Issuu on Google+

ANNUAL REPORT 2011/2012 | GABRIEL HOLDING A/S

Growth in revenue and operating proďŹ t (EBIT) Record revenue in the FurnMaster business unit ZenXit upholstery material in continued development Continued investment in sales and development


2

Summary

GROWTH IN REVENUE AS EXPECTED, WHILE OPERATING PROFIT (EBIT) EXCEEDED THE GROUP’S EXPECTATIONS FOR THE 2011/2012 FINANCIAL YEAR

Revenue increased by 2% to DKK 247.6 million. The profit before tax was almost unchanged and amounted to DKK 22.3 million against DKK 22.5 million last year. The level of activity increased during the financial year. Further resources were allocated to sales and development-oriented activities in order to ensure that the group will realise its potential on both existing and new markets. SUMMARY ∙ Revenue increased to DKK 247.6 million (DKK 242.6 million). ∙ Operating profit (EBIT) was DKK 21.4 million (DKK 18.2 million). ∙ The operating margin was 8.7% (7.5%). ∙ The profit after tax was DKK 17.8 million (DKK 16.9 million). ∙ Financial items affected the profit negatively with a net charge of DKK 0.6 million against a netincome of DKK 0.8 million last year. ∙ The return on invested capital (ROIC) before tax was 11.2% (9.4%). ∙ The cash flow from operations in the period was DKK 28.0 million (DKK 26.7 million). ∙ Gross expenditure on research and development during the financial year was DKK 7 million, equivalent to 3% of revenue and at the level of the preceding year. ∙ The board of directors recommends an increase in dividend to DKK 4.50 (DKK 4.25) per DKK 20 share to the general meeting. ∙ The expectations for the 2012/13 financial year are encumbered by a high level of uncertainty concerning developments in international economic conditions. The market for contract furniture is judged to be stable to mildly decreasing, but given the group’s outreach activities and constantly increasing initiatives in the field of development and sales activities, management expects organic growth in revenue of the order of 5-10% in the forthcoming 2012/13 financial year and a corresponding increase in the operating profit (EBIT).

The board of directors recommends as follows to the general meeting of Gabriel Holding A/S on 13 December 2012: ∙ Distribution of a dividend of DKK 4.50 per DKK 20 share. ∙ The board of directors proposes approval of the general guidelines for incentive payments to the executive board. ∙ The board of directors proposes re-election of directors Jørgen Kjær Jacobsen, Kaj Taidal and Søren B. Lauritsen, and election of Knud Erik Hansen, director, as the company’s boardmembers elected by the general meeting. ∙ The board of directors proposes re-election of the company’s auditors. ∙ The annual report is recommended for approval by the company’s general meeting at 2:00 p.m. on 13 December 2012 at the company’s office in Aalborg. The official annual report will be published on the company’s website at the latest three weeks before the general meeting, and the printed version of the annual report will be available at the company’s office on 4 December 2012.

Argos 2 and Digital 2 upolstered on Viveros furniture model Hanabi. Designed by Yuki Abe.


Annual report 2011/12

33

FINANCIAL HIGHLIGHTS FOR THE GROUP

Key figures

Unit

2011/12

2010/11

2009/10

2008/09

2007/08

Revenue

DKK million

247.6

242.6

220.4

204.7

279.7

Index

89

87

79

73

100

Of which exports

DKK million

227.9

221.2

200.1

182.8

243.8

Export percentage

%

92

91

91

89

87

Operating profit (EBIT)

DKK million

21.4

18.2

10.4

2.0

23.0

Net financing, etc.

DKK million

0.9

4.3

2.5

-0.3

0.0

Profit before tax

DKK million

22.3

22.5

12.9

1.7

23.0

Tax

DKK million

-4.5

-5.6

-2.7

-0.4

-5.9

Profit after tax

DKK million

17.8

16.9

10.2

1.3

17.1

operating activities

DKK million

28.0

26.6

-8.4

18.5

23.3

investing activities

DKK million

8.7

-3.7

-11.0

-58.5

-35.0

financing activities

DKK million

-10.6

-8.8

4.4

34.5

- 8.4

Cash flows for the year

DKK million

26.1

14.1

-15.0

-5.5

-20.1

Investments in property, plant and equipment

DKK million

2.9

4.5

13.6

24.3

32.1

Depreciation/amortisation and impairment losses

DKK million

6.1

6.2

4.5

4.4

4.9

Equity

DKK million

146.6

136.7

125.8

115.4

122.6

Balance sheet total

DKK million

229.4

228.8

221.7

197.1

154.5

Invested capital

DKK million

189.2

195.2

193.8

163.9

122.7

Number of employees

Number

69

64

63

92

117

Revenue per employee

tDKK

3,589

3,791

3,499

2,225

2,391

Cash flows from:

Financial ratios Operating margin (EBIT margin)

%

8.7

7.5

4.7

1.0

8.2

Return on invested capital (ROIC) before tax

%

11.2

9.4

5.8

1.4

19.5 14.5

Return on invested capital (ROIC) after tax Earnings per share (EPS) Return on equity Solvency ratio

%

9.2

8.7

5.7

0.9

DKK

9.4

8.9

5.4

0.7

9.0

%

12.5

12.8

8.4

1.1

14.5 79.3

%

63.9

59.7

56.7

58.6

Net asset value at year end

DKK

78

72

67

61

64

Market price at year end

DKK

100

80

68

69

118

1.3

1.1

1.0

1.1

1.8

Price/book value Price earnings (PE)

DKK

10.6

9.0

12.6

99

13.1

Price cash flow (PCF)

DKK

6.7

5.7

-

6.5

9.6

Dividends proposed per DKK 20 share

DKK

4.50

4.25

3.25

0.00

4.00

Dividends yield

%

4.5

5.3

4.8

0

3.4

Payout ratio

%

48

48

60

0

49

The basis year applied for the index figures is 2007/08. Earnings per share were calculated in accordance with IAS 33. Other financial ratios are calculated in accordance with the Danish Society of Financial Analysts’ “Recommendations and financial Ratios 2010”.


4

Contents

CONTENTS

Page 02 03 06 16 18 18 18 20 20 22 22 22 23 23 23 26 28 30 34 36 40 44 45 46 50 52 53 54 55 56 57 59 60

Summary Financial highlights for the Group Gabriel profile CSR must never go out of fashion Financial review Sales and earnings for 2011/12 Main points Outlook Sales activities in 2011/12 Product development and innovation in Gabriel Gabriel Asia Pacific ZenXit A/S FurnMaster UAB, Lithuania Scandye UAB, Lithuania Gabriel Erhvervspark Bene brings fabric into the office Management of business risks Gabriel and corporate governance Tailor-made solution for Finnish design firm Corporate Social Responsibility Shareholder information Company details Statement by the Executive Board and the Board of Directors Textiles with exceptional qualities Independent auditors’ report Income statement for the year Statement of comprehensive income for the year Balance sheet at 30.09.2012 – Assets Balance sheet at 30.09.2012 – Liabilities Statement of equity – Group Statement of equity – Parent Company Cash flow statement Notes to the financial statements

Gabriel Holding A/S Company registration no. 58868728 Hjulmagervej 55 ∙ 9000 Aalborg, Denmark Tel.: +45 9630 3100 ∙ Fax: +45 9813 2544 E-mail: mail@gabriel.dk ∙ www.gabriel.dk


Luna 2 upholstered on EFG’s model Gaia.


6

Gabriel’s profile

GABRIEL’S PROFILE

MISSION Innovation and value-adding partnerships are fundamental values of Gabriel’s mission statement. Gabriel is a niche company which, in the entire value chain from concept to furniture user, develops, manufactures and sells upholstery fabrics, components, upholstered surfaces and related products and services. Gabriel develops its services to be used in fields of application where product features, design and logistics have to meet invariable requirements and where quality and environmental management must be documented. VISION ∙ Gabriel is to be the preferred development partner and supplier to selected leading international manufacturers and lead users of upholstered furniture, seats and upholstered surfaces. ∙ Gabriel is to achieve Blue Ocean status through an innovative business concept, patents, licences, exclusivity agreements or similar rights. ∙ Gabriel is to enjoy the status of an attractive workplace and partner company among competent employees and companies.

FINANCIAL TARGETS Gabriel aims at achieving: ∙ A return on invested capital (ROIC) of at least 15% before tax. ∙ An increasing operating margin (EBIT margin). ∙ An average annual increase in earnings per share of minimum 15%. ∙ An average annual increase in revenue of minimum 15%.

GROWTH STRATEGY – GROWING WITH THE LARGEST MARKET PARTICIPANTS Gabriel’s growth is ensured in close co-operation with selected key account customers in a global strategy. Gabriel strives to account for the largest share of the selected key account customers’ purchases of furnishing fabrics, other refined components and related services in the value chain. Gabriel is constantly attentive to potential acquisitions, alliances and business areas to optimise its competitiveness and value adding. Management advised in the annual report for the 2010/11 financial year that the goal of an average growth of 15% p.a. will be achieved via a combination of organic growth and acquisitions. A structured acquisition process was therefore developed in which a pipeline of relevant items will be established.

Sancal’s sofa Float upholstered in Step and Step Melange. Designed by Karim Rashid.


Annual report 2011/12

7

Gabriel’s value-adding model Finance

Operating margin (EBIT-margin)

Earnings growth

Revenue growth Market share Customers

Processes

Innovation and learning

Return on invested capital (ROIC)

Invested capital

Potential Satisfaction Key Account/Distributor/End user

Global Account Management

Logistics

Competent employees/partners

Product and process innovation

Price competitiveness

Knowledge sharing

User groups

Organisational learning Satisfaction employees/partners

Resource optimisation

IT platform development

Strategy understanding

Idea generation and analyses

Gabriel’s history, business concept and vision

FIELDS OF APPLICATION Gabriel’s services are directed towards the following fields of application:

The financial perspective sets out Gabriel’s targeted return on invested capital (ROIC) specifically defined as revenue potential with Gabriel’s selected customers and targeted sales and earnings growth.

∙ Contract (contract furniture and seats for transport vehicles, theatres, concert halls, cinemas, auditoriums, hospitals and care institutions etc.). ∙ Home (furniture for private homes, including beds etc.).

The customer perspective is focused only on customer satisfaction. Both perspectives include achievement goals only and these are supported by leading initiatives in the core and support processes.

CORPORATE MODEL Gabriel’s focus on innovation and value-adding partnerships is ensured via carefully selected and effective management systems and core processes and a high level of expertise. The basis for Gabriel’s value-adding model is the use of the following Balanced Scorecard Model (applied since 2003) and the four perspectives:

The core processes have been selected on the basis of the Group’s strategy, and goals for initiatives results (KPIs) have been set for each of the selected core processes: ∙ ∙ ∙ ∙

Key Account Management (KAM). Logistics. Product and process innovation. Price competitiveness.

The objective of Innovation and Learning is to ensure a continuous focus on innovation and learning among all employees.


8

Gabriel’s profile

Gabriel’s process outline Managerial processes

Core processes

Supporting processes – strategic business units

Strategy process

Employee information

Management follow-up

Resource optimisation

Investor Relations

Shareholders, Analysts, etc.

A and B1 customers

KAM from potential to regular customer relations

Product and process innovation – from conception to product ready for sale/new process

A Customers

All customers

Logistics from customer order to product supplied

Price competitiveness lowest cost

Suppliers

KAM-Master

SampleMaster

DesignMaster

FurnMaster

QEP-Master

LogisticsMaster

InnovationMaster

MarketingMaster

TransportMaster

FinanceMaster

Gabriel Asia Pacific

Gabriel Erhvervspark

HR-Master

ProjectMaster

Technology and Facilities

GABRIEL’S PROCESS OUTLINE – STRATEGIC BUSINESS UNITS Gabriel’s business model requires a process-oriented approach introduced in the organisation over several years. The increasingly important strategic business units (Masters) with their own visions, targets, strategies and budgets carry out some of the supporting processes. The strategic business units are run as independent profit centres with their own business concepts, visions, targets, strategies, action plans and budgets. Intra-unit settlement takes place on an arm’s length basis and in competition with external suppliers. The individual profit centre is entitled, and under an obligation, to generate earnings growth through external trading in goods and services where relevant. In addition, the individual business units are expected to buy services at the most competitive prices – both from intra-Group and extra-Group sources.

FurnMaster (established in 2003/04) offers subsupplies in the form of logistics solutions, cutting, sewing, upholstering and mounting of furniture and screens for Gabriel’s key account customers. FurnMaster’s services are deemed central to Gabriel’s core business and in 2011/12 they again provided an increasing positive contribution to the Group’s operating profit, comprising over 10% of the Group’s revenue. The business unit holds major growth potential, which is brought to life through the strategy “Fabrics in action” and strengthened via the upholstery unit FurnMaster UAB. FurnMaster UAB (established 2012) is a competitive upholstery unit whose object is to support the Group’s strategy “Fabrics in action” via production services within sewing and upholstering of components and completed furniture.

The strategic business units are to: ∙ deliver future growth through new channels without compromising the overall strategy in the core processes ∙ ensure a progressively increasing return on invested capital ∙ reduce dependency on overheads in the core business ∙ ensure competitive power throughout the entire value chain from conception to user.

Gabriel Asia Pacific (formerly Gabriel China) (established 2003), which comprises Gabriel’s representative office and the trading company Gabriel (Tianjin) International Trading Co. Ltd., sources products and services to Gabriel in Europe and develops and sells products and services to leading furniture manufacturers in Asia and the USA. In 2011/12, both sourcing and sales were strongly increasing, and Gabriel Asia Pacific enjoyed growth both through sales to leading local manufacturers on the Chinese market and to other Asian and North American markets.


Annual report 2011/12

SampleMaster (established in 2000/01) develops and manufactures samples and sales literature as well as valued-adding solutions in the form of effective and attractive sales tools. The business unit’s revenue developed positively and is making a positive contribution to the Group’s profit. The business unit is expected to be able to generate growth in both revenue and profit in 2012/13. Gabriel Erhvervspark – Gabriel Ejendomme A/S (established 2011), comprising the Group’s building complex in the centre of Aalborg, develops and lets office premises to internal and external tenants. The building was awarded a prize in 2010 by the Committee on prize awards for buildings in Aalborg “for its respectful refurbishment of old factory buildings, which underpins Aalborg’s transformation from industrial city to a knowledge-based city”. Reference is made to the financial review on page 23. InnovationMaster (established 2006/07) continued its work in 2011/12 on development projects offering major but uncertain earnings potential. The projects are focused on the development of technical textiles and related products expected to be used primarily within Gabriel’s existing value chain.

9

At the beginning of the 2012/13 financial year, DesignMaster is, in addition to internally generated assignments, engaged in a number of assignments for external Gabriel Key Accounts. KAM-Master (established in 2006/07) co-ordinates the cooperation between the individual Key Account’s organisation and Gabriel’s business units to foster maximum long-term value for each Key Account and KAM-Master. In 2011/12, Gabriel’s Key Account Managers are organised in six individual business units in charge of designated customer activities within their area. The KAM unit was expanded throughout the 2011/12 financial year by the appointment of additional staff in Denmark, Norway, Sweden and Germany, and additional appointments are expected in 2012/13. The workforce is a part of the continuing development of the Group’s focused initiatives towards selected leading manufacturers. LogisticsMaster (established 2006/07), handles the flow of goods and inventory management throughout the entire value chain from raw material to textile to product supplied, and represents the primary supporting function in one of Gabriel’s core processes, logistics.

In addition to product-oriented innovation processes, InnovationMaster masterminded a large number of internal process innovations in 2011/12 in order to boost Gabriel’s general competitiveness.

The objective of the core process, logistics, is to ensure a strong delivery performance to all Gabriel’s customers. The reliability of supply throughout the 2011/12 financial year was at a high level, judged to be at the absolute top of the market.

DesignMaster (established 2006/07) is engaged in design-based activities and advisory services revolving around customer and end user behaviour. Such activities are facilitated by strong market insight and targeted research activities with a “time-to-market” horizon of 3-18 months.

