2.2.1 Basis of preparation

2.2.1.1 1. Reporting entity

ForFarmers N.V. (the ‘Company’) is a public limited company domiciled in the Netherlands. The Company’s registered office is at Kwinkweerd 12, 7241 CW Lochem. The consolidated interim financial statements for the financial year ended 31 December 2016 comprise ForFarmers N.V. and its subsidiaries (jointly the 'Group' or 'ForFarmers') and the Group’s interest in its joint venture.

As at 31 December 2016, the interest in the Company is distributed as follows: 

ForFarmers N.V. is an internationally operating feed company that offers Total Feed solutions for conventional and organic livestock farming. ForFarmers gives its very best “For the Future of Farming”: for the continuity of farming and for a financially secure sector that will continue to serve society for generations to come in a sustainable way. On 23 May 2016, ForFarmers changed its legal form from ForFarmers B.V. to ForFarmers N.V. to enable its public listing on Euronext Amsterdam that became effective on 24 May 2016.

2.2.1.2 2. Basis of accounting

Statement of compliance

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

The consolidated (and company) financial statements were approved for issuance by the Executive Board and Supervisory Board on 13 March 2017. The Group’s financial statements will be subject to adoption by the Annual General Meeting of Shareholders on 26 April 2017.

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

Changes in accounting policies in 2016

Other than the change in accounting policy with regard to 'Offsetting of financial assets and financial liabilities', as described below, there were no new standard or changes in accounting policies, effective from 1 January 2016, that materially impact the Group.

Offsetting of financial assets and financial liabilities

IAS 32 'Financial instruments: presentation' prescribes that a financial asset and a financial liability shall be offset when there is a legally enforceable right to offset and the intention to settle on a net basis or realise the asset and settle the liability simultaneously. The Group has both the legally enforceable right (by contract) to set off the amounts under notional cash pooling arrangement as well as the intention to settle on a net basis. Due to the fact that IFRS is principle-based and does not prescribe how the intention to settle on a net basis is evidenced, the Group applies certain practices to evidence that the requirement of “intention to settle net” is met.

In April 2016, an Agenda Rejection Notice ('ARN') was published by the IFRS Interpretations Committee ('IFRIC') on balance sheet offsetting of notional cash pooling products. The issue in the ARN relates to the question whether certain cash pooling arrangements would meet the requirements for offsetting under IAS 32. The IFRIC provided further clarification that the transfer of balances into a netting account should occur at the period-end to demonstrate an intention to settle on a net basis.

As a result of the ARN the Group has changed its accounting policy. This change in accounting policy is accounted for retrospectively. The comparative amounts as at 31 December 2015 are adjusted accordingly in accordance with the information set out below.

Summary of impact of changes in accounting policies

The change in the accounting policy, as described above, has no impact on the Consolidated statement of profit or loss (including earnings and diluted earnings per share), Consolidated statement of comprehensive income, Consolidated statement of cash flows and the Consolidated statement of changes in equity.

In the Consolidated statement of financial position the amounts on the line items Cash and cash equivalents, Current assets, Total assets, Bank overdrafts, Current liabilities and Total liabilities are impacted. These line items increase by €44.8 million as at 31 December 2015.

Accounting policies

Details of the Group’s significant accounting policies are included in Notes 39 and 40.

2.2.1.3 3. Functional and presentation currency

These consolidated financial statements are presented in euro, which is the Company’s functional currency. All amounts have been rounded to the nearest thousand, unless otherwise indicated. The subsidiaries' functional currencies are mainly the euro and Pound sterling. Most of their transactions, and resulting balance occur in their local and functional currency. The following exchange rates have been applied for the during the year:

Rate as at 31 December

Average rate

2.2.1.4 4. Use of judgements and estimates

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

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

A. Judgements

Information about judgements made in applying accounting policies that have the most significant effect on the amounts recognised in the consolidated financial statements is included in the following notes:

• revenue: whether the Group acts as an agent in the transaction rather than as a principal (Note 8);
• consolidation: whether the Group has de facto control over an investee (Note 32);
• leases: whether an arrangement contains a lease (Note 35); and
• lease classification (Note 35).

B. Assumption and estimation uncertainties

The estimates and assumptions considered most critical are:

• measurement of defined benefit obligations: key actuarial assumptions (Note 15);
• recognition of deferred tax assets: availability of future taxable profit against which carry forward tax losses can be used (Note 16);
• useful lives of property, plant and equipment and intangible assets (Notes 17 and 18);
• impairment test: key assumptions underlying recoverable amounts (Note 18);
• valuation of trade and other receivables (Note 21); and
• recognition and measurement of provisions and contingencies: key assumptions about the likelihood and magnitude of an outflow of resources (Note 29).

C. Measurement of fair values

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

‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

When one is available, the Group measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.

If an asset or a liability measured at fair value has a bid price and an ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price.

The best evidence of the fair value of a financial instrument on initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value on initial recognition differs from the transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique for which any unobservable inputs are judged to be insignificant in relation to the measurement, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value on initial recognition and the transaction price. Subsequently, that difference is recognised in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

The Group has an established control framework with respect to the measurement of fair values. This includes a valuation team that has overall responsibility for over­seeing all significant fair value measurements, including Level 3 fair values, and reports directly to the CFO.

The valuation team regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair values, then the valuation team assesses the evidence obtained from the third parties to support the conclusion that these valuations meet the requirements of IFRS, including the level in the fair value hierarchy in which the valuations should be classified.

Significant valuation issues are reported to the Group’s Audit Committee.

