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Accounting report
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NAPREJ

ACCOUNTING REPORT OF THE GORENJE GROUP

Consolidated financial statements

Consolidated Income Statement of the Gorenje Group download

EURk Note 2013 2014
Revenue 12 1,240,482 1,245,553
Change in inventories   -26,122 -12,042
Other operating income 13 34,517 21,468
       
Gross profit   1,248,877 1,254,979
       
Cost of goods, materials and services 14 -910,516 -919,501
Employee benefits expense 15 -237,914 -227,586
Amortisation and depreciation expense 16 -41,875 -42,989
Other operating expenses 17 -22,242 -21,396
       
Operating profit   36,330 43,507
       
Finance income 18 7,547 8,668
Finance expenses 18 -61,929 -47,381
Net finance expenses 18 -54,382 -38,713
       
Share in profits or losses of associates   -592 65
       
Profit or loss before tax    -18,644 4,859
       
Income tax expense 19 4,219 -2,624
       
Profit or loss without discontinued operation   -14,425 2,235
Loss of discontinued operation 10 -10,574 -996
Profit or loss for the period   -24,999 1,239
Attributable to non-controlling interests   225 220
Attributable to equity holders of the parent   -25,224 1,019
Basic or diluted earnings per share without discontinued operation (in EUR)   -0.88 0.09
Basic or diluted earnings per share (in EUR) 33 -1.51 0.04

Consolidated Statement of Other Comprehensive Income of the Gorenje Group download

EURk Note 2013 2014
Profit or loss for the period    -24,999 1,239
Other comprehensive income      
Items that will not be reclassified subsequently to profit or loss   -1,262 0
Change in fair value of land 21 -1,262 0
Items that may be reclassified subsequently to profit or loss   -9,003 -11,260
Net change in fair value of available-for-sale financial assets    -153 -41
Change in effective portion of gains and losses on hedging instruments in a cash flow hedge   -72 -145
Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss 18 2,465 2,472
Net change in fair value arising on exchange differences from investments in subsidiaries, reclassified to profit or loss   -711 0
Income tax on other comprehensive income 26 -236 -381
Translation reserve   -10,296 -13,165
Other comprehensive income for the period    -10,265 -11,260
Total comprehensive income for the period    -35,264 -10,021
Attributable to equity holders of the parent    -35,489 -10,241
Attributable to non-controlling interests   225 220

Consolidated Balance Sheet of the Gorenje Group  download

EURk Note 2013 2014
ASSETS   1,148,065 1,102,398
       
Non-current assets   593,890 593,281
 Intangible assets 20 167,882 181,597
 Property, plant and equipment 21 356,552 355,962
 Investment property 22 28,129 18,931
Non-current investments 23 5,527 4,145
Investments in associates 24 711 1,122
Non-current trade receivables 25 10,559 6,801
Deferred tax assets 26 24,530 24,723
       
Current assets   554,175 509,117
Non-current assets held for sale   1,655 1,648
Inventories 27 235,767 219,389
Current investments  28 17,202 20,461
Trade receivables 29 205,581 180,380
Other current assets 30 45,859 43,216
Income tax receivable    2,756 3,034
Cash and cash equivalents  31 38,589 35,843
Assets included in disposal groups  10 6,766 5,146
       
EQUITY AND LIABILITIES   1,148,065 1,102,398
       
Equity 32 380,670 380,267
 Share capital   92,240 101,922
 Share premium   175,568 175,698
 Revenue reserves   95,818 99,301
 Treasury shares    -3,170 -3,170
 Profit or loss for the period   -26,711 -2,464
 Profit or loss from previous years   39,540 12,829
 Translation reserve    -4,435 -17,600
 Fair value reserve   9,007 10,912
Equity of holders of the parent   377,857 377,428
Equity of non-controlling interests   2,813 2,839
       
Non-current liabilities   278,973 347,693
Provisions 34 66,671 63,453
Deferred income 35 5,081 5,270
Non-current operating liabilities  36 5,773 5,912
Deferred tax liabilities 26 2,694 2,988
Non-current financial liabilities 37 198,754 270,070
       
Current liabilities   488,422 374,438
Current financial liabilities 38 198,659 97,536
Trade payables 39 213,820 202,473
Other current liabilities 40 71,001 70,627
Deferred tax liabilities   1,243 1,689
Liabilities included in disposal groups 10 3,699 2,113

Consolidated Statement of Cash Flows of the Gorenje Group download

EURk Note 2013 2014
A. CASH FLOWS FROM OPERATING ACTIVITIES      
Profit or loss for the period   -24,998 1,239
Adjustments for:      
-depreciation of property, plant and equipment  21 10 35,436 35,950
-amortisation of intangible assets  20 10 6,705 7,069
-investment income 18 10 -7,571 -8,750
-finance expenses 18 10 68,832 47,422
-gain on sale of property, plant and equipment 13 10 -4,859 -288
-gain on sale of investment property 13 10 -51 -83
-revaluation operating income  13 10 -6,851 0
-income tax expense 19 10 -4,219 2,624
Operating profit before changes in net operating current assets and provisions   62,424 85,183
Change in trade and other receivables    5,620 20,196
Change in inventories   12,642 16,552
Change in provisions   3,786 -4,452
Change in trade and other payables   -8,716 -19,483
Cash generated from operations   13,332 12,813
Interest paid   -21,574 -21,526
Income tax paid   -3,437 -4,048
Net cash from operating activities   50,745 72,422
       
B. CASH FLOWS FROM INVESTING ACTIVITIES      
Proceeds from sale of property, plant and equipment   14,482 5,477
Proceeds from sale of investment property   9,250 3,274
Interest received    2,547 1,793
Dividends received   -495 120
Disposal of subsidiary   0 10
Acquisition of property, plant and equipment   -60,928 -40,371
Acquisition of investment property   -7,304 -9
Other investments   -432 -3,258
Acquisition of intangible assets   -15,678 -21,264
Net cash used in investing activities   -58,558 -54,228
       
C. CASH FLOWS FROM FINANCING ACTIVITIES      
Capital increase    25,855 9,812
Interest-bearing borrowings   90,954 168,496
Repayment of borrowings   -124,084 -272,940
Bonds issued   0 73,000
Net cash used in financing activities   -7,275 -21,632
Net change in cash and cash equivalents   -15,088 -3,438
Cash and cash equivalents at beginning of period   54,588 39,500
Cash and cash equivalents at end of period   39,500 36,062

 

Consolidated Statement of Changes in Equity of the Gorenje Group download

EURk Share capital Share premium Revenue reserves Treasury shares Retained earnings Trans-lation reserve Fair value reserve Equity holders of the parent Non-controlling interests Total 
Legal reserves Statutory reserves Treasury share reserve Other revenue reserves Profit or loss from previous periods Profit or loss for the period
Opening balance at 1 Jan 2013 66,378 175,575 12,896 6,653 3,170 71,612 -3,170 25,395 14,145 5,861 8,976 387,491 2,352 389,843
Total comprehensive income for the period                            
Profit for the period                 -25,224     -25,224 225 -24,999
Total other comprehensive income                    -10,296 31 -10,265   -10,265
Total comprehensive income for the period 0 0 0 0 0 0 0 0 -25,224 -10,296 31 -35,489 225 -35,264
Transactions with owners (when acting as owners) recognised directly in equity                             
Contributions by owners and distribution to owners                            
Capital increase 25,862 849                   26,711   26,711
Costs of capital increase    -856                   -856   -856
Transfer of previous period’s profit to retained earnings               14,145 -14,145     0   0
Transfer of part of profit for 2013 to other reserves           1,217     -1,217     0   0
Creation of statutory reserves       270         -270     0   0
Total contributions by owners and distributions to owners 25,862 -7 0 270 0 1,217 0 14,145 -15,632 0 0 25,855 0 25,855
Change in equity interests in subsidiaries that do not result in a loss of control                            
Change in equity interests                       0 236 236
Total changes in equity interests in subsidiaries  0 0 0 0 0 0 0 0 0 0 0 0 236 236
Total transactions with owners 25.862 -7 0 270 0 1.217 0 14.145 -15.632 0 0 25.855 236 26.091
Closing balance at 31 Dec 2013 92.240 175.568 12.896 6.923 3.170 72.829 -3.170 39.540 -26.711 -4.435 9.007 377.857 2.813 380.670
EURk Share capital Share premium Revenue reserves Treasury shares Retained earnings Trans-lation reserve Fair value reserve Equity holders of the parent Non-controlling interests Total 
Legal reserves Statutory reserves Treasury share reserve Other revenue reserves Profit or loss from previous periods Profit or loss for the period
Opening balance at 1 Jan 2014 92,240 175,568 12,896 6,923 3,170 72,829 -3,170 39,540 -26,711 -4,435 9,007 377,857 2,813 380,670
Total comprehensive income for the period                            
Profit for the period                 1,019     1,019 220 1,239
Total other comprehensive income  0 0 0 0 0 0 0 0 0 -13,165 1,905 -11,260 0 -11,260
Total comprehensive income for the period 0 0 0 0 0 0 0 0 1,019 -13,165 1,905 -10,241 220 -10,021
Transactions with owners (when acting as owners) recognised directly in equity                             
Contributions by owners and distribution to owners                            
Capital increase 9,682 318                   10,000   10,000
Costs of capital increase    -188                   -188   -188
Transfer of previous period’s profit to retained earnings               -26,711 26,711          
Transfer of part of profit for 2014 to other reserves           2,850     -2,850          
Creation of statutory reserves       633         -633          
Total contributions by owners and distributions to owners 9,682 130 0 633 0 2,850 0 -26,711 23,228 0 0 9,812 0 9,812
Change in equity interests in subsidiaries that do not result in a loss of control                            
Change in equity interests                         -194 -194
Total changes in equity interests in subsidiaries  0 0 0 0 0 0 0 0 0 0 0 0 -194 -194
Total transactions with owners 9,682 130 0 633 0 2,850 0 -26,711 23,228 0 0 9,812 -194 9,618
Closing balance at 31 Dec 2014 101,922 175,698 12,896 7,556 3,170 75,679 -3,170 12,829 -2,464 -17,600 10,912 377,428 2,839 380,267

 

 

Notes to the Consolidated Financial Statements

1. Reporting entity

Gorenje, d.d. (hereinafter referred to also as “Company”) is the controlling company Homeiciled in Slovenia. The address of the Company’s registered office is Partizanska 12, 3503 Velenje. The consolidated financial statements of Gorenje, d.d. at and for the year ended 31 December 2014 comprise the controlling company and its subsidiaries (together referred to as the “Group”), the Group’s interests in jointly controlled entities and the Group’s interests in associates. The Group is primarily engaged in the production and sale of household appliances.

2. Basis of preparation

(a) Statement of compliance

 

The consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union and with provisions of the Companies act. The Management Board approved the financial statements on 3 March 2015.

 

(b) Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis, except for the following items which are measured at fair value:

  • derivative financial instruments,
  • available-for-sale financial assets,
  • land,
  • investment property.

The methods used to measure fair values are discussed further in Note 4.

 

(c) Functional and presentation currency

 

These consolidated financial statements are presented in EUR, which is the parent company’s functional currency. All financial information presented in EUR has been rounded to the nearest thousand, except when otherwise indicated.

 

(d) Use of estimates and judgements

 

The preparation of financial statements in conformity with IFRSs, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about significant estimation of uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

  • Note 19 and 26 – deferred taxes;
  • Note 21 and 22 and accounting policies 3(d) and 3(f) – valuation of property, plant and equipment and investment property;
  • Note 34 and accounting policy 3(l) (iv) - measurement of liabilities for retirement benefits and jubilee premiums;
  • Note 34 and accounting policy 3(l) (iii) – provisions for onerous contracts;
  • Note 34 and accounting policy 3(l) (i) – provisions for warranties;
  • Note 42 and accounting policy 3 (i) (i) – valuation of investments;
  • Note 20 and accounting policy 3 (e) (i) – goodwill;
  • Accounting policy 3(i) (i) - impairment of financial assets, including receivables.

(e) Changes in accounting policies

 

The Group has not changed its accounting policies in 2014, except where necessary due to the amendments to IFRSs.

3. Significant accounting policies

The accounting policies set out below have been applied consistently by Group companies to all periods presented in these consolidated financial statements.

 

(a) Basis for consolidation

 

(i) Business combinations

 

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that currently are exercisable.

 

The Group measures goodwill at the acquisition date as:

  • the fair value of the consideration transferred;plus
  • the recognised amount of any non-controlling interests in the acquiree; plus
  • if the business combination is achieved in stages, the fair value of the pre-existing equity interest in the acquiree; less
  • the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

 

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts generally are recognised in the income statement.

 

Transactions costs, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

 

Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then it is not remeasured and settlement

is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration are recognised in the income statement.

 

When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

 

Recognised value of the non-controlling interest can initially be measured at fair value or at the proportionate share of assumed assets and liabilities as at the date of the transfer. At each transfer, the Group decides which possibility is to be used.

 

(ii) Acquisition of non-controlling interests

 

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

 

(iii) Subsidiaries

 

Subsidiaries are entities controlled by the Group. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

 

The accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

 

(iv) Loss of control

 

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Remeasurment of the residual amount to fair value has an impact on the income statement. Subsequently it is accounted for as an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

 

(v) Investments in associates and joint ventures (equity-accounted investees)

 

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20 and 50 percent of the voting power of another entity. Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions.

 

Investments in associates and jointly controlled entities are accounted for using the equity method and are recognised initially at cost. The cost of the investment includes transaction costs.

 

The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income, after adjustments to align the accounting policies with those of the Group, from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.

 

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation or has made payments on behalf of the investee.

 

(vi) Transactions eliminated on consolidation

 

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity- accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

 

(b) Foreign currency

 

(i) Foreign currency transactions

 

Transactions in foreign currencies are translated to the respective functional currencies of Group companies at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

 

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction.

 

Foreign currency differences arising on retranslation are recognised in the income statement, except for differences arising on the retranslation of:

  • available-for-sale equity investments,
  • a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective, or
  • qualifying cash flow hedges to the extent that the hedge is effective.

(ii) Foreign operations

 

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on consolidation, are translated to euro at exchange rates at the reporting date. The income and expenses of foreign operations, excluding foreign operations in hyperinflationary economies, are translated to euro at average exchange rates applicable at the date of translation.

 

Foreign currency differences arising from translation are recognised directly in other comprehensive income. From the date of transfer to IFRSs, these differences are recognised in translation reserve in equity. When a foreign operation is disposed of (partly or wholly), the relevant amount in the translation reserve related to that foreign operation is reclassified to profit or loss.

 

(c) Financial instruments

 

(i) Non-derivative financial assets

 

The Group initially recognises loans, receivables, and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

 

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

 

Financial assets and liabilities are offset and the net amount presented in the balance sheet when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

Non-derivative financial assets of the Group comprise: liabilities and receivables, available-for-sale financial assets, and cash and cash equivalents.

 

Liabilities and receivables

 

Liabilities and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, liabilities and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and an investment (deposit) with maturity (of three months or less). Bank overdrafts that are repayable on demand form an integral part of the current financial liabilities.

 

Available-for-sale financial assets

 

Available-for-sale financial assets are non-derivative financial assets that are designated as available for sale or are not classified in any of the above categories of financial assets. Subsequent to initial recognition they are measured at fair value plus any directly attributable transaction costs.

 

Change in fair value (see note 3(i)(i)) and foreign currency differences on available-for-sale debt instruments (see note 3(b)(i)), are recognised in other comprehensive income and presented in the fair value reserve in equity. When an available- for-sale financial asset is derecognised or permanently impaired, the gain or loss accumulated in equity is reclassified to profit or loss. Available-for-sale financial assets comprise equity securities and debt securities.

 

(ii) Non-derivative financial liabilities

 

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

 

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire.

 

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

 

Other financial liabilities comprise loans and borrowings, bank overdrafts, and trade and other payables.

 

(iii) Share capital

 

Ordinary shares

 

Ordinary shares are a constituent part of share capital. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

 

Repurchase of share capital (treasury shares)

 

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in equity as a deduction item and simultaneously treasury share reserve is formed. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.

 

Dividends are recognised as a liability in the period in which a resolution on dividend payment is adopted by the Shareholders' Meeting.

 

(iv) Derivative financial instruments, including hedge accounting

 

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

 

On initial designation of the derivative as the hedging instrument, the Group formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80 – 125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

 

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

 

Cash flow hedges

 

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

 

When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified in profit or loss.

 

Other derivative financial instruments

 

When a non-trading derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.

 

(d) Property, plant and equipment

 

(i) Recognition and measurement

 

Items of property (excluding land), plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs. Computer software purchased, which significantly contribute to the functionality of assets are to be capitalised as part of this equipment.

 

Borrowing costs directly attributable to the construction or production of a qualifying item of property, plant and equipment were capitalised subject to the following conditions: if the value of qualifying asset in total sales exceeded 5%, and if the duration of construction exceeded 6 months.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

Fair value model or revaluation model is applied to land. The effect of revaluation is recorded in other comprehensive income. Impairment of land previously increased in value results in a decrease in revaluation surplus in other comprehensive income; otherwise, it is recognised in the income statement.

 

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognised net within other income/other expenses in profit or loss.

 

(ii) Reclassification to investment property

 

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on remeasurement of fair value is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the fair value reserve in equity.

 

(iii) Subsequent costs

 

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. All other costs, such as day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

 

(iv) Depreciation

 

Depreciation is recognised on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Land is not depreciated.

 

Items of property, plant and equipment are depreciated from the date that they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

 

The estimated useful lives for the current and comparative years are as follows: 

buildings

20 - 50 years

plant and equipment

5 - 20 years

computer equipment

2 - 5 years

transportation vehicles (assets)

3 - 20 years

office equipment

3 - 10 years

tools

3 - 10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if appropriate.

 

(e) Intangible assets

 

(i) Goodwill

 

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, see Note 3(a)(i).

 

Subsequent measurement

 

Goodwill is measured at cost less accumulated impairment losses.

 

(ii) Research and development

 

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

 

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, other costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

 

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

 

(iii) Other intangible assets

 

Intangible assets with infinite useful lives (trademarks) are tested once a year whether the need for impairment has occurred. Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

 

(iv) Subsequent expenditure

 

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

 

(v) Amortisation

 

Amortisation is recognised on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use. The estimated useful lives for the current and comparative years are as follows:

capitalised development costs

5 - 10 years

long-term property rights

5 - 10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

(f) Investment property

 

Investment property is property held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is measured at fair value (see note 4(iii)) with any change therein recognised in profit or loss.

 

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use and capitalised borrowing costs.

 

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

 

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting.

 

(g) Leased assets

 

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

 

Other leases are operating leases and are not recognised in the Group’s balance sheet.

 

(h) Inventories

 

Inventories measured at the lower of historical cost and net realisable value. The cost of inventories is based on the weighted average price method and includes expenditure incurred in acquiring the inventories, dependent costs and other costs incurred in bringing them to their existing location and condition.

 

Inventories of products and work in progress are valued at production costs (in broader sense), which in addition to direct costs of material, labour, services, depreciation and part of production costs, include also costs of production overheads, acquisition costs, costs of maintenance and quality assurance overheads, and total costs of research and development.

 

Inventories of work in progress and products are not revalued due to value increase. Their write-off is mandatory if the carrying amount exceeds their market value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Decline in value of inventories of work in progress and products due to write-off, is credited against change in inventories.

 

(i) Impairment

 

(i) Non-derivative financial assets

 

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

 

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on term that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Group, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant prolonged decline in its fair value below its cost is objective evidence of impairment.

 

Financial assets measured at amortised cost

 

The Group considers evidence of impairment for financial assets measured at amortised cost (loans and receivables and held-to-maturity investment securities) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together with similar risk characteristics.

 

In assessing collective impairment the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

 

In line with the Accounting Manual, the Group considers evidence of impairment for receivables based on the observance of criteria pertaining to the maturity and collateralisation of receivables. Thereafter, it is corrected by an individual estimate.

 

Available-for-sale financial assets

 

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income..

 

If, in a subsequent period, the fair value of an impaired available- for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

 

(ii) Non-financial assets

 

The carrying amounts of the Group’s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite-lived intangible assets are tested annually for impairment prior to preparing the financial statements. An impairment loss is recognised if the carrying amount of an asset or cash-generating unit (CGU) exceeds its recoverable amount.

 

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

 

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

(j) Non-current assets held for sale or distribution

 

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale or distribution rather than through continuing use, are classified as held for sale or distribution. Immediately before classification as held for sale or distribution, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale or distribution and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

 

Once classified as held for sale or distribution, intangible assets and property, plant and equipment are not amortised or depreciated and any equity-accounted investees is no longer equity accounted.

 

(k)Employee benefits

 

(i) Short-term employee benefits

 

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

 

(l) Provisions

 

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance expenses.

 

(i) Warranties for products and services

 

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

 

(ii) Restructuring

 

A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating expense is not provided for.

 

(iii) Onerous contracts

 

A provision for onerous contracts is recognised when the expected benefits to be derived by the Group from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Group recognises any impairment loss on the assets associated with that contract.

 

(iv) Provisions for retirement benefits and jubilee premiums

 

In accordance with the statutory requirements, the collective agreement, and the internal regulations, the Group is liable to pay jubilee premiums and retirement benefits to its employees. For these obligations, provisions are created.

 

Provisions are created by discounting, at the reporting date, the estimated future payments of retirement benefits and jubilee premiums. The obligation is calculated separately for each employee by estimating the costs of retirement benefits and the costs of all expected jubilee premiums until retirement. The balance of provisions is verified every three years on the basis of the calculation prepared by a certified appraiser.

 

As from 1 January 2013, actuarial gains and losses arising on provisions for retirement benefits and jubilee premiums are recognised in other comprehensive income in compliance with the amended IAS 19. Company’s accounting policy was changed as required under the stated amendments to IAS 19. Management assesses that the relevant change has no significant impact on the company’s financial statements for the current and previous period, hence no retrospective restatement is required.

 

(v) Site restoration

 

In accordance with the Group’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognised when the land is contaminated.

 

(m) Revenue

 

(i) Revenue from the sale of products, goods and materials

 

Revenue from the sale of products, goods and materials in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when persuasive evidence exists that the significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

 

The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of goods, usually transfer occurs when the goods are received at the customer’s warehouse; however, for some international shipments transfer occurs upon loading the goods onto the relevant carrier at the port. Generally for such products the customer has no right of return.

 

(ii) Revenue from services rendered

 

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.

 

(iii) Commission

 

When the Group acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Group.

 

(iv) Rental income

 

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from subleased property is recognised as other income.

 

(n) Government grants

 

Government grants are recognised initially as deferred income when there is reasonable assurance that they will be received and the Group will comply with the conditions associated with the grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Group for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised.

 

(o) Finance income and finance expenses

 

Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available- for-sale financial assets, fair value gains on financial assets at fair value through profit or loss, exchange gains, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the shareholder’s right to receive payment is established, which in the case of quoted securities is normally the ex-dividend date.

 

Finance expenses comprise interest expense on borrowings (a portion of borrowing costs may be capitalised within property, plant and equipment), foreign exchange losses, impairment losses recognised on financial assets, and losses on hedging instruments that are recognised in profit or loss. All borrowing costs are recognised in the income statement using the effective interest method, except for borrowing costs related to qualifying assets which are recognised as part of the cost of such assets.

 

Foreign currency gains and losses are reported on a net basis as either finance income or finance expenses.

 

(p) Income tax

 

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

  • temporary differences on the initial recognition of assets or 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 and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and
  • taxable temporary differences arising on the initial recognition of goodwill.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted.

 

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

(r) Basic earnings per share

 

The Group presents basic earnings per share (EPS) data for its ordinary shares, which is equivalent to diluted earnings per share data, as the Group has not issued any preference shares or convertible bonds. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period.

 

(s) Comparative information

 

Comparative information has been harmonised with the presentation of information in the current year. Where required, adjustment of comparative information has been carried out in order to comply with the presentation of information in the current year.

 

(t) Assets held for sale or held for distribution, and discontinued operations

 

(i) Discontinued operations

 

A discontinued operation is a component of the Group’s business, the operations and cash flows of which can be clearly distinguished from the rest of the Group and which:

  • represents a separate major line of business or geographical area of operations,
  • is part of a single co-ordinated plan to dispose of a separate major line of business or geographical area of operations; or
  • is a subsidiary acquired exclusively with a view to re-sale.

Classification as a discontinued operation occurs on disposal or when the operation meets the criteria to be classified as held-for-sale, if earlier. When an operation is classified as a discontinued operation, the comparative statement of comprehensive income is re-presented as if the operation had been discontinued from the start of the comparative year.

 

(u) Segment reporting

 

Segment results that are reported to the Group’s executive officer include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Group’s headquarters), head office expenses, and tax assets and liabilities..

 

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

 

(v) Standards and interpretations applicable in the current period

 

Following standards, amendments to existing standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the EU apply:

  • IFRS 10 ‘Consolidated Financial Statements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IFRS 11 ‘Joint Arrangements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IFRS 12 ‘Disclosure of Interests in Other Entities’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IAS 27 (amended in 2011) ‘Separate Financial Statements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IAS 28 (amended in 011) ‘Investments in Associates and Joint Ventures’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of Interests in Other Entities’ - Transition Guidance, adopted by the EU as at 4 April 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 27 (amended in 2011) ‘Separate Financial Statements’ - Investment Entities, adopted by the EU as at 20 November 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 32 ‘Financial Instruments: Presentation’ – Offsetting Financial Assets and Financial Liabilities, adopted by the EU as at 13 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 36 ‘Impairment of Assets’ Recoverable Amount Disclosures for Non-Financial Assets, adopted by the EU as at 19 December 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ – Novation of Derivatives and Continuation of Hedge Accounting, adopted by the EU as at 19 December 2013 (effective for annual periods beginning on or after 1 January 2014).

Adoption of the relevant amendments to the existing standards did not result in any change of the Company's accounting policies.

 

(z) New standards and interpretations not yet adopted

 

The following new standards and interpretations are not yet effective for the annual period ended 31 December 2014 and have not been applied in preparing the financial statements hereunder: 

  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2010-2012 Cycle’ (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38), in response to eliminate inconsistency and provide clarification of wording in IFRSs, which were adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015)
  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2011-2013 Cycle’ (IFRS 1, IFRS 3, IFRS 13 and IAS 40), in response to eliminate inconsistency and provide clarification of wording in IFRSs, which were adopted by the EU on 18 December 2014 (effective for annual periods beginning on or after 1 January 2015),
  • Amendments to IAS 19 ‘Employee Benefits’ - Defined Benefit Plans: Employee Contributions, which were adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015),
  • IFRIC 21 ‘Levies’, which was adopted by the EU on 13 June 1014 (effective for annual periods beginning on or after 17 June 2014).

Standards and interpretations issued by the IASB but not yet adopted by the EU

 

At present the IFRSs, as adopted by the EU, do not significantly differ from regulations adopted by IASB, except for following standards, amendments to existing standards and interpretations, which as of the date of approval of financial statements were not yet effective in EU:

  • IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 1 January 2018),
  • IFRS 14 'Regulatory Deferral Accounts' (effective for annual periods beginning on or after 1 January 2016),
  • IFRS 15 'Revenue from Contracts with Customers' (effective for annual periods beginning on or after 1 January 2017),
  • Amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures' - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IFRS 10 'Consolidated Financial Statements', IFRS 12 ' Disclosure of Interests in Other Entities ' and IAS 28 'Investments in Associates and Joint Ventures' – Investment Entities: consolidation exceptions (effective for annual periods beginning on or after 1 January 2016), 
  • Amendments to IFRS 11 'Joint Arrangements' – Accounting for acquisitions of interests in joint operations (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 1 'Presentation of Financial Statements' – Disclosure initiative (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 16 'Property, Plant and Equipment' and IAS 38 'Intangible Assets' – Clarification of acceptable methods of depreciation and amortisation (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 16 'Property, Plant and Equipment' and IAS 41 'Agriculture' - Agriculture: Bearer Plants (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 27 'Separate Financial Statements' – Equity method at separate financial statements (effective for annual periods beginning on or after 1 January 2016),
  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2012-2014 Cycle' (IFRS 5, IFRS 7, IFRS 19 and MRS 34), in response to eliminate inconsistency and provide clarification of wording in IFRSs (effective for annual periods beginning on or after 1 January 2016).

The Group does not expect the new standards, amendments to existing standards and interpretations to have a material impact on the financial statements during the early application.

 

In addition, hedge accounting in connection with financial assets and liabilities that was not adopted by the EU yet, remains non-regulated.

 

The Group assesses that hedge accounting in connection with financial assets and liabilities pursuant to provisions of IAS 39: »Financial Instruments: Recognition and Measurement « would not significantly impact the Group’s consolidated financial statements if applied as at the balance sheet date.

4. Determination of fair value

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

(i) Property, plant and equipment

 

The fair value of property, plant and equipment recognised as a result of a business combination is the estimated amount for which a property could be exchanged on the date of acquisition between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably.

 

A revaluation of land is based on the independent valuer’s report by applying the comparable sales method and is carried out every five years. The Group examines, on an annual basis, if revaluation of land is required.

 

(ii) Intangible assets

 

The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned.

 

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.

 

(iii) Investment property

 

An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Group’s investment property portfolio every five years, whereas in the interim period the need for revaluation is being assessed. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

 

In the absence of current prices in an active market, the valuations are prepared by considering the estimated rental value of the property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents.

 

Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Group and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-notices, have been served validly and within the appropriate time.

 

(iv) Investments in debt and equity securities

 

The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market-related discount rate.

 

(v) Trade and other receivables

 

The fair value of non-current trade and other receivables is estimated at the present value of future cash flows, discounted at the market rate of interest at the reporting date.

 

Trade and other receivables are not discounted due to shortterm maturity. However, impairment to fair value is considered.

 

(vi) Forward exchange contracts and interest rate swaps

 

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a credit-adjusted risk-free interest rate (based on government bonds).

 

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

 

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and counterparty when appropriate.

 

(vii) Other non-derivative financial liabilities

 

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases the market rate of interest is determined by reference to similar lease agreements.

5. Capital management

The fundamental purpose of Gorenje Group's capital management is to maintain capital adequacy. Within the framework of capital management, following objectives are, in addition to capital adequacy, followed: long-term liquidity, high financial stability, and achievement of the highest possible value for Gorenje's stakeholders.

 

The strategic policy of reducing financial debt was pursued in 2014 as well. The net financial debt/equity ratio was improved by means of successful performance and a sound management of working capital. The Gorenje Group improved also the return on equity ratio calculated as the profit for the period attributable to parent company's owners and the average value of equity attributable to parent company's owners.

 

Capital adequacy, long-term liquidity, and sound financial stability was enhanced through the successfully completed share capital increase in the Gorenje Group in the total amount of EUR 36,711,446.74, whereof by EUR 10,000,000 in 2014 and by EUR 26,711,444.81 in 2013.

EURk

Note

2013

2014

Non-current financial liabilities

37

198,754

270,070

Current financial liabilities

38

198,659

97,536

Total financial liabilities

 

397,413

367,606

Total equity

32

380,670

380,267

Debt / equity

 

1.04

0.97

Cash and cash equivalents

31

38,589

35,843

Total net financial liabilities

 

358,824

331,763

Net debt / equity

 

0.94

0.87

Operating profit or loss

 

-24,999

1,239

Return on equity - ROE (%)

 

-6.5 %

0.3 %

6. Segment reporting

Business segments

 

The Group consists in 2014 of two key business segments i.e. Home and Portfolio Investments, which includes in 2012 also the separately disclosed business segment Ecology in compliance with the updated Strategic Plan for the period until 2018. The new classification of business segments, which was adopted upon the updated strategic plan (Home and Portfolio Investments) reflects strategic decisions pursuant to which Gorenje shall in future focus more on the core business activity.