TransportMaster (established 2009/10) is responsible for transport services and optimum freight solutions to all Gabriel’s business units and customers. TransportMaster also plays an important role in the Group’s operation and development of established warehouse units and in the establishment of new distribution centres.

The projects are carried out in Gabriel’s existing value chain and set out to realise the potential of upholstered textiles, techniques and related products. The business unit regularly engages in activities relying on core competences such as textile design and finishing, upholstery design and technologies. In addition, design and production of complete furniture components are included in the solutions offered to customers.

FinanceMaster (established 2006/07) is responsible for financial management and regular financial reporting. FinanceMaster participates actively in pinpointing value adding throughout the entire Group and is in charge of financial and risk management. The Group’s IT operations and development were placed under FinanceMaster in 2011/12 with the object of basing the Group’s IT development on continuous business development and optimisation.

Based on the concept “Fabrics in action” and through targeted communication of Gabriel’s innovation and development strategies, the business unit has developed a close relationship with designers, development teams and decision-makers of designated furniture manufacturers.

MarketingMaster (established 2006/07) is a full-service advertising agency offering services to Gabriel’s business units and customers.


10

Gabriel’s profile

”One Stop Gabriel” – innovation in the value chain

Conception

Design/ development

Raw material

Yarn

Greige piece

Dyeing/ Finishing

Cutting/ sewing

Piece goods/ coupon

Fabric cut/cover sewn

Upholstery material Upholstery

QEP-Master, Quality, Environment and Production (established 2006/07) supports Gabriel’s business development by optimising quality and environmental matters in connection with products, services and processes. QEP-Master is responsible for the quality of products and services and is accountable to its customers for all quality-related and environmental decisions in the supply chain. QEP offers competences within quality and environmental management, product labelling, working environment and production. Technology and facilities (established 2006/07) is in charge of the repair and maintenance of textile machines, including forging, machining and electricity as well as the refurbishment of buildings. This service is offered to all Gabriel’s business units and partners.

MANAGEMENT SYSTEMS Gabriel has been DS/ISO 9001 and EMAS/ISO 14001 certified since 1991 and 1996 respectively. Gabriel’s Chinese subsidiary Gabriel “Tianjin” International Trading Co. Ltd. gained DS/ISO 9001 certification in 2006. In addition to the Balanced Score Card model implemented in 2002, Gabriel has taken the following important initiatives on which further information is available on Gabriel’s website ∙ EU Flower ecolabel carried by the company’s main products since 2003 ∙ Development – Blue Ocean Strategy since 2005. ∙ Innovation Cup participant in 2006, 2007, 2009, 2010 and 2011. ∙ Division of Gabriel into independent Master units from 2006/07. ∙ First company in Denmark with C2C certification since November 2010.

Partly fitted fabric

Furniture part

Fitting

Finished furniture

Gabriel Contract

Key Accounts

Distributors

Gabriel Home

Other Accounts

Furniture users

VALUE CHAIN Gabriel’s value chain covers all steps from concept to furniture user, and the Group supplies products and services from all stages in the value chain. Gabriel terms the complete value chain perspective “One Stop Gabriel”. The One Stop model’s intention is that customers can ensure development and delivery of products and services in all stages of the value chain via a single contact person. INNOVATION Under Gabriel’s Blue Ocean strategy, new products and services should offer exceptional functional or emotionally utility value to the user. Close interplay with Gabriel’s network of customers, users, suppliers, advisers and qualified employees ensures the evaluation of new concepts and business potential. Gabriel’s goal is to ensure that at least 30% of revenue derives from products and services launched within the past five years. In 2011/12, these products and services amounted to 27%. The number of products released serves as an “early warner”. With eight new products realised in 2011/12, Gabriel met its target for the financial year. The products were well received by the market, and they are expected to contribute to the Group’s growth as early as 2012/13. HUMAN RESOURCES Gabriel must be able to attract and retain staff with the right skills and knowledge required to create innovation and growth as an international company. Gabriel gives priority to everyone’s using, developing and sharing knowledge and skills. All employees are familiarised with Gabriel’s vision, strategy, targets and activity plans and are regularly updated on their work situation as part of appraisal reviews and staff meetings. Accordingly, targets and areas of responsibility have been clearly defined for all employees for the purpose of stimulating professional and personal development.


PERCENTAGE OF REVENUE GENERATED BY NEW PRODUCTS AND NUMBER OF PRODUCTS LAUNCHED Percentage of revenue Number of products launched

30 25 20 15 10 5 0 Real. 07/08

Real. 08/09

Real. 09/10

Real. 10/11

Real. 11/12

Skandiform’s Concorde Easy-chair upholstered in Luna Fleur 2. Designed by Mattias Ljunggren.


Inspiration in DesignMaster.


Annual report 2011/12

13

Dynamobel’s Slat16 office chair upholstered in Runner. Designed by Dynamobel Design Team.

EMPLOYEE SATISFACTION Gabriel makes an effort to be an attractive workplace for all employees. Employee satisfaction measurements were therefore again made in 2012 for both Danish and foreign employees. The average satisfaction measured on a scale from 1-5 was 4.1.

Gabriel’s services and products must be in line with the requirements and expectations of its customers. Production and distribution are to promote a regular reduction in resources and in environmentally harmful emissions. Gabriel enjoys a status as a qualityand environmentally conscious company rendered visible by its certifications under the ISO 9001, ISO 14001 and EMAS schemes.

BOARD MEMBERS ELECTED BY THE EMPLOYEES In accordance with the Danish Executive Order on Employee representation in public limited companies, employee representatives and alternates for service on the Board of Directors are elected every fourth year. Currently two employee representatives and two alternates are elected.

Gabriel’s customers should be able to choose an environmentally sound and healthy product, for which purpose the Company applies the flower ecolabel and the Oeko-Tex label. These schemes enjoy a high level of trust from consumers, and awareness of the schemes is also increasing.

CORPORATE SOCIAL RESPONSIBILITY Corporate social responsibility is an integrated element in the business of the Group. To Gabriel, CSR means that the company takes responsibility for adding value which contributes, directly or indirectly, to social developments. The Company accedes to the principles laid down in the UN’s Global Compact.

FURTHER INFORMATION For further information on environmental considerations and CSR, please see page 36 and www.gabriel.dk. The environmental report can also be downloaded from the company’s website in January 2013.


14

GABRIEL’S GREEN VALUES A targeted environmental strategy yields competitive advantages via exceptional value adding for customers, users and society, now and in the future. Gabriel has shown that it is possible to deliver products which are both environmentally optimal and competitive.


15


16

CSR MUST NEVER GO OUT OF FASHION CSR is central to the way we run Gabriel as a company and is a permanent point on the strategic agenda. CSR at Gabriel is no mere fashion phenomenon but a strategic driver on a par with product development, sales and other activities.


Annual report 2011/12

17

Product practice at Gabriel.

Gabriel’s continuous work with CSR ensures that: ∙ we deliver healthy, quality products, ∙ we make products with maximum consideration for the environment and resource consumption, ∙ we ensure a healthy working environment everywhere we produce, and with our customers, ∙ we can document the relationship between words and actions – at a minimum, we meet the requirements under the UN Global Compact. Our CSR activities make a positive contribution to all areas in our company because this creates healthy and valuable business ethics which are visible at all levels in the supply chain. We do not believe that it can pay to compromise on, for example, working conditions, the environment or animal welfare, because all these areas have an influence on the company’s health and they provide the necessary security for our customers, explains CEO Anders Hedegaard Petersen.

THERE’S A PERSON BEHIND THE PROCESS Here at Gabriel we put a fingerprint on society all the way from raw materials to the finished upholstered product, and we therefore share responsibility at all stages, both locally and globally. Our approach to textile production therefore always has CSR and value adding in mind. For example, we’re strongly focused on animal welfare for the 100,000 sheep which supply wool for Gabriel’s textiles; we ensure that our dye works in Lithuania operates with safe technology and

environmentally correct machinery; we require that our Chinese suppliers comply with western CSR standards, and that there is no corruption at any time, or child labour or breaches of human rights at any point throughout the process. – We may never lose consciousness of the person behind the processes in the supply chain. We must always assume responsibility here and ensure orderly conditions. We therefore also make heavy demands on our partners and advisers, says Business Manager for QEP (Quality, Environment and Production) Kurt Nedergaard.

EXCEPTIONAL VALUE FOR CUSTOMERS AND USERS Our continuous serious work with CSR ensures that we as a company can vouch for the conditions under which our products are made. For our customers, our work ensures that their furniture products are easier to document and attract no negative attention with respect to CSR. We work globally with customers who specify the most stringent requirements with respect to documentation for our products. This also applies to social impacts, and we believe that our CSR activities provide exceptional assurance, and therewith also value here.


Financial review

18

FINANCIAL REVIEW

SALES AND EARNINGS 2011/12 The Group achieved revenue of DKK 247.6 million in the 2011/12 financial year against DKK 242.6 million in the previous year, an increase of 2%. The revenue increase for Q4 was 7%. The operating profit (EBIT) was DKK 21.4 million (DKK 18.2 million). The operating margin improved to 8.7% (7.5%). The profit before tax was DKK 22.3 million (DKK 22.5 million). The share of the profit after tax from the associate, Scandye UAB, was DKK 1.4 million against DKK 3.4 million last year. The profit after tax was DKK 17.8 million (DKK 16.9 million). Financial income and expenses had a negative effect on the profit, with net costs of DKK 0.6 million against a net income of DKK 0.8 million last year. Return on invested capital (ROIC) before tax was 11.2% (9.4%). Cash flows from operating activities in the period were DKK 28.0 million. (DKK 26.6 million).

Management expressed expectations of revenue and a primary operating profit (EBIT) on a par with those for 2010/11 in the Q3 report for 2011/12. Profit before tax was expected to be DKK 18-20 million. However, both revenue and earnings exceeded expectations in Q4, and the year’s total operating profit and profit before tax were thus better than expected. Given the current market conditions, management finds the profit for the year satisfactory.

MAIN POINTS Revenue The Group’s revenue increased by 2% to DKK 247.6 million against DKK 242.6 million in the preceding year. Cost of sales – gross profit The Group’s realised gross profit in 2011/12 was 40.5% against 41.9% in 2010/11. The gross profit fell because optimisations, productivity improvements and sales price adjustments were unable to compensate for increases primarily in global wool and polyester raw material prices. Other external costs The Group’s external costs fell by DKK 3.0 million, equivalent to 7%. The fall is primarily attributable to savings in freight and participation in trade fairs, where by comparison, 2010/11 was affected by the Group’s substantial costs for the “Orgatec” fair which is held every second year in Cologne.

CONTRIBUTION MARGIN PER EMPLOYEE Contribution in tDKK

1.800

1.600

1.400

OPERATING PROFIT (EBIT) 1.200

DKK million

1.000

25

800

20

600

15

400

10

200

5

0

0 07/08

08/09

09/10

10/11

11/12

07/08

08/09

09/10

10/11

11/12


Annual report 2011/12

26%

19

30%

Administration

Administration

60% Sales 14%

56% Sales 14%

Development

Development

Distribution of staff costs for the 2011/12 financial year

Staff costs Consolidated staff costs fell by 2% to DKK 35.2 million in 2011/12 against 36.0 million in the preceding year. Staff costs for the financial year were 26% (30%) for administration, 14% (14%) for development and 60% (56%) for sales promotion costs. The increased share of sales costs reflects the fact that the Group’s efficiency gains in administration were used in sales promotion activities to ensure a broadening of potentials in both mature and growth markets. The average number of employees for the financial year was 69 against 64 in 2010/11. The number of employees in the Group at the end of the 2011/12 financial year was 72. Depreciation/amortisation Consolidated depreciation/amortisation was DKK 6.1 million against DKK 6.2 million in the preceding year. Profit/loss from investment in Scandye UAB The profit for the year includes a total share of the result of the investment in Scandye UAB of DKK 1.4 million against DKK 3.4 million last year. The share of results increased from 40% to 49.3% in connection with further acquisition of shares in the Company with effect from June 2012. The profit in the dye works, which was negatively affected by a single major customer’s reduced purchases of piecework dyeing during the year, is considered satisfactory and better than expected. Financial income and expenses Financial income and expenses shows net costs of DKK 0.6 million against net income last year of DKK 0.8 million. This item was

Distribution of staff costs for the 2010/11 financial year

negatively affected by exchange rate losses in 2011/12, the low interest rate and the low interest on the Group’s bond portfolio. Balance sheet total The consolidated balance sheet total is DKK 229.4 million against DKK 228.8 million last year. Inventories The Group’s inventories were DKK 40.5 million against DKK 40.7 million last year. Receivables Receivables totalled DKK 42.9 million against DKK 44.5 million last year. Consolidated trade receivables increased to DKK 32.9 million against DKK 32.6 million on 30 September 2011. The consolidated Lithuanian VAT receivables were reduced from DKK 4.9 million at 30 September 2011 to DKK 3.0 million at 30 September 2012. Financing and capital resources Consolidated cash flows from operating activities in 2011/12 accounted for DKK 28.0 million against DKK 26.6 million in the same period last year. The improvement occurred even though the payment of corporation taxes in 2011/12 reduced liquidity by DKK 8.3 million against a net refund of DKK 3.1 million in 2010/11. Gabriel made total investments of DKK 2.9 million in property, plant and equipment in 2011/12 against DKK 4.5 million in the previous year. The investments primarily concerned a number of minor acquisitions.


20

Financial review

The net balance of liquid holdings at the end of the year was DKK 19.7 million. The Group also has undrawn credit facilities via its bank and a liquidity reserve of DKK 11.9 million invested in Danish mortgage credit bonds. Equity Consolidated equity was DKK 146.6 million at 30 September 2012 against DKK 136.7 million at the same time in the preceding year. Equity thus increased by DKK 9.9 million, DKK 17.8 million of which is attributable to the profit for the year and DKK 0.1 million to other comprehensive income, while DKK 8.0 million in dividends was paid. Dividends The Board of Directors recommends to the general meeting that dividends of DKK 4.50 per share be distributed for 2011/12, equivalent to total dividends of DKK 8.5 million.

OUTLOOK A number of activities to increase growth and potential were carried out in the 2011/12 financial year, thereby creating a better basis for growth. These activities included: 1. The focus for a number of years has been on product development, which was largely done together with strategic customers with global distribution. DKK 7 million, equivalent to 3% of revenue, was invested in 2011/12 alone. 2. The introduction of the upholstery material ZenXit is proceeding as planned. At 1 October 2012, a project manager was appointed with responsibility for the commercial development. 3. The sales force was increased by Key Account Managers in Sweden, Denmark, Norway and Germany. 4. The sales force was increased in China and remains in step with the recruitment which it is possible to implement, and regional sales offices in the country are regularly being added. An acquisition committee on which the Executive Board and the Board of Directors are represented was established at the end of the 2010/11 financial year with a view to achieving growth via acquisitions. The committee’s task is to structure and extend the initiatives for identification and assessment, and to contact targets and intermediaries. The committee added and analysed a number of possibilities during the financial year without implementing or planning specific purchases apart from the increased ownership interest in the dye works Scandye UAB. FurnMaster UAB was established in Lithuania after the end of the financial year. Please see page 23 for further details.

The expectations for the 2012/13 financial year are encumbered by a high level of uncertainty concerning developments in international economic conditions. The market for contract furniture is judged to be stable to mildly decreasing, but given the Group’s outreach activities and constantly increasing initiatives in the field of development and sales activities, management expects organic growth in revenue in the order of 5-10% for the forthcoming 2012/13 financial year and a corresponding increase in operating profit (EBIT).

