TenCate Annual Report 2013

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Annual Report 2013 of TenCate. Royal TenCate is listed on the NYSE Euronext (AMX)

Annual Report 2013 of TenCate. Royal TenCate is listed on the NYSE Euronext (AMX)

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  • 1. Royal Ten Cate Annual report 2013 PROTECTING PEOPLE
  • 2. Organisation Sectors and market groups Royal Ten Cate ADVANCED TEXTILES & COMPOSITES SECTOR GEOSYNTHETICS & GRASS SECTOR OTHER ACTIVITIES SECTOR PROTECTIVE FABRICS GEOSYNTHETICS INKJET TECHNOLOGY Protective and safety fabrics and multi-risk solutions for firefighting and defence, industry and services. Synthetic fabrics, non-wovens, grids and systems for use in infrastructure, civil engineering, water management, the environmental sector, agriculture and horticulture. Digital inkjet technologies for industrial production processes. OUTDOOR FABRICS GRASS TECHNICAL COMPONENTS Protective fabrics for outdoor applications, such as the camping and awning market. Synthetic turf components and integrated synthetic turf systems for top-flight sports, recreation and landscaping. Technical rollers and components, particularly for printers, copiers, fax machines, postal sorting machines and ATMs. ADVANCED COMPOSITES HOLDING & SERVICES Advanced composites, compounds and systems for the space and aerospace industry and industrial applications, including automotive, industrial components and energy generation. Holding company activities, including finance, accounting, patent development and management, investor relations, business development, information technology, human resources management and insurance. ADVANCED ARMOUR Advanced composites, ceramics and integrated systems for the active and passive protection of police, army, air force, navy and civilian service personnel, vehicles and vessels. . A legal overview of operating companies, associated companies and other interests can be found on the inside of the back flap.
  • 3. Focus From trends to solutions WORLDWIDE TRENDS SAFETY SUSTAINABILITY PROTECTING PEOPLE IN TRANSIT IN HABITATS AT WORK DURING LEISURE Mobility continues to grow apace. Increasing prosperity is making people worldwide more mobile and giving rise to increased transportation of goods and raw materials within and between continents, and even to extraterrestrial destinations. Making those transport movements increasingly efficient, safe and sustainable is a challenge in itself. Urbanisation is increasing steadily across all continents. Urban areas are growing ever larger and more complex. Societies are changing into compact networks of cities. That requires a high degree of organisation and logistics with safe and sustainable infrastructure. The working environment of personnel in industry and services may be risky, hazardous or even hostile. Personal protection in the workplace, on the road, on-site or during the mission is essential in order to work professionally and safely. Leisure time increases as prosperity grows. In addition to tourism and recreation, people are enjoying sports as amateurs or top-flight performers. Leisure activities and sports must above all be pursued responsibly. That requires safe, sustainable facilities. END-MARKETS MOBILITY INFRASTRUCTURE WATER MANAGEMENT DEFENCE PERSONAL PROTECTION SPORT AND LEISURE Composites for vehicles, vessels, aircraft, helicopters and mobility concepts Geotextiles for infrastructure works; composites for structures; synthetic turf for landscaping Geotextiles and systems for water management, maritime projects and dewatering Materials for protection of military personnel; vehicle, vessel, aircraft and helicopter armour Materials for protection of persons in their working and living environments Synthetic turf for sport; outdoor fabrics; composites for sport applications
  • 4. Royal Ten Cate PROTECTING PEOPLE VISION TenCate focuses on the growing demand for protection of people and their living and working environments. The worldwide trends towards ‘safety and protection’ and ‘sustainability and the environment’ serve as the focal points of the protective solutions which TenCate provides. The four market themes are In transit, In habitats, At work and During leisure. The end-markets in which TenCate operates are mobility, infrastructure, water management, defence, personal protection, sport and leisure. TenCate’s vision is based on the development (‘buy & build’) of a broad, advanced technological base. As a company in the technical textile sector, TenCate occupies a broad and innovative technological position worldwide (including patent positions). That enables the company to develop materials which are an optimum match for individual market requirements in the chosen market themes of safety and protection of man and the environment. MATERIALS ENGINEERING AND INNOVATION MISSION TenCate is a multinational company which combines textile technology with chemical process technology in the development and production of functional materials, modules and systems which are an optimum match for specific market requirements. It is also increasingly important to reduce the ancillary costs of the chosen solution, since materials and modules form part of a total system. The technological base determines the high-grade applications (product-market-technology combinations) which TenCate supplies in selected niche markets. TenCate aims to maintain a leading position in the provision of sustainable solutions for personal protection and protection of living and working environments. Developing the right product portfolio, tailored to specific market requirements, drawing attention to solutions in an effective way and incorporating the control of safety risks in specifications are key parts of the way in which TenCate fulfils its mission. TECHNICAL TEXTILES STRATEGY TenCate is the world market leader in technical textiles. These materials have specific characteristics which are usually defined and qualified on the basis of functional specifications. TenCate maintains an active portfolio policy and with its advanced technological base is able to offer the widest range of functionalities in materials, modules and systems. It does this independently or in co-operation with third parties. TenCate operates principally in six end-markets reflecting the global trends of safety and sustainability. TenCate’s materials are used in particular for: ■ Personal safety and protection of living and working environments ■ Modernisation of army, firefighting and police equipment ■ Aerospace ■ Water management, infrastructure and environmental solutions ■ Industrial applications TenCate’s strategy is based on value-chain management. This business model determines how TenCate – based on its position in the value chain – creates value, establishes value in products and systems and adds value to customer-focused system solutions. The end-user is central in this process. The cornerstones of this policy are end-user marketing, technological innovation, cost leadership and product differentiation. The creation of network structures with partners in the value chain adds a market-focused dimension to this business model. The aim is to improve access to markets and strengthen the competitive position, thereby giving fresh impetus to the growth of the company. Profile Material technology group
  • 5. Organisation, Focus and Profile Inside cover Key developments in 2013 2 Assessment of 2013 action plans 3 Key data 2013 4 Key figures 2013 6 The TenCate share 7 Foreword by the Chairman of the Executive Board 10 Protecting people in transit 14 Business overview 15 Vision, mission and strategy 16 Strategic objectives 17 Business model and value creation 18 Strategic objectives and progress 23 Indicators 24 Sectors 32 Corporate information 41 Business context 47 Business environment 48 Stakeholders 50 Materiality matrix 52 SWOT analysis 54 Risk management 56 Governance 59 Executive Board 60 Supervisory Board 61 Report of the Supervisory Board 62 Corporate governance 65 Performance 67 Report of the Executive Board 68 Sector revenues and results 72 Outlook 93 Outlook for 2014 94 Action plans for 2014 95 Corporate initiatives for 2014 96 Statement by the Executive Board 97 Financial statements 99 Financial statements 2013 100 Other information 151 Ten-year summary 154 Glossary 156 Means of communication 158 Colophon 160 List of subsidiaries, associated companies and other interests Inside cover Contact Outside cover Royal Ten Cate Annual Report 2013 .. A summary of this annual report is available as a printed Annual Review through royal@tencate.com .. An interactive digital version of this report is available at www.tencateannualreports.com A legal overview of operating companies, associated companies and other interests can be found on the inside of the back flap.
  • 6. 2 |  TenCate annual report 2013  |  Key developments in 2013 Decrease in results of Geosynthetics & Grass sector ■■ EBITA of the Geosynthetics & Grass sector declined by 11% to € 27.9 million, mainly due to a weak performance in the TenCate Geosynthetics market group in Asia and high initial marketing costs and volatile raw material costs in the Grass group. Strong improvement in profitability of Other Activities ■■ EBITA of Other Activities (Xennia Technology, TenCate Enbi and Holding & Services) improved to –€ 0.5 million (2012: –€ 4.9 million). The improved profitability was mainly attributable to lower costs at Xennia Technology combined with a higher gross margin as a result of the strategic reorientation. Revenues declined by 4% to € 1,012 million ■■ The decline in revenues was once again concentrated in the American and European defence markets. This was mainly due to the tightening of defence policy in the United States, with US troops being withdrawn from foreign war zones at an accelerated pace. ■■ Revenues outside government-related markets grew positively. The proportion of revenues generated in the private market increased to 53% (2012: 47%). Operating result before amortisation (EBITA) € 48.7 million (2012: € 50.1 million); net profit € 19.0 million (2012: € 20.9 million) ■■ The decrease in revenues in the defence market had a major effect on the operating result before amortisation (EBITA). Cost control measures mitigated the decline in profit somewhat, as a result of which the organic decline in EBITA compared to 2012 was limited to 3%. ■■ Non-recurring costs had less impact than in the previous year. Non-recurring costs amounted to € 5.9 million (2012: € 8.0 million), mainly due to writedowns of inventories in TenCate Protective Fabrics, which took place predominantly in the second half of the year. ■■ The normalised operating result (EBITA) in 2013 amounted to € 54.6 million (–6% compared to 2012). ■■ EBIT remained unchanged compared to 2012 at € 35.6 million. ■■ The 2013 net profit amounted to € 19.0 million (2012: € 20.9 million). ■■ Net interest-bearing debt decreased by €  41 million in 2013 to € 189 million, with a debt ratio of 2.27 (2012: 2.55). Lower revenues in defence market affect profitability of Advanced Textiles & Composites sector ■■ EBITA of the Advanced Textiles & Composites sector declined by 9% to € 21.3 million due to the sharp fall (–40%) in defence-related revenues. Key developments in 2013
  • 7. 3TenCate annual report 2013  |  Assessment of 2013 action plans | Developments in emerging geographic markets ■■ Revenue growth in new geographic markets slowed, partly due to declining economic growth in the markets concerned. TenCate continues to see opportunities in markets such as South America and China. ■■ TenCate critically assesses partnerships in emerging markets. Particular care is exercised in the protection of patents and process knowledge. ■■ Further steps were taken in China in collaboration with aviation industry research establishments for the promising development of thermoplastic composites in the new aircraft by Caiga and Comac. However, this is a long-term development. At the beginning of 2014 a marketing and development agreement was signed with Shanghai Leadgo-tech to support the market for composites for the Chinese aviation industry. Further revenue growth in composites ■■ Amber Composites (UK) was acquired at the beginning of 2013, giving TenCate accelerated access to the market for automotive composites (thermoset). ■■ Although revenues in the automotive market are still not significant, a number of interesting development projects (demonstrators) were initiated. The first revenues were generated in the Formula 1 and sports car market segment. Some of the developments are of a long-term nature. ■■ Outside the space and aerospace market, materials were developed with partners, including for the electronics and oil and gas industries (pipelines). Start of production based on digital inkjet technology at TenCate Protective & Outdoor Fabrics ■■ The first production printer came off the line in mid-2013. This process was developed specifically for the outdoor market. The first production trials took place successfully. Customer-specific products are being launched at the beginning of 2014. The primary advantage of this new process technology is that customer-specific production runs can be offered with very short lead times. It also allows the manufacture of products which cannot be produced industrially using analogue technology. Assessment of 2013 action plans Increased importance of marketing ■■ TenCate intensified its activities in the field of marketing and sales. This was particularly the case in TenCate Grass. New synthetic turf systems were successfully introduced. The creation of new standards for quality and sustainability in global market developments is immensely important. There was also increased marketing and sales activity in the worldwide Water & Environment business unit of the Geosynthetics group, which led to revenue growth in this segment. ■■ Attention was devoted to upgrades of websites and the rollout of digital media in various market groups. Focus on successful market niches and partnerships ■■ Growth was achieved in the leading brands operated by TenCate (TenCate Geotube® , TenCate Tecasafe™ Plus, TenCate Cetex® etc.). TenCate gave greater focus to the product portfolio and adjusted its marketing efforts accordingly. ■■ Partnerships, most of which are still in the initial phase, developed positively. This had a strong impact on the desired positioning in various markets, providing a positive basis for future revenue growth. ■■ In September a long-term agreement was concluded with US Army Research, Development and Engineering Command (RDECOM) for collaboration and development of the TenCate ABDS™ active blast countermeasure system. Continuing profit recovery at TenCate Grass ■■ The ambitions in the Grass group were only partly fulfilled. Component production (upstream) recorded growth in results, while the downstream activities recorded a decrease, partly due to a steep rise in marketing and promotion costs. The integration of the downstream activities had a positive effect on the cost level. ■■ The market climate, with a continuing deterioration of profit margins, provided no support for ambitions in this area. Profitability is under continuing pressure across the entire sector, particularly in geographic markets with low quality awareness. Continuing focus on sustainable cost savings ■■ Control of costs and working capital proved effective. The number of FTEs was reduced by 198 in 2013 in order to adapt the cost base – of TenCate Protective Fabrics among others – to the decrease in (defence-related) revenues. TenCate intends to keep the cost base at a structurally low level. Cost control therefore remains high on the agenda.