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

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

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

Further information about the assumptions made in measuring fair values is included in the following notes.

Share-based payment arrangements (Note 14)

For depository receipts granted to employees, the fair value of the depository receipts is based on the market price of the entity’s shares as publically listed (until 24 May 2016: as listed  on Van Lanschot’s multilateral trading platform), and if necessary adjusted to take into account the terms and conditions upon which the depository receipts were granted.

Property, plant and equipment and investment property (Notes 17 and 19)

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

Intangible assets, excluding goodwill (Note 18)

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

Inventories (Note 22)

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

Biological assets (Note 23)

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

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

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

Derivatives (Note 31)

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

• by inference from the fair value of its components or of a similar instrument, in case a reliable fair value can be demonstrated for its components or for a similar instrument; or
• using generally accepted valuation models and techniques.

Financial instruments, other than derivatives (Note 31)

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

2.2.2 Results for the year

2.2.2.1 5. Operating segments

A. Basis for segmentation

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

• The Netherlands
• Germany / Belgium
• United Kingdom

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

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

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

The Group’s Executive Committee reviews internal management reports of each cluster on a monthly basis, and its members are jointly considered as the chief operating decision making body.

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

B. Information about reportable segments

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

2.2.2.1.1

2.2.2.1.2

The column Group / eliminations represents include amounts as result of Group activities and eliminations in the context of the consolidation.

Other non-current assets for this purpose consist of property, plant and equipment, intangible assets and goodwill and investment property.

The working capital consists of inventories, biological assets, trade and other receivables less current liabilities.

The Group is not reliant on any individually major customers.

C. Reconciliation of profit

The reconciliation between the reportable segments’ operating profits and the Group’s profit before tax is as follows:

2.2.2.2 6. Business combinations

Acquisition VleutenSteijnVoeders B.V. (The Netherlands)

On 22 July 2016 ForFarmers announced the acquisition of VleutenSteijnVoeders B.V. ('Vleuten-Steijn'). The proposed transaction was approved end September 2016, after which ForFarmers acquired all shares of Vleuten-Steijn. Vleuten-Steijn is a feed company focussed on the swine sector, predominantly in the South East of the Netherlands, and Germany. Vleuten-Steijn generated a revenue of some €91 million in 2015 from the sale of approximately 295,000 tons of feed to mostly larger companies, particularly in the sow and piglet segment. Vleuten-Steijn has outsourced the feed production to third parties. The business activities of Vleuten-Steijn are integrated in ForFarmers Netherlands.

Vleuten-Steijn is consolidated in the results of ForFarmers as from 1 October 2016. From the date of acquisition, Vleuten-Steijn contributed €21.9 million of revenue and €0.9 million profit before tax. If the acquisition of Vleuten-Steijn would have taken place at the beginning of the year, the contribution to revenues would have been €85.1 million and the contribution to profit before tax would have been €3.1 million. Herewith, at the beginning of the year, Group revenues would have been €2,172 million and Group profit before tax would have been €70.4 million.

A. Purchase consideration

As agreed in the share purchase agreement 70% of the total consideration was paid in 2016 (€20,481 thousand). The remainder is paid after three years, depending on the achievement of targets which have been specified in advance. For this purpose the Group has included €7,638 thousand as contingent consideration, which represent its fair value at the date of acquisition (1 October 2016). As at 31 December 2016 the contingent consideration had increased to €7,660 thousand (see Note 30).

B. Acquisition-related costs

The transaction costs related to the acquisition amounted to €0.5 million. These expenses relate to due-diligence costs and legal fees that have been included in 'other operating expenses'.

C. Identifiable assets acquired and liabilities assumed

The provisional fair values of the identifiable assets and liabilities of Vleuten-Steijn acquired as at the date of acquisition were:

Measurement of fair values

The trade and other receivables comprise gross contractual amounts due of €13,121 thousand, of which €2,456 thousand was expected to be uncollectible at the acquisition date.

D. Goodwill

The acquisition of Vleuten-Steijn is accounted for according to the acquisition method, whereby the price paid is based on an enterprise value of €30.5 million. The positive difference between the purchase consideration and the fair value of the acquired identifiable assets and liabilities assumed is capitalised as goodwill. The goodwill has been set at €15.6 million. The goodwill concerns the value of expected synergies arising from the acquisition. Goodwill is allocated entirely to the Netherlands cluster. Possible impairments and depreciation related to goodwill and customer relations recognised are not deductible for income tax purposes.

E. Acquisitions 2015

Countrywide Farmers (United Kingdom)

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

From the date of acquisition, Countrywide Farmers contributed €68.0 million of revenue and €2.1 million profit before tax. If the acquisition of Countrywide Farmers had taken place at the beginning of the year 2015, the contribution to revenues would have been €102.0 million and the contribution to profit before tax had been €3.2 million. Herewith, at the beginning of the year 2015, Group revenues would have been €2,278 million and Group profit before tax would have been €67.3 million.

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

The provisional fair values of the identifiable assets and liabilities of Countrywide Farmers acquired in 2015 as at the date of acquisition did not change and have become final in 2016:

2.2.2.3 7. Disposals

Leafield Feeds Ltd. (United Kingdom)

As per 30 June 2016 the Group sold its interest in Leafield Feeds Ltd. to SugaRich for €1.3 million, resulting in a gain of €0.8 million that has been recognised as other operating income in the statement of profit or loss. The Leafield bread and biscuit products are mainly sold to business-to-business clients. As ForFarmers focuses on providing products and services to farmers, and its product portfolio is attuned accordingly, the decision has been taken to sell  Leafield. The sale concerns a share transaction of the entity Leafield Feeds Ltd. that comprises the production site in Wakefield, West Yorkshire and 15 employees. Since the transaction is effective as per 30 June 2016, the corresponding assets and liabilities of Leafield Feeds Ltd. were deconsolidated and fully transferred to SugaRich.