 

(i) Business Segment Home

 

Business Segment Home: the manufacture and sale of household appliances of own manufacture, the sale of household appliances of other producers (supplementary programme), the sale of products from the complementary programme outside of the three main programmes of large household appliances, the manufacture and sale of heating appliances of own manufacture, the manufacture of mechanical components, the manufacture and sale of sanitary fixtures and ceramic tiles, and the sale of kitchen and bathroom furniture.

 

(ii) Business Segment Portfolio Investments

 

Business Segment Portfolio Investments: the overall waste management, tool manufacture, trade, engineering, representation, catering and tourism.

 

Geographical segments

 

In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

 

The Group comprises the following main geographical segments:

 

Western Europe: Austria, Germany, Italy, France, Denmark, Sweden, Belgium, Finland, Great Britain, Greece, Norway, the Netherlands, Spain, Switzerland, Ireland, Luxembourg, Malta and Portugal.

 

Eastern Europe: Ukraine, Russia, Macedonia, Croatia, Serbia, Montenegro, Albania, Bosnia and Herzegovina, Belarus, Kosovo, Moldova, Latvia, Lithuania, Estonia, Slovenia, Czech Republic, Hungary, Poland, Bulgaria, Romania, Slovakia.

 

Other: other countries. 

7. Statement of cash flows

The statement of cash flows has been compiled under the indirect method on the basis of the items in the balance sheet at 31 December 2014, the balance sheet at 31 December 2013, the income statement for the year ended 31 December 2014, and the additional information required for the adjustment of inflows and outflows. The statement of cash flows is inclusive of discontinued and continued operations.

8. Composition of Gorenje Group

Pursuant to International Financial Reporting Standards (IFRSs) as adopted by EU, the consolidated financial statements of the Gorenje Group comprise the financial statements of the parent company Gorenje, d.d. and the financial statements of 79 subsidiaries:

Companies operating in Slovenia

Equity interest (%)

Business segment

Gorenje I.P.C., d.o.o., Velenje

100.00

BSH

Gorenje GTI, d.o.o., Velenje

100.00

BSPI

Gorenje Gostinstvo, d.o.o., Velenje

100.00

BSPI

Energygor, d.o.o., Velenje

100.00

BSPI

Kemis, d.o.o., Vrhnika

100.00

BSPI

Gorenje Orodjarna, d.o.o., Velenje

100.00

BSPI

ZEOS, d.o.o., Ljubljana

51.00

BSPI

Gorenje Surovina, d.o.o., Maribor

100.00

BSPI

Indop, d.o.o., Šoštanj

100.00

BSPI

ERICo, d.o.o., Velenje

51.00

BSPI

Gorenje design studio, d.o.o., Velenje

52.00

BSH

PUBLICUS, d.o.o., Ljubljana

51.00

BSPI

EKOGOR, d.o.o., Jesenice

51.00

BSPI

Gorenje GAIO, d.o.o, Šoštanj

100.00

BSPI

Gorenje GSI, d.o.o., Ljubljana

100.00

BSH

Gorenje Keramika, d.o.o., Velenje

100.00

BSPI

Gorenje Surovina Fotoreciklaža, d.o.o., Maribor

51.00

BSPI

Gorenje Studio, d.o.o., Ljubljana

100.00

BSH

Companies operating abroad

Equity interest (%)

Business segment

Gorenje Beteiligungs GmbH, Austria

100.00

BSH

Gorenje Austria Handels GmbH, Austria

100.00

BSH

Gorenje Vertriebs GmbH, Germany

100.00

BSH

Gorenje Körting Italia S.r.l., Italy

100.00

BSH

Gorenje France S.A.S., France

100.00

BSH

Gorenje Belux S.a.r.l., Belgium

100.00

BSH

Gorenje Espana, S.L., Spain

100.00

BSH

Gorenje UK Ltd., Great Britain

100.00

BSH

Gorenje Group Nordic A/S, Denmark

100.00

BSH

Gorenje AB, Sweden

100.00

BSH

Gorenje OY, Finland

100.00

BSH

Gorenje AS, Norway

100.00

BSH

Gorenje spol. s r.o., Czech Republic

100.00

BSH

Gorenje real spol. s r.o., Czech Republic

100.00

BSH

Gorenje Slovakia s.r.o., Slovakia

100.00

BSH

Gorenje Magyarország Kft., Hungary

100.00

BSH

Gorenje Polska Sp. z o.o., Poland

100.00

BSH

Gorenje Bulgaria EOOD, Bulgaria

100.00

BSH

Gorenje Zagreb, d.o.o., Croatia

100.00

BSH

Gorenje Skopje, d.o.o., Macedonia

100.00

BSH

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

100.00

BSH

Gorenje, d.o.o., Serbia

100.00

BSH

Gorenje Podgorica , d.o.o., Montenegro

99.975

BSH

Gorenje Romania S.r.l., Romania

100.00

BSH

Gorenje aparati za domaćinstvo, d.o.o., Serbia

100.00

BSH

Mora Moravia s r.o., Czech Republic

100.00

BSH

Gorenje - kuchyně spol. s r.o., Czech Republic

100.00

BSH

KEMIS-Termoclean, d.o.o., Croatia

100.00

BSPI

Kemis - BH, d.o.o., Bosnia and Herzegovina

100.00

BSPI

Gorenje Studio, d.o.o., Serbia

100.00

BSH

Gorenje Gulf FZE, United Arab Emirates

100.00

BSH

Gorenje Tiki, d.o.o., Serbia

100.00

BSH

Gorenje Istanbul Ltd., Turkey

100.00

BSH

Gorenje TOV, Ukraine

100.00

BSH

ST Bana Nekretnine, d.o.o., Serbia

100.00

BSPI

Kemis Valjevo, d.o.o,  Serbia

100.00

BSPI

Kemis – SRS, d.o.o., Bosnia and Herzegovina

100.00

BSPI

ATAG Nederland BV, the Netherlands

100.00

BSH

ATAG België NV, Belgium

100.00

BSH

Intell Properties BV, the Netherlands

100.00

BSH

Gorenje Nederland BV, the Netherlands

100.00

BSH

Gorenje Kazakhstan, TOO, Kazakhstan

100.00

BSH

»Euro Lumi & Surovina« SH.P.K., Kosovo

51.00

BSPI

OOO Gorenje BT, Russia

100.00

BSH

Gorenje GTI, d.o.o., Beograd, Serbia

100.00

BSPI

Asko Appliances AB, Sweden

100.00

BSH

Gorenje North America,Inc., USA

100.00

BSH

Asko Appliances Pty, Australia

100.00

BSH

Asko Appliances OOO, Russia

100.00

BSH

»Gorenje  Albania« SHPK, Albania

100.00

BSH

Gorenje Home d.o.o., Zaječar, Serbia

100.00

BSH

ORSES d.o.o., Beograd, Serbia

100.00

BSPI

Gorenje Ekologija, d.o.o., Stara Pazova, Serbia

100.00

BSPI

Gorenje Corporate GmbH, Austria

100.00

BSH

Cleaning System S, d.o.o., Serbia

100.00

BSPI

ZEOS eko-sistem d.o.o., Bosnia and Herzegovina

49.45

BSPI

Gorenje Solarna energija Solago, d.o.o., Valjevo, Serbia

100.00

BSPI

Gorenje Sola - Home, d.o.o., Valjevo, Serbia

100.00

BSPI

Gorenje do Brasil Ltda., Brasil

100.00

BSH

Gorenje Asia Ltd., China

100.00

BSH

Gorenje MDM, d.o.o., Kragujevac, Serbia

100.00

BSPI

Associates:

  • Gorenje Projekt, d.o.o., Velenje
  • GGE družba za izvajanje energetskih storitev, d.o.o. (GGE d.o.o.), Ljubljana
  • RCE - Razvojni center energija d.o.o. (RCE d.o.o.), Velenje
  • Econo Projektiranje d.o.o., Ljubljana
  • ENVITECH D.O.O., Belgrade, Serbia
  • Gorenje Electronics Trading LLC, Dubai, United Arab Emirates
  • Gorenje Projekt, d.o.o., Belgrade, Serbia
  • Tosidos, d.o.o., Ljubljana

Representative offices of Gorenje, d.d., abroad:

  • in Kiev (Ukraine)
  • in Athens (Greece)
  • in Shanghai (China)
  • in Almaty (Kazakhstan)
  • in Kishinev (Moldova)

9. Non-controlling equity interests

Non-controlling interests as at 31 December 2014:

 

2013

2014

EURk

Non-controlling interest

 

Share in profit or loss

 

Non-controlling interest

 

Share in profit or loss

 

Gorenje Podgorica, d.o.o., Montenegro

1

0

1

0

ZEOS, d.o.o., Ljubljana

462

67

546

80

Gorenje Surovina, d.o.o., Maribor

4

0

0

0

»Euro Lumi & Surovina« SH.P.K., Kosovo

278

-55

242

-36

ERICo, d.o.o., Velenje

652

9

677

25

Gorenje kuhinje, d.o.o., Ukraine

-49

-12

0

0

PUBLICUS, d.o.o., Ljubljana

797

232

904

185

Gorenje design studio, d.o.o., Velenje

151

-3

152

1

EKOGOR, d.o.o., Jesenice

34

0

67

1

Kemis, d.o.o., Vrhnika

1

0

0

0

KEMIS-Termoclean, d.o.o., Croatia

0

0

0

0

Kemis-BH, d.o.o., Bosnia and Herzegovina

0

0

0

0

Kemis-SRS, d.o.o., Bosnia and Herzegovina

0

0

0

0

Kemis Valjevo, d.o.o., Serbia

0

0

0

0

Gorenje Ekologija, d.o.o., Serbia

0

0

0

0

Cleaning System S, d.o.o., Serbia

284

5

0

0

ZEOS eko-sistem, d.o.o., Bosnia and Herzegovina

218

6

244

12

Gorenje Surovina Fotoreciklaža, d.o.o., Maribor

-20

-24

6

-48

Total

2,813

225

2,839

220

The transfer of ownership between companies of the Gorenje Group had no impact on the consolidated financial statements as the intra-group transactions were eliminated in the consolidation process.

10. Discontinued operations

Gorenje is in the process of discontinuing/disposing/restructuring its activitiesin business segment Home, which has had a negative impact on the Group’s profitability and the cash flow in the past. Accordingly, Gorenje d.d. sold Gorenje Kuhinje, d.o.o., and Gorenje Notranja oprema d.o.o. to the investment firm CoBe Capital in late February 2013. For the purpose of managing the distribution subsidiary Gorenje France S.A.S., the parent company concluded a business agreement with the company Targos S.A.S. The latter company has also the optional right to purchase the 100% equity interest in Gorenje France S.A.S. provided that certain conditions and terms are met. Targos S.A.S. can exercise the purchasing right in May 2015, whereby the contractually agreed-upon transaction price equals the book value of the company's equity interest as at 31 December 2014 within a certain value interval. The economic parameters of the transaction comply with the company's appraised value. The classification of activities among discontinued operations is stipulated and defined by IFRS 5. Comparability of information was maintained by reclassifying the effects of the operation of companies, which are classified as discontinued operations within the consolidated Income Statement for the period January – December 2014 and 2013, to a separate item i.e. Profit or loss from discontinued operation. In addition, assets and liabilities of companies classified as discontinued operations were reclassified among assets/liabilities held for sale in the Group's Consolidated Balance Sheet as at 31 December 2013 and 31 December 2014.

 

The income statement, the balance sheet and the statement of cash flows of discontinued operation are outlined below.

 

Income statement – discontinued operations

EURk

2013

2014

Revenue

11,449

8,164

Change in inventories

337

0

Other operating income

1,449

226

Gross profit

13,235

8,390

Cost of goods, materials and services

-12,348

-8,185

Employee benefits expense

-3,914

-893

Amortisation and depreciation expense

-266

-30

Other operating expenses

-993

-254

Operating loss

-4,286

-972

Finance income

24

17

Finance expenses

-6,312

-41

Net finance expenses

-6,288

-24

Loss before tax

-10,574

-996

Income tax expenses

0

0

Loss for the period

-10,574

-996

 

Balance sheet – discontinued operations

EURk

2013

2014

Assets included in disposal groups

6,766

5,146

     

Intangible assets

8

3

Property, plant and equipment

112

127

Investment property

0

0

Non-current investments

962

980

Deferred tax assets

0

0

Non-current trade receivables

38

187

Inventories

584

410

Current investments

20

20

Trade receivables

3,062

2,209

Other current assets

1,069

991

Cash and cash equivalents

911

219

     

Liabilities included in disposal groups

3,699

2,113

     

Provisions

947

672

Non-current operating liabilities

25

25

Deferred tax liabilities

0

0

Non-current financial liabilities

0

0

Current financial liabilities

0

0

Trade payables

168

142

Other current liabilities

2,559

1,274

 Cash Flows of discontinued operation

EURk

2013

2014

Net cash flow from operating activities

-2,286

-749

Net cash used in investing activities

2,412

-66

Net cash used in financing activities

-4

0

Net cash flows of discontinued operation

122

-815

11. Associates

Group's share in profits or losses of associates amounted to EUR 65k in 2014 (2013: EUR -592k).

 

Assets, liabilities, revenue and expenses of associates in 2013 are outlined below (overview of equity interests and shares is provided in Note 24:

Company /

 EURk

 

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Revenue

Expenses

Income tax expense

Profit or loss for the period

Econo Projektiranje, d.o.o., Ljubljana

83

850

22

457

1,205

-922

0

283

GGE, d.o.o., Ljubljana

2,703

1,624

1,321

2,287

3,700

-3,584

0

116

RCE, d.o.o., Velenje

5,361

2,476

14,631

8,403

2,247

-5,824

0

-3,577

ENVITECH D.O.O., Belgrade

7

63

0

68

11

-67

0

-56

Gorenje Projekt, d.o.o., Velenje

116

9,218

72

8,318

14,075

-13,727

-62

286

Gorenje Projekt d.o.o., Belgrade

31

3

0

1

2

-19

0

-17

Gorenje Electronics Trading LLC, Dubai

58

11

0

0

121

-50

0

71

Assets, liabilities, revenue and expenses of associates in 2014 are outlined below:

Company /

 EURk

 

Non-current assets

Current assets

Non-current liabilities

Current liabilities

Revenue

Expenses

Income tax expense

Profit or loss for the period

Econo Projektiranje, d.o.o., Ljubljana

75

618

9

498

922

-916

-1

5

GGE, d.o.o., Ljubljana

2,560

1,722

1,332

1,985

5,109

-4,859

0

250

RCE, d.o.o., Velenje

5,601

2,223

13

10,601

2,668

-4,856

0

-2,188

ENVITECH D.O.O., Belgrade

3

77

0

77

33

-32

0

1

Gorenje Projekt, d.o.o., Velenje

656

7,674

29

7,363

26,081

-26,075

0

6

Gorenje Projekt d.o.o., Belgrade

23

9

0

1

19

-19

0

0

Gorenje Electronics Trading LLC, Dubai

32

35

206

23

41

-143

0

-102

Tosidos, d.o.o., Ljubljana

197

3,374

59

3,298

9,439

-9,308

-24

107

Note 12 – Revenue EUR 1,245,553k

EURk

2013

2014

Revenue from the sale of products and goods

1,182,286

1,187,037

Revenue from the sale of services

58,196

58,516

Total

1,240,482

1,245,553

Note 13 – Other operating income EUR 21,468k

EURk

2013

2014

Income from subsidies, donations and compensations

4,597

1,948

Rental income

1,851

1,660

Income from use and reversal of provisions

4,153

3,073

Income from use of deferred income relating to government grants

3,625

3,774

Gain on disposal of property, plant and equipment

3,878

691

Gain on disposal of investment property

51

83

Income from revaluation of investment property

6,851

0

Other operating income

9,511

10,239

Total

34,517

21,468

Income arising from subsidies declined by EUR 2,649k if compared to 2013, which is largely attributable to higher subsidies received last year in connection with additional jobs created in Serbia.

 

Major part of income from use of deferred income relating to government grants in the amount of EUR 3,774k refers to Gorenje IPC, d.o.o., a company employing disabled persons,in which government grants were used in line with the Vocational Rehabilitation and Employment of Disabled Persons Act.

 

Other operating income includes primarily income from compensation for damages (EUR 2,730k), income arising from the implementation of the Directive on Waste Electrical and Electronic Equipment (EUR 453k), income from write-off of debts (EUR 65k), and other operating income (EUR 6,991k).

 

Rental income 

EURk

2013

2014

Rental income – up to 1 year

1,008

476

Total

1,008

476

Note 14 – Cost of goods, materials and services EUR 919,501k

EURk

2013

2014

Cost of goods sold

215,851

222,329

Cost of materials

477,833

491,440

Cost of services

216,832

205,732

Total

910,516

919,501

Cost of services includes cost of provisions for warranties in the amount of EUR 29,315k (2013: EUR 30,528k) and cost of rentals in the amount of EUR 20,591k (2013: EUR 21,165k).

Note 15 – Employee benefits expense EUR 227,586k

EURk

2013

2014

Wages and salaries

179,696

164,561

Social security costs

35,070

37,497

Other employee benefits expense

23,148

25,528

Total

237,914

227,586

The item of other employee benefits expense includes cost of provisions formed for retirement benefits and jubilee premiums in the amount of EUR 716k (2013: EUR 1,133k).

 

Part of employee benefits expense (EUR 4,028k) was used to create provisions from government grants in Gorenje I.P.C., d.o.o., which has the status of a company employing disabled persons.

 

Other employee benefits expense includes mainly annual leave bonuses, meal allowances, commuting allowances, retirement benefits and jubilee premiums in compliance with the national labour legislation and the companies’ internal regulations.

Number of employees by business segment

As at 31 Dec

Average

 

2013

2014

2013

2014

Business Segment Home

9,032

8,815

9,296

9,041

Business Segment Portfolio Investments

1,356

1,427

1,343

1,427

Total

10,388

10,242

10,639

10,468

Note 16 – Amortisation and depreciation expense EUR 42,989k 

EURk

2013

2014

Amortisation expense of intangible assets

6,678

7,064

Depreciation expense of property, plant and equipment

35,197

35,925

Total

41,875

42,989

Note 17 – Other operating expenses EUR 21,396k

EURk

2013

2014

Write-off of inventories to net realisable value

2,174

2,809

Disposal and impairment of assets

1,788

838

Other taxes and charges

3,454

3,283

Other operating expenses

14,826

14,466

Total

22,242

21,396

The item of other taxes and charges comprises charges for the use of building plot, water charge, environmental taxes, membership fees in mandatory associations, and other mandatory taxes and charges.

 

Other expenses include mostly expenditure relating to environmental protection, where of a large part under the Directive on Waste Electrical and Electronic Equipment (EUR 8,641k)and compensation in damages (EUR 1,231k).

Note 18 – Net finance expenses EUR 38,713k

Finance income EUR 8,668k

EURk

2013

2014

Dividend income from available-for-sale investments

97

54

Interest income

2,326

1,793

Change in fair value of interest rate swaps

0

4,025

Income from net exchange differences

0

0

Income from forward exchange contracts

0

388

Other finance income

5,124

2,408

Total

7,547

8,668

Finance expenses EUR 47,381k

EURk

2013

2014

Interest expenses

19,931

19,550

Expenses on interest rate swaps

2,465

1,902

Change in fair value of interest rate swaps

0

570

Expenses on net exchange differences

9,384

5,544

Expenses on forward exchange contracts

26

250

Change in fair value of forward exchange contracts

209

190

Impairment loss on available-for-sale investments

10,675

96

Impairment loss on trade receivables

9,482

5,126

Impairment loss on non-current and other receivables

3,442

4,233

Impairment loss on loans

2,705

762

Impairment loss on investments in associates

0

600

Other finance expenses

3,610

8,558

Total

61,929

47,381

Fair value of trade receivables, investments and loans given is secured through the impairment of receivables, investments and loans given in the amount of EUR 10,817k (2013: EUR 15,629k). With respect to contractual provisions, the impairment of loans given refers to the company Arosa Mobilia, d.o.o. and the loan to RCE – Razvojni center energija, d.o.o.

 

A significant portion of other finance expenses includes primarily derecognised accrued income in connection with damages not yet invoiced (EUR 2.2m) and provisions formed for the expected collection of the bank guarantee (EUR 1.1m).

 

Finance income and expenses recognised directly in other comprehensive income (net)

EURk

2013

2014

Net change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-489

-533

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,465

2,472

Net change in fair value of available-for-sale financial assets

-109

-34

Net change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

Net change in exchange differences of subsidiaries, reclassified to profit or loss

-711

0

Finance expenses recognised in other comprehensive income

1,156

1,905

Finance expenses recognised in other comprehensive income attributable to equity holders of the parent

1,156

1,905

Finance expenses recognised in other comprehensive income attributable to non-controlling interests

0

0

Note 19 – Income tax expenses EUR 2,624k

The disclosure of income tax expense encompasses current tax liabilities, deferred tax assets, and deferred tax liabilities.

EURk

2013

2014

Current tax expense

3,581

4,216

Deferred tax expense

-7,800

-1,592

Total

-4,219

2,624

In 2014, the Group has not formed any deferred tax assets in the amount of EUR 5,883k (EUR 5,155k) referring to unused tax incentives for research and development, and tax losses.

 

Effective income tax rates:

EURk

2013

2013

2014

2014

Profit or loss before tax

 

-18,644

 

4,859

Income tax using the domestic tax rate

17.0 %

-3,169

17.0 %

826

Effect of tax rates in foreign jurisdictions

3.8 %

-713

-10.2 %

-494

Non-deductible expenses

6.6 %

-1,229

29.1 %

1,416

Tax exempt income

0.9 %

-170

-0.5 %

-23

Tax reliefs

4.8 %

-904

-61.2 %

-2,972

Tax losses of the current year for which deferred tax assets are not recognised

-14.1 %

2,632

91.4 %

4,439

Other differences

3.6 %

-666

-11.7 %

-568

Income tax expense

22.6 %

-4,219

54.0 %

2,624

 

Following deferred tax amounts were recognised in other comprehensive income:

EURk

2013

 

Pre-tax

amount

Tax

After-tax amount

Change in fair value of available-for-sale financial assets

-153

44

-109

Change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

0

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-72

-417

-489

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,465

0

2,465

Net change in exchange differences of subsidiaries, reclassified to profit or loss

-711

0

-711

Change in fair value of land

-1,262

137

-1,125

Foreign currency translation differences for foreign operations

-10,296

0

-10,296

Other comprehensive income

-10,029

-236

-10,265

EURk

2014

 

Pre-tax

amount

Tax

After-tax amount

Change in fair value of available-for-sale financial assets

-41

7

-34

Change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

0

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-145

-388

-533

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,472

0

2,472

Change in fair value of land

0

0

0

Foreign currency translation differences for foreign operations

-13,165

0

-13,165

Other comprehensive income

-10,879

-381

-11,260

Note 20 – Intangible assets EUR 181,597k

EURk

2013

2014

Development costs

13,718

26,924

Industrial property rights

13,526

12,293

Trademark

61,964

61,964

Goodwill

68,653

68,653

Intangible assets under construction

10,021

11,763

Total

167,882

181,597

The item of intangible assets includes mostly trademarks (Atag, Etna and Pelgrim), goodwill, deferred development costs, and computer software.

 

Goodwill in the amount of EUR 62,130k and fair value of trademarks Atag, Etna and Pelgrim in the amount of EUR 61,964k were established in 2008 at the acquisition of the company ATAG Europe BV. In addition, goodwill was established in 2008 in the amount of EUR 1,617k at the acquisition of the majority interest in PUBLICUS, d.o.o. Goodwill in the amount of EUR 2,030k was established in 2007 at the acquisition of the majority interest in Gorenje Surovina, d.o.o. Goodwill in the amount of EUR 2,875k was established in 2005 at the acquisition of Mora Moravia, s r. o. in the Czech Republic and Gorenje Studio, d.o.o. in Serbia.

 

Impairment testing of goodwill and trademark

 

Impairment testing of goodwill and trademarks Atag, Etna and Pelgrim arising from the acquisition of ATAG Europe BV was carried out. The calculations are based on cash flow projections for the ATAG Group, which have been prepared on the basis of the adopted business plan for 2015 and the strategic business plan for the period 2016-2019. The main underlying assumptions used to calculate the value in use are: the revenue growth rate of 3.0% (2013: 3.5%) and the discount rate of 8.70% (2013: 11.27%).

The recoverable value of the cash-generating unit exceeds its carrying amount, including that of goodwill and trademarks Atag, Etna and Pelgrim. Hence, there was no need for impairment to be carried out.

 

Impairment testing of goodwill arising on the acquisition of PUBLICUS, d.o.o. was carried out. The calculations are based on cash flow projections for PUBLICUS, d.o.o., which have been compiled on the basis of the adopted business plan for 2015 and the strategic business plan for the period 2016-2019. The main underlying assumptions used to calculate the value in use are: the revenue growth rate of 2.0% (2013: 1.0%) and the discount rate of 7.79% (2013: 8.6%).

According to findings made, the recoverable value of the cash-generating unit exceeds its carrying amount, including that of goodwill. Consequently, no need for impairment of goodwill exists.

 

Impairment testing of goodwill arising from the acquisition of Mora Moravia, s r.o. was carried out. The calculations are based on cash flow projections for Mora Moravia, s r.o., which have been prepared on the basis of the adopted business plan for 2015 and the strategic business plan for the period 2016-2019. The main underlying assumptions used to calculate the value in use are: the revenue growth rate of 2.0% (2013: 2.0%) and the discount rate of 6.80% (2013: 8.21%).

The recoverable value of the cash-generating unit exceeds its carrying amount, including that of goodwill. No need for impairment accordingly exists.

 

Impairment testing of goodwill arising from the acquisition of Gorenje Studio, d.o.o. was carried out. The calculations are based on cash flow projections for Gorenje Studio, d.o.o. that have been compiled on the basis of the adopted business plan for 2015 and the strategic business plan for the period 2016-2019. The main underlying assumptions used to calculate the value in use are: the revenue growth rate of 2.0% (2013: 2.5%) and the discount rate of 11.53% (2013: 14.69%).

 

The recoverable value of the cash-generating unit was determined to be higher than its carrying amount, including that of goodwill. Therefore there was no need for impairment of goodwill.

 

Impairment testing of goodwill arising from the acquisition of Gorenje Surovina, d.o.o. was carried out. The calculations are based on the cash flow projections for Gorenje Surovina, d.o.o., which have been prepared on the basis of the adopted business plan for 2015 and the strategic business plan for the period 2016-2019. The main underlying assumptions used to calculate the value in use are: the revenue growth rate of 3.0% (2013: 3.0%) and the discount rate of 8.6% (2013: 8.6%).

The recoverable value of the cash-generating unit was determined to be higher than its carrying amount, including that of goodwill. Therefore there was no need for impairment of goodwill. Increase in intangible assets largely refers to the development of new products (new generation of washing machines, completion of the new generation of built-in ovens, the upgrade of the 600 mm cookers, and the upgrade of existing generation of dishwashers).  

 

Movements in intangible assets in 2013

EURk

 

Develop-ment costs

Industrial property rights

Trade-mark

Good-will

Intangible assets under construction

Total

Cost at 1 Jan 2013

33,664

34,825

61,964

68,653

1,178

200,284

Acquisition

1,925

323

   

13,430

15,678

Disposals, write-offs

-382

-1,235

     

-1,617

Other transfers

4,419

276

   

-4,586

109

Exchange differences

-126

-784

   

-1

-911

Cost at 31 Dec 2013

39,500

33,405

61,964

68,653

10,021

213,543

           

 

Accumulated amortisation

at 1 Jan 2013

23,096

17,581

0

0

0

40,677

Disposals, write-offs

-382

-621

     

-1,003

Amortisation

3,766

2,912

     

6,678

Other transfers

-552

480

     

-72

Exchange differences

-146

-473

     

-619

Accumulated amortisation

at 31 Dec 2013

25,782

19,879

0

0

0

45,661

 

 

 

 

 

 

 

Carrying amount

at 1 Jan 2013

10,568

17,244

61,964

68,653

1,178

159,607

Carrying amount

 at 31 Dec 2013

13,718

13,526

61,964

68,653

10,021

167,882

Movements in intangible assets in 2014

EURk

Develop-ment costs

Industrial property rights

Trade-mark

Good-will

Intangible assets under construction

Total

Cost at 1 Jan 2014

39,500

33,405

61,964

68,653

10,021

213,543

Acquisition

2,631

1,368

   

17,265

21,264

Disposals, write-offs

-8,074

-8,302

     

-16,376

Sale of companies

 

-160

     

-160

Other transfers

15,031

564

   

-15,490

105

Exchange differences

-135

-407

   

-33

-575

Cost at 31 Dec 2014

48,953

26,468

61,964

68,653

11,763

217,801

 

 

 

 

 

 

 

Accumulated amortisation

at 1 Jan 2014

25,782

19,879

 

 

 

45,661

Disposals, write-offs

-8,076

-8,277

     

-16,353

Amortisation

4,351

2,713

     

7,064

Other transfers

 

71

     

71

Exchange differences

-28

-211

     

-239

Accumulated amortisation at 31 Dec 2014

22,029

14,175

 

 

 

36,204

 

 

 

 

 

 

 

Carrying amount

 at 1 Jan 2014

13,718

13,526

61,964

68,653

10,021

167,882

Carrying amount

at 31 Dec 2014

26,924

12,293

61,964

68,653

11,763

181,597

Note 21 – Property, plant and equipment (PPE) EUR 355,962k

EURk

2013

2014

Land

40,607

41,797

Buildings

152,372

146,894

Production and other equipment

149,706

141,873

Property, plant and equipment under construction

13,867

25,398

Total

356,552

355,962

Movements in property, plant and equipment in 2013

EURk

Land

Buildings

Production and other equipment

PPE under construction

Total

Cost at 1 Jan 2013

40,879

290,402

524,798

37,326

893,405

Acquisition

846

1,689

7,577

50,816

60,928

Merger of companies

242

328

   

570

Disposals, write-offs

-1,128

-15,244

-20,797

-177

-37,346

Transfer to investment property

-85

-641

   

-726

Other transfers

51

22,217

877

-73,889

-50,744

Exchange differences

-198

-3,487

-6,601

-209

-10,495

Cost at 31 Dec 2013

40,607

295,264

505,854

13,867

855,592

 

 

 

 

 

 

Accumulated depreciation

at 1 Jan 2013

0

145,777

406,457

0

552,234

Disposals, write-offs

 

-9,148

-18,861

 

-28,009

Depreciation

 

7,717

27,480

 

35,197

Transfer to investment property

 

-143

   

-143

Other transfers

 

-13

-54,223

 

-54,236

Exchange differences

 

-1,298

-4,705

 

-6,003

Accumulated depreciation

at 31 Dec 2013

0

142,892

356,148

0

499,040

 

 

 

 

 

 

Carrying amount at 1 Jan 2013

40,879

144,625

118,341

37,326

341,171

Carrying amount at 31 Dec 2013

40,607

152,372

149,706

13,867

356,552

Movements in property, plant and equipment in 2014 

EURk

Land

Buildings

Production and other equipment

PPE under construction

Total

Cost at 1 Jan 2014

40,607

295,264

505,854

13,867

855,592

 

Acquisition

665

2,017

6,264

31,425

40,371

Disposals, write-offs

-13

-15,006

-42,856

-75

-57,950

Disposal of companies

-52

 

-139

 

-191

Transfer from investment property

930

4,867

   

5,797

Other transfers

-3

2,626

9,850

-19,714

-7,241

Exchange differences

-337

-3,733

-3,478

-105

-7,653

Cost at 31 Dec 2014

41,797

286,035

475,495

25,398

828,725

 

 

 

 

 

 

Accumulated depreciation

at 1 Jan 2014

0

142,892

356,148

0

499,040

Disposals, write-offs

 

-10,262

-42,188

 

-52,450

Depreciation

 

7,409

28,516

 

35,925

Disposal of companies

   

-56

 

-56

Transfer from investment property

 

-1

   

-1

Other transfers

 

-85

-6,931

 

-7,016

Exchange differences

 

-812

-1,867

 

-2,679

Accumulated depreciation

at 31 Dec 2014

0

139,141

333,622

0

472,763

 

 

 

 

 

 

Carrying amount at 1 Jan 2014

40,607

152,372

149,706

13,867

356,552

Carrying amount at 31 Dec 2014

41,797

146,894

141,873

25,398

355,962

Most of investments in the amount of EUR 32,668k were carried out within the central Business Segment Home, where a significant portion thereof was invested into technological equipment (e.g. replacing the equipment, increasing the automation, investment maintenance). Part of investments were made as to support sales activities (e.g. opening of new retail stores, exhibition premises, and similar). Investments recorded in 2014 by the segment Portfolio Investments amounted to EUR 7,703k and to a large extent refer to ecology, tool manufacturing and the production of ceramic tiles (Gorenje Keramika, d.o.o. is in the process of completing a major project of renewing the format of tiles, whereby other companies under this business segment started with projects aimed at increasing the sales volume).