  • 8. 4 |  TenCate annual report 2013  |  Key data 2013 Key data 2013 1,200 900 600 300 0 2008 2009 2010 2011 2012 2013 – 4% € 1,012.0 mln REVENUES 120 90 60 30 0 2008 2009 2010 2011 2012 2013 – 3% € 48.7 mln EBITA 60 45 30 15 0 2008 2009 2010 2011 2012 2013 – 9% € 19.0 mln NET RESULT 1.2 0.9 0.6 0.3 0 2008 2009 2010 2011 2012 2013 0% 0.50 DIVIDEND PER SHARE (IN € ) 2.4 1.8 1.2 0.6 0 2008 2009 2010 2011 2012 2013 – 11% 0.72 NET EARNINGS PER SHARE (IN € ) – 7% € 517.8 mln € 66.4 mln € 427.8 mln 0% – 5% 42% 51% 7% Advanced Textiles & Composites Geosynthetics & Grass Other activities 22% 3,320 936 78% 22% 78%Female Male BREAKDOWN OF EMPLOYEES 4,800 3,600 2,400 1,200 0 2008 2009 2010 2011 2012 2013 – 4% 4,256 EMPLOYEES REVENUE BREAKDOWN BY SECTOR – 9% € 27.9 mln – € 0.5 mln € 21.3 mln – 11% 44% 57% –1% Advanced Textiles & Composites Geosynthetics & Grass Other activities EBITA BY SECTOR
  • 9. 5TenCate annual report 2013  |  Key data 2013 | TenCate has its own production sites (■) and sales offices (■) in the following countries: Americas NORTH AMERICA United States Canada SOUTH AMERICA Brazil EMEA EUROPE Austria Belgium Czech Republic Denmark France Germany Hongary Ireland Italy Netherlands Poland Romania Spain Switzerland United Kingdom AFRICA Benin South-Africa MIDDLE EAST Dubai AsiaPacific ASIA China India Malaysia Singapore Thailand South Korea OCEANIA Australia New Zealand Production and Sales Sales Geographic spread of revenues in 2013 41% 44% 1,595 By destination By origin Employees 43% 47% 1,726 11% 7% 859 NORTH AMERICA SOUTH AMERICA PACIFIC EMEA ASIA 3% 0% 0 2% 2% 76
  • 10. 6 |  TenCate annual report 2013  |  Key data 2013 PROFIT AND LOSS ACCOUNT 2012* 2013 Revenues 1,049.0 1,012.0 Operating result before depreciation and amortisation (EBITDA) 87.2 83.5 Operating result before amortisation (EBITA) 50.1 48.7 Normalised operating result before amortisation (EBITA) 58.1 54.6 Operating result before amortisation as % of revenues 4.8% 4.8% Operating result (EBIT) 35.6 35.6 Net result 20.9 19.0 Normalised net result 26.2 23.2 CONSOLIDATED BALANCE SHEET AND RETURN Net invested capital (year-end) 750.5 708.4 Return (EBITA) on average net invested capital 6.2% 6.4% Net interest-bearing debt (year-end) 229.9 189.2 CONSOLIDATED CASH FLOW Cash flow from operating activities 101.8 75.1 Cash flow from investing activities – 33.4 – 32.5 Cash flow from operating and investing activities 68.4 42.6 DEBT RATIO Net debt / EBITDA ratio 2.55 2.27 SHARES IN ISSUE (X 1,000) Number of shares in issue at year-end 26,498 26,791 Weighted average number of shares in issue (before dilution) 25,895 26,225 Weighted average number of shares in issue (after dilution) 26,040 26,366 PER-SHARE DATA Net result 0.81 0.72 Diluted net result 0.80 0.72 Dividend 0.50 0.50 Equity 17.25 17.70 EMPLOYEES Number of staff years at year-end ** 4,454 4,256 –  of which in the Netherlands 795 774 * Adjusted for accounting policy change pensions. ** Excluding temporary personnel. (in millions of euros unless stated otherwise) Key figures 2013
  • 11. 7TenCate annual report 2013  |  The TenCate share | The decrease in the debt position and a rise in the results in the third quarter of 2013 also had a positive effect on the share price. The highest share price was recorded in November 2013, at € 23.95. The TenCate share ended the year at a price of € 22.90, representing a rise of 15% compared to the starting price of €  19.87. With the inclusion of dividends, TenCate shareholders earned a return of 18% in 2013. The total volume of trading in the share on NYSE Euronext Amsterdam in 2013 was 8% lower than in 2012. GENERAL INFORMATION The TenCate share is listed on NYSE Euronext Amsterdam and forms part of the Amsterdam AMX index. The weighting of the share in the AMX index on 31 December 2013 amounted to 2.04%. TenCate has been listed as an option fund on NYSE Life in Amsterdam since 2011. The TenCate share is also traded on the Chi-X, Equiduct, Turqoise and BATS alternative exchanges. In 2013 over 80% of the shares were traded on NYSE Euronext Amsterdam. The share is followed by analysts in leading banks and securities houses in the Netherlands and Belgium. SHARE PRICE PERFORMANCE IN 2013 The equity markets in Europe staged a recovery in 2013 due to an easing of tensions in the eurozone. The TenCate share initially underperformed the AMX and MSCI Europe indices due to TenCate’s high proportion of government-related revenues and continuing cuts by the US Ministry of Defence. The recovery in the TenCate share price began in September after the publication of a number of positive reports concerning, among other things, the long-term CRADA contract with the US Army RDECOM for the TenCate ABDS™ active blast countermeasure system and the collaboration with various parties of strategic/commercial relevance. The positive price performance was coupled with relatively high trading volumes, with over two million shares traded in September, equivalent to 9% of the total number of shares in issue. The TenCate share VOLUME OF TRADING IN TENCATE SHARES 0 650 1,300 1,950 2,600 January 2013 June December number of shares x 1,000 AMX MSCI Europe KTC 30.0 22.5 15.0 7.5 0.0 –7.5 –15.0 January February March April May June July August September October November December 2013AMXKTC MSCI Europe DATA PER SHARE; IN % Source: NYSE Euronext ISIN code: NL 0000375731 Reuters code: NTCN.AS Bloomberg code: KTC.NA
  • 12. 8 |  TenCate annual report 2013  |  The TenCate share .. The TenCate share The majority of the institutional shareholders are based in the Netherlands. The proportion of shares held in the United States and the United Kingdom decreased compared to 2012. COMMUNICATION POLICY TenCate participated actively in roadshows and investor conferences in Europe in 2013. Having regard to its transparency objective, TenCate sets great store by intensive dialogue with analysts, shareholders and potential shareholders. A Capital Markets Day was held in November at the production site in Primarette, France. Analysts and shareholders were informed in particular about the activities of TenCate Advanced Armour EMEA and TenCate Grass EMEA. Background information and details of the various strategic themes are provided in TenCate’s txtures magazine, on the company’s website and in the updated IR app. DIVIDEND POLICY AND PROPOSED DIVIDEND TenCate pursues a balanced dividend policy in which a decrease in profit, such as that which occurred in 2013, is reflected to a somewhat muted extent in the change in dividend. The dividend policy is based on a distribution rate of 40%. An optional dividend is usually offered. In 2013, 60% of shareholders opted to receive a cash dividend. Having regard to the current results, a dividend pay-out ratio of 69% is proposed. The dividend would therefore amount to € 0.50 per € 2.50 par value share, payable at shareholders’ discretion in shares as a charge to the share premium reserve or in cash. NUMBER OF SHARES IN ISSUE Number of shares in issue on 31 December 2012 26,497,666 Increase in share capital as a result of stock dividend 293,701 Number of shares in issue on 31 December 2013 26,791,367 CHANGES IN THE NUMBER OF SHARES IN ISSUE 2012 2013 Par value € 2.50 € 2.50 Lowest price € 16.66 € 17.15 Highest price € 26.30 € 23.95 Average price € 20.81 € 19.74 Closing price € 19.87 € 22.90 Earnings per share € 0.81 € 0.72 Dividend per share € 0.50 € 0.50 DISCLOSURE OF MAJOR HOLDINGS IN LISTED COMPANIES ACT The register maintained by the Netherlands Authority for the Financial Markets (AFM) in connection with the disclosure of major holdings in listed companies contains details of the following investors with interests of over 3%. There are no known holdings in the AFM register of short positions. Name Date of disclosure Percentage Norges Bank 31 December 2013 3.07% Allianz Global Investors Europe GmbH 15 November 2013 4.99% Delta Lloyd N.V. 6 May 2011 5.67% Delta Lloyd Deelnemingen Fonds N.V. 22 June 2010 10.16% Kempen Oranje Participaties N.V. 1 January 2010 6.34% GEOGRAPHIC SPREAD OF INSTITUTIONAL SHAREHOLDINGS (Source: LionShare, 31 December 2013) The Netherlands Germany United States United Kingdom Norway Belgium Switzerland Other 1%3% 61% 7% 7% 11% 7% 3% 2013
  • 13. 9TenCate annual report 2013  |  The TenCate share | OPTION PLAN, SHAREHOLDINGS OF PERSONNEL AND EXECUTIVE BOARD Details of the option plan and the shareholdings of managers and members of the Executive Board can be found on page 146 of this report. The shares repurchased by the company relate to the hedging of granted options. IMPORTANT DATES IN 2014 Publication of 2013 full-year figures 27 February Publication of 2013 annual report 5 March Annual General Meeting of Shareholders 17 April Ex-dividend date 23 April Record date: determination of dividend entitlements 25 April Option period for cash or stock dividend 28 April to 9 May Publication of trading update for first quarter of 2014 28 April Announcement of conversion ratio 12 May Payment of dividend / delivery of shares (stock) 14 May Publication of 2014 half-year figures 24 July Publication of trading update for third quarter of 2014 24 October Capital Markets Day TenCate held a Capital Markets Day at its production site in Primarette, France, on 20 November. Analysts and shareholders were informed in particular about the activities of TenCate Advanced Armour EMEA and TenCate Grass EMEA. Presentations were given by Loek de Vries (President and CEO of TenCate), Steen Tanderup (Managing Director of TenCate Advanced Armour EMEA and APAC) and Ton Raaphorst (Managing Director of TenCate Grass EMEA). Visitors were also given a tour of the production site, in which composites and ceramics are produced for aerospace armour applications and personal ballistic protection.