Indirect transport business Wheyfeed (United Kingdom)

In 2016, the Group sold the indirect transport business of Wheyfeed to the former shareholder of Wheyfeed Ltd. The feed business of Wheyfeed Ltd. and the entity itself remain part of the Group. The gain of €0.4 million relates to the disposal of vehicles and is recognised as other operating income, see Note 10.

Disposals 2015

In 2015 the Group sold its 6% share ownership of Adaptris (United Kingdom) to RBI. The shares were transferred on 2 October 2015. A book profit of €1.1 million was recorded as other operating income.

2.2.2.4 8. Revenue

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

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

The decrease of the revenue of €135.5 million is mainly caused by a negative currency impact of €88.2 million, further the net effect of acquisitions and divestments cause a positive effect on the revenue of €34.4 million. This results in a like-for-like decrease of €81.7 million. This decrease is a result of lower raw material prices, partly compensated with higher volume.

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

2.2.2.5 9. Cost of raw materials and consumables

In 2016 the write down of inventories to net realisable value was €35 thousand (2015: €20 thousand).

2.2.2.6 10. Other operating income

Under the other operating income amounts are included that relate to the disposal of Leafield Feeds Ltd. €0.8 million (United Kingdom), the disposal of vehicles of Wheyfeed €0.4 million (United Kingdom), the disposal of the Doetinchem industry site €0.1 million (The Netherlands) and the disposal of the Oss site €0.9 million (The Netherlands). The latter was previously classified as asset held for sale (2015: €1.1 million for the disposal of Adaptris and €0.3 million for the sale of the Cranswick site - both in the United Kingdom). For disclosure about the disposals and assets held for sale reference is made to Note 7 respectively Note 25.

2.2.2.7 11. Operating expenses

The like-for-like decrease of the operating expenses was €4.0 million. The other changes can be explained by a negative currency impact (-€17.2 million), the net effect of acquisitions and divestments (€1.2 million) and incidental items (€1.9 million comprising restructuring costs).

A. Other operating expenses

The other operating expenses decreased by €22.1 million, of which €8.8 million was caused by a currency impact. The expenses decreased by €0.2 million due to the net effect of acquisitions and divestments. The like-for-like decrease of the other operating expenses amounts €13.1 million. The expenses for utilities, transport and maintenance decreased amongst others due to the OneForFarmers initiatives and the lower costs for diesel and electicity. The sales expenses decreased mainly due to a lower net addition to the allowance for impairment in respect to trade  receivables. The other expenses in 2016 include also a one-off expense relating to the listing on Euronext. (€1.5 million).

B. Research and development expenses

In 2016 the Group incurred an amount of €4.8 million (2015: €4.9 million) relating to research and development expenses. These expenses mainly comprise personnel expenses of nutrition specialists, product managers and laboratory workers.

C. Auditor’s fee

The following fees were charged by KPMG Accountants N.V. to the company, its subsidiaries and other consolidated companies, as referred to in Section 2:382a(1) and (2) of the Netherlands Civil Code.

The fees mentioned in the table for the audit of the financial statements relate to the total fees for the audit of the financial statements, irrespective of whether the activities have been performed during the financial year. The remaining auditor´s costs are relating to 'Other audit engagements', were charged to the financial year in which the services were rendered.

2.2.2.8 12. Net finance costs

As a result of the devaluation of the Pound sterling, a loss was incurred in 2016 relating to foreign exchange results. In 2015 there was a positive foreign exchange result as a result of the appreciation of the Pound sterling compared to the euro.

The other interest income mainly comprises interest received on long-term outstanding receivables (loans) and postive bank balances. The other interest expenses mainly comprise interest paid on bank loans and other financing liabilities.

The other financial expenses result include amortisation of €0.4 million (2015: €0.4 million) which relates to capitalized cost in realtion to financing arrangement concluded in 2014, as further disclosed in Note 28.

2.2.2.9 13. Earnings per share

A. Basic earnings per share

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

B. Diluted earnings per share

The calculation of diluted earnings per share is equal to the calculation of basic earnings per share, since no new shares have been issued in 2015 and 2016, except for 1 priority share during 2015 with a par value of €1.00 that has no dilutive effect on the basic earnings per share. The priority share is not entitled to dividend. See Note 26 for further information.

2.2.3 Employee benefits

2.2.3.1 14. Share-based payment arrangements

A. Description of the share-based payment arrangements

The Group distinguishes two participation plans. One plan relates to members of the Executive Committee and senior management (applicable for 2014, 2015 and 2016), the other plan relates to other employees (applicable for 2015 and 2016). Both plans have further details set out for employees in The Netherlands ("The Netherlands participation plan") and for employees in the United Kingdom, Germany and Belgium, collectively the “Foreign participation plan”, respectively.

The participation plans are annual plans only applicable for the respective year to which they relate, any additional participation plans are considered new plans. New plans can only be executed upon shareholder approval on the recommendation of the Supervisory Board for the purchase of shares related to the plan.