 

Disposal of property, plant and equipment relates to the sale of non-operating assets.

 

Group’s land was appraised at the end of 2013 by an independent certified appraiser of real property. Assessments carried out have indicated that terms and conditions for another appraisal have not been met. If land was disclosed at cost, the book value of land would amount to EUR 31,794k.

 

As at 31 December 2014, no financial liabilities were secured by mortgage on real property.

 

No borrowing costs were attributed to the items of property, plant and equipment in 2014.

 

Transfers include transfers from investment property to property, transfers from property, plant and equipment to intangible assets, and transfers between individual items.

Note 22 – Investment property EUR 18,931k

EURk

2013

2014

Land and buildings

28,129

18,931

Total

28,129

18,931

The item of investment property includes land and buildings acquired for resale or increase in investments. Investment property is measured by using the fair value model. Group's investment property was appraised by an independent certified appraiser at the end of 2013. Assessments carried out have indicated that terms and conditions for another appraisal have not been met.

 

Rental income generated on investment property is recognised in the income statement for 2014 and amounted to EUR 106k. Expenses generated on investment property amounted to EUR 494k in 2014.

 

Movements in investment property

EURk

2013

2014

Opening balance at 1 January

23,276

28,129

Increase

7,304

9

Revaluation

6,851

0

Decrease

-9,885

-3,409

Transfer from PPE

583

0

Transfer to PPE

0

-5,798

Closing balance at 31 December

28,129

18,931

Note 23 – Non-current investments EUR 4,145k

EURk

2013

2014

Loans (1 to 5 years)

4,622

3,208

Deposits

23

17

Other investments

882

920

Total

5,527

4,145

Movements in loans

EURk

2013

2014

Opening balance at 1 January

6,354

4,622

Exchange differences

0

-1

Increase

0

0

Decrease

-15

-12

Discontinued operations

0

0

Transfer to current investments

-1,717

-1,401

Closing balance at 31 December

4,622

3,208

The item of loans includes loans extended by the parent company and its subsidiaries to

non-Group companies. The interest rate, which depends on the currency in which the loan

 

is denominated, ranged from 3.682 percent to 4.0 percent.

Note 24 – Investments in associates EUR 1,122k

EURk

Equity interest

2013

2014

Gorenje Projekt, d.o.o., Velenje

50.00 %

474

513

GGE, d.o.o., Ljubljana

33.33 %

205

288

RCE, d.o.o., Velenje

24.00 %

-134

0

Econo Projektiranje, d.o.o., Ljubljana

26.00 %

111

113

Gorenje Electronics Trading LLC, Dubai

49.00 %

39

191

ENVITECH D.O.O., Belgrade

26.00 %

16

17

Total

 

711

1,122

Note 25 – Non-current trade receivables EUR 6,801k

Major portion of non-current trade receivables in the amount of EUR 4,084k comprises rescheduled trade receivables in Gorenje Zagreb, d.o.o.

Note 26 – Deferred tax assets and liabilities

Deferred taxes are calculated based on temporary differences by using the liability method and the tax rate, applicable in the country in which the respective Group company is Homeiciled.

EURk

Tax assets

Tax liabilities

Tax assets – tax liabilities

 

2013

2014

2013

2014

2013

2014

PPE

-243

-227

4,397

3,596

-4,640

-3,823

Investments

1,428

1,462

40

21

1,388

1,441

Receivables

1,130

1,165

24

37

1,106

1,128

Inventories

51

49

-46

-32

97

81

Liabilities from litigations

0

1

0

0

0

1

Provisions in line with local standards and tax laws

927

341

28

85

899

256

Provisions for retirement benefits and jubilee premiums

2,275

2,002

0

0

2,275

2,002

Provisions for warranties

1,814

1,999

-81

-57

1,895

2,056

Unused tax losses

11,062

12,146

-59

-59

11,121

12,205

Unused tax incentives

7,229

7,553

71

197

7,158

7,356

Cash flow hedge - interest rate swaps

479

92

0

156

479

-64

Changes within Group

0

0

-58

904

58

-904

Total

26,152

26,583

4,316

4,848

21,836

21,735

EURk

Tax assets – tax liabilities

Through profit or loss

Through other comprehensive income

 

2013

2014

2013

2014

2013

2014

PPE

-4,640

-3,823

303

-17

137

0

Investments

1,388

1,441

-495

36

45

7

Receivables

1,106

1,128

86

-87

0

0

Inventories

97

81

-9

-14

0

0

Liabilities from litigations

0

1

0

2

0

0

Provisions in line with local standards and tax laws

899

256

589

1,388

0

0

Provisions for retirement benefits and jubilee premiums

2,275

2,002

18

-43

0

0

Provisions for warranties

1,895

2,056

83

108

0

0

Unused tax losses

11,121

12,205

2,784

-421

0

0

Unused tax incentives

7,158

7,356

4,441

-332

0

0

Cash flow hedge - interest rate swaps

479

-64

0

0

-418

-388

Changes within Group

58

-904

0

972

0

0

Total

21,836

21,735

7,800

1,592

-236

-381

Group companies recognised deferred tax assets and deferred tax liabilities in 2014.

Note 27 – Inventories EUR 219,389k

EURk

2013

2014

 

Home

Portfolio Investments

Total

Home

Portfolio Investments

Total

Materials

62,821

2,295

65,116 

58,565

3,320

61,885

Work in progress

8,881

3,287

12,168 

9,128

2,876

12,004

Products

112,403

420

112,823 

99,657

1,458

101,115

Merchandise

31,004

10,306

41,310 

28,436

13,444

41,880

Advances

4,174

176

4,350 

2,419

86

2,505

Total

219,283

16,484

235,767 

198,205

21,184

219,389

Allowances for inventories and inventory write-offs amounted to EUR 2,809k in 2014 (2013:EUR 2,174k). Allowances for inventories and write-offs of inventories to net realisable value were recorded under other operating expenses.

Advances refer to inventories of raw materials, materials and merchandise.

The carrying amount of inventories of products, where production costs were adjusted to net realisable value, amounted to EUR 5,277k.

Note 28 – Current investments EUR 20,461k

EURk

2013

2014

Available-for-sale investments

3,986

3,626

Short-term deposits

1,506

1,547

Loans

9,854

10,021

Transfer from non-current loans

1,717

1,401

Interest receivables

139

166

Other current receivables from financing activities

0

3,700

Total

17,202

20,461

Loans include cash surplus deposited in short-term time deposits with banks and entities. The interest rate for bank deposits and loans ranges from 1.428 percent to 13.0 percent.

The Group concluded forward exchange contracts for 2015 in order to hedge against exchange rate fluctuations. Fair value of forward exchange contracts is recognised directly in the income statement. In 2014, the Group recorded settlements arising on derivatives used as hedging instruments in the amount of EUR 138k and in the same amount increased its finance expenses. In addition, finance income increased by EUR 4,025k and finance expenses by EUR 190k as a result of Group's adjustment of forward exchange contracts to fair value.

 

Movements in available-for-sale shares and interests

EURk

2013

2014

Opening balance at 1 January

15,065

3,986

Exchange differences

-19

-7

Increase

180

158

Decrease

-718

-374

Change in fair value

-10,522

-137

Discontinued operation

0

0

Closing balance at 31 December

3,986

3,626

The change in fair value amounting to EUR 137k (2013: EUR 10,522k) is disclosed among finance expenses in the amount of EUR 96k, whereas EUR 41k is recorded among decreasing the fair value reserve for available-for-sale financial assets.

Note 29 – Trade receivables EUR 180,380k

In 2014, write-offs and impairment of trade receivables amounted to EUR 5,126k (2013: EUR 9,482k).

 

Allowances for receivables amounted to EUR 27,326k (2013: EUR 25,078k) as at the balance sheet date. Movement in allowances for trade receivables is discussed in Note 42 (Financial risks and financial instruments).

 

Group's trade receivables are adequately and well insured in the amount of EUR 111,176k.

Note 30 – Other current assets EUR 43,216k

EURk

2013

2014

Other current receivables

33,359

32,031

Short-term advances and collaterals given

2,889

1,250

Short-term deferred costs

7,791

6,464

Other current assets

1,820

3,471

Total

45,859

43,216

Other current receivables comprise a significant part of the Group's input VAT receivable, which by the end of 2014 amounted to EUR 12,132k (2013: EUR 13,844k).

Large part of other current assets includes accrued receivables, whereas short-term deferred costs include costs of services billed but not yet rendered.

Note 31 – Cash and cash equivalents EUR 35,843k

EURk

2013

2014

Cash in hand

1,766

812

Bank balances and cash held in other financial institutions

36,823

35,031

Total

38,589

35,843

Note 32 – Equity EUR 380,267k

As at 31 December 2014, the share capital of Gorenje, d.d. amounted to EUR 101,922,103.97 (31 December 2013: EUR 92,240,139.36) and was divided into 24,424,613 ordinary, freely transferable, registered, no par value shares. In 2014, a share capital increase was carried out by means of a debt-to-equity conversion agreement signed with Gorenjska banka d.d., Kranj in the amount of EUR 5,668,365.46 and with the International Finance Corporation from USA in the amount of EUR 4,331,636.20. The total converted equity amounted to EUR 10,000,001.66, whereof EUR 9,681,964.61 was used for the share capital increase and the residual amount of EUR 318,037.05 for the share premium.

 

Group's reserves consist of share premium, revenue reserves, treasury share reserve and translation reserve.

 

Capital surplus (share premium) in the amount of EUR 175,698k (2013: EUR 175,568k) includes paid-in capital in excess of par value of shares in the amount of EUR 64,474k (2013: EUR 64,344k), surplus in excess of book value of disposed own shares (treasury shares) in the amount of EUR 15,313k (2013: EUR 15,313k), and general equity revaluation adjustment in the amount of EUR 78,048k (2013: EUR 78,048k), and other effects of transition to IFRSs. Capital surplus relating to excess of par value of shares grew by EUR 318k over the 2013 balance due to the relevant capital increase, and declined by EUR 188k due to the costs of capital increase.

 

Revenue reserves recorded as at the balance sheet date in the amount of EUR 99,301k (31 December 2013: EUR 95,818k) consist of legal reserves, statutory reserves, treasury share reserve and other revenue reserves.

 

As at 31 December 2014, Group’s legal reserves amounted to EUR 12,896k (31 December 2013: EUR 12,896k). In accordance with provisions of the Companies Act, share premium (capital surplus) and legal reserves can in their excess amount, be used for share capital increase, for coverage of loss for the period and retained loss if revenue reserves are not simultaneously used for dividend payout.

 

In compliance with the parent company’s Articles of Association, statutory reserves were created in the amount of EUR 633k i.e. 10% of net profit, and as at the balance sheet date amounted to EUR 7,556k (2013: EUR 6,923k). Statutory reserves can according to parent company's Articles of Association be used for a share capital increase; for coverage of loss for the period and retained loss should no other sources be available; for share withdrawal in case of a compulsory transfer of shares, and for share withdrawal by parent company’ acquisition; for share withdrawal under the simplified procedure of share capital decrease; for creation of treasury shares if no other sources are available, and for balancing the dividend policy.

 

Treasury shares (own shares) in the amount of EUR 3,170k (31 December 2013: EUR 3,170k) are disclosed as a deductible item of equity and at cost.

 

As at 31 December 2014, Group’s other revenue reserves amounted to EUR 75,679k (31 December 2013: EUR 72,829k) and were created on the basis of resolutions on the allocation of profit for the period adopted by the Management Board and the Supervisory Board of the parent company, and resolutions of the General Meeting of Shareholders on the allocation of the accumulated profit. Pursuant to the resolution of the parent company’s Management Board and provisions of the Companies Act, part of the net profit for the period was reallocated in the amount of EUR 2,850k to other revenue reserves. Other revenue reserves can be used for any purpose whatsoever, except for the legally defined formation of the treasury share reserve.

 

Retained earnings in the amount of EUR 10,365 k (31 December 2013: EUR 12,829k) comprise retained earnings or losses from previous periods and the profit for 2014, which remained upon the allocation of net profit for the period for statutory reserves in the amount of EUR 633k and for other reserves EUR 2,850k.

 

Translation reserve declined by EUR 13,165k over the 2013 balance and amounted as at 31 December 2014 to EUR -17,600k. The decrease is attributable to exchange differences that arise on the restatement of subsidiaries' assets and liabilities from national currencies to the Group’s reporting currency. Given the last quarter’s complex macroeconomic situation in Russia, which has affected business operations and the future settlement of the subsidiary’s liabilities in that country, the Group’s management has assessed that a portion of receivables due from Gorenje TB shall not be settled. Accordingly, part of these receivables in the amount of EUR 11,837,162k was in compliance with IAS 21 classified as part of the investment in subsidiary. Exchange differences arising on the portion of receivables outstanding on a long-term basis are disclosed directly in other comprehensive income in the amount of EUR 5,019,387k as required within the meaning of the above-mentioned standard.

 

Fair value reserve amounting to EUR 10,912k as at 31 December 2014 (31 December 2013: EUR 9,007k) includes a surplus from revaluation of land which is valued using the revaluation model, a change in fair value of available-for-sale investments, and a change in value of the cash flow hedge.

 

Changes in fair value reserve are shown in the table below:

EURk

Fair value reserve for land

Fair value reserve for available-for-sale financial assets

Fair value reserve for derivatives

Total

Balance at 1 January 2013

9,642

3,879

-4,545

8,976

Revaluation of land

     

0

Transfer of land

     

0

Change in fair value of cash flow hedge

   

-67

-67

Change in fair value of cash flow hedge, reclassified to profit or loss

   

2,465

2,465

Change in fair value of available-for-sale financial

assets

 

-153

-5

-158

Disposal of available-for-sale financial assets

     

0

Impairment of available-for-sale financial assets

     

0

Change in exchange differences from subsidiaries

 

-711

 

-711

Disposal of subsidiary

-1,262

   

-1,262

Acquisition of non-controlling interest

     

0

Deferred taxes

137

44

-417

-236

Balance at 31 December 2013

8,517

3,059

-2,569

9,007

EURk

Fair value reserve for land

Fair value reserve for available-for-sale financial assets

Fair value reserve for derivatives

Total

Balance at 1 January 2014

8,517

3,059

-2,569

9,007

Revaluation of land

     

0

Transfer of land

     

0

Change in fair value of cash flow hedge

   

-145

-145

Change in fair value of cash flow hedge, transferred to profit or loss

   

2,472

2,472

Change in fair value of available-for-sale financial

assets

 

-41

 

-41

Disposal of available-for-sale financial assets

     

0

Impairment of available-for-sale financial assets

     

0

Disposal of subsidiary

     

0

Acquisition of non-controlling interest

     

0

Deferred taxes

 

7

-388

-381

Balance at 31 December 2014

8,517

3,025

-630

10,912

Note 33 – Earnings per share

In 2014, earnings per share were recorded at EUR 0.04 (2013: EUR -1.51). No preference shares have been issued, hence basic and diluted earnings per share are equal.

 

Earnings per share were computer on the basis of following data on the Group’s profit for the period and the weighted average number of ordinary shares in the period:

2013

 EURk

Loss for the period

-25,224

Weighted average number of ordinary shares

16,688,725

Basic / Diluted earnings per share (in EUR)

-1,51

   

2014

 EURk

Profit for the period

1,019

Weighted average number of ordinary shares

22,949,860

Basic / Diluted earnings per share (in EUR)

0.04

All shares issued are of the same class and give their owner the right to participate in managing the company. Each share gives one vote and a right to dividend.

 

No dividends were paid out to shareholders in 2014.

Note 34 – Provisions EUR 63,453k

EURk

2013

2014

Provisions for warranties

41,127

38,360

Provisions for retirement benefits and jubilee premiums

18,714

18,226

Other provisions

6,830

6,867

Total

66,671

63,453

Provisions for warranties were created on the basis of estimated costs of warranties calculated by taking into account the past known data on the quality level of products and the costs of repairs under warranties.

 

The Group did not carry out actuarial calculations in 2014. Provisions for retirement benefits and jubilee premiums were created based on the actuarial calculation of estimated future payments of retirement benefits and jubilee premiums that was made as at 31 December 2012. The actuarial calculation took into account following assumptions:

  • a discount rate of 4.60% in December 2012 representing the 10-year corporate high-yield bonds from an euro area issuer;
  • last applicable amount of retirement benefits and jubilee premiums as defined in the internal acts of individual companies or in the national regulations;
  • fan employee turnover depending in particular on the employee’s age;
  • a mortality rate stated in the latest available mortality tables of the local population;
  • an increase in wages and salaries due to adjustment for inflation and career promotion.

Company's management assesses that assumptions applied have not changed materially.

 

Other provisions comprise mostly provisions for costs in connection with the Directive on Waste Electrical and Electronic Equipment recorded by ZEOS, d.o.o., and funds reserved for possible encashment of the bank guarantee at Gorenje, d.d.

 

Movements in provisions in 2013

EURk

Balance at 1 Jan 2013

Use

 

Exchange differences

Reversal

Creation

Transfers

Balance at 31 Dec 2013

Provisions for warranties

38,645

-25,012

-470

-3,577

30,528

1,013

41,127

Provisions for retirement benefits and jubilee premiums

21,749

-3,561

-243

-292

1,338

-277

18,714

Other provisions

4,626

-931

-9

-273

2,819

598

6,830

Total

65,020

-29,504

-722

-4,142

34,685

1,334

66,671

Movements in provisions in 2014

EURk

Balance at 1 Jan 2014

Use

 

Exchange differences

Reversal

Creation

Transfers

Balance at 31 Dec 2014

Provisions for warranties

41,127

-29,009

-750

-2,323

29,315

0

38,360

Provisions for retirement benefits and jubilee premiums

18,714

-1,209

-7

-17

716

29

18,226

Other provisions

6,830

-1,588

-49

-707

2,381

0

6,867

Total

66,671

-31,806

-806

-3,047

32,412

29

63,453

Note 35 – Deferred income EUR 5,270k

EURk

Balance at

1 Jan 2013

Depreciation

Exchange differences

Creation

Balance

31 Dec 2013

Deferred income - government grants

3,145

-3,625

-15

5,576

5,081

Total

3,145

-3,625

-15

5,576

5,081

Note 36 – Non-current trade payables EUR 5,912k

Non-current trade payables in the amount of EUR 5,733k largely refer to the long-term maintenance contract concluded in connection with costs of repairs and product swap in the company ATAG Nederland BV.

Note 37 – Non-current financial liabilities EUR 270,070k

EURk

2013

2014

Borrowings from banks

281,738

248,280

Transfer to current borrowings from banks

-124,396

-50,140

Borrowings from third parties

62,853

22,736

Transfer to current borrowings from third parties

-22,368

-9,544

Liabilities from bonds issued

0

72,643

Transfer to current liabilities from bonds issued

0

-14,600

Other financial liabilities 

927

695

Total

198,754

270,070

Non-current financial liabilities are denominated in EUR and recorded at amortised cost i.e. restated under the effective interest method and inclusive of costs of granting the borrowing.

 

As of 10 October 2014, Gorenje, d.d., issued bonds in the total amount of EUR 73m bearing a fixed interest rate of 3.85% and recording maturity on 10 October 2019.

Maturity of borrowings and liabilities from bonds issued 

EURk

Maturity from 1 to 2 years

73,778

Maturity from 2 to 4 years

118,181

Maturity from 4 to 6 years

63,167

Maturity from 6 to - years

14,249

Total

269,375

Interest-bearing borrowings and bonds issued

 

Currency

Value in EURk

Interest rate

from

to

EUR

268,939

1.08 %

12.25 %

RSD

343

4.95 %

4.95 %

CHF

93

12.5 %

12.5 %

Total

269,375

 

 

The effective interest rate does not deviate essentially from the contractual interest rate.

Collateralisation 

EURk

Bills

67,569

Financial covenants

200,034

Guarantees

34,035

Guarantees refer to guarantees or sureties issued by Gorenje, d.d., Gorenje Nederland BV and Gorenje Surovina, d.o.o., to commercial banks to secure liabilities of Group companies.

Note 38 – Current financial liabilities EUR 97,536k

EURk

2013

2014

Borrowings from banks

44,686

17,399

Transfer from non-current financial liabilities to banks

124,396

50,140

Borrowings from third parties

2,865

2,014

Transfer from non-current financial liabilities to third parties

22,368

9,544

Interest payable

1,133

2,473

Liabilities from bonds issued

0

14,600

Dividends payable

84

59

Derivatives

3,112

1,307

Other financial liabilities

15

0

Total

198,659

97,536

Current borrowings from banks and liabilities from bonds issued

Interest rate

Currency

Value in currency

(in 000)

Value in EURk

from

to

EUR

77,458

77,458

1.81 %

6.67 %

RSD

510,399

4,206

4.95 %

12.00 %

PLN

1,734

406

3.49 %

3.49 %

CZK

1,593

57

1.56 %

1.56 %

CHF

9

7

12.5 %

12.5 %

GBP

4

5

3.5 %

3.5 %

Total

 

82,139

 

 

Current borrowings from others

Interest rate

Currency

Value in currency

(in 000)

Value in EURk

from

to

EUR

11,558

11,558

1.08 %

4.17 %

Total

 

11,558

 

 

The effective interest rate does not significantly deviate from the contractual interest rate.

Collateralisation 

EURk

Bills

24,950

Financial covenants

53,091

Guarantees

34,796

Collateralisation of non-current and current financial liabilities

 

None of the Group's current or non-current financial liabilities is collateralised by mortgage or any other type of collateral. A significant portion of Group companies’ borrowings is collateralised by bills and the Pari-Passu and Negative Pledge clauses in compliance with individual contracts. Non-current borrowings, in particular, are frequently supported by financial covenants as defined in individual loan contracts.

 

The item of guarantees refers to guarantees or collaterals issued to banks by Gorenje, d.d., Gorenje Beteiligungs GmbH, Gorenje Nederland B.V. and Gorenje Surovina, d.o.o. in connection with liabilities of individual Group companies.

 

Certain loan contracts concluded between individual Group companies and bank partners, mostly in case of non-current borrowings, include financial covenants that are in the vast majority checked and verified once a year on the basis of audited consolidated financial statements for individual fiscal year. Other, minor part of relevant contracts are reviewed on a three-month basis.

 

Given the anticipated breach of some financial covenants for the fiscal year 2014, the Group companies applied already before the year-end to its bank partners for waiver of financial covenants requiring consolidated financial statements for 2014. Waivers were approved by all bank partners for all credit lines and guarantee transactions, which are secured by financial covenants, that were breached. The waiver of financial covenants applies to the fiscal year 2014.

Note 39 – Trade payables EUR 202,473k

As at 31 December 2014, the total trade payables recorded by the Group in the amount of EUR 202,473k do not include any payables to the members of the Management Board and Supervisory Board and the internal owners.

Note 40 – Other current liabilities EUR 70,627k

EURk

2013

2014

Payables to employees

14,043

13,529

Payables to state

12,898

14,702

Accrued costs and expenses

32,908

32,972

Other current liabilities

11,152

9,424

Total

71,001

70,627

Payables to employees and contributions and taxes payable to state institutions apply to wages and salaries for December paid in January 2015.

 

Accrued costs and expenses were created for accrued costs of discounts, accrued interest expense, and other accrued costs of services.

Note 41 – Contingent liabilities

The Group's contingent liabilities from guarantees and collaterals given to financial institutions and companies outside Gorenje Group amounted to EUR 45,657k as at the 31 December 2014.

 

In conformity with the ordinary business practice, the ATAG company is not liable to publish its annual results of operation in the country, where its corporate seat is, if the shareholder, in a special statement, assumes liability to pay any outstanding obligations of the Company. The respective statement shall remain in effect until rescinded by the shareholder.

Note 42 – Financial risks and financial instruments

Gorenje Group is exposed to numerous financial risks, in particular to credit risk, liquidity risk, currency risk, interest rate risk and other risks arising on changed market conditions.

 

With respect to financial risk management, several new internal policies and rules were adopted and the existing ones modified in order to achieve a more efficient and centralised financial risk management. The objectives of the financial risk management are:

  • to achieve stability of operations and to reduce exposure to individual risks to an acceptable level,
  • to increase the value of the Group,
  • to improve the credit rating of the Group,
  • to reduce net finance expenses of the Group, and
  • to minimise the impacts of the implemented critical risks.

The exposure to each individual type of financial risk and the effective hedge measures are judged and applied respectively on the basis of their effects on Group’s cash flows and net finance expenses. The risk management principles and methodologies applied are in detail outlined in the annual report’s business report under ‘Risk management’. Essential financial risks that are regularly assessed and the adequacy of implemented measures tested are clarified in detail below.

 

Credit risk

The carrying amount of financial assets represents the maximum credit risk exposure. The maximum credit risk exposure at the reporting date:

EURk

2013

2014

Available-for-sale financial assets

3,986

3,626

Loans 

16,193

14,630

Trade and other receivables

243,649

217,132

Deposits

1,529

1,564

Other financial receivables

1,021

4,786

Cash and cash equivalents

38,589

35,843

Total

304,967

277,581

Trade receivables form the Group's most significant portion of credit risks or risk of default by the counterparty. As at the year-end of 2014, trade receivables amounted to EUR 180,380k and indicate a decline over 2013 by EUR 25,201k. The decrease in trade receivables is mostly the result of a more active receivables management, which includes an intensified collection and precise rules for defining credit limits for each individual customer.

 

The maximum credit risk exposure of trade receivables at the reporting date by geographic region:

EURk

2013

2014

Western Europe

51,460

40,355

Eastern Europe

141,252

126,152

Other countries

12,869

13,873

Total

205,581

180,380

The maximum credit risk exposure of trade receivables at the reporting date by type of customer:

EURk

2013

2014

Wholesale customers

163,846

147,220

Retail customers

30,829

26,817

Other customers

10,906

6,343

Total

205,581

180,380

In the wake of geographic diversity, a large number of Group’s customers are primarily legal entities from worldwide, and to lesser extent, in the retail segment, also individuals. In general, business is carried out solely with buyers that boast of a proper credit rating, which is monitored on a regular basis, whereas we have also defined clear rules on approving overdrafts for individual customer. For this purpose, a renewed Accounts Receivable Management Policy was adopted which defines the relevant management processes, persons in charge, and instruments allowed for hedging against credit risks. The respective policy was adopted on the Gorenje Group level and provides a compulsory framework for rules and policies on accounts receivable management that were adopted and integrated by subsidiaries. Concurrently, all Group companies in the business segment Home are in the process of introducing an information module for credit risk management with the aim to automate the process of monitoring and collecting receivables and credit limits that ultimately results in a lower share of past due receivables and thereby in a gradually higher share of insured receivables.

 

Maturity of trade receivables as at the balance sheet date:

EURk

Gross value

Allowance

Gross value

Allowance

 

2013

2013

2014

2014

Not past due

159,918

 

143,126

 

Past due 1 to 5o days

33,526

 

21,363

 

Past due 51 to 100 days

5,464

 

3,879

 

Past due 101 to 180 days

2,903

 

3,534

 

Past due 181 to 270 days

4,110

 

4,911

 

Past due 271 to 360 days

1,126

 

4,037

 

Past due 361 to 720 days

4,144

 

4,314

 

Past due 721 to 1081 days

4,114

 

3,755

 

Past due over 1081 days

15,354

 

18,787

 

Allowances for receivables

 

25,078

 

27,326

Total

230,659

25,078

207,706

27,326

Movements in allowances for trade receivables

EURk

2013

2014

Opening balance at 1 January

24,682

25,078

Exchange differences

-786

-264

Impairment loss

9,482

5,126

Decrease in allowances

-3,938

-869

Final write-off of receivables

-4,362

-1,745

Closing balance at 31 December

25,078

27,326

Group's partners are impacted by the ever-changing macroeconomic environment that can also result in a swift turn-around of the credit rating and liquidity of the individual Group’s business partner. Regardless of implementing the receivables management process within the Group, default on the side of customers or even their inability to settle their payments exists. With respect to the Group's dispersed sales model that is not subject to high concentration of receivables per individual customer or customers related through mutual ownership, we assess that the Group’s exposure to credit risk is moderate. None of the customer or customers related through mutual ownership exceed 10% or more in the Group’s total sales generated, whereby also the exposure to an individual customer or groups of customers does not exceed 10% of Group's receivables.

 

Customers whose balance of receivables exceeds EUR 5,000 are included into the credit control process, which covers also collateralization of receivables with acceptable hedging instruments. Following hedging instruments are considered as acceptable according to the accounts receivable management policy:

  • collateralisation through credit insurance companies,
  • collateralization of receivables through bank guarantees and letters of credit,
  • sale of receivables without recourse, and
  • in exceptional circumstances and upon receiving special approval, also pledges or first class mortgages.

By the end of 2014, Group's total trade receivables secured with acceptable hedging instruments accounted for 61.6%, which indicates an improvement of 5.6 p.p. The share of secured receivables on the business segment Home is recorded at 64.7%, which is 5.9 p.p. more than in 2013. Most of receivables are secured by the SID - Prva kreditna zavarovalnica d.d., a smaller part with credit insurance companies on individual local markets, and other acceptable hedging instruments. It should be noted that a minor portion of customers, approved under a special procedure, is unsecured as these customers have an excellent credit rating that is monitored on an ongoing basis. We apply counter-trade (primarily servicers) with most of the unsecured receivables, whereby there are also numerous smaller customers that are dispersed and therefore the credit risk with an individual customer is low.

 

The Group carefully monitors the credit risk also in other business segments. Current surplus of assets and balances on bank accounts are placed in compliance with corporate policies, which includes the methodology for selecting acceptable counterparties on the financial area. These policies determine also the methodology for selecting acceptable clients when entering into derivative financial instruments.

 

As a result of the launched receivables management procedures, the credit risk is assessed as moderate. The highest risk exposure arises in connection with the value of trade receivables and other receivables.

 

Liquidity risk

 

Liquidity risk includes risks denoting the lack of available funds and consequently risk that the Group will fail to meet commitments in stipulated period of time.

Liquidity depends on effective cash management and investment dynamics. Liquidity risk is actively monitored within the Group by means of a centralised balancing of assets' liquidity (primarily receivables and inventories), of liabilities and cash flows from operating and investment activities. Cash management is centralised and supported by a software solution for planning and daily monitoring of cash flows on the Group level. Considerable attention is accorded to the compilation of the cash flow plan and its monitoring. A successful liquidity planning is also provided through an optimum management of possible current surpluses or deficits in available assets.

 

The Group applies a uniform and centralised approach to bank partners in Slovenia and abroad, and on its basis provides for the optimum indebtedness of the entire Group not only in view of scope, costs and maturity, but also in the light of the Group's currency balance.