  • 14. 10 |  TenCate annual report 2013  |  Foreword by the Chairman of the Executive Board Dear stakeholders, As expected, 2013 was a challenging year for TenCate. Revenues and results were under pressure throughout the year. The 2013 financial year was marked by sluggish government markets due to tight budget policies. This led to a decrease in market potential and uncertainty surrounding government orders which were already in the pipeline. This made it difficult to plan production and financing adequately. It was inevitable that some revenue generation was postponed and certain developments took longer than expected to materialise. For many years, government-related markets such as defence and infrastructure had developed in a reliable and fairly predictable way for TenCate. That has changed in recent times. Situations widely viewed as impossible, including a complete freeze and reduction of all government spending, as occurred in the United States, had a major impact on TenCate’s financial development in 2013. In response to events in the markets in which TenCate operates, the company maintained a restrained financial policy. This was characterised by low investments in tangible fixed assets, cost control and debt reduction aimed at keeping the risk profile as low as possible. The intensification of internal and external collaboration announced in 2012 was further developed. Companies must adapt ever more rapidly to market dynamics: not only to the new reality, but also to fast- changing demands of markets and technological and other developments which offer new opportunities. By working together it is possible to share costs and mobilise knowledge faster. DEVELOPMENTS IN THE DEFENCE MARKET Measured over the last ten years, defence spending in Europe reached a low point. Discussions in the United States on the government budget had a paralysing effect on expenditure. The decline in TenCate’s revenues was caused predominantly by the drop-off in defence orders in the TenCate Protective Fabrics (TenCate Defender™ M) and TenCate Advanced Armour (vehicle armour) market groups. Vehicle armour remains an attractive market for TenCate, in view of the many specialisations which have been brought together within the company. The development of the TenCate ABDS™ active blast countermeasure system is also expected to give further impetus to these and other activities of TenCate in the armour market in the future. NON-GOVERNMENT MARKETS One of the most successful markets for TenCate is the aerospace market. The synthetic turf businesses and other activities focused on industrial end-markets also developed positively. TenCate is actively pursuing the development of new markets, such as automotive composites. TenCate also endeavoured to develop the ‘Protecting People’ theme outside the defence market. This aim is reflected in new concepts for the police and other emergency services (law enforcement). Success in these new markets, usually involving new materials, nevertheless requires time. SUSTAINABLE INNOVATION TenCate’s innovation policy is focused on ground-breaking technological developments which can create new standards. This process usually takes a number of years. The intended result is that TenCate develops a tenable technology position, usually supported by patents, allowing long-term revenue growth. The focal points in the development of new product-market-technology combinations are: ■■ Digital printing and finishing technologies ■■ Innovative synthetic turf systems ■■ Automotive composites ■■ TenCate ABDS™ active blast countermeasure system Major strides were made in all these developments in 2013. TenCate is therefore developing dynamically, even amid less favourable market conditions. Innovation is nevertheless a long-term process that is focused on long-term growth. Foreword by the Chairman of the Executive Board
  • 15. 11TenCate annual report 2013  |  Foreword by the Chairman of the Executive Board | REPORTING For reporting and positioning purposes, a sharper focus was applied both to the company’s identity (around the theme of Protecting People) and to the market approach. The market is increasingly being approached on the basis of geographic regions (continent-based management). Continuing integration is also taking place in the Advanced Textiles & Composites and Geosynthetics & Grass sectors. The theme of sustainability is high on the agenda in TenCate’s development, positioning and reporting. New materials often have favourable environmental effects, such as a reduction in the CO2 footprint. In practice, this can be a key driver in demand for high- quality functional materials. Good examples are automotive composites and various geotextiles. ORGANISATION AND EMPLOYEES The current market dynamics and changing organisational approach also require the necessary flexibility from employees. The more market-oriented approach was also a factor in the demand for high- calibre employees capable of thinking in terms of solutions and prepared to collaborate both internally and externally and work in teams. I would like to thank all employees for the additional commitment they have demonstrated in less favourable circumstances. L. de Vries, President and CEO
  • 16. 12 |  TenCate annual report 2013  |  People Planet Profit People Planet Profit 25%more training hours for TenCate employees 100%recyclable GreenFields®  MX woven synthetic turf system 53%composites in the Airbus A350, including thousands of TenCate Cetex® clips TenCate focuses on the sustainable protection of people and their working and living environments
  • 17. 13TenCate annual report 2013  |  People Planet Profit | 14%less CO2 emitted by TenCate than a year ago 9Highly Protected Risk Awards from FM Global for TenCate 15%weight reduction in helicopter tailplane using TenCate Cetex® technology
  • 18. 14 |  TenCate annual report 2013  |  People Planet Profit Protecting people in transit As a textile technology group, TenCate focuses on ‘Protecting People’: creating sustainable solutions to protect people in their working and living environments. On the basis of the six end-markets in which TenCate operates, four areas of application have been defined: In Transit (mobility), In Habitats (infrastructure, water management), At Work (personal protection, defence) and During Leisure (sport and leisure). TenCate focuses particularly on the production of materials intended to fulfil specific characteristics based on industry standards, laws and regulations, safety standards and the requirements of particular target groups. TenCate’s materials usually form an essential part of an end-product or overall solution. We live in a society that involves risk. The world has a growing need for better and sustainable protection against numerous threats, regardless of whether they have a natural or human origin. TenCate aims to occupy a leading position in the development, production and supply of sustainable protective solutions, for which the company has a broad technological base. TenCate employees around the world make the difference in the development and production of protective solutions. In addition to the core theme of personal safety and physical protection, the features incorporated in the production of materials are weight reduction, fuel conservation, noise reduction, environmental protection, reuse and recyclability. TenCate’s knowledge of material technology enables it to provide solutions jointly with end-users and industry partners. MOBILITY In the field of mobility, the areas of application lie particularly in the aerospace market. With its wide portfolio of composites, TenCate has gained a strong position particularly in the aviation and space industries. Composites are increasingly used in components of the secondary structure and interiors of aircraft and helicopters. Safety is essential in aerospace materials. On the basis of the expertise and experience gained with composites, TenCate has continued to develop this material. This has resulted in composites for other applications, particularly armour, based on bullet- and fragment-resistant plate material in army vehicles, aircraft, helicopters and ships. This development has led to the establishment of TenCate Advanced Armour as an independent market group within the Advanced Textiles & Composites sector. Within automotive composites TenCate focuses mainly on vehicle components which affect the safety and structure. High demands are made on these materials. For applications in mobility (automotive industry), TenCate operates in a number of innovation networks in which it contributes its own specific knowledge, know-how and experience. The company also collaborates with numerous universities, colleges and institutions. In open innovation, TenCate works on primary structural components of thermoplastic composites. Examples of knowledge networks are the Thermoplastic Affordable Primary Aircraft Structures consortium (TAPAS), the ThermoPlastic composite Research Centre (TPRC), the Advanced Manufacturing Research Centre (AMRC) and the Aachener Zentrum für Integrativen Leichtbau (AZL). PROTECTING PEOPLE IN TRANSIT Mobility continues to grow apace. Increasing prosperity is making people worldwide more mobile and giving rise to increased transportation of goods and raw materials within and between continents, and even to extraterrestrial destinations. Making those transport movements increasingly efficient, safe and sustainable is a challenge in itself. The use of advanced materials in areas such as aerospace, the automotive industry, transport and infrastructure works and structures offers protective and environmentally conscious solutions for the long term.
  • 19. 15TenCate annual report 2013  |  Business overview | Business overview provides a detailed explanation of why TenCate does what it does, how it does it and what it does Business overview 16 Strategic objectives 17 Business model and value creation 18 Strategic objectives and progress 23 Indicators 24 Sectors 32 Corporate information 41 BUSINESS OVERVIEW
  • 20. 16 |  TenCate annual report 2013  |  Business overview TenCate is a multinational company that combines textile technology with chemical process technology in the development and production of high-quality materials, modules and systems. TenCate specialises in materials engineering and is a world market leader in the field of technical textiles. TenCate increasingly offers total solutions, independently or in co-operation with partners. The company is subdivided into two main sectors: Advanced Textiles & Composites and Geosynthetics & Grass. VISION TenCate’s vision is based on the development (‘buy & build’) of an extensive and progressive technological base. As a company in the technical textile sector, TenCate’s worldwide technology position (including patents) has unparalleled breadth and innovative capacity. That enables the company to develop materials that cater optimally to the individual market requirements in the chosen market themes of safety and protection of man and the environment. MISSION TenCate strives for leadership in solutions for personal protection and protection of working and living environments: Protecting People with textile technology-based materials which make the difference. Safety and protection of people and their working and living environments are worldwide growth markets. Developing the right product portfolio, tailored to specific market requirements, drawing attention to solutions in an effective way and incorporating the control of safety risks in specifications are key parts of the way in which TenCate fulfils its mission. TenCate operates principally within six end-markets which have been derived from the worldwide trends of safety and sustainability. These end-markets are personal protection, defence, mobility, infrastructure, water management and sport & leisure. The materials, modules and systems developed on the basis of these end-markets have specific characteristics. These characteristics are usually defined and qualified on the basis of functional specifications. STRATEGY TenCate’s strategy is based on value chain management. The cornerstones of this business model are end-user marketing, technological innovation, cost leadership and product differentiation (see page 20). This model determines how TenCate – based on its position in the value chain – creates value, establishes value in products and systems and adds value to customer-focused system solutions. The end-user is central in this process. TenCate focuses primarily on markets requiring products that meet high functional demands. The use of network structures with partners in the value chain adds a new dimension to the business model. The aim is to improve access to markets and strengthen the competitive position. Business overview DURING LEISURE IN TRANSIT AT WORK IN HABITATS PROTECTING PEOPLE
  • 21. 17TenCate annual report 2013  |  Business overview | Strategic objectives Quantitative strategic objectives are: ■■ The net invested capital must generate a sufficient return. The operating result before amortisation as a percentage of average net invested capital must be at least 15%. ■■ The financial position must be sufficiently solid. The ratio of net interest-bearing debt to the operating result before depreciation and amortisation (EBITDA) must be structurally lower than 2.5. ■■ The target of 10% annual profit growth is based on EBITA (operating result before amortisation). This target has not been met in the last few years. The objective nevertheless remains to achieve long-term profit growth averaging 10% per year. To this end, the buy & build strategy will be pursued. An increase in added value and efficiency is also necessary, since the organic growth of the current core activities is expected to average less than 10% in the years ahead. ■■ An adequate profit margin must be generated. The consolidated EBITA margin must rise to at least 10%. TenCate works to maintain its position as a developer and producer of materials within the chain. Forward or backward integration has a direct impact on the company’s positioning and immediately influences the competitive position and relationships with direct customers. STRATEGIC OBJECTIVES Qualitative strategic objectives are: ■■ Creation of value for stakeholders through profitable growth based on knowledge, expertise and internal synergy. ■■ Achievement of critical mass in product-market-technology combinations by occupying leading positions in worldwide market niches. ■■ Achievement of a healthy financial position with sufficient strength for acquisitions. ■■ Management of a balanced portfolio of activities, in which product- market-technology combinations differ in terms of growth opportunities and risk profile. ■■ Stimulation of an open, creative and enterprising culture for change and progress. ■■ Management of a global commercial organisation which thinks in terms of customer-centric (system) solutions within the overall value chain. ■■ Acceleration of growth of the company through partnerships. SAFETY SUSTAINABILITY HIGH END SPECIFICATIONS TEXTILE TECHNOLOGY BASED MATERIALS
  • 22. INPUT 18 |  TenCate annual report 2013  |  Business overview Business model and value creation Customerspeci fic solutions Cost-efficien tproduction End-userex perience Disruptive and su stainingtechnologies HUMAN 4,500 employees 10% management 1% corporate FINANCIAL Assets Liabilities PRODUCTION Solutions Services DIGITAL Data SOCIAL Customers End-users Suppliers Joint ventures TECHNICAL Techniques Technologies Processes Qualification INTELLECTUAL Intellectual property Branding Corporate identity NATURE Natural sources Synthetic sources Other sources CAPITAL VALUE DRIVERS END-USER MARKETING ■■ Reduction in total cost of ownership of end-users ■■ Problem-solving capability ■■ System approach ■■ Best in class: price-performance ratio ■■ Co-creation: development with customers ■■ Reliability: TenCate brand stands for quality PRODUCT DIFFERENTIATION ■■ Product portfolio: linked to specific customer requirements ■■ Time to market ■■ Best in class: price-performance-­ quality-service ■■ Flexibility: fast adaptation to changing demands TECHNOLOGICAL INNOVATION ■■ Broad technological base ■■ Open innovation networks Knowledge networks ■■ Patents and intellectual property Market- driven innovation and ■■ problem-solving capability COST LEADERSHIP ■■ Economies of scale ■■ Purchasing advantages ■■ Availability of raw materials ■■ Geographic spread of production ■■ Logistical advantages: close to customers ■■ Recyclability
  • 23. OUTPUT 19TenCate annual report 2013  |  Business overview | IN TRANSIT Aerospace Automotive Transport Naval Etc. IN HABITATS Infrastructure Water management Agriculture/Horticulture Structures Etc. AT WORK Personal protection Armour Medical Etc. DURING LEISURE Sport Recreation Holidays Etc. MATERIALS THAT MAKE A DIFFERENCE PROTECTING PEOPLE SUSTAINABILITY AND ENVIRONMENT Characteristics: Lightweight Long life 100% recyclable Reusable Etc. SAFETY AND PROTECTION Characteristics: Fire-resistant Flame-retardant Bullet-proof Fragment-proof Etc. PROTECTIVE FABRICS THERMOPLASTIC COMPOSITES ANTIBALLISTIC PROTECTION MATERIALS GEOTEXTILES OUTDOOR FABRIC THERMOSET COMPOSITES SURVIVAL SYSTEMS SYNTHETIC TURF
  • 24. 20 |  TenCate annual report 2013  |  Business overview .. Business model and value creation TECHNOLOGICAL INNOVATION Innovations at TenCate usually have a technological background, as in the development of thermoplastic composite technology (TenCate Cetex® ) or process innovation through the use of digital inkjet technology. Innovations also result from combinations of existing technologies, as in the case of TenCate Defender™ M and TenCate GeoDetect® . Technological innovations are necessary to secure the future. It is also important to develop existing products by incorporating new technologies. TenCate strives for continuous progress in order to accommodate or initiate new regulations and standards. Innovation also gives rise to development costs associated with specifications and qualifications of materials. These costs are not usually reported separately. Acquisitions with a technological background also form part of the innovation process. TenCate conducts an active intellectual property policy and now has more than 670 patents. An up-to-date list of patents can be found on the corporate website under Company profile. The main value drivers for innovation are: ■■ Broad technological base ■■ Links to universities, colleges and knowledge networks ■■ Membership of open innovation networks ■■ Internal co-operation and exchanges of knowledge between market groups (social innovation) ■■ Knowledge positions and intellectual property ■■ Market-driven (applied) innovation aimed at problem-solving. COST LEADERSHIP Although products must have the right technical and functional specifications, the cost aspect remains very important. In the current economic climate in particular, with declining government budgets, there is also high cost-awareness on the demand side. That compels the company to remain very alert to costs, but also to cost-efficient production, margin policy, process optimisation, organisation of logistics flows, reduced environmental costs, etc., and to the use of scarce resources and raw materials. TenCate also conducts an active portfolio policy whereby the portfolio is kept constantly under review and the product life cycle is assessed against market requirements. By manufacturing globally and accessing commodity markets worldwide, TenCate in principle has a good cost VALUE CHAIN MANAGEMENT TenCate operates a business model based on value chain management. TenCate’s business model determines how the company creates value, establishes value in products and systems and adds value to customer- focused system solutions. The end-user is central in this process. The cornerstones of the business model are end-user marketing, technological innovation, cost leadership and product differentiation. END-USER MARKETING Every new product which TenCate develops must be linked with prevailing customer demand or new national or international standards and laws and regulations. The specifications are agreed or developed with the customer and/or end-user at an early stage. Specific customer demand and changing specifications can be accommodated thanks to the acquired expertise and technological base. This is an important competitive advantage. Higher standards can be set and progress made by flexibly adapting decision-making units to end-markets to take account of new technological possibilities, which can then be included in new standards. TenCate’s products and solutions provide functional added value in almost all cases. In some cases they can be life-saving. In some cases, for example in tenders, TenCate operates through its customers. In some end-markets, therefore, its image and brand awareness can only be assessed indirectly. The main value drivers for end-user marketing are: ■■ Problem-solving capability: responding to functional requirements of the end-user ■■ System approach: components/materials form part of an integrated system ■■ Differentiation of the product portfolio to meet local needs, standards and rules ■■ Best in class: price-performance ratio ■■ Innovation: co-creation; developing specifications jointly with customers ■■ Reliability: the TenCate brand stands for quality and functionality ■■ Creation of standards: with its positioning as a specialist in its core markets and its very broad technological base, TenCate aims to be a foremost solution provider, partly on the strength of leading market positions.
  • 25. 21TenCate annual report 2013  |  Business overview | VALUE PROPOSITION TenCate operates in markets in which it is important to draw attention to the distinctive features of the product range on the basis of the value proposition. An important target group comprises institutions such as purchasing organisations which play a decisive role in drawing up standards and specifications which materials must fulfil. In addition to functionality, requirements may be specified in areas such as sustainability, CO2 footprint, costs during economic service life and warranties. It is also important to be able to respond rapidly to new market requirements. The setting of specifications and standards is generally a dynamic process to which TenCate must respond appropriately. That requires a flexible and innovative organisation. base and operates in close proximity to most end-markets. The company also benefits from economies of scale because it occupies leading positions in most core markets. Technological innovation involving new production methods can have a positive impact on the cost structure. The main value drivers for cost leadership are: ■■ Constant focus on process innovation ■■ Market leadership and associated economies of scale ■■ Purchasing advantages due to global coverage of commodity markets ■■ Availability of raw materials (TenCate is a key customer) ■■ Geographic spread of production ■■ Proximity of end-users; logistical advantages. PRODUCT DIFFERENTIATION TenCate aims to develop an appropriate product portfolio offering dependable solutions tailored to specific market and/or customer requirements. Because product life cycles are becoming shorter, TenCate has to bring a steady flow of new products and solutions to the market. TenCate is guided by evolving markets in which demands are ever higher, laws change and standards become more exacting. The company adapts characteristics or incorporates them in materials in order to create customer-specific products and specialties. Product differentiation must increasingly be linked to end-user marketing in order to position the overall value proposition correctly. Greater significance is therefore being attributed to marketing. The sustainability aspect is of growing importance, partly because public- sector bodies, which constitute TenCate’s principal customer groups, usually set greater store by sustainability. The main value drivers for product differentiation are: ■■ Broad product portfolio: a good fit for specific customer requirements ■■ Relatively large number of recently developed products ■■ Best in class: price / performance ■■ Relatively short time to market: ability to respond rapidly to market demands ■■ Long-term experience: material specifications, databases, qualifications, etc. VALUE PROPOSITION FOR DIGITAL TECHNOLOGY Individualisation is a characteristic of contemporary market requirements. Manufacturers are increasingly facing declining production runs, make-to-order products, etc. This will lead to an increase in the product range and will pose fresh logistical challenges for market participants throughout the value chain. The rise of digital media, with individual customers buying their products on demand, will increasingly be seen as the standard. Digitisation of production processes is on the rise in many industries. This is also a new challenge for TenCate, which is a leader in this regard as a producer of technical textiles. The advantages for TenCate’s direct (business-to-business) customers is that reaction times to market trends can be shortened considerably and inventory levels can be reduced throughout the value chain. On this basis market participants can anticipate individual customer requirements with much greater immediacy. New characteristics can also be added to materials, opening up new markets.
  • 26. 22 |  TenCate annual report 2013  |  Business overview .. Business model and value creation CORPORATE VALUES TenCate has a royal hallmark, recognising not only the company’s exceptional history as one of the oldest enterprises in the Netherlands, but also the way in which it does business around the world. TenCate is assiduous in imparting its ten principal corporate values to its employees: ■■ The customer is central: Protecting People ■■ Effective: doing the right things ■■ Efficient: doing things well ■■ Creative: seeking solutions and creating systems ■■ Flexible: the ‘living organisation’, adapting to external developments, new demands and trends ■■ Enterprising: identifying and optimising opportunities ■■ Innovative: thinking ‘outside the box’ ■■ Reliable: doing business on the basis of trust; ensuring that TenCate is seen as a reliable partner ■■ Commitment: dedication to the work which the company stands for ■■ Co-operation: working with colleagues and in teams. Employees are TenCate’s human capital and are selected, rewarded and appraised partly on the basis of the above values. They are expected to be proactive, dedicated and open to change.
  • 27. 23TenCate annual report 2013  |  Business overview | Strategic objectives and progress 0 Strategic objectives 2013 target 2013 progress 2014 target Priorities PEOPLE TenCate aims for a male-female ratio at management level (and in management bodies) that is comparable to that of the rest of the workforce (75%-25%), as an indicator of equal opportunities. The target for the male-female ratio at management level in 2013 was 80%-20% (2012: 80%-20%). The male-female ratio at management level in 2013 was 82%-18%. The target for the male-female ratio at management level in 2014 is 80%-20% (2013: 82%-18%). Where equally suitable, female candidates will be proposed for appointment to management bodies, management posts and the rest of the workforce. TenCate aims to increase the number of training hours. The target in 2013 was for the number of training hours to rise to 16 (2012: 14 hours). The number of training hours in 2013 was 16. The target in 2014 is for the number of training hours to rise to 17 (2013: 16 hours). Achieving more training hours, partly through executive policies of training experts and HR departments. TenCate aims for optimum occupational health and safety targeted at permanent prevention of fatal and non-fatal industrial accidents and safety incidents. The target for the number of fatal industrial accidents in 2013 was zero. The aim was for the ratio of days of absence due to non-fatal industrial accidents to fall to 35.0 per 100 FTEs in 2013 (2012: 48.9 per 100 FTEs). The number of fatal industrial accidents in 2013 was zero. There were 33.0 days of absence due to non-fatal industrial accidents per hundred FTEs in 2013. The target for the number of fatal industrial accidents in 2014 is zero. The aim is for the ratio of days of absence due to non-fatal industrial accidents to fall to 25.0 per 100 FTEs in 2014 (2013: 33.0 per 100 FTEs). Increase of at least 3 in the number of TenCate production facilities having received the Highly Protected Risk Award from FM Global (2013: 9 sites). PLANET TenCate aims to increase the proportion of renewable electricity worldwide. The target in 2013 was to raise the proportion of renewable electricity by 3% (2012: 2.6%). The proportion of renewable electricity rose by 15.2% in 2013. The target in 2014 is to raise the proportion of renewable electricity by 3% (2013: 15.2%). Increased use of renewable electricity at production sites worldwide. TenCate aims to increase energy efficiency worldwide, leading to a steady fall in CO2 emissions. The target in 2013 was to increase the energy efficiency of production sites by 1% (2012: 1%). Energy efficiency worldwide rose by 1% in 2013. In the Netherlands, the rise in energy efficiency in 2013 was 2%. The target in 2014 is to increase the energy efficiency of production sites by 1% (2013: 1%). Pursuit of energy-saving measures at production sites worldwide. Buying more energy- efficient plant and equipment at times of replacement. TenCate aims to reduce or at least maintain the existing level of total water consumption (on like-for-like revenues). The target in 2013 was to reduce water consumption at production sites to 2.9 million m3 (2012: 3.5 million m3 ). Water consumption worldwide in 2013 was 2.9 million m3 . The target in 2014 is for water consumption at production sites to be at or below 3.0 million m3 (2013: 2.9 million m3 ). Increase in digital finishing and printing of outdoor fabrics (UV curing) and any other substrates. Implementation of existing water conservation programmes. TenCate aims for a worldwide reduction in the amount of waste released during production processes (on like-for-like revenues). The target in 2013 was for the amount of waste from production processes to fall to 13 kilotons (2012: 14 kilotons). The amount of waste in 2013 was 13 kilotons. The target in 2014 is an amount of waste from production processes of 13 kilotons or less (2013: 13 kilotons). Introduction of the 5S methodology at a number of production sites worldwide. More internal recycling of scrap. PROFIT TenCate aims to maintain a sufficiently solid financial position. TenCate aims for a ratio of net interest-bearing debt to EBITDA of less than 2.5 over the long term (2012: 2.55). The debt ratio at the end of 2013 was 2.27. TenCate aims for a ratio of net interest-bearing debt to EBITDA of less than 2.5 over the long term (2013: 2.27). TenCate will control the risk profile by pursuing a restrained financial policy. TenCate aims for a sufficient return on net invested capital. TenCate aims for EBITA as a percentage of average net invested capital of at least 15% over the long term (2012: 6.2%). EBITA as a percentage of average net invested capital was 6.4% in 2013. TenCate aims for EBITA as a percentage of average net invested capital of at least 15% over the long term (2013: 6.4%). High-quality / innovative technological development and internal synergy. Management of a balanced portfolio of activities with product-market-technology combinations in different phases of the production life cycle. Acceleration of growth of the company through partnerships. Attaining critical mass in product- market-technology combinations by occupying leading positions in global market niches. TenCate aims for sustainable profit growth. TenCate aims for average EBITA growth of 10% per year over the long term. Reported EBITA declined by 3% in 2013. TenCate aims for average EBITA growth of 10% per year over the long term. TenCate aims for an adequate profit margin. TenCate aims for an EBITA margin of at least 10% over the long term (2012: 4.8%). The consolidated EBITA margin in 2013 was 4.8%. TenCate aims for an EBITA margin of at least 10% over the long term (2013: 4.8%).
  • 28. 24 |  TenCate annual report 2013  |  Business overview Indicators COST LEADERSHIP The principal indicators include: ■■ Production ■■ Costs per unit/hour ■■ Turnaround time in days ■■ First-time-right percentage ■■ Use of raw materials, water and energy ■■ Number of defects ■■ Downtime ■■ Rejects and waste ■■ CO2 emissions ■■ Storage-inventory-delivery ■■ Inventory level ■■ Inventory turnover rate ■■ Percentage of products delivered on time ■■ Percentage of products delivered correctly ■■ Human resources ■■ Personnel costs ■■ Turnover ■■ Absenteeism PRODUCT DIFFERENTIATION The principal indicators include: ■■ Number of new product-market-technology combinations ■■ Quantitative and qualitative portfolio growth ■■ Net present value of the product portfolio ■■ Number of extensions of product life cycles Key performance indicators (KPIs) are the factors and aspects of business operations that affect the performance and hence the value of the company. TenCate draws a distinction between general and specific indicators. A number of general indicators are periodically assessed against the cornerstones of TenCate’s business model. Specific corporate social responsibility indicators have been defined at corporate level on the basis of the guidelines of the Global Reporting Initiative (GRI). These KPIs indicate TenCate’s worldwide position with regard to social, ecological and economic aspects of corporate social responsibility. Brief details of a number of key indicators are provided below. The indicators collectively contribute to the company’s value chain management. GENERAL INDICATORS END-USER MARKETING Important indicators include: ■■ Customer satisfaction ■■ Market share ■■ Sale volume ■■ Customer retention (share of wallet) ■■ Number of complaints and complaint handling ■■ Brand recognition and image TECHNOLOGICAL INNOVATION The principal indicators include: ■■ Number of patents ■■ Number of trademark registrations and countries of registration ■■ Completion of process innovation projects ■■ Creation of new standards in niche markets ■■ Number of innovation networks in which TenCate operates TenCate business model © TenCate VALUE CHAIN MANAGEMENT INTERNALEXTERNAL portfolio management process management market management END-USER MARKETING market product technology process DIFFERENTIATION INNOVATION COST LEADER business development
  • 29. 25TenCate annual report 2013  |  Business overview | TARGETS Corporate social responsibility is implemented by the line management within the stated policy frameworks. This is actively co-ordinated and supported at corporate level through the provision of tools that enable these activities to be maintained, measured and presented as transparently as possible. Once again in 2013, all market groups within TenCate received detailed feedback on reporting business units worldwide by means of CSR fact sheets, for both full-year 2012 and the first half of 2013. This combined information indicates the performance relative to comparable business units within the Group and provides a basis on which the local management can formulate CSR improvement plans and any corporate and other targets for the current financial year. Since 2012, the market group units which were certified in accordance with the CSR Performance Ladder (level 3) have already formulated their own, similar or related targets, including for the nine reported KPIs. TenCate took major steps in 2013 aimed at the further development and measurability of corporate social responsibility. This process will continue in the years ahead, partly through the definition and adjustment of new and existing CSR targets. SPECIFIC INDICATORS (CSR) The principal and most material CSR themes were determined and key performance indicators (KPIs) were defined at corporate level at the beginning of 2012, on the basis of the guidelines of Global Reporting Initiative 3. These KPIs reflect TenCate’s performance with regard to social, ecological and economic aspects of corporate social responsibility. Worldwide CSR data have been gathered, validated, aggregated and analysed at corporate level every six months since 2012. The CSR data for 2011 are included here as a baseline. This section reports on the specific indicators relating to the 2013 reporting year. As in the case of the 2012 data, these comply with TenCate’s accuracy criteria. The data quality and relevant processes were further improved in 2013. A corporate CSR controller has joined the corporate CSR team in order to continue the gathering, analysis, aggregation and validation of the CSR data and deepen or broaden the data as necessary. The business units in the downstream activities of TenCate Grass (very limited in-house production) and the activities of TenCate Enbi and Xennia Technology have not been included in the measurements. Data for the Thailand business unit also ceased to be included in the CSR figures for 2013, because it was closed during the reporting year. The CSR information for Amber Composites, which was acquired at the beginning of 2013, was also excluded from the CSR analyses for the past year, with the exception of employee data. 2012 2013 North and South America EMEA Asia Pacific 39% 20% 41% 38% 24% 38% 1 · ANALYSIS OF EMPLOYEES BY REGION IN 2012 AND 2013 2012 2013 90% 2% 8% 89% 2% 9% Permanent contract Temporary contract Agency contract 2 · ANALYSIS OF EMPLOYEES BY CONTRACT TYPE IN 2012 AND 2013 Male Female 78% 22% 76% 24% 2012 2013 3 · ANALYSIS OF EMPLOYEES BY GENDER IN 2012 AND 2013 Male Female 82% 18% 80% 20% 2012 2013 4 · ANALYSIS OF MANAGEMENT BY GENDER IN 2012 AND 2013
  • 30. 26 |  TenCate annual report 2013  |  Business overview .. Indicators PERSONNEL BREAKDOWN As a multinational company, TenCate has a worldwide presence. Production sites are located on various continents. Figure 1 shows the geographic breakdown of TenCate employees (headcount) by continent at the end of 2013. Figure 2 shows the breakdown of employees by contract type at the end of 2013, i.e. between permanent, temporary and agency contracts. The breakdown of employees by region has changed somewhat compared to 2012 as a result of the integration of the TenCate Protective Fabrics activities in Thailand into the Dutch production site. The workforces on the continents of America and EMEA are now of equal number, partly as a result of the acquisition of Amber Composites. The proportion of employees with agency contracts has decreased by 1% compared to 2012 due to more cost- effective use of production organisations. Despite its technical character, TenCate is committed to being a company that offers sufficient scope for diversity among employees. Figure 3 shows the composition of the workforce by gender. Almost 78% of the total number of employees are male and over 22% female. Figure 4 shows the composition of the management of TenCate. Eight out of 10 management personnel are male and two out of ten are female. Both sets of percentages have changed fractionally compared to 2012. TenCate aims to achieve a comparable male-female ratio in its management as in the rest of its workforce, as an indicator of equal opportunities. In the years ahead, TenCate will aim to achieve a 75%-25% male-female ratio for both its management and overall workforce. OCCUPATIONAL SAFETY AND WELFARE The safety and protection of employees and their working environment at TenCate’s production sites are a central focus of the company’s policy. Table 5 provides an overview of occupational safety and welfare, expressed in ratios of industrial accidents, fatal industrial accidents, absence due to industrial accidents in days/working days, occupational diseases and sickness absence. There were no notable incidents in 2013. SOCIAL ASPECTS TenCate believes that the conduct of a sustainable personnel policy focused on the interests of the people which make up TenCate is the most important aspect of the social dimension of enterprise. Within this policy the following themes are the most material: ■■ Personnel diversity and equal opportunities ■■ Occupational safety and welfare ■■ Education and training SUSTAINABLE PERSONNEL POLICY As a technology group, TenCate is a knowledge-intensive company. The safety, health and knowledge of the employees are paramount. Social innovation through investments in this human capital benefits the company. The safety policy is implemented at production and operating sites worldwide to promote optimum occupational health and safety and keep safety incidents and industrial accidents to an absolute minimum. Protecting people right through to the shop floor. GreenSource™ The Sustainable Water Fund of the Ministry of Economic Affairs commissioned Pentair, TenCate and Wavin jointly to produce 20 sustainable drinking water systems in South Africa. TenCate is supplying the high-quality synthetic turf and geotextiles for this project. This innovation is being supported by the Advanced Materials Manufacturing Oost-Nederland (AMMON) foundation.
  • 31. 27TenCate annual report 2013  |  Business overview | TenCate aims to continue deepening and broadening its package of technical and management training courses. The company intends to increase the number of training hours by at least 5% annually in the years ahead. ECOLOGICAL ASPECTS TenCate considers the conduct of an integrated sustainability policy focused on biodiversity and the company’s natural environment to be the most important aspect of the ecological dimension of enterprise. Within this policy the following themes are the most material: ■■ Energy consumption and CO2 emissions ■■ Water consumption and wastewater ■■ Rejects and waste SUSTAINABLE ENERGY POLICY Energy consumption is an issue that demands greater attention worldwide. TenCate has a sense of responsibility in this regard and sees it as an opportunity for cost reduction and process optimisation. Through its actions, investments and technological innovations, it contributes to the reduction and maximum efficiency of energy consumption. In the process, the CO2 footprint of the company is reduced. An increase in the share of ‘green energy’ is part of the prevailing energy policy. ENERGY CONSUMPTION Total energy consumption in 2013 amounted to approximately 1,752 terajoules (TJ). This represents a decrease of 11% compared to 2012, which was due in part to the closure of the TenCate Protective Fabrics site in Thailand. Among TenCate’s production processes, it is particularly fabric production and the extrusion of synthetic fibres that are the most energy-intensive. Since the beginning of 2013, over 15% of energy consumed has come from sustainable sources, such as green electricity. Biogas is produced at the company’s own wastewater 5 · OCCUPATIONAL SAFETY AND WELFARE 2011 2012 2013 Industrial accidents* 1.8 2.4 1.9 Fatal industrial accidents* 0 0 0 Absence due to industrial accidents in days/working days* 22.1 48.9 33.0 Occupational diseases* 0.03 0.00 0.15 Sickness absence* 2.1% 2.7% 3.0% * Ratio per hundred FTEs. These figures show that industrial accidents and days of absence decreased in 2013, returning almost to a level comparable to 2011. The temporary rise in these figures in 2012 resulted from the setting up of a new production process during that year at the TenCate Advanced Armour site in Newark in the United States, where a number of minor safety incidents occurred. Immediate remedial action was taken, which is reflected in the 2013 figures. The slightly higher sickness absence in 2013 was due in particular to the TenCate Protective Fabrics production site in Nijverdal. Measures were taken to counter this incidental rise in sickness absence. TenCate has focused its occupational safety and welfare policy on the structural prevention of safety incidents and fatal or non-fatal industrial accidents. It aims to reduce the ratio of days/working days of absence due to industrial accidents to 20.0 in the years ahead. EDUCATION AND TRAINING TenCate invests in the quality and skills of its employees. Education and training are crucial for the optimum development and maintenance of the company’s knowledge resources – and hence its competitive strength. The company uses both external and internal on-the-job training. In 2013, 860 employees took part in technical training courses while 265 attended management training. Both figures represent a rise compared to the previous year. The number of training hours per employee has also risen by two. Figure 6 shows the ratio of internal to external training hours. The total number of training hours increased by 22% in 2013 compared to 2012. A training expert was appointed for the four market groups in Nijverdal at the beginning of 2013 and is making a substantial contribution to the knowledge qualification process. Internal training hours External training hours 79% 21% 81% 19% 2012 2013 6 · INTERNAL AND EXTERNAL TRAINING HOURS IN 2012 AND 2013
  • 32. 28 |  TenCate annual report 2013  |  Business overview .. Indicators treatment plant and is used to produce steam for processes. Figure 7 shows the percentage breakdown of energy consumption into the main energy sources for 2011, 2012 and 2013. 7 · ENERGY CONSUMPTION BY ENERGY SOURCE 2011 2012 2013 Renewable electricity 2.7% 2.6% 15.2% Non-renewable electricity 51.0% 51.1% 45.2% Biogas 0.0% 0.1% 0.1% Natural gas 33.0% 33.3% 25.8% Steam 12.6% 12.1% 13.0% Other sources 0.7% 0.8% 0.7% The increase in the consumption of sustainably generated electricity was achieved by switching the Nijverdal production sites to green electricity from 2013. TenCate Geosynthetics in Linz, Austria, also proactively increased the proportion of green electricity consumed in 2013. TenCate is aims to bring about a further increase the proportion of renewable electricity consumed worldwide. It intends to raise this proportion by 3% per year over the next three years. TenCate production sites worldwide have also set a target of improving energy efficiency by 1% per year by taking numerous energy-saving measures. TenCate’s Dutch production sites even have an energy efficiency improvement target of approximately 2% per year, in line with the Multi-Year Energy Efficiency Agreement of the Ministry of Economic Affairs and the Modint industry organisation on the more effective and efficient use of energy and processes in the textile and technical textile industry. CO2 FOOTPRINT POLICY CO2 emissions are coupled with energy consumption. The increase in CO2 in the atmosphere increases the greenhouse effect on earth and contributes to climate change. TenCate is mindful of this and directs its policy towards reducing CO2 emissions. By determining its level of CO2 emissions, TenCate gains insight into the total greenhouse gas emissions caused by its operations. A better understanding of CO2 footprints and how to reduce them can be obtained by identifying and then categorising emissions. At the same time, energy conservation helps to increase energy efficiency and reduce both fossil fuel consumption and CO2 footprints in order to cut process costs. TenCate’s CO2 footprint is made up of the various emission sources, such as electricity, natural gas and steam. TenCate’s climate policy is aimed primarily at reducing energy consumption through efficiency measures, based on process management and cost leadership as part of the TenCate business model. This is supported by the objective of a gradual switch to renewable, sustainable energy. CO2 EMISSIONS In 2013 TenCate’s total CO2 emissions worldwide amounted to approximately 152 kilotonnes. That represents a reduction of almost 22% compared to 2012. This decrease is due partly to the closure of the TenCate Protective Fabrics production site in Thailand and partly to the substantial rise in the proportion of green electricity in the Netherlands in particular. Figure 8 shows a breakdown of CO2 emissions by energy source in 2011, 2012 and 2013. The data show that approximately 73% of TenCate’s CO2 footprint is due to electricity consumption. Sustainable sources, such as wind power, hydroelectricity or solar energy now account for over 15% of electricity consumption. This portion is therefore CO2 -neutral. The bulk of CO2 emissions are attributable to the energy-intensive market groups, namely TenCate Protective & Outdoor Fabrics and TenCate Grass. 8 · CO2 EMISSIONS BY ENERGY SOURCE 2011 2012 2013 Electricity 70.3% 71.0% 73.3% Natural gas 19.1% 18.4% 16.6% Steam 8.4% 7.9% 6.9% Flights 0.4% 0.6% 0.8% Car travel 0.7% 0.8% 1.2% Other Activities 1.1% 1.3% 1.2% SUSTAINABLE WATER AND WASTEWATER POLICY Water consumption is a growing issue worldwide. TenCate is mindful of this and implements measures, investments and technical innovations aimed at reducing and optimising the efficiency of water consumption. Water consumption is broken down by water source. Waste processing is broken down by destination. TenCate’s water treatment plants are an integral part of the water and wastewater policies of the respective sites worldwide.
  • 33. 29TenCate annual report 2013  |  Business overview | WATER CONSUMPTION Total water consumption in 2013 amounted to approximately 2.9 million cubic metres. This represents a 15.1% reduction overall compared to 2012. This decrease is largely due to the closure of the TenCate Protective Fabrics production site in Thailand. As in 2012, groundwater and drinking water consumption decreased in 2013, while surface water consumption rose slightly. Figure 9 shows the consumption of water by source. The underlying data show that the dominant consumer of water is the TenCate Protective & Outdoor Fabrics market group, with a combined share of water consumption of around 42%. This percentage can be explained by the current analogue finishing process used for technical textiles in the water-intensive processes in this market group. As a result of the introduction of digital printing and finishing for TenCate outdoor fabrics in mid-2013, a decrease in water consumption can be expected for this market group. TenCate is aiming for a further reduction in water consumed in production processes worldwide. For the next three years, TenCate aims to stabilise water consumption at less than 3 million cubic metres with a comparable level of revenues. WASTEWATER The total volume of waste water was 2.6 million cubic metres in 2013. This represents a decrease of 15.7% compared to 2012. This decrease is largely due to the closure of the TenCate Protective Fabrics production site in Thailand. Figure 10 provides an overview of total waste water by destination. Since part of the water drawn evaporates during production or is absorbed by products, the volume of discharged water is by definition lower than the volume of water drawn. Groundwater Drinking water Surface water 37.1% 19.7% 43.2% 28.9% 18.3% 52.8% 2012 2013 9 · WATER CONSUMPTION BY SOURCE IN 2012 AND 2013 Synthetic turf system for Kyocera Stadium In the space of two weeks the synthetic turf supplier GreenFields, the synthetic turf manufacturer TenCate and the construction company Heijmans completed a brand-new synthetic turf system at the Kyocera Stadium, the home venue of Dutch Premier League side ADO Den Haag. The synthetic turf system based on TenCate Evolution™ fibre was laid in just two weeks. The installation was completed swiftly and efficiently thanks to excellent collaboration between the three companies, the municipality of The Hague and ADO Den Haag. The construction of a roof over the pitch means that games can also be played at night and in poor weather. The synthetic turf system was approved by the KNVB (Royal Netherlands Football Association) on Monday 21 October and delivered on Wednesday 23 October. After the 2013-2014 football season GreenFields, TenCate and Heijmans will install a GreenFields® TX synthetic turf system in the Kyocera Stadium and in the adjacent temporary GreenFields Stadium for the 2014 Hockey World Cup. Surface water Sewage Other 50.4% 31.8% 17.8% 40.3% 38.0% 21.7% 2012 2013 10 · WASTEWATER BY DESTINATION IN 2012 AND 2013
  • 34. 30 |  TenCate annual report 2013  |  Business overview .. Indicators Since 2013 TenCate has also added the volume of textile waste to the waste separation categories. The resulting figures will appear for the first time in the reporting for 2014. TenCate is endeavouring to reduce the volume of waste released during production processes worldwide. In the next three years, TenCate aims to stabilise the volume of waste from production processes at less than 13 kilotonnes per year with a comparable level of revenues. ECONOMIC ASPECTS The economic indicators relating to TenCate’s financial performance can be found in the other parts of the annual report and in the financial statements for 2013. In this section TenCate reports on the critical performance indicators with regard to sponsorship and donations during the reporting year. SUSTAINABLE SOCIAL POLICY TenCate has a strong commitment to society through sponsorship and donations. Employees worldwide are actively involved in numerous initiatives and projects. TenCate feels closely involved in the local communities in which it operates. Every year, TenCate sponsors various initiatives, both financially and in kind by providing materials which the company produces. Market groups and employees also make time or resources available for local or regional social activities. The sponsorship and donations policy and activities in 2013 are detailed at www.tencateannualreports.com. SPONSORSHIP AND DONATIONS In 2013 the contribution to social projects totalled approximately 0.15% of revenues, which represents a considerable increase compared to 2012. This was achieved in particular through the greatly increased involvement of TenCate Grass in the Coöperatie Eerste Divisie for professional football in the Netherlands and the partnership with the Royal Netherlands Hockey Association in preparation for the 2014 Hockey World Cup. Material sponsorship also increased strongly. Among other beneficiaries, TenCate Advanced Composites sponsored Solar Team Twente of the University of Twente and Saxion University of Applied Sciences. This team secured third place in the World Solar Challenge 2013, the highest place in its history, with its RED Engine weighing just 139 kilograms. Figure 14 provides an overview of investments through sponsorship or donations in 2012 and 2013. The main sponsorship in 2013 was once again Heracles Almelo. SUSTAINABLE WASTE POLICY TenCate uses raw materials as efficiently as possible. A lower volume of waste materials by definition means better utilisation of scarce raw materials. Unavoidable waste materials are separated in an environmentally conscious way and processed by recognised waste- processing organisations. WASTE FLOWS Almost 13 kilotonnes of waste were released in TenCate’s production processes in 2013, representing a decrease of nearly 8% compared to 2012. Over 10 kilotonnes were recycled during the reporting year and over 2.9 kilotonnes were processed externally (a decrease of 5% compared to 2012), 830 tonnes were incinerated by the waste processor and the remainder was sent to landfill. Figures 11, 12 and 13 provide an overview of waste by waste stream, type of waste separation, type of recycling and method of waste processing. Non-hazardous waste Hazardous waste 97.5% 2.5% 97.6% 2.4% 2012 2013 11 · WASTE BY TYPE IN 2012 AND 2013 Paper waste Plastic waste Wood waste Organic waste 13.4% 66.5% 12.4% 7.7% 15.0% 74.9% 9.9% 0.2% 2012 2013 12 · WASTE SEPARATION BY TYPE IN 2012 AND 2013 External recycling Landfill Incineration Internal recycling 49.3% 17.9% 5.0% 27.8% 35.3% 6.4% 16.2% 42.1% 2012 2013 13 · WASTE RECYCLING AND WASTE PROCESSING IN 2012 AND 2013
  • 35. 31TenCate annual report 2013  |  Business overview | TRANSPARENCY BENCHMARK TenCate is assessed annually as part of the transparency benchmark of the Netherlands Ministry of Economic Affairs. The aim of this annual examination is to assess and improve the content and quality of social reporting by Dutch companies. For the 2013 Annual Report, TenCate intends to consolidate the position it achieved that year in the top 100, in the knowledge that the criteria have been tightened. TenCate’s long-term aim is to secure a position in the top 50. Transparency Benchmark of the Ministry of Economic Affairs Year Annual Report Participants TenCate’s position TenCate’s points 2013 2012 460 82 149 2012 2011 472 141 89 2011 2010 468 150 61 2010 2009 462 146 41 2009 2008 172 78 26 In past years the company has achieved the following scores and positions in the transparency benchmark: Sponsorship in cash Sponsorship in kind Donations 85.3% 9.8% 4.9% 85.6% 11% 3.4% 2012 2013 14 · SPONSORSHIP AND DONATIONS IN 2012 AND 2013
  • 36. (VALUE ADDED) RESELLERS PROTECTIVE FABRICS • R&D • Spinning • Weaving • Knitting • Pre-treatment • Dyeing • Finishing • Laminating • Quality control • Packaging & Logistics • Marketing & Sales PROTECTIVE FABRICS • Garment makers • Distributors PROTECTIVE FABRICS • Industrial safety • Emergency response • Military & Police • Services & Industries PROTECTIVE FABRICS • Chemical suppliers • Polymer suppliers • Fibre suppliers PROTECTIVE FABRICS • Chemicals • Polymers OUTDOOR FABRICS • R&D • Spinning • Weaving • Pre-treatment • Dyeing • Finishing • Quality control • Packaging & Logistics • Marketing & Sales OUTDOOR FABRICS • Confectioners OUTDOOR FABRICS • Distributors • Dealers OUTDOOR FABRICS • Leisure • Home & Terrace • Emergency response • Refugee response • Military ISO9001 FMHPR(G,USA) ISO14001(NL)/MVOPL(NL) OUTDOOR FABRICS • Chemical suppliers • Polymer suppliers • Fibre suppliers • Fabric suppliers OUTDOOR FABRICS • Chemicals • Polymers END-USER MARKETS CUSTOMERS SUPPLIERS RAW MATERIALS ISO9001 ISO14001(NL)/MVOPL(NL) PROTECTIVE FABRICS • Distributors • PPE-dealers • Laundries MVOPL(NL) END-USER MARKETS CUSTOMERS SUPPLIERS RAW MATERIALS AEROSPACE COMPOSITES • R&D • Weaving • Pre-treatment • Chemical finishing • Calandering • Impregnation • Consolidation • Moulding • Quality control • Packaging & Logistics • Marketing & Sales AEROSPACE COMPOSITES • Original Equipment Manufacturers (OEM) - Prime contractors • Tier 1 & Tier 2 - Suppliers of integrated structures and assemblies • Tier 3 - Subcontracted part manufacturers AEROSPACE COMPOSITES • Aviation - Interior - Exterior • Radomes & Antennas • Space • Military AEROSPACE COMPOSITES • Chemical suppliers • Polymer suppliers • Fibre suppliers • Fabric suppliers AEROSPACE COMPOSITES • Chemicals • Polymers • Glass ISO9001|AS/EN9100 INDUSTRIAL COMPOSITES • R&D • Weaving • Pre-treatment • Chemical finishing • Calandering • Impregnation • Consolidation • Moulding • Quality control • Packaging & Logistics • Marketing & Sales INDUSTRIAL COMPOSITES • Original Equipment Manufacturers (OEM) INDUSTRIAL COMPOSITES • Automotive • Oil & Gas • Commercial & Industrial • Sports & Leisure • Medical INDUSTRIAL COMPOSITES • Chemical suppliers • Polymer suppliers • Fibre suppliers • Fabric suppliers INDUSTRIAL COMPOSITES • Chemicals • Polymers • Glass ISO9001 ADVANCED ARMOUR • R&D • Designing & Testing • Production & Construction - Spall-liners - Add-on-Armour - Structural composites - Body armour inserts - Ready to fit solutions - Survivability packages • Quality control • Packaging & Logistics • Marketing & Sales ADVANCED ARMOUR • Original Equipment Manufacturers (OEM) - Vehicle manufacturers - Shipyards - Aircraft manufacturers - Body armour manufacturers - Helmet manufacturers - Cash-in-transit vehicle converters ADVANCED ARMOUR • Military - Land forces - Naval forces - Air forces - Special forces • Law enforcement • Personal protection • Cash-in-transit ADVANCED ARMOUR • Chemical suppliers • Polymer suppliers • Fibre suppliers • Fabric suppliers • Ceramic suppliers • Ballistic metal supplliers ADVANCED ARMOUR • Chemicals • Polymers • Ceramics • Metals • Glass ISO9001|AS/EN/JISQ9100(FR) ISO14001(DK)/MVOPL(NL) FMHPR(FR) MVOPL(NL) FMHPR(C,USA) 32 |  TenCate annual report 2013  |  Business overview Sectors
  • 37. 33TenCate annual report 2013  |  Business overview | ADVANCED TEXTILES & COMPOSITES The principal end-markets for the Advanced Textiles & Composites sector are: ■■ Personal protection ■■ Defence ■■ Mobility ■■ Sport and leisure The products’ main areas of application are the protection of military personnel, police and process workers (heat- and flame-resistant protection and ballistic protection), protection of personnel in industry (process industry, oil and gas extraction) and protection of fire brigades and police forces. TenCate is also the European market leader in high-quality outdoor fabrics for the outdoor market. TenCate is the market leader in the field of protective fabrics and one of the pre-eminent suppliers of aerospace composites. Applications in the automotive sector and other industrial sectors are also expected to emerge over time. In both markets the strong growth in demand is being driven mainly by the need to save fuel costs (lower emissions) and reduce weight. The armouring of army and other vehicles concerns land, sea and air vehicles. The armouring of helicopters is a growing activity. TenCate operates in this field in the European market as a supplier of the end-product: an entirely customised, ready-to-install set of armour components, including fixing materials. In 2013 TenCate expanded its portfolio to include products for personal protection for the law enforcement market. Materials are increasingly required to meet specific demands. TenCate usually benefits when markets specify higher standards and demand is differentiated on the basis of specific customer requirements. TECHNOLOGY The Advanced Textiles & Composites sector is concentrated around impregnation and coating technologies for the application and processing of functional characteristics in and on textiles. The products in this sector mainly comprise protective fabrics and composite materials. TenCate occupies a unique position in the composites market because it has both thermoset and thermoplastic composites in its portfolio. TenCate has a leading position in thermoplastic composites technology in the aircraft industry. The automotive industry is also increasingly discovering the advantages of thermoplastic composites. Broad application on an industrial scale will nevertheless be a long-term development. The raw materials used in the Advanced Textiles & Composites sector are mainly synthetic fibres such as para- and meta-aramids, glass fibre fabrics and carbon and aramid fibres. MARKET GROUPS The Advanced Textiles & Composites sector consists of four market groups and one business unit: ■■ TenCate Protective Fabrics ■■ TenCate Outdoor Fabrics Protective and safety fabrics for a wide range of professional groups and protective fabrics for outdoor applications. The activities in the TenCate Protective Fabrics market group are concentrated around the production sites in the Netherlands and the United States. In the Netherlands, safety fabrics are produced using finished substrates (cotton blends as well as synthetic products). In the United States products are manufactured with a combination of inherently protective (artificial) fibres. TenCate therefore has a wide range of product types for highly varied applications, each with specific product characteristics. ■■ TenCate Advanced Composites ■■ TenCate Industrial Composites ■■ TenCate Advanced Armour Composites for aerospace and industrial applications; antiballistic materials for personal protection, survivability solutions and vehicle armour. The TenCate Advanced Composites market group and the TenCate Industrial Composites business unit are concentrated around production sites in the United States, the United Kingdom and China (mainly thermosets) and in the Netherlands (mainly thermoplastics). The company has a strong qualification base with a complementary product range, as a result of close internal co-operation. For larger customers, TenCate can be a dependable partner in the value chain by providing a one-stop shop service.
  • 38. 34 |  TenCate annual report 2013  |  Business overview .. Sectors TenCate Advanced Armour has European manufacturing sites in France, the United Kingdom and Denmark and operates as a manufacturer in the United States. TenCate has both strong design TENCATE PROTECTIVE & OUTDOOR FABRICS BUSINESS MODEL END-USER MARKETING ■■ Value proposition focused on specific target groups and standards ■■ Increased market awareness ■■ Risk awareness / safe society ■■ Partnerships TECHNOLOGICAL INNOVATION ■■ Digital inkjet technology / ‘sustainable factory of the future’ ■■ Smart textiles ■■ Effective use of internal knowledge (social innovation) ■■ Patents PRODUCT DIFFERENTIATION ■■ Global market position, with local product adaptations for local specifications ■■ Fabrics based on fibre blends and coated / finished fabrics (product champions: distinctive in quality-performance ratio and costs) ■■ Co-makership, products tailored to specific needs COST LEADERSHIP ■■ Internal production combined with outsourcing delivers flexibility ■■ Economies of scale ■■ Process innovation ■■ Cost control TENCATE ADVANCED COMPOSITES, TENCATE INDUSTRIAL COMPOSITES AND TENCATE ADVANCED ARMOUR BUSINESS MODEL END-USER MARKETING ■■ Access to market participants and partnerships with OEM relationships in market phase of the TenCate ABDS™ active blast countermeasure system ■■ Solution-focused approach due to independence from fibre suppliers ■■ Reputation and qualifications of renowned market participants TECHNOLOGICAL INNOVATION ■■ TenCate ABDS™ active blast countermeasure system ■■ Innovation via networks and partnerships (TAPAS, TPRC, AMRC, eTAC) ■■ Qualifications for future programmes ■■ Industrialisation of processes, focused on volume production PRODUCT DIFFERENTIATION ■■ Development of new areas of application ■■ Developments in unidirectional (UD) tape technology ■■ Development of the non-aerospace product portfolio ■■ Development of the value chain particularly in automotive applications for thermoplastic composites COST LEADERSHIP ■■ Increased efficiency in production ■■ Economies of scale ■■ Outsourcing and partnerships ■■ Development of low-cost solutions (industrial markets) capabilities and a wide range of protective (fibre-reinforced) composites. The market group supplies complete solutions for vehicle programmes.
  • 39. 35TenCate annual report 2013  |  Business overview | STRATEGY The strategy of the sector is derived from the group strategy, which is based on TenCate’s business model for value chain management. This strategy continued to be implemented in 2013. In all activities, growth can be achieved by broadening the geographic spread (new markets) and further developing the product portfolio (new applications). This can be implemented in individual areas as follows. PROTECTIVE FABRICS TenCate operates particularly in the upper segment of the safety clothing market. As a global player, TenCate has access to the worldwide commodity markets. Optimum functional characteristics can be achieved in materials through intelligent combinations of characteristics of fibres from different providers. A good example of this strategy is the success of the TenCate Defender™ M and the TenCate Tecasafe® portfolio. By effectively mobilising internal knowledge and collaborating with third parties, the aim is to accelerate access to new geographic and other markets. In all end-markets TenCate seeks to maintain direct contact with end-users and industry organisations so as to respond effectively to customer requirements and ensure that TenCate products are well- positioned among end-customers. TenCate applies an own-brand strategy based on the specific functional aspects and qualities which end-users demand. TenCate works closely with market operators, suppliers of the complete range of industrial clothing and professional wear, which occupy leading positions in certain markets. This collaboration usually results in co-development, joint branding and marketing support. COMPOSITES The focus of the Group-wide growth strategy is on composite activities, where TenCate currently occupies a unique technology position. After an initial focus on aerospace applications, further growth is being pursued in industrial markets, such as tooling (die construction), the automotive industry, the electronics industry and oil and gas extraction (transport pipes). The combination of thermoset and thermoplastic composite technology offers TenCate good growth opportunities in these markets. The strategy is also focused on good collaboration with operators along the entire value chain. TenCate has close relationships with fibre producers, the processing industry and end-customers (OEMs). In the case of both TenCate Protective Fabrics and the two market groups in the composites segment, it is essential to maintain good relationships with raw material suppliers, particularly fibre producers and chemical companies. Many orders are project-driven. Delivery reliability along the entire chain is vital. As a result of its leading market positions, TenCate is usually one of the largest buyers of fibres in the specific market segment. Long-term co-operation agreements have been entered into with a number of fibre producers. VALUE PROPOSITION TenCate is the global market leader in the field of protective fabrics and one of the pre-eminent suppliers of composites. Good internal collaboration is also essential with regard to the value proposition. The aerospace background of the subsidiary TenCate Advanced Composites also gives TenCate a strong base in aerospace armour. The operation of different business units in, for example, the defence market strengthens the overall value proposition in the market. TenCate positions itself as a specialist in the field of personal protection. The various activities in the market are mutually reinforcing. With its broad technological background, TenCate is well able to anticipate specific market requirements. These usually result from laws or regulations, industrial and safety standards which specify the technical characteristics of materials. In the markets in which TenCate operates, supplier reliability and commitment with regard to the performance of materials and operation as a development partner are essential. The requirements in terms of functional aspects of materials evolve constantly and TenCate has the necessary knowledge and flexibility to respond effectively.
  • 40. (VALUE ADDED) RESELLERS GEOSYNTHETICS • R&D • Weaving • Non-woven • Knitting • Grids • Pre-treatment • Finishing • Quality control • Packaging & Logistics • Marketing & Sales GEOSYNTHETICS • Distributors • Contractors • Retailers GEOSYNTHETICS • Dealers • Subcontractors GEOSYNTHETICS • Civil work • Water & Environment • Industrial • Oil & Gas • Renewable energy GEOSYNTHETICS • Chemical suppliers • Polymer suppliers • Fabric suppliers • Yarn suppliers GEOSYNTHETICS • Chemicals • Polymers END-USER MARKETS CUSTOMERS SUPPLIERS RAW MATERIALS ISO9001 FMHPR(G,USA) ISO14001(F,AU,NL)/MVOPL(NL) (VALUE ADDED) RESELLERS GRASS • R&D • Spinning yarns • Weaving backing • Finishing yarns • Finishing backing • Quality control • Packaging & Logistics • Marketing & Sales GRASS • Tufters • Weavers GRASS • Installers • Marketing organisations GRASS • Soccer • American Football • Hockey • Tennis • Golf • Padel • Multisport • Landscaping GRASS • Chemical suppliers • Polymