2.2.1

2.2.1.1 1. Reporting entity

2.2.1.1.1

ForFarmers B.V. (the ‘Company’) is a limited liability company domiciled in the Netherlands. The Company’s registered office is at Kwinkweerd 12, 7241 CW Lochem. The consolidated financial statements for the financial year ended 31 December 2015 comprise ForFarmers B.V. and its subsidiaries (jointly the 'Group' or 'ForFarmers') and the Group’s interest in its joint venture.

Coöperatie FromFarmers U.A. as at 31 December 2015 controls 61.0% of ForFarmers B.V. (25.4%, the cooperative manages directly and 35.6% indirectly on behalf of the members). Together with the depository receipts of the members, the control was 68.2%. The remaining 31.8% is owned by third parties.

ForFarmers B.V. is an international organisation, active in North Western Europe, that offers nutritional solutions for both conventional and organic livestock farms mainly in the ruminant, swine, poultry and equine sectors. With its Total Feed Business the organisation offers a complete range of products, from feed to seeds and fertilisers.

The consolidated (and company) financial statements were approved for issuance by the Board of Directors and Board of Supervisory Directors on 21 March 2016. The Group’s financial statements will be subject to adoption by the Annual General Shareholders’ Meeting on 15 April 2016.

The consolidated financial statements are prepared in accordance with the going concern principle.

2.2.1.2 2. Basis of preparation

2.2.1.2.1

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union (EU-IFRSs, hereafter stated as IFRS) and section 2:362 sub 9 of the Netherlands Civil Code.

With reference to the income statement of the company as per the company financial statements, use has been made of the exemption pursuant to Section 402 of Book 2 of the Netherlands Civil Code.

Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for the following items, which are measured on an alternative basis on each reporting date:

• derivative financial instruments are measured at fair value;
• financial instruments, other than derivatives, stated at fair value at the first recognition and subsequently stated at amortised cost and upon deduction of possible impairments (the latter only in the case of financial instruments recognised as asset);
• first recognition of individual assets and liabilities in a business combination are measured based on acquisition method, with contingent considerations assumed in a business combination at fair value;
• biological assets are measured at fair value less costs to sell;
• tax liabilities for cash-settled share-based payment arrangements are measured at fair value; and
• the net defined benefit liability (asset) is measured at the fair value of plan assets, less the present value of the defined benefit obligation.

Details of the Group’s significant accounting policies and new standards and interpretations not yet adopted are included in Notes 37 and 38.

Functional and presentation currency

These consolidated financial statements are presented in euro, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated.

Use of estimates and judgements

In preparing these consolidated financial statements, management has made judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. The judgements, assumptions and estimates have been made taking into account the opinions and advice of (external) experts. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

The estimates and assumptions considered most critical are:

• impairment test: key assumptions underlying recoverable amounts (Note 15)
• useful lives of property, plant and equipment and intangible assets (Notes 14 and 15)
• recognition of deferred tax assets: availability of future taxable profit against which carry forward tax losses can be used (Note 13);
• valuation of trade and other receivables (Note 20)
• measurement of defined benefit obligations: key actuarial assumptions (Note 26); and
• recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources (Note 27).

Measurement of fair values

A number of the Group’s accounting policies and disclosures require the measurement of fair values, for both financial and non-financial assets and liabilities.

When measuring the fair value of an asset or a liability, the Group uses market observable data as far as possible. Fair values are categorised into different levels in a fair value hierarchy based on the inputs used in the valuation techniques as follows.

• Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
• Level 2: inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
• Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred.
If the inputs used to measure the fair value of an asset or a liability might be categorised in different levels of the fair value hierarchy, then the fair value measurement is categorised in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the entire measurement.

Share-based payment arrangements (Note 24)

For depository receipts granted to employees, the fair value of the depository receipts is based on the market price of the entity’s shares, as listed  on Van Lanschot’s multilateral trading platform and if necessary adjusted to take into account the terms and conditions upon which the depository receipts were granted. For more detail on the fair value measurement, refer to Note 24.

Property, plant and equipment and investment property (Notes 14 and 16)

The fair value of property, plant and equipment and investment property recognised as a result of a business combination is the estimated amount for which property could be exchanged on the acquisition date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably. The fair value of items of property, plant and equipment and investment property is based on the market approach and cost approaches using quoted market prices for similar items when available and depreciated replacement costs when appropriate. Depreciated replacement cost reflects adjustments for physical deterioration as well as functional and economic obsolescence.

Intangible assets, excluding goodwill (Note 15)

The fair value of patents and trademark names acquired in a business combination is based on the discounted estimated royalty payments that are expected to be avoided as a result of the patents or trademarks being owned. The fair value of customer relationships acquired in a business combination is determined using the multi-period excess earnings method. The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Biological assets (Note 19)

Where there is an active market for biological assets, the quoted price in that market is the appropriate basis for determining the fair value of that asset. If an active market does not exist, one or more of the following methods are used to estimate the fair value:

• most recent transaction price (provided that there has not been a significant change in economic circumstances between the date of that transaction and the balance sheet date);
• market prices for similar assets with adjustments to reflect differences.

In measuring fair value of livestock, management estimates are required for the determination of the fair value. These estimates and judgements relate to the average weight of an animal, mortality rates and the stage of the animal’s life.

Inventories (Note 18)

The fair value of inventories acquired in a business combination is determined based on the estimated selling price in the ordinary course of business operations less the estimated cost of completion and sale less a reasonable profit margin based on the effort that is required to complete and sell the inventories.

Financial instruments, other than derivatives (Note 29)

The fair value at the first recognition of trade and other receivables, trade and other payables, outstanding for longer than a year, is determined on the present value of future cash flows, discounted at market interest at the balance sheet date (amortised cost), taking into account possible write-offs due to impairments or uncollectability (applicable if it regards an asset). When determining the effective interest rate, premiums or discounts at the moment of acquisition and transaction costs are taken into account.

Derivatives (Note 25)

The fair value of derivatives is determined using available market information or estimation methods. In case of estimation methods, the fair value is approximated:

• by inference from the fair value of its components or of a similar instrument, in case a reliable fair value can be demonstrated for its components or for a similar instrument; or

• using generally accepted valuation models and techniques.

2.2.1.3 3. First-time adoption of IFRS

2.2.1.3.1

These financial statements, for the year ended 31 December 2015, are the first the Group has prepared in accordance with IFRS. For periods up to and including the year ended 31 December 2014, the Group has prepared its financial statements in accordance with Dutch GAAP.

Accordingly, the Group has prepared financial statements which comply with IFRS applicable for periods ending on or after 31 December 2015, together with the comparative period data as at and for the year ended 31 December 2014, as described in the summary of significant accounting policies at note 37.

In preparing these financial statements, the opening statement of financial position was prepared as at 1 January 2014, the Group’s date of transition to IFRS. As these financial statements are the first the Group prepares based on IFRS, the opening balance sheet as per 1 January 2014 is additionally included, compared to our regular two year statements. This note explains the principal adjustments made under IFRS 1 – first time adoption in restating its Dutch GAAP financial statements, including the statement of financial position at 1 January 2014 and 31 December 2014 and the statement of profit or loss for the year ended 31 December 2014.

Exemptions applied

The Group has applied the following exemptions:

• IFRS 3 'Business Combinations' has not been applied to acquisitions of subsidiaries, which are considered businesses for IFRS, or of interests in associates and joint ventures that occurred before 1 January 2014. Use of this exemption means that the Dutch GAAP carrying amounts of assets and liabilities, that are required to be recognised under IFRS, is their deemed cost at the date of the acquisition. After the date of the acquisition, measurement is in accordance with IFRS. Assets and liabilities that do not qualify for recognition under IFRS are excluded from the opening IFRS statement of financial position. The Group did not recognise any previously unrecognised amounts or exclude any previously recognised amounts as a result of IFRS recognition requirements.
• IFRS 1 also requires that the Dutch GAAP carrying amount of goodwill must be used in the opening IFRS statement of financial position (apart from adjustments for goodwill impairment and recognition or derecognition of intangible assets). In accordance with IFRS 1, the Group has tested goodwill for impairment at the date of transition to IFRS. No goodwill impairment was deemed necessary at 1 January 2014.
• Cumulative currency translation differences for all foreign operations are deemed to be zero as at 1 January 2014.
• The transitional provision in IFRIC 4 'Determining whether an arrangement contains a lease' has been applied and thus all arrangements have been assessed based upon the conditions in place as at the date of transition.
• The transitional provisions in IAS 23 'Borrowing Costs' have been applied and as such the Group capitalises borrowing costs relating to all qualifying assets after the date of transition. Similarly, the Group has not restated for borrowing costs capitalised under Dutch GAAP on qualifying assets prior to the date of transition to IFRS.
• A decommissioning liability is measured in accordance with IAS 37 at the date of transition to IFRS, and an estimate of the amount to include in the cost of the asset when the liability first arose is made at the date of transition to IFRS.
• The exemption that IAS 39 'Day one gain or loss provisions' are accounted for prospectively to transactions occurring on or after the date of transition to IFRS. Therefore, transactions that occurred prior to the date of transition to IFRS are not retrospectively restated.
• The designation of financial assets and liabilities as at fair value through profit or loss or as available-for-sale is conducted at the date of transition to IFRS.
• The exemption to use fair value as deemed cost for items of property, plant and equipment at the date of transition to IFRS.