SALES ACTIVITIES IN 2011/12 The Group’s revenue rose by 2% in the financial year to DKK 247.6 million against DKK 242.6 million in the preceding year. The growth derives from upholstery fabrics for contract furniture and products and services which the Group sells to the same customers but which belong to the next link in the value chain, e.g. cutting, sewing and upholstering of furniture components. A minor portion of the growth in revenue derives from increased rental income from Gabriel Erhvervspark. The FurnMaster business unit experienced continuing positive development throughout the financial year in both revenue and the establishment of new potential. Total export revenue increased by 3% to DKK 227.9 million against DKK 221.2 million last year. The proportion exported increased from 91% to 92%. Sales in Denmark fell by 8% to DKK 19.7 million against DKK 21.5 million last year. The fall in revenue in Denmark is primarily attributable to continued outsourcing by Danish furniture manufacturers and the bankruptcy of a major Danish furniture manufacturer. Gabriel is maintaining its strategy of “growing with the largest”, ensuring targeted efforts towards selected key account customers. Gabriel’s focus on product and process innovation with assistance from several business units is having a positive effect on sales. The sales force was expanded during 2011/12 by the addition of Key Account Managers who will develop the markets in Germany, Sweden, Norway, Denmark and China. Gabriel was represented at Scandinavia’s largest furniture trade fair in Stockholm in February 2012. The fair confirmed to Gabriel that our strategy “Fabrics in action” produces results and contributes to increasing the success rates of a number of Gabriel’s business units.


21

REVENUE DKK million

300

250

200

150

100

50

0 07/08

08/09

09/10

10/11

11/12

Comfort+ upholstered on Ohlab’s “Precious Boxes”. Designed by Paloma Hernaiz and Jaime Oliver. Photographed by José Hevia Furniture module: Decágono


22

Financial review

At NEOCON, North America’s biggest furniture fair, held every year in Chicago, Gabriel noted strong representation of its textiles and textile solutions among a number of market leading manufacturers. The share of the American market increased during the year, and this meant marked growth in sales to the leading American manufacturers. The Group’s most important sales activity, participation in the contract furniture fair “Orgatec” in Cologne, Germany, was held after the end of the financial year. The Group introduced a large number of new textiles and solutions at the fair. The introduction of these new products, which was done in cooperation with leading contract furniture manufacturers, was performed positively, providing an expectation that these products and solutions can help to retain and extend the Group’s position as the preferred partner and supplier.

PRODUCT DEVELOPMENT AND INNOVATION IN GABRIEL Notwithstanding the continued subdued demand, the leading manufacturers of contract furniture are showing a high level of interest in new products and solutions. Development activities among these customers are being intensified, and they include both textiles and services/solutions from the Group’s other business units. Gabriel’s product and process innovation system from concept to upholstered product continued to be a high priority core activity in 2011/12. Gross expenditure on research and development during the financial year was DKK 7 million, equivalent to 3% of revenue. New products and solutions are being developed in coordination with the Group’s most important customers. The coordinated initiatives are helping to increase the accuracy of targeting and the speed of introduction of products, solutions and services launched on the market. The Group’s goal of deriving least 30% of revenue from products which are less than five years old was not met in 2011/12 as the share of revenue from new products was 27%. The share was 31% in 2010/11. The share of revenue from new products among top customers was 35% in 2011/12. This reflects the Group’s focused strategy, where product development and inbound selling are targeted to this very customer group. Product development and innovation take place in all of Gabriel’s strategic business units (Masters), which collectively support the core process “product and process innovation”. The individual units’ unique market potentials are identified, developed and activated, while the value of a joint coordinated effort is utilised and targeted towards the market’s leading furniture manufacturers.

The DesignMaster business unit performs ongoing design-based development and provides consultancy activities on the basis of customers’ and end users’ needs and wishes. This is done on the basis of a fundamental understanding of the market and targeted research based on a “time-to-market” of 3-18 months. On the basis of the theme “Fabrics in action” and through targeted communication of Gabriel’s innovation and development strategy, close relationships have been established with selected furniture manufacturers’ designers, development teams and decision makers. A number of projects were performed, and new ones initiated, on this basis. Eight new products were launched during the financial year, meeting the goal for the year. Please see www.gabriel.dk for product news and cases.

GABRIEL ASIA PACIFIC (FORMERLY GABRIEL CHINA) Sales development in the 2011/12 financial year continued to be positive, and the unit’s performance on profit growth was satisfactory. Gabriel Asia Pacific is an important part of the total strategy of being able to service global contract furniture manufacturers and distributors and to ensure the production of innovative and competitive products for all markets. New products were developed and regular deliveries established to new strategic customers in the USA and Asia. New development projects are constantly in the pipeline and local efforts are being intensified. The Asian market is generally price-sensitive, but the leading players in the market are increasingly showing an interest in Gabriel Asia Pacific, which occupies the niche for highly improved furniture fabrics and related textile products, where there are indispensible requirements regarding design, quality, and products with documentation for environmental and energy-related sustainability, competitive prices and short delivery times.

ZENXIT A/S The development project ZenXit, concerning an environmentally friendly upholstery material, was transferred to Gabriel Innovation A/S from the sister company Gabriel A/S during the 2011/12 financial year. Gabriel Innovation A/S also changed its name to ZenXit A/S. On 1 October 2012, a project manager was employed both to ensure the continued development of the material’s potential and


Annual report 2011/12

23

Nobel 2 upholstered on Vidon-Gerlier’s “Hommage (à Jean Prouvé)”. Designed by Céline Lhuillier.

to bring the product on to the market in close collaboration with Gabriel’s sales organisation. The Company had no activities until the development project was taken over. The ZenXit product is not included in the sales expectations for 2012/13, and it is expected that the development will incur special costs for the forthcoming product adaptation and introduction in this and future financial years.

UPHOLSTERY COMPANY FURNMASTER UAB, LITHUANIA The operating company Gabriel A/S established the subsidiary FurnMaster UAB in Lithuania after the end of the financial year. The ownership interest in the company is 90%. FurnMaster UAB was established as a production unit to support the Group’s continuing strategic initiatives to promote the use of upholstery fabric.

DYE WORKS SCANDYE UAB, LITHUANIA The share of the profit (after tax) from the associate Scandye UAB was DKK 1.4 million against DKK 3.4 million last year. The decrease in profit is attributable to a reduction in activity by a single major customer. The ownership interest in the company was increased to 49.3% in the financial year by a pro rata takeover of a former shareholder’s ownership interest. Increases in both revenue and profit are expected in 2012/13.

GABRIEL ERHVERVSPARK – GABRIEL EJENDOMME A/S The valuation of the property complex in the consolidated financial statements was again stated at cost less cumulative depreciations, corresponding to a carrying amount of DKK 68.0 million at 30 September 2012. The Group’s building complex in Aalborg, which has been transferred to the subsidiary Gabriel Ejendomme A/S, was stated at calculated fair value of DKK 82.5 million, which is equivalent to additional value of DKK 14.5 million on the carrying amount recognised in the consolidated financial statements at 30 September 2012. Profit after tax for 2011/12 for Gabriel Ejendomme A/S was DKK 1.9 million. New leases with external tenants were entered into during the financial year, and slightly increasing revenue and earnings are expected in 2012/13. At 30 September 2012, Gabriel Ejendomme A/S had leased out approximately 6,000 m2, equivalent to almost full rental of the renovated building. Management regularly assesses how the property’s value and income can be developed and optimised for the benefit of both tenants and owners. Gabriel Erhvervspark is well established in its role as one of several meeting places in Aalborg for business and university people. This was facilitated partly on initiatives by external business and educational institutions and partly by Gabriel and other tenants of Gabriel Erhvervspark.


24

GABRIEL IS GROWING WITH THE LARGEST Gabriel’s growth strategy of growing with the largest is working. Gabriel’s goal is to achieve the greatest possible share of the selected customers’ purchases of furniture fabrics, processed components and services throughout the value chain. A targeted initiative that works and year by year consolidates Gabriel’s position as the industry’s preferred development partner and supplier.


25

Runner upholstered on Wilkhahn’s ON office chair. Designed by Wiege Exhibited at Orgatec 2012


26

BENE BRINGS FABRIC INTO THE OFFICE Space, shapes and multifunctional interactive areas are important concepts in PARCS, Bene’s innovative popular office furniture concept. Many offices around the world have now been transformed by PARCS’ modern functional design with its practical approach to interactive office areas.


Annual report 2011/12

27

Europost 2 upholstered on Bene’s PearsonLloyd, Parcs, Toguna low, American Diner mid-high and Idea wall with table and club chairs.

The Austrian furniture manufacturer Bene introduced its innovative office furniture concept PARCS in 2009, and it was an immediate hit. PARCS is designed for the central areas in our modern offices, where the employees work together on various activities away from their respective workplaces. Wolfgang Neubert from Bene AG’s Executive Board Sales and Marketing explains: – We wanted to create areas for informal communication and cooperation which could counterbalance the traditional workplaces. Our PARCS solutions take account of productivity as well as the company’s employees’ wellbeing by enabling different working methods such as brainstorming, meetings or reading.

RAISING THE BAR FOR FABRICS – When Bene expanded its range to include PARCS, there was a need for a big range of standard fabrics – and lots of them, given the size and design of the furniture. Today, one of the company’s best selling PARCS fabrics is Europost, which is designed and made by Gabriel. - We chose Europost because it offers a combination of qualities which meet our criteria for the PARCS line of furniture. Of course there were specific requirements regarding quality, design, colour palette and price level, but qualities such as being fire-resistant, easy to clean and sustainable were also important factors in the choice. It’s not without reason that Europost is one of the more popular PARCS fabrics – it’s perfect for comfortable office furniture, explains Bene’s product manager Nicole Schemerl-Streben.

Europost 2 is a classic textile which highlights the furniture’s design. It has a homogeneous surface without visible direction, and the design’s felt-like character gives the surface a uniform and clean expression. The wool’s sheen and quality give the colours life and depth. Europost carries both the EU Ecolabel and the Oeko-Tex 100 label – a guarantee of health and sustainability. Bene recently introduced two new fabrics in the PARCS range, Step and Step Melange, also from Gabriel. The expectations are high: – We expect that the Step and Step Melange fabrics will become very popular, especially because of the many design possibilities offered by the melange effect, but also because of the colours, the fire-retardant properties and the price level, says Schemerl-Streben.

CREATING TOMORROW’S SOLUTIONS PARCS has conformed Bene’s growing reputation as a design-controlled organisation which sets the agenda and raises the bar for innovative furniture solutions for office environments. Bene and Gabriel expect to continue their partnership on future furniture projects: – It’s a delight to work with Bene because it’s a recognised brand with outstanding products. Our partnership has played, and will continue to play, an important role in the creation of tomorrow’s solutions for the furniture sector, concludes Anders H. Petersen, Gabriel’s CEO.


28

Management of business risks

MANAGEMENT OF BUSINESS RISKS

The nature of Gabriel’s business area includes a number of commercial and financial risks of importance to the Group’s future. The management makes an effort to counter and minimise any risks manageable by the Company’s own actions. Gabriel’s policy is also not to engage in active speculation in financial instruments. Risk management only covers risks arising directly from the Group’s operations, investments and financing.

THE COMPETITIVE SITUATION Gabriel is a niche company which is primarily concerned with customers and areas where product features, design and logistics have to meet invariable requirements and where quality and environmental management must be documented. Gabriel is a well-known global brand within its niche. Gabriel’s activities are constantly directed towards developing and consolidating a position as the preferred supplier of upholstery fabrics and associated components to strategically selected international contract furniture manufacturers. This is done via a consistent development of Blue Ocean products and services within the value chain.

RAW MATERIALS The prices of Gabriel’s primary raw materials, wool and polyester, have fluctuated greatly in recent years. On the basis of projected future production, Gabriel strives to meet its requirements by entering into short-term or long-term supply agreements with the Group’s primary suppliers.

CURRENCY RISKS The Group hedges currency exposure considering projected future cash flows and projected future exchange rate movements. Sales to customers in Europe are generally invoiced in the customer’s currency. Other countries are mainly invoiced in euros. Currency risks on the income side are thus limited as they are very largely invoiced in euros. The company’s most important purchases are settled in Danish kroner, euros or US dollars. To ensure an optimum interest level and to match financing in euros, the Group has raised a mortgage loan and entered into lease agreements denominated in euros. Bank financing is in the form of open credits denominated in euros or Danish kroner. See note 23 for a more detailed description of currency risks.

The company constantly strives to strengthen its competitiveness via ongoing development of the business model so that Gabriel is in the best possible position to satisfy the market’s requirements and structural development. Outsourcing of support processes, which are optimally located in low wage countries, and further focusing on the selected core processes, have consolidated Gabriel’s position as a primary supplier and business partner.

CUSTOMERS AND MARKETS Gabriel targets its product development at selected key account customers. 92% of the company’s revenue derives from exports, mainly to European countries, but increasingly also to overseas countries such as the USA and China.

PRODUCTS Relying on its business model, Gabriel aims at diversifying risks by offering new product solutions throughout a large part of the value chain. This takes place in co-operation with strategically designated key account customers by developing furniture fabrics, parts and services for future use.

INTEREST RATE RISKS The Group’s bank loans are open floating-rate business credits, while the mortgage loan is an adjustable-rate loan denominated in euros and subject to annual adjustment. The bond portfolio consists primarily of short-dated bonds denominated in Danish kroner, adjusting interest to the general societal interest level. The Group’s financial receivables carry a fixed interest rate during their entire life as laid down by contract. See note 23 for a more detailed description of interest rate risks.

CREDIT RISKS In line with Group credit risk policy, all major customers and other business partners are regularly credit rated. Credit risk management is based on internal credit lines for customers. Since the financial crisis, the Group has intensified its focus on the approval of customer credit lines as well as on the management and monitoring of customers. Group trade receivables are distributed on numerous customers, countries and markets, ensuring a high degree of risk diversification. Gabriel has been provided with collateral in productive equipment leased out to business partners.


Annual report 2011/12

29

Fame and Argos upholstered on Normann Copenhagen’s Sumo Pouf. Designed by Simon Legald.

CAPITAL RESOURCES The Group regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against the higher degree of uncertainty surrounding external financing. In 2009, the Group chose to raise a mortgage loan to finance a construction project and to strengthen the Group’s cash resources. A portion of the proceeds, equivalent to DKK 11.9 million, is still placed in Danish mortgage credit bonds. Gabriel had no net bank debt at the end of 2011/12 and an unused line of credit in the Group’s bank. On this basis, the Group is deemed to have sufficient liquidity to finance future operations and investments.

PLACES OF BUSINESS The Group performs its activities in China and other places. The performance of activities in China involves risks which are not normally present in traditional European markets. The tax and other legislation is characterised by frequent changes which can result in risks and other problems. The Group is attempting to minimise these risks via regular contact with its partners and use of local advisers.

INSURANCE Gabriel’s policy is to take out insurance against risks of material importance to the financial position of the Group. Insurance has been taken out against operating losses and product liability. The company has also taken out all risks insurance covering the Group’s property, plant and equipment and inventories in Denmark and abroad.

ENVIRONMENTAL RISKS Certifications for the Environmental Management Standard ISO 14001, the Eco Management and Audit Scheme (EMAS), the EU Ecolabel scheme, Oeko-Tex and the Quality Management Standard ISO 9001 ensure that neither the activities nor the company’s products are associated with any significant environmental risks. The objectives of Gabriel’s environmental policy are to prevent spillage/accidents and to ensure that the company’s products do not contain any substances which are hazardous to health.

IT RISKS The Group has chosen to outsource the operation of its IT platform to external service partners, ensuring regular updating of security systems and minimising the risk of a major operational break-down.

TRADE RISKS The majority of raw materials, semi-manufactured products and finished goods used by Gabriel are available from alternative suppliers in the event of non-delivery by the usual suppliers.

CONTINGENCY PLANS In accordance with its quality and environmental management systems, Gabriel in Aalborg continuously develops its contingency plans and communicates these to its staff. Gabriel holds regular first-aid and fire-fighting courses, and all areas have prepared an operational contingency plan in case of spillage/accidents.


30

Gabriel and corporate governance

GABRIEL AND CORPORATE GOVERNANCE

Gabriel’s strategy and planned activities are implemented and performed to create added value for customers, employees, shareholders and other stakeholders.