 

In order to disperse the sources of financing, Gorenje already for the second time successfully issued commercial papers in 2014 in the total par value of EUR 35,000k. Short-term issues of commercial papers that will continue also in 2015 (the third issue of short-term commercial papers in the par value of EUR 27,000k was conducted in February 2015), are earmarked for balancing the seasonal dynamics of cash flows from operating and investing activities, which as a rule is negative in the first half-year but gradually improves by the end of the calendar year. The short-term imbalance of cash flows is additionally balanced by revolving loans and overdrafts on bank accounts in Slovenia and abroad. The liquidity reserve that consists of unused but approved credit lines, bank balances and deposits with banks, amounted to EUR 109,349k as at the year-end of 2014. The liquidity reserves is earmarked for short-term balancing of cash flows and significantly reduces the Group’s exposure to liquidity risk.

 

 

A large-scale debt restructuring programme was carried out in 2014 by means of which the borrowings, which gradually matured in 2014, were replaced by non-current sources. We have within this process:

  • improved the maturity structure of financial liabilities by 23.5 p.p. – Group’s non-current financial liabilities accounted for a 73.5% share within total financial liabilities by the end of 2014;
  • issued a 5-year corporate note GV01 bond in the total par value of EUR 73,000k and thereby dispersed sources of financing also on the debt's non-current segment; in addition to current bills, the issue of non-current bonds provides an additional guarantee that banks, as well as other investors, have confidence in the Group;
  • carried out the third stage of the parent company’s share capital increase under authorised capital and in accordance with the resolution adopted by the Shareholders' Meeting in 2013. The capital increase was in form of a debt-to-equity conversion carried out in conformity with the resolution of the Shareholders’ Meeting in the amount of EUR 10,000k;
  • reduced the Group's total financial debt by EUR 29,807k; and
  • essentially lowered the scope of required refinancing in 2015.

The Group has a long-term servicing plan for financial liabilities that is being regularly updated.

 

Group's financial liabilities by maturity is compiled based on contractual cash flows:

 

31 December 2013

EURk

Carrying amount

Contractual cash flows

1 year or less

1 – 2 years

2 – 5 years

More than

5 years

Non-derivative financial liabilities

Bank borrowings

326,424

348,935

178,849

43,356

116,071

10,659

Borrowings from others

65,718

70,761

27,675

19,361

22,170

1,556

Other financial liabilities

2,159

2,296

1,448

317

240

290

Trade and other payables

257,686

257,686

257,686

 

 

 

Total

651,987

679,678

465,658

63,034

138,481

12,505

 

 

 

 

 

 

 

Derivative financial liabilities

Interest rate swaps

-2,820

-3,310

-2,108

-925

-277

 

Forward exchange contracts used for hedging

-292

-292

-292

 

 

 

Outflow

-292

-292

-292

 

 

 

Inflow

 

 

 

 

 

 

Other forward exchange contracts used for hedging

 

 

 

 

 

 

Outflow

 

 

 

 

 

 

Inflow

 

 

 

 

 

 

Total

-3,112

-3,602

-2,400

-925

-277

 

31 December 2014

EURk

Carrying amount

Contractual cash flows

1 year or less

1 – 2 years

2 – 5 years

More than

5 years

Non-derivative financial liabilities

Bank borrowings

265,679

298,477

78,038

61,032

131,707

27,702

Borrowings from others

24,750

26,142

12,153

7,562

5,139

1,287

Payables from bonds issued

72,643

80,026

17,129

16,567

46,329

 

Other financial liabilities

3,227

3,227

3,227

 

 

 

Trade and other payables

246,040

246,040

246,040

 

 

 

Total

612,339

653,912

356,587

85,161

183,175

28,989

 

 

 

 

 

 

 

Derivative financial liabilities

Interest rate swaps

-1,110

-1,109

-853

-256

 

 

Forward exchange contracts used for hedging

3,503

3,503

3,503

 

 

 

Outflow

-197

-197

-197

 

 

 

Inflow

3,700

3,700

3,700

 

 

 

Other forward exchange contracts

 

 

 

 

 

 

Outflow

 

 

 

 

 

 

Inflow

 

 

 

 

 

 

Total

2,393

2,394

2,650

-256

 

 

Contractual cash flows arising on Group's outstanding financial liabilities, which fall due in one year or less, amounted as at the year-end of 2014 to EUR 356,587k and indicate a decline of EUR 109,071k over the equivalent ones as at the end of 2013. Most of the relevant decline in contractual cash flows is attributable to a more favourable maturity structure of financial liabilities as a result of the financial debt restructuring process in 2014.

 

Group's liquidity risk is assessed as moderate in view of measures implemented within restructuring the debt maturity structure, the centralised planning of short-term and long-term cash flows, and access to a wide range of financial and bank partners.

 

Currency risk

 

With regard to diversification of its international business operations, the Gorenje Group is strongly exposed to currency risk, which is the risk that the economic benefits of the Group may be decreased due to changes in foreign exchange rates against its functional currency (EUR). The largest currency risk arises from Gorenje's business operations in markets of Russia, Serbia, Australia, Great Britain, the Czech Republic, Poland, Hungary, Croatia, Ukraine and all US dollar markets.

 

Group's balance sheet discloses a surplus of assets over liabilities in the stated currencies, which is treated as a long-term currency position. Receivables due from end buyers and payables to suppliers are key accounting categories that form the currency position. The US dollar, where a surplus of liabilities over assets is recorded, is an exception since the volume of purchase that bound by US dollar markets exceeds our sales volume in this currency. The exposure of the financial position is in a lesser degree also the result of borrowing in local currencies.

 

31 December 2013

EURk

EUR

HRK

DKK

PLN

RSD

CZK

Other currencies

Trade receivables

110,976

13,752

3,722

6,350

15,784

7,812

47,185

Financial liabilities

-380,953

-138

 

-1,671

-599

-8,681

-100

Trade payables

-174,986

-1,851

-909

-1,431

-7,905

-4,023

-22,715

Financial position exposure

-444,963

11,763

2,813

3,248

7,280

-4,892

24,370

31 December 2014

EURk

EUR

RUB

USD

HRK

RSD

CZK

Other currencies

Trade receivables

91,504

20,016

4,144

13,140

16,408

7,551

27,617

Financial liabilities

-357,954

 

 

 

-4,550

-57

-511

Trade payables

-168,607

-484

-13,098

-1,392

-10,296

-3,527

-5,069

Financial position exposure

-435,057

19,532

-8,954

11,748

1,562

3,967

22,037

*EUR is the Group’s functional currency and as such not subject to currency risk

 

Significant exchange rates applied during the year comprise:

 

 

Average rate

Reporting date spot rate

2013

2014

2013

2014

HRK

7.579

7.635

7.627

7.658

CZK

25.987

27.536

27.427

27.735

DKK

7.458

7.455

7.459

7.445

RSD

112.944

116.863

114.140

120.600

PLN

4.197

4.184

4.154

4.273

RUB

42.390

51.011

45.325

72.337

USD

1.328

1.329

1.379

1.214

In 2014, the Group adopted the Currency Risk Management Policy, which among others defines:

  • the methodology for measuring currency risk exposure,
  • competencies and responsibilities within currency risk management,
  • manners and required scope of hedging against currency risk,
  • instruments acceptable for hedging against currency risk,
  • acceptable partners for implementing currency-risk hedges,
  • the method of measuring the effectiveness of currency risk management.

The Group is engaged in active hedging against currency risks, whereby also natural balancing of currency risks is carried out by means of internal techniques that include customising the purchase/sale segment in individual currency, and the foreign currency borrowing, where assets and other internal mechanisms are exposed. Hedges against currency fluctuations are entered into on a regular and continuous 12-month basis by applying acceptable hedging instruments, whereby the hedge level is set between 60% and 80% of planned cash flows. The planned cash flows in individual currency are used as the basis for hedging with short-term forward exchange contracts. The required level of hedge is determined on the basis of the ratio between the individual currency's impact on Group's performance (volume of business operations) and the probability of currency fluctuation (currency volatility).

 

Currency risk management is carried out on a centralised basis and a committee for managing currency risks was appointed as well. The parent company enters into hedging instruments on its own behalf and on behalf of other Group companies, and transfers these instruments on a contract basis to companies that are locally exposed to such risk. Subsidiaries also enter into hedging instruments on local markets but in limited scope, whereby the parent company provides adequate support and credit limits with acceptable partners. The centralised approach to credit risk management has shown more optimum hedging results.

 

Sensitivity analysis

 

A 5-percent increase (decrease) in the euro’s value against the above stated currencies as at 31 December would have resulted in an increase (decrease) in profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates remain unchanged. The analysis for 2014 has been performed on the same basis as for 2013.

 

31 December 2013

EURk

Profit or loss for the period

HRK

-588

DKK

-141

PLN

-162

RSD

-364

CZK

245

Other currencies

-1,218

 

31 December 2014

EURk

Profit or loss for the period

RUB

-977

USD

448

HRK

-587

RSD

-78

CZK

-198

Other currencies

-1,102

A 5-percent decrease in the euro’s value against the above stated currencies as at 31 December would have had equal yet opposite effect, provided that all other variables remain unchanged.

 

In compliance of the policy adopted against currency risks, 57% of planned cash flows was hedged in 2014.

 

Regardless of hedging measures implemented, the exposure to currency risks is assessed as high in the light of essential currency fluctuations on the world markets.

 

Interest rate risk

 

Financing of Group’s current operations and their investment activities is subject to interest rate risk as most of borrowings raised bear the Euribor variable interest rate, in lesser extent also other local variable reference interest rates. Thus, exposure to interest rate risk represents primarily the unfavourable movement (increase) of the Euribor variable interest rate that applies to Group's financial liabilities. Major portion of financial liabilities are subject to a variable interest rate that is bound by the 3-month or 6-month Euribor.

 

Group’s exposure to interest rate risk:

EURk

2013

2014

Fixed-rate financial instruments

Financial assets

7,688

7,587

Financial liabilities

31,183

101,706

 

 

 

Variable-rate financial instruments

Financial assets

9,464

8,000

Financial liabilities

360,959

261,366

Table is exclusive of non-interest bearing financial assets and non-interest bearing financial liabilities.

 

Interest structure of financial assets and financial liabilities is not adjusted as the Group records considerably more received financial liabilities than interest-bearing assets. The volume of financial liabilities bearing a fixed interest rate has significantly increased in 2014, which is mostly the result of the corporate note GV01 bond issued in 2014 that bears a fixed interest rate of 3.85%. By issuing the bonds, the financial liabilities were replaced with interest rate swaps. The portion of outstanding financial liabilities bearing a fixed interest rate increased by 20 p.p. and as at 31 December 2014 accounted for 28% among total interest-bearing financial liabilities. The previously mentioned share bearing a fixed interest rate additionally increased after the end of 2014.

 

As at 31 December 2014, the Group recorded also interest rate swaps in the amount of EUR 28,300k. As for interest rate swaps, the Group enters into derivatives in the same manner as in the case of currency financial derivatives i.e. with acceptable partners only. We therefore asses that the risk of default on the side of the contracting party is minimal. The purpose of hedging by means of entering into embedded derivatives, is fixing of the interest rate that results in a stable cash flow. While entering into interest rate swaps, the Group observes the requirement that characteristics of relevant swaps equal (i.e. maturity, amount, type of interest rate and its alignment) a borrowing that is hedged by the interest rate swap. Consequently, the valuation of a hedging instrument defined as successful hedge, is recognised directly in equity.

 

A portion of borrowings, which were defined as hedged items subject to interest rate swaps, was early repaid in 2014. A direct link between the hedged item and the hedging instrument no longer exists in the part of these repaid borrowings, therefore the valuation of this part of instruments is recognised directly in Group's profit or loss. The valuation effect of these instruments was negative and recorded at EUR 570k. The final maturity of interest rate swaps, where unbundling between the instrument and the hedged item occurred, was in 2016.

 

Cash flow sensitivity analysis for variable interest rate instruments

 

A change in the interest rate by 50 basis points (bp) at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates remain unchanged. The analysis for 2014 has been performed on the same basis as for 2013.

EURk

Profit or loss for the period

Other comprehensive income

Increase

Decrease

Increase

Decrease

by 50 bp

by 50 bp

by 50 bp

by 50 bp

31 December 2013

Variable rate instruments

-2,964

2,964

 

 

Interest rate swap contract

557

-557

376

-376

Cash flow variability (net)

-2,407

2,407

376

-376

 

 

 

 

 

31 December 2014

Variable rate instruments

-1,266

1,266

 

 

Interest rate swap contract

450

-450

89

-89

Cash flow variability (net)

-816

816

89

-89

Variable interest rates recorded in 2014 primarily a downward trend, hence no derivatives earmarked as hedging against the increase of the variable interest rate risk were entered into. The share of interest-bearing financial liabilities that are subject to a fixed interest rate or hedged by instruments against rising interest rates risk, accounted for 35% as at the end of 2014. Although no hedging instruments were entered into against rising interest risk rates, the Group monitors financial markets on an ongoing basis to promptly respond to changes on macroeconomic markets.

 

Group's exposure to interest rate risk is assessed as moderate.

Note 43 – Fair value

The fair values and book values of assets and liabilities

 

EURk

Book value

Fair value

Book value

Fair value

2013

2013

2014

2014

Available-for-sale investments

3,986

3,986

3,626

3,626

Non-current loans and deposits

4,645

4,645

3,225

3,225

Non-current trade receivables

10,559

10,559

6,801

6,801

Current loans and deposits

13,216

13,216

12,969

12,969

Derivatives

-3,112

-3,112

2,393

2,393

Trade receivables

205,581

205,581

180,380

180,380

Other current assets

38,068

38,068

36,752

36,752

Cash and cash equivalents

38,589

38,589

35,843

35,843

Non-current financial liabilities

-198,654

-198,654

-203,672

-203,672

Non-current financial liabilities (fixed interest rate)

-100

-15

-66,398

-55,298

Non-current operating liabilities

-5,773

-5,773

-5,912

-5,912

Current financial liabilities

-195,532

-195,532

-96,229

-96,229

Trade payables

-213,820

-213,820

-202,473

-202,473

Other payables

-38,093

-38,093

-37,655

-37,655

Total

-340,440

-340,355

-330,350

-319,250

The estimated fair value of current assets and liabilities equals nearly their book value. The fair value of non-current financial liabilities was calculated on the basis of market interest rates and is classified under Level 2 within the fair value hierarchy.

 

Fair value scale

 

The table shows method of valuing assets and liabilities recorded at fair value:

 

Level 1: stock price (unadjusted) in the active market of identical assets and liabilities;

 

Level 2: data differing from stock price data (these are included in Level 1) monitored with the intention of direct or indirect valuation of assets and liabilities;

 

Level 3: data on the value of assets and liabilities not based on the active market.

 

Financial year 2013

EURk

Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

782

91

3,113

3,986

Derivatives – assets

-

-

-

-

Derivatives – liabilities

-

-3,112

-

-3,112

Land and investment properties

-

-

68,736

68,736

Financial year 2014

EURk

Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

675

88

2,863

3,626

Derivatives – assets

-

3,700

-

3,700

Derivatives – liabilities

-

-1,307

-

-1,307

Land and investment properties

-

-

60,728

60,728

Land was valued on the basis of comparable sales with adjustments made in view of time and location of the sale, the size of the property and other physical and functional characteristics. Fair value of investment property was assessed by applying the direct capitalisation method. Land and investment properties were appraised by an independent certified appraiser of real property at the end of 2013.

 

Forward exchange contracts

 

The total fair value of forward exchange contracts amounted to EUR 3,503k as at 31 December 2014 and was recorded under other financial receivables and other financial liabilities.

 

Interest rate swaps

 

As at 31 December 2014, the total fair value of interest rate swaps amounted to EUR -1,110k and was recorded under other financial liabilities.

 

Interest rate swap hedges, which relate to hedged balance sheet items, are disclosed within equity under the fair value reserve.

Note 44 – Commitments relating to investments

Contractually agreed investments in intangible assets and property, plant and equipment not yet recognised in the Group’s financial statements at the reporting date amounted to EUR 8,380k (2013: EUR 9,765k).

Note 45 – Related party transactions

The transactions with related parties were conducted by the Group companies on the basis of sale/purchase contracts. The prices used in these related party transactions were the market prices of products and services.

 

Information on earnings

 

In 2013, the Gorenje Group companies paid to the groups of persons stated below the following gross personal earnings:

EURk

Management Boards of Group companies

Supervisory Board

Employees under individual employment agreements

Salaries

6,212

 

7,740

Benefits and other earnings

1,300

160

529

Total

7,512

160

8,269

No non-current and current loans were granted by the Group companies to the Management Board and Supervisory Board members and internal owners.

 

In 2014, the Gorenje Group companies paid to the groups of persons stated below the following gross personal earnings:

EURk

Management Boards of Group companies

Supervisory Board

Employees under individual employment agreements

Salaries

7.061

 

9.107

Benefits and other earnings

1.338

210

538

 

Total

8.399

210

9.645

Gorenje Group companies recorded following transactions with associates:

EURk

Value of transaction

Balance

2013

2014

2013

2014

Revenue

1,096

506

824

367

Expenses

995

693

312

616

Note 46 – Events after the balance sheet date

  • As of 20 February 2015, Gorenje, d.d., issued 10-month commercial papers in the total par value of EUR 27m bearing an interest rate of 2.20% p.a., which is 35% more than initially planned. Sizeable interest in third issue of commercial papers is proof of investor confidence in the Gorenje Group.
  • With the last year's issue of 5-year bonds and the issue of 10-month commercial papers, Gorenje has raised EUR 100m in capital markets in no more than four months. At present, over a quarter of Gorenje's financing is sourced through capital markets, which ensures an appropriate stability and thereby competitiveness within providing sources of finance.
  • Gorenje, d.d., started negotiations with the Polish company Elemental Holding SA on the possible sale of the controlling interest in the subsidiary Gorenje Surovina, d.o.o. The relevant talks refer also to certain subsidiaries of Gorenje Surovina and aim to define the scope, value and terms of sale. Managements of Gorenje, d.d., and Elemental Holding SA expect to concluded these negotiations by the end of Q2 2015.

No other significant events occurred upon compiling the balance sheet as of 31 December 2014.

Note 47 – Transactions with the audit company

In 2014, the contractual value of auditing the financial statements of Gorenje Group companies and the consolidated financial statements of the Gorenje Group amounted to EUR 707k (2013: EUR 791k). The auditors of all Gorenje Group companies did not render any other significant services for Gorenje Group companies.

Note 48 – Business segments

EURk

Home

Portfolio Investments

Group

2013

2014

2013

2014

2013

2014

Revenue from sale to third parties

1,065,076

1,065,866

175,406

179,687

1,240,482

1,245,553

Inter-segment sale

4,768

6,201

13,293

11,342

18,061

17,543

Interest income

2,104

1,628

222

165

2,326

1,793

Interest expenses

-19,585

-19,050

-346

-500

-19,931

-19,550

Amortisation and depreciation expense

-36,455

-37,847

-5,420

-5,142

-41,875

-42,989

Operating profit or loss before tax

-25,951

-9

7,307

4,868

-18,644

4,859

Income tax expense

4,856

-2,076

-637

-548

4,219

-2,624

Profit or loss without discontinued operation

-21,095

-2,085

6,670

4,320

-14,425

2,235

Profit or loss of discontinued operation

-10,574

-996

0

0

-10,574

-996

Profit or loss for the period

-31,669

-3,081

6,670

4,320

-24,999

1,239

Total assets

1,034,015

991,668

114,050

110,730

1,148,065

1,102,398

Total liabilities

718,386

669,453

49,009

52,678

767,395

722,131

Investments

68,471

53,885

8,135

7,759

76,606

61,644

Impairment of financial assets

-12,398

-1,458

-982

0

-13,380

-1,458

Impairment of property, plant and equipment

-764

-306

-934

-138

-1,698

-444

Note 49 – Geographical segments

EURk

Western Europe

Eastern Europe

Other

Group

2013

2014

2013

2014

2013

2014

2013

2014

Revenue from sale to third parties

465,841

459,074

676,137

677,451

98,504

109,028

1,240,482

1,245,553

Total assets

358,695

337,648

672,139

604,326

117,231

160,424

1,148,065

1,102,398

Investments

11,287

11,967

55,584

36,186

9,735

13,491

76,606

61,644

Independent auditor's report

Appendix 1: Information on the Gorenje Group companies

Company

Share capital

(EURk)

Number of employees

Gorenje, d.d., Slovenia

101,922

4,081

Gorenje I.P.C., d.o.o., Slovenia

93

811

Gorenje GTI, d.o.o., Slovenia

3,769

42

Gorenje Gostinstvo, d.o.o., Slovenia

3,790

164

Energygor, d.o.o., Slovenia

9

0

Kemis, d.o.o., Slovenia

2,650

37

Gorenje Orodjarna, d.o.o., Slovenia

927

219

Indop, d.o.o., Slovenia

1,000

17

ZEOS, d.o.o., Slovenia

477

5

Gorenje Surovina, d.o.o., Slovenia

9,402

330

ERICo, d.o.o., Slovenia

278

50

Gorenje design studio, d.o.o., Slovenia

500

23

PUBLICUS, d.o.o., Slovenia

897

102

EKOGOR, d.o.o., Slovenia

200

0

Gorenje GAIO, d.o.o., Slovenia

1,800

85

Gorenje GSI, d.o.o., Slovenia

4,657

114

Gorenje Keramika, d.o.o., Slovenia

3,069

111

Gorenje Surovina Fotoreciklaža, d.o.o., Slovenia

160

1

Gorenje Studio, d.o.o., Slovenia

8

52

Gorenje Beteiligungs GmbH, Austria

26,600

6

Gorenje Austria Handels GmbH, Austria

3,275

51

Gorenje Vertriebs GmbH, Germany

5,700

69

Gorenje Körting Italia S.r.l., Italy

90

6

Gorenje France S.A.S., France

100

14

Gorenje Belux S.a.r.l., Belgium

237

1

Gorenje UK Ltd., Great Britain

385

17

Gorenje Group Nordic A/S, Denmark

269

57

Gorenje AB, Sweden

213

4

Gorenje spol. S r.o., Czech Republic

4,423

44

Gorenje real spol. S r.o., Czech Republic

9,375

18

Gorenje Slovakia s.r.o., Slovakia

1,892

12

Gorenje Magyarország Kft., Hungary

2,266

16

Gorenje Polska Sp. Z o.o., Poland

8,132

37

Gorenje Bulgaria EOOD, Bulgaria

3,175

20

Gorenje Zagreb, d.o.o., Croatia

19,211

81

Gorenje Skopje, d.o.o., Macedonia

248

20

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

1

79

Gorenje, d.o.o., Serbia

3,205

57

Gorenje Studio, d.o.o., Serbia

837

0

Gorenje Podgorica, d.o.o., Montenegro

2,800

15

Gorenje OY, Finland

115

9

Gorenje AS, Norway

243

5

Gorenje Romania S.r.l., Romania

365

10

Gorenje aparati za domaćinstvo, d.o.o., Serbia

25,289

1,203

Mora Moravia s r.o., Czech Republic

9,869

604

Gorenje – kuchyně spol. S r.o., Czech Republic

1,514

2

ST Bana Nekretnine, d.o.o., Serbia

1,976

0

KEMIS – Termoclean, d.o.o., Croatia

807

61

Kemis – BH, d.o.o., Bosnia and Herzegovina

210

11

Gorenje Gulf FZE, United Arab Emirates

218

12

Gorenje Espana S.L., Spain

3

0

Gorenje Tiki, d.o.o., Serbia

17,978

414

Gorenje Istanbul Ltd., Turkey

6,670

0

Gorenje TOV, Ukraine

148

17

Kemis – SRS, d.o.o., Bosnia and Herzegovina

72

3

ATAG Nederland BV, the Netherlands

16

375

ATAG België NV, Belgium

248

51

Intell Properties BV, the Netherlands

45

0

Gorenje Nederland BV, the Netherlands

20,796

1

Gorenje Kazakhstan, TOO, Kazakhstan

1,042

10

OOO Gorenje BT, Russia

12,425

98

»Euro Lumi & Surovina« SH.P.K., Kosovo

431

6

Kemis Valjevo, d.o.o., Serbia

1,160

45

Gorenje GTI, d.o.o., Beograd, Serbia

1

20

Asko Appliances AB, Sweden

11,711

61

Gorenje North America, Inc., USA

1

6

Asko Appliances Pty, Australia

6,744

76

Asko Appliances OOO, Russia

301

14

»Gorenje Albania« SHPK, Albania

1

6

Gorenje Home d.o.o. Zaječar, Serbia

2,691

120

Gorenje Ekologija, d.o.o., Stara Pazova, Serbia

1,245

0

ORSES d.o.o., Beograd, Serbia

468

1

Gorenje Corporate GmbH, Austria

35

0

ZEOS eko-sistem d.o.o., Bosnia and Herzegovina

420

4

Cleaning System S, d.o.o., Serbia

875

14

Gorenje Solarna energija Solago, d.o.o., Valjevo, Serbia

0

0

Gorenje Sola-Home, d.o.o., Valjevo, Serbia

0

0

Gorenje Asia Ltd., China

215

31

Gorenje do Brasil Ltda., Brasil

190

6

Gorenje MDM, d.o.o. Kragujevac, Serbia

1,034

78

Appendix 2: Managing Directors

In 2014, the Group companies were managed by following managing directors:

Company

Managing Director

Gorenje, d.d., Slovenia

Franc Bobinac, President of the Management Board

 

Marko Mrzel, Member of the Management Board

 

Peter Kukovica, Member of Management Board (since 28 April 2014)

 

Branko Apat, Member of the Management Board

 

 

Peter Groznik, Member of the Management Board

 

Drago Bahun, Member of the Management Board

Gorenje, I.P.C., d.o.o., Slovenia

Mirko Rožanc

Gorenje GTI, d.o.o., Slovenia

Cita Špital-Meh

Gorenje Gostinstvo, d.o.o., Slovenia

Stanko Brunšek

Energygor, d.o.o., Slovenia

Marijan Penšek

Kemis, d.o.o., Slovenia

Emil Nanut

Gorenje Orodjarna, d.o.o., Slovenia

 
    Blaž Nardin
 

Indop, d.o.o., Slovenia

Matej Sevčnikar

ZEOS, d.o.o., Slovenia

Emil Šehič

Gorenje Surovina, d.o.o., Slovenia

Jure Fišer

ERICo, d.o.o., Slovenia

Marko Mavec

Gorenje design studio, d.o.o., Slovenia

Jasna Petan

PUBLICUS, d.o.o., Slovenia

Slavko Hrženjak

EKOGOR d.o.o., Slovenia

Dušan Marc (until 13 November 2014); Ivan Hrženjak (since 14 November 2014)

Gorenje GAIO, d.o.o., Slovenia

Andrej Koželj

Gorenje GSI, d.o.o., Slovenia

Robert Polšak (until 18 May 2014); Miro Košutnik (since 19 May 2014)

Gorenje Keramika, d.o.o., Slovenia

Boris Laubič

Gorenje Surovina Fotoreciklaža d.o.o., Slovenia

Pötke Thorsten Ralf (until 7 May 2014); Jure Fišer (since 8 May 2014)

Gorenje Studio, d.o.o., Slovenia

Marina Borkovič

Gorenje Beteiligungs GmbH, Austria

Žiga Debeljak, Marko Šefer (until 31 March 2014); Tomaž Kuntarič (since 1 April 2014)

Gorenje Austria Handels GmbH, Austria

Sandra Lubej

Gorenje Vertriebs GmbH, Germany

Thomas Wittling

Gorenje Körting Italia S.r.l., Italy

Matjaž Geratič

Gorenje France S.A.S., France

Renaud de Barry

Gorenje Belux S.a.r.l., Belgium

Andre Genevrois (until 9 February 2014); Darko Janjič (since 10 February 2014)

Gorenje UK Ltd., Great Britain

Jernej Hren

Gorenje Group Nordic A/S, Denmark

Jan Štern

Gorenje AB, Sweden

Jan Štern

Gorenje spol. s r.o., Czech Republic

Suad Hadžić; Stanko Romih (since 19 June 2014)

Gorenje real spol. s r.o., Czech Republic

Suad Hadžić; Stanko Romih (Since 19 June 2014)

Gorenje Slovakia s.r.o., Slovakia

Dragutin Špiranec (until 8 June 2014); Stanko Romih (since 9 June 2014)

Gorenje Magyarország Kft., Hungary

Norbert Fülle

Gorenje Polska Sp. z o.o., Poland

Franc Rogan (until 6 January 2014); Simon Kumer (since 7 January 2014)

Gorenje Bulgaria EOOD, Bulgaria

Bojan Bratkovič

Gorenje Zagreb, d.o.o., Croatia

Robert Polšak

 

Gorenje Skopje, d.o.o., Macedonia

Nenad Jovanović

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

Uroš Marolt

Gorenje, d.o.o., Serbia

Goran Lukić (until 31 October 2014; Stanka Pejanović (since 1 November 2014)

Gorenje Studio, d.o.o., Serbia

Alenka Mrzel

Gorenje Podgorica, d.o.o., Montenegro

Darko Vukčević

Gorenje OY, Finland

Jan Štern

Gorenje AS, Norway

Jan Štern

Gorenje Romania S.r.l., Romania

Damir Dražetić

Gorenje aparati za domaćinstvo, d.o.o., Serbia

Mirko Meža

Mora Moravia s r.o., Czech Republic

Vitezslav Ružička; Matija Zupanc

 

Gorenje – kuchyně spol. s r.o., Czech Republic

Viktor Faktor

ST Bana Nekretnine, d.o.o., Serbia

Štefan Kuhar

KEMIS – Termoclean, d.o.o., Croatia

Zoran Matić

Kemis – BH, d.o.o., Bosnia and Herzegovina

Maid Hadžimujić

Gorenje Gulf FZE, United Arab Emirates

Nermin Salman (until 31 December 2014); Branko Podpečan (since 1 January 2015)

Gorenje Espana, S.L., Spain

Jernej Hren

Gorenje Tiki, d.o.o., Serbia

Branko Apat

Gorenje Istanbul Ltd., Turkey

Nedim Hadžibegić (since 5 February 2014)

Gorenje TOV, Ukraine

Gregor Gržina

Kemis – SRS, d.o.o., Bosnia and Herzegovina

Slobodan Sjenčić

ATAG Nederland BV, the Netherlands

Atag Europe BV (until 25 June 2014); Robert Meenink and Darko Janjič (from 26 June 2014 to 30 September 2014); Jeoren van Benthen (from 1 October 2014 to 31 January 2015); Robert Kapteijn (since 1 February 2015)

 

ATAG België NV, Belgium

Marc Jozef Wynant

Intell Properties BV, the Netherlands

ATAG Europe BV (until 25 June 2014); Darko Janjič (since 26 June 2014)

 

Gorenje Nederland BV, the Netherlands

Žiga Debeljak; Darko Janjič

Gorenje Kazakhstan, TOO, Kazakhstan

Bratislav Krunić

OOO Gorenje BT, Russia

Marko Špan

»Euro Lumi & Surovina« SH.P.K., Kosovo

Amir Pira

Kemis Valjevo d.o.o., Serbia

Zoran Milovanović

Gorenje GTI d.o.o., Beograd, Serbia

Miloš Leković

Asko Appliances AB, Sweden

 

Jonas Lidberg

Gorenje North America, Inc, USA

Marko Šefer

Asko Appliances Pty, Australia

Črt Prašnikar

Asko Appliances OOO, Russia

Dime Rangelov

»Gorenje Albania« SHPK, Albania

Gregor Verbič

Gorenje Home d.o.o., Zaječar, Serbia

Vlado Krebs

ORSES d.o.o., Beograd, Serbia

Mirko Meža

Gorenje Ekologija d.o.o., Stara Pazova, Serbia

Tadej Krošlin (until 31 January 2015); Zoran Milovanović (since 1 February 2015)

Gorenje Corporate GmbH, Austria

Žiga Debeljak

Cleaning System S, d.o.o., Serbia

Zoran Milovanović; Mikica Vasić (until 8 September 2014)

ZEOS eko-sistem d.o.o., Bosnia and Herzegovina

Emil Šehič

Gorenje Asia Ltd., China

Urška Kupec (until 31 December 2014); Kristian Hansen (since 1 January 2015)

Gorenje do Brasil Ltda., Brasil

Tatjana Močenik

Gorenje Solarna energija Solago, d.o.o., Valjevo, Serbia

Mirko Meža

Gorenje Sola Home, d.o.o., Valjevo, Serbia

Mirko Meža

Gorenje MDM, d.o.o., Kragujevac, Serbia

Marko Klinc

Appendix 3: Foreign exchange rates

 

 

 

2013

2014

 

Currency

Unit

Closing exchange rate

(in EUR)

Average exchange rate

(in EUR)

Closing exchange rate

(in EUR)

Average exchange rate

(in EUR)

Australia

AUD

1

1.542

1.377

1.483

1.472

Czech Republic

CZK

1

27.427

25.987

27.735

27.536

Denmark

DKK

1

7.459

7.458

7.445

7.455

Great Britain

GBP

1

0.834

0.849

0.779

0.806

Croatia

HRK

1

7.627

7.579

7.658

7.635

Hungary

HUF

1

297.040

296.941

315.540

308.707

Norway

NOK

1

8.363

7.805

9.042

8.355

Poland

PLN

1

4.154

4.197

4.273

4.184

Sweden

SEK

1

8.859

8.650

9.393

9.097

USA

USD

1

1.379

1.328

1.214

1.329

Turkey

TRY

1

2.961

2.533

2.832

2.907

Bosnia and Herzegovina

BAM

1

1.956

1.956

1.956

1.956

Bulgaria

BGN

1

1.956

1.956

1.956

1.956

Macedonia

MKD

1

61.936

61.932

61.695

61.553

Switzerland

CHF

1

1.228

1.232

1.202

1.215

Romania

RON

1

4.471

4.419

4.483

4.444

Serbia

RSD

1

114.140

112.944

120.600

116.863

Ukraine

UAH

1

11.202

10.808

18.736

15.513

Japan

JPY

1

144.720

130.157

145.230

140.226

United Arab Emirates

AED

1

4.999

4.873

4.585

4.907

Kazakhstan

KZT

1

210.000

201.943

226.650

237.619

Russia

RUB

1

45.325

42.390

72.337

51.011

Albania

ALL

1

140.700

140.331

140.220

139.876

Brasil

BRL

1

3.258

2.956

3.221

3.123

China

CNY

1

8.349

8.297

7.536

8.188

New Zealand

NZD

1

1.676

1.624

1.553

1.600

ACCOUNTING REPORT OF GORENJE, D.D.