Estimates

The estimates at 1 January 2014 and 31 December 2014 are based on the information available at that time and are consistent with those made for the same dates in accordance with Dutch GAAP (after adjustments to reflect any differences in accounting policies) apart from the following items, where application of Dutch GAAP did not require estimation:

• Impairment analysis on goodwill
• Impairment analysis on investment in joint venture

2.2.1.3.2

Overview of the impact of the transition to IFRS

The impact of the transition on total equity and on net profit can be summarized as follows:

2.2.1.3.3 Explanatory notes of the transition to IFRS

2.2.1.3.3.1

General

In the below notes to the transition of the statement of profit or loss, statement of financial position, equity and total comprehensive income reconciliation, we present the main relevant transition adjustments. The transition impact is therefore primarily explained starting from the perspective of the statement of profit or loss, statement of total comprehensive income and statement of equity.

A – Profit attributable to non-controlling interests

Statement of profit or loss

There is no transition impact other than presenting the group profit for the year as attributable to owners of the company and non-controlling interests instead of deducting the non-controlling interest part (amounting to € 0.9 million) of the profit from the profit of the Group, which was disclosed as such in the Dutch GAAP financial statements 2014.

Total comprehensive income

Under Dutch GAAP the Group reported income as the total comprehensive income attributable to the shareholders of the Group plus the other comprehensive income attributable to the non-controlling interest. Total comprehensive income under IFRS is presented for both shareholders and non-controlling interests, resulting in an increase of total comprehensive income by € 0.9 million.

Equity

There is no impact.

B – Employee benefits

Statement of profit or loss

The IFRS transition adjustments for employee benefits expenses amounting to € 6.2 million relate to several items:

1. The transition adjustments for post-employment benefits (€ 6.5 million, see further set-out below)
2. The transition adjustments for other long-term employee benefits (€ 0.2 million, see further set-out below)
3. Reclassifications between other operating expenses, finance costs and employee benefit expenses (- € 0.5 million)

B1.

Under Dutch GAAP the post-employment benefit plans in the Netherlands were accounted for in accordance with Dutch GAAP. For the post-employment benefit plans in the UK and Germany, the Group already made use of the option under Dutch GAAP to apply IAS 19.

Post-employment benefit expenses for the year 2014 are positively impacted by € 6.5 million, this consists of:

1. The positive impact results from the plan amendments in 2014 of € 3.0 million, caused by the decrease of the pension accrual rate from 2.0% to 1.875% and the reduction of the maximum pensionable salary of € 100,000 by Dutch law.
2. Current service costs that are lower than the employer contributions as accounted under Dutch GAAP (premium paid) during the year by € 2.7 million. The lower current service costs result from the actuarial calculation method in which the total service costs are evenly spread over the employee’s service life. Employer contributions depend on the pensionable salary of the respective year.
3. Different assumptions of the German pension costs (mainly in interest), resulting in a decrease of € 0.8 million.

B2.

The Group has a long-term incentive plan, which under Dutch GAAP was fully recognised through profit or loss in the year to which the plan relates to. Under IFRS the vesting period of the bonus scheme is to be taken into account.

This difference in accounting resulted in a positive impact on profit of € 0.2 million.

Total comprehensive income B1. + B2.

As a result of the actuarial calculations under IFRS, the Group has recorded an amount of € 6.8 million, net of tax as a loss through other comprehensive income resulting from the change in the discount rate between 1 January 2014 and 31 December 2014. Together with the positive transition impact of employee benefit expenses amounting to € 4.6 million (which is the € 6.5 million net of tax), this resulted in a total comprehensive impact of € 2.2 million.

Equity B1. + B2.

The difference between the equity impact at 1 January 2014 (€ 3,689 thousand) and 31 December 2014 (€ 5,875 thousand) is € 2,186 thousand which is equal to the total comprehensive income impact.

Statement of financial position B1.

Under Dutch GAAP a provision was recorded for future pension obligations that resulted from the acquisition of Hendrix UTD in 2012. In this context arrangements were agreed on with Nutreco with regard to the settlement of pension entitlements that were accrued prior to the acquisition. Under IAS 19 the resulting liability is not to be presented as part of the employee benefits liabilities, but as part of the provisions and other payables (as part of trade and other payables).

C – Provisions

The Group has recorded the provisions under Dutch GAAP based on nominal value. Under IFRS provisions are to be valued at net present value.

Statement of profit or loss

The unwinding of discount of the provisions amounted € 173 thousand accounted under finance costs.

Total comprehensive income

The  impact on total comprehensive income is equal to the profit or loss impact.

Equity

The difference between the equity impact at 1 January 2014 (€ 197 thousand) and 31 December 2014 (€ 370 thousand) is € 173 thousand which is equal to the total comprehensive income impact.

D – Financial instruments

Under Dutch GAAP the Group accounts for the interest rate swaps through cost-price hedge accounting and these are as such kept off-balance. Under IFRS the interest rate swaps do not qualify for hedge accounting and are valued at fair value. At the transition date the fair value of the interest rate swaps is presented as non-current loans and borrowings, including derivatives.

Statement of profit or loss

The positive impact of € 1.4 million relating to the swaps is partly offset by interest expenses of € 0.6 million to be incurred relating to the post-employment benefit plans as elaborated under note B and the unwinding of discount of provisions as elaborated under note C, resulting in an impact on net finance costs amounting to € 0.8 million. The impact on the finance income and finance costs is due to the reclassification of the foreign currency translation effects recognised in profit or loss.

Total comprehensive income

The increase of total comprehensive income of € 942 thousand is the swap impact of € 1.4 million after tax.

Equity

The difference between the equity impact at 1 January 2014 (- € 1,014 thousand) and 31 December 2014 (- € 72 thousand) is € 942 thousand which is equal to the total comprehensive income impact.

E – Biological assets

Biological assets, that exists of living animals under Dutch GAAP have been valued at acquisition cost, plus additional costs for feed and care. Under IFRS biological assets are value at fair value less cost to sell.

Statement of profit or loss

The gross margin increased by € 213 thousand in 2014. Furthermore, the revenues of the internal feed deliveries amounting to € 5.7 million for living animals accounted as biological assets have been eliminated with the cost of raw materials and consumables.

Total comprehensive income

The resulting impact on total comprehensive income of € 159 thousand is mainly the adjustment of the fair value of biological assets of € 213 thousand after tax.

Equity

The difference between the equity impact at 1 January 2014 (- € 12 thousand) and 31 December 2014 (€ 147 thousand) is € 159 thousand which is equal to the total comprehensive income impact.

Statement of financial position

The resulting impact at 31 December 2014 on the biological assets amounted to € 197 thousand (1 January 2014: € 16 thousand). The impact on retained earnings per 31 December amounted to € 147 thousand (1 January 2014: € 12 thousand). The effect on total comprehensive income for the year amounted to € 159 thousand. Furthermore, IFRS requires the biological assets to be presented separately on the face of the statement of financial position, resulting in a reclassification from inventories compared with Dutch GAAP of € 4.8 million at 31 December 2014 (1 January 2014: € 5.6 million).

F – Share-based payments

Under Dutch GAAP the Group has accounted for its share-based payment plans by recording the related expenses upon the grant date in profit and loss. Under IFRS the related share-based payment expenses are recognized in profit and loss over the vesting period of the share-based payment plan.

Statement of profit or loss

The impact on the statement of profit or loss amounts € 136 thousand which is part of the € 6.2 million other transition adjustments on employee benefit expenses.

Total comprehensive income

The total comprehensive income impact is equal to the impact on statement of profit or loss corrected for taxes.

Equity

The difference between the equity impact at 1 January 2014 (€ nil) and 31 December 2014 (€ 113 thousand) is equal to € 136 thousand minus a direct charge to equity of € 23 thousand.

G – Business combinations

The Group amortized goodwill under Dutch GAAP, whereas under IFRS goodwill is not amortized, but tested for impairment on a yearly basis. In transition to IFRS the Group has reversed the goodwill amortization recorded for the year. Furthermore, under Dutch GAAP the Group included transaction costs in the purchase consideration paid and as such in the goodwill balance. Under IFRS these balances are to be recognized in profit or loss when incurred. Expensing the transaction costs has resulted in a reduction in profit for the year related to the 2014 acquisitions of HST Feeds and Wheyfeed in the UK. As a result of the transition differences the goodwill balances recorded at 31 December 2014 are impacted by the transition to IFRS by € 2,920 thousand.

Statement of profit or loss

The positive impact of € 2.8 million on amortisation and depreciation expenses relate to the reversal of the goodwill amortisation (€ 3.2 million), partly offset by depreciation expenses (€ 0.4 million) reclassified from other operating expenses caused by some leases which qualify as finance lease under IFRS.

Total comprehensive income

The total comprehensive income impact is equal to reversal of the goodwill amortisation of € 3.2 million offset with the acquistion costs deducted from goodwill and recognised as other operating expenses amounting to € 0.6 million. The net impact is € 2,533 thousand.

Equity

The difference between the equity impact at 1 January 2014 (€ nil) and 31 December 2014 (€ 2,533 thousand) is € 2,533 thousand.

H- Joint venture accounting HaBeMa

Deconsolidation HaBeMa

Under Dutch GAAP the Group accounted for its investment in HaBeMa based on proportionate consolidation, whereas under IFRS the investment is accounted for based on the equity method. The transition to IFRS has as such resulted in the deconsolidation of the proportionately consolidated amounts and the recognition of the investment value as part of the equity-accounted investees. In the different reconciliations the effect of the deconsolidation has been presented separately as the transition effect was considered material to the financial statements. In addition hereto, the Group presents the result of its investment in the equity accounted investee net of tax. As the Group bears part of the corporate income taxes of the equity accounted investee, the resulting taxes imposed on the Group are deducted from the result on investment amounting to € 0.9 million, refer to note 13. Together with the deconsolidation of the tax expense borne by HaBeMa self, this results in a total decrease of the tax expense by € 2 million.

Statement of profit or loss

The positive profit or loss impact amounts € 651 thousand. This is mainly the result of transition adjustments for:

1. Post-employment benefits that qualify as defined benefit plans under IAS 19,
2. Different accounting of certain provisions under IAS 37,
3. Change in measurements of certain components of property, plant and equipment under IAS 16, and
4. Recognition and fair value measurement of interest rate swaps under IAS 39 that were kept off-balance under Dutch GAAP.

Comprehensive income

The positive impact on total comprehensive income for the year amounts € 316 thousand  which is the result the postive profit or loss impact of € 651 thousand offsetted by the direct equity charge of € 335 thousand related to pensions.

Equity

The difference between the equity impact at 1 January 2014 (- € 300 thousand) and 31 December 2014 (€ 16 thousand) is € 316 thousand.

I – Property, plant & equipment

Equity

The Group applied the exemption to use fair value as deemed cost at the date of transition to IFRS for certain items of property, plant & equipment.  The resulting impact on equity as at 31 December 2014 amounted to € 6,054 thousand, net of tax (1 January 2014: € 6,063 thousand).

Total comprehensive income

As the exemption was only applied to land, which is not depreciated, the impact on total comprehensive income for the year amounted to only € 9 thousand.

Statement of financial position

The positive fair value as deemed cost adjustment of € 8.7 million related to the land is offset by a reclassification of € 6.0 million to investment property relating to assets no longer in use by the Group and a reclassification of the investment grant to loans and borrowings, including derivatives. The net change impact on property, plant and equipment is € 2,052 thousand (1 January 2014).

J - Income taxes

Statement of profit or loss

The net income tax effect on the IFRS transition amounting to € 2,020 thousand is the result of the related tax effect on all IFRS transition adjustments.

Statement of financial position

In accordance with IAS 12.74 deferred tax assets and liabilities are offset if the deferred taxes relate to the same taxable entity and there is an enforceable right to offset the current taxes on a net basis. The impact on deferred tax assets per 1 January 2014 amounts € 9,253 thousand and on the deferred tax liabilities € 8,053 thousand.

K - Group equity presentation

Under Dutch GAAP the Group presented a translation reserve and legal reserve seperately under group equity. Under IFRS the group applied the option to deem the cumulative translation differences to be zero at 1 January 2014 where the amount of € 1,572 thousand had been reclassified to retained earnings. Furthermore, the group has chosen to present the treasury share reserve seperately from other reserves and retained earnings resulting in a reclassification of € 466 thousand for shares held by the company (both 1 January 2014 and 31 December 2014). As disclosed under note 37 Significant accounting policies, the par values of repurchased shares are classified as treasury shares and are presented in the treasury share reserve. Finally the legal reserve has been presented under other reserves and retained earnings under IFRS resulting in a reclassification impact of € 4,194 thousand as at 1 January 2014 respectively € 6,534 thousand as at 31 December 2014. For the company financial statements, the company remains to present the legal reserve separetely from retained earnings, see note 46 Shareholders' equity.

2.2.1.3.4 Reconciliation of statement of changes in cash flows

The Group determines the effects on the reported cash flows as follows:

2.2.1.3.4.1

L - Effect of deconsolidation HaBeMa

The transition from Dutch GAAP to IFRS has had an impact on the statement of cash flows, for the exclusion of the cash flows related to HaBeMa which was proportionally consolidated under Dutch GAAP. Under IFRS the investment in HaBeMa has been accounted for through the equity method.

M - Effect of inclusion of bank overdrafts

Under IFRS the bank overdrafts are included in the cash and cash equivalents for cash flow measurements purposes as management manages its cash flows including bank overdrafts.

N - Other effects

Under IFRS the acquisition costs of business combinations are recognised as other operating expenses instead part of goodwill under Dutch GAAP resulting in a reclassification of the net cash from (used in) investment activities to net cash from operations.

2.2.1.4 4. Operating segments

The Group has the following three strategic clusters, which are its operating segments.

• The Netherlands
• Germany / Belgium
• United Kingdom

The Group’s products include compound feed and blends, feed for young animals and specialities, raw materials and co-products to seed and fertilisers. Core activities are feed production, logistics and providing Total Feed solutions based on nutritional expertise.

The clusters offer similar products and services and have similar production processes, customers and methods to distribute products. However, as the clusters are managed separately and are also subject to different currencies (i.e. UK cluster versus the remaining clusters), the operating segments are not aggregated.

This allocation is consistent with the organisation structure and internal management reporting and also represents the geographical regions in which the Group operates. The corporate headquarters of the Group is domiciled in Lochem, The Netherlands.

The Group’s board of directors reviews internal management reports of each cluster on a monthly basis and is considered together as the chief operating decision maker.

There are varying levels of integration between the segments. This integration includes transfers of inventories and shared distribution services, respectively. Inter-segment pricing is determined on an arm’s length basis.

Information related to each reportable segment is set out below. Segment operating result represent the earnings before interest and income tax, and is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

2.2.1.5 5. Business combinations

2.2.1.5.1 Acquisitions 2015

​Countrywide Farmers (UK)

In December 2014, the Group announced that ForFarmers was to acquire the feed and forage business from Countrywide Farmers subject to clearance by the UK Competition Authorities.  Clearance for the proposed transaction was received on 1 May 2015. These business activities were integrated within ForFarmers UK. The price paid is based on an enterprise value of € 14 million. The transaction concerns an asset deal including the acquisition of 49 employees, accounted for according to the acquisition method. The positive difference between the acquisition price and the fair value of the acquired identifiable assets is capitalised as goodwill. The goodwill has been set at € 2.0 million. The goodwill comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the United Kingdom cluster. The goodwill and customer base recognised are expected to be deductible for income tax purposes.

From the date of acquisition, Countrywide Farmers contributed € 68.0 million of revenue and € 2.1 million profit before tax. If the acquisition of Countrywide Farmers had taken place at the beginning of the year, Group revenues would have been € 2,278 million and Group profit before tax had been € 67.3 million.

The transaction costs related to the acquisition amounted to € 1.1 million. As part of the purchase agreement the Group has not agreed a contingent consideration with the previous owner of Countrywide Farmers.

Assets acquired and liabilities assumed

The provisional fair values of the identifiable assets and liabilities of Countrywide Farmers acquired in 2015 as at the date of acquisition were:

2.2.1.5.2 Acquisitions 2014

HST Feeds Ltd (UK)

On 3 February 2014 the Group acquired 100% of the share capital of HST Feeds Ltd. HST Feeds Ltd is based in Crewe in the UK and sells approximately 140,000 tonnes of ruminant and poultry compound feed per year in the northwest of England. The company employs 57 employees and in 2013 the turnover amounted to € 43 million. HST Feeds Ltd is part of ForFarmers UK. The price paid is based on an enterprise value of € 16.2 million, including cash and cash equivalents.

The transaction was accounted for according to the acquistion method. The positive difference between the acquisition price and the fair value of the acquired identifiable assets and liabilities is capitalised as goodwill. The goodwill has been set at € 2.8 million.

The deferred taxes mainly relate to the tax effect on the step-up of the net book value of the property, plant & equipment and a resulting lower future depreciation for tax purposes.

The goodwill of € 2.8 million comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the United Kingdom segment. None of the goodwill recognised is expected to be deductible for income tax purposes.

From the date of acquisition, HST Feeds contributed € 37.4 million of revenue and € 2.3 million to profit before tax. If the acquisition of HST Feeds had taken place at the beginning of the year, Group revenues would have been € 2,203 million and Group profit before tax had been € 56.4 million.

As part of the transaction, the Group acquired net cash of € 4.7 million and total transaction costs related to the acquisition amounted to € 0.3 million. The transaction costs have been included in other operating expenses.

As part of the purchase agreement the Group has not agreed a contingent consideration with the previous owner of HST Feeds Ltd.

Wheyfeed Ltd (UK)

On 2 July 2014 the Group acquired 100% of the share capital of Wheyfeed Holdings Ltd, owner of Wheyfeed Ltd. Wheyfeed Ltd, established near Nottingham, sells and distributes approximately 200,000 tonnes of liquid by-products per year in the UK. The company has 82 employees and a fleet of 35 tanker lorries. The company had a split financial year and the turnover over the last financial year, which was closed on 31 May 2014, amounted to € 9 million. Wheyfeed Ltd is part of ForFarmers UK. The price paid is based on an enterprise value of the company of € 5.4 million.

The transaction was accounted for according to the acqusition method. The positive difference between the acquisition price and the fair value of the acquired identifiable assets and liabilities is capitalised as goodwill. The goodwill has been set at € 2.1 million.

The deferred taxes mainly relate to the tax effect on the step-up of the net book value of the property, plant & equipment and a resulting lower future depreciation for tax purposes.

The goodwill of € 2.1 million comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the United Kingdom segment. None of the goodwill recognised is expected to be deductible for income tax purposes.

From the date of acquisition, Wheyfeed contributed € 4.2 million of revenue and € 56 thousand loss to profit before tax. If the acquisition of Wheyfeed had taken place at the beginning of the year, Group revenues would have been € 2,203 million and Group profit before tax had been € 56.2 million.

As part of the transaction, the Group did not acquire any net cash and total transaction costs related to the acquisition amounted to € 0.3 million. The transaction costs have been included in other operating expenses.

As part of the purchase agreement the Group has agreed with the previous owner of Wheyfeed Ltd a contingent consideration. There will be additional cash payments to the previous owner of Wheyfeed Ltd of € 0.3 million if the contribution margin for the first twelve months after the acquisition date would exceed a predefined margin.

At the date of acquisition the fair value of the contingent consideration was estimated to be zero as the Group did not expect the margin to exceed the predefined margin. The actual margin realised during the first twelve months after the acquisition date did not exceed the predefined margin.

De Peel dealer activities

In the 2014 financial year the Group acquired, within the framework of the integration of the dealer activities of Hendrix, 100% of the shares in De Peel Consultancy B.V. and De Peel Voeders B.V. This acquisition took effect on 1 January 2014. The transaction value amounted to € 1.2 million. This amount fully qualified as goodwill because, with the acquisition of Hendrix in 2012, the underlying customer base had already been acquired. As part of the transaction, the Group did not acquire any net cash nor did it incur any transaction costs.

The goodwill of € 1.2 million comprises the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the Netherlands segment. None of the goodwill recognised is expected to be deductible for income tax purposes.

From the date of acquisition, De Peel contributed € 1.0 million of revenue and € 0.1 million to profit before tax. No contingent considerations had been agreed as part of the purchase agreement with the previous owner of De Peel Consultancy B.V. and De Peel Voeders B.V.

Assets acquired and liabilities assumed

The fair values of the identifiable assets and liabilities of the subsidiaries acquired in 2014 as at the date of acquisition were:

The receivables acquired relate to short-term trade receivables for which the fair value at the acquisition date corresponds with the carrying amount at that date due to the short-term nature of these receivables. The carrying amounts are the gross contractual amounts and are expected to be collected in full.

2.2.1.5.3 Measurements of fair values

2.2.1.6 6. Assets held for sale and disposals during the year

2.2.1.6.1 Assets held for sale

2015

At the end of 2015 one of the land sites in The Netherlands has been reclassified from investment property as management has initiated a plan to sell the respective site and has the expectation that the site will be sold within twelve months after the balance sheet date. The fair value of the site at 31 December 2015 amounts to € 5.6 million and is based on the preliminary agreement reached with the potential buyer in the course of 2015. The fair value measurement is based on the value from the preliminary agreement which is settled between two independent market participants.

2014

In August 2014, management committed to a plan to sell the Cranswick site. Accordingly, the respective site is presented as an asset held for sale as per 31 December 2014. Efforts to sell the site were started and the sale was completed by 31 March 2015. The asset being disposed relates to the Cranswick site, consisting of land and one silo, both recorded as investment property at 1 January 2014 and part of the UK operating segment. There are no cumulative income or expenses recognised in OCI relating to the site. The fair value of the site at 31 December 2014 amounts to € 1.0 million and is based on the preliminary agreement reached with the potential buyer in the course of 2014. The fair value measurement is based on the value from the preliminary agreement which is settled between two independent market participants. In the course of 2015 the site has been sold for € 1.0 million.

2.2.1.6.2 Disposals

2015

In 2015 the Group sold its 6% share ownership of Adaptris to RBI. The shares were transferred on 2 October 2015. A book profit of € 1.1 million was recorded in the profit or loss in the course of which sales proceeds were accounted for as other operating income.

2014

Subli

On 1 July 2014 the Group sold its 50% share ownership of Subli to Agruniek Rijnvallei, the other shareholder of Subli. The shares were transferred on 15 July 2014 as a result of which the company no longer has policymaking influence in Subli from that date. A book profit of € 0.1 million was recorded in the profit and loss account in the course of which sales proceeds were accounted for as other operating income and the disposal costs still to be paid by the Group as operating expenses.

Export activities BOCM PAULS International (UK)

In 2014 BOCM PAULS (UK) transferred its export activities in the countries in which it is not primarily active to Nutreco. This relates to the export of young animal feed and represents an annual turnover of € 8.5 million. This transaction did not result in a sale of participating interests. A net profit of € 1.9 million was accounted for in the profit and loss account under other operating income.

2.2.1.7 7. Revenue

The geographic distribution of the revenue can be represented as follows:

The distribution of the revenue per category can be represented as follows:

The increase of the revenue is mainly the result of an FX result (€ 72.5 million) and an acquisition effect (€ 43.7 million) which results in an organic decrease of € 93.0 million. This decrease is a result of lower raw material prices, partly compensated with higher volume.

The other revenue mainly relates to the sale of single feed, other trading products and provided services (the latter is immaterial for separate presentation).

2.2.1.8 8. Cost of raw materials and consumables

In 2015 the write down of inventories to net realisable value was € 20 thousand (2014: € 397 thousand).  Included in cost of raw materials and consumables are the fair value movements of poultry livestock of € 1,993 thousand (2014: € 2,086 thousand).

2.2.1.9 9. Employee benefit expenses

Total post-employment expenses related to defined contribution plans amount to € 6,027 thousand (2014: € 6,532 thousand).

Total post-employment expenses related to defined benefit plans amount to € 1,682 (2014: € 2,368 thousand). In these expenses the following amounts are included:

• the current service costs and administrative expenses amounting to € 3,825 thousand (2014: € 2,528 thousand);
• the release of the provision for pension liabilities related to the acquisition Hendrix UTD recognised in the post-employment benefit expenses amounting to € 2,536 thousand (2014: € 1,873 thousand);
• an incidental charge amounting to € 393 thousand in 2015 related to the closing of the Hendrix UTD pension plan as a consequence of the new pension plan for all Dutch employees that took effect on 1 January 2016 (2014: an incidental profit of € 3,023 thousand related to the adjustment of the pension accrual rate of 2.000% to 1.875% in the Hendrix UTD pension plan).

The interest charges related to the defined benefit plans amount to € 2,307 thousand (2014: € 2,359 thousand) are recognised in the finance costs.

Refer to note 26 for further details on the post-employment plans.

Expenses related to other long-term service plans relate to anniversary benefits for employees in The Netherlands, Germany and Belgium and to a long-term incentive plan for the board of directors.

The expenses relating to the equity-settled share-based payments and cash-settled share-based payments relate to the depository receipts issued for the employees according to the employee participation plans for 2015 and 2014 as disclosed under note 24.

The increase in the personnel expenses is caused by an increase in the number of employees. In the UK, 47 fulltime equivalents were added due to the acquisition of Countrywide (2014: increase 124; due to HST Feeds as from 1 February 2014 and Wheyfeed as from 1 July 2014). The remaining increase is a result of strengthening of the organization and hiring temporary staff on a permanent basis.

Of the total number of employees (FTE), 1,518 (2014: 1,457) employees are employed outside the Netherlands. Of the number of employees, being employed outside the Netherlands, 977 (2014: 969) employees are working in Production and Logitics, 347 (2014: 315) are working in Commercial departments and 194 (2014: 173) are working at other departments.

2.2.1.10 10. Other operating expenses

Explanation of total operating expenses

In 2015 the Group incurred an amount of € 4.9 million (2014: € 5.0 million) relating to research and development expenses. These expenses mainly comprise personnel expenses of nutrition specialists, product managers and laboratory workers.

The increase of the total operating expenses (which beside the other operating expenses also comprise employee benefit expenses and depreciation & amortisation epxenses) can be explained by an FX effect (€ 14.2 million), acquisition effect (€ 7.5 million) and incidental items (€ 2.6 million). Without these items the total operating expenses increased by € 1.5 million (organic increase), which can mainly be explained by more additions to the allowance for impairment in relation to trade and other receivables (€ 1.9 million). 

The auditor’s and advisory fees accounted for in the financial statements can be specified as follows:

The auditor’s costs with regard to the financial statement audit were accounted for in the financial year that the activities related to. The remaining auditor´s costs (i.e. relating to audit related services, tax advisory services and other non-audit fees) were charged to the financial year in which the activities were performed.

2.2.1.11 11. Net finance costs

The other financial expenses in 2014 include a write-down of € 0.5 million relating to capitalised agency and other bank fees as part of the secured bank loan that has been terminated during 2014 as result of the refunding to a new financing agreement, refer to note 25.

2.2.1.12 12. Earnings per share

Basic earnings per share

The calculation of basic earnings per share has been based on the following profit attributable to ordinary shareholders and weighted-average number of ordinary shares outstanding.

2.2.1.13 13. Income taxes

2.2.1.14 14. Property, plant and equipment

Transfer to investment property and impairment

During 2014, the land of one site in the Netherlands was transferred to investment property (see note 16), because it was no longer used by the Group and it was decided that the building would be sold to a third party. As a consequence of the decision to close the site in the Netherlands an impairment of € 1.4 million was recognised in profit and loss in 2014 as part of depreciation and amortization to reduce the carrying value of the plant and machinery at the site to nil as the site was going to be dismantled, with the related land available for sale.

Leased other operating assets

The Group leases some other operating assets under a number of finance leases. The corresponding finance lease obligations are accounted under loans and borrowings. At 31 December 2015, the net carrying amount of leased equipment was € 352 thousand (2014: € 642 thousand; 1 January 2014: € 984 thousand). The decrease of the book value was caused by the fact that the leased assets has been replaced by assets owned.

2.2.1.15 15. Intangible assets and goodwill

Amortisation

The amortisation of customer bases, trademarks and software is included in the depreciation and amortisation expense. The disposals of the trade and brand names in 2015, relate to trade names which are no longer in use by the Group.

Impairment test

Goodwill acquired through business combinations with indefinite lives is allocated to the Netherlands, Germany / Belgium and United Kingdom, which are also operating and reportable segments, for impairment testing.

The Group performed its annual impairment test in December 2015 for 2015 and during its conversion project to IFRS for 2014 and 1 January 2014. The Group considers the relationship between its market capitalisation and its carrying amount, among other factors, when reviewing for indicators of impairment.

Fair value information

The recoverable amounts of the different CGUs were based on fair value less costs of disposal, estimated using an earnings multiplier model. The earnings multiples are based on a mix of trading multiples of peer companies, ForFarmers analysts’ multiples and transaction multiples. The Group has estimated the recoverable amount to be the midpoint of the recoverable amounts calculated from using the different earnings multiples. The fair value measurement was categorised as a Level 2 fair value based on the inputs in the valuation technique used. Given the similarity of the different CGUs, the Group has used the same earnings multipliers in determining the fair value less costs of disposal of the different CGUs.

Key assumptions

The key assumptions the Group used in the estimation of the recoverable amount are set out below and concern EBITDA (operating profit adding back the amounts of depreciation and amortisation) multiples. The values assigned to the key assumptions represented management’s assessment of trends in the relevant industries and were based on historical data from both external and internal sources.

In order to determine the EBITDA-basis for applying the earnings multiples, EBITDA is normalized for incidental items. The future expectations EBITDA for the year was estimated taking into account past experiences, adjusted as follows:

• Gross margin growth was projected taking into account the average growth levels experienced over the past years and the estimated sales volume and price development. An assessment has been made on margin development and not sales price development. The commodity price development is hardly to predict.
• Estimated cash flows related to a restructuring that is expected to be carried out in the forecasted year were reflected in the estimations EBITDA.

Earning multiples used in estimating the headroom were for:

• 2015: 7.1x consistent for all CGUs
• 2014: 7.3x consistent for all CGUs
• 1 January 2014: 7.3 consistent for all CGUs

Sensitivity analysis

The Group has performed a sensitivity analysis on the resulting headroom based on a lower mutiple (6.6x) applicable for the respective reporting period. This sensitivity analysis did not result in recoverable amounts below the carrying amounts of these CGUs.

Impairment on intangible assets other than goodwill

During 2015 the Group recognised an impairment of € 454 thousand relating to customer bases of the United Kingdom.

2.2.1.16 16. Investment property

2015
At the end of 2015 one of the land sites in the Netherlands has been reclassified to non-current assets held for sale as management has initiated a plan to sell the respective site and has the expectation that the site will be sold within twelve months after the balance sheet date.

2014
At 1 January 2014, the Group’s investment properties consist of two properties in the Netherlands and one property in the UK. The investment properties are sites that are no longer being used in the Group’s operations and are held for future disposal. Investment properties are valued using the cost model. As the investment properties in the Netherlands relate to land, these are not being depreciated. The investment property in the UK has been acquired as part of the BOCM Pauls acquisition in 2012 and was valued at fair value at the acquisition date. As the expected residual value of the investment property is estimated to be at least equal to the carrying value, the asset is not depreciated.

At the end of 2014 the investment property in the UK has been reclassified to non-current assets held for sale as management has initiated a plan to sell the respective site and has the expectation that the site will be sold within twelve months after the balance sheet date. Furthermore, upon the decision in 2014 to close one of the production sites in the Netherlands an additional site has been reclassified from property, plant and equipment as investment property during the year.

Fair value information

The fair value of investment property was determined by external, independent property valuators, having appropriate recognised professional qualifications and experience or by reference to the sales prices currently being negotiated.

The fair value measurement for investment properties was € 2.0 million (31 December 2014: € 6.5 million; 1 January 2014: € 6.4 million) and has been categorised as a Level 3 fair value based on the information derived from market transactions.

The following table shows the valuation technique used in measuring the fair value of investment property, as well as the significant unobservable inputs used.

2.2.1.17 17. Equity-accounted investees

Joint venture

HaBeMa Futtermittel Produktions- und Umschlagsgesellschaft GmbH & Co. KG (HaBeMa) is the only joint arrangement in which the Group participates. HaBeMa is one of the Group’s suppliers and is principally engaged in trading of raw materials, storage and transhipment, production and delivery of compound feeds in Hamburg, Germany.

HaBeMa is structured as a separate vehicle and the Group has a residual interest in the net assets of the entity. Accordingly, the Group has classified its interest in HaBeMa as a joint venture. The Group does not have any commitments or contingent liabilities relating to HaBeMa, except for the purchase commitments of goods as part of the normal course of business.

The following table summarises the financial information of HaBeMa as included in its own financial statements, adjusted for differences in accounting policies. The table also reconciles the summarised financial information to the carrying amount of the Group’s interest in HaBeMa.

2.2.1.18 18. Inventories

The increase of the total amount of inventories has mainly being caused by an increase of the volume of raw materials and other inventories, which are partly being off-set by a decrease of the volume of finished products and a decrease of the average price.

Other inventories include trading inventories part of the Group’s Total Feed business and include amongst others fertilizers and seeds.

In 2015 the inventories includes € 20 thousand write off to net realisable value (2014: € 397 thousand).

For important purchase commitments reference is made to the explanation of the commitments and contingencies under note 34.

2.2.1.19 19. Biological Assets

At balance sheet date the poultry livestock amounts to 1,494,846 animals (2014: 1,049,730 animals; 1 January 2014: 1,345,956 animals) with a value of € 6.1 million (2014: € 5.0 million; 1 January 2014: € 5.6 million). The poultry livestock relate to hens and a number of roosters, aged between 16 and 20 weeks, that are sold to hatcheries. The full biological asset balance is a current balance.

Measurement of fair values

Fair value hierarchy

The fair value measurement for the roosters and hens has been categorised as Level 3 fair values based on the full production costs plus a proportional share of the margin to be realised at sale. No active market with quoted market prices exists for these hens and therefore, management considers the most recent market transaction price to be the most reliable estimate for fair value resulting in a fair value hierarchy level 3.

Level 3 fair values

The following table shows a breakdown of the total gains (losses) recognised in cost of raw materials and consumables in respect of Level 3 fair values (livestock). The non-realised part of the adjustment in fair value is part of the revaluation of the biological assets at the balance date.

Valuation techniques and significant unobservable inputs

The following table shows the valuation techniques used in measuring Level 3 fair values, as well as the significant unobservable inputs used.

The Group is exposed to the following risks relating to its livestock.

Regulatory and environmental risks

The Group is subject to laws and regulations in various countries in which it operates. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws.

Supply and demand risk

The Group is exposed to risks arising from fluctuations in the price and sales volume of poultry livestock. Management performs regular industry trend analyses for hens and rooster volumes and pricing.

Agricultural risk

The Group is exposed to the regular risks relating agricultural activities, amongst others risks related to diseases. The Group follows the developments in the market closely and adjusts its policy where required.

2.2.1.20 20. Trade and other receivables

The non-current trade and other receivables consist of:

• Receivables that will be due after one year, that are largely interest-bearing and mainly include loans to customers for which, if possible, securities were provided in the form of feed equivalents, participation accounts, livestock, and immovable property.
• Loans to employees, of which the level of interest is equal to the interest on Dutch state loans and at least equal to the interest referred to in Article 59 of the Wages & Salaries Tax Implementing Regulation 2001. The repayment of the loans is a minimum of 7.5% per annum of the original nominal value starting from 2015. As a security for the obligations, a right of distrain was established on the depository receipts purchased with the loan amount, the market value of which per balance sheet date exceeds the balance of the loans. These loans have been provided as part of the employee participation plan 2007-2009. No new loans will be provided to employees as from now.

The related party receivable relates to a receivable on Coöperatie FromFarmers U.A.

The other receivables, prepayments and accrued income mainly consist of unbilled revenue to customers and prepayments to suppliers.

Information about the Group’s exposure to credit and market risks, and impairment losses for trade and other receivables, is included in note 29 (Financial Instruments).

2.2.1.21 21. Cash and cash equivalents

The outstanding deposits are saving accounts which can be withdrawn almost immediately. As such the Group considered these to be part of cash and cash equivalents.

The cash and cash equivalents are at the free disposal of the company. The increase of the cash and cash equivalents is mainly explained by the EBITDA and working capital offset against the acquisitions and dividend.

2.2.1.22 22. Capital and reserves

Share capital and share premium

All ordinary shares rank equally with regard to the Company’s residual assets. The ordinary shares of ForFarmers B.V. are held by Stichting Administratiekantoor ForFarmers that issued depository receipts for the same. The priority share is held by Coöperatie FromFarmers U.A. and has been issued and paid-up in 2015. For the special rights of the priority share we refer to the paragraph Priority share under this note.

The share premium consists of the positive difference between the issue price and the nominal value of the issued shares.

Ordinary shares

Holders of these shares are entitled to dividends as declared from time to time, and are entitled to one vote per share at general meetings of the Company. All rights attached to the Company’s shares held by the Group are suspended until those shares are reissued.

Priority share

The priority share provides the holder of the share the right to appoint four out of the six Supervisory Directors as defined in the Articles of Association of the Company. With a stake of fifty percent or less the holder has this right for three of the six Supervisory Directors. As long as the holder has more than fifty percent of the voting rights it will also have the control right over how the role of the Chairman of the Board of Supervisory Directors of ForFarmers B.V. is detailed. Issues of new shares must be approved by seventy-five percent of the Board of Supervisory Directors. Major acquisitions, for which the total consideration of more than 25% of shareholder's equity are to be approved by the holder of the priority share.

The Group’s priority share can only be held by the Company itself or the Cooperative FromFarmers U.A., provided that it may exercise twenty percent or more of the total votes on shares or depository receipts to be cast in the capital of the Company.

The priority share is classified as equity, because the share does not contain any obligations to deliver cash or other financial assets and does not require settlement in a variable number of the Group’s equity instruments.

Treasury share reserve

The reserve for the Company’s treasury shares comprises the cost of the Company’s depository receipts held by the Group. In its role as liquidity provider, SNS Securities N.V. is authorised by the company to support the trade in depository receipts of ForFarmers on its trading platform by issuing permanent purchase and sale orders. The treasury shares are accounted for as a reduction of the equity attributable the owners of the parent.

Treasury shares are recorded at cost, representing the market price on the acquisition date, where the par value of treasury shares purchased is debited to the treasury share reserve. When treasury shares are sold or re-issued, the par value of the instruments is credited to the treasury share reserve. Any premium or discount to par value as result of the market price is shown as an adjustment to retained earnings.

During the year the Company purchased 620,420 (2014: 250,000) of it owns depository receipts to be able to re-issue the depository receipts in relation to the employee participation plans. At 31 December 2015, the Group held 399,429 of the Company’s shares (2014: 466,210; 1 January 2014: 466,392).

The movement in the treasury shares can be summarised as follows:

The other movements relates to depository receipts sold by the liquidity provider SNS independently from the company.

2.2.1.23 23. Capital Management

For the purpose of ForFarmers’ capital management, capital includes share capital, share premium and all other equity reserves attributable to the equity holders of the parent. Management monitors the average capital ratio as well as the level of dividends to ordinary shareholders.

ForFarmers’ monitors capital using a ratio return on average capital employed (ROACE). This ratio is defined as the EBITDA to average capital employed. For this purpose, EBITDA is adjusted for incidentals and average capital employed consisting of the average balance of capital throughout the year. The average capital employed for 2015 was € 441.0 million (2014: € 454.8 million) and the ROACE was 20.5% (2014: 20.0%). The capital employed is defined as equity (excluding intercompany) plus loans and borrowings including derivatives.

Funding target

Furthermore, ForFarmers’ long term target is to have a net debt to adjusted EBITDA ratio of maximum 2.5, in which EBITDA is adjusted for incidentals, such as restructuring expenses and one-off items. These one-off items are in line with the bank facility. ForFarmers’ net debt to adjusted EBITDA ratio at 31 December 2015 and 31 December 2014 was as follows:

In order to achieve this overall objective, the ForFarmers’ capital management, amongst other things, aims to ensure that it meets financial covenants attached to the interest-bearing loans and borrowings that define capital structure requirements. The long term target of 2.5 net debt / adjusted EBITDA level is lower than the ratios in credit facility, refer to note 25. There have been no breaches in the financial covenants of any interest-bearing loans and borrowing in the current period.

Employee participation plan

From time to time ForFarmers’ purchases its own shares on the market. The shares are solely intended to be used for issuing shares under its share based payment plans. Approval for purchasing own shares is requested in the shareholders meeting. The purchase is outsourced and ForFarmers only determines the maximum number of shares not the timing and not the price.

2.2.1.24 24. Share-based payment arrangements

Description of the share-based payment arrangements

The Group distinguishes two participation plans. One plan relates to members of the board and senior management (applicable for both 2015 and 2014), the other plan relates to other employees (applicable for 2015). Both plans have further details set out for employees of The Netherlands ("The Netherlands participation plan") and for employees of the United Kingdom, Germany and Belgium, collectively the “Foreign participation plan”, respectively.

The participation plans are annual plans only applicable for the respective year to which it relates, any additional participation plans are considered new plans. New plans can only be executed upon shareholder approval for the purchase of depository receipts related to the plan.

2015 participation plan (members of the board and senior management)

In terms of the 2015 participation plan, as per 17 April 2015 (grant date), members of the board and senior management personnel are entitled to receive depository receipts of the Group from their 2014 bonus (both Netherlands and Foreign participation plans) and/or additional vacation rights (only the Netherlands).

The employee is entitled to buy depository receipts at a discount of between 13.5% and 20% of the grant date fair value of the depository receipt, for which additional depository receipts to the value of the discount provided are received.

The Group is liable for employment tax obligations relating to the discount of the depository receipts. The foreign employee tax obligations is based on the fair value of the depository receipts on settlement date.

Key differences between the Netherlands and Foreign participation plans for the additional depository receipts:

• Netherlands: A service related vesting condition applies that the original value of the discount is repaid by the employee to the Group if the employee leaves within 3 years. All applicable depository receipts were issued within 2015.
• Foreign participation plan: A service related vesting condition applies that the employee will not be entitled to receive the additional depository receipts if employee leaves within 3 years. Additional depository receipts for foreign employees are held in custody by the company during the term and are issued to the foreign employees at settlement date. The total cost to company for the additional shares, including the cash-settled employee tax obligations, is limited to the amount of total costs that the Company bears for comparable Dutch employees.

During the 2015 year, 24 employees of the Netherlands and 9 employees of the United Kingdom participated in 2015 participation plans. A total number of 239,049 and 34,529 for the Netherlands and Foreign participation plan were granted respectively as part of the 2015 participation plans.

The value of the depository receipt for which the employee could buy their depository receipts of the Group was determined as an average of a 5 trading days closing rate during the period 20 - 24 April 2015, the averages rating amounted to € 5.04. The value of the employee tax benefit amounts to € 81 thousand.
There were no cancellations or modifications to the awards in 2015.

2015 participation plan (employees)

In terms of the 2015 participation plan, as per 17 April 2015 (grant date), employees are entitled to buy depository receipts of the Group from own payment (both Netherlands and Foreign participation plans) and/or “inleveren bovenwettelijk verlof” (only the Netherlands).

The employee is entitled to buy depository receipts at a discount of between 13.5% of the grant date fair value of the depository receipt, for which additional depository receipts to the value of the discount provided are received.

The Group is liable for employment tax obligations relating to the discount of the depository receipts. The foreign employee tax obligations is based on the fair value of the depository receipts on settlement date.

Key differences between the Netherlands and Foreign participation plans for the additional depository receipts:

• Netherlands: A service related vesting condition applies that the original value of the discount is repaid by the employee to the Group if the employee leaves within 3 years. All applicable depository receipts were issued within 2015.
• Foreign participation plan: A service related vesting condition applies that the employee will not be entitled to receive the additional depository receipts if employee leaves within 3 years. Depository receipts for foreign employees are held in custody by the company during the term and are issued to the foreign employees at settlement date. The total cost to company for the additional shares, including the cash-settled employee tax obligations, is limited to the total value of the discount provided.

During the 2015 year, 325 employees of the Netherlands, 60 employees of the United Kingdom, 15 employees of Germany and 28 employees of Belgium participated in 2015 participation plans. A total number of 297,327 and 73,025 for the Netherlands and Foreign participation plan were granted respectively as part of the 2015 participation plans.

The value of the depository receipt for which the employee could buy their depository receipts of the Group was determined as an average of a 5 trading days closing rate during the period June 1 to June 5, the averages rating amounted to € 5.176.

There were no cancellations or modifications to the awards in 2015.

2014 participation plan

In terms of the 2014 participation plan, as per 15 April 2014 (grant date), members of the board and senior management personnel are entitled to receive depository receipts of the Group from their 2013 bonus (both Netherlands and Foreign participation plans) and/or additional vacation rights (only the Netherlands).

The employee is entitled to buy depository receipts at a discount of between 13.5% and 20% of the grant date fair value of the depository receipt, for which additional depository receipts to the value of the discount provided are received. 

The Group is liable for employment tax obligations relating to the discount of the depository receipts. The foreign employee tax obligations is based on the fair value of the depository receipts on settlement date.

Key differences between the Netherlands and Foreign participation plans for the additional depository receipts:

• Netherlands: A service related vesting condition applies that the original value of the discount is repaid by the employee to the Group if the employee leaves within 3 years. All applicable depository receipts were issued within 2014.
• Foreign participation plan: A service related vesting condition applies that the employee will not be entitled to receive the additional depository receipts if employee leaves within 3 years. Depository receipts for foreign employees are held in custody by the company during the term and are issued to the foreign employees at settlement date. The total cost to company for the additional shares, including the cash-settled employee tax obligations, is limited to the total value of the discount provided.

During the 2014 year, 22 employees of the Netherlands, 6 employees of the United Kingdom and 2 employees of Germany participated in 2014 participation plans. A total number of 215,174 and 21,730 for the Netherlands and Foreign participation plan were granted respectively as part of the 2014 participation plans.

The fair value of the depository receipts at the grant date (16 April 2014), which is the first day after the shareholders approved the purchase of the depository receipts, represents the depository receipt value on Van Lanschot’s MTF trading platform of € 3.22 at grant date. The value of the employee tax benefit amounts to € 53 thousand, of which € 17 thousand (2014: € 35 thousand) has not vested.

There were no cancellations or modifications to the awards in 2015 or 2014.

Expense recognised in profit or loss

As the depository receipts for the employees of the Netherlands participation plan were fully issued in 2015 resp. 2014, the non-vested portion was not recognized within profit and loss, but rather as Other receivables within Trade and other receivables of € 462 thousand (2014: € 150 thousand) of which € 269 thousand was classified as current (2014: € 75 thousand as current). The cumulative share-based payment reserve relating to the Foreign participation plan amounts to € 23 thousand (2014: € 5 thousand).

Pre-2014 participation plan

As at 1 January 2014 the 2009 participation plan was still in place. The plan had a 5 year vesting period which ended during 2014. A total number of 135,911 depository receipts were granted at a value of € 1.74 per depository receipt excluding 12.5% discount which was settled with depository receipts.

An equity-settled share-based payment expense of € 6 thousand relating to the 2009 participation plan was recognized within profit and loss in 2014.

2.2.1.25 25. Loans and borrowings, including derivatives

Both the current and non-current portion of the secured bank loans as per 1 January 2014 has been fully repaid during the year 2014. During 2014 the Group entered into a new financing arrangement for which no short term repayment obligations exist as at 31 December 2015 (equal as per 31 December 2014) (see next Multicurrency revolving facility agreement).

Information about the Group’s exposure to interest rate, foreign currency and liquidity risk is included in note 29.

2.2.1.25.1

Unsecured bank loans

Multicurrency revolving facility agreement

In 2014 the Group concluded a new financing agreement (multicurrency revolving facility agreement) with ABN AMRO Bank, Rabobank, Lloyds Bank and BNP Paribas that is free from securities with which the previous financing arrangements of the Group by ABN AMRO Bank, Rabobank and Lloyds Bank were refunded. The agreement has a term up to 31 January 2020. The amount of the facility amounts to a maximum of € 300 million, consisting of € 200 million loan facility and € 100 million bank overdraft facility, of which a total nominal amount of GBP 40.0 million (€ 54.5 million)(31 December 2014: GBP 43.1 million (€ 55.3 million)) was used as at 31 December 2015. The interest on the financing is based on Euribor and/or Libor (depending on the currency that the facility is withdrawn) plus a margin between 0.7% and 2.1%. The margin depends on the leverage ratio; on the basis of the 2015 ratio the said margin amounts to 0.7% (2014: 0.7%).

Covenant guidelines

Existing guidelines for financial ratios

• Leverage ratio, that is determined by net debt divided by Normalised EBITDA. The leverage ratio shall not exceed 3.0; whereas in a maximum of three relevant but not consecutive periods during the duration of the agreement the leverage ratio is allowed to be between 3.0 and 3.5.
• Interest coverage ratio, that is determined by operating result (EBIT) divided by net interest expense and shall not be between zero and 4.0.

Net debt means the total amount of all debts to credit institutions and other financiers (including financial lease commitments) less cash and cash equivalents.

EBITDA means operating result as reflected from time to time in the consolidated financial statements after adding back any amount attributable to the amortisation or depreciation of assets.