THE STOCK EXCHANGE’S RECOMMENDATIONS ON CORPORATE GOVERNANCE NASDAQ OMX Copenhagen A/S has adopted a set of corporate governance recommendations which were most recently revised in 2011. The recommendations on corporate governance can be obtained from the Committee for Corporate Governance’s website www.corporategovernance.dk. Companies must follow these recommendations and in particular provide explanations where their practice deviates from the recommendations. The supreme governing body has considered their position on the recommendations, with which Gabriel essentially complies. The supreme governing body has adopted a different practice in the following areas: 1. Composition and organisation of the supreme governing body Gabriel does not disclose the required and actual competencies of its supreme governing body. Gabriel does not comply with the recommendation on independence, as none of the Company’s board members elected by the annual general meeting is considered independent. Gabriel attaches importance to the individual board member’s capacity, competencies and contribution to Group management. Accordingly, the Company has not defined an age limit for its board members. Gabriel does not disclose the size of shareholdings etc. in the Gabriel Group held by individual members of the supreme governing body. Due to the size and complexity of Gabriel, the supreme governing body has chosen not to set up any other board committees than the audit committee. 2. Management’s remuneration Total remuneration of the Board of Directors and the Executive Board is disclosed in the annual report. The annual report does not specify any individual remuneration as this is personal information of limited relevance to the shareholders. Remuneration of the supreme governing body and the Executive Board is effected on market terms for a listed company of this size. Given the size of the Company, the Board of Directors does not find it relevant to prepare a remuneration policy for the supreme governing body and the Executive Board.

Runner upholstered on Wilkhahns’ office chair ON. Designed by Wiege.


Annual report 2011/12

3. Risk management and internal control systems As recommended, Gabriel has considered the establishment of a Whistleblower scheme and, given the Company’s size and complexity, has not found it relevant at this time. A more systematic review of Gabriel’s management practice in relation to NASDAQ OMX Copenhagen A/S’s recommendations is available on the Company’s website http://www.gabriel.dk/fileadmin/Download/ Diverse/God%20Selskabsledelse%20november%202011%20UK.pdf.

REPORTING ON INTERNAL CONTROL AND RISK MANAGEMENT SYSTEMS Gabriel’s supreme governing body has general responsibility for the Group’s risk management and internal controls in relation to financial reporting, including compliance with relevant legislation and other financial reporting regulations. The objective of the Group’s risk management and internal controls is to avoid any material misstatements and omissions during the financial reporting process. The Board of Directors/audit committee and the Executive Board regularly assess risks and internal controls arising from the Group’s activities and any impact on the financial reporting process. Control environment Management regularly assesses the organisational structure and staffing of the Group and lays down and approves overall policies, procedures and controls in relation to the financial reporting process, with emphasis on clear reporting policies and segregation of duties. Risk assessment When the annual business plan is prepared, material business risks are identified, and against this background Management makes an overall risk assessment, including an assessment of material risks arising from the financial reporting process. As part of the risk assessment, Management considers the risk of fraud and any other improper influence on the financial reporting process annually. The Group’s Risk Management policy strives to eliminate and/or reduce the risks identified on the basis of an assessment of materiality and cost-benefit analyses. The Board of Directors assesses Gabriel’s IT security and insurance coverage annually. The most important risks arising from the financial reporting process are disclosed in Management’s review and notes to the financial statements, to which reference is made.

31

Control activities At the board meetings, the Executive Board reports on the status of any risk factors attributable to strategy, organisation or operations. The Group has a systematic internal reporting system comparing monthly reporting with the budget and regularly evaluating performance and the meeting of specific targets through Key Performance Indicators etc. The system highlights the different corporate activities and allows Management to gain an insight into and knowledge of issues relating to the entire financial reporting process. Each quarter, the Board of Directors is provided with a detailed account of financial performance compared with the budget and prior periods. The reporting also describes and assesses material balance sheet items, cash flows, forecast future activities and earnings and other matters with an impact on operations. Information The Board of Directors lays down the general requirements for the result and the external financial reporting in accordance with relevant legislation and regulations. The Group also aims to offer adequate, complete and precise information reflecting corporate performance at all times. Within the framework for listed companies, the Board of Directors attempts to promote open communication and to ensure that each employee is familiar with his/her function in the internal control process. The Group has chosen to divide operations and internal reporting into independent strategic business units. The strategic business units are run as independent profit centres with their own business concepts, visions, targets, strategies, action plans and budgets, ensuring that skills, following-up and delegation of responsibilities are distributed on all organisational levels and that relevant information is communicated effectively and reliably throughout the entire system. Monitoring Gabriel monitors the functioning of its internal control and risk management system at all Group levels on a regular basis and for each quarter. The scope thereof is determined primarily on the basis of the risk assessment and the effectiveness of controls and procedures. Weaknesses, failings in controls or non-compliance with guidelines are reported to the Executive Board or the Board of Directors on the basis of materiality. The reporting is typically discussed at the next board meeting, at which the Board of Directors is informed of actual findings and recommendations on procedural changes etc.


32

Gabriel and good corporate governance

In their long-form audit report to the Board of Directors, the auditors appointed by the annual general meeting report any material failings in the Group’s internal control systems in relation to the financial reporting process. The Board of Directors follows up on the implementation of any planned optimisation of risk management procedures and internal controls in relation to the financial reporting process. AUDIT COMMITTEE In accordance with Section 31 of the Danish Act on Approved Auditors and Audit Firms, Gabriel Holding A/S set up an audit committee in 2009, on which the entire Board of Directors serves. The vice-chairman of the Board of Directors acts as chairman of the audit committee, which meets quarterly.

The audit committee’s tasks are: 1. to monitor the financial reporting process, 2. to monitor the effective functioning of the company’s internal control and risk management systems, 3. to monitor the statutory audit of the financial statements etc., and 4. to monitor and check the auditor’s independence. In 2011/12, the audit committee focused on the Group’s IT strategy and security and reporting from subsidiaries.

Runner upholstered on Studio Färg & Blanche’s item Succession. Designed by Fredrik Färg & Emma Marga Blanche.


Europost 2 and Europost EW upholstered on Boss Design’s module Cega.


TAILOR-MADE SOLUTION FOR FINNISH DESIGN FIRM When the Finnish furniture design firm Avarte chose a total solution from FurnMaster for their auditorium chair, we put together the optimal value chain for the product with focus on cost optimisation of components and processes.


Annual report 2011/12

35

Auditorium chairs designed with Fame.

When an older auditorium in Turku, Finland was to be modernised, the Finnish furniture design firm Avarte was awarded the project: Design new chairs. Avarte had worked previously with FurnMaster on a range of furniture and auditorium assignments, and it was thus entirely natural to place the total contract with FurnMaster: – Our partnership with FurnMaster means that we can order the entire furniture production from a single supplier. They take over the project management and we’re spared the task of having to find suppliers for every single component in the chairs, from textile and upholstery to veneer, foam and metal parts, and then having to hire an assembly firm. As FurnMaster takes care of all these sourcing and coordination processes for us, our resources are freed for the benefit of such other areas as sales, design and development, explains Avarte Partner and Manager Andreas Haufe. First, Avarte received the sketches of the auditorium from the architect who had ordered the chair “Salina”, designed by Jenni Roininen. The technical drawings were then prepared by Avarte, and we then collaborated on optimising the details. When everybody was agreed, we took over project management and launched the sourcing process. Avarte was not involved again until the delivery details were to be coordinated, says project manager Kim Jakobsen of FurnMaster.

OPTIMISATION WITHOUT COMPROMISE Avarte elected to work with FurnMaster because, with our extensive international supplier and partner network, we can put the entire value chain together and supply a total solution for furniture production. – When FurnMaster is at the helm in the production process, they’re in a position to minimise the costs of components so that the end product is cost-competitive with no compromise on quality. I personally also attach great importance to the company’s Danish management, which has an eye for detail and helps to ensure that the end product is unique and tailor-made for its intended purpose. My end customer in Turku is very satisfied with the result, says Andreas Haufe. The auditorium chairs in Turku are upholstered with the textile Fame by Gabriel, one of the softest and absolutely strongest textiles on the market. Fame has outstanding upholstering qualities and an exclusive structure. The body of the seat and the arm rests are made from oak veneer and the seat is fitted with a laminated table.


36

Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY

CSR POLICIES CSR work is a natural part of the Group’s work. For Gabriel, CSR means taking responsibility for adding value which contributes to positive social development. Gabriel accepts the principles in the UN’s Global Compact and focuses on the following areas: ∙ Gabriel’s products and services are developed and manufactured with consideration for the safety and health of users. Gabriel strives in the production process to minimise environmental impacts, and animal welfare is respected. ∙ A sound working environment is ensured in the entire supply chain together with compliance with country-specific legislation and Gabriel’s own requirements. These requirements comprise specific technical specifications and matters specified in Gabriel’s Code of Conduct. ∙ Continuous job and competence development of all employees. ∙ Gabriel desires to support students on traineeships and to enter into educational projects for the benefit of both students and the company. ∙ Gabriel communicates openly on its CSR activities, promoting CSR as a management activity.

THE CSR ACTIVITIES Gabriel’s CSR policies are realised in the actions below, where the results obtained are also described. A high value in products and services supplied to our customers and end users is ensured via certified quality management pursuant to ISO 9001 and compliance with stringent requirements specified in a large number of international product standards. Gabriel regularly measures customer satisfaction. The measurement taken in mid-2012 shows both a very high level and an increase in customer satisfaction. Gabriel makes it easy to choose products with good environmental and health qualities and highlights this in a number of environmental labels, including the EU Ecolabel (formerly the EU Flower) and the Oeko-Tex health label as well as Cradle to Cradle (C2C). Gabriel’s Cradle to Cradle (C2C) certified upholstery fabric in pure new wool “Gaja C2C” was introduced in 2010 and it has been particularly well received on the market. For several customers, C2C has become a part of their development work in the creation of innovative new solutions which comply with market requirements concerning resource consumption, health and environmental impact.

The increasing popularity of C2C includes supplying consultancy services by the Master unit QEP which, together with the consultancy firm Milestone Pro, has most recently advised the company KE Fibertec on obtaining C2C certification. Gabriel is a member of the sector organisation Danish Fashion and Textile’s CSR committee for the promotion of CSR in the sector. Gabriel’s active CSR initiatives prevent both risks to end users and employees in the production stages and the risk of financial losses and loss of trust. To promote knowledge and the advantages of a systematic CSR effort, Gabriel has contributed to several conferences focusing on CSR and C2C. The partnership with students from Aalborg University and other educational institutions is intensive and in constant development. Gabriel has an intensive partnership with suppliers throughout the supply chain, and CSR is a high-priority element. We ensure that our suppliers work in accordance with the UN’s Global Compact. The wool used is from New Zealand, and requirements concerning animal welfare are monitored. Gabriel regularly assesses the requirements for its suppliers’ reporting on CSR matters and follows up via audits of the individual supplier. The Lithuanian dye works Scandye UAB is certified under ISO 9001, ISO 14001 and the health and safety standard OHSAS 18001. Action plans which support continued development of the working environment are prepared on the basis of the company’s workplace evaluation. All employees in Aalborg are covered by the company’s health insurance, and a subsidy is provided for sporting activities. Gabriel’s environmental action programme includes specific goals for the development of environmental qualities in the company’s product range, e.g. focusing on recycling.

FURTHER INFORMATION For further information on CSR, please see www.gabriel.dk or contact Gabriel’s business unit QEP.


37 3 7

9001 ISO 9001

A high value in products and services supplied to our customers and end users is ensured via certified quality management pursuant to ISO 9001 and compliance with stringent requirements specified in a large number of international product standards.


38

THE BLUE OCEANS Under Gabriel’s Blue Ocean strategy, new products and services should contain exceptionally functional or emotional utility value for the user. Innovation is created in close collaboration with customers, users, partners and others, meaning that the solutions meet not only customers’ current wishes, but also needs which the users have yet to express.


39


40

Shareholder information

SHAREHOLDER INFORMATION

SHARE CAPITAL Gabriel Holding A/S’s share capital comprises 1,890,000 shares of DKK 20 each. Gabriel Holding A/S has one class of shares, and no shares have special rights. All shares are freely negotiable securities. Gabriel Holding A/S is listed on the NASDAQ OMX Copenhagen A/S under the ticker symbol GABR and the ID code DK0060124691. The share is traded under the Small Cap Index.

PRICE MOVEMENT The 2011/12 financial year opened with a price of 80 and closed with a price of 100. The total market capitalisation was DKK 189.0 million on 30 September 2012.

CAPITAL MANAGEMENT The Group regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against the higher degree of uncertainty surrounding external financing.

A high solvency ratio has always been a top priority of Gabriel in order to ensure room for manoeuvring in all situations. The Group’s solvency ratio on 30.09.12 was 64%, four percentage points higher than last year. There is continuing focus on regular reduction of the Group’s working capital. The Group aims at providing its shareholders with a regular return on their investments while maintaining an appropriate equity level to ensure the company’s future development. The Board of Directors proposes that dividends of DKK 4.50 per share be distributed for 2011/12, equivalent to total dividends of DKK 8.5 million. The dividend amounts to 5.8% of the equity and 47.9% of the profit for the year after tax paid for the Group. Against this background, the present capital resources are deemed adequate in the present economic climate.

DIVIDENDS AND EARNINGS PER SHARE

7%

Dividends per share in DKK Earnings per share in DKK

Other shareholders

22%

10

40%

Other registered shareholders

Gabol A/S, Aarhus

9

8

7

6

5

4

3

11%

Fulden Holding A/S, Aarhus

20% Svend Mathiesen A/S,

2

1

Aarhus 0

Composition of shareholders

07/08

08/09

09/10

10/11

11/12


MARKET PRICE AND NET ASSET VALUE Market price in DKK Net asset value in DKK

125

100

75

50

25

0 07/08

08/09

09/10

10/11

11/12

Runner upholstered on Phoneon’s Sound Butler®. Designed by Susanne Friebel and Frank Sander.


42 2

25% INCREASED MARKET VALUE

Gabriel Holding’s market value increased by 25% in the financial year to DKK 189 million.

Move upholstered on EF’s Novah. Designed af Cevin.


Annual report 2011/12

STOCK EXCHANGE ANNOUNCEMENTS IN THE 2011/12 FINANCIAL YEAR 15.11.11 Announcement of the annual report for 2010/11: “Increase in revenue and earnings” 22.11.11 Notice of annual general meeting 22.11.11 Annual report 2010/11. 15.12.11 Information on today’s general meeting. 15.12.11 Minutes of the annual general meeting. 26.01.11 Subsidiary Gabriel Innovation A/S changes its name to ZenXit A/S. 09.02.12 Q1 report 2011/12: “Gabriel Holding A/S’s management maintains expectations”. 15.05.12 First half-yearly report 2011/12: “Revenue and operating profit (EBIT) as expected”. 19.06.12 Gabriel A/S increases its stake in the dye works Scandye UAB. 14.08.12 Q3 report 2011/12: “Management maintains expectations for operating profit (EBIT) for the year”. 14.08.12 Financial calendar 2012/13.

FINANCIAL CALENDAR 2012/13 15.11.12 Announcement of the annual report 04.12.12 The printed annual report for 2011/12 is available 13.12.12 Annual general meeting 05.02.13 Q1 report 14.05.13 Half-yearly report 22.08.13 Q3 report 14.11.13 Announcement of the annual report 12.12.13 Annual general meeting

MARKET PRICE AT YEAR END Market capitalisation in DKK million

300

250

200

150

INVESTOR RELATIONS Gabriel Holding aims to provide a satisfactory and uniform level of information to its investors and analysts, ensuring stable price movements and reflecting the forecast corporate performance at all times. Gabriel’s website www.gabriel.dk is the stakeholders’ primary source of information and it is regularly updated with new and relevant information on Gabriel’s profile, activities, line of business and results. Investor relations contact: Anders Hedegaard Petersen, CEO Phone: +45 9630 3100

100

50

0 07/08

08/09

09/10

10/11

11/12

ANNUAL GENERAL MEETING The annual general meeting will be held at 2:00 p.m. Thursday 13 December 2012 at the company’s office in Aalborg.

43


44

Company information

COMPANY INFORMATION

BOARD OF DIRECTORS

EXECUTIVE BOARD

GENERAL MANAGER JØRGEN KJÆR JACOBSEN

GENERAL MANAGER KAJ TAIDAL

GENERAL MANAGER CLAUS CHRISTENSEN

Chairman (60 years) Joined the board of directors in 2010 (D)

Vice-chairman and chairman of the audit committee (53 years) Joined the board of directors in 1998 (D)

(50 years) Joined the board of directors in 1999 (D)

Executive positions Raskier A/S Directorships Scandye UAB, Lithuania (CM) Mekoprint Holding A/S (CM) UNO Danmark A/S (CM) Dolle A/S (CM) A/S Peder Nielsen Beslagfabrik (CM) Nordjyske Medier A/S (VC) BKI Foods A/S Utzon Center A/S AM3D A/S Gabol A/S Raskier A/S

Executive positions A/S V. Sørensen Directorships A/S V. Sørensen Dan-Iso Holding A/S (CM) Dan-Iso A/S (CM) EM-Fiberglas A/S (CM) Impartex A/S (F) Slovakian Farm Invest A/S (CM)

Shareholders’ committee and local council Sydbank A/S Trusts Mads Eg Damgaards Familiefond

Executive positions HC Projects A/S HCH A/S IVON A/S CC Holding ApS HC Invest ApS B&C Holding ApS Directorships Brøgger Arkitektfirma A/S (VC) DanPhone A/S (CM) HC Projects A/S HCH A/S HESA Holding A/S (CM) HESA Ejendomme A/S (CM) House of BI A/S (CM) Judex Holding A/S Judex A/S KPF Arkitekter A/S (VC) M-Tec Holding A/S (CM) M-Tec TrackUnit A/S (CM) M-Tec Production A/S (CM) Medical Insight A/S IVON A/S Novi Innovation A/S Scape Technologies A/S Sydbank A/S Strøm Hansen A/S (CM) Shareholders’ committee and local council Sydbank A/S

CEO ANDERS HEDEGAARD PETERSEN (36 years) Employed in 2004 External executive positions KAAN ApS Directorships GAB Invest ApS (CM) Dansk Mode & Textil

AUDITORS KPMG, Statsautoriseret Revisionspartnerselskab

BANK Sydbank A/S

SUBSIDIARIES Gabriel A/S, Aalborg ZenXit A/S, Aalborg Gabriel Ejendomme A/S, Aalborg Gabriel (Tianjin) International Trading Co. Ltd., China

ASSOCIATED COMPANIES Scandye UAB, Litauen

REGISTERED OFFICE AND REPRESENTATION The registered office with sales, logistics, development, innovation and accounts departments is located in Aalborg.

GENERAL MANAGER SØREN BRAHM LAURITSEN

ENGINEERING WORKER OLE THOMSEN

SALES SUPPORTER QUINTEN XERXES VAN DALM

(45 years) Joined the board of directors in 2010 (D)

(60 years) elected by the employees Joined the board of directors in 2009

(40 years) elected by the employees Joined the board of directors in 2010

Executive positions ONE Marketing A/S Directorships ONE Marketing A/S (CM) Stanesø A/S

D I CM VC

= Dependent member = Independent member = Chairman = Vice-chairman

Gabriel has its own representatives in Denmark, Sweden, Finland, Norway, Germany, France, Spain, Italy, the UK and China.


Annual report 2011/12

45

STATEMENT BY THE EXECUTIVE BOARD AND THE BOARD OF DIRECTORS

The Board of Directors and the Executive Board have today discussed and approved the annual report of Gabriel Holding A/S for the financial year 2011/12. The annual report has been prepared in accordance with International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.

In our opinion, the Management’s review includes a fair review of the development in the Group’s and the Parent Company’s operations and financial conditions, the results for the year, cash flows and financial position as well as a description of the most significant risks and uncertainty factors that the Group and the Parent Company face. We recommend that the annual report be approved at the annual general meeting.

It is our opinion that the consolidated financial statements and the parent company financial statements give a true and fair view of the Group’s and the Parent Company’s financial position at 30 September 2012 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 October 2011 – 30 September 2012.

Aalborg, 15 November 2012

Management

Anders Hedegaard Petersen CEO

Board of directors

Jørgen Kjær Jacobsen Chairman

Kaj Taidal Vice-chairman

Claus Christensen

Søren Brahm Lauritsen

Quinten Xerxes van Dalm Elected by the employees

Ole Thomsen Elected by the employees


46

TEXTILES WITH EXCEPTIONAL QUALITIES At Gabriel, we’re constantly working with new concepts for the furniture of the future and regularly finding other ways to use the textiles and the underlying technology. The central point is always our close contact with customers and the market. This enables us to look ahead several years and identify the targets of the future for upholstery solutions.


Annual report 2011/12

47

Leaf and Breeze upholstered on Steelcase Be Free lounge furniture.

– Central to our products is that not only are we focused on design as an expression of appearance, but that we place just as much emphasis on aesthetics, quality and functionality when we develop the textiles of the future, says Inger Mosholt Nielsen, Business Manager, DesignMaster. CRISP – A RICH EXPRESSION OF COLOURS Crisp is an upholstery fabric woven in an attractive strong woollen yarn with a tight crisp expression which is relaxed by the melange effect. Crisp is a multicolour textile without pattern but with a mottled vibrant surface which creates variation and depth of expression. The textile was developed with good upholstering qualities. LEAF AND BREEZE – ELEGANT WOOLLEN TEXTILES Leaf has an elegant uncoloured leaf pattern which comes to life via changing structures in play with light contrasts. The design can be cut in any direction without regard to the position of the pattern. Breeze is a modern new basic design with a living and soft structure based on nature’s influence on the trends of the times. HARLEQUIN – ANYTHING BUT ORDINARY Notwithstanding its 3D construction and semi-transparent character, Harlequin is being launched as a self-supporting net textile. The almost closed structure gives the textile an expression of classic upholstery material. With Harlequin, a new trend is being introduced within net textiles, where we’re moving away from the open techno-inspired net and approaching the classic upholstery textiles’ values in expression.

STRING – INVISIBLE WITH EXCEPTIONAL STRENGTH A transparent, almost invisible net textile with incredible load-carrying capacity and a tight graphic design. String signals strength and lightness and it can be used alone or in combination with other textiles. The colour palette consists of a classic grey scale supplemented by single accent colours. OMEGA – A PLAY WITH COLOURS The combination of classic 3D net structure with high stability of shape and unique colour combinations makes Omega perfect as a load-bearing textile in chair backs. Omega has a modern and sporty look, and the relatively open net design gives space to play with colour effects. In the individual colours, the textile’s always black reverse side plays together with a colourful front, and attractive contrasting colour combinations are developed. MOMENT – FULL OF CONTRASTS Moment is a soft and comfortable two-tone fabric. The combination of materials, design and colours adds movement and depth. The strong mix of discreet colour tones creates a graphic contrast between light and dark. INFINITY – SOFT AND ELEGANT Infinity radiates elegance and naturalness. Its special weave and yarn mix create a velvety textile with a light and modern look. With its mix of different yarns in harmonious colour combinations, Infinity presents itself with a sprightly structure and an attractive colour play, concludes Inger Mosholt Nielsen.


48

ONE STOP GABRIEL Gabriel’s value chain covers all steps from concept to furniture user, and the Group supplies products and services from all parts in the value chain. Gabriel terms the complete value chain perspective “One stop Gabriel”. The model’s intention is that customers can ensure development and delivery of products and services in all parts on the value chain via a single contact person.


49


50

Independent auditor’s report

INDEPENDENT AUDITORS’ REPORT

TO THE SHAREHOLDERS OF GABRIEL HOLDING A/S INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AND THE PARENT COMPANY FINANCIAL STATEMENTS We have audited the consolidated financial statements and the parent company financial statements of Gabriel Holding A/S for the financial year 2011/12. The consolidated financial statements and the parent company financial statements comprise income statement, statement of comprehensive income, balance sheet, statement of changes in equity, cash flow statement and notes, including accounting policies for the Group as well as for the Parent Company. The consolidated financial statements and the parent company financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act.

MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND THE PARENT COMPANY FINANCIAL STATEMENTS Management is responsible for the preparation of consolidated financial statements and parent company financial statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act and for such internal control that Management determines is necessary to enable the preparation of consolidated financial statements and parent company financial statements that are free from material misstatement, whether due to fraud or error.

AUDITORS’ RESPONSIBILITY Our responsibility is to express an opinion on the consolidated financial statements and the parent company financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the parent company financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements and the parent company financial statements. The procedures selected depend on the auditors’ judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the parent company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the Company’s preparation of consolidated financial statements and parent company financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by Management, as well as evaluating the overall presentation of the consolidated financial statements and the parent company financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. Our audit has not resulted in any qualification.

OPINION In our opinion, the consolidated financial statements and the parent company financial statements give a true and fair view of the Group’s and the Parent Company’s financial position at 30 September 2012 and of the results of the Group’s and the Parent Company’s operations and cash flows for the financial year 1 October 2011 – 30 September 2012 in accordance with International Financial Reporting Standards as adopted by the EU and additional disclosure requirements in the Danish Financial Statements Act.

STATEMENT ON THE MANAGEMENT’S REVIEW Pursuant to the Danish Financial Statements Act, we have read the Management’s review. We have not performed any further procedures in addition to the audit of the consolidated financial statements and the parent company financial statements. On this basis, it is our opinion that the information provided in the Management commentary is consistent with the consolidated financial statements and the parent company financial statements.

Aalborg, 15 November 2012 KPMG Statsautoriseret Revisionspartnerselskab

Hans B. Vistisen State-authorised public accountant

Søren V. Nejmann State-authorised public accountant


Code upholstered on BoConcept’s Nago. Designed by Anders Nørgaard.


52

Annual report 2011/12

INCOME STATEMENT FOR THE FINANCIAL YEAR 01.10.2011 - 30.09.2012

Consolidated

Note

Parent Company

tDKK

2011/12

2010/11

2011/12

2010/11

Revenue

247,643

242,611

-

1,897

-1,910

1,800

-

-

1,181

558

-

10,567

Changes in inventories of finished goods and work in progress 2

Other operating income

3

Cost of sales

-145,493

-142,792

-

-

4

Other external costs

-38,770

-41,778

-1,311

-1,907

5

Staff costs

-35,157

-36,009

-1,100

-1,055

10

Depreciation/amortisation of intangible assets and property, plant and equipment

-6,055

-6,167

-

-538

Operating profit/loss (EBIT)

21,439

18,223

-2,411

8,964

1,372

3,430

-

-

12

Share of profit/loss after tax in associates

6

Financial income

1,292

2,481

8,447

4,782

7

Financial expenses

-1,848

-1,665

-11

-329

Profit before tax

22,255

22,469

6,025

13,417

Tax on profit for the year

-4,488

-5,610

369

-2,060

Profit for the year

17,767

16,859

6,394

11,357

Proposed dividends

8,505

8,033

Retained earnings

-2,111

3,324

6,394

11,357

8

Proposed profit appropriation

9

Earnings per share (DKK) Earnings per share (EPS), basic

9.4

8.9

Earnings per share (EPS-D), diluted

9.4

8.9


Annual report 2011/12

53

STATEMENT OF COMPREHENSIVE INCOME 01.10.2011 - 30.09.2012

Consolidated

Note

tDKK

Parent Company

2011/12

2010/11

2011/12

2010/11

17,767

16,859

6,394

11,357

-26

171

-26

171

-1

-38

-1

-38

Value adjustment of hedging transactions

109

-

-

-

Tax thereon

-27

-

-

-

81

33

-

-

136

166

-27

133

17,903

17,025

6,367

11,490

ProďŹ t for the year Other comprehensive income Value adjustment to fair value Tax thereon

Value adjustment at the translation of foreign entities Other comprehensive income after tax Total comprehensive income


54

Annual report 2011/12

BALANCE SHEET AT 30.09.2012

ASSETS

Note

tDKK

10

Non-current assets

Consolidated

Parent Company

2011/12

2010/11

2011/12

2010/11

9,128

7,061

-

-

68,026

69,500

-

-

971

1,488

-

-

8,838

8,957

-

-

77,835

79,945

-

-

Intangible assets: Development projects

Property, plant and equipment: Land and buildings Plant and machinery Fixtures and ďŹ ttings, other plant and equipment

Other non-current assets: 11

Investments in subsidiaries

12

Investments in associates

-

-

67,288

67,288

18,734

15,104

-

13

-

Amounts owed by associates

7,269

8,633

-

-

14

Other receivables

1,470

1,470

-

-

15

Securities

11,864

27,524

11,864

27,524

39,337

52,731

79,152

94,812

126,300

139,737

79,152

94,812

Total non-current asserts

Current assets 16

Inventories

40,514

40,721

-

-

17

Receivables

42,899

44,464

23,839

13,300

Cash at bank and in hand

19,676

3,885

1,538

818

Total current assets

103,089

89,070

25,377

14,118

Total assets

229,389

228,807

104,529

108,930


Annual report 2011/12

EQUITY AND LIABILITIES

Note

tDKK

Consolidated

55

Parent Company

2011/12

2010/11

2011/12

2010/11

Equity 19

Share capital

37,800

37,800

37,800

37,800

Translation reserve

223

142

-

-

Reserve for fair value adjustments

179

206

179

206

82

-

-

-

Retained earnings

99,786

90,524

54,885

56,996

Proposed dividends

8,505

8,033

8,505

8,033

146,575

136,705

101,369

103,035

Reserve for hedging transaction

Total equity

Liabilities Non-current liabilities 20

Deferred tax

21

Credit institutions

22

Lease liabilities Total non-current liabilities

7,223

7,960

-

58

34,855

36,907

-

-

3,337

4,003

-

-

45,415

48,870

-

58

-

Current liabilities 21

Credit institutions

2,099

12,388

-

22

Lease liabilities

1,281

1,086

-

-

Trade payables

19,956

13,029

696

358

Debt to associates

-

-

724

-

1,054

4,072

795

3,685

Other debt

13,009

12,657

945

1,794

Total current liabilities

37,399

43,232

3,160

5,837

Total liabilities

82,814

92,102

3,160

5,895

229,389

228,807

104,529

108,930

Corporation tax

Total equity and liabilities


56

Annual report 2011/12

STATEMENT OF EQUITY

CONSOLIDATED

tDKK

Share capital

Reserve for Reserve for Translation fair value hedging reserve adjustments transactions

Retained earnings

Proposed dividends

Total equity

2010/11 37,800

109

73

-

81,698

6,143

125,823

-

-

-

-

8,826

8,033

16,859

-

33

-

-

-

-

33

available for sale

-

-

171

-

-

Tax on other comprehensive income

-

-

-38

-

-

Equity 01.10.10 Comprehensive income for the period Profit for 2010/11 Other comprehensive income Exchange rate adjustment at the translation of foreign entities Value adjustment of financial assets

171 -

-38

Total other comprehensive income

-

33

133

-

-

-

166

Total comprehensive income for the year

-

33

133

-

8,826

8,033

17,025

-

-

-

-

-

-6,143

-6,143

37,800

142

206

-

90,524

8,033

136,705

37,800

142

206

-

90,524

8,033

136,705

-

-

-

-

9,262

8,505

17,767

-

81

-

-

-

-

81

available for sale

-

-

-26

-

-

-

-26

Value adjustment of hedging transactions

-

-

-

109

-

-

109

Tax on other comprehensive income

-

-

-1

-27

-

-

-28

Total other comprehensive income

-

81

-27

82

-

-

136

Total comprehensive income for the year

-

81

-27

82

9,262

8,505

17,903

-

-

-

-

-

-8,033

-8,033

37,800

223

179

82

99,786

8,505

146,575

Transactions with shareholders Distributed dividends Equity 30.09.11 2011/12 Equity 01.10.11 Comprehensive income for the period Profit for 2011/12 Other comprehensive income Exchange rate adjustment at the translation of foreign entities Value adjustment of financial assets

Transactions with shareholders Distributed dividends Equity 30.09.12


Annual report 2011/12

57

PARENT COMPANY Share capital

Reserve for fair value adjustments

Retained earnings

Proposed dividends

Total equity

37,800

73

53,672

6,143

97,688

-

-

3,324

8,033

11,357

available for sale

-

171

-

-

171

Tax on other comprehensive income

-

-38

-

-

-38

Total comprehensive income

-

133

3,324

8,033

11,490

-

-

-

-6,143

-6,143

37,800

206

56,996

8,033

103,035

37,800

206

56,996

8,033

103,035

-

-

-2,111

8,505

6,394

available for sale

-

-26

-

-

-26

Tax on other comprehensive income

-

-1

-

-

-1

Total comprehensive income

-

-27

-2,111

8,505

6,367

-

-

-

-8,033

-8,033

37,800

179

54,885

8,505

101,369

tDKK 2010/11 Equity 01.10.10 Comprehensive income for the period Profit for 2010/11 Other comprehensive income Value adjustment of financial assets

Transactions with shareholders Distributed dividends Equity 30.09.11 2011/12 Equity 01.10.11 Comprehensive income for the period Profit/loss for 2011/12 Other comprehensive income Value adjustment of financial assets

Transactions with shareholders Distributed dividends Equity 30.09.12


Annual report 2011/12

59

CASH FLOW STATEMENT

Consolidated

tDKK

Parent Company

2011/12

2010/11

2011/12

2010/11

22,255

22,469

6,025

13,417

6,055

6,167

-

538

-

-

-

-10,558

Share of profit after tax in associates

-1,372

-3,430

-

-

Cash generated from operations before changes in working capital

26,938

25,206

6,025

3,397

Changes in inventories

207

-5,655

-

-

Changes in receivables

1,565

-879

-5,010

-2,921

Cash flows from operating activities Profit before tax Adjustment for non-cash items: Depreciation/amortisation Gain on the disposal of non-current assets

Changes in trade and other payables

7,575

4,835

-466

1,074

-8,278

-2,179

-7,417

-2,179

-

5,328

-

5,328

28,007

26,656

-6,868

4,699

Acquisition of intangible assets

-3,372

-2,650

-

-

Acquisition of property, plant and equipment

-2,872

-4,507

-

-

245

-

-

-

-2,258

-

-

-

Corporation tax paid Corporation tax refunded

Cash flows from investing activities

Disposal of property, plant and equipment Purchase of shares in associates Change in amount owed by associate Acquisition/disposal of securities

1,364

1,253

-

-

15,621

2,217

15,621

2,217

8,728

-3,687

15,621

2,217

-2,084

-2,061

-

-

Cash flows from financing activities External financing: Repayment on long-term debt Extension of lease

723

-

-

-

-1,194

-637

-

-

-8,033

-6,143

-8,033

-6,143

-10,588

-8,841

-8,033

-6,143

Changes for the year in cash and cash equivalents

26,147

14,128

720

773

Opening bank loans/cash and cash equivalents

-6,471

-20,599

818

45

Closing bank loans/cash and cash equivalents

19,676

-6,471

1,538

818

Repayment on lease Shareholders: Dividends distributed


60

Notes to the financial statements

OUTLINE OF NOTES

Note 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Segment information Other operating income Cost of sales Other external costs Staff costs Financial income Financial expenses Tax on profit for the year Earnings per share Non-current assets Investments in subsidiaries Investments in associates Amounts owed by associates Other receivables Securities Inventories Receivables Research and development costs Share capital Deferred tax Credit institutions Lease liabilities Financial risks and derivative financial instruments Operating leases Contingent liabilities and collateral Transactions with group companies, major shareholders, Board of Directors and Executive Board Accounting estimates and judgments Events after the balance sheet date New financial reporting regulations Accounting policies


61 61


62

Notes to the financial statements

NOTES TO THE FINANCIAL STATEMENTS

Note 1

Segment information The Gabriel Group has only one reportable business segment, as all its products relate to furniture fabrics and related textiles. The products are sold to selected leading international manufacturers and key account customers specialised in upholstered furniture, seats and upholstered surfaces. Gabriel A/S accounts for most of the activities. The manufacturing processes are practically identical for the individual business areas, and the sales divisions service the same type of customer groups. In addition, the product distribution channels are the same. Revenue generated by the Western European markets accounts for more than 92% of total revenue, where the economic and political climates, activities, risks and currency exposure remain undifferentiated. The Group is dependent to a lesser extent on sales to individual customers, none of whom accounts for more than 10% of the Group’s total revenue. Consequently, the Group’s income and expenses as well as assets and liabilities are not broken down on operating segments in the notes. The geographical break-down of revenue and non-current assets and the break-down of revenue on products and services are disclosed. The information is based on the internal management reporting. Geographical information Geographical information specifies revenue on geographical segments based on the geographical location of the customers. The break-down of assets by geographical segments is based on the physical location of the assets. Revenue is distributed on markets as follows: Consolidated

Parent Company

2011/12

2010/11

Denmark

19,493

21,457

Sweden

50,976

49,859

Germany

51,645

50,950

125,529

120,345

247,643

242,611

Denmark

85,744

85,413

Lithuania

971

1,488

Other countries

248

105

86,963

87,006

244,712

240,649

tDKK

Other countries

2011/12

2010/11

Non-current assets except financial assets etc., are distributed as follows:

Products and services Distribution of revenue: Textiles Rental income

2

2,931

1,962

247,643

242,611

Other operating income -

-

-

10,558

Sale of services, etc.

430

72

-

-

Repayment of deduction for canteen VAT

351

-

-

-

Other income

400

486

-

9

1,181

558

-

10,567

Gains on the sale of property, plant and equipment


Annual report 2011/12

Consolidated

Note

tDKK

3

Cost of sales Cost of sales

63

Parent Company

2011/12

2010/11

2011/12

2010/11

-146,994

-142,393

-

-

Write-down for the year of inventories

-774

-399

-

-

Reversal of write-downs on inventories

2,275

-

-

-

-145,493

-142,792

-

-

-308

-305

-45

-45

-

-14

-

-

-35

-28

-10

-14

-154

-439

-55

-128

-497

-786

-110

-187

Reversal of write-downs on sales of inventories written-down 4

Other external costs Other external costs include fees to auditors appointed at the general meeting as follows: Statutory audit services Other assurance engagements Tax advisory services Other services

5

Staff costs Payroll etc.

-32,213

-33,287

-1,100

-1,055

Defined contribution pension schemes

-2,037

-1,933

-

-

Other social security costs

-1,576

-1,390

-

-

Other payroll-related costs

-1,613

-1,340

-

-

-37,439

-37,950

-1,100

-1,055

2,022

1,941

-

-

Payroll costs capitalised regarding development projects Payroll costs transferred to cost of sales

Remuneration of the Board of Directors of the Parent Company Remuneration of the Executive Board of the Parent Company Pension contribution to the Parent Company’s Executive Board Remuneration of other managerial employees Pensions for other managerial employees Average number of employees 6

260

-

-

-

-35,157

-36,009

-1,100

-1,055

-830

-830

-655

-655

-1,725

-1,871

-400

-400

-152

-109

-

-

-9,643

-9,762

-

-

-758

-813

-

-

69

64

-

-

Financial income Dividends from subsidiary

-

-

7,500

4,000

1,098

1,180

484

606

Interest income from subsidiary

-

-

463

176

Foreign exchange gains

-

1,301

-

-

Interest income, cash, bonds, etc.

Other financial income

194

-

-

-

1,292

2,481

8,447

4,782


64

Notes to the financial statements

Consolidated Note

tDKK

7

Financial expenses Interest expenses, etc. Foreign exchange losses Other financial expenses

8

Parent Company

2011/12

2010/11

2011/12

2010/11

-1,171 -203

-1,181

-

-216

-65

-

-

-474

-419

-11

-113

-1,848

-1,665

-11

-329

-5,229

-5,060

0

0

-

-

310

529

-

-

-

-2,640

Tax on the profit for the year Current tax Joint taxation contribution Calculated tax on the disposal of activity to subsidiary Adjustment of deferred tax Adjustment re previous year

98

-676

59

-73

643

126

-

124

-4,488

-5,610

369

-2,060

-5,564

-5,617

-1,506

-3,354

-35

-187

-

-45

Tax on profit for the year is specified as follows Computed tax on profit before tax, 25%

Tax effect of: Non-deductible costs Non-taxable dividends

-

-

1,875

1,000

Non-taxable interest

-

-9

-

-9

Share of results after tax in associates

343

858

-

-

Adjustment of tax in foreign subsidiaries to 25%

125

-655

-

-

-

-

-

348

Transferred for taxation in subsidiary upon divestment of activity Adjustment re. previous year

Effective tax rate

9

643

-

-

-

-4,488

-5,610

369

-2,060

20.2%

25.0%

-6.1%

15.4%

Earnings per share Profit for the year after tax

17,767

16,859

Average number of shares

1,890,000

1,890,000

0

0

Average number of shares in circulation

1,890,000

1,890,000

Earnings per share (EPS), basic DKK 20

9.4

8.9

Earnings per share (EPS-D) diluted DKK 20

9.4

8.9

Average number of own shares


65

Gabriel at Orgatec.


66

Notes to the financial statements

Group

Development projects

Land and buildings

Plant and machinery

Fixtures and fittings, other plant and equipment

Cost at 01.10.2010

9,877

99,323

27,378

31,384

Additions during the year

2,650

2,612

-

1,895

Disposals during the year

-665

-

-18,138

-11,758

11,862

101,935

9,240

21,521

3,636

30,972

25,560

21,132

-665

-

-18,138

-11,113

1,506

1,463

330

2,545

324

-

-

-

Note

tDKK

10

Non-current assets 2010/11

Cost at 30.09.2011

Depreciation/amortisation at 01.10.2010 Disposals during the year Depreciation/amortisation for the year Write-downs for the year Depreciation/amortisation at 30.09.2011

4,801

32,435

7,752

12,564

Carrying amount at 30.09.2011

7,061

69,500

1,488

8,957

Thereof development projects/assets under construction

3,933

-

-

-

-

-

-

4,576

5 years

10-25 years

3-8 years

3-8 years

11,862

101,935

9,240

21,521

Thereof assets held under finance leases Depreciated/amortised over

2011/12 Cost at 01.10.2011 Value adjustment Additions during the year Disposals during the year Cost at 30.09.2012

Depreciation/amortisation at 01.10.2011 Value adjustment Disposals during the year Depreciation/amortisation for the year Write-downs for the year

-

-

-

25

3,372

21

-

2.851

-50

-

-1,576

-3,357

15,184

101,956

7,664

21,040

4,801

32,435

7,752

12,564

-

-

-

-3

-50

-

-1,576

-3,097

1,255

1,495

517

2,723

50

-

-

15

Depreciation/amortisation at 30.09.2012

6,056

33,930

6,693

12,202

Carrying amount at 30.09.2012

9,128

68,026

971

8,838

Thereof development projects/assets under construction

6,609

-

-

-

-

-

-

3,978

5 years

10-25 years

3-8 years

3-8 years

Thereof assets held under finance leases Depreciated/amortised over

In 2011/12, the Group performed an impairment test on the carrying amounts of recognised development projects in progress. The test resulted in a total write-down of tDKK 50. The project development sequence in the form of expenses paid and results obtained was also evaluated in relation to the approved project and business plans. It was judged on this basis that the recoverable amount after the write-down exceeds the carrying amount.


Annual report 2011/12

67

Parent Company Note

tDKK

11

Investments in subsidiaries Cost at 01.10.

2011/12

2010/2011

67,288

36,419

-

30,932

Additions during the year on transfer of activity to subsidiary Disposals Cost at 30.09.

-

-63

67,288

67,288

Registered office

Stake

Company capital tDKK

Equity tDKK

Profit before tax tDKK

Profit for the year tDKK

Gabriel A/S

Aalborg

100%

25,500

78,653

18,331

13,976

ZenXit A/S

Aalborg

100%

1,000

1,047

-25

-19

Gabriel Ejendomme A/S

Aalborg

100%

1,000

32,796

2,383

1,923

China

100%

1,516

5,288

3,435

2,701

117,784

24,124

18,581

Name

Gabriel (Tianjin)

Consolidated

12

2011/12

2010/2011

11,553

11,553

Investments in associates Cost at 01.10. Acquisitions

2,258

-

Cost at 30.09.

13,811

11,553

Adjustments 01.10.

3,551

121

Share of profit for the year

1,279

3,375

Internal profit

122

122

Value adjustment of property

-29

-67

Adjustments 30.09. Carrying amount 30.09.

4,923

3,551

18,734

15,104

Gabriel’s share

Name Scandye UAB Value adjustment, property Intra-group profit Goodwill 30.09.2012

Registered office Lithuania

Stake

Revenue tDKK

Profit for the year tDKK

Assets tDKK

Liabilities tDKK

Equity tDKK

Profit for the year tDKK

49%

31,976

2,829

58,409

31,306

13,359

1,279

1,207

-29

-631

122

4,799

0

18,734

1,372

Carrying amount at 30.09.2012


68

Notes to the financial statements

Consolidated Note

tDKK

13

Non-current receivables from associates Cost at 01.10.

2011/12

2010/2011

8,633

9,898

Additions

-

-

Disposals

-1,364

-1,265

7,269

8,633

Book value at 30.09.

Gross receivables are specified as follows: Due within 1 year

1,767

1,768

Due within 1-5 years

6,423

8,013

Due after 5 years Unearned future financing income Total receivables

-

177

-921

-1,325

7,269

8,633

Net receivables are specified as follows: Due within 1 year

1,409

1,335

Due within 1-5 years

5,860

6,998

Due after 5 years

-

300

Total receivables

7,269

8,633

The receivable arises from finance leasing of productive equipment to Scandye UAB. At the end of the lease term of 5-8 years, the lessee has the option of acquiring the productive equipment. The assets leased out have been provided as collateral for the Group’s receivables. 14

Other non-current receivables Cost at 01.10. Additions Disposals Carrying amount at 30.09.

1,470

1,458

-

12

-

-

1,470

1,470

The gross receivables are specified as follows: Due within 1 year Due within 1-5 years Due within 5 years Unearned future financing income Total receivables

250

250

1,532

1,532

-

-

-312

-312

1,470

1,470

Net receivables are specified as follows: Due within 1 year Due within 1-5 years

148

148

1,322

1,322

Due after 5 years

-

-

Total receivables

1,470

1,470

The receivable arises from finance leasing of productive equipment and loan to a business partner.


Annual report 2011/12

Parent Company

Consolidated

Note

tDKK

15

Securities Cost at 01.10.

69

2011/12

2010/11

2011/12

2010/11

27,260

29,574

27,260

29,574

Additions during the year

-

25,520

-

25,520

Disposals during the year

-15,632

-27,834

-15,632

-27,834

11,628

27,260

11,628

27,260

Cost at 30.09.

Adjustments at 01.10.

264

93

264

93

Adjustments for the year

-28

171

-28

171

Adjustments at 30.09.

236

264

236

264

11,864

27,524

11,864

27,524

Carrying amount at 30.09.

The investment portfolio comprises fixed- and variable-interest Danish mortgage bonds.

16

Inventories Raw materials and consumables

9,170

10,063

-

-

Work in progress

3,247

3,640

-

-

28,097

27,018

-

40,514

40,721

-

32,939

32,603

-

-

-

-

23,606

12,285

9,960

11,861

233

1,015

42,899

44,464

23,839

13,300

Finished goods and goods for resale

-

The Group has no inventories recognised at fair value.

17

Receivables Trade receivables Amounts owed by subsidiaries Other receivables

Other receivables include a total VAT receivable of tDKK 3,047. (2010/11: tDKK 4,932) concerning VAT returns in Lithuania. The Group is still experiencing delays in the repayment process. Credit risks depend primarily on the debtor’s home country. Based on the Group’s internal credit rating procedures and external credit rating, receivables not subject to any write-down are deemed to hold high creditworthiness and to pose a low risk of loss. See also note 23 for information on credit risks. The Group’s trade receivables are distributed as follows by geographical area:

Denmark

2,815

3,471

Scandinavia

9,927

8,767

16,201

18,867

3,996

1,498

32,939

32,603

EU Other countries


70

Notes to the financial statements

Note 17 cont. The Group’s trade receivables at 30.09.2012 include receivables totalling tDKK 1,009 (2010/11: tDKK 1,366), which were written down by tDKK 1,000 (2010/11: tDKK 1,304) based on an individual assessment. Other external costs comprise bad debts of tDKK 704. (2010/11: tDKK 641). Write-downs of trade receivables are due to customer bankruptcy or anticipated payment default. Individually written-down receivables are distributed as follows by geographical areas: Consolidated tDKK

2011/12

2010/11

Scandinavia

130

203

EU

724

938

Other countries

146

163

1,000

1,304

Trade receivables due at 30.09.2012, but not impaired, were recognised as follows:

Maturity Up to 30 days

2,481

2,486

Between 30 and 90 days

358

603

Over 90 days

988

1,314

3,827

4,403

Interest income arising from receivables written down is not recognised.

18

Research and development costs The correlation between research and development costs incurred and expensed is specified as follows:

Research and development costs incurred Development costs recognised as intangible assets

7,773

6,961

-3,372

-2,650

4,401

4,311

Research and development costs for the year recognised in the income statement

19

Share capital The share capital comprises 1,890,000 shares of DKK 20 each. No shares carry special rights. Neither the Group nor the Parent Company holds any treasury shares. Capital management The Group’s ordinary activities still generate high cash flows, enabling the Group to maintain solid financial resources. The Group regularly assesses the need for adjusting its capital structure to hold the required higher return on equity up against the higher degree of uncertainty surrounding external financing. A high solvency ratio has always been a top priority of Gabriel in order to ensure the greatest room for manoeuvre in all situations. At 30.09.2012, the solvency ratio was 64%, four percentage points higher than last year. Reducing tied-up funds is also constantly on the Group’s agenda. The Group wishes to provide its shareholders with a return on their investment while maintaining an appropriate level of equity to ensure the Company’s future operations. Against this background, the present capital resources are deemed adequate in the present economic climate.


Annual report 2011/12

Consolidated Note

tDKK

20

Deferred tax Deferred tax at 01.10. Transferred to subsidiary Deferred tax for the year recognised in the income statement Deferred tax for the year recognised in equity Adjustment in respect of previous years

Parent Company

2011/12

2010/11

2011/12

2010/11

7,960

6,998

58

3,706

-

-

-

-3,751

-98

676

-58

73

28

38

-

38

-667

248

-

-8

7,223

7,960

-

58

Intangible assets

2,282

1,765

-

-

Land and buildings

3,542

4,019

-

-

Plant and machinery, etc.

1,371

1,869

-

-

28

149

-

58

Deferred tax at 30.09.

Deferred tax is incumbent on:

Current assets Current liabilities

21

-

158

-

-

7,223

7,960

-

58

36,954

38,939

-

-

Credit institutions Amounts owed to credit institutions relate to: Mortgage debt Overdraft facilities Total carrying amount

-

10,356

-

-

36,954

49,295

-

-

34,855

36,907

-

-

Amounts owed to credit institutions were recognised on the balance sheet as follows: Non-current liabilities

2,099

12,388

-

-

Total carrying amount

Current liabilities

36,954

49,295

-

-

Fair value

38,316

50,922

-

-

2,659

13,134

-

-

Debt falls due as follows: 0-1 years 1-5 years

10,529

11,007

-

-

> 5 years

28,621

32,588

-

-

The loan is a oating-rate mortgage loan in EUR (F1) subject to annual adjustment. The current level of interest is 1.03% p.a. with the principal of tEUR 5,920. The overdraft facility carries oating-rate interest denominated in Danish kroner. The maturity analysis is based on all undiscounted cash ows, including estimated interest payments. Interest payments are estimated on the basis of existing market conditions.

71


72

Notes to the financial statements

Note 22

Lease liabilities Lease liabilities are recognised as follows on the balance sheet: Consolidated 2011/12

Consolidated 2010/11

Minimum lease payment

Interest element

Carrying amount

Minimum lease payment

Interest element

Carrying amount

0-1 years

1,406

-125

1,281

1,250

-164

1,086

1-5 years

3,471

-134

3,337

4,250

-247

4,003

-

-

-

-

-

-

4,877

-259

4,618

5,500

-411

5,089

tDKK

>5 years

Lease liabilities concern the financing of a new ERP system, and financing thereof has been agreed with the Group’s bankers. The agreement runs for five years and expires in 2016.

23

Financial risks and derivative financial instruments Given its operations, investments and financing, the Group is exposed to a number of financial risks, including market risks (currency risks, interest rate risks and risks relating to raw materials), credit risks and liquidity risks. Gabriel’s policy is not to engage in active speculation in financial risks. Risk management thus covers only risks arising directly from the Group’s operations, investments and financing. Management monitors the Group’s risk concentration broken down on customers, geographical areas, currencies, etc. Management also monitors whether the Group’s risks are correlated, and whether the Group’s risk concentration has undergone any changes. The Group’s risk exposure and risk management have remained unchanged from 2010/11. Reference is made to the balance sheet for a specification of the different categories of financial assets and liabilities. The fair value of financial assets and liabilities is in line with the carrying amount apart from amounts owed to credit institutions (see note 21). The Group measures its portfolio of bonds at market value (see note 15). Securities are classified as level 1 “listed prices” under the market value hierarchy. Derivative financial instruments of foreign exchange contracts entered into to hedge future cash flows are accepted under financial assets at market value of tDKK 109. Foreign exchange contracts are valued under generally recognised valuation techniques based on relevant observable exchange rates and classified as level 2 “other input” under the market value hierarchy.


Annual report 2011/12

73

Note 23 cont. Currency risks The Group’s foreign exchange positions in Danish kroner are specified as follows at 30.09.2012:

Trade receivables

Bank loans Trade payables/ credit institutions

Hedged by forward contracts

Net position

DKK

3,695

-954

-

2,741

EUR

22,616

-43,401

-

-20,785

SEK

2,304

609

-5,608

-2,695

NOK

288

398

-

686

4,036

2,805

-

6,841

29,244

-39,589

-5,608

-15,953

tDKK Currency

Other Abroad

The Group’s foreign exchange positions in Danish kroner were as follows at 30 September 2011:

Trade receivables

Bank loans trade payables/ credit institutions

Hedged by forward contracts

Net position

DKK

5,179

-22,733

-

-17,554

EUR

21,932

-45,849

-

-23,917

SEK

2,740

1,661

-

4,401

NOK

551

478

-

1,029

2,201

-971

-

1,230

27,424

-44,681

-

-17,257

tDKK Currency

Other Abroad

The Group has used forward exchange transactions to hedge its risks related to changes in cash flows resulting from exchange rate movements. The effective part of the outstanding forward exchange contract’s market value at 30.09.2012, which is used to fulfil the terms for hedge accounting of future transactions, is recognised directly in equity until the hedged transactions are recognised in the income statement. Forward exchange contracts were entered into with a principal of tDKK 5,608 at 30.09.2012 to hedge exchange rate risks in SEK. A value adjustment of tDKK 109 is recognised in equity at 30.09.2012. The foreign exchange contracts mature within five months.


74

Notes to the financial statements

Note

23 cont. The Group hedges currency risks considering projected future cash flows and projected future exchange rate movements. The majority of sales in Europe are settled in the customer’s currency, while the euro is primarily used for settlement with other international customers. Currency risks generated by income are only of a limited scale, as most income is invoiced in the Scandinavian currencies or euros. Most purchases are settled in Danish kroner or euros. Any changes in the exchange rates at 30.09.2012 are not deemed to have any material impact on results or equity as a result of the low currency exposure at 30.09.2012. Given the Group’s use of derivative financial instruments to hedge the Group’s exposure in relation to expected sales transactions and financial instruments, the Group’s equity will be affected by the recognition of the effective part of the changes in the hedging instruments’ market value in the reserve for cash flow hedging. In 2012/13, the Group’s foreign currency exposure is expected to be essentially unchanged relative to 2011/12. Liquidity and interest rate risks The Group has generated positive cash flows for many years and has thus not been dependent on external financing. At 30.09.2012, the Group had liquid holdings of DKK 19.7 million and a further liquidity reserve of DKK 11.9 million in Danish mortgage credit bonds. At 30.09.2012, the Group had no bank debt and an unused line of credit of DKK 30 million with the Group’s bank. The Group is thus judged to have adequate liquidity to ensure the ongoing financing of future operations and investments. The Group’s bank debt is an ongoing operating credit, while the mortgage loan was taken up as an adjustable rate loan in euros with annual interest adjustments. The lease for the ERP system was drawn up in euros with a variable interest rate. The agreement runs for five years. The bond portfolio consists primarily of short-dated bonds denominated in Danish kroner, adjusting interest to the general societal interest level. Group receivables carry a contractual fixed interest rate during their entire lives. On this basis, an isolated rise or fall of one percentage point in the market rate is judged not to be of major significance for the Group’s profit. Risks relating to raw materials The Group typically enters into cooperative agreements with its most important suppliers to ensure reliability of delivery and to lock prices. As indicated in note 25, Gabriel has concluded purchase agreements for raw material supplies for 2012/13. The Group is not exposed to any major price risks arising from its use of raw materials. Credit risks In line with Group credit risk policy, all major customers and other business partners are regularly credit rated. Credit risk management is based on internal credit lines for customers. Prompted by the financial crisis, the Group has intensified its focus on the approval of customer credit lines as well as on the management and monitoring of customers. Group trade receivables are distributed on numerous customers, countries and markets, ensuring a high degree of risk diversification. On the basis of the Group’s internal credit procedures, it is judged that the quality of the Group’s receivables from sales depends primarily on the debtor’s home country. The creditworthiness of debtors from Scandinavia and the EU is usually higher than that of debtors from other countries. The Group aims to reduce risk through efficient monitoring, follow-up and credit insurance of major foreign and domestic receivables or alternative collateral. Credit insurance has been taken out for all major foreign and domestic receivables at 30.09.2012. The Group’s trade receivables are usually due for payment no later than 1-2 months after delivery. The Group has a past record of minor bad debts and is usually exposed to only a limited risk of major losses. We refer to note 17.


Annual report 2011/12

75

Note

23 cont.

The Group recognised production equipment for the associate Scandye UAB and another business partner as investments. Gabriel has been provided with collateral in the leased equipment and with a guarantee for the amount. The lessees may perform the contracts at their residual values.

24

Operating leases At 30.09.2012, the Group held operating leases for vehicles with a residual lease liability of tDKK 2,252, of which tDKK 979 is due within one year, while the rest is due within 1-3 years. An amount of tDKK 806 was expensed in the financial year as against tDKK 739 in 2010/11.

25

Contingent liabilities and collateral The Parent Company has issued a letter of subordination to the bankers of the subsidiary Gabriel A/S covering the subsidiary’s current bank loans. The Parent Company is jointly taxed with other Danish companies in the Gabriel Holding Group. As administrative company, the Company has unlimited joint and several liability with the other companies in the joint taxation unit for Danish withholding taxes on dividends and interest within the joint taxation unit. Any subsequent corrections to withholding taxes could result in a change in the company’s liability. The subsidiary Gabriel A/S has issued a guarantee assuming primary liability of tDKK 1,094 to Scandye UAB’s bankers in Lithuania as collateral for Scandye UAB’s bank business. As part of usual Group operations, the Group has entered into purchase agreements for future raw material supplies at an amount of tDKK 7,005 to ensure raw material supplies in 2012/13. Claims and warranties do not represent a major expense for the Group. This is the result of the certifications for the ISO 9001 Quality Management Standard since 1991 and the Environmental Management Standard ISO 14001 since 1996. Gabriel has provided collateral of tDKK 44,100 in land and buildings for amounts owed to credit institutions. The carrying amount of land and buildings was tDKK 68,026 at 30.09.2012, while amounts owed to credit institutions (mortgage debt) were tDKK 36,954.

26

Transactions with group companies, major shareholders, Board of Directors and Executive Board The Parent Company’s related parties comprise subsidiaries as well as their Boards of Directors and Executive Boards. Related parties also comprise companies in which the above persons have substantial interests. Gabriel Holding A/S has no related parties exercising control. The Parent Company is jointly taxed with other Danish companies in the Gabriel Holding Group, which means that the company is liable for Danish withholding taxes, etc. within the joint taxation unit. Please see note 25 for further information.


76

Notes to the financial statements

Note

26 cont. Trading with Group enterprises was as follows: Parent Company tDKK Rent from Group enterprises Interest, etc. from Group enterprises Dividends from Group enterprises

2011/12

2010/11

462 7,500

1,242 218 4,000

Transactions with group enterprises were eliminated in the consolidated financial statements in accordance with the accounting policy. The related parties also include associates over which Gabriel exercises significant influence. Trading with the associate Scandye UAB comprised the following: Consolidated tDKK Purchases from associates Interest, etc. from associates

2011/12

2010/11

23,740 432

25,976 502

Apart from executive remuneration disclosed in note 5, the Group did not engage in any transactions with the Board of Directors, Executive Board, executive employees, major shareholders and other related parties in the year under review. 27

Accounting estimates and judgments The carrying amount of certain assets and liabilities is stated on the basis of Management’s estimated impact of future events on the value of these assets and liabilities at the balance sheet date. Estimates important to the financial reporting include the calculation of provisions for inventory obsolescence, write-downs for bad debts, depreciation/amortisation and impairment losses, and contingent liabilities.

28

Events after the balance sheet date The operating company Gabriel A/S established the subsidiary Furnmaster UAB in Lithuania after the end of the financial year. The ownership interest in the company is 90%. FurnMaster UAB is established as a production unit to support the Group’s continuing strategic initiatives on “furniture fabric in use”.

29

New financial reporting regulations The IASB has issued new financial reporting regulations (IASs and IFRSs) and IFRICs which are not mandatory for adoption by Gabriel Holding A/S in the preparation of the 2011/12 annual report. Gabriel Holding A/S expects to implement the new accounting standards and IFRICs upon their mandatory adoption. The new standards and IFRICs are not expected to materially affect Gabriel Holding A/S’s future financial reporting.

30

Accounting policies Gabriel Holding A/S is a limited liability company domiciled in Denmark. The financial section of the annual report for the period 01.10.2011-30.09.2012 comprises the consolidated financial statements of Gabriel Holding A/S and its subsidiaries (the Group) and separate parent company financial statements.


Annual report 2011/12

77

Note

30 cont.