Participation plans 2016

On 15 April 2016, the Group offered two 2016 participation plans to the employees. One plan relates to members of the board and senior management, the other plan relates to other employees. For both plans the participants are required to remain in service for the 36 consecutive months to entitle the discount on the depository receipts being purchased. The employee is entitled to buy depository receipts at a discount of between 13.5% and 20% on the fair value of the depository receipt at the grant date, for which additional depository receipts are provided. The conditions of both plans are consistent with the participation plans applicable for 2015 and 2014.

During 2016, 34 employees (of which 8 foreign employees) participated in the participation plan for the Executive Committee and senior management and 319 employees (of which 61 foreign employees) participated in the participation plan for other employees. The total number of participants comprises 15% of the total number of the Group's employees. The number of depositary receipts granted with respect to the 2016 participations plans were as follows:

After the awards there were no cancellations or modifications to the awards in 2016.

Participation plans 2015

(i) Members of the Executive Committee and senior management
In terms of the 2015 participation plan, as per 17 April 2015 (grant date), members of the Executive Committee and senior management were entitled to buy depository receipts of the Company from their 2014 bonus (both the Netherlands and Foreign participation plans) and/or upon surrender of surplus holiday rights (only the Netherlands).

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

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

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

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

During the 2015 year, 24 employees in the Netherlands and 9 employees in foreign countries participated in the 2015 participation plans. A total number of 239,049 and 34,529 depository receipts were granted respectively for the Netherlands and the Foreign 2015 participation plan.

There were no cancellations or modifications to the awards in 2015 and 2016.

(ii) Other employees
In terms of the 2015 participation plan, as per 17 April 2015 (grant date), employees were entitled to buy depository receipts of the Company from own payment (both Netherlands and Foreign participation plans) and/or upon surrender of surplus holiday rights (only the Netherlands).

The employee was entitled to buy depository receipts at a discount of between 13.5% of the grant date fair value of the depository receipt. Additional depository receipts were provided for the value of the discount.

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

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

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

During the 2015 year, 325 employees in the Netherlands, 103 employees in foreign countries participated in 2015 participation plans. A total number of 297,327 and 73,025 depository receipts were granted respectively for the Netherlands and the Foreign 2015 participation plan.

In 2016 a total of 4,825 granted depository receipts were cancelled as result of leavers. There were no cancellations or modifications to the awards in 2015.

Participation plan 2014

In terms of the 2014 participation plan, as per 15 April 2014 (grant date), members of the Executive Committee and senior management were entitled to buy depository receipts of the Company from their 2013 bonus (both the Netherlands and Foreign participation plans) and/or upon surrender of surplus holiday rights (only the Netherlands).

The employee was entitled to buy depository receipts at a discount of between 13.5% and 20% of the grant date fair value of the depository receipt. Additional depository receipts were provided for the value of the discount. 

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

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

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

During the 2014 year, 22 employees in the Netherlands, 8 employees in foreign countries participated in 2014 participation plans. A total number of 215,174 and 21,730 depository receipts were granted respectively for the Netherlands and the Foreign 2014 participation plan.

In 2016 a total of 634 granted depository receipts were cancelled as result of leavers. There were no cancellations or modifications to the awards in 2015.

B. Measurement of fair values

Participation plans 2016

The value of the depository receipt of the Company, for which the employee (members of the Executive Committee, senior management and other employees) could buy their depository receipts, was determined as the average of the closing prices in the 5 trading days during the period 19 - 25 April 2016, which average amounted to €6.24. The value of the employee tax obligation amounts to €96 thousand.

Participation plans 2015

(i) Members of the Executive Committee and senior management
The value of the depository receipt for which the employee could buy their depository receipts of the Company was determined as the average of the closing prices in the 5 trading days during the period 20 - 24 April 2015, which average amounted to €5.04. The value of the employee tax obligation amounts to €81 thousand.

(ii) Other employees
The value of the depository receipt for which the employee could buy their depository receipts of the Group was determined as an average of a 5 trading days closing rate during the period June 1 to June 5, the averages rating amounted to €5.18.

Participation plan 2014

The fair value of the depository receipts at the grant date (16 April 2014), being the first day after the shareholders approved the purchase of the depository receipts, represents the depository receipt value of  €3.22 on Van Lanschot’s MTF trading platform. The value of the employee tax obligation amounts to €53 thousand.

C. Amounts recognised in statement of profit or loss and statement of financial position

The expenses are recognised in the statement of profit or loss over the term of the participation plan (3 years), see Note 15F. The depository receipts for the employees in the Netherlands participation plan were fully granted in 2016 respectively 2015 and 2014. The non-vested portion was not recognized within profit and loss, but rather as other receivables within trade and other receivables of €569 thousand (2015: €462 thousand) of which €319 thousand was classified as current (2015: €269 thousand as current). The cumulative share-based payment reserve relating to the Foreign participation plan amounts to €187 thousand (2015: €23 thousand).

2.2.3.2 15. Employee benefits

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

For details on the related employee benefit expenses, see 15F.

A. Post-employment plans and funding

The Group contributes to the following post-employment plans which are described per cluster.

The Netherlands

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

Under the defined benefit plan the Group was exposed to actuarial risks related to the guarantee premium that was to be settled even after the termination of the insurance contract. The commitments under the plan were calculated on the basis of actuarial calculations, with discounting at the applicable discount rate. The defined benefit plan was partly funded.

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

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

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

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

The net liability related to the defined benefit plans in The Netherlands per 31 December 2016 amounts to €14,437 thousand (31 December 2015: €11,753 thousand). The increase in this liability is caused by the decrease in the interest rate, whereby the change in the financial assumptions was recognized in other comprehensive income.