Normalised EBITDA means, in respect of a relevant period, EBITDA for that relevant period adjusted by:

• Including EBITDA of a business combination acquired during the relevant period for that part of the relevant period prior to its becoming a business combination;
• Excluding EBITDA attributable to any member of the Group (or to any business) disposed of during the relevant period prior to its disposal unless the purchase price in relation to such disposal has not yet been received during the relevant period, in which case EBITDA of the disposed member of the Group or business shall be included in Normalised EBITDA provided that, in the event that the purchase price is partially (and not fully) received during the relevant period, EBITDA attributable to that member, calculated on a pro rata basis, shall be included in Normalised EBITDA.
• Including, at the election of the Company, extraordinary costs incurred in the relevant period related to the integration of business combinations acquired in the relevant period or the disentanglement of members of the Group or business disposed of in the relevant period provided that the aggregated amount of such costs does not exceed € 25 million at any time and € 10 million in any financial year of the Company and the Company delivers to the agent of the credit institutions that granted the facility, at the same time as the compliance certificate with regards to the covenant guidelines, specification of any such extraordinary costs.

Net interest expense means the net amount of financial income and expense less interest, commission, fees, discounts and other finance charges accrued in accordance with the applicable accounting standards during that relevant period.

As per 31 December 2015 the leverage ratio and interest coverage ratio amount both below zero (31 December 2014: negative 0.28 respectively 9.75) in accordance with then applicable accounting standards. Herewith ForFarmers fully complies with the terms and conditions of the covenants as per 31 December 2015 as well as per 31 December 2014.

Other unsecured loan facilities

ForFarmers Thesing has a financing agreement with Bremers Landesbank, free from securities, with a maximum amount of € 6 million. On this facility an amount of € 1.8 million (31 December 2014: € 1.4 million) has been used as bank overdraft with an interest of 2.47 % (2014: 1.393%).

2.2.1.25.2

Secured bank loans (redeemed)

Secured bank loan 1

In 2012 the Group concluded a term- and revolving facilities agreement with ABN AMRO Bank and Rabobank (expiry date of 31 March 2017). The maximum of the loan amounted € 120.0 million, of which € 64.0 million was used. The interest on the loan was based on Euribor plus a margin of 1.0% to 2.4%. The margin depended on the adjusted ratio between net interest-bearing debt and EBITDA (leverage ratio; maximum 3.5) and an interest coverage ratio (minimum 2.6).

The secured bank loan is secured with the following Mortgage-backed securities and rights of restraint:

• mortgage-backed security for a total amount of € 170.4 million;
• mandate mortgage on the real estate in Izegem, Belgium;
• first right of restraint on the shares in ForFarmers B.V.;
• first right of restraint on the machinery, stock and (trade) receivables;
• right of restraint on the tangible fixed assets of ForFarmers Langförden GmbH;
• right of restraint on the bank accounts of ForFarmers GmbH and ForFarmers Langförden GmbH
• right of restraint on the receivables of ForFarmers Langförden GmbH.

The Group complied with all conditions of the secured bank loan as per 1 January 2014.

For the first three years (until 31 March 2015), the variable part of the interest (Euribor) has been converted, by means of an interest rate swap, to a fixed interest rate of 1.095%, plus the supplements detailed above. The nominal value of this swap decreases from € 70.0 million to € 56.0 million in line with the redemption schedule.

For the period from 1 April 2015 to 31 March 2017, the variable part of the interest has been converted, by means of an interest rate swap, to a fixed interest rate of 2.13%, plus the supplements detailed above. The nominal value of this swap would decrease from € 32.4 million to € 24.0 million in line with the repayment schedule. The fair value of the swaps as per 31 December 2013 is negative € 1.3 million.

The swaps were terminated during 2014 since the secured bank loan was superseded by the new multicurrency revolving credit facility as disclosed under Unsecured bank loans. Furthermore no hedge accounting was applied in 2014 nor did the swaps have any cash-collateral obligations.

Secured bank loan 2

In 2011 the Group concluded a financing agreement with Lloyds Banking Group (expiry date 31 December 2015). The maximum of the loan amounted € 103 million (GBP 86 million), of which € 70.0 million (GBP 58.4 million) as at 1 January 2014 was used.

• mortgage-backed security on the tangible fixed assets of ForFarmers UK;
• right of restraint on receivables of ForFarmers UK.

The Group complied with all conditions of the secured bank loan as per 1 January 2014.

The variable interest on the loan is Libor plus 1.95% to 2.50%. The interest was, by means of interest rate swap, fixed to Libor at 0.79% for the period till September 2015, with a nominal amount of € 48 million (GBP 40 million). The fair value of the swap as per 31 December 2014 amounted to € 96 thousand negative (1 January 2014: € 16 thousand negative). During 2014 and 2015 no hedge accounting was applied for this swap.

2.2.1.25.3

Finance lease liabilities

Finance lease liabilities are payable as follows:

The decrease of the future lease payments has been caused by assets that were leased in the past and are now purchased by the company. This mainly concerns vehicles. 

2.2.1.26 26. Employee benefits

Separate employee benefit plans are applicable in the various countries where the Group operates.

The Netherlands

In the Netherlands the employees of different subsidiaries were covered by two post-employment plans in 2015 and 2014. An insured defined benefit plan was in place for (former) employees of Hendrix, which have been acquired by the Group in 2012. Furthermore, an insured defined contribution plan was in place for (former) ForFarmers employees.

Under the defined benefit plan the Group was exposed to actuarial risks related to the guarantee premium that was to be settled even after the termination of the insurance contract. The commitments under the plan were calculated on the basis of actuarial calculations, with discounting at the applicable discount rate. The defined benefit plan was partly funded. As per 31 December 2014, two plan amendments were taken into account that came into effect as per 1 January 2015. The plan amendments related to the decrease of the accrual rate (from 2.0% to 1.875%) in the plan and the maximization by law of the pensionable salary (€ 100,000). The plan amendments had a positive impact on the past-service costs in 2014 of € 3,023 thousand.

In 2015, the Group initiated a plan to harmonize the post-employment plans applicable for the Dutch subsidiaries. As a result, effective per 1 January 2016, the Group entered into a new post-employment plan that is applicable for all Dutch employees, leaving all post-employment rights accrued until December 31, 2015 in the old post-employment plans.

Therefore, both former pension plans are closed as of 31 December 2015. From that date, pension rights will be accrued under the new plan on the basis of collective defined contribution. An insurance company administers the obligations under that plan. As of that date no further obligations will remain under the former ForFarmers post-employment plan. Under the former Hendrix post-employment plan, for the pension rights accrued up to December 31, 2015, the Group will remain committed to pay the related guarantee premiums and as such accounts for the plan as a defined benefit plan.

The closing of the post-employment plans resulted in a settlement expense of € 393 thousand in 2015.

Together with the new pension plan, the Group has also agreed on a defined contribution plan for employees with a salary above € 52,763. An insurance company will be administering the obligations under both plans as of 1 January 2016.

The net liability related to the defined benefit plans in The Netherlands per 31 December 2015 amounts to € 11,753 thousand (31 December 2014: € 13,097 thousand; 1 January 2014: € 10,502 thousand).

Germany / Belgium

The German subsidiaries have, for a limited number of people, an in-house defined benefit plan that is already closed so no new obligations are being incurred. The commitments were calculated on the basis of actuarial calculations in the course of which the applicable discount rate was taken into account. Actuarial results are recorded directly into equity as other comprehensive income. The German defined benefit plan is unfunded.

In addition to the in-house defined benefit plan, a defined contribution plan is in place for all other employees of the German subsidiaries. The Belgium subsidiaries only have defined contribution plans for their employees.

The net liability related to the defined benefit plans in Germany per 31 December 2015 amounts to € 5,307 thousand (31 December 2014: € 5,756 thousand; 1 January 2014: € 4,854 thousand).

United Kingdom

In the UK, two defined benefit plans exists. A net defined benefit liability has been recorded in the consolidated balance sheet for the obligations under these plans. The pension assets have been valued at current value. The obligations have been calculated on the basis of actuarial calculations, with discounting at the applicable discount rate. Actuarial results are recorded directly into equity as other comprehensive income.

The first plan relates to (former) employees of BOCM PAULS which have been acquired by the Group in 2012. As per 1 October 2006, this plan was closed, so no new obligations are being incurred. From that date, a new plan exists on the basis of defined contribution. An insurance company administers the obligations under that plan. The second plan is a small defined benefit plan that relates to (former) employees of HST Feeds which have been acquired by the Group in 2014. Also for this plan no new post-employment rights are being built up. Both defined benefit plans in the UK are fully funded plans, for which the funding requirements are based on the pension fund’s actuarial measurement framework set out in the funding policies of the plan.

The net liability related to the defined benefit plans in the United Kingdom per 31 December 2015 amounts to € 50,156 thousand (31 December 2014: € 52,360 thousand; 1 January 2014: € 42,967 thousand).

2.2.1.26.1

Movement in net defined benefit (asset) liability

The following table shows a reconciliation from the opening balance to the closing balances for net defined benefit liability and its components.