The consolidated financial statements and the parent company financial statements of Gabriel Holding A/S for 2011/12 were prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and disclosure requirements in the Danish Financial Statements Act. The Board of Directors and the Executive Board discussed and approved the annual report for 2011/12 of Gabriel Holding A/S on 15 November 2012. The annual report is presented to the shareholders of Gabriel Holding A/S for approval at the annual general meeting on 13 December 2012. Basis for preparation The consolidated financial statements and the parent company financial statements are presented in DKK rounded to the nearest DKK 1,000. The accounting policies as described below were applied consistently during the year under review and for the comparative figures. Comparative figures are not restated for standards to be implemented in the future. As the implemented standards and IFRICs have not affected the balance sheet at 1 October 2011 and related notes, the opening balance sheet and related notes have been omitted. Change in accounting policies With effect from 1 October 2011, Gabriel Holding A/S has implemented: ∙ Amendments to IFRS 7 Disclosures – Transfer of Financial Assets. ∙ Amendments to IFRS 1 Severe Hyperinflation and Removal of Fixed Assets for First-Time Adopters. ∙ Amendments to IAS 12 Deferred Tax: Recovery of Underlying Assets. The new standards and IFRICs did not affect the recognition and measurement in 2011/12. ACCOUNTING POLICIES APPLIED Consolidated financial statements The consolidated financial statements comprise the Parent Company Gabriel Holding A/S and subsidiaries in which Gabriel Holding A/S exercises control, i.e. the power to govern the financial and operating policies so as to obtain benefits from its activities. Control is obtained when the Company directly or indirectly holds more than 50% of the voting rights in the subsidiary, or which it controls in some other way. Enterprises over which the Group exercises significant influence, but which it does not control, are considered associates. Significant influence is generally obtained by direct or indirect ownership or control of more than 20% of the voting rights but less than 50%. Whether Gabriel Holding A/S exercises control or significant influence is determined on the basis of the potential voting rights exercisable at the balance sheet date. The consolidated financial statements comprise the Parent Company Gabriel Holding A/S and the subsidiaries Gabriel A/S, Gabriel Ejendomme A/S, ZenXit A/S and Gabriel (Tianjin) International Trading Co. Ltd. Scandye UAB is considered an associate and was recognised as an investment in associates in the annual report. The consolidated financial statements were prepared as a consolidation of the Parent Company’s and the individual subsidiaries’ financial statements prepared according to the Group’s accounting policies. On consolidation, intra-group income and expenses, shareholdings, intra-group balances and dividends and realised and unrealised gains on intra-group transactions are eliminated. Unrealised gains on transactions with associates are eliminated in proportion to the Group’s ownership share of the enterprise. Unrealised losses are eliminated in the same way as unrealised gains to the extent that impairment has not taken place.


78

Notes to the financial statements

Note

30 cont. Foreign currency translation A functional currency is set for each of the reporting group enterprises. The functional currency is the currency used in the primary economic environment in which the individual reporting enterprises operate. Transactions denominated in other currencies than the functional currency are transactions denominated in foreign currencies. At initial recognition, transactions denominated in foreign currencies are translated to the functional currency at the exchange rates ruling at the transaction date. Foreign exchange differences arising between the exchange rates at the transaction date and at the date of payment are recognised in the income statement as financial income or financial expenses. Receivables, payables and other monetary items denominated in foreign currencies are translated to the functional currency at the exchange rates on the balance sheet date. The difference between the exchange rates on the balance sheet date and at the date on which the receivable or payable arose or was recognised in the latest financial statements is recognised in the income statement as financial income or financial expenses. On recognition in the consolidated financial statements of subsidiaries with a functional currency other than DKK, the income statements are translated at the exchange rates at the transaction date and the balance sheet items are translated at the exchange rates at the balance sheet date. An average exchange rate for the month is used as the exchange rate on the transaction date to the extent that this does not significantly distort the presentation of the underlying transactions. Foreign exchange differences arising on the translation of the share of the opening balance of equity of these enterprises at the exchange rates on the balance sheet date, and on translation of the income statements from the exchange rates on the transaction date to the exchange rates on the balance sheet date, are recognised as other comprehensive income in a separate translation reserve in equity. On recognition in the consolidated financial statements of associates with a functional currency other than DKK, the share of the profit/loss for the year is translated at average exchange rates, and the share of equity including goodwill is translated at the exchange rates at the balance sheet date. Foreign exchange differences arising on translation of the opening equity of foreign associates at the exchange rates on the balance sheet date and on translation of the share of profit/loss for the year from average exchange rates to the exchange rates on the balance sheet date are recognised as other comprehensive income in a separate translation reserve in equity. Derivative financial instruments Derivative financial instruments are recognised and measured on the balance sheet at fair value. Positive and negative fair values of derivative financial instruments are included in other receivables and payables, respectively. Fair values for derivative financial instruments are measured on the basis of current market data and acknowledged valuation methods. Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of the fair value of a recognised asset or liability are recognised in the income statement together with changes in the fair value of the hedged asset or liability as regards the portion hedged. Changes in the fair value of derivative financial instruments designated as and qualifying for recognition as a hedge of future cash flows, and which effectively hedge changes in future cash flows, are recognised in equity under a separate reserve for hedging transactions until the hedged cash flows affect the income statement. At this time, any gain or loss regarding such hedging transactions is transferred from equity and recognised in the same item as the hedged item. For derivative financial instruments that do not qualify for hedge accounting, changes in fair value are recognised in the income statement as financial income or financial expenses. INCOME STATEMENT Revenue Revenue from the sale of goods for resale and finished goods is recognised in the income statement provided that delivery and transfer of risk to the buyer has taken place before year end and that the income can be reliably measured and is expected to be received. Rental income is accrued and recognised on a straight-line basis over the period in accordance with contracts entered into. Revenue is measured ex VAT, taxes and discounts in relation to the sale.


Annual report 2011/12

79

Note

30 cont. Other operating income Other operating income comprises items secondary to the principal activities of the enterprise, including gains on the disposal of intangible assets and property, plant and equipment. Cost of sales Cost of sales comprises costs incurred in generating revenue for the year. These costs include direct and indirect costs of raw materials, consumables, goods for resale, power, etc. Other external costs Other external costs are mainly costs concerning sales, distribution, maintenance, premises and administration. Profit/loss from investments in associates recognised in the consolidated financial statements The proportionate share of the results after tax of the individual associates is recognised in the consolidated income statement after full elimination of the proportionate share of intra-group profits/losses. Financial income and expenses Financial income and expenses comprise interest income and expenses, gains and losses as well as write-downs on securities, payables and transactions denominated in foreign currencies, amortisation of financial assets and liabilities and surcharges and refunds under the on-account tax scheme, etc. Realised and unrealised gains and losses on derivative financial instruments which are not designated as hedging arrangements are also included. Dividends received from investments in subsidiaries are recognised in the parent company income statement in the financial year in which the dividends are declared. If distributed dividends exceed comprehensive income for the relevant period, an impairment test is made. Tax on profit/loss for the year Gabriel Holding A/S is jointly taxed with the subsidiaries Gabriel A/S, Gabriel Ejendomme A/S and Zenxit A/S. The current Danish corporation tax is allocated between the jointly taxed Danish companies in proportion to their taxable incomes (full absorption with deduction for tax losses). The jointly taxed companies are taxed under the on-account tax scheme. The tax for the year comprises current tax and changes in deferred tax for the year. The tax expense relating to the profit/ loss for the year is recognised in the income statement, and the tax expense relating to changes directly recognised in equity is recognised directly in equity. BALANCE SHEET Development projects Development costs comprise salaries, amortisation and other costs directly or indirectly attributable to the Company’s development activities. Public subsidies for the financing of development projects are offset against the costs covered by the subsidy and recognised when there is a reasonable degree of assurance that they will be received. Development projects that are clearly defined and identifiable, where the technical utilisation degree, sufficient resources and a potential future market or development opportunities in the Company are evidenced, and where the Company intends to produce, market or use the project, are recognised as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings can cover production and distribution costs, administrative expenses and development costs. Other development costs are recognised in the income statement as incurred. Capitalised development costs are measured at the lower of cost less cumulative amortisation and impairment losses and recoverable amount.


80

Notes to the financial statements

Note

30 cont. Following the completion of the development work, development costs are amortised on a straight-line basis over the estimated useful life. The usual amortisation period is five years. Property, plant and equipment Land and buildings, plant and machinery, fixtures and fittings, other plant and equipment are measured at costs less cumulative depreciation and impairment losses. Cost comprises the purchase price and any costs directly attributable to the acquisition until the date on which the asset is available for use. The cost of self-constructed assets comprises direct and indirect costs of materials, components, suppliers, and wages and salaries as well as borrowing costs from specific and general borrowing directly relating to the construction of the individual asset. Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items which are depreciated separately. The cost of finance leases is stated at the lower of fair value and the net present value of future minimum lease payments. When the net present value of the future lease payments is calculated, the interest rate implicit in the lease or the incremental borrowing rate is used as the discount factor. Subsequent costs arising from e.g. the replacement of components of property, plant and equipment are recognised in the carrying amount of the relevant asset when it is probable that future economic benefits will flow to the Group. The components replaced will be derecognised on the balance sheet and the carrying amount will be transferred to the income statement. All other ordinary costs of repair and maintenance will be recognised in the income statement as incurred. Depreciation is provided on a straight-line basis over the expected useful lives of the assets/components as follows: Buildings Plant and machinery Fixtures and fittings, other plant and equipment Land is not depreciated.

10-25 years 3-8 years 3-8 years

The depreciation is calculated on the basis of the residual value less impairment losses. Depreciation period and residual value are determined on the acquisition date and reassessed annually. If the residual value exceeds the carrying amount, depreciation is discontinued. When the depreciation period or the residual value is changed, the effect on depreciation is recognised prospectively as a change in accounting estimates. Gains and losses on the disposal of property, plant and equipment are determined as the difference between the sales price less disposal costs and the carrying amount at the date of disposal. Gains or losses are recognised in the income statement as other operating income or other operating costs, respectively. Impairment of non-current assets The carrying amount of non-current assets is subject to an annual impairment test. When there is an indication that assets may be impaired, the recoverable amount of the asset is determined. The recoverable amount is the higher of an asset’s net selling price less anticipated disposal costs and its value in use. The value in use is calculated as the net present value of forecast future cash flows from the cash-generating unit to which the asset belongs. An impairment loss is recognised if the carrying amount of the net assets exceeds its recoverable amount.


Annual report 2011/12

81

Note

30 cont.

Investments in associates in the consolidated financial statements Investments in associates are measured according to the equity method. Investments in associates are measured at the proportionate share of the enterprises’ net asset values calculated in accordance with the Group’s accounting policies plus or minus the proportionate share of unrealised intra-Group profits and losses and plus or minus the carrying amount of goodwill. Investments in associates are tested for impairment when there is an indication of impairment. Amounts owed by associates are measured at amortised cost. Write-downs are made for losses on bad debts. Investments in subsidiaries in the parent company financial statements Investments in subsidiaries are measured at cost. Where the recoverable amount is lower than cost, investments are written down to this lower value. At the distribution of reserves other than retained earnings in subsidiaries, the distribution will reduce the cost of investments when the distribution is characterised as repayment of the Parent Company’s investment. Amounts owed by associates Amounts owed by associates are attributable to lease contracts for assets of which the Group is the owner, but of which all major risks and maintenance liabilities are incumbent on the associate. Finance leases are recognised on the balance sheet at the net present value of future lease payments. The interest rate implicit in the lease is used for the calculation of the net present value. Securities Listed bonds classified as available-for-sale are recognised as non-current assets at cost at the trade date and are measured at fair value corresponding to the market price. Unrealised value adjustments are recognised directly in equity except for foreign exchange adjustments of bonds denominated in foreign currencies, which are recognised in the income statement as financial income or financial expenses. On realisation, the cumulative value adjustment recognised in equity is transferred to financial income or financial expenses in the income statement. Inventories Inventories are measured at cost in accordance with the FIFO method. Where the net realisable value is lower than cost, inventories are written down to this lower value. Goods for resale, raw materials and consumables are measured at cost, comprising purchase price plus delivery costs. Finished goods and work in progress are measured at cost, comprising the cost of raw materials, consumables, direct wages/salaries and indirect production overheads. Indirect production costs comprise indirect materials, wages/salaries and maintenance as well as depreciation of production equipment, buildings and equipment and factory administration and management. The net realisable value of inventories is calculated as the sales amount less costs of completion and costs necessary to make the sale, and is determined taking into account marketability, obsolescence and development in expected sales price. Receivables Receivables are measured at amortised cost. Write-downs are made for losses on bad debts when there is an objective indication of an impairment loss. In such cases, a write-down is made individually for each specific receivable. Write-downs are determined as the difference between the carrying amount and the net present value of projected cash flows, including the net realisable value of any collateral.


82

Notes to the financial statements

Note

30 cont. Equity Dividends

Proposed dividends are recognised as a liability at the date on which they are adopted at the annual general meeting (declaration date). The expected dividend payment for the year is disclosed as a separate item under equity. Treasury shares

Cost of acquisition of, consideration received for and dividends received from treasury shares are recognised directly as retained earnings in equity. Gains and losses on disposal are not recognised in the income statement. Translation reserve

The translation reserve in the consolidated financial statements comprises foreign exchange differences arising on translation of financial statements of foreign enterprises from their funtional currencies to Danish kroner. Hedging reserve

The hedging reserve comprises the cumulative net change in the fair value of hedging transactions which qualify for recognition as a cash flow hedge and where the hedged transaction has not been realised. Reserve for fair value adjustment

The reserve for fair value adjustment comprises the cumulative change in the fair value of financial assets available for sale. The reserve, which forms part of the Company’s distributable reserves, is eliminated and transferred to the income statement as the investment is sold or written down. Current tax and deferred tax Current tax payable and receivable is recognised on the balance sheet as tax computed on the taxable income for the year, adjusted for tax on the taxable income of prior years and for tax paid on account. Deferred tax is measured using the balance sheet liability method on all temporary differences between the carrying amount and the tax value of assets and liabilities. Where alternative tax rules can be applied to determine the tax base, deferred tax is measured based on the planned use of the asset or settlement of the liability. Deferred tax assets are recognised at the expected value of their utilisation, either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal tax entity and jurisdiction. Deferred tax is measured according to the tax rules and at the tax rates applicable at the balance sheet date when the deferred tax is expected to crystallise as current tax. The change in deferred tax as a result of changes in tax rates is recognised in the income statement. Financial liabilities Amounts owed to credit institutions etc. are recognised at the date of borrowing at the net proceeds received less transaction costs paid. In subsequent periods, the financial liabilities are measured at amortised cost, corresponding to the capitalised value using the effective interest rate. The difference between the proceeds and the nominal value is accordingly recognised in the income statement as financial expenses over the term of the loan. Financial liabilities also include the capitalised residual obligation on finance leases measured at amortised cost. Liabilities comprising trade payables, group enterprises and other payables are measured at nominal value.


Annual Report 2011/12

83

Note

30 cont. Leasing For accounting purposes lease obligations are divided into finance and operating leases. Leases are classified as finance leases if they transfer substantially all the risks and rewards incidental to ownership to the lessee. All other leases are classified as operating leases. The accounting treatment of assets held under finance leases and lease obligations is described under Property, plant and equipment and Financial liabilities, respectively. Operating lease payments are recognised in the statement of comprehensive income on a straight-line basis over the lease term. CASH FLOW STATEMENT The cash flow statement shows the cash flows from operating, investing and financing activities for the year, the year’s changes in cash and cash equivalents as well as cash and cash equivalents at the beginning and end of the year. Cash flows from operating activities

Cash flows from operating activities are calculated as the share of the profit/loss adjusted for non-cash operating items, changes in working capital and corporation tax paid. Cash flows from investing activities

Cash flows from investing activities comprise payments in connection with acquisitions and disposals of enterprises and activities and of intangible assets, property, plant and equipment and other non-current assets as well as the acquisition and disposal of securities not recognised as cash and cash equivalents. Cash flows from financing activities

Cash flows from financing activities comprise the raising of loans, repayment of interest-bearing debt, acquisition of treasury shares and payment of dividends to shareholders. Bank loans/cash and cash equivalents The item comprises cash and bank loans (overdraft facilities). SEGMENT INFORMATION The Gabriel Group has only one reportable business segment, as all products relate to furniture fabrics and related textiles. The products are sold to selected international leading manufacturers and key account customers specialised in upholstered furniture, seats and upholstered surfaces. Gabriel A/S accounts for most of the activities. The manufacturing processes are practically identical for the individual business areas, and the sales divisions service the same type of customer groups. In addition, the product distribution channels are the same. Revenue generated by the Western European markets accounts for more than 90% of total revenue, where the economic and political climates, activities, risks and currency exposure remain undifferentiated. Consequently, the Group’s income and expenses as well as assets and liabilities are not broken down on operating segments in the notes. The geographical break-down of revenue and non-current assets is disclosed based on internal management reporting.


ANNUAL REPORT 2011/2012 | GABRIEL HOLDING A/S

Gabriel Holding A/S | Hjulmagervej 55 | DK-9000 Aalborg Phone: +45 9630 3100 | Fax: +45 9813 2544 | E-mail: mail@gabriel.dk | www.gabriel.dk


Gabriel A/S - Annual report 2012