Financial statements

Income Statement of Gorenje, d.d. download

EURk

Note

2013

2014

 

Revenue

8

664,644

687,210

Change in inventories

 

-7,296

-95

Other operating income

9

17,219

10,252

 

 

 

 

Gross profit

 

674,567

697,367

 

 

 

 

Cost of goods, materials and services

10

-542,718

-555,271

Employee benefits expense

11

-92,675

-96,898

Amortisation and depreciation expense

12

-18,335

-21,618

Other operating expenses

13

-5,793

-5,631

 

 

 

 

Operating profit

 

15,046

17,949

 

 

 

 

Finance income

14

18,290

16,578

Finance expenses

14

-38,657

-28,585

Net finance expenses

14

-20,367

-12,007

 

 

 

 

Profit or loss before tax

 

-5,321

5,942

 

 

 

 

Income tax expense

15

8,026

392

 

 

 

 

Profit for the period

 

2,705

6,334

Basic and diluted earnings per share (in EUR)

28 

0.16

0.28

Statement of Other Comprehensive Income of Gorenje, d.d. download

 

EURk

Note

2013

2014

Profit for the period

 

2,705

6,334

Other comprehensive income

 

 

 

Items that will not be reclassified subsequently to profit or loss

 

0

0

Change in fair value of land

 

0

0

Items that may be reclassified subsequently to profit or loss

 

1,330

1,857

Net change in fair value of available-for-sale financial assets

24 28

-1

-41

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge

28

-5

-192

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

14

2,466

2,472

Net change in fair value arising on exchange differences from investments in subsidiaries, reclassified to profit or loss

14 28

-713

Income tax on other comprehensive income

22

-417

-382

Other comprehensive income for the period

 

1,330

1,857

Total comprehensive income for the period

 

4,035

8,191

Balance Sheet of Gorenje, d.d. download

 

EURk

Note

2013

2014

ASSETS

 

885,588

910,137

 

 

 

 

Non-current assets

 

472,935

487,383

Intangible assets

16

21,651

33,247

Property, plant and equipment

17

170,668

180,660

Investment property

18

25,361

16,729

Investments in subsidiaries

19

236,245

238,363

Investments in associates

20

976

341

Other non-current investments

21

690

689

Deferred tax assets

22

17,344

17,354

 

 

 

 

Current assets

 

412,653

422,754

Inventories

23

95,811

96,138

Current investments

24

90,626

137,280

Trade receivables

25

195,935

167,714

Other current assets

26

15,377

11,368

Cash and cash equivalents

27

14,904

10,254

 

 

 

 

EQUITY AND LIABILITIES

 

885,588

910,137

 

 

 

 

Equity

28

347,907

365,910

Share capital

 

92,240

101,922

Share premium

 

157,705

157,835

Revenue reserves

 

95,818

99,301

Treasury shares

 

-3,170

-3,170

Retained earnings

 

1,369

4,220

Fair value reserve

 

3,945

5,802

 

 

 

 

Non-current liabilities

 

193,601

256,032

Provisions

30

23,185

21,929

Non-current financial liabilities

31

170,416

234,103

 

 

 

 

Current liabilities

 

344,080

288,195

Current financial liabilities

32

157,461

113,990

Trade payables

33

169,476

154,786

Other current liabilities

34

17,143

19,419

Statement of Cash Flows of Gorenje, d.d. download

EURk

Note

2013

2014

A. CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

Profit for the period

 

2,705

6,334

Adjustments for:

 

 

 

- depreciation of property, plant and equipment

12 17

15,411

18,446

- amortisation of intangible assets

12 16

2,924

3,172

- investment income

14

-18,290

-16,578

- finance expenses

14

38,657

28,585

- gain on sale of property, plant and equipment

 

-506

-36

- gain on sale of investment property

 

0

-83

- revaluation operating income

 

-2,416

- income tax expense

15

-8,026

-392

Operating profit before changes in net operating current assets and provisions

 

30,459

39,448

Change in trade and other receivables

 

-2,273

25,219

Change in inventories

23

-11,594

-327

Change in provisions

30

1,553

-2,404

Change in trade and other payables

 

12,467

-16,471

Cash generated from operations

 

153

6,017

 Interest paid

 

-17,656

-17,054

Net cash from operating activities

 

12,956

28,411

 

 

 

 

B. CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

Proceeds from sale of property, plant and equipment

 

7,418

7,391

Proceeds from sale of investment property

 

453

3,274

Interest received

 

6,034

6,731

Dividends received

 

9,837

5,349

Disposal of subsidiary

 

0

266

Acquisition of subsidiary

 

-6,600

-4,506

Acquisition of property, plant and equipment

 

-40,731

-23,385

Acquisition of investment property

 

-7,304

-9

Other investments

 

3,866

-44,832

Acquisition of intangible assets

 

-10,903

-14,767

Net cash used in investing activities

 

-37,930

-64,488

 

 

 

 

C. CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

Capital increase

 

25,856

9,812

Interest-bearing borrowings

 

117,336

213,962

Repayment of borrowings

 

-122,286

-265,347

Bonds issued

 

0

73,000

Net cash used in financing activities

 

20,906

31,427

Net change in cash and cash equivalents

 

-4,068

-4,650

Cash and cash equivalents at beginning of period

 

18,972

14,904

Cash and cash equivalents at end of period

 

14,904

10,254

Statement of Changes in Equity of Gorenje, d.d. download

EURk

Share capital

Share premium

Revenue reserves

 

Treasury shares

Retained earnings

Fair value reserve

Total

Legal reserves

Statutory reserves

Treasury share reserve

Other revenue reserves

Profit or loss from previous periods

Profit or loss for the period

Opening balance at 1 Jan 2013

66,378

157,712

12,896

6,653

3,170

71,612

-3,170

151

0

2,615

318,017

Total comprehensive income for the period

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

 

 

 

 

 

 

2,705

 

2,705

Total other comprehensive income

 

 

 

 

 

 

 

 

 

1,330

1,330

Total comprehensive income for the period

0

0

0

0

0

0

0

0

2,705

1,330

4,035

Transactions with owners (when acting as owners) recognised directly in equity

 

 

 

 

 

 

 

 

 

 

0

Contributions by owners and distributions to owners

 

 

 

 

 

 

 

 

 

 

0

Capital increase

25,862

849

 

 

 

 

 

 

 

 

26,711

Costs of capital increase

 

-856

 

 

 

 

 

 

 

 

-856

Creation of statutory reserves

 

 

 

270

 

 

 

 

-270

 

0

Transfer of part of profit for 2013 to other reserves

 

 

 

 

 

1,217

 

 

-1,217

 

0

Total contributions by owners and distributions to owners

25,862

-7

0

270

0

1,217

0

0

-1,487

0

25,855

Total transactions with owners

25,862

-7

0

270

0

1,217

0

0

-1,487

0

25,855

Closing balance at 31 Dec 2013

92,240

157,705

12,896

6,923

3,170

72,829

-3,170

151

1,218

3,945

347,907

EURk

Share capital

Share premium

Revenue reserves

 

Treasury shares

Retained earnings

Fair value reserve

Total

Legal reserves

Statutory reserves

Treasury share reserve

Other revenue reserves

Profit or loss from previous periods

Profit or loss for the period

Opening balance at 1 Jan 2014

92,240

157,705

12,896

6,923

3,170

72,829

-3,170

151

1,218

3,945

347,907

Total comprehensive income for the period

 

 

 

 

 

 

 

 

 

 

 

Profit for the period

 

 

 

 

 

 

 

 

6,334

 

6,334

Total other comprehensive income

 

 

 

 

 

 

 

 

 

1,857

1,857

Total comprehensive income for the period

0

0

0

0

0

0

0

0

6,334

1,857

8,191

Transactions with owners (when acting as owners) recognised directly in equity

 

 

 

 

 

 

 

 

 

 

0

Contributions by owners and distributions to owners

 

 

 

 

 

 

 

 

 

 

0

Capital increase

9,682

318

 

 

 

 

 

 

 

 

10,000

Costs of capital increase

 

-188

 

 

 

 

 

 

 

 

-188

Creation of statutory reserves

 

 

 

633

 

 

 

 

-633

 

0

Transfer of profit or loss from previous period to retained earnings or losses

 

 

 

 

 

 

 

1,218

-1,218

 

0

Transfer of part of profit for 2014 to other reserves

 

 

 

 

 

2,850

 

 

-2,850

 

0

Total contributions by owners and distributions to owners

9,682

130

0

633

0

2,850

0

1,218

-4,701

0

9,812

Total transactions with owners

9,682

130

0

633

0

2,850

0

1,218

-4,701

0

9,812

Closing balance at 31 Dec 2014

101,922

157,835

12,896

7,556

3,170

75,679

-3,170

1,369

2,851

5,802

365,910

Notes to the Financial Statements

1. Reporting entity

Gorenje, d.d. (hereinafter referred to also as “Company”) is the Gorenje Group’s controlling company Homeiciled in Slovenia. The address of the Company’s registered office is Partizanska 12, 3503 Velenje.

 

The financial statements of the Company have been prepared as at and for the year ended 31 December 2014. The Company is primarily involved in the production and sale of household appliances.

2. Basis of preparation

a) Statement of compliance

 

The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted in the European Union and with the provisions of the Companies act. The financial statements were approved by the Management Board on 3 March 2015.

 

b) Basis of measurement

 

The financial statements have been prepared on the historical cost basis, except for the following items that are measured at fair value:

  • derivative financial instruments
  • available-for-sale financial assets,
  • land,
  • investment property.

The methods used to measure fair values are discussed further in Note 4.

 

c) Functional and presentation currency

 

These financial statements are presented in EUR, which is the Company’s functional currency. All financial information presented in EUR has been rounded to the nearest thousand, except when otherwise indicated.

 

d) Use of estimates and judgements

 

The preparation of financial statements in conformity with IFRSs, as adopted by the EU, requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

 

 

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

 

Information about significant estimation of uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes:

  • Note 15 and 22 – deferred taxes:
  • Notes 17 and 18 and accounting policies 3(e) and 3(g) – valuation of property, plant and equipment and investment property:
  • Note 19 and 20 and accounting policies 3(c) and 3(d) – acquisition and disposal of companies;
  • Note 30 and the accounting policy (m)(ii) - measurement of liabilities for retirement benefits and jubilee premiums;
  • Note 30 – provisions for onerous contracts 3(m) (v);
  • Note 30 and the accounting policy 3(m)(i) - provisions for warranties;
  • Note 24 - valuation of investments;
  • Accounting policy 3(j)(i) - impairment of financial assets, including receivables.

e) Change in accounting policies

 

The Company has not changed its accounting policies, except where required by the amended IFRSs.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these financial statements.

 

a) Foreign currency

 

(i) Foreign currency transactions

 

Transactions in foreign currencies are translated to EUR (the functional currency of the Company) at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain and loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the period, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

 

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to EUR at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated to the functional currency using the exchange rate at the date of transaction.

 

Foreign currency differences arising on retranslation are recognised in the profit or loss, except for differences arising on the retranslation of:

  • available-for-sale equity instruments;
  • a financial liability designated as a hedge of the net investment in a foreign operation to the extent that the hedge is effective; or
  • qualifying cash flow hedges to the extent that the hedge is effective.

b) Financial instruments

 

(i) Non-derivative financial assets

 

The Company initially recognises loans, receivables, and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

 

The Company derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Company is recognised as a separate asset or liability.

 

Financial assets and liabilities are offset and the net amount is presented in the balance sheet when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

 

The Company classifies non-derivative financial instruments into the following categories: liabilities and receivables, available- for-sale financial assets, cash and cash equivalents.

 

Liabilities and receivables

 

Liabilities and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, liabilities and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

 

Cash and cash equivalents

 

Cash and cash equivalents comprise cash balances and an investment (deposit) with maturity (of three months or less). Bank overdrafts that are repayable on demand form an integral part of the Company’s current financial liabilities.

 

Available-for-sale financial assets

 

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of financial assets. Subsequent to initial recognition, they are measured at fair value plus any directly attributable transaction costs.

 

Fair value changes (see note 3(j)(i)) and foreign currency differences on available-for-sale equity instruments (see note 3(a)) are recognised in other comprehensive income and disclosed in equity or fair value reserves. When available- for-sale financial assets are derecognised or permanently impaired , the gain or loss accumulated in equity is reclassified to profit or loss. Available-for-sale financial assets comprise equity securities and debt securities.

 

(ii) Non-derivative financial liabilities

 

The Company initially recognises debt securities issued and subordinated liabilities on the date of their accrual. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Company becomes a party to the contractual provisions of the instrument.

 

The Company derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

 

The Company classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

 

Other financial liabilities comprise loans, bank overdrafts, and trade and other payables.

 

(iii) Share capital

 

Ordinary shares

 

Ordinary shares are equity constituent part of share capital. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

 

Repurchase of share capital (treasury shares)

 

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and disclosed in equity as a deductible item; in addition treasury share reserve is created. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.

 

Dividends are recognised as a liability in the period in which a resolution on dividend payment is adopted by the General Meeting of Shareholders.

 

(iv) Derivative financial instruments, including hedge accounting

 

The Company holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

 

On initial designation of the derivative as the hedging instrument, the Company formally documents the relationship between the hedging instrument and hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Company makes an assessment, both at the inception of the hedging relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80-125 percent. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

 

Derivatives are recognised initially at fair value; attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

 

Cash flow hedge

 

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

 

When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in other comprehensive income is recognised immediately in profit or loss.

 

Other derivative financial instruments

 

When a non-trading derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.

 

c) Subsidiaries

 

Investments in subsidiaries are valued at cost. Incremental costs directly attributable to the acquisition of a subsidiary are recognised as an increase in the cost of equity investment. Share of profit is recognized as income when a resolution on payment is adopted by the General Meeting of Shareholders.

 

d) Associates

 

Investments in associates are valued at cost. Incremental costs directly attributable to the acquisition of an associate company are recognised as an increase in the cost of equity investment.

 

e) Property, plant and equipment

 

(i) Recognition and measurement

 

Items of property (excluding land), plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

 

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowings costs. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

 

Borrowing costs directly attributable to the acquisition, construction or production of a qualifying item of property, plant and equipment were capitalised subject to the following conditions: if the value of individual asset under construction in total sales exceeded 5%, and if the duration of assets under construction exceeded six months.

 

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

 

Fair value model or revaluation model is applied to land. The effect of revaluation is recorded in other comprehensive income. Impairment of land previously increased in value results in a decrease in revaluation surplus in other comprehensive income; otherwise, it is recognised in the income statement.

 

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognised net within other income/other expenses in profit or loss.

 

(ii) Reclassification to investment property

 

When the use of a property changes from owner-occupied to investment property, the property is remeasured to fair value and reclassified as investment property. Any gain arising on remeasurement of fair value is recognised in profit or loss to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in the fair value reserve in equity.

 

(iii) Subsequent expenditure

 

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Company, and if its cost can be measured reliably. All others costs, such as day-to-day servicing of property, plant and equipment, are recognised in profit or loss as incurred.

 

(iv) Depreciation

 

Depreciation is recognised on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment; this method most accurately reflects the expected pattern of the use of the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

 

Items of property, plant and equipment are depreciated on the first day of the following month, when they are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready for use.

 

Estimated useful lives for the current and comparative years are as follows:

 

buildings

20–50 years

plant and equipment

5–20 years

computer equipment

2–5 years

transportation means

5–20 years

office equipment

5–10 years

tools

5–10 years

Depreciation methods, useful lives and residual values are reviewed at each reporting date and adjusted, if appropriate.

 

f) Intangible assets

 

(i) Research and development

 

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

 

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Company intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, other costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

 

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

 

(ii) Other intangible assets

 

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

 

(iii) Subsequent expenditure

 

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

 

(iv) Amortisation

 

Amortisation is based on the cost of an asset less its residual value. Amortisation is recognised on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful lives for the current and comparative periods are as follows:

 

patents and trademarks

10 years

capitalised development costs

7 - 10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

 

g) Investment property

 

Investment property is property held either to earn rental income or to increase the value of non-current investment or for both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes. Investment property is recognised at fair value with any change therein recognised in the income statement.

 

Cost includes expenditure that is directly attributable to the acquisition of the investment property. The cost of self-constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use, and capitalised borrowing costs.

 

Property rented to a subsidiary and associate with the conduct of the Company's business activities, is accounted for as an item of property, plant and equipment. Investment property also includes property, of which more than 50% of the available surface area is leased out.

 

Any gain or loss on disposal of an investment property (calculated as the difference between the net proceeds from disposal and the carrying amount of the item) is recognised in profit or loss.

 

When the use of a property changes such that it is reclassified as property, plant and equipment, its fair value at the date of reclassification becomes its cost for subsequent accounting of depreciation.

 

h) Leased assets

 

Leases in terms of which the Company assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

 

Other leases are operating leases and are not recognised in the Company’s balance sheet.

 

i) Inventories

 

Inventories of merchandise and goods are measured at the lower of cost and net realisable value. The cost of inventories of materials and merchandise is based on the weighted average price method and includes expenditure incurred in acquiring the inventories, dependent costs and other costs incurred in bringing them to their existing location and condition.

 

Inventories of products and work in progress are valued at production costs (in broader sense), which in addition to direct costs of material, labour, services, depreciation and part of production costs, include also costs of production overheads, acquisition costs, costs of maintenance and quality assurance overheads, and total costs of research and development.

 

The standard price method is applied when disclosing inventories of products. Deviations from input (charged) and standard prices are established and accounted on a monthly basis.

 

Inventories of work in progress and products are not revalued due to value increase. Their write-off is mandatory if the carrying amount exceeds their market value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. Decline in value of inventories of work in progress and products due to write-off is credited against change in inventories.

 

Write-off of obsolete inventories of products and semi-finished products in carried out in compliance with Group's policies.

 

j) Impairment of assets

 

(i) Non derivative financial assets

 

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

 

Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on term that the Company would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, adverse changes in the payment status of borrowers or issuers in the Company, economic conditions that correlate with defaults or the disappearance of an active market for a security. In addition, for an investment in an equity security, a significant prolonged decline in its fair value below its cost is objective evidence of impairment.

 

Financial assets measured at amortised cost

 

The Company considers evidence of impairment for financial assets measured at amortised cost (loans and receivables and held-to-maturity investment securities) at both a specific asset and collective level. All individually significant assets are assessed for specific impairment. Those found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are collectively assessed for impairment by grouping together with similar risk characteristics.

 

In assessing collective impairment the Company uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

 

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables or held-to-maturity investment securities. Interest on the impaired asset continues to be recognised. When a subsequent event (e.g. repayment of debt by the debtor) causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

 

In line with the accounting policies, the Company considers evidence of impairment for receivables based on the observance of criteria pertaining to the maturity and collateralisation of receivables. Thereafter, it is corrected by an individual estimate.

 

Available-for-sale financial assets

 

Impairment losses on available-for-sale financial assets are recognised by reclassifying the losses accumulated in the fair value reserve in equity, to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss recognised previously in profit or loss. Changes in impairment provisions attributable to application of the effective interest method are reflected as a component of interest income.

 

If, in a subsequent period, the fair value of an impaired available- for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

 

(ii) Non-financial assets

 

The carrying amounts of the Company’s non-financial assets, other than investment property, inventories and deferred tax assets, are reviewed at each reporting to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill and indefinite-lived intangible assets that are not yet available for use are tested annually prior to the preparation of financial statements. An impairment loss is recognised if the carrying amount of a cash-generating unit (CGU) exceeds its recoverable amount.

 

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash-generating unit, or CGU”). Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

 

Impairment losses are recognised in the income statement. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

 

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised.

 

k) Non-current assets classified as held for sale

 

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Company’s accounting policies. Thereafter generally the assets, or disposal group, are measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group first is allocated to goodwill, and then to remaining assets and liabilities on pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, investment property, which continue to be measured in accordance with the Company’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains and losses on remeasurement are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

 

Once classified as held for sale, intangible assets and property, plant and equipment are not amortised or depreciated. In addition, equity accounting of equity-accounted investees ceases once classified as held for sale.

 

l) Employee benefits

 

(i) Short-term employee benefits

 

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

 

m) Provisions

 

A provision is recognised if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance expenses.

 

(i) Warranties for products and services

 

A provision for warranties is recognised when the underlying products or services are sold. The provision is based on historical warranty data and a weighting of all possible outcomes against their associated probabilities.

 

(ii) Provisions for retirement benefits and jubilee premiums

 

In accordance with the statutory requirements, the collective agreement and the internal regulations, the Company is liable to pay jubilee premiums and retirement benefits to its employees. For these obligations, long-term provisions are created.

 

Provisions are created by discounting, at the reporting date, the estimated future payments of retirement benefits and jubilee premiums. The obligation is calculated separately for each employee by estimating the costs of retirement benefits and the costs of all expected jubilee premiums until retirement. The balance of provisions is verified on a three-year basis based on a calculation that has been made by a certified actuary.

 

As from 1 January 2013, actuarial gains and losses arising on provisions for retirement benefits and jubilee premiums are recognised in other comprehensive income in compliance with the amended IAS 19. Company’s accounting policy was changed as required under the stated amendments to IAS 19. Company’s management assesses that the relevant change has no significant impact on the company’s financial statements for the current and previous period, hence no retrospective restatement is required.

 

(iii) Restructuring

 

A provision for restructuring is recognised when the Company has approved a detailed and formal restructuring plan, and the restructuring either has commenced or has been announced publicly. Future operating expense is not provided for.

 

(iv) Site restoration

 

In accordance with the Company’s published environmental policy and applicable legal requirements, a provision for site restoration in respect of contaminated land, and the related expense, is recognised when the land is contaminated.

 

(v) Onerous contracts

 

A provision for onerous contracts is recognised when the expected benefits to be derived by the Company from a contract are lower than the unavoidable cost of meeting its obligations under the contract. The provision is measured at the present value of the lower of the expected cost of terminating the contract and the expected net cost of continuing with the contract. Before a provision is established, the Company recognises any impairment loss on the assets associated with that contract.

 

n) Revenue

 

(i) Revenue from sale of products, goods and materials

 

Revenue from the sale of products, goods and materials in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts, resale rebates, and volume rebates. Revenue is recognised when persuasive evidence exists, usually in the form of an executed sales agreement, that the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, then the discount is recognised as a reduction of revenue as the sales are recognised.

 

The timing of the transfer of risks and rewards varies depending on the individual terms of the sales agreement. For sales of goods, usually transfer occurs when the product is received at the customer’s warehouse; however, for some international shipments transfer occurs upon loading the goods onto the relevant carrier at the port. Generally for such products the customer has no right of return.

 

(ii) Revenue from services rendered

 

Revenue from services rendered is recognised in profit or loss in proportion to the stage of completion of the transaction at the reporting date. The stage of completion is assessed by reference to surveys of work performed.

 

When the services under a single arrangement are rendered in different reporting periods, the consideration is allocated on a relative fair value basis between the services.

 

(iii) Commission

 

When the Company acts in the capacity of an agent rather than as the principal in a transaction, the revenue recognised is the net amount of commission made by the Company.

 

(iv) Rental income

 

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease. Rental income from subleased property is recognised as other income.

 

o) Government grants

 

Government grants are recognised initially as deferred income when there is reasonable assurance that they will be received and the Company will comply with the conditions associated with the grant and are then recognised in profit or loss as other income on a systematic basis over the useful life of the asset. Grants that compensate the Company for expenses incurred are recognised in profit or loss as other income on a systematic basis in the same periods in which the expenses are recognised.

 

p) Finance income and finance expenses

 

Finance income comprises interest income on funds invested, dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss, gains on the remeasurement to fair value of any pre-existing interest in an acquiree, and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss on the date that the shareholder’s right to receive payment is established, which in the case of quoted securities is the ex-dividend date.

 

Finance expenses comprise borrowing costs (part of borrowing costs can be capitalised within property, plant and equipment), exchange losses, impairment losses on financial assets, and losses on hedging instruments that are recognised in income statement. Borrowing costs that are not directly attributable to the acquisition of a qualifying asset in construction or production are recognised in income statement using the effective interest method.

 

Foreign currency gains and losses are reported on a net basis as either finance income or finance expenses.

 

r) Income tax

 

Income tax expense comprises current and deferred tax. Income tax expense is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

 

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

  • temporary differences on the initial recognition of assets or 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 and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and
  • taxable temporary differences arising on the initial recognition of goodwill.

The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. For investment property that is measured at fair value, the presumption that the carrying amount of the investment property will be recovered through sale has not been rebutted.

 

Deferred tax (is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

 

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

 

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

 

s) Basic earnings per share

 

The Company presents basic earnings per share that equals the diluted earnings per share since the Company has not issued preference shares or floating-rate bonds. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year.

 

t) Comparable information

 

Comparative information has been harmonised with the presentation of information in the current year. Where required, adjustment of comparative information has been carried out in order to comply with the presentation of information in the current year.

 

u) New standards and interpretations applicable in the current period

 

Following standards, amendments to existing standards and interpretations issued by the International Accounting Standards Board (IASB) and adopted by the EU apply:

  • IFRS 10 ‘Consolidated Financial Statements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IFRS 11 ‘Joint Arrangements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IFRS 12 ‘Disclosure of Interests in Other Entities’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IAS 27 (amended in 2011) ‘Separate Financial Statements’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • IAS 28 (amended in 011) ‘Investments in Associates and Joint Ventures’ adopted by the EU as at 11 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and IFRS 12 ‘Disclosure of Interests in Other Entities’ - Transition Guidance, adopted by the EU as at 4 April 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IFRS 10 ‘Consolidated Financial Statements’, IFRS 12 ‘Disclosure of Interests in Other Entities’ and IAS 27 (amended in 2011) ‘Separate Financial Statements’ - Investment Entities, adopted by the EU as at 20 November 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 32 ‘Financial Instruments: Presentation’ – Offsetting Financial Assets and Financial Liabilities, adopted by the EU as at 13 December 2012 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 36 ‘Impairment of Assets’ Recoverable Amount Disclosures for Non-Financial Assets, adopted by the EU as at 19 December 2013 (effective for annual periods beginning on or after 1 January 2014),
  • Amendments to IAS 39 ‘Financial Instruments: Recognition and Measurement’ – Novation of Derivatives and Continuation of Hedge Accounting, adopted by the EU as at 19 December 2013 (effective for annual periods beginning on or after 1 January 2014).

Adoption of the relevant amendments to the existing standards did not result in any change of the Company's accounting policies.

 

v) New standards and interpretations not yet adopted

 

The following new standards and interpretations are not yet effective for the annual period ended 31 December 2014 and have not been applied in preparing the financial statements hereunder:

  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2010-2012 Cycle’ (IFRS 2, IFRS 3, IFRS 8, IFRS 13, IAS 16, IAS 24 and IAS 38), in response to eliminate inconsistency and provide clarification of wording in IFRSs, which were adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015),
  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2011-2013 Cycle’ (IFRS 1, IFRS 3, IFRS 13 and IAS 40), in response to eliminate inconsistency and provide clarification of wording in IFRSs, which were adopted by the EU on 18 December 2014 (effective for annual periods beginning on or after 1 January 2015),
  • Amendments to IAS 19 ‘Employee Benefits’ - Defined Benefit Plans: Employee Contributions, which were adopted by the EU on 17 December 2014 (effective for annual periods beginning on or after 1 February 2015),
  • IFRIC 21 ‘Levies’, which was adopted by the EU on 13 June 1014 (effective for annual periods beginning on or after 17 June 2014).

Standards and interpretations issued by the IASB but not yet adopted by the EU

 

At present the IFRSs, as adopted by the EU, do not significantly differ from regulations adopted by IASB, except for following standards, amendments to existing standards and interpretations, which as of the date of approval of financial statements were not yet effective in EU:

  • IFRS 9 'Financial Instruments' (effective for annual periods beginning on or after 1 January 2018),
  • IFRS 14 'Regulatory Deferral Accounts' (effective for annual periods beginning on or after 1 January 2016),
  • IFRS 15 'Revenue from Contracts with Customers' (effective for annual periods beginning on or after 1 January 2017),
  • Amendments to IFRS 10 'Consolidated Financial Statements' and IAS 28 'Investments in Associates and Joint Ventures' - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IFRS 10 'Consolidated Financial Statements', IFRS 12 ' Disclosure of Interests in Other Entities ' and IAS 28 'Investments in Associates and Joint Ventures' – Investment Entities: consolidation exceptions (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IFRS 11 'Joint Arrangements' – Accounting for acquisitions of interests in joint operations (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 1 'Presentation of Financial Statements' – Disclosure initiative (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 16 'Property, Plant and Equipment' and IAS 38 'Intangible Assets' – Clarification of acceptable methods of depreciation and amortisation (effective for annual periods beginning on or after 1 January 2016),
  • Amendments to IAS 27 'Separate Financial Statements' – Equity method at separate financial statements (effective for annual periods beginning on or after 1 January 2016),
  • A collection of amendments to various IFRSs ‘Annual Improvements to IFRSs 2012-2014 Cycle' (IFRS 5, IFRS 7, IFRS 19 and MRS 34), in response to eliminate inconsistency and provide clarification of wording in IFRSs (effective for annual periods beginning on or after 1 January 2016).

The Company does not expect the new standards, amendments to existing standards and interpretations to have a material impact on the financial statements during the early application.

 

In addition, hedge accounting in connection with financial assets and liabilities that was not adopted by the EU yet, remains non-regulated.

 

The Company assesses that hedge accounting in connection with financial assets and liabilities pursuant to provisions of IAS 39: »Financial Instruments: Recognition and Measurement « would not significantly impact the Company's financial statements if applied as at the balance sheet date.

4. Determination of fair value

A number of the Company’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

 

(i) Property, plant and equipment

 

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

 

A revaluation of land is based on the independent valuer’s report and is carried out every five years. The Company examines, on an annual basis, if revaluation of land is required.

 

(ii) Intangible assets

 

The fair value of patents and trademarks acquired in a business combination is based on the discounted estimated royalty payments that have been avoided as a result of the patent or trademark being owned.

 

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.

 

(iii) Investment property

 

An external, independent valuation company, having appropriate recognised professional qualifications and recent experience in the location and category of property being valued, values the Company’s investment property portfolio every five years. Assessments are carried out in the intermediate period to determine whether any revaluations are required to be made. The fair values are based on market values, being the estimated amount for which a property could be exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

 

In the absence of current prices in an active market, the valuations are prepared by considering the estimated rental value of the property. A market yield is applied to the estimated rental value to arrive at the gross property valuation. When actual rents differ materially from the estimated rental value, adjustments are made to reflect actual rents.

 

Valuations reflect, when appropriate, the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation, the allocation of maintenance and insurance responsibilities between the Company and the lessee, and the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices, and when appropriate counter-notices, have been served validly and within the appropriate time.

 

(iv) Investments in debt and equity securities

 

The fair value of equity and debt securities is determined by reference to their quoted closing bid price at the reporting date, or if unquoted, determined using a valuation technique. Valuation techniques employed include market multiples and discounted cash flow analysis using expected future cash flows and a market-related discount rate. The fair value of held-to-maturity investments is determined for disclosure purposes only.

 

(v) Trade and other receivables

 

The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

 

Trade and other receivables are not discounted due to short-term maturity. However, impairment to fair value is considered.

 

(vi) Forward exchange contracts and interest rate swaps

 

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a credit-adjusted risk-free interest rate (based on government bonds).

 

The fair value of interest rate swaps is based on broker quotes. Those quotes are tested for reasonableness by discounting estimated future cash flows based on the terms and maturity of each contract and using market interest rates for a similar instrument at the measurement date.

 

Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group and counterparty when appropriate.

 

(vii) Other non-derivative financial liabilities

 

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. In respect of the liability component of convertible notes, the market rate of interest is determined by reference to similar liabilities that do not have a conversion option. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

5. Capital management

Capital management is outlined within the Group's financial statements.

6. Segment reporting

The Company has no reportable segments. Segment information is presented in the consolidated financial statements of the Gorenje Group.

7. Statement of cash flows

The statement of cash flows has been compiled under the indirect method on the basis of items in the balance sheet at 31 December 2014, the balance sheet at 31 December 2013, the income statement for the year ended 31 December 2014, and additional information required for the adjustment of inflows and outflows.

Note 8 – Revenue EUR 687,210k

EURk

2013

2014

Revenue from the sale of products – domestic market

15,609

15,828

Revenue from the sale of products – foreign market

386,796

410,989

Revenue from the sale of merchandise – domestic market

43,258

39,419

Revenue from the sale of merchandise – foreign market

147,337

151,574

Revenue from the sale of services – domestic market

5,379

4,575

Revenue from the sale of services – foreign market

18,358

22,060

Revenue from the sale of materials and semi-finished products – domestic market

12,368

14,936

Revenue from the sale of materials and semi-finished products – foreign market

35,539

27,829

Total

664,644

687,210

Revenue from the sale to subsidiaries in the Gorenje Group is recorded at EUR 528,839k (2013: EUR 498,148k) indicating an increase of 6.2% over the 2013 balance.

Note 9 – Other operating income EUR 10,252k

EURk

2013

2014

Income from subsidies and donations

1,192

997

Income from license fees

3,902

4,403

Rental income 

2,705

2,357

Income from compensation in damages

4,153

687

Income from reversal of long-term provisions

2,087

1,109

Gain on sale of property, plant and equipment

506

37

Gain on sale of investment property

0

83

Gain on revaluation of investment property and art works

2,416

0

Other operating income

258

579

Total

17,219

10,252

Other operating income disclosed at EUR 6,449k refers to subsidiaries (2013: EUR 6,628k). Income from license fees includes allowances charged under the use of the Gorenje trademark rights and fees for the use of software licences. Income from compensation in damages refers to charged damages under contractual relationships.

 

Rental income

 

EURk

2013

2014

Rentals - up to 1 year (Gorenje Group companies)

2,097

1,879

Rentals - up to 1 year (other companies)

608

478

Total

2,705

2,357

Rental income relates primarily to real property, which is partly used by the Company and in part leased out to subsidiaries.

Note 10 – Cost of goods, materials and services EUR 555,271k

EURk

2013

2014

Cost of goods sold

194,323

189,094

Cost of materials

269,665

290,609

Cost of services

78,730

75,568

Total

542,718

555,271

Cost of services that arises on transactions with subsidiaries in the Group are recorded at EUR 26,404k (2013: EUR 23,998k). Cost of services includes cost of provisions for warranties in the amount of EUR 7,512k (2013: EUR 11,268k).

 

Cost of services includes cost of rentals in the amount of EUR 3,256k (2013: EUR 3,100k).

 

The table below shows the minimum rental payments under operating lease (Company as lessee) as at the year-end of 2014.

EURk

2014

Up to 1 year

1,966

More than 1 and up to 5 years

1,798

More than 5 years

518

Total

4,282

Note 11 – Employee benefits expense EUR 96,898k

EURk

2013

2014

Wages and salaries

66,569

68,206

Social security costs

12,920

13,659

Provisions for retirement benefits and jubilee premiums

147

43

Other employee benefits expense

13,039

14,990

Total

92,675

96,898

The item of social security costs comprises costs of voluntary, additional, collective pension insurance in the amount of EUR 2,383k (2013: EUR 2,254k). In 2014, the average number of employees calculated based on working hours was 4,121.33 (2013: 4,169.26 employees).

 

Employee benefits expense increased by 4.6% compared to the previous year and is the result of adjusting the said expenses with the collective agreement and the employment legislation, and of removing the extraordinary measure that decreased wages of higher-paid employees and still applied in the first half-year of 2013.

Note 12 – Amortisation and depreciation expense EUR 21,618k

EURk

2013

2014

Amortisation expense of intangible assets

2,924

3,172

Depreciation expense of property, plant and equipment

15,411

18,446

Total

18,335

21,618

In respect to 2013, amortisation and depreciation expenses increased by 17.9% as a result of relocating the equipment for manufacturing dishwashers and dryers from Sweden, which was completed in the second half-year of 2013.

Note 13 – Other operating expenses EUR 5,631k

EURk

2013

2014

Write-off of plant and equipment

651

32

Write-down of inventories to net realisable value

1,526

2,002

Other taxes and charges

1,443

1,662

Environmental levies

742

734

Scholarships

210

298

Creation of provisions for litigations

839

200

Other expenses

382

703

Total

5,793

5,631

Other taxes and charges include charges for the use of the building plot, water charge, environmental taxes, and other mandatory taxes and charges. Other expenses primarily comprise compensations relating to operations.

Note 14 – Net finance expenses EUR 12,007k

Finance income EUR 16,578k

EURk

2013

2014

Dividend income and income from other profit shares

8,197

5,349

Interest income on transactions with Group companies

5,500

6,878

Interest income on transactions with other companies

628

479

Change in fair value of forward exchange contracts

0

2,096

Net exchange gains

0

1,258

Gain on disposal of available-for-sale financial assets

0

10

Other finance income

3,965

508

Total

18,290

16,578

Dividend income and income from other profit shares recorded at EUR 5,300k refer to dividends paid by subsidiaries.

 

Other finance income includes income from commissions on loan guarantees issued to subsidiaries and third parties, and from elimination of allowances for receivables from previous periods, which were paid or reversed.

 

Finance expenses EUR 28,585k

EURk

2013

2014

Interest expenses on transactions with Group companies

1,634

2,305

Interest expenses on transactions with other companies

13,237

14,135

Change in fair value of interest rate swaps

0

570

Expenses on interest rate swaps transactions

2,466

1,902

Change in fair value of forward exchange contracts

209

0

Expenses on forward exchange contracts

26

75

Expenses on net exchange differences

629

0

Impairment of investments in subsidiaries

2,800

2,132

Impairment of investments in associates

0

600

Impairment loss on available-for-sale financial assets

9,695

1

Impairment loss on trade receivables

669

327

Impairment loss on loans

5,934

762

Other finance expenses

1,358

5,776

Total

38,657

28,585

Impairment of investments in associates refers to companies Gorenje Keramika d.o.o. and Indop, d.o.o. The impairment of investments made in associates applies to the company RCE – Razvojni center energija, d.o.o.

 

The fair value of trade receivables and loans is ensured through the impairment of trade receivables and loans in the amount of EUR 1,089k (2013: EUR 6,603k). With respect to contractual provisions, the impairment of loans given refers to the company Arosa Mobilia, d.o.o. and the loan to RCE – Razvojni center energija, d.o.o.

 

Other finance expenses include primarily derecognised accrued income in connection with compensations not invoiced in the amount of EUR 2.2m, and provisions formed for the expected collection of the bank guarantee in the amount of EUR 1.1m.

 

Finance income and expenses recognised directly in other comprehensive income (net)

 

EURk

2013

2014

Net change in fair value of available-for-sale financial assets

-1

-35

Net change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

Net change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-422

-580

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,466

2,472

Net change in fair value of investments in subsidiaries, reclassified to profit or loss

-713

0

Finance income / expense recognised in other comprehensive income

1,330

1,857

Net effect from the statement of comprehensive income is shown in the above table; it does not, however, include a change in fair value of land.

Note 15 – Income tax expense EUR 392k

Income tax expense at EUR 392k represents the effect of the changed value of deferred tax assets, as the income tax calculation actually discloses a positive tax base in the amount of EUR 7.3m for which tax incentives are utilised. Changes in deferred tax are attributable primarily to unutilised investment-related tax incentives for 2014. The relocation of the washing machine and dishwasher production from Sweden to Slovenia is expected to result in positive effects also in future periods.

 

The Company has not formed any deferred tax assets in 2014 referring to tax incentives for research and development in the amount of EUR 2,165k (2013: EUR 1,907k) that are to be utilised by 2019.

EURk

2013

2014

Current tax expense

0

0

Deferred tax

8,026

392

Total

8,026

392

Effective income tax rates calculated based on the commercial balance sheet:

 

EURk

2013

2013

2014

2014

Profit or loss before tax

 

-5,321

 

5,942

Income tax using the domestic tax rate

17.00%

-905

17.00%

1,010

Non-deductible expenses

-4.03%

214

22.87%

1,359

Tax exempt income

53.14%

-2,828

-17.60%

-1,046

Unused tax losses and tax incentives relating to deferred tax

84.72%

-4,507

-28.87%

-1,715

Income tax expense

150.83%

-8,026

-6.60%

-392

EURk

2013

Pre-tax

amount

Tax

After-tax amount

Change in fair value of available-for-sale financial assets

-1

0

-1

Change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

0

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-5

-417

-422

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,466

0

2,466

Net change in fair value of investments in subsidiaries, reclassified to profit or loss

-713

0

-713

Total

1,747

-417

1,330

EURk

2014

Pre-tax

amount

Tax

After-tax amount

Change in fair value of available-for-sale financial assets

-41

6

-35

Change in fair value of available-for-sale financial assets, reclassified to profit or loss

0

0

0

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge

-192

-388

-580

Change in effective portion of gains and losses on hedging instruments in a cash flow hedge, reclassified to profit or loss

2,472

0

2,472

Net change in fair value of investments in subsidiaries, reclassified to profit or loss

0

Total

2,239

-382

1,857

Note 16 – Intangible assets (IA) EUR 33,247k

EURk

2013

2014

Development costs

7,908

18,627

Industrial property rights

4,319

3,891

Intangible assets under construction

9,424

10,729

Total

21,651

33,247

Movements in intangible assets in 2013

 

EURk

Development costs

Industrial property rights

Intangible assets under construction

Total

Cost at 1 Jan 2013

21,097

14,584

928

36,609

Acquisition

 

 

10,903

10,903

Disposal, write-down

 

-1,047

 

-1,047

Transfer

2,034

373

-2,407

0

Cost at 31 Dec 2013

23,131

13,910

9,424

46,465

 

 

 

 

 

Accumulated amortisation at

1 Jan 2013

13,150

9,189

0

22,339

Disposal, write-down

 

-449

 

-449

Amortisation

2,073

851

 

2,924

Accumulated amortisation at

31 Dec 2013

15,223

9,591

0

24,814

 

 

 

 

 

Carrying amount at 1 Jan 2013

7,947

5,395

928

14,270

Carrying amount at 31 Dec 2013

7,908

4,319

9,424

21,651

Movements in intangible assets in 2014

 

EURk

Development costs

Industrial property rights

Intangible assets under construction

Total

Cost at 1 Jan 2014

23,131

13,910

9,424

46,465

Acquisition

 

 

14,768

14,768

Disposal, write-down

 

-14

 

-14

Transfer

13,018

445

-13,463

0

Cost at 31 Dec 2014

36,149

14,341

10,729

61,219

 

 

 

 

 

Accumulated amortisation at

1 Jan 2014

15,223

9,591

0

24,814

Disposal, write-down

 

-14

 

-14

Amortisation

2,299

873

 

3,172

Accumulated amortisation at

31 Dec 2014

17,522

10,450

0

27,972

 

 

 

 

 

Carrying amount at 1 Jan 2014

7,908

4,319

9,424

21,651

Carrying amount at 31 Dec 2014

18,627

3,891

10,729

33,247

The relevant increase in development costs largely refers to new advanced products that are developed by competence centres of individual programmes (EUR 12,758k) and to the development of packaging (EUR 260k). Costs of services referring to development and recognised in the income statement amounted to EUR 2,616k. As for the item of industrial property rights, additions refer mostly to purchasing new and upgrading the existing licences (EUR 342k), and to the information system upgrade (EUR 103k).

 

The item of intangible assets under construction primarily refers to the development of new advanced products (new versions of the H-BIO oven and new dishwashers, washing machines and dryers) developed by competence centres in Velenje and in ASTKO Sweden (EUR 9,232k).

Note 17 – Property, plant and equipment (PPE) EUR 180,660k

EURk

2013

2014

Land

20,365

21,294

Buildings

51,746

54,068

Production and other equipment

90,792

90,035

Property, plant and equipment under construction

7,765

15,263

Total

170,668

180,660

Movements in property, plant and equipment in 2013

 

EURk

Land

Buildings

Production and other equipment

PPE under construction

Total

Cost at 1 Jan 2013

20,365

153,157

388,674

12,420

574,616

Acquisition

 

 

 

40,732

40,732

Disposal, write-down

 

-36

-17,516

 

-17,552

Transfer

 

2,599

42,788

-45,387

0

Cost at 31 Dec 2013

20,365

155,720

413,946

7,765

597,796

 

 

 

 

 

 

Accumulated depreciation at 1 Jan 2013

0

100,822

327,046

0

427,868

Disposal, write-down

 

-9

-16,142

 

-16,151

Depreciation

 

3,161

12,250

 

15,411

Accumulated depreciation at 31 Dec 2013

0

103,974

323,154

0

427,128

 

 

 

 

 

 

Carrying amount at 1 Jan 2013

20,365

52,335

61,628

12,420

146,748

Carrying amount at 31 Dec 2013

20,365

51,746

90,792

7,765

170,668

Movements in property, plant and equipment in 2014

 

EURk

Land

Buildings

Production and other equipment

PPE under construction

Total

Cost at 1 Jan 2014

20,365

155,720

413,946

7,765

597,796

Acquisition

 

 

 

28,820

28,820

Disposal, write-down

 

-2

-11,915

 

-11,917

Transfer from investment property

929

4,506

 

-5,435

0

Transfers

 

1,015

14,872

-15,887

0

Cost at 31 Dec 2014

21,294

161,239

416,903

15,263

614,699

 

 

 

 

 

 

Accumulated depreciation at 1 Jan 2014

0

103,974

323,154

0

427,128

Disposal, write-down

 

-1

-11,534

 

-11,535

Depreciation

 

3,198

15,248

 

18,446

Accumulated depreciation at 31 Dec 2014

0

107,171

326,868

0

434,039

 

 

 

 

 

 

Carrying amount at 1 Jan 2014

20,365

51,746

90,792

7,765

170,668

Carrying amount at 31 Dec 2014

21,294

54,068

90,035

15,263

180,660

Land EUR 21,294k

 

Land was appraised at the end of 2013 by an independent certified appraiser of real property. The valuation effect was recorded at EUR 1,623k. If land was disclosed at cost, the book value would amount to EUR 13,839k.

 

Increase is attributable to the transfer from investment properties, which were purchased from Gorenje Notranja oprema, d.o.o. (Velenje and Šoštanj) in 2013, whereas the Company started to use them for its own purpose in 2014.

 

Land is not pledged as collateral for outstanding loan liabilities.

 

Buildings EUR 54,068k

 

A growth in the value of buildings in the amount of EUR 5,521k is mostly the result of the transfer from investment properties, which were purchased from Gorenje Notranja oprema, d.o.o. (Velenje and Šoštanj) in 2013 and started to be used by the Company in the second half-year of 2014 (EUR 4,506k). The residual amount refers to the renovation of business premises and production facilities.

 

A decrease in value of land is the result of depreciation accounted. Buildings were appraised at the end of 2013 by an independent certified appraiser of real property. The valuation effect under the stated method amounted to EUR -1,230k.

 

Buildings are not pledged as collateral for outstanding loan liabilities.

 

Production and other equipment EUR 90,035k

 

The increase in value of equipment is attributable to capitalised technological equipment acquired and commissioned in 2014.

 

In 2014, investments in new equipment, reconstruction and upgrade of the production equipment were made in the amount of EUR 4,609k, and of the mechanical hardware in the amount of EUR 1,056k. Investments made in new tools and upgrades of the old tools amounted to EUR 8,191k, and in computer equipment to EUR 382k. Investments in modernising transport means were recorded at EUR 738k.

 

The decrease in value of equipment refers to sale of equipment, the disposal of obsolete equipment, and depreciation expense.

 

At the end of 2013, the appraisal of plant and equipment was carried out and no conditions leading to impairment were established.

 

Property, plant and equipment under construction EUR 15,263k

 

The item of property, plant and equipment under construction relates to the equipment that shall be activated in the first half-year of 2015 and includes certain development projects in progress, as well as tools. It refers largely to the equipment used in the Panasonic project of washing machines and dryers (EUR 8,521k). Expenses relating to investment property and comprising costs of repairs and maintenance were in 2014 recorded at EUR 377k. The item of expenses includes also costs referring to investment property purchased from Gorenje Notranja oprema, d.o.o. (Velenje and Šoštanj), which were transferred among property, plant and equipment as at the year-end of 2014.

Note 18 – Investment property EUR 16,729k

EURk

2013

2014

Land and buildings

25,361

16,729

Total

25,361

16,729

Investment property includes land and buildings intended for resale or increase of investment property. In association with investment property, rental income in the amount of EUR 121k (2013: EUR 225k) was recognised in the income statement.

 

Movements in investment property

 

EURk

2013

2014

Balance at 1 January

16,147

25,361

Acquisition

7,303

9

Revaluation

2,364

0

Transfer to land and buildings

0

-5,435

Disposal

-453

-3,206

Balance at 31 December

25,361

16,729

Investment property is measured using the fair value model. Investment property was appraised by an independent certified appraiser at the end of 2013 and showed an increase in value in the amount of EUR 2,364k. Transfer to land and buildings includes investment properties that were purchased from Gorenje Notranja oprema, d.o.o. (Velenje and Šoštanj) in 2013 and started to be used by the Company in the second half-year of 2014. The decline is attributable to the sale of investment properties acquired in 2013 from Gorenje Notranja oprema, d.o.o. (Nazarje), and to the sale of apartments.

Note 19 – Investments in subsidiaries EUR 238,363k

EURk

Equity interest

Equity of company 2014

Profit or loss of company 2014

Invest-ment at

31 Dec 2013

Invest-ment at

31 Dec 2014

Gorenje I.P.C., d.o.o., Velenje

100.00%

6,310

408

377

377

Gorenje design studio, d.o.o., Velenje

52.00%

317

2

260

260

ERICo, d.o.o., Velenje

0.00%

1,381

50

256

0

ENERGYGOR, d.o.o.,Velenje

100.00%

182

5

58

58

Gorenje Keramika, d.o.o., Velenje

100.00%

1,556

-1,311

7,990

6,858

Gorenje GTI, d.o.o., Velenje

100.00%

5,502

99

3,934

3,934

Gorenje GSI, d.o.o., Ljubljana

100.00%

5,199

-130

4,861

4,861

Gorenje Gostinstvo, d.o.o., Velenje

100.00%

6,638

560

5,958

5,958

Gorenje Orodjarna, d.o.o., Velenje

100.00%

3,865

290

3,038

3,038

Indop, d.o.o., Šoštanj

100.00%

617

68

1,000

0

Gorenje GAIO, d.o.o., Šoštanj

100.00%

464

21

800

800

Gorenje Surovina, d.o.o., Maribor

85.80%

24,058

2,438

23,489

23,495

ZEOS, d.o.o., Ljubljana

51.00%

1,114

172

243

243

Gorenje Zagreb, d.o.o., Croatia

100.00%

6,697

-5,372

17,230

21,730

ST Bana Nekretnine, d.o.o., Serbia

1.61%

2,641

-145

50

50

Gorenje Tiki, d.o.o., Serbia

100.00%

26,332

2,815

23,306

23,306

Gorenje Home, d.o.o., Serbia

100.00%

5,971

1,142

3,001

3,001

Gorenje Skopje, d.o.o., Macedonia

100.00%

1,395

-41

538

538

Mora Moravia s r.o., Czech Republic

67.95%

19,425

3,791

8,750

8,750

Gorenje Nederland BV, the Netherlands

100.00%

132,036

140

131,106

131,106

Gorenje-kuchyně spol. S r.o., Czech Republic

 

100.00%

152

466

0

0

Total

 

251,852

5,468

236,245

238,363

Movement of investments in subsidiaries

 

EURk

2013

2014

Balance at 1 January

232,447

236,245

Increase

6,600

4,506

Decrease

-2

-256

Impairment

-2,800

-2,132

Balance at 31 December

 

236,245

238,363

Increase in investments in Gorenje Group's subsidiaries includes:

  • share capital increase in Gorenje Zagreb, d.o.o. in the amount of EUR 4,500k,
  • acquisition of equity interest in Gorenje Surovina, d.o.o. in the amount of EUR 6k.

The respective decline is attributable to the sale of the subsidiary ERICo, d.o.o., Velenje to the subsidiary Gorenje Surovina, d.o.o., Maribor.

 

Impairment applies to subsidiaries Gorenje Keramika, d.o.o. and Indop, d.o.o.

Note 20 – Investments in associates EUR 341k

EURk

Equity interest

Equity of company 2014

Profit or loss of company 2014

Invest-ment at

31 Dec 2013

Invest-ment at

31 Dec 2014

GGE, d.o.o., Ljubljana

33.33%

965

250

200

200

ECONO projektiranje, d.o.o., Ljubljana

0.00%

185

5

35

0

RCE, d.o.o., Velenje

24.00%

-2,790

-2,188

600

0

Gorenje Projekt, d.o.o., Velenje

50.00%

939

6

141

141

Total

 

-701

-1,927

976

341

Movement of investments in associates in 2014

EURk

Investments in associates

Balance at 1 January 2014

 

976

Increase

0

Decrease

-35

Impairment

-600

Balance at 31 December 2014

341

The decline in investments in associates resulted from the sale of the company ECONO projektiranje, d.o.o. to the subsidiary Gorenje Surovina, d.o.o., Maribor. Impairment refers to investments made in RCE - Razvojni center energija, d.o.o.

 

List of Group companies that are not directly owned by Gorenje, d.d. Group companies are owners up to a certain percentage as disclosed in the table below:

EURk

Equity interest

Equity of company

2014

Profit or loss of company 2014

KEMIS, d.o.o., Vrhnika

99.98%

6,731

741

PUBLICUS, d.o.o., Ljubljana

50.99%

1,684

377

EKOGOR, d.o.o., Jesenice

74.99%

138

3

Gorenje Beteiligungs GmbH, Austria

100.00%

42,994

139

Gorenje Austria Handels GmbH, Austria

100.00%

3,955

4

Gorenje Vertriebs GmbH, Germany

100.00%

8,553

13

Gorenje Körting Italia S.r.l., Italy

100.00%

168

-771

Gorenje France S.A.S., France

100.00%

-402

-996

Gorenje Belux S.a.r.l., Belgium

100.00%

-784

-804

Gorenje Espana S.L., Spain

100.00%

-182

-14

Gorenje UK Ltd., Great Britain

100.00%

-1,186

-1,215

Gorenje Group Nordic A/S, Denmark

100.00%

2,474

-2,832

Gorenje AB, Sweden

100.00%

245

9

Gorenje OY, Finland

100.00%

307

-41

Gorenje AS, Norway

100.00%

-112

-285

Gorenje spol. s r.o., Czech Republic

100.00%

7,392

370

Gorenje real spol. s r.o., Czech Republic

100.00%

9,437

-274

Gorenje Slovakia s.r.o., Slovakia

100.00%

2,197

87

Gorenje Magyarország Kft., Hungary

100.00%

771

-976

Gorenje Polska Sp. z o.o., Poland

100.00%

5,995

-649

Gorenje Bulgaria EOOD, Bulgaria

100.00%

3,996

65

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

100.00%

3,715

614

Gorenje, d.o.o., Serbia

100.00%

8,103

-529

Gorenje Podgorica , d.o.o., Montenegro

99.97%

2,867

-147

Gorenje Romania S.r.l., Romania

100.00%

450

-219

Gorenje aparati za domaćinstvo, d.o.o., Serbia

100.00%

39,433

868

Gorenje - kuchyně spol. S r.o., Czech Republic

100.00%

152

466

KEMIS-Termoclean, d.o.o., Croatia

99.98%

1,581

-684

Kemis - BH, d.o.o., Bosnia and Herzegovina

99.98%

505

34

Gorenje Studio, d.o.o., Serbia

100.00%

1,877

-393

Gorenje Gulf FZE, United Arab Emirates

100.00%

270

-312

Gorenje Istanbul Ltd., Turkey

100.00%

394

-344

Gorenje TOV, Ukraine

100.00%

-828

-1,126

Kemis Valjevo, d.o.o, Serbia

99.98%

1,428

48

Kemis – SRS, d.o.o., Bosnia and Herzegovina

99.98%

36

-89

ATAG Nederland BV, the Netherlands

100.00%

35,826

8,551

ATAG België NV, Belgium

100.00%

1,129

-75

Intell Properties BV, the Netherlands

100.00%

1,655

-32

Gorenje Kazakhstan, TOO, Kazakhstan

100.00%

708

1

»Euro Lumi & Surovina« SH.P.K., Kosovo

50.99%

493

-74

OOO Gorenje BT, Russia

100.00%

8,164

-6,125

Gorenje GTI, d.o.o., Serbia

100.00%

109

64

Asko Appliances AB, Sweden

100.00%

12,835

960

Gorenje North America, Inc., USA

100.00%

843

-77

Asko Appliances Pty, Australia

100.00%

5,823

46

Asko Appliances OOO, Russia

100.00%

-383

-801

»Gorenje Albania« SHPK, Albania

100.00%

132

47

ORSES d.o.o., Serbia

100.00%

488

6

Gorenje Corporate GmbH, Austria

100.00%

36

1

Cleaning sistem S, d.o.o., Serbia

75.99%

927

-75

Zeos eko-sistem d.o.o., Bosnia and Herzegovina

49.45%

483

50

Gorenje Studio d.o.o., Ljubljana

100.00%

-192

-198

Gorenje Asia Ltd., China

100.00%

527

321

Gorenje MDM, d.o.o., Serbia

100.00%

958

9

Gorenje Surovina Fotoreciklaža, d.o.o., Maribor

50.99%

13

-98

Gorenje do Brasil Ltda., Brasil

100.00%

-595

-515

Gorenje Solarna energija Solago, d.o.o., Serbia

100.00%

-39

-37

Gorenje Sola-Home, d.o.o., Serbia

100.00%

-26

-26

Gorenje Ekologija, d.o.o., Serbia

100.00%

1,247

0

Total

 

225,515

-6,939

Note 21 – Other non-current investments EUR 689k

Other non-current investments include non-current loans in the amount of EUR 17k (2013: EUR 19k) and other non-current investments in the amount of EUR 672k (2013: EUR 671k). The increase is attributable to the acquisition of the equity interest in the company VAN d.o.o., Velenje.

 

As for the structure of total non-current investments, the Company is not exposed to higher financial risks since most of these investments refer to subsidiaries.

 

Movements in other non-current investments

 

EURk

2013

2014

Opening balance at 1 January

619

671

Increase

52

1

Decrease

0

0

Closing balance at 31 December

671

672

Movements in loans

EURk

2013

2014

Opening balance at 1 January

42

19

Increase

0

Decrease

-23

-2

Reposting to current investments

0

Closing balance at 31 December

19

17

Loans by maturity

EURk

2013

2014

Maturity from 1 to 2 years

19

17

Maturity from 2 to 3 years

0

Maturity from 3 to 4 years

0

Maturity from 4 to 5 years

0

Maturity over 5 years

0

Total

19

17

No non-current loans were recorded as at the year-end of 2014, except housing loans under the Housing Act of 1991.

 

Breakdown of non-current loans to specific groups of persons

 

No non-current loans were granted to Management Board members, Supervisory Board members, and internal owners.

Note 22 – Deferred tax assets and liabilities

EURk

Tax assets

Tax liabilities

Tax assets – Tax liabilities

2013

2014

2013

2014

2013

2014

PPE

36

52

1,268

1,268

-1,232

-1,216

Investments

1,406

1,406

20

14

1,386

1,392

Tax differences on taxed profit shares

0

0

0

0

0

Receivables

723

738

0

723

738

Provisions for retirement benefits and jubilee premiums

1,327

1,259

0

1,327

1,259

Provisions for warranties

938

893

0

938

893

Unused tax losses

7,480

7,480

0

7,480

7,480

Unused tax incentives

6,241

6,715

0

6,241

6,715

Cash flow hedge – interest rate swaps

481

93

0

481

93

Total

18,632

18,636

1,288

1,282

17,344

17,354

EURk

Tax assets – Tax liabilities

Through profit or loss

Through other comprehensive income

2013

2014

2013

2014

2013

2014

PPE

-1,232

-1,216

-14

16

0

0

Investments

1,386

1,392

3

0

0

6

Tax differences on taxed profit shares

0

0

-265

0

0

0

Receivables

723

738

-109

15

0

0

Provisions for retirement benefits and jubilee premiums

1,327

1,259

-104

-68

0

0

Provisions for warranties

938

893

138

-45

0

0

Unused tax losses

7,480

7,480

3,868

0

0

0

Unused tax incentives

6,241

6,715

4,509

474

0

0

Cash flow hedge – interest rate swaps

481

93

0

0

-417

-388

Total

17,344

17,354

8,026

392

-417

-382

Note 23 – Inventories EUR 96,138k

EURk

2013

2014

Materials

43,917

43,058

Work in progress

7,044

6,954

Products

15,472

15,468

Merchandise

25,492

28,531

Advances

3,886

2,127

Total

95,811

96,138

Inventories increased by 0.34% over the previous year's balance primarily as a result of higher inventories of merchandise, which is attributable to the inclusion of goods in transit (coal) that are already owned by the Company in view of the parity (an advance payment of EUR 2,831k was received in 2013 for coal).