Germany / Belgium

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

In addition to the in-house defined benefit plan, a defined contribution plan is in place for all other employees of the German subsidiaries.

The net liability related to the defined benefit plans in Germany per 31 December 2016 amounts to €5,509 thousand (31 December 2015: €5,306 thousand).

The Belgian subsidiaries have two insured benefit plans for their employees which qualify as defined benefit plans as from 2016 as a result of changes in laws and regulations. In 2015 these plans qualified as only defined contribution plans. The net liability related to the defined benefit plans in Belgium per 31 December 2016 amounts to €185 thousand (31 December 2015: not applicable).

United Kingdom

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

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

End of 2016 it has been agreed that the BOCM PAULS Pension Scheme will adopt CPI as the inflation reference for all pension increases in payment (including Guaranteed Minimum Pension (GMP) and excess pension over GMP) and revaluation in deferment (excluding GMP). Previously the practice was to use RPI as the inflation reference for pension increases in payment and revaluation in deferment for pensions in excess of GMP. This change has acted to reduce the net liability by around €17 million at 31 December 2016 which was measured through Other Comprehensive Income as a change in financial assumptions. Furthermore, the Group agreed to make an additional contribution in January 2017 of £10 million (equivalent to €11.7 million at the exchange rate of 31 December 2016) to make up a portion of the deficit in UK pension plan which will reduce the net defined benefit liability.

The net liability related to the defined benefit plans in the United Kingdom per 31 December 2016 amounts to €40,828 thousand (31 December 2015: €50,167 thousand). The decrease of this liability is mainly caused by the above-mentioned adjustment in financial assumptions and the foreign currency effect due to the decline of the Pound sterling.

2.2.3.2.1

B. Movement in net defined benefit (asset) liability

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

The remeasurement loss (these are actuarial loss/gain and return on plan assets) of €527 thousand (2015: gain €7,303 thousand) after tax amounted to €210 thousand (2015: gain €4,851 thousand), see Note 16B. The change in the actuarial 'remeasurement result', compared to 2015, is mainly due to the decrease in the discount rate in 2016 (in 2015, there was an increase in the discount rate), partially offset by the effect from the adjustment of the inflation reference RPI to CPI in the BOCM PAULS Pension Scheme (United Kingdom), see A. For none of the defined benefit pension plans, the fair value of the plan assets exceeds the defined benefit obligation.

2.2.3.2.2

C. Plan assets

Periodically, an Asset-Liability Matching study is performed in which the consequences of the strategic investment policies are analysed. Based on market conditions a strategic asset mix has been made between shares, bonds, real estate, cash and other investments in predominantly active markets, which is comprised as follows in the plan assets:

D. Defined benefit obligation

Risk exposure

The defined benefit plans expose the Group to actuarial risks, such as longevity risk, currency risk, interest rate risk and market (investment) risk.

Actuarial assumptions

The principal actuarial assumptions at the reporting date (expressed as weighted averages) were the following:

Assumptions regarding future mortality have been based on published statistics and mortality tables:

• The Netherlands (funded plans): AG2016
• Germany (unfunded plans): RT Heubeck 2005G
• Belgium (funded plans): MR/FR-5
• UK (funded plans): CMI Mortality Projects Model “CMI_2015”

The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows (expressed as weighted averages):

As at 31 December 2016, the weighted-average duration of the defined benefit obligation was 18.3 years (31 December 2015: 16.0 years).

Sensitivity analysis

Possible changes at the reporting date to one of the relevant actuarial assumptions, which could reasonably be expected, keeping other assumptions constant, would have affected the defined benefit obligation of €298 million (31 December 2015: €285 million) by the amounts shown below:

Employer contributions

The Group expects to pay €15.7 million in contributions to its defined benefit plans in 2017 (2016: €3.3 million). This increase compared to last year is the result of a commitment by ForFarmers to make up a portion of the deficit in the UK pension plan in 2017 (see Note 15A).

E. Other long-term service plans

The liabilities and expenses related to other long-term service plans relate to anniversary benefits for employees in The Netherlands, Germany and Belgium and to a long-term incentive plan for the Executive Committee.

F. Employee benefit expenses

The employee benefit expenses increased by €2.1 million, this includes a decrease of €7.0 million due to a currency effect. The increase is caused by additional post-employment expenses, additions to the restructuring provision, the full-year effect of strenghtening of the organisation and the net effect of acquisitions and divestments.

The post-employment expenses are specified as follows:

The interest charges related to the defined benefit plans amounting to €2,098 thousand (2015: €2,307 thousand) are recognised in the finance costs.

Refer to Note 15A for further details on the post-employment plans.

The expenses relating to the equity-settled share-based payments and cash-settled share-based payments relate to the depository receipts granted to the employees according to the employee participation plans for 2016, 2015 and 2014 as disclosed under Note 14.

In the Netherlands, 4 full-time equivalents were added due to the acquisition of Vleuten-Steijn (in 2015: increase 47; due to the acquisition of Countrywide in the UK as from 1 May 2015).

2.2.4 Income taxes

2.2.4.1 16. Income taxes

A. Amounts recognised in statement of profit or loss

2.2.4.1.1

The total tax expense excluded the Group’s share of tax expense of the equity-accounted investees of €889 thousand (2015: €1,053 thousand), which has been included in ‘share of profit of equity accounted investees, net of tax’, see G.

