REPORT CONTENTS Basis for opinion To the Shareholders of Revenue recognition for Tooling Novem Group S.A. 19, rue Edmond Reuter We conducted our audit in accordance with the EU a) Why the matter was considered to be one of most L ‑ 5326 Contern Regulation N° 537/2014, the Law of 23 July 2016 on signiﬁcant in our audit of the consolidated ﬁnancial Luxembourg the audit profession (“Law of 23 July 2016”) and with statements for the year ended 31 March 2023 International Standards on Auditing (“ISAs”) as adopted for Luxembourg by the Commission de Surveillance du As mentioned in notes 2.15 Revenue recognition and 1 REPORT OF THE RÉVISEUR Secteur Financier (“CSSF”). Our responsibilities under 4.1. Revenue, the Group’s revenues are generated from D’ENTREPRISES AGRÉÉ the EU Regulation N° 537/2014, the Law of 23 July the sales of serial parts, the provision of development 2016 and ISAs as adopted for Luxembourg by the services and the sale of tools necessary for the produc- TO OUR CSSF are further described in the « Responsibilities of tion of serial parts, whereas the sale of tools amounted SHAREHOLDERS Report on the audit of the consolidated “réviseur d’entreprises agréé” for the audit of the con- to €82,1 million in ﬁnancial year ended 31 March 2023. 2 ﬁnancial statements solidated ﬁnancial statements » section of our report. We are also independent of the Group in accordance Novem Group S.A. has determined that the develop- with the International Code of Ethics for Professional ment work and subsequent sale of the tools constitute NON-FINANCIAL Opinion Accountants, including International Independence one single performance obligation. The associated REPORT Standards, issued by the International Ethics Stand- revenue is recognised upon completion and transfer 3 We have audited the consolidated ﬁnancial statements ards Board for Accountants (“IESBA Code”) as adopted of the tool to the customer. An asset is considered to be of Novem Group S.A. and its subsidiaries (the “Group”), for Luxembourg by the CSSF together with the ethi- transferred when the customer obtains control of that which comprise the consolidated statement of ﬁnan- cal requirements that are relevant to our audit of the asset. Novem Group S.A. recognises revenue for Tool- GROUP cial position as at 31 March 2023, and the consolidated consolidated ﬁnancial statements, and have fulﬁlled ing at a point in time, in the amount to which Novem MANAGEMENT statement of comprehensive income, consolidated our other ethical responsibilities under those ethical Group S.A. expects to be entitled. REPORT statement of changes in equity and consolidated state- requirements. We believe that the audit evidence we 4 ment of cash ﬂows for the year then ended, and notes have obtained is suﬃcient and appropriate to provide The Management Board has presented the criteria for to the consolidated ﬁnancial statements, including a a basis for our opinion. the recognition of revenue from the sale of Tooling summary of signiﬁcant accounting policies. in a group-wide accounting policy and implemented CONSOLIDATED speciﬁc recognition and cut‑off procedures. Although FINANCIAL Key audit matters In our opinion, the accompanying consolidated ﬁnan- there exist deﬁned criteria in Novem’s process for STATEMENTS cial statements give a true and fair view of the consoli- revenue recognition for Tooling, the process includes 5 dated ﬁnancial position of the Group as at 31 March Key audit matters are those matters that, in our profes- manual accounting steps and is complex as control is 2023 and of its consolidated ﬁnancial performance and sional judgment, were of most signiﬁcance in our audit transferred without that the customer obtains physical its consolidated cash ﬂows for the year then ended of the consolidated ﬁnancial statements of the current possession of the tool. ANNUAL in accordance with International Financial Reporting period. These matters were addressed in the context of ACCOUNTS Standards (IFRSs) as adopted by the European Union. the audit of the consolidated ﬁnancial statements as a There is the risk for the consolidated ﬁnancial state- 6 whole, and in forming our opinion thereon, and we do ments that revenue for Tooling is not correctly rec- not provide a separate opinion on these matters. ognised throughout the period and that at year-end such revenues are overstated since the tools were not ADDITIONAL transferred to the customer at year-end. INFORMATION NOVEM ANNUAL REPORT 2022/23 121 CONTENTS Other information b) How the matter was addressed during the audit The Management Board is responsible for presenting and marking up the consolidated ﬁnancial statements In order to assess whether Tooling revenue is recog- The Management Board is responsible for the other in compliance with the requirements set out in the nised in the correct ﬁnancial year, our audit procedures information. The other information comprises the infor- Delegated Regulation 2019/815 on European Single consisted of, but were not limited, to: mation stated in the consolidated report including the Electronic Format (“ESEF Regulation”). consolidated management report and the Corporate • We assessed the design and implementation of Governance Statement but does not include the con- In preparing the consolidated ﬁnancial statements, the 1 internal key controls relating to the revenue recogni- solidated ﬁnancial statements and our report of the Management Board is responsible for assessing the tion process in relation to Tooling, and in particular “réviseur d’entreprises agréé” thereon. Group’s ability to continue as a going concern, disclos- the determination and veriﬁcation of the actual ing, as applicable, matters related to going concern and TO OUR transfer of control. Our opinion on the consolidated ﬁnancial statements using the going concern basis of accounting unless SHAREHOLDERS • We assessed compliance of the group-wide does not cover the other information and we do not the Management Board either intends to liquidate the 2 accounting policy regarding revenue recognition express any form of assurance conclusion thereon. Group or to cease operations, or has no realistic alter- with IFRS 15 and have veriﬁed the correct applica- native but to do so. tion of the latter while recognising revenues. In connection with our audit of the consolidated ﬁnan- NON-FINANCIAL • For a sample of Tooling transactions recorded in cial statements, our responsibility is to read the other Those charged with governance are responsible for REPORT the general ledger we reconciled those selected information and, in doing so, consider whether the other overseeing the Group’s ﬁnancial reporting process. 3 sales records with customer invoices, the underly- information is materially inconsistent with the consoli- ing order, the proof of transfer of control and the dated ﬁnancial statements or our knowledge obtained Responsibilities of the réviseur d’entreprises payments received from customers. in the audit or otherwise appears to be materially mis- GROUP agréé for the audit of the consolidated ﬁnancial • We assessed the adequacy of the Group’s dis- stated. If, based on the work we have performed, we MANAGEMENT statements closures in respect of the accounting policies on conclude that there is a material misstatement of this REPORT revenue recognition as disclosed in notes 2.15 and other information, we are required to report this fact. 4 4.1. of the consolidated ﬁnancial statements. We have nothing to report in this regard. The objectives of our audit are to obtain reasonable assurance about whether the consolidated ﬁnancial statements as a whole are free from material misstate- CONSOLIDATED Other matter relating to comparative Responsibilities of the Management Board and ment, whether due to fraud or error, and to issue a report FINANCIAL information Those Charged with Governance for the of the “réviseur d’entreprises agréé” that includes our STATEMENTS consolidated ﬁnancial statements opinion. Reasonable assurance is a high level of assur- 5 The consolidated ﬁnancial statements of the Group for ance, but is not a guarantee that an audit conducted in the year ended 31 March 2022 were audited by another The Management Board is responsible for the prepara- accordance with the EU Regulation N° 537/2014, the auditor who expressed an unmodiﬁed opinion on those tion and fair presentation of the consolidated ﬁnancial Law of 23 July 2016 and with ISAs as adopted for Lux- ANNUAL consolidated ﬁnancial statements on 27 June 2022. statements in accordance with IFRSs as adopted by embourg by the CSSF will always detect