 

As at the balance sheet date, the Company records no inventories as pledge. The book value of inventories does not exceed their net realisable value. The book value of inventories of products, for which value adjustments were made from production cost to net realisable value, is recorded at EUR 3,049k (2013: EUR 1,591k).

 

In 2014, value adjustments of inventories amounted to EUR 1,918k (2013: EUR 1,701k) and resulted from write-off of obsolete inventories.

Note 24 – Current investments EUR 137,280k

EURk

2013

2014

Available-for-sale investments

2,758

2,847

Loans

87,395

131,357

Interest receivable

473

852

Derivatives

0

1,851

Other current investments

0

373

Total

90,626

137,280

Available-for-sale financial assets include shares and interests in banks worth EUR 60k (2013: EUR 102k) and in other companies entities worth EUR 2,787k (2013: EUR 2,656k).

 

The Company concluded forward exchange contracts for 2015 in order to hedge against exchange rate fluctuations. Fair value of forward exchange contracts is recognised directly in the income statement. In 2014, Gorenje, d.d. recorded settlements arising on derivatives used as hedging instruments in the amount of EUR -75k and in the same amount increased its finance expenses. In addition, finance expenses increased by EUR 2,096k as a result of Company's adjustment of forward exchange contracts to fair value.

 

Movements in available-for-sale shares and interests

 

EURk

2013

2014

Opening balance at 1 January

12,310

2,758

Increase

169

157

Decrease

-26

-26

Change in fair value

-9,695

-42

Closing balance at 31 December

2,758

2,847

The change in fair value amounting to EUR 42k (2013: EUR 9,695k) is disclosed among finance expenses in the amount of EUR 1k, whereas EUR 41k is recorded among decreasing the fair value reserve for available-for-sale financial assets.

 

Current loans

 

EURk

2013

2014

Current loans to Group companies

79,719

124,028

Current loans to other companies

7,676

7,329

Total

87,395

131,357

Current bank deposits with a maturity up to 30 days are recorded under cash and cash equivalents in the amount of EUR 89k (2013: EUR 604k).

 

The Company impaired the loans given to the company Arosa Mobilia, d.o.o. (EUR 447k) and to the company RCE - Razvojni center energija, d.o.o. (EUR 311k).

 

Current loans given to Group companies operating in Slovenia

 

Company

2013

2014

KEMIS, d.o.o., Vrhnika

1,070

445

Gorenje Surovina, d.o.o., Maribor

7,815

831

Gorenje Orodjarna, d.o.o., Velenje

2,406

2,988

Gorenje Keramika, d.o.o., Velenje

1,095

2,911

Gorenje GAIO, d.o.o., Šoštanj

0

1,140

Gorenje GTI, d.o.o., Velenje

3,696

1,057

Total

16,082

9,372

Current loans given to Group companies operating abroad

 

Company

2013

2014

KEMIS-Termoclean, d.o.o., Croatia

510

0

Gorenje Beteiligungs GmbH, Austria

20,811

38,722

Gorenje Nederland BV, the Netherlands

38,598

71,831

Gorenje Magyarország Kft., Hungary

2,376

877

Gorenje Polska Sp. Z o.o., Poland

137

1,500

Gorenje-kuchyně spol. S r.o., Czech Republic

1,205

1,726

Total

63,637

114,656

Short-term loans bear interest at a nominal interest rate ranging from 1.428% to 6.0%. In view of current loans, the Company is not exposed to higher financial risks as most of these loans were extended to its subsidiaries. The loan extended to Arosa Mobilia, d.o.o. is secured with a lien on property in the amount of EUR 2,343k.

 

Current loans to specific groups of persons

 

No current loans were granted to members of the Management Board, the Supervisory Board, and internal owners.

Note 25 – Trade receivables EUR 167,714k

EURk

2013

2014

Trade receivables – Group companies

158,498

137,882

Trade receivables – other companies

37,437

29,832

Total

195,935

167,714

Collateralisation of receivables

 

The Company records trade receivables due from other companies, which are appropriately and well secured in the amount of EUR 17,568k (2013: EUR 22,223k).

 

Current trade receivables due from Group companies

EURk

2013

2014

Trade receivables due from customers in Slovenia

11,498

11,920

Trade receivables due from customers abroad

147,000

125,962

Total

158,498

137,882

Current trade receivables due from customers (Group companies) operating in Slovenia

Company

2013

2014

ENERGYGOR, d.o.o., Ljubljana

1

1

ZEOS, d.o.o., Ljubljana

9

10

PUBLICUS, d.o.o., Ljubljana

1

1

KEMIS, d.o.o., Vrhnika

8

2

Gorenje Surovina, d.o.o., Maribor

322

213

Gorenje I.P.C., d.o.o.,Velenje

1,534

1,454

Gorenje GTI, d.o.o., Velenje

30

515

Gorenje Gostinstvo, d.o.o., Velenje

66

57

Gorenje Orodjarna, d.o.o., Velenje

152

349

ERICo, d.o.o., Velenje

1

1

Gorenje design studio, d.o.o., Velenje

13

11

Indop, d.o.o., Šoštanj

107

83

Gorenje GAIO, d.o.o., Šoštanj

998

60

Gorenje GSI, d.o.o., Ljubljana

7,914

8,625

Gorenje Keramika, d.o.o., Velenje

27

32

Gorenje Studio, d.o.o., Ljubljana

315

505

EKOGOR d.o.o., Jesenice

0

1

Total

11,498

11,920

Current trade receivables due from customers (Group companies) operating abroad

Company

2013

2014

Gorenje Zagreb, d.o.o., Croatia

16,788

12,964

Gorenje, d.o.o., Serbia

6,683

7,159

Gorenje aparati za domaćinstvo, d.o.o., Serbia

27,656

18,490

Gorenje Tiki, d.o.o., Serbia

962

784

Gorenje Home, d.o.o., Serbia

7,515

5,932

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

210

11

Gorenje Skopje, d.o.o., Macedonia

2,142

1,197

Gorenje Podgorica, d.o.o., Montenegro

4,044

2,327

Gorenje Vertriebs GmbH, Germany

10,340

9,931

Gorenje Austria Handels GmbH, Austria

1,859

-228

Gorenje Beteiligungs GmbH, Austria

4,836

3,097

Asko Appliances AB, Sweden

2,976

3,837

Asko Kodinkone, Finland

3

0

Gorenje Group Nordic A/S, Denmark

11,628

5,792

ATAG Nederland BV, the Netherlands

594

1,446

Gorenje Nederland BV, the Netherlands

68

7

Gorenje UK Ltd., Great Britain

4,312

3,459

Gorenje Belux S.a.r.l., Belgium

1,486

740

Gorenje France S.A.S., France

886

981

Gorenje Körting Italia S.r.l., Italy

4,522

3,895

Gorenje Espana S.L., Spain

-20

-20

OOO Gorenje BT, Russia

11,678

13,810

Gorenje TOV, Ukraine

6,101

1,526

Gorenje Kazakhstan, TOO, Kazakhstan

42

32

Gorenje Slovakia s.r.o., Slovakia

-3

6

Gorenje spol. s r.o., Czech Republic

501

3,480

Gorenje - real spol s r.o., Czech Republic

95

86

Mora Moravia, s.r.o., Czech Republic

1,487

1,501

Gorenje Magyarország Kft., Hungary

1,669

3,462

Gorenje Polska Sp. z o.o., Poland

2,348

2,099

Gorenje Bulgaria EOOD, Bulgaria

53

-11

Gorenje Romania S.r.l., Romania

3,003

3,515

Gorenje Istanbul Ltd., Turkey

0

-8

»Gorenje Albania« SHPK, Albania

249

384

Gorenje Gulf FZE, United Arab Emirates

1,128

2,945

Gorenje North America, Inc., USA

3,214

1,322

Asko Appliances Pty, Australia

4,935

8,126

Gorenje do Brasil Ltda, Brasil

237

504

Asko Appliances OOO, Russia

740

1,046

Gorenje Solarna energija Solago, d.o.o., Serbia

165

168

Gorenje Sola-Home, d.o.o., Serbia

121

121

Gorenje MDM d.o.o., Serbia

11

2

Gorenje Studio, d.o.o., Serbia

0

1

Gorenje GTI, d.o.o., Serbia

0

1

Revaluation

-264

43

Total

147,000

125,962

Note 26 – Other current assets EUR 11,368k

EURk

2013

2014

Advance for services

352

339

Short-term deferred costs and expenses

1,974

1,880

Other current assets

13,051

9,149

Total

15,377

11,368

Advances for services mainly include collaterals received in the amount of EUR 221k (2013: EUR 227k).

 

The item of short-term deferred costs and expenses comprises deferred costs that refer to subsequent periods and indicate a decline by 4.8%.

 

Other current assets include to a large extent input VAT receivables in the Republic of Slovenia in the amount of EUR 6,298k (2013: EUR 7,592k), unpaid VAT receivables relating to foreign countries in the amount of EUR 378k (2013: EUR 508k), current receivables from tax deductions in the amount of EUR 337k (2013: EUR 495k), and receivables not yet charged in the amount of EUR 1,075k (2013: EUR 3,295k).

Note 27 – Cash and cash equivalents EUR 10,254k

EURk

2013

2014

Cash in hand and cash in transit

1,105

200

Bank balances and cash held in other financial institutions

13,799

10,054

Total

14,904

10,254

Bank balances also include deposits with maturity up to 30 days, which amounted to EUR 89k in 2014 (2013: EUR 604k).

Note 28 – Equity EUR 365,910k

As at 31 December 2014, the share capital of Gorenje, d.d. amounted to EUR 101,922,103.97 (31 December 2013: EUR 92,240,139.36) and was divided into 24,424,613 ordinary, freely transferable, registered, no par value shares. In 2014, a share capital increase was carried out by means of a debt-to-equity conversion agreement signed with Gorenjska banka d.d., Kranj in the amount of EUR 5,668,365.46 and with the International Finance Corporation from USA in the amount of EUR 4,331,636.20. The total converted equity amounted to EUR 10,000,001.66, whereof EUR 9,681,964.61 was used for the share capital increase and the residual amount of EUR 318,037.05 for the share premium.

 

Capital surplus (share premium) in the amount of EUR 157,835k (2013: EUR 157,705k) includes paid-in capital in excess of par value of shares in the amount of EUR 64,475k (2013: EUR 64,345k), surplus in excess of book value of disposed own shares (treasury shares) in the amount of EUR 15,313k (2013: EUR 15,313k), and general equity revaluation adjustment in the amount of EUR 78,047k (2013: EUR 78,047k) transferred upon the transition to IFRSs. Capital surplus relating to excess of par value of shares grew by EUR 318k over the 2013 balance due to the relevant capital increase, and declined by EUR 188k due to the costs of capital increase.

 

Revenue reserves recorded as at the balance sheet date in the amount of EUR 99,301k (31 December 2013: EUR 95,818k) consist of legal reserves, statutory reserves, treasury share reserve and other revenue reserves.

 

As at 31 December 2014, legal reserves amounted to EUR 12,896k (31 December 2013: EUR 12,896k). In accordance with provisions of the Companies Act, share premium (capital surplus) and legal reserves can in their excess amount, be used for share capital increase, for coverage of loss for the period and retained loss if revenue reserves are not simultaneously used for dividend payout.

 

In compliance with the Company's Articles of Association, statutory reserves were created in the amount of EUR 633k i.e. 10% of net profit, and as at the balance sheet date amounted to EUR 7,556k (31 December 2013: EUR 6,923k). Statutory reserves can according to Company's Articles of Association be used for a share capital increase; for coverage of loss for the period and retained loss should no other sources be available; for share withdrawal in case of a compulsory transfer of shares, and for share withdrawal by Company's acquisition; for share withdrawal under the simplified procedure of share capital decrease; for creation of treasury shares if no other sources are available, and for balancing the dividend policy.

 

The number of treasury shares (own shares) did not change in the reporting period. As at 31 December 2014, the Company recorded 121,311 treasury shares at a cost of EUR 3,170k.

 

As at 31 December 2014, Company's other revenue reserves amounted to EUR 75,679k (31 December 2013: EUR 72,829k) and were created on the basis of resolutions on the allocation of profit for the period adopted by the Management Board and the Supervisory Board and resolutions of the General Meeting of Shareholders on the allocation of the accumulated profit. Pursuant to the resolution of the Management Board and provisions of the Companies Act, the Company reallocated part of the net profit for the period in the amount of EUR 2,850k to other revenue reserves. Other revenue reserves can be used for any purpose whatsoever, except for the legally defined formation of the treasury share reserve.

 

Retained earnings in the amount of EUR 4,220k (31 December 2013: EUR 1,369k) comprise retained earnings or losses from previous periods (EUR 1,369k) and the profit for 2014 (EUR 2,851k), which remained upon the allocation of net profit for the period for statutory reserves in the amount of EUR 633k and for other reserves EUR 2,850k.

 

Fair value reserve amounting to EUR 5,802k as at 31 December 2014 (2013: EUR 3,945k) includes a surplus from revaluation of land which is valued using the revaluation model, a change in fair value of available-for-sale investments, and a change in value of the cash flow hedge.

 

Changes in fair value reserve are shown in the table below:

EURk

Fair value reserve for land

Fair value reserve for available-for-sale financial assets

Fair value reserve for derivatives

Fair value reserve for investments in subsidiaries

Total

Balance at 1 Jan 2013

6,186

98

-4,382

713

2,615

Revaluation of land

0

0

0

0

0

Disposal of land

0

0

0

0

0

Change in fair value of cash flow hedge

0

0

-5

0

-5

Change in fair value of cash flow hedge, reclassified to profit or loss

0

0

2,466

0

2,466

Change in fair value of

available-for-sale financial

assets

0

-1

0

0

-1

Disposal of available-for-sale financial assets

0

0

0

0

0

Impairment of available-for-sale financial assets

0

0

0

0

0

Subsidiary-related exchange differences

0

0

0

-713

-713

Deferred taxes

0

0

-417

0

-417

Balance at 31 Dec 2013

6,186

97

-2,338

0

3,945

EURk

Fair value reserve for land

Fair value reserve for available-for-sale financial assets

Fair value reserve for derivatives

Fair value reserve for investments in subsidiaries

Total

Balance at 1 Jan 2014

6,186

97

-2,338

0

3,945

Revaluation of land

0

0

0

0

0

Disposal of land

0

0

0

0

0

Change in fair value of cash flow hedge

0

0

-192

0

-192

Change in fair value of cash flow hedge, reclassified to profit or loss

0

0

2,472

0

2,472

Change in fair value of

available-for-sale financial

assets

0

-41

0

0

-41

Disposal of available-for-sale financial assets

0

0

0

0

0

Impairment of available-for-sale financial assets

0

0

0

0

0

Subsidiary-related exchange differences

0

0

0

0

0

Deferred taxes

0

6

-388

0

-382

Balance at 31 Dec 2014

6,186

62

-446

0

5,802

Own shares (treasury shares)

Number of own shares

1 Jan 2014

Purchase

Sale

31 Dec 2014

Repurchased own shares

121,311

0

0

121,311

In 2014, earnings per share amounted to EUR 0.28 (2013: EUR 0.16).

 

To determine earnings per share, the following data on the profit or loss and the average number of shares was used:

 

 

2013

2014

Profit for the period (EURk)

2,705

6,334

Weighted average number of ordinary shares

16,688,725

22,949,860

Earnings per share (in EUR)

0.16

0.28

No preference shares have been issued by Gorenje, d.d., hence basic and diluted earnings per share are equal.

 

In 2014, no dividends were paid out. The last dividends were paid out in 2012 in the amount of EUR 0.15 gross per share.

Note 29 - Accumulated profit and proposal for its appropriation in line with the Companies Act

Pursuant to the Companies Act and the Articles of Association of Gorenje, d.d., the Management Board decided that part of the profit for 2014 (EUR 6,333,707.34) is in the amount of EUR 633,370.73 allocated to statutory reserves and in the amount of EUR 2,850,168.31 to other revenue reserves. The Supervisory Board endorsed the decision.

 Profit for the period

6,333,707.34

- formation of statutory reserves

-633,370.73

- formation of other revenue reserves pursuant to Management Board’s resolution

-2,850,168.31

+ retained earnings

1,369,322.25

= accumulated profit as at 31 December 3014

4,219,490.55

The proposal on the allocation of distributable profit for the year 2014 will be announced in the convocation of the Shareholders Assembly where the decision on this proposal will be made.

Note 30 – Provisions EUR 21,929k

EURk

2013

2014

Provisions for warranties

11,035

10,504

Provisions for retirement benefits and jubilee premiums

10,235

9,814

Other provisions

1,915

1,611

Total

23,185

21,929

Movements in provisions in 2013

 

EURk

Balance at

1 Jan 2013

Use

Reversal

Creation

Balance at 31 Dec 2013

Provisions for warranties

9,408

-7,998

-1,643

11,268

11,035

Provisions for retirement benefits and jubilee premiums

10,772

-449

-235

147

10,235

Other provisions

1,452

-168

-208

839

1,915

Total

21,632

-8,615

-2,086

12,254

23,185

Movements in provisions in 2014

 

EURk

Balance at

1 Jan 2014

Use

Reversal

Creation

Balance at 31 Dec 2014

Provisions for warranties

11,035

-7,581

-462

7,512

10,504

Provisions for retirement benefits and jubilee premiums

10,235

-464

43

9,814

Other provisions

1,915

-1,005

-647

1,348

1,611

Total

23,185

-9,050

-1,109

8,903

21,929

Non-current provisions for warranties were created based on estimated costs of warranties calculated by considering the historical data on the quality level of products and the costs of repairs under warranties. The respective level of provisions for warranties was primarily influenced by the reversal of provisions for warranties from 2011 that are, in view of providing a two-year warranty for products, no longer required.

 

The Company conducted no actuarial calculation in 2014. Provisions for retirement benefits and jubilee premiums were formed and charged against the current profit or loss in the amount of EUR 43k (2013: EUR 147k); they relate to new permanent employments and were calculated on the basis of the actuarial calculation in 2012. The actuarial calculation from 2012 is founded on the 4.60% discount rate, which reflects the rate of return on 10-year entrepreneurial high-credit bonds in the euro zone in 2012. According to management's assessment, no significant changes to assumptions have occurred that would have a material impact on provisions disclosed.

 

Other provisions include provisions for claims filed with the court and provisions for collecting the bank guarantee, which is in the amount of EUR 1.1m disclosed among other finance expense.

Note 31 – Non-current financial liabilities EUR 234,103k

EURk

2013

2014

Non-current financial liabilities to banks

221,966

204,519

Short-term portion of non-current liabilities to banks

-82,808

-34,093

Adjustment of non-current financial liabilities to banks at amortised cost

-1,029

-1,410

Non-current financial liabilities from bonds issued

0

73,000

Short-term of non-current liabilities from bonds issued

0

-14,600

Adjustment of non-current financial liabilities from bonds issued at amortised cost

0

-357

Non-current financial liabilities to other companies

52,125

14,230

Short-term portion of non-current liabilities to other companies

-19,284

-6,829

Adjustment of non-current financial liabilities to other companies at amortised cost

-554

-398

Non-current finance lease

0

41

Total

170,416

234,103

Non-current financial liabilities are denominated in EUR and recorded at amortised cost i.e. restated under the effective interest method and inclusive of costs of granting the borrowing.

 

As of 10 October 2014, Gorenje, d.d. issued bonds in the total amount of EUR 73m bearing a fixed interest rate of 3.85% and recording maturity on 10 October 2019.

 

Non-current financial liabilities to other companies include liabilities from borrowings from International Finance Corporation (IFC).

 

Financial liabilities by maturity

 

EURk

2013

2014

Maturity from 1 to 2 years

43,412

58,902

Maturity from 2 to 3 years

82,314

57,875

Maturity from 3 to 4 years

25,276

45,484

Maturity from 4 to 5 years

9,572

47,563

Maturity over 5 years

9,842

24,279

Total

170,416

234,103

Collateralisation of financial liabilities

 

EURk

2013

2014

Bills

89,158

113,426

Pari-Passu Clause, Negative Pledge Clause

171,999

177,827

Financial covenants (ratios)

170,599

177,827

Guarantees

32,841

7,400

Interest-bearing borrowings

 

Currency

Value in currency (in 000)

 

Value in EURk

Interest rate

from

to

EUR

234,062

234,062

2.210%

12.250%

Note 32 – Current financial liabilities EUR 113,990k

 

EURk

2013

2014

Borrowings from banks

11,500

0

Borrowings from related companies

38,093

53,291

Borrowings from third parties

1,216

1,474

Interest payable

1,421

2,532

Dividends payable

59

58

Short-term portion of non-current liabilities to banks

82,808

34,093

Short-term portion of non-current liabilities from bonds issued

0

14,600

Short-term portion of non-current liabilities to other companies

19,284

6,829

Derivatives

3,065

1,110

Other current financial liabilities

15

3

Total

157,461

113,990

Embedded derivatives refer to liabilities under hedging against interest rate risk in the amount of EUR 1,110k (2013: EUR 3,065k).

 

In order to hedge cash flows against interest rate fluctuations, the Company concluded interest rate swap contracts that mature by 15 June 2016; each individual contract documents the relation between the derivative and the hedged category. Fair value of concluded interest rate swap contracts, which refers to cash flow hedging, is recognised directly in the fair value reserve of the derivative in the comprehensive income and amounts to EUR -540k. The fair value of interest rate swap contracts relating to early repayment of borrowing is recognised as a non-hedged item directly in the income statement and amounts to EUR -570k.

 

In 2014, the Company realised settlement amounts relating to derivatives of interest rate swaps in the amount of EUR -1,902k and by this amount reduced the profit but increased the fair value reserve of derivatives in equity. The hedging of fair value of interest rate swaps for the borrowing's early repayment in the amount of EUR -570k resulted in a higher fair value reserve of derivatives in equity and reduced the profit for the period. Further, the Company reduced the fair value reserve of derivatives in the comprehensive income by EUR 192k as a result of adjusting interest rate swaps to fair value, which applies to the cash flow hedge.

 

Borrowings received from Group companies operating in Slovenia

 

Company

2013

2014

Gorenje Gostinstvo, d.o.o., Velenje

2,615

2,868

Gorenje I.P.C., d.o.o., Velenje

5,160

6,795

Gorenje GAIO, d.o.o., Šoštanj

12

0

Gorenje GSI, d.o.o., Ljubljana

5,840

7,340

Gorenje design studio, d.o.o., Velenje

173

171

ENERGYGOR, d.o.o., Velenje

164

164

ERICo, d.o.o., Velenje

195

255

Indop, d.o.o., Šoštanj

584

227

ZEOS, d.o.o., Ljubljana

1,767

2,292

Gorenje Studio, d.o.o., Ljubljana

1,083

180

Total

17,593

20,292

Borrowings received from Group companies operating abroad

 

Company

2013

2014

ATAG Nederland BV, the Netherlands

17,400

21,745

Gorenje real spol. S r.o., Czech Republic

3,100

3,100

Asko Appliances AB, Sweden

0

7,375

Gorenje North America, Inc., USA

0

779

Total

20,500

32,999

Collateralisation of current financial liabilities

 

EURk

2013

2014

Bills

44,308

34,093

Pari-Passu Clause, Negative Pledge Clause

108,092

40,922

Financial covenants (ratios)

100,692

40,922

Guarantees

19,284

6,829

Interest-bearing borrowings

 

Currency

Value in currency    (in 000)

 

Value in EURk

Interest rate

from

to

EUR

109,508

109,508

2.210%

4.805%

USD

946

779

4.080%

 

Total

 

110,287

 

 

Collateralisation of non-current and current financial liabilities

 

None of the Company's current or non-current financial liabilities is collateralised by mortgage or any other type of collateral. A significant portion of Company’s borrowings is collateralised by bills and the Pari-Passu and Negative Pledge clauses in compliance with individual contracts. Non-current borrowings, in particular, are frequently supported by financial covenants as defined in individual loan contracts.

 

Guarantees refer to the collateral issued to the International Finance Corporation (IFC) by the company Gorenje Nederland B.V. in connection with liabilities of Gorenje, d. d.

 

Certain Company’s loan contracts concluded with bank partners, mostly in case of non-current borrowings, include financial covenants that are in the vast majority checked and verified once a year on the basis of Gorenje Group’s audited consolidated financial statements for individual fiscal year. Other, minor part of relevant contract are reviewed on a three-month basis.

 

Given the anticipated breach of some financial covenants for the fiscal year 2014, the Group companies applied already before the year-end to its bank partners for waiver of financial covenants requiring consolidated financial statements for 2014. Waivers were approved by all bank partners for all credit lines and guarantee transactions, which are secured by financial covenants, that were breached. The waiver of financial covenants applies to the fiscal year 2014.

Note 33 – Trade payables EUR 154,786k

EURk

2013

2014

Trade payables to suppliers in the Gorenje Group

34,725

23,972

Trade payables to other suppliers

134,751

130,814

Total

169,476

154,786

Trade payables to suppliers in the Gorenje Group

 

EURk

2013

2014

Trade payables to suppliers in Slovenia

6,560

5,761

Trade payables to suppliers abroad

28,165

18,211

Total

34,725

23,972

Trade payables to suppliers in the Gorenje Group – Slovenia

 

Company

2013

2014

Kemis, d.o.o., Radomlje

32

21

Gorenje Surovina, d.o.o., Maribor

86

71

Gorenje I.P.C., d.o.o., Velenje

4,477

3,362

Gorenje GTI, d.o.o., Velenje

162

144

Gorenje Gostinstvo, d.o.o., Velenje

129

141

Gorenje Orodjarna, d.o.o., Velenje

916

1,142

ERICo, d.o.o., Velenje

14

8

Gorenje design studio, d.o.o., Velenje

184

207

Gorenje GAIO, d.o.o., Šoštanj

238

313

Gorenje GSI, d.o.o., Ljubljana

310

343

ZEOS, d.o.o., Ljubljana

1

0

Gorenje Keramika, d.o.o., Velenje

10

7

Gorenje Studio, d.o.o., Ljubljana

1

2

Total

6,560

5,761

Trade payables to suppliers in the Gorenje Group – foreign countries

 

Company

2013

2014

Gorenje Zagreb, d.o.o., Croatia

8

23

Gorenje, d.o.o., Serbia

162

322

Gorenje aparati za domaćinstvo, d.o.o., Serbia

12,064

5,637

Gorenje Tiki, d.o.o., Serbia

2,236

2,937

Gorenje Vertriebs GmbH, Germany

315

81

Gorenje Austria Handels GmbH, Austria

51

16

Gorenje Beteiligungs GmbH, Austria

250

250

Asko Appliances AB, Sweden

5,711

5,184

Gorenje Group Nordic A/S, Denmark

335

301

ATAG Nederland BV, the Netherlands

71

280

Gorenje Nederland BV, the Netherlands

64

33

Gorenje UK Ltd., Great Britain

27

113

Gorenje France S.A.S., France

2

2

Gorenje Körting Italia S.r.l., Italy

71

192

Gorenje Espana S.L., Spain

-20

-20

Gorenje Slovakia s.r.o., Slovakia

65

2

Gorenje spol. s r.o., Czech Republic

156

298

Mora Moravia s r.o., Czech Republic

5,977

1,636

Gorenje Budapest Kft., Hungary

57

35

Gorenje Polska Sp. z o.o., Poland

0

60

Gorenje Romania S.r.l., Romania

46

5

Gorenje Gulf FZE, United Arab Emirates

147

16

Gorenje Istanbul Ltd., Turkey

17

37

Gorenje Commerce, d.o.o., Bosnia and Herzegovina

121

22

Gorenje Home, d.o.o., Serbia

171

393

Gorenje real spol .s.r.o., Czech Republic

2

2

Gorenje TOV, Ukraine

60

31

Gorenje Asia Ltd., China

0

160

Asko Appliances Pty., Australia

0

19

Gorenje North America, Inc., USA

0

124

OOO Gorenje BT, Russia

0

15

Gorenje Kazakhstan, TOO, Kazakhstan

0

4

Gorenje Podgorica, d.o.o., Montenegro

0

5

Gorenje Bulgaria EOOD, Bulgaria

0

1

Revaluation

-1

-5

Total

28,165

18,211

Trade payables to other suppliers

 

EURk

2013

2014

Trade payables to other suppliers in Slovenia

45,733

38,027

Trade payables to other suppliers abroad

89,018

92,787

Total

134,751

130,814

Note 34 – Other current liabilities EUR 19,419k

EURk

2013

2014

Payables to employees

7,056

7,083

Payables to state and other institutions

1,024

1,030

Payables for advances received

680

347

Other payables

1,653

1,912

Accrued costs and expenses

6,730

9,047

Total

17,143

19,419

As at 31 December, payables to employees include:

 

EURk

2013

2014

Wages and salaries, continued pay

3,797

3,781

Payroll contributions

1,372

1,381

Payroll taxes

765

783

Other work-related earnings

151

157

Deductions from wages and salaries

918

914

Other payables

53

67

Total

7,056

7,083

Accrued costs and expenses were created for accrued costs of services in the amount of EUR 3,508k (2013: EUR 1,855k), accrued interest expenses on borrowings taken in the amount of EUR 2,586k (2013: EUR 2,307k), accrued costs for employee benefits expense in the amount of EUR 1,061k (2013: EUR 985k), and accrued costs for work-related costs in the amount of EUR 1,892k (2013: EUR 1,452k).

Note 35 – Contingent liabilities

Contingent liabilities from loan guarantees given to financial institutions for financial burdens of its subsidiaries in the amount of EUR 89,186k (2013: EUR 123,833k) and its associates in the amount of EUR 3,619k (2013: EUR 5,305k), to third parties in the amount of EUR 10,675k (2013: EUR 9,571k), and to the subsidiary Gorenje Beteiligungs in the amount of EUR 5,999k (2013: EUR 7,363k) are recorded in a separate account. The guarantee to third parties in the amount of EUR 9,883k refers to the shipping transport of coal. In addition, contingent liabilities from performance bonds and payment guarantees in the amount of EUR 2,285k (2013: EUR 3,977k) are also recorded in a separate account.

 

In accordance with the ordinary business practice, the ATAG company is not liable to publish its annual results of operation in the country, where its corporate seat is, if the shareholder, in a special statement, assumes liability to pay any outstanding obligations of the company. The respective statement shall remain in effect until rescinded by the shareholder.

Note 36 – Financial risks and financial instruments

The Company is exposed to numerous financial risks, in particular to credit risk, liquidity risk, currency risk, interest rate risk and other risks arising on changed market conditions.

 

With respect to financial risk management, several new internal policies and rules were adopted and the exisitng ones modified in order to achieve a more efficient and centralised financial risk management. The Company pursues a centralised financial policy within the framework of corporate rules and conducts the financial risk management on the Company and Group level. The objectives of the financial risk management are:

  • to achieve stability of operations and to reduce risk exposure to an acceptable level,
  • to increase the value of Company and Group,
  • to improve the credit rating of Company and Group,
  • to reduce financial expenses of Company and Group, and
  • to minimise the impacts of the implemented critical risks.

The exposure to each individual type of financial risk and the effective hedge measures are judged and applied respectively on the basis of their effects on Company’s and Group’s cash flows and net finance costs. The risk management principles and methodologies applied are in detail outlined in the annual report’s business report under ‘Risk management’. Essential financial risks that are regularly assessed and the adequacy of implemented measures tested are clarified in detail below.

 

Credit risk

 

The carrying amount of financial assets represents the maximum credit risk exposure. The maximum credit risk exposure at the reporting date:

EURk

2013

2014

Available-for-sale financial assets

2,758

2,847

Loans 

87,414

131,374

Trade and other receivables

209,337

177,202

Cash and cash equivalents

14,904

10,254

Other receivables from financing activities

2,120

4,089

Total

316,533

325,766

Trade receivables form the Company's most significant portion of credit risks or risk of default by the counterparty. As at the year-end of 2014, trade receivables amounted to EUR 167,714k and indicate a decline over the year 2013 by EUR 28,221k. The decrease in trade receivables is mostly the result of a more active receivables management, which includes an intensified collection and precise rules for defining credit limits for individual customers.

 

The maximum credit risk exposure of trade receivables at the reporting date by geographic region:

EURk

2013

2014

Western Europe

52,551

38,316

Eastern Europe

122,362

104,684

Other countries

21,022

24,714

Total

195,935

167,714

The maximum credit risk exposure of trade receivables at the reporting date by type of customer:

EURk

2013

2014

Wholesale customers

195,500

167,312

Other customers

435

402

Total

195,935

167,714

 

The substantial part of revenue is generated on transactions with Group companies, hence most of trade receivables (82.2%) refers to subsidiaries. The default risk on the side of the counterparty under these receivables is thereby minimal. In view of third parties, the Company conducts business solely with buyers that boast of a proper credit rating, which is monitored on a regular basis; we have also defined clear rules on approving overdrafts for individual customers. For this purpose, the Company adopted a renewed Accounts Receivable Management Policy that defines the relevant management processes, persons in charge, and instruments allowed for hedging against credit risks. The Accounts Receivable Management Policy is applied on the Company and Group level. The Company is also introducing an information module for credit risk management with the aim to automate the process of monitoring and collecting receivables and credit limits that ultimately results in a lower share of past due receivables and thereby in a gradually higher share of insured receivables.

 

Maturity of trade receivables as at the reporting date:

EURk

Gross value

Allowance

Gross value

Allowance

2013

2013

2014

2014

Not past due

160,172

0

142,245

Past due 1 to 5o days

14,781

0

11,816

Past due 51 to 100 days

14,774

0

7,050

Past due 101 to 180 days

4,627

0

1,659

Past due 181 to 270 days

262

0

1,338

Past due 271 to 360 days

165

0

1,434

Past due 361 to 720 days

568

0

1,213

Past due 721 to 1080 days

1,420

0

552

Past due over 1081 days

6,874

0

8,171

Allowances for receivables

0

-7,708

-7,764

Total

203,643

-7,708

175,478

-7,764

Movements in allowances for trade receivables:

EURk

2013

2014

Balance at 1 January

7,249

7,708

Impairment loss

669

327

Payments

-123

-145

Write-off of receivables

-244

-78

Acceptance of allowance

1,126

0

Reversal of allowance

-969

-48

Balance at 31 December

7,708

7,764

Company's partners are impacted by the ever-changing macroeconomic environment that can also result in a swift turn-around of the credit rating and liquidity of the individual business partner. Regardless of implementing the receivables management process, default on the side of unrelated entities or even their inability to settle their payments exists. With respect to the Company's and Group's dispersed sales model that is not subject to high concentration of receivables per individual customer or customers related through mutual ownership, we assess that the exposure to credit risk is moderate. Customers whose balance of receivables exceeds EUR 5,000 are included into the credit control process, which covers also collateralization of receivables with acceptable hedging instruments. Following hedging instruments are considered as acceptable according to the accounts receivable management policy:

  • collateralisation through credit insurance companies
  • collateralization of receivables through bank guarantees and letters of credit,
  • sale of receivables without recourse, and
  • in exceptional circumstances and upon receiving special approval, also pledges or first class mortgages.

By the end of 2014, Company's total receivables due from independent buyers and secured with acceptable hedging instruments accounted for 58.9%, which is comparable to the year-end balance in 2013. Receivables are secured by the SID - Prva kreditna zavarovalnica d.d., while a smaller part also with other acceptable hedging instruments. Part of Company's receivables is hedged naturally with counter-trade, thus the risk of default in this part is minimal and hedging with acceptable instruments unnecessary. Given the macroeconomic situation in Ukraine and the resultant decline or even terminated coverage by insurance companies, the respective trade receivables arising in this country are secured at a lower share. Receivables due from customers in Ukraine are subject to a very precise, daily monitoring, assisted also by our representative office there, and the volume of sales is thereupon adjusted. Trade receivables referring to Ukraine have significantly declined in 2014 (by 53.9%). We assess that no material risks arise in this relation.

 

In compliance with the financing policy, the Company primarily finances its subsidiaries. Loans recorded as at 31 December 2014 (EUR 131,357k) mostly includes loans extended to subsidiaries (EUR 124,028k) and as such do not cause essential risks. Loans given to entities outside the Group are in part secured with acceptable hedging instruments.

 

The Company carefully monitors the credit risk also in other business segments. Current surplus of assets and balances on bank accounts are placed in compliance with corporate policies, which includes the methodology for selecting acceptable counterparties on the financial area. These policies determine also the methodology for selecting acceptable clients when entering into derivative financial instruments.

 

As a result of the launched receivables management procedures, the credit risk is assessed as moderate. The highest risk exposure arises in connection with the value of trade receivables and other receivables.

 

Liquidity risk

 

Liquidity risk includes risks denoting the lack of available funds and consequently risk that the Company and Group will fail to meet commitments in stipulated period of time.

 

Liquidity depends on effective cash management and investment dynamics. Providing for Company’s and Group’s liquidity is inseparable due to the Group's sales model. Liquidity risk is actively monitored on the Company and Group level by means of a centralised balancing of assets' liquidity (primarily receivables and inventories), of liabilities and cash flows from operating and investment activities. The Company applies a centralised cash management, supported by a software solution for planning and daily monitoring of cash flows on the Group level. Considerable attention is accorded to the compilation of the cash flow plan and its monitoring. A successful liquidity planning is also provided through an optimum management of possible current surpluses or deficits in available assets.

 

The Company applies a uniform and centralised approach to bank partners in Slovenia and abroad, and on its basis provides for the optimum indebtedness of the entire Group not only in view of scope, costs and maturity, but also in the light of the Group's currency balance.

 

In order to disperse the sources of financing, Gorenje already for the second time successfully issued commercial papers in 2014 in the total par value of EUR 35,000k. The respective issues of commercial papers that will continue also in 2015 (the third issue of short-term commercial papers in the par value of EUR 27,000k was conducted in February 2015), are earmarked for balancing the seasonal dynamics of cash flows from operating and investing activities, which as a rule is negative in the first half-year but gradually improves by the end of the calendar year. The short-term imbalance of cash flows is additionally balanced by revolving loans and overdrafts on bank accounts in Slovenia and abroad. Company's liquidity reserve that consists of unused credit lines, bank balances and deposits with banks, amounted as at the year-end of 2014 to EUR 35,137k. The liquidity reserves is earmarked for short-term balancing of cash flows and significantly reduces the Company’s exposure to liquidity risk.

 

The Company provides for debt financing and servicing the entire Gorenje Group. A largescale debt restructuring programme was carried out in 2014 by means of which Company's and Group's borrowings, which gradually matured in 2014, were replaced by non-current sources. We have within this process:

  • improved the maturity structure of Group's financial liabilities by 23.5 p.p. – Group’s noncurrent financial liabilities accounted for a 73.5% share within total financial liabilities by the end of 2014. Company's maturity structure of financial liabilities was improved by 15.3 p.p. – Company's non-current financial liabilities accounted for 67.2% among total financial liabilities by the year-end of 2014;
  • issued a 5-year GV01 bond in the total par value of EUR 73,000k and thereby dispersed sources of financing also on the debt's non-current segment; in addition to current bills, the issue of non-current bonds provides an additional guarantee that banks, as well as other investors, have confidence in Gorenje;
  • carried out the third stage of the Company's share capital increase in accordance with the resolution adopted by the Shareholders' Meeting in 2013. The third round of capital increase was in form of a debt-to-equity conversion carried out in 2014 in the amount of EUR 10,000k;
  • reduced the Group's total financial debt by EUR 29,807k, whereby Company's total financial debt increased by EUR 20,216k as a result of the centralised financing of the Group; and
  • essentially lowered the scope of required refinancing in 2015.

The Company and the Group have a long-term servicing plan for financial liabilities that is being regularly updated.

 

Financial liabilities by maturity:


31 December 2013

EURk

Carrying amount

Contractual cash flows

1 year or less

1 – 2 years

2 – 5 years

More than

5 year

Non-derivative financial liabilities

Bank borrowings

223,437

251,968

102,319

34,414

104,962

10,273

Borrowings from related entities and third parties

90,880

97,043

62,402

 16,566

 18,075

 

Other financial liabilities

1,495

1,495

1,495

 

 

 

Trade payables

169,476

169,476

169,476

 

 

 

Other current liabilities

10,413

10,413

10,413

 

 

 

Total

504,701

530,395

346,105

50,980

123,037

10,273

 

 

 

 

 

 

 

Derivative financial receivables and liabilities

Interest rate swaps

-2,820

-3,310

-2,108

-925

-277

 

Forward exchange contracts used for hedging

-245

-245

-245

 

 

 

Outflow

-245

-245

-245

 

 

 

Inflow

 

 

 

 

 

 

Other forward exchange contracts used for hedging

 

 

 

 

 

 

Outflow

 

 

 

 

 

 

Inflow

 

 

 

 

 

 

Total

-3,065

-3,555

-2,353

-925

-277

0

31 December 2014

EURk

Carrying amount

Contractual cash flows

1 year or less

1 – 2 years

2 – 5 years

More than

5 year

Non-derivative financial liabilities

Bank borrowings

203,109

232,157

42,776

47,501

116,517

25,363

Liabilities from bonds issued

72,643

80,026

17,129

16,567

46,330

 

Borrowings from related entities and third parties

68,598

71,935

64,277

5,127

2,531

 

Other financial liabilities

2,634

2,634

2,634

 

 

 

Trade payables

154,786

154,786

154,786

 

 

 

Other current liabilities

10,372

10,372

10,372

 

 

 

Total

512,142

 

551,910

291,974

69,195

165,378

25,363

 

 

 

 

 

 

 

Derivative financial receivables and liabilities

Interest rate swaps

-1,110

-1,109

-853

-256

 

 

Forward exchange contracts used for hedging

1,851

1,851

1,851

 

 

 

Outflow

 

 

 

 

 

 

Inflow

1,851

 

1,851

1,851

 

 

 

Other forward exchange contracts

 

 

 

 

 

 

Outflow

 

 

 

 

 

 

Inflow

 

 

 

 

 

 

Total

741

 

742

998

-256

0

0

Contractual cash flows arising on Company's outstanding financial liabilities, which fall due in one year or less, amounted as at the year-end of 2014 to EUR 291,974k and indicate a decline of EUR 54,131k over the 31 December 2013 balance. Most of the relevant decline in contractual cash flows is attributable to a more favourable maturity structure of financial liabilities as a result of the financial debt restructuring process in 2014.

 

Company's liquidity risk is assessed as moderate in view of measures implemented within restructuring the debt maturity structure, the centralised planning of current and non-current cash flows, and access to a wide range of financial and bank partners.

 

Currency risk

 

For reasons of the sales model applied within the Gorenje Group and under which the holding company transfers the currency risk to its subsidiaries, the Company is not directly exposed to currency risk, which is the risk that the economic benefits of an entity may be decreased due to changes in foreign exchange rates. In 2014, the currency risk accordingly originated mostly from the performance of business activities in the US dollar markets, whereas the exposure to other currencies is insignificant. When managing currency risk, particularly in the US dollar markets, greater attention was paid to natural hedging of currency risk and harmonisation of business operations to ensure long-term decline in currency fluctuation exposure by matching or netting sales and purchases.

 

Additional short-term hedging against EUR/USD currency fluctuations on the level of net exposure is carried out by forward exchange contracts and by raising of US dollar shortterm borrowings.

 

Company's exposure to currency risk:

 

31 December 2013 

EURk

EUR

HRK

DKK

PLN

USD

HUF

Other currencies

Trade receivables

184,071

 

 

 

7,546

 

4,318

Financial liabilities

-323.317

 

 

 

 

 

 

Trade payables

-154,486

-8

-6

-270

-13,692

-3

-1,011

Financial position exposure

-293.732

-8

-6

-270

-6,146

-3

3,307

31 December 2014

EURk

EUR

HRK

DKK

PLN

USD

HUF

Other currencies

Trade receivables

162,983

 

 

 

4,787

 

-56

Financial liabilities

-343.571

 

 

 

-779

 

 

Trade payables

-141,513

-24

 

-1

-12,545

-1

-702

Financial position exposure

-322.101

-24

0

-1

-8,537

-1

-758

Significant exchange rates applied during the year comprise:

 

 

Average rate

Reporting date spot rate

2013

2014

2013

2014

HRK

7.5791

7.6346

7.6265

7.6580

DKK

7.4579

7.4549

7.4593

7.4453

PLN

4.1971

4.1845

4.1543

4.2732

USD

1.3282

1.3288

1.3791

1.2141

HUF

296.9400

308.7067

297.0400

315.5400

In 2014, the Currency Risk Management Policy was adopted on the Company and Group level, which among others defines:

  • the methodology for measuring currency risk exposure,
  • competencies and responsibilities within currency risk management,
  • manners and required scope of hedging against currency risk,
  • instruments acceptable for hedging against currency risk,
  • acceptable partners for implementing currency-risk hedges,
  • the method of measuring the effectiveness of currency risk management.

The Company is engaged in active hedging against currency risks, whereby also natural balancing of currency risks is carried out by means of internal techniques that include customising the purchase/sale segment in individual currency, and the foreign currency borrowing, where assets and other internal mechanisms are exposed. Hedges against currency fluctuations are entered into on a regular and continuous 12-month basis by applying acceptable hedging instruments, whereby the hedge level is set between 60% and 80% of planned cash flows. The planned cash flows in individual currency are used as the basis for hedging with short-term forward exchange contracts. The required level of hedge is determined on the basis of the ratio between the individual currency's impact on Group's performance (volume of business operations) and the probability of currency fluctuation (currency volatility).

 

Currency risk management is carried out on a centralised basis and a committee for managing currency risks was appointed as well. The Company enters into hedging instruments on its own behalf and on behalf of other Group companies, and transfers these instruments on a contract basis to companies that are locally exposed to such risk. Subsidiaries also enter into hedging instruments on local markets but in limited scope, whereby the parent company provides adequate support and credit lines with acceptable partners. The centralised approach to credit risk management has shown improved hedging results on the Group and the Company level.

 

Sensitivity analysis

 

A 5 percent increase (decrease) in the euro’s value against the above stated currencies as at 31 December would have resulted in an increase (decrease) in profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular interest rates remain unchanged. The analysis for 2014 has been performed on the same basis as for 2013.

 

31 December 2013

EURk

Profit or loss for the period

HRK

0

DKK

0

PLN

13

USD

-577

HUF

0

Other currencies

32

31 December 2014

EURk

Profit or loss for the period

HRK

0

DKK

0

PLN

1

USD

-625

HUF

1

Other currencies

38

A 5 percent decrease in the euro’s value against the above stated currencies as at 31 December would have had equal yet opposite effect, provided that all other variables remain unchanged.

 

Company's exposure to currency risk is assessed as low.

 

Interest rate risk

 

Financing of Company’s and Group’s current operations and their investment activities is subject to interest rate risk as most of borrowings raised bear the Euribor variable interest rate, in lesser extent also the reference interest rate. Thus, exposure to interest rate risk represents primarily the unfavourable movement (increase) of the Euribor interest rate that applies to Group's financial liabilities. Major portion of financial liabilities are subject to a variable interest rate that is bound by the 3-month or 6-month Euribor.

 

Company’s exposure to interest rate risk:

EURk

2013

2014

Fixed-rate financial instruments

 

 

Financial assets

8,177

131,357

Financial liabilities

-8,500

-135,327

 

 

 

Variable-rate financial instruments

 

 

Financial assets

79,217

0

Financial liabilities

-314,817

-209,023

Derivative financial assets/liabilities

-3,065

741

Table is exclusive of non-interest bearing financial assets and non-interest bearing financial liabilities.

 

 

Interest structure of financial assets and financial liabilities is not adjusted as the Company records considerably more received financial liabilities than interest-bearing assets. The volume of financial liabilities bearing a fixed interest rate has significantly increased in 2014, which is mostly the result of the GV01 bond issued in 2014 that bears a fixed interest rate of 3.85%. By issuing the bonds, the Company replaced financial liabilities with interest rate swaps. As at the balance sheet, the portion of outstanding financial liabilities bearing a fixed interest rate accounted for 39.3% among total interest-bearing financial liabilities. The previously mentioned share bearing a fixed interest rate additionally increased as at the end of 2014.

 

Subsidiaries are being since 2014 extended loans with fixed interest rates that are, however, gradually adjusted with the average costs of Gorenje Group's financing.

 

As at 31 December 2014, the Company recorded also interest rate swaps in the amount of EUR 28,300k. As for interest rate swaps, the Company enters into derivatives in the same manner as in the case of currency financial derivatives i.e. with acceptable partners only. We therefore asses that the risk of default on the side of the contracting party is minimal. The purpose of hedging by means of entering into embedded derivatives, is fixing of the interest rate that results in a stable cash flow. While entering into interest rate swaps, the Company observes the requirement that characteristics of relevant swaps equal (i.e. maturity, amount, type of interest rate and its alignment) a borrowing that is hedged by the interest rate swap. Consequently, the valuation of a hedging instrument defined as successful hedge, is recognised directly in equity.

 

A portion of borrowings, which were defined as hedged items subject to interest rate swaps, was early repaid in 2014. A direct link between the hedged item and the hedging instrument no longer exists in the part of these repaid borrowings, therefore the valuation of this part of instruments is recognised directly in Company's profit or loss. The valuation effect of these instruments was negative and recorded at EUR 570k. The final maturity of interest rate swaps, where unbundling between the instrument and the hedged item occurred, was in 2016.

 

Cash flow sensitivity analysis for variable interest rate instruments

 

A change in the interest rate by 50 basis points (bp) at the reporting date would have increased (decreased) profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign exchange rates remain unchanged.

 

The analysis for 2014 has been performed on the same basis as for 2013.

EURk

Profit or loss for the period

Other comprehensive income

Increase by 50 bp

Decrease by 50 bp

Increase by 50 bp

Decrease by 50 bp

31 December 2013

Variable rate instruments

-2,222

2,222

0

0

Interest rate swap contracts

557

-557

376

-376

Cash flow variability (net)

-1,665

1,665

376

-376

 

 

 

 

 

31 December 2014

Variable rate instruments

-1,054

1,054

0

0

Interest rate swap contracts

450

-450

89

-89

Cash flow variability (net)

-604

604

89

-89

Variable interest rates recorded in 2014 primarily a downward trend, hence no derivatives earmarked as hedging against the increase of the variable interest rate risk were entered into. The share of interest-bearing financial liabilities that are subject to a fixed interest rate or hedged by instruments against rising interest rates, accounted for 43.9% as at the end of 2014. Although no hedging instruments were entered into against rising interest rates, the Company monitors financial markets on an ongoing basis to promptly respond to macroeconomic changes.

 

Company's exposure to interest rate risk is assessed as moderate.

Note 37 – Fair value

The fair values and book values of financial assets and financial liabilities 

EURk

Book value

Fair value

Book value

Fair value

2013

2013

2014

2014

Available-for-sale investments

2,758

2,758

2,847

2,847

Non-current loans

19

19

17

17

Current loans

87,395

87,395

131,357

131,357

Derivatives

-3,065

-3,065

741

741

Trade receivables

195,935

195,935

167,714

167,714

Other current assets

13,402

13,402

9,488

9,488

Cash and cash equivalents

14,904

14,904

10,254

10,254

Non-current financial liabilities

-170,416

-170,416

-168,141

-168,141

Non-current financial liabilities

(fixed interest rate)

 

0

0

-65,962

-54,478

Current financial liabilities

-154,396

-154,396

-112,880

-112,880

Trade payables

-169,476

-169,476

-154,786

-154,786

Other payables

-10,413

-10,413

-10,372

-10,372

Total

-193,353

-193,353

-189,723

-178,239

Available-for-sale investments are valued at fair value based on officially published prices on the active market in the amount of EUR 155k and assumptions about significant impact on the fair value that are inconsistent with observable current market transactions using the same instruments and investments, valued at cost and totalling to EUR 2,692k.

 

The estimated fair value of current assets and liabilities equals nearly their book value. The fair value of non-current financial liabilities was calculated on the basis of market interest rates and is classified under Level 2 within the fair value hierarchy.

 

Fair value scale

 

The table shows method of valuing financial assets recorded at fair value. The levels are as follows:

 

Level 1: stock price (unadjusted) in the active market of identical assets and liabilities,

 

Level 2: data differing from stock price data (these are included in Level 1) monitored with the intention of direct or indirect valuation of assets and liabilities,

 

Level 3: data on the value of assets and liabilities not based on the active market.

 

Financial year 2013

EURk

Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

155

-

2,603

2,758

Derivatives – assets

-

-

-

-

Derivatives – liabilities

-

-3,065

-

-3,065

Land and investment property

-

-

45,727

45,727

Financial year 2014

EURk

Level 1

Level 2

Level 3

Total

Available-for-sale financial assets

155

-

2,692

2,847

Derivatives – assets

-

1.851

-

1.851

Derivatives – liabilities

-

-1.110

-

-1.110

Land and investment property

-

-

38,023

38,023

Land was valued based on comparable sales with adjustments made in view of time and location of the sale, the size of the property and other physical and functional characteristics. Fair value of investment property was assessed by applying the direct capitalisation method. Land and investment properties were appraised at the end of 2013 by an independent certified appraiser of real property.

 

Forward exchange contracts

 

The total fair value of forward exchange contracts amounted to EUR 1,851k as at 31 December 2014 (2013: EUR -245k) and was recorded under other current financial receivables.

 

Interest rate swaps

 

The total fair value of interest rate swaps as at 31 December 2014 amounted to EUR -1,110k (2013: EUR -2,820k) and is recorded under other current financial liabilities.

 

Interest rate swap hedges, which refer to hedged balance sheet items, are recorded under equity as the fair value reserve.

Note 38 – Commitments relating to investments

Contractually agreed investments in intangible assets and property, plant and equipment, which are not yet recognised in financial statements as at the balance sheet date amounted to EUR 6,825k (2013: EUR 3,742k). The largest portion worth EUR 3,250k refers to the DW 30 washing machine within the refrigerator-freezer and dishwasher programme, followed by investments made in the Panasonic washing machines and dryers project (GOPA) in the amount of EUR 1,607k.

Note 39 – Related party transactions

The transactions with related parties were conducted based on sale/purchase contracts. The prices used in these contracts were the market prices of products and services equivalent to those prevailing in the arm's length transactions. The transactions with related parties were disclosed under the respective balance sheet items.

 

Information on earnings

 

Following personal earnings were paid to the groups of persons stated below:

 

Gross earnings in 2013

EURk

Management Board

Supervisory Board

Employees under individual employment agreements

- salaries

1,090

0

4,990

- incentive bonuses

0

0

196

- benefits

90

0

246

- other income

89

0

90

- attendance fees

0

37

0

- function-related allowance

0

105

0

- refund of work-related expenses

0

18

0

Total

1,269

160

5,522

Net earnings in 2013

EURk

Management Board

Supervisory Board

Employees under individual employment agreements

- salaries

449

0

2,551

- incentive bonuses

0

0

89

- other income

70

0

52

- attendance fees

0

29

0

- function-related allowance

0

81

0

- refund of work-related expenses

0

14

0

Total

519

124

2,692

Gross earnings in 2014

EURk

Management Board

Supervisory Board

Employees under individual employment agreements

- salaries

1,224

0

5,800

- incentive bonuses

0

0

643

- benefits

98

3

284

- other income

307

0

61

- attendance fees

0

31

0

- function-related allowance

0

114

0

- refund of work-related expenses

0

62

0

Total

1,629

210

6,788

Other income paid out to Management Board members comprises the annual vacation bonus, year-end bonus, and the Supervisory Board membership allowance in the company Gorenje Beteiligungs. The latter contributions were in 2014 accounted in full, whereas in 2013 for the period of 4 months. The item of benefits refers to the use of the company car for private use and to insurance premiums.

 

Benefits paid to Supervisory Board members comprise payments under the liability insurance.

 

Net earnings in 2014

EURk

Management Board

Supervisory Board

Employees under individual employment agreements

- salaries

497

2,912

- incentive bonuses

0

285

- other income

243

39

- attendance fees

0

23 

0

- function-related allowance

0

83 

0

- refund of work-related expenses

0

53 

0

Total

740

159

3,236

Pursuant to the Companies Act, total payments, reimbursements, and other benefits to the Management Board members, the Supervisory Board members, and the members of the audit committee are outlined below:

 

Management Board members

 

Gross earnings in 2013

EUR

Salaries

Incentive bonuses

Benefits

Other income

Total

Franc Bobinac

233,541

0

25,750

23,591

282,882

Marko Mrzel

177,705

0

14,645

21,315

213,665

Branko Apat

191,119

0

15,748

21,315

228,182

Peter Groznik

201,753

0

12,304

21,315

235,372

Uroš Marolt

95,741

0

8,865

410

105,016

Drago Bahun

189,886

0

12,388

830

203,104

Total

1,089,745

0

89,700

88,776

1,268,221

Net earnings in 2013

EUR

Salaries

Incentive bonuses

Other income

Total

Franc Bobinac

89,356

0

18,669

108,025

Marko Mrzel

79,692

0

16,869

96,561

Branko Apat

78,940

0

16,860

95,800

Peter Groznik

82,641

0

16,860

99,501

Uroš Marolt

40,111

0

235

40,346

Drago Bahun

77,967

0

470

78,437

Total

448,707

0

69,963

518,670

Gross earnings in 2014

EUR

Salaries

Incentive bonuses

Benefits

Other income

Total

Franc Bobinac

251,682

0

27,333

71,044

350,059

Marko Mrzel

191,501

0

21,332

64,053

276,886

Branko Apat

205,853

0

24,643

64,062

294,558

Peter Groznik

233,040

0

10,630

64,176

307,846

Peter Kukovica

137,594

0

394

42,484

180,472

Drago Bahun

204,563

0

13,455

1,589

219,607

Total

1,224,233

0

97,787

307,408

1,629,428

Net earnings in 2014

EUR

Salaries

Incentive bonuses

Other income

Total

Franc Bobinac

95,456

0

56,397

151,853

Marko Mrzel

80,982

0

50,840

131,822

Branko Apat

79,248

0

50,833

130,081

Peter Groznik

95,849

0

50,876

146,725

Peter Kukovica

62,791

0

33,725

96,516

Drago Bahun

83,033

0

795

83,828

Total

497,359

0

243,466

740,825

Members of the Supervisory Board and the Audit Committee

 

Gross earnings in 2013

EUR

Meeting attendance fees

Function-related allowance

Incentive bonuses

Refund of work-related expenses

Total

 

Uroš Slavinec

4,104

12,000

0

208

16,312

Maja Makovec Brenčič

3,936

10,800

0

896

15,632

Marcel Van Assen

2,928

9,600

0

7,271

19,799

Bachtiar Djalil

1,440

4,671

0

32

6,143

Keith Miles

4,416

10,200

0

8,418

23,034

Bernard C. Pasquier

4,272

10,200

0

848

15,320

Jure Slemenik

3,216

9,600

0

0

12,816

Drago Krenker

4,416

9,600

0

0

14,016

Krešimir Martinjak

3,456

10,800

0

0

14,256

Peter Kobal

4,032

9,600

0

0

13,632

Aleksander Igličar

960

7,680

0

485

9,125

Total

37,176

104,751

0

18,158

160,085

Net earnings in 2013

EUR

Meeting attendance fees

Function-related allowance

Incentive bonuses

Refund of work-related expenses

Total

 

Uroš Slavinec

3,181

9,300

0

160

12,641

Maja Makovec Brenčič

3,050

8,370

0

694

12,114

Marcel Van Assen

2,269

7,440

0

5,635

15,344

Bachtiar Djalil

1,116

3,620

0

25

4,761

Keith Miles

3,422

7,905

0

6,524

17,851

Bernard C. Pasquier

3,310

7,905

0

657

11,872

Jure Slemenik

2,492

7,440

0

0

9,932

Drago Krenker

3,422

7,440

0

0

10,862

Krešimir Martinjak

2,678

8,370

0

0

11,048

Peter Kobal

3,124

7,440

0

0

10,564

Aleksander Igličar

744

5,952

0

376

7,072

Total

28,808

81,182

0

14,071

124,061

Gross earnings in 2014

EUR

Meeting attendance fees

Function-related allowance

Incentive bonuses

Refund of work-related expenses

Benefits

Total

 

Uroš Slavinec

3,084

11,400

0

344

330

15,158

Maja Makovec Brenčič

2,208

5,952

0

287

165

8,612

Marcel Van Assen 

1,680

5,290

0

5,894

165

13,029

Bachtiar Djalil

3,418

9,800

0

226

330

13,774

Keith Miles

4,032

10,150

0

10,119

330

24,631

Bernard C. Pasquier

3,264

10,350

0

875

330

14,819

Corinna Claudia Graf

432

4,310

0

645

55

5,442

Toshibumi Tanimoto

864

4,310

0

42,539

55

47,768

Marko Voljč

600

5,110

0

147

55

5,912

Jure Slemenik

2,256

9,600

0

61

330

12,247

Drago Krenker

3,370

9,600

0

148

330

13,448

Krešimir Martinjak

2,448

10,700

0

61

330

13,539

Peter Kobal

2,784

9,600

0

61

330

12,775

Aleksander Igličar

922

7,680

0

363

0

8,965

Total

31,362

113,852

0

61,770

3,135

210,119

Net earnings in 2014

EUR

Meeting attendance fees

Function-related allowance

Incentive bonuses

Refund of work-related expenses

Total

 

Uroš Slavinec

2,243

8,291

0

249

10,783

Maja Makovec Brenčič

1,605

4,329

0

209

6,143

Marcel Van Assen 

1,222

3,848

0

4,287

9,357

Bachtiar Djalil

2,485

7,128

0

164

9,777

Keith Miles

3,102

7,826

0

7,795

18,723

Bernard C. Pasquier

2,373

7,528

0

636

10,537

Corinna Claudia Graf

315

3,134

0

469

3,958

Toshibumi Tanimoto

629

3,134

0

30,938

34,741

Marko Voljč

437

3,716

0

107

4,260

Jure Slemenik

1,641

6,982

0

44

8,667

Drago Krenker

2,451

6,982

0

108

9,541

Krešimir Martinjak

1,781

7,782

0

44

9,607

Peter Kobal

2,025

6,982

0

44

9,051

Aleksander Igličar

671

5,585

0

264

6,520

Total

22,980

83,247

0

45,358

151,585

No non-current and current loans were extended to members of the Management Board, the Supervisory Board, and to internal owners.

Note 40 – Events after the balance sheet date

As of 20 February 2015, Gorenje, d.d., issued 10-month commercial papers in the total par value of EUR 27m bearing an interest rate of 2.20% p.a., which is 35% more than initially planned. Sizeable interest in third issue of commercial papers is proof of investor confidence in the Gorenje Group.

 

With the last year's issue of 5-year bonds and the issue of 10-month commercial papers, Gorenje has raised EUR 100m in capital markets in no more than four months. At present, over a quarter of Gorenje's financing is sourced through capital markets, which ensures an appropriate stability and thereby competitiveness within providing sources of finance.

 

Gorenje, d.d. started negotiations with the Polish company Elemental Holding SA on the possible sale of the controlling interest in the subsidiary Gorenje Surovina, d.o.o. The relevant talks refer also to certain subsidiaries of Gorenje Surovina and aim to define the scope, value and terms of sale. Managements of Gorenje, d.d. and Elemental Holding SA expect to concluded these negotiations by the end of Q2 2015.

 

No other significant events occurred upon compiling the balance sheet as of 31 December 2014.

Note 41 – Transactions with the audit company

Pursuant to Article 57 of the Companies Act, the audit of Gorenje, d.d. was conducted by the audit company Deloitte Slovenia and the independent auditor's report was issued on 13 April 2015. In 2014, the cost of the annual report’s audit was recorded at EUR 94k (2013: EUR 88k).

Independent auditors's report