2.2.4.1.2

B. Amounts recognised in Other Comprehensive Income (OCI)

2.2.4.1.2.1

Within the Group, loans are agreed between the different subsidiaries. Two of the loans in the United Kingdom are considered to form part of the net investment in the subsidiaries, and as such foreign exchange differences on these loans are recorded directly through other comprehensive income. For income tax purposes these foreign exchange differences are taxable / tax deductible. As the foreign exchange differences are recorded through other comprehensive income, the related current tax impact is also recorded through other comprehensive income for a positive amount of €1,381 thousand in 2016 (2015: €558 thousand negative).

2.2.4.1.3

C. Reconciliation of effective tax rate

D. Movement in deferred tax balances

2.2.4.1.4

The Group expects that its accruals for tax liabilities are adequate for all open years based on its assessment of many factors, including interpretations of tax law and prior experience. The Group off-sets tax assets and liabilities if, and only if, it has a legally enforceable right to do so. ForFarmers recognises deferred tax assets to the extent that it is considered probable based on business forecasts that sufficient taxable profits will be available.

E. Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of tax losses carried forward in Germany as management has established that it is uncertain whether future taxable profits would be available against which these losses can be utilised, and therefore this amount has been included in the balance of unrecognised losses of €3.9 million at 31 December 2016 (31 December 2015: €4.2 million), with a tax effect of €1.1 million (31 December 2015: €1.3 million). The tax losses can be carried forward indefinitely, but management applies a ten year period to determine the adequacy whether tax losses can be utilised.

Furthermore, deferred tax assets have not been recognised in respect of tax losses incurred on the sale of real estate in the United Kingdom amounting to €3.2 million (31 December 2015: €3.3 million), with a tax effect of €0.6 million (31 December 2015: €0.7 million). These tax losses can only be utilised against a future tax gain on the sale of specific assets such as real estate. As management does not have plans to dispose real estate, the recovery of the deferred tax asset is highly uncertain and as such not recognised.

Also in the Netherlands no deferred tax asset is recognised related to individual real estate where the fiscal carrying amount is higher than the book carrying amount at the end of the year and there is no management intent to sell or liquidate this particular real estate. Also it is not expected that the possibility for fiscal depreciation will increase significantly in the near future for this particular real estate, because management does expect that the fiscal valuation by the Dutch tax authorities ("WOZ waarde") of these objects will not decline significantly in the near future, what would create posibilities for fiscal depreciation. This concerns at 31 December 2016 an amount of €2.9 million (31 December 2015: €2.1 million), with a tax effect of €0.7 million (31 December 2015: €0.5 million).

F. Tax Group

The Company and the Dutch subsidiaries, in which the company has a 100% interest, form a tax group for the purpose of income tax, of which ForFarmers N.V. is the head of the tax group. For VAT, a comparable tax group exists for the Dutch subsidiaries, which also includes the majority shareholder Coöperatie FromFarmers U.A. which is the head of this tax group. The total current receivable or liability towards the tax authorities is accounted for in the statement of financial position of the head of the tax group. Settlement of taxes within this tax group takes place as if each company is independently liable for tax. Each participating subsidiary is jointly and severally liable for possible liabilities of the tax group as a whole.

A number of companies in Germany form a tax group for the purposes of income tax (‘Organschaft’ for Körperschaftsteuer and Gewerbesteuer). Settlement of taxes within this tax group takes place as if each company is independently liable for tax.

The companies in the United Kingdom form a tax group for the purposes of income tax (‘Group Relief’) and VAT. Settlement of taxes within this tax group takes place as if each company is independently liable for tax.

G. Taxes on equity-accounted investees

Corporate income taxes on the results of HaBeMa are settled with the tax authorities by ForFarmers Langförden, Germany (indirect shareholder). The results of HaBeMa are accounted for based on the equity method and are presented net of tax in the consolidated statement of profit and loss. These corporate income tax charges are deducted from the share of profit of equity-accounted investees for an amount of €889 thousand (2015: €1,053 thousand). Trade taxes (Gewerbesteuer) applicable to HaBeMa are borne by the entity itself.

2.2.4.1.5

2.2.5 Assets

2.2.5.1 17. Property, plant and equipment

A. Reconciliation of carrying amount

2.2.5.1.1

In the United Kingdom the construction of a new production facility (Exeter) and a central office (Bury St. Edmunds) has begun. This requires an investment of £10 million respectively £4 million (equivalent to €11.7 million respectively €4.7 million at the exchange rate of 31 December 2016), of which a portion has been recognised as Assets under construction.

B. Impairment loss

There were no indicators in 2016 and 2015 for impairment of property, plant and equipment.

C. Leased other operating assets

The Group leases some other operating assets under a number of finance leases. The corresponding finance lease obligations are accounted for under loans and borrowings. As at 31 December 2016, the net carrying amount of leased equipment was €236 thousand (2015: €352 thousand). The decrease of the carrying amount was caused by the fact that the leased assets has been replaced by assets owned.

2.2.5.2 18. Intangible assets and goodwill

A. Reconciliation of carrying amount

The goodwill and other changes 'acquisitions through business combinations' of €24.608 thousand relate to the acquisition of Vleuten-Steijn (2015: total of €14.048 thousand acquired intangible assets and goodwill of Countrywide Farmers) see note 5.

2.2.5.2.1

B. Amortisation

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

C. Impairment test

(i) Impairment testing for cash generating units containing goodwill

From 2016 onwards, the Group performs its annual goodwill impairment test in the third quarter and at another time if there is a trigger for impairment. In connection with the IFRS transition, the test of 2015 was performed in the fourth quarter of that year. Goodwill is monitored and tested at the level of the clusters. The Group evaluates, among other things, the relationship between the recoverable amount and the carrying amount in the evaluation of indicators of potential impairment.