a material mis- ACCOUNTS the European Union, and for such internal control as the statement when it exists. Misstatements can arise from 6 Management Board determines is necessary to enable fraud or error and are considered material if, individually the preparation of consolidated ﬁnancial statements or in the aggregate, they could reasonably be expected that are free from material misstatement, whether due to inﬂuence the economic decisions of users taken on ADDITIONAL to fraud or error. the basis of these consolidated ﬁnancial statements. INFORMATION NOVEM ANNUAL REPORT 2022/23 122 CONTENTS Our responsibility is to assess whether the consoli- uncertainty exists, we are required to draw attention were of most signiﬁcance in the audit of the consoli- dated ﬁnancial statements have been prepared in all in our report of the “réviseur d’entreprises agréé” to dated ﬁnancial statements of the current period and material respects with the requirements laid down in the related disclosures in the consolidated ﬁnancial are therefore the key audit matters. We describe these the ESEF Regulation. statements or, if such disclosures are inadequate, matters in our report unless law or regulation precludes to modify our opinion. Our conclusions are based public disclosure about the matter. As part of an audit in accordance with the EU Regula- on the audit evidence obtained up to the date of tion N° 537/2014, the Law of 23 July 2016 and with our report of the “réviseur d’entreprises agréé”. 1 Report on other legal and regulatory ISAs as adopted for Luxembourg by the CSSF, we exer- However, future events or conditions may cause requirements cise professional judgment and maintain professional the Group to cease to continue as a going concern. skepticism throughout the audit. We also: • Evaluate the overall presentation, structure and TO OUR content of the consolidated ﬁnancial statements, We have been appointed as “réviseur d’entreprises SHAREHOLDERS • Identify and assess the risks of material misstate- including the disclosures, and whether the consoli- agréé” by the Shareholders on 25 August 2022 and the 2 ment of the consolidated ﬁnancial statements, dated ﬁnancial statements represent the underlying duration of our uninterrupted engagement, including whether due to fraud or error, design and perform transactions and events in a manner that achieves previous renewals and reappointments, is one year. audit procedures responsive to those risks, and fair presentation. NON-FINANCIAL obtain audit evidence that is suﬃcient and appropri- • Obtain suﬃcient appropriate audit evidence regard- The consolidated management report on pages 33 to REPORT ate to provide a basis for our opinion. The risk of not ing the ﬁnancial information of the entities and 61 of the annual report is consistent with the consoli- 3 detecting a material misstatement resulting from business activities within the Group to express an dated ﬁnancial statements and has been prepared in fraud is higher than for one resulting from error, opinion on the consolidated ﬁnancial statements. accordance with applicable legal requirements. as fraud may involve collusion, forgery, intentional We are responsible for the direction, supervision GROUP omissions, misrepresentations, or the override of and performance of the Group audit. We remain The Corporate Governance Statement is included in MANAGEMENT internal control. solely responsible for our audit opinion. the consolidated management report. The information REPORT • Obtain an understanding of internal control relevant required by Article 68ter paragraph (1) letters c) and d) 4 to the audit in order to design audit procedures that We communicate with those charged with governance of the law of 19 December 2002 on the commercial are appropriate in the circumstances, but not for the regarding, among other matters, the planned scope and companies register and on the accounting records purpose of expressing an opinion on the effective- and timing of the audit and signiﬁcant audit ﬁndings, and annual accounts of undertakings, as amended, is CONSOLIDATED ness of the Group’s internal control. including any signiﬁcant deﬁciencies in internal control consistent with the consolidated ﬁnancial statements FINANCIAL • Evaluate the appropriateness of accounting poli- that we identify during our audit. and has been prepared in accordance with applicable STATEMENTS cies used and the reasonableness of accounting legal requirements. 5 estimates and related disclosures made by the We also provide those charged with governance with a Management Board. statement that we have complied with relevant ethical We conﬁrm that the audit opinion is consistent with the • Conclude on the appropriateness of the Manage- requirements regarding independence, and to commu- additional report to the audit committee or equivalent. ANNUAL ment Board’s use of the going concern basis of nicate with them all relationships and other matters ACCOUNTS accounting and, based on the audit evidence that may reasonably be thought to bear on our inde- We conﬁrm that the prohibited non‑audit services 6 obtained, whether a material uncertainty exists pendence, and where applicable, related safeguards. referred to in the EU Regulation N° 537/2014 were not related to events or conditions that may cast sig- provided and that we remained independent of the niﬁcant doubt on the Group’s ability to continue as From the matters communicated with those charged Group in conducting the audit. ADDITIONAL a going concern. If we conclude that a material with governance, we determine those matters that INFORMATION NOVEM ANNUAL REPORT 2022/23 123 CONTENTS We have checked the compliance of the consolidated Luxembourg, 22 June 2023 ﬁnancial statements of the Group as at 31 March 2023 with relevant statutory requirements set out in the ESEF KPMG Audit S.à r.l. Regulation that are applicable to consolidated ﬁnancial Cabinet de révision agréé statements. Yves Thorn For the Group it relates to: Partner 1 • Consolidated ﬁnancial statements prepared in a valid xHTML format; TO OUR • The XBRL markup of the consolidated ﬁnancial SHAREHOLDERS statements using the core taxonomy and the 2 common rules on markups speciﬁed in the ESEF Regulation as described in Note 1. NON-FINANCIAL In our opinion, the consolidated ﬁnancial statements REPORT of Novem Group S.A. as at 31 March 2023, identiﬁed 3 as Novem-2023-03-31-en.zip, have been prepared, in all material respects, in compliance with the requirements laid down in the ESEF Regulation. GROUP MANAGEMENT Our audit report only refers to the consolidated ﬁnan- REPORT cial statements of Novem Group S.A. as at 31 March 4 2023, identiﬁed as Novem-2023-03-31-en.zip, prepared and presented in accordance with the requirements laid down in the ESEF Regulation, which is the only CONSOLIDATED authoritative version. FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 124 Aluminium damascene brushed 5 accounts Annual BALANCE SHEET as of 31 March 2023 CONTENTS Assets Capital, reserves and liabilities in € thousand Note 31 Mar 23 31 Mar 221 in € thousand Note 31 Mar 23 31 Mar 22 Formation expenses 3 2,854 3,713 Capital and reserves 7 681,796 682,483 Fixed assets 924,283 924,182 Subscribed capital 430 430 1 Tangible assets 4 124 23 Share premium account 540,803 540,803 Other ﬁxtures and ﬁttings, tools and Reserves 484 149 124 23 equipment Legal reserve 43 6 TO OUR Financial assets 5 924,159 924,159 SHAREHOLDERS Other non‑available reserves 441 143 Shares in aﬃliated undertakings 5.1 674,159 674,159 2 Proﬁt or loss brought forward 123,851 140,025 Loans to aﬃliated undertakings 5.2 250,000 250,000 Proﬁt or loss for the ﬁnancial year 16,228 1,075 Current assets 6,404 7,962 Provisions 8 519 85 NON-FINANCIAL Debtors 6 5,911 7,047 REPORT Other provisions 519 85 Amounts owed by aﬃliated undertakings 6.1 5,478 6,683 Creditors 9 251,290 253,290 3 becoming due and payable within one year 5,478 6,683 Amounts owed to credit institutions 9.1 250,105 250,063 Other debtors 6.2 433 365 becoming due and payable within one year 105 63 GROUP becoming due and payable within one year 433 365 becoming due and payable after more than MANAGEMENT 250,000 250,000 Cash at bank and in hand 493 915 REPORT one year Prepayments 64 - Trade creditors 9.2 16 560 4 Total assets 933,605 935,858 becoming due and payable within one year 16 560 Amounts owed to aﬃliated undertakings 1 813 1 Adjustment in the presentation. Reclassiﬁcations between Amounts owed by aﬃliated undertakings and CONSOLIDATED Loans to aﬃliated undertakings as well as Other creditors and Other provisions. becoming due and payable within one year 1 813 FINANCIAL STATEMENTS Other creditors 9.3 1,168 1,854 5 Tax authorities 355 1,195 Social security debts 13 8 Other creditors 800 651 ANNUAL ACCOUNTS becoming due and payable within one year 800 651 Total capital, reserves and liabilities 933,605 935,858 6 The accompanying notes form an integral part of these stand‑alone ﬁnancial statements. ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 126 PROFIT AND LOSS ACCOUNT for the ﬁnancial year ended 31 March 2023 CONTENTS in € thousand Note FY 2022/23 FY 2021/22 Other operating income 10 1,649 5,879 Raw materials and consumables and other external expenses 1,014 5,216 Raw materials and consumables 7 9 Other external expenses 11 1,007 5,208 Staff costs 12 965 475 1 Wages and salaries 914 443 Social security costs 51 32 TO OUR Value adjustments 955 537 SHAREHOLDERS in respect of formation expenses and on tangible and intangible ﬁxed assets 955 537 2 Other operating expenses 373 228 Income from participating interests 13 18,000 - NON-FINANCIAL derived from aﬃliated undertakings 18,000 - REPORT Other interest receivable and similar income 14 6,595 12,331 3 derived from aﬃliated undertakings 6,595 12,331 Interest payable and similar expenses 15 6,382 10,180 GROUP concerning aﬃliated undertakings - 7,404 MANAGEMENT other interest and similar expenses 6,382 2,776 REPORT Tax on proﬁt 16 2 487 4 Other taxes 325 13 Proﬁt or loss for the ﬁnancial year 16,228 1,075 CONSOLIDATED FINANCIAL The accompanying notes form an integral part of these stand‑alone ﬁnancial statements. STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 127 NOTES TO THE ANNUAL ACCOUNTS CONTENTS 1 General has participation or in which it has a direct or indirect and related uncertainties could result in outcomes that interest. The Company may, for its own account as require an adjustment to the carrying amount of assets Novem Group S.A. (the “Company”, formerly Car Interior well as for the account of third parties, carry out any and liabilities affected in future periods. Design (Luxembourg) S.à r.l.) was originally formed as commercial, industrial or ﬁnancial activities which may a private company (société à responsabilité limitée) for be useful or necessary to the accomplishment of its While management sees no direct impact of the Ukraine an unlimited period of time under the laws of Luxem- purposes or which are related directly or indirectly to war on Novem Group S.A., indirect consequences could bourg on 12 July 2011 pursuant to a deed of incorpora- its purpose. be observed. The indirect impact mainly resulting from 1 tion published in the Mémorial, Recueil des Sociétés et political and economic sanctions against Russian enti- Associations C on 28 September 2011, number 2306. The Company became listed on 19 July 2021 with its ties and huge barriers for importing or exporting goods shares listed on the Frankfurt stock exchange under between and through the war zones and the European TO OUR In June 2021, the extraordinary General Shareholders’ the ISIN code LU2356314745. Union or other third countries led to massive supply SHAREHOLDERS Meeting converted the Company from a private limited chain disruptions and rising transport costs. Additional 2 liability company (société à responsabilité limitée) to a The Company’s ﬁnancial year begins on 1 April and impacts also result indirectly from high energy prices public company limited by shares (société anonyme). ends on 31 March of each year. and rising interest rates as well as volatility of com- As a consequence, the shares (parts sociales) were modity prices. NON-FINANCIAL also converted and became shares with no nominal The Company also prepared consolidated ﬁnan- REPORT value. The Company’s corporate name was amended cial statements in accordance with EU regulation Management has regularly reviewed the implications of 3 to Novem Group S.A. The Company is registered under 1606/2002, which are available at the registered oﬃce the changing geopolitical and macroeconomic condi- the number B 162.537 in the Luxembourg trade register. of the Company. tions and has not identiﬁed a going concern or a signiﬁ- cant issue, beyond the general scope of impact, on the GROUP The Company is managed by a Management Board The Company’s annual accounts are presented in Euro, performance and ﬁnancial position of the Group as of MANAGEMENT under the supervision of the Supervisory Board. the Company’s functional currency. All amounts are today. Management continues to monitor the current REPORT rounded to the nearest thousand Euro unless otherwise developments and their potential impact on the Group. 4 The Company is formed for an unlimited duration. indicated. Totals in tables were calculated on the basis of exact ﬁgures and rounded to the nearest thousand The oﬃcial version of the accounts is the ESEF ver- The purpose of the Company is the taking of participat- Euro. For computational reasons, there may be round- sion available with the Oﬃcially Appointed Mechanism CONSOLIDATED ing interests in whatsoever form in other, either in Lux- ing differences to the exact mathematical values in (OAM) tool. FINANCIAL embourg or foreign companies and the management, tables and references (monetary units, percentages, STATEMENTS control and development of such participating inter- etc.). 5 ests. The Company may, in particular, acquire all types of transferable securities, either by way of contribution, The board has made an assessment of the Company’s subscription, option, purchase or otherwise, as well as ability to continue its activities as a going concern. ANNUAL realise them by sale, transfer, exchange or otherwise. It concluded that, as of the establishment of these ACCOUNTS The Company may also acquire and manage all pat- annual accounts, it is reasonable to assume that the 6 ents, trademarks, connected licenses and other rights Company will be able to continue as a going concern. deriving from these patents or complementary thereto. However, market conditions subsequent to year‑end The Company may borrow and grant any assistance, ADDITIONAL loan, advance or guarantee to companies in which it INFORMATION NOVEM ANNUAL REPORT 2022/23 128 CONTENTS 2 Summary of signiﬁcant valuation and Intangible and tangible assets Formation expenses, tangible and ﬁnancial ﬁxed assets accounting policies denominated in currencies other than Euro are trans- lated at the historical exchange rates. Intangible and tangible assets are used for business purposes and are measured at cost less accumulated Basis of preparation Cash at bank denominated in currencies other than value adjustments. Depreciation on intangible and Euro is translated at the exchange rates prevailing at tangible assets is recorded on a straight-line basis in The annual accounts were prepared in accordance with the date of the balance sheet. accordance with its utilisation and based on the useful 1 Luxembourg’s legal and regulatory requirements under life of the asset. The residual value, depreciation meth- the historical cost convention and the going concern Current assets and liabilities denominated in currencies ods and useful life are reviewed annually and adjusted, assumption. Accounting policies and valuation rules other than Euro are translated separately respectively if necessary. TO OUR are, besides the ones laid down by the Commercial Law at the lower or at the higher of the value converted at SHAREHOLDERS dated 10 August 1915 as amended and the amended the historical exchange rate or the value determined on Useful life of tangible assets (Other ﬁxtures and ﬁttings, 2 Law of 19 December 2002, determined and applied by the basis of the exchange rates effective at the balance tools and equipment): 6 years the Management Board. sheet date. Solely the unrealised exchange losses are recorded in the proﬁt and loss account. The exchange NON-FINANCIAL Financial assets From the current perspective, there are no risks to the gains are recorded in the proﬁt and loss account at the REPORT continued existence of Novem Group S.A. and its aﬃli- moment of their realisation. 3 ated companies. Shares in aﬃliated undertakings, participating interests Long‑term debts denominated in currencies other than and securities held as ﬁxed assets are stated at acqui- In preparing the annual accounts in accordance with Euro are translated at the historical exchange rates. sition cost including the expenses incidental thereto. GROUP Luxembourg Generally Accepted Accounting Principles, Write-downs are recorded if a durable reduction in the MANAGEMENT management has made judgements and estimates As a result, realised exchange gains and losses and fair value is expected. The impairment analysis is done REPORT that affect the application of accounting policies and unrealised losses are recorded in the proﬁt and loss individually for each investment. 4 the reported amounts of assets, liabilities, income and account. Unrealised exchange gains are not recognised. expenses. Loans to aﬃliated undertakings are recorded at their nominal value. Loans are written down to their recover- CONSOLIDATED Formation expenses Due to unforeseeable developments beyond the con- able amount if there is a durable impairment. FINANCIAL trol of management, the actual ﬁgures may differ from STATEMENTS these estimates. Estimates and underlying assump- The position carries expenses arising from the context These value adjustments may not be continued if the 5 tions are reviewed on an ongoing basis. of the private placement and stock exchange listing reasons for which the value adjustments were recog- (capital market transactions) of the Novem Group S.A. nised have ceased to exist. relating to the newly issued shares and the reﬁnanc- ANNUAL Foreign currency translation ing. Formation expenses are measured at cost less ACCOUNTS Debtors accumulated value adjustments and are written off on 6 The Company maintains its books and records in Euro. a straight‑line basis over a period of 5 years. The balance sheet and the proﬁt and loss account are Current receivables are recorded at their nominal value. expressed in this currency. They are subject to value adjustments where their ADDITIONAL recovery is compromised. INFORMATION NOVEM ANNUAL REPORT 2022/23 129 CONTENTS 3 Formation expenses 4 Fixed assets These value adjustments may not be continued if the reasons for which the value adjustments were recog- nised have ceased to exist. Formation expenses comprised expenses arising Tangible assets from the context of the private placement and stock exchange listing of the Novem Group S.A. relating to Cash the newly issued shares and the reﬁnancing. Fixed assets were written off on a straight‑line basis over a period of up to six years. 1 Cash at bank and in hand is recorded at its nominal Formation expenses were written off on a straight‑line value and comprises bank current accounts. basis over a period of ﬁve years (60 months). in € thousand Total TO OUR Gross value SHAREHOLDERS in € thousand Total Provisions Balance as of 01 Apr 22 26 2 Gross value Additions 121 Provisions are made at year-end and in the event the Balance as of 01 Apr 22 4,247 Disposals - Company has a legal or implicit obligation resulting Additions - Balance as of 31 Mar 23 147 NON-FINANCIAL from a past event, where it is likely that an amount will REPORT Disposals - have to be paid out to meet this obligation and where Accumulated value adjustments Balance as of 31 Mar 23 4,247 3 the amount of the obligation can be reliably determined. Balance as of 01 Apr 22 4 The amount of the provision corresponds to the most Accumulated value adjustments accurate estimate of the expenditure required to meet Additions 20 Balance as of 01 Apr 22 534 GROUP the obligation existing on the last day of the year. Disposals - MANAGEMENT Additions 859 REPORT Balance as of 31 Mar 23 24 Disposals - 4 Creditors Net book value Balance as of 31 Mar 23 1,393 Balance as of 01 Apr 22 22 Debts are recorded at their reimbursement value. Net book value Balance as of 31 Mar 23 123 CONSOLIDATED Where the amount repayable on account exceeds the FINANCIAL Balance as of 01 Apr 22 3,713 amount received, the difference is shown as an asset STATEMENTS Balance as of 31 Mar 23 2,854 and is written off over the period of debt. The tangible ﬁxed assets comprise oﬃce equipment 5 and vehicles. The Management Board assessed that no value adjustment was required on the Company’s Dividend income tangible assets. ANNUAL ACCOUNTS Dividend income is recognised at the moment the 6 Company obtains legal entitlement to such income. ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 130 CONTENTS 5 Financial assets 6 Debtors 5.1 Shares in aﬃliated undertakings 6.1 Amounts owed by aﬃliates undertakings The shares in aﬃliated undertakings of the Company Receivables from aﬃliated companies of €5,478 consist of an investment in the Novem Group GmbH. thousand (31 March 2022: €6,683 thousand) resulted 1 The Company is the sole shareholder of Novem Group largely from cash pooling receivables from aﬃliated GmbH (the “Subsidiary”). undertakings. TO OUR The ﬁgures for the year ended 31 March 2022 relating to SHAREHOLDERS Percentage of Closing date of the last the items Loans to aﬃliated undertakings and Amounts Subsidiary Registered oﬃce ownership approved accounts 2 owed by aﬃliates undertakings have been reclassiﬁed Weiden i.d. Oberpfalz Novem Group GmbH 100% 31 Mar 23 to ensure comparability with the ﬁgures for the year (Germany) ended 31 March 2023. This reclassiﬁcation had no Result of the Book value at Book value at NON-FINANCIAL impact on the result for the ﬁnancial year 2021/22. REPORT in € thousand Shareholder’s equity ﬁnancial period 31 Mar 21 31 Mar 22 Novem Group GmbH 674,156 37,125 674,159 674,159 3 6.2 Other debtors GROUP The Management Board has the opinion that no value 31 March 2023 amounting to €35 thousand (31 March The amount of €433 thousand (31 March 2023: €365 MANAGEMENT adjustment was required on the Company’s ﬁnancial 2022: €35 thousand) is calculated on the basis of a 360 thousand) mainly related to receivables from the tax REPORT assets as at 31 March 2023. days-year with months of actual days. authorities. 4 The ﬁgures for the year ended 31 March 2022 relating to 5.2 Loans to aﬃliated undertakings the items Loans to aﬃliated undertakings and Amounts CONSOLIDATED owed by aﬃliates undertakings have been reclassiﬁed FINANCIAL As of 31 March 2023, amounts owed by aﬃliated to ensure comparability with the ﬁgures for the year STATEMENTS undertakings consisted of the loan agreements with ended 31 March 2023. This reclassiﬁcation had no 5 Novem Group GmbH. The stated principal amount is impact on the result for the ﬁnancial year 2021/22. €250,000 thousand (31 March 2022: €250,000 thou- sand) and matures on 20 July 2026. The interest as of ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 131 CONTENTS 7 Capital and reserves Subscribed capital There were the following changes in equity in ﬁnancial As of 31 March 2023, the issued and fully paid‑up years 2021/22 and 2022/23: subscribed capital amounted to €430 thousand (31 March 2022: €430 thousand) and was represented by 43,030,303 shares of €0.01 each (31 March 2022: Share 43,030,303 shares of €0.01 each). premium Special Results Proﬁt for 1 Subscribed and similar in € thousand capital premiums Share premium and similar premiums Balance as of 01 Apr 21 63 21,891 161,095 TO OUR SHAREHOLDERS Additions 367 - 367 As of 31 March 2023, the share premium and simi- Contributions - 518,912 518,912 2 lar premiums account of the Company amounted Allocation of the to €540,803 thousand (31 March 2022: €540,803 - - - - 1,034 - 1,034 result 2020/21 thousand). Proﬁt for the ﬁnancial NON-FINANCIAL - - - - - 1,075 1,075 REPORT year Balance as of 31 Mar 22 430 540,803 6 143 140,025 1,075 682,483 3 Legal reserve Balance as of 01 Apr 22 430 540,803 6 143 140,025 1,075 682,483 In accordance with Luxembourg Law, the Company is Movement for the year GROUP required to appropriate a minimum of 5% of the net MANAGEMENT Allocation of previous proﬁt after tax for the year to a legal reserve until the - - - - 1,075 ‑1,075 - REPORT year's proﬁt balance of such reserve is equal to 10% of the issued Dividend distributions - - - - ‑17,212 - -17,212 4 share capital. The legal reserve is not available for dis- Allocation to the legal tribution to shareholders except upon the dissolution - - 37 - ‑37 - - reserve of the Company. The legal obligation was fulﬁlled for CONSOLIDATED Allocation to the net the last ﬁnancial year and will likewise be done for the - - - 298 - - 298 FINANCIAL wealth tax reserve current ﬁnancial year. STATEMENTS Proﬁt or loss for the - - - - - 16,228 16,228 5 year Balance as of 31 Mar 23 430 540,803 43 441 123,851 16,228 681,796 Authorised capital ANNUAL The authorised capital of the Company is set at ACCOUNTS €520,000 thousand divided into 52,000,000 shares with 6 no nominal value. The Management Board is author- ised to increase the current issued capital up to the amount of the authorised capital, in whole or in part, ADDITIONAL from time to time during ﬁve years after IPO. INFORMATION NOVEM ANNUAL REPORT 2022/23 132 CONTENTS 9 Creditors Special reserve net wealth tax (NWT) have been reclassiﬁed to ensure comparability with the ﬁgures for the year ended 31 March 2023. This reclas- In accordance with paragraph 8a of the 16 October siﬁcation had no impact on the result for the ﬁnancial 9.1 Amounts owed to credit institutions 1934 Law as amended, the Company is entitled to year 2021/22. reduce the net wealth tax due for the year by an amount which cannot exceed the corporate income tax due for In June 2021, a new term loan agreement for €310,000 10 Other operating income the year. In order to avail of the above, the Company thousand in total (€250,000 thousand as a term loan 1 must set up a restricted reserve equal to ﬁve times the and €60,000 thousand as a revolving credit facility) amount of the net wealth tax credited. This reserve has was entered into between Novem Group S.A. and an The other operating income included reimbursements to be maintained for a period of ﬁve years following the international syndicate of banks. Accordingly, the reﬁ- for management services provided by Novem Group TO OUR year in which it was created. In case of distribution of nancing was implemented as of 23 July 2021 by the S.A. to other Novem Group companies amounting SHAREHOLDERS the restricted reserve, the tax credit falls due during the drawdown of the term loan of €250,000 thousand and to €1,649 thousand (PY: €5,879 thousand). The prior 2 year in which it was distributed. matures in July 2026. The revolving credit facility of ﬁnancial year contained cost reimbursements of €5,181 €60,000 thousand has not been used to date. For the thousand according to the initial public offering. drawn term facility, the margin range is between 2.0% Reserve to be Amount in NON-FINANCIAL and 1.0% per annum, depending on the total net lever- NWT of the year created in FS € thousand REPORT 11 Other external expenses age of the Group. Additionally, the respective 3‑month 2016 2016 10,525 3 Euribor is reﬂected in the all‑in rate. 2017 2017 29,375 The amount of €1,007 thousand (PY: €5,208 thousand) 2018 2018 32,325 mainly included legal, advisory and audit fees as well 2019 2019 35,425 GROUP 9.2 Trade creditors as tax services. The prior ﬁnancial year was mainly MANAGEMENT 2020 2020 46,075 driven by legal and advisory fees and a minor amount REPORT Trade accounts payable amounted to €16 thousand of audit fees related to the private placement and stock 2021 2021 26,650 4 (31 March 2022: €560 thousand) and mainly consisted exchange listing. 2022 2022 52,475 of invoices for insurance and advisory services. 2023 2023 208,075 Total 440,925 CONSOLIDATED 12 Employees FINANCIAL 9.3 Other creditors STATEMENTS The Company employed four employees as of 31 March 5 8 Provisions The position of other creditors amounting to €1,168 2023 (31 March 2022: four employees). The average thousand (31 March 2022: €1,854 thousand) contained number of employees in the ﬁnancial year 2022/23 Provisions comprised primarily share-based payments mainly accruals for annual accounts costs and Supervi- was four (PY: four employees), containing two full‑time ANNUAL of €310 thousand (31 March 2022: €69 thousand) (refer sory Board. In addition, they included taxes amounting employees (PY: two full‑time employees). ACCOUNTS to section 18) and provisions for bonuses of €128 thou- to €355 thousand (31 March 2022: €1,195 thousand) 6 sand (31 March 2022: €16 thousand). relating to the prior ﬁnancial year. The ﬁgures for the year ended 31 March 2022 relat- ADDITIONAL ing to the items Other creditors and Other provisions INFORMATION NOVEM ANNUAL REPORT 2022/23 133 CONTENTS 13 Income from participating interests 17 Related parties 31 March 2025. The second tranche (tranche 2022) started at the beginning of ﬁnancial year 2022/23 and The income from participating interests amounting to Novem Group S.A. is obliged by the European direc- will end on 31 March 2026. €18,000 thousand (PY: €0) derived from the dividend tive and Luxembourg Law to draw up a Remuneration distribution. Policy for the Supervisory Board as well as the Man- The conditionally granted number of virtual shares at agement Board. The principles and measurement of the beginning of the performance period is calculated the Remuneration Policy for the Management Board for each tranche by dividing a contractually deﬁned 1 14 Other interest receivable and similar and Supervisory Board of the Novem Group S.A. are individual target amount by the start share price of the income prepared in accordance with Article 7bis of the Luxem- share of Novem Group S.A. (arithmetic mean of the bourg Law of 24 May 2011 on Shareholders. closing prices of the stock during the last 60 trading TO OUR The income from other interest receivable and similar days prior to the start of the performance period). SHAREHOLDERS income derived from aﬃliated undertakings of €6,595 In the ﬁnancial year 2022/23, no transactions occurred 2 thousand (PY: €12,331 thousand) comprised the with direct and indirect shareholders. Throughout the The ﬁnal number of virtual shares is determined by interest from an intercompany loan. The reduction last two ﬁnancial years 2021/22 and 2020/21, the multiplying the total target achievement by the con- originated from the contribution of the existing share- Company incurred costs in connection with the private ditionally granted number of virtual shares. The total NON-FINANCIAL holder loans related to the private placement and stock placement, listing and its preparation. Due to a cost target achievement depends on the target achieve- REPORT exchange listing in prior ﬁnancial year. sharing and indemnity agreement entered into with ment of the two ﬁnancial ﬁgures relative Total Share- 3 its direct and indirect shareholders, the costs incurred holder Return (70% weighting) and EBIT margin (30% were invoiced to its shareholders (with the percentage weighting). Thereby, the target achievement of relative 15 Interest payable and similar expenses of the secondary shares) so that these costs repre- Total Shareholder Return and EBIT margin can range GROUP sented a pass‑through item (amounted to €8,032 thou- between 0% and 150%. MANAGEMENT The position carried no amounts concerning aﬃli- sand which have already been settled). REPORT ated undertakings (PY: €7,404 thousand) and interest In order to determine the payout in cash, the ﬁnal num- 4 payables to banks amounting to €6,382 thousand ber of virtual shares is multiplied by the end share price 18 Share-based payments (PY: €2,776 thousand) for the incorporated term loan. of the share of Novem Group S.A. (arithmetic mean of The decreased amount from aﬃliated undertakings the closing prices of the stock during the last 60 trading CONSOLIDATED resulted from the contribution of the existing share- The Management Board members of Novem Group days prior to the end of the performance period) plus FINANCIAL holder loans related to the private placement and stock S.A. participated in a long-term incentive (Performance the sum of the dividends disbursed during the perfor- STATEMENTS exchange listing in the prior ﬁnancial year. Share Plan) in the form of virtual shares. The Perfor- mance period. The payout is capped at 200% of the 5 mance Share Plan is classiﬁed according to IFRS 2 as contractually deﬁned individual target amount. a cash-settled share-based payment. 16 Taxation The ﬁrst tranche of the Performance Share Plan was ANNUAL The Performance Share Plan is granted in annual allocated to Management Board members of Novem ACCOUNTS The Company is subject to Luxembourg Company Tax tranches of virtual shares with a respective perfor- Group S.A. for ﬁnancial year 2021/22 and the number 6 Law. For detailed information on special reserve net mance period of four years. Deviating from this, the of conditionally granted virtual shares amounted to wealth tax refer to section 7. performance period of the tranche 2021 started on the 40,826, resulting in a provision of €170 thousand as of day of the listing of Novem Group S.A. and will end on 31 March 2023 (31 March 2022: €69 thousand). ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 134 CONTENTS The second tranche was awarded for ﬁnancial year For comparative purposes, the fair value and inputs Contingent liabilities constitute off-balance-sheet 2022/23 with a total number of 60,384 conditionally used in the assessment of the fair value as of 31 March contingent liabilities recognised in the amount of the granted virtual shares, corresponding to a provision of 2022 were as follows: valuation as of the reporting date. Contingent liabili- €140 thousand as of 31 March 2023 (31 March 2022: ties included a guarantee assumed for third parties €0). amounting to €17 thousand. The probability of claims Valuation as of on this guarantee was assessed as low based on past Tranche 2021 31 March 2022 These provisions have been included in Other provisions. experience. 1 19 Jul 21 – Performance period 31 Mar 25 In total, the expenses for ﬁnancial year 2022/23 20 Subsequent events Start share price amounted to €241 thousand (PY: €69 thousand). €16.46 TO OUR Novem Group S.A. SHAREHOLDERS Remaining duration of The fair value of the Performance Share Plan to calcu- There were no events or developments that could have 3.0 years performance period 2 late expenses and provisions was determined by using materially affected the measurement and presentation Expected annual volatility 44.9% a Monte-Carlo-Simulation. The fair value and the inputs of the Company’s assets and liabilities as of 31 March used in the assessment of the fair value as of 31 March Risk-free annual interest 2023. 0.1% NON-FINANCIAL rate 2023 were as follows: REPORT Expected target achievement for internal 100% 3 target EBIT margin Valuation as of Tranche Tranche 31 March 2023 2021 2022 Fair value per virtual share €8.96 GROUP 19 Jul 21 – 1 Apr 22 – Performance period MANAGEMENT 31 Mar 25 31 Mar 26 REPORT 19 Commitments, contingencies and Start share price €16.46 €11.25 4 Novem Group S.A. pledges Remaining duration of 2.0 years 3.0 years performance period The Company entered into an English law governed CONSOLIDATED Expected annual volatility 45.8% 47.6% intercreditor agreement together with some of its FINANCIAL Risk-free annual interest subsidiaries and several ﬁnancial institutions, with STATEMENTS 2.7% 2.5% rate the Company as the original borrower of the facilities 5 Expected target agreement and an external bank as the original facil- achievement for internal 100% 100% ity agent and security agent. In connection with this target EBIT margin agreement, the Company additionally entered into an ANNUAL Fair value per virtual share €8.82 €8.85 account pledge agreement, a share pledge agreement ACCOUNTS and a security assignment agreement in order to guar- 6 antee the underlying nominal amount of the facilities agreement. ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 135 RESPONSIBILITY STATEMENT CONTENTS We, Günter Brenner (Chief Executive Oﬃcer), Dr. Johannes Burtscher (Chief Financial Oﬃcer), Mathias Rieger (Director Internal Audit) and Frank Schmitt (Director Consolidation), conﬁrm, to the best of our knowledge, that the annual accounts which have been prepared in accordance with the legal requirements and generally accepted accounting principles appli- 1 cable in the Grand Duchy of Luxembourg, give a true and fair view of the assets, liabilities, ﬁnancial position and proﬁt and loss of Novem Group S.A. and that the TO OUR Group Management Report includes a fair review of SHAREHOLDERS the development and performance of the business 2 and the position of Novem Group S.A., together with a description of the principal risks and uncertainties that they face. NON-FINANCIAL REPORT Luxembourg, 22 June 2023 3 Novem Group S.A. Management Board GROUP MANAGEMENT REPORT Günter Brenner Dr. Johannes Burtscher 4 Mathias Rieger Frank Schmitt CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 136 INDEPENDENT AUDITOR‘S REPORT CONTENTS To the Shareholders of under the EU Regulation N° 537/2014, the Law of 23 Novem Group S.A. is the ultimate holding entity of a Novem Group S.A. July 2016 and ISAs as adopted for Luxembourg by the group of entities which are specialised in the supply 19, rue Edmond Reuter CSSF are further described in the « Responsibilities of of trim parts and decorative functional elements of L ‑ 5326 Contern “réviseur d’entreprises agréé” for the audit of the annual vehicle interiors in the premium automotive sector. Luxembourg accounts » section of our report. We are also independ- ent of the Company in accordance with the International As a holding entity, the Company holds as at 31 March Code of Ethics for Professional Accountants, including 2023, a direct investment in Novem Group GmbH and 1 REPORT OF THE RÉVISEUR International Independence Standards, issued by the has granted to it an intercompany loan. As at 31 March D’ENTREPRISES AGRÉÉ International Ethics Standards Board for Accountants 2023, the Company’s direct investment amounts to (“IESBA Code”) as adopted for Luxembourg by the CSSF €674,159 thousand, and is disclosed under Shares TO OUR together with the ethical requirements that are relevant in aﬃliated undertakings, whereas the intercompany SHAREHOLDERS Report on the audit of the annual accounts to our audit of the annual accounts, and have fulﬁlled loan amounts to €250,000 thousand and is disclosed 2 our other ethical responsibilities under those ethical under Loans to aﬃliated undertakings, both amounts requirements. We believe that the audit evidence we representing in aggregate 99% of the total assets. Both Opinion have obtained is suﬃcient and appropriate to provide the Shares in aﬃliated undertakings and the Loans to NON-FINANCIAL a basis for our opinion. aﬃliated undertakings are recorded at their nominal REPORT We have audited the annual accounts of Novem Group value including any incidental costs thereto, if any, 3 S.A. (the “Company”), which comprise the balance sheet value adjustments if the recoverable amount is durably Key audit matters as at 31 March 2023, and the proﬁt and loss account for impaired. the year then ended, and notes to the annual accounts, GROUP including a summary of signiﬁcant accounting policies. Key audit matters are those matters that, in our profes- At least annually, the Management Board of the MANAGEMENT sional judgment, were of most signiﬁcance in our audit Company evaluates the carrying value of the Shares REPORT In our opinion, the accompanying annual accounts give a of the annual accounts of the current period. These in aﬃliated undertakings and the Loans to aﬃliated 4 true and fair view of the ﬁnancial position of the Company matters were addressed in the context of the audit of undertakings. as at 31 March 2023 and of the results of its operations the annual accounts as a whole, and in forming our for the year then ended in accordance with Luxembourg opinion thereon, and we do not provide a separate The evaluation of the carrying value of the Shares CONSOLIDATED legal and regulatory requirements relating to the prepara- opinion on these matters. in aﬃliated undertakings and the Loans to aﬃliated FINANCIAL tion and presentation of the annual accounts. undertakings is considered a key audit matter due to STATEMENTS Valuation of Shares in aﬃliated undertakings and their weight of the total assets. In addition, the mar- 5 Loans to aﬃliated undertakings ket capitalisation of Novem has decreased from the Basis for opinion date of the stock listing, this being 19 July 2021, to a) Why the matter was considered to be one of most the 31 March 2023, leading to an impairment trigger. ANNUAL We conducted our audit in accordance with the EU signiﬁcant in our audit of the annual accounts of the In order to assess the potential durable reduction in ACCOUNTS Regulation N° 537/2014, the Law of 23 July 2016 on current period value, the Management Board prepared a valuation of 6 the audit profession (“Law of 23 July 2016”) and with the Novem Group GmbH and its subsidiaries using a International Standards on Auditing (“ISAs”) as adopted Refer to note 2 Summary of signiﬁcant valuation and Discounted Cash Flow (DCF) model. Certain aspects of for Luxembourg by the Commission de Surveillance accounting policies and note 5 Financial assets of the the DCF model require signiﬁcant judgement, such as ADDITIONAL du Secteur Financier (“CSSF”). Our responsibilities annual accounts. INFORMATION NOVEM ANNUAL REPORT 2022/23 137 CONTENTS Responsibilities of the Management Board and the estimation of the Weighted Average Cost of Capital We also assessed the adequacy of the Company’s Those Charged with Governance for the annual (WACC), the estimated cash ﬂow projections including disclosures in respect of the accounting policies on accounts the growth rates and the expected margins. impairment as disclosed in Note 2 and Note 5 to the annual accounts. b) How the matter was addressed during the audit The Management Board is responsible for the prepa- ration and fair presentation of the annual accounts Other matter relating to comparative Our audit procedures in relation to the assessment of in accordance with Luxembourg legal and regulatory 1 information the valuation of the Shares in aﬃliated undertakings and requirements relating to the preparation and presen- the Loans to aﬃliated undertakings performed by Man- tation of the annual accounts, and for such internal agement Board, consisted of but were not limited to: The annual accounts of the Company for the year control as the Management Board determines is neces- TO OUR ended 31 March 2022 were audited by another auditor sary to enable the preparation of annual accounts that SHAREHOLDERS • Assessing the appropriateness of the valuation who expressed an unmodiﬁed opinion on those annual are free from material misstatement, whether due to 2 methodology applied by the Management Board accounts on 27 June 2022. fraud or error. regarding valuation of Shares in aﬃliated undertak- ings and the Loans to aﬃliated undertakings. The Management Board is responsible for presenting NON-FINANCIAL Other information • Gaining an understanding of the Management the annual accounts in compliance with the require- REPORT Board’s process and controls related to the identiﬁ- ments set out in the Delegated Regulation 2019/815 on 3 cation of impairment indicators and the impairment The Management Board is responsible for the other European Single Electronic Format (“ESEF Regulation”). test in relation to the Shares in aﬃliated undertak- information. The other information comprises the ings and Loans to aﬃliated undertakings (ﬁnancial information stated in the management report and the In preparing the annual accounts, the Management GROUP assets), through inquiries. Corporate Governance Statement but does not include Board is responsible for assessing the Company’s MANAGEMENT • Gaining an understanding of the Board of Manage- the annual accounts and our report of the “réviseur ability to continue as a going concern, disclosing, as REPORT ment’s process in relation to budgeting and recon- d’entreprises agréé” thereon. applicable, matters related to going concern and using 4 ciling the budget used in the DCF model with the the going concern basis of accounting unless the Man- budget approved by the Supervisory Board. Our opinion on the annual accounts does not cover the agement Board either intends to liquidate the Company • Auditing the key parameters of the DCF model other information and we do not express any form of or to cease operations, or has no realistic alternative CONSOLIDATED applied by the Management Board, such inputs assurance conclusion thereon. but to do so. FINANCIAL consisting among others of the WACC, the esti- STATEMENTS mated cash ﬂow projections, including the growth In connection with our audit of the annual accounts, Those charged with governance are responsible for 5 rates and the expected margins as well as the net our responsibility is to read the other information and, overseeing the Company’s ﬁnancial reporting process. debt as at 31 March 2023. in doing so, consider whether the other information is • Verifying the mathematical accuracy of the DCF materially inconsistent with the annual accounts or our ANNUAL Responsibilities of the réviseur d’entreprises model knowledge obtained in the audit or otherwise appears ACCOUNTS agréé for the audit of the annual accounts • Comparing the equity value of the Shares in aﬃliated to be materially misstated. If, based on the work we 6 undertakings determined by the Management Board have performed, we conclude that there is a material through the DCF model with the carrying amount of misstatement of this other information, we are required The objectives of our audit are to obtain reasonable the Shares in aﬃliated undertakings as recorded in to report this fact. We have nothing to report in this assurance about whether the annual accounts as a ADDITIONAL the annual accounts as at 31 March 2023. regard. whole are free from material misstatement, whether INFORMATION NOVEM ANNUAL REPORT 2022/23 138 CONTENTS due to fraud or error, and to issue a report of the “révi- purpose of expressing an opinion on the effective- communicate with them all relationships and other seur d’entreprises agréé” that includes our opinion. ness of the Company’s internal control. matters that may reasonably be thought to bear on Reasonable assurance is a high level of assurance, but • Evaluate the appropriateness of accounting poli- our independence, and where applicable, related is not a guarantee that an audit conducted in accord- cies used and the reasonableness of accounting safeguards. ance with the EU Regulation N° 537/2014, the Law of estimates and related disclosures made by the 23 July 2016 and with ISAs as adopted for Luxembourg Management Board. From the matters communicated with those charged by the CSSF will always detect a material misstatement • Conclude on the appropriateness of the Manage- with governance, we determine those matters that 1 when it exists. Misstatements can arise from fraud or ment Board’s use of the going concern basis of were of most signiﬁcance in the audit of the annual error and are considered material if, individually or in accounting and, based on the audit evidence accounts of the current period and are therefore the key the aggregate, they could reasonably be expected to obtained, whether a material uncertainty exists audit matters. We describe these matters in our report TO OUR inﬂuence the economic decisions of users taken on related to events or conditions that may cast sig- unless law or regulation precludes public disclosure SHAREHOLDERS the basis of these annual accounts. niﬁcant doubt on the Company’s ability to continue about the matter. 2 as a going concern. If we conclude that a material Our responsibility is to assess whether the annual uncertainty exists, we are required to draw attention Report on other legal and regulatory accounts have been prepared in all material respects in our report of the “réviseur d’entreprises agréé” to NON-FINANCIAL requirements with the requirements laid down in the ESEF Regulation. the related disclosures in the annual accounts or, REPORT if such disclosures are inadequate, to modify our 3 As part of an audit in accordance with the EU Regula- opinion. Our conclusions are based on the audit We have been appointed as “réviseur d’entreprises tion N° 537/2014, the Law of 23 July 2016 and with evidence obtained up to the date of our report of agréé” by the Shareholders on 25 August 2022 and the ISAs as adopted for Luxembourg by the CSSF, we exer- the “réviseur d’entreprises agréé”. However, future duration of our uninterrupted engagement, including GROUP cise professional judgment and maintain professional events or conditions may cause the Company to previous renewals and reappointments, is one year. MANAGEMENT skepticism throughout the audit. We also: cease to continue as a going concern. REPORT • Evaluate the overall presentation, structure and The management report, which is include on page 47 4 • Identify and assess the risks of material misstate- content of the annual accounts, including the dis- of the Group Management Report, itself included in the ment of the annual accounts, whether due to fraud closures, and whether the annual accounts repre- Novem Annual Report, is consistent with the annual or error, design and perform audit procedures sent the underlying transactions and events in a accounts and has been prepared in accordance with CONSOLIDATED responsive to those risks, and obtain audit evidence manner that achieves fair presentation. applicable legal requirements. FINANCIAL that is suﬃcient and appropriate to provide a basis STATEMENTS for our opinion. The risk of not detecting a material We communicate with those charged with governance The Corporate Governance Statement is included in the 5 misstatement resulting from fraud is higher than regarding, among other matters, the planned scope Group Management Report. The information required for one resulting from error, as fraud may involve and timing of the audit and signiﬁcant audit ﬁndings, by Article 68ter paragraph (1) letters c) and d) of the law collusion, forgery, intentional omissions, misrepre- including any signiﬁcant deﬁciencies in internal control of 19 December 2002 on the commercial and compa- ANNUAL sentations, or the override of internal control. that we identify during our audit. nies register and on the accounting records and annual ACCOUNTS • Obtain an understanding of internal control relevant accounts of undertakings, as amended, is consistent 6 to the audit in order to design audit procedures that We also provide those charged with governance with with the annual accounts and has been prepared in are appropriate in the circumstances, but not for the a statement that we have complied with relevant accordance with applicable legal requirements. ethical requirements regarding independence, and to ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 139 CONTENTS We conﬁrm that the audit opinion is consistent with the Luxembourg, 22 June 2023 additional report to the audit committee or equivalent. KPMG Audit S.à r.l. We conﬁrm that the prohibited non‑audit services Cabinet de révision agréé referred to in the EU Regulation N° 537/2014 were not provided and that we remained independent of the Yves Thorn Company in conducting the audit. Partner 1 We have checked the compliance of the annual accounts of the Company as at 31 March 2023 with TO OUR relevant statutory requirements set out in the ESEF SHAREHOLDERS Regulation that are applicable to annual accounts. 2 For the Company it relates to: NON-FINANCIAL • Annual accounts prepared in a valid xHTML format. REPORT 3 In our opinion, the annual accounts of Novem Group S.A. as at 31 March 2023, identiﬁed as Novem-2023-03- 31-en.zip, have been prepared, in all material respects, GROUP in compliance with the requirements laid down in the MANAGEMENT ESEF Regulation. REPORT 4 Our audit report only refers to the annual accounts of Novem Group S.A. as at 31 March 2023, identiﬁed as Novem-2023-03-31-en.zip, prepared and presented CONSOLIDATED in accordance with the requirements laid down in the FINANCIAL ESEF Regulation, which is the only authoritative version. STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 140 Birch open pore 6 information Additional FINANCIAL CALENDAR CONTACT CONTENTS 17 August 2023 Q1 2023/24 Results Investor Relations [email protected] 24 August 2023 Annual General Meeting 2023 29 November 2023 HY 2023/24 Results IMPRINT 15 February 2024 Q3 2023/24 Results 1 29 May 2024 FY 2023/24 Preliminary Results TO OUR 27 June 2024 FY 2023/24 Results SHAREHOLDERS Published by 2 All information is constantly updated and available. Novem Group S.A. Please visit the investor section on the Company website: 19, rue Edmond Reuter NON-FINANCIAL https://ir.novem.com 5326 Contern, Luxembourg REPORT www.novem.com 3 Concept and layout GROUP MANAGEMENT Novem Group REPORT 4 Date of publication CONSOLIDATED 29 June 2023 FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 142 GLOSSARY CONTENTS Adj. EBIT is deﬁned as EBIT as adjusted for certain Days payables outstanding (DPO) is deﬁned by divid- LkSG stands for Lieferkettensorgfaltspﬂichtengesetz. adjustments which management considers to be ing trade payables (as shown in the consolidated state- non-recurring in nature, as Novem believes such items ment of ﬁnancial position, but excluding tooling) by net LMC is an independent and exclusively automotive- are not reﬂective of the ongoing performance of the costs series incurred in the three months. focused global forecasting and market intelligence business. service provider. Days sales outstanding (DSO) is deﬁned by dividing Adj. EBIT margin is deﬁned as Adj. EBIT divided by trade payables (as shown in the consolidated state- Net ﬁnancial debt is deﬁned as gross ﬁnancial debt 1 revenue. ment of ﬁnancial position, but excluding tooling) by rev- less cash and cash equivalents. enue generated from the sale of series trim elements Adj. EBITDA is deﬁned as proﬁt for the year before in the last three months. Net leverage ratio is deﬁned as the ratio of net ﬁnancial TO OUR income tax result, ﬁnancial result and amortisation, debt to Adj. EBITDA. SHAREHOLDERS depreciation and write-downs as adjusted for certain EBIT is deﬁned as proﬁt for the year before income tax 2 adjustments which management considers to be result and ﬁnancial result. Order intake is deﬁned as all offers for goods and ser- non-recurring in nature, as Novem believes such items vices processed within a certain period of time. are not reﬂective of the ongoing performance of the EBITDA is deﬁned as proﬁt for the year before income NON-FINANCIAL business. tax result, ﬁnancial result and amortisation and Quality data includes, for example, key ﬁgures such REPORT depreciation. as scrap and rework rates as well as PPM (parts per 3 Adj. EBITDA margin is deﬁned as Adj. EBITDA divided million). by revenue. FAAC stands for Financial assets measured at amor- tised cost. Shareholder’s Rights Law is the Luxembourg Law of 24 GROUP Articles of Association means the articles of associa- May 2011 on the exercise of certain shareholder rights MANAGEMENT tion of the Company. FAFVTPL stands for Financial assets measured at fair in listed companies, as amended. REPORT value through proﬁt or loss. 4 Capital expenditure is deﬁned as the sum of cash paid Staﬃng level is deﬁned as the number of employees for investments in property, plant and equipment and FLAC stands for Financial liabilities measured at amor- working at any one time. cash paid for investments in intangible assets exclud- tised cost. CONSOLIDATED ing currency translation effects. Takeover Law is the Luxembourg Law on Takeovers FINANCIAL FLFVTPL stands for Financial liabilities measured at of 19 May 2006. STATEMENTS Companies’ Law is the Luxembourg Law of 10 August fair value through proﬁt or loss. 5 2015 on commercial companies, as amended. Total operating performance is deﬁned as the sum of Fluctuation is deﬁned as the number of employees who revenue and increase or decrease in ﬁnished goods. Days inventory outstanding (DIO) is deﬁned by dividing left the Group per year in relation to the total workforce. ANNUAL inventories (as shown in the consolidated statement Total working capital is deﬁned as the sum of inven- ACCOUNTS of ﬁnancial position, but excluding tooling) by revenue Free cash ﬂow is deﬁned as the sum of cash ﬂow from tories, trade receivables and contract assets excluding 6 generated from the sale of series trim elements in the operating and investing activities. expected losses less trade payables, tooling received last three months. advance payments received and other provisions Gross ﬁnancial debt is deﬁned as the sum of liabilities related to Tooling. ADDITIONAL to banks, hedging and lease liabilities. INFORMATION NOVEM ANNUAL REPORT 2022/23 143 CONTENTS Trade working capital is deﬁned as the sum of inven- tories non-tooling and trade receivables related to non-tooling less trade payables related to non-tooling. Transparency Directive is the Directive 2004 / 109 / EC, as amended. 1 TO OUR SHAREHOLDERS 2 NON-FINANCIAL REPORT 3 GROUP MANAGEMENT REPORT 4 CONSOLIDATED FINANCIAL STATEMENTS 5 ANNUAL ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 144 DISCLAIMER CONTENTS Novem Group S.A. (the “Company”) has prepared this Annual Report solely for your information. It should not be treated as giving investment advice. Neither the Company, nor any of its directors, oﬃcers, employees, direct or indirect shareholders and advisors nor any other person shall have any liability whatsoever for any direct or indirect losses arising from any use of 1 this Annual Report. While the Company has taken all reasonable care to ensure that the facts stated in this Annual Report are accurate and that the opinions con- TO OUR tained in it are fair and reasonable, this Annual Report SHAREHOLDERS is selective in nature. Any opinions expressed in this 2 Annual Report are subject to change without notice and neither the Company nor any other person is under any obligation to update or keep current the information NON-FINANCIAL contained in this Annual Report. Where this Annual REPORT Report quotes any information or statistics from 3 any external source, you should not interpret that the Company has adopted or endorsed such information or statistics as being accurate. This Annual Report con- GROUP tains forward-looking statements, which involve risks, MANAGEMENT uncertainties and assumptions that could cause actual REPORT results, performance or events to differ materially from 4 those described in, or expressed or implied by, such statements. These statements reﬂect the Company’s current knowledge and its expectations and projections CONSOLIDATED about future events and may be identiﬁed by the con- FINANCIAL text of such statements or words such as “anticipate”, STATEMENTS “believe”, “estimate”, “expect”, “intend”, “plan”, “project” 5 and “target”. No obligation is assumed to update any such statement. Numbers were rounded to one deci- mal. Due to rounding, the numbers presented may not ANNUAL add up precisely to the totals provided. ACCOUNTS 6 ADDITIONAL INFORMATION NOVEM ANNUAL REPORT 2022/23 145 NOVEM ANNUAL REPORT 2022/23

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