Goodwill is allocated as follows to the cash generating units:

Information about the net realisable value including the key assumptions

2016
For the 2016 goodwill impairment test, the recoverable amount of the various cash generating units was based on its value in use, determined by discounting the future cash flows to be generated from the continuing use of the cash generating units. This method was changed compared to 2015 so that the Group has better reference to its internal performance measures when determining the valuation.

The key assumptions used in the estimation of value in use per cash generating unit in 2016 were as follows.

The used discount rate was a pre-tax measure based on the yield of 30-year government bonds, issued by the government in the relevant market and in the same currency as the cash flows, adjusted for a risk premium to reflect both the increased risk of investing in equities generally, and the systemic risk of the specific cash generating unit.

The average EBITDA growth rates were based on expectations of future outcomes of gross profits taking into account past experience of the average growth of recent years and estimated sales volumes in tons. To estimate the forecasted gross profit, primarily an assessment has been made on margin development, and on not sales price development. The commodity price development is hard to predict.

The value in use of the cash generating units is determined based on the budget 2016 and the medium term plans to 2020. For the period after 2020 a growth rate equal to the forecasted long-term inflation rate is used, as is common practice in the market.

2015
For the 2015 goodwill impairment test, the recoverable amount of the different cash generating units was based on fair value less costs of disposal, estimated using an earnings multiplier model. The earnings multiples are based on a mix of trading multiples of peer companies, analysts’ multiples and transaction multiples. The Group has estimated the recoverable amount to be the midpoint of the recoverable amounts calculated from using the different earnings multiples. The fair value measurement was categorised as a Level 2 fair value based on the inputs in the valuation technique used. Given the similarity of the different cash generating units (CGUs), the Group has used the same earnings multipliers in determining the fair value less costs of disposal of the different CGUs.

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

In order to determine an EBITDA on which earnings multiples can be applied, EBITDA is normalized for incidental items. The developments of EBITDA has been estimated, taking into account past experiences, adjusted as follows:

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

Earning multiples used in estimating the fair value in 2015 were 7.1x consistent for all cash generating units.

Result of the goodwill impairment test and sensitivity analysis

The result of the goodwill impairment test of the cash-generating units shows that the recoverable amount exceeds the carrying amount of the cash generating units, and no impairment was required (2015: ditto). In these cases a reasonable adjustment of the assumptions did not result in recoverable amounts below the carrying amounts of these cash generating units (2015: ditto).

(ii) Impairment on intangible assets other than goodwill

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

2.2.5.3 19. Investment property

A. Reconciliation of carrying amount

Investment property comprises a number of Industrial properties that are no longer in use for the Group's feed activities and will be disposed in the future. In 2016 there were no material changes occurred in the composition and size of investment property.

At the end of 2015 the land site Oss in the Netherlands has been reclassified from investment property to asset held for sale as management had initiated a plan to sell the respective site and expected that the site would be sold within twelve months after balance sheet date. In the first half-year of 2016, the land site Oss was sold for €5.6 million resulting in a gain of €0.9 million that has been recognised as other operating income in the statement of profit or loss, see Note 10.

B. Fair value information

The fair value of investment property was determined by external, independent property valuators, having appropriate recognised professional qualifications and experience, and taking into account sales prices which have currently been agreed upon.

The fair value measurement for investment properties was €2.1 million (31 December 2015: €2.0 million) and has been categorised as a Level 3 fair value based on the information derived from market transactions.

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

2.2.5.4 20. Equity-accounted investees

2.2.5.4.1

Joint venture

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

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

Corporate income taxes on the results of HaBeMa are settled with the tax authorities by ForFarmers Langförden, Germany (indirect shareholder). The results of HaBeMa are accounted for based on the equity method and are presented net of tax in the consolidated statement of profit and loss. These corporate income tax charges are deducted from the share of profit of equity-accounted investees for an amount of €889 thousand (2015: €1,053 thousand). Trade taxes (Gewerbesteuer) applicable to HaBeMa are borne by the entity itself.

2.2.5.4.2

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

2.2.5.5 21. Trade and other receivables

2.2.5.5.1

The non-current trade and other receivables consist of:

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

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

Information about the Group’s exposure to credit and market risks, and impairment losses for trade and other receivables, is included in Note 31 (Financial Instruments).

2.2.5.6 22. Inventories

The decline in inventories is mainly caused by a decrease in the average price of raw materials and the fact that as per 2016 part of the grain intake from customers is outsourced to third parties.

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

In 2016, an amount of  €35 thousand  was written off on inventories (2015: €20 thousand).

For important purchase commitments reference is made to the explanation of the commitments and contingencies under Note 36.
 

2.2.5.7 23. Biological Assets

A. Reconciliation of carrying amount

As at balance sheet date the poultry livestock comprises of 1,144,592 animals (2015: 1,494,846 animals) with a value of €5.1 million (2015: €6.1 million). The poultry livestock relate to hens and a number of roosters, reared to an age ranging between 16 and 20 weeks, and then are sold to hatcheries. The full biological asset balance is a current balance.

B. Measurement of fair values

Fair value hierarchy

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

Level 3 fair values

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

Valuation techniques and significant unobservable inputs

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

C. Risk management of biological assets

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

Regulatory and environmental risks

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

Supply and demand risk

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

Agricultural risk

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

2.2.5.8 24. Cash and cash equivalents

The outstanding deposits are saving accounts which can be withdrawn immediately without cost. As such the Group considered these to be part of cash and cash equivalents.

The cash and cash equivalents are at the free disposal of the Group. The increase of the cash and cash equivalents is mainly explained by the realised EBITDA and movements in working capital, partly compensated by acquisitions, capex and paid dividend.

2.2.5.9 25. Assets held for sale

At the end of 2015 the land site Oss in the Netherlands has been reclassified from investment property to asset held for sale as the Executive Committee had initiated a plan to sell the respective site and expected that the site would be sold within twelve months after balance sheet date. In 2016, the land site Oss was sold for €5.6 million. Due to €0.1 million disposal costs this results in a gain of €0.9 million that has been recognised as other operating income in the statement of profit or loss, see Note 10.

2.2.6 Equity and liabilities

2.2.6.1 26. Equity

A. Share capital and share premium

On 15 April 2016, it was resolved to amend the Articles of Association of the Company, to change the legal form of the Company into a public limited company, and the par value of the shares was reduced from €1.00 to €0.01 per share with an effective date per 23 May 2016. As at 31 December 2016, the share capital consists of 106,261,040 ordinary shares and 1 priority share. At balance sheet date the shares were issued and fully paid up.

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

(i) Ordinary shares

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

(ii) Priority share

The priority share is held by Coöperatie FromFarmers U.A. Given that Coöperatie FromFarmers U.A., on the latest reference date of 1 January 2017, could exercise the voting right for more than fifty per cent (50%) of votes to be cast on the total of ordinary shares on the shares it holds and/or could give voting instructions with regard to the shares held by the Trust Office Foundation, Coöperatie FromFarmers U.A. as priority share holder:
(i)        has a recommendation right for four of the six members of the Supervisory Board;

(ii)       may appoint a member of the Supervisory Board as Chairman after consultation with the Supervisory Board;

(iii)     has an approval right as regards the decisions of the Executive Board regarding:

1. moving the Company’s head office outside the east of the Netherlands (Gelderland and Overijssel);
2. an important change in the identity of nature of the Company or its enterprise as a result of (1) transfer of the enterprise or practically all of the enterprise to a third party or (2) entering into or breaking off a long-term partnership of the Company or a subsidiary thereof with another legal entity or company, or as fully liable partner in a limited partnership or general partnership, if such partnership or its termination represents a fundamental change to the Company;
3. taking or disposing of a participating interest in the capital of a company to a value of at least a third of the amount of the Company’s equity according to the balance sheet with explanatory notes or, in the event the Company draws up consolidated balance sheets, according to the consolidated balance sheet with explanatory notes, according to the most recently adopted annual accounts of the Company, or any of its subsidiaries;
4. changes to the Company’s articles of association;
5. affecting a merger or division.

Please refer to the Corporate Governance Statement for the conditions for holding the priority share and the special control rights associated thereto if that voting right and/or voting instruction can be exercised or given for 50% or less.

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

B. Nature and purpose of reserves

(i) Treasury share reserve

The reserve for the Company’s treasury shares comprises the cost of the Company’s (depositary receipts) shares held by the Group. The treasury shares are accounted for as a reduction of the equity attributable to the owners of the parent.

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

During the reporting period the Company purchased 400,000 (2015: 620,420) of its (depositary receipts) shares to be able to re-issue the depository receipts in relation to the employee participation plans.  Besides the repurchase of the abovementioned number of shares, the 82,502 treasury shares, which were obtained on behalf of the previous liquidity provider agreement (SNS) which ended on May 24 2016, were used for the purpose of employee participation plans. At 31 December 2016, the Group held 77.580 of the Company’s shares (2015: 399,429).

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

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

(ii) Translation reserve

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations. The decrease in this reserve as at 31 December 2016 is due to the devaluation of the Pound sterling.

(iii) Hedging reserve

The hedging reserve comprises the effective portion of the cumulative net change in the fair value of hedging instruments used in cash flow hedges pending subsequent recognition in profit or loss as the hedged cash flows affect profit or loss.

(iv) Other reserves and retained earnings

Other reserves are held by the Company for statutory purposes.

Retained earnings comprise the balance of accrued profits that have not been distributed to the shareholders.

Pursuant to the Articles of Association a decision to distribute a dividend may be taken if, and to the extent that, equity exceeds the issued share capital plus the statutory reserves.

A reference is made to the section Other information regarding the result appropriation scheme under the Articles of Association.

For a further clarification of the other reserves and retained earnings a reference is made to Note 48 Shareholders’ equity of the Company financial statements.

C. Dividends

The following dividends were declared and paid by the Company for the year:

After the respective reporting date, the following dividends were proposed by the Executive Committee. The dividends have not been recognised as liabilities and there are no tax consequences.

2.2.6.1.1

D. Other comprehensive income accumulated in reserves, net of tax

2.2.6.2 27. Capital Management

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

The Executive Committee has presented the performance measure 'underlying EBITDA' as they monitor this performance measure at a consolidated level, and they believe this measure is relevant to understand the Group’s financial performance. Underlying EBITDA is calculated by adjusting operating profit to exclude the impact of depreciation, amortisation, restructuring cost, impairment losses/reversals related to non-current assets and the gains/losses on sale of investments and assets held for sale.
Underlying EBITDA is not a defined performance measure in IFRS. The Group’s definition of underlying EBITDA may not be comparable with similarly titled performance measures and disclosures by other entities. ForFarmers has earlier issued its guidance for the medium term of an on average annual EDITDA growth in the mid single digits at constant currencies.

2.2.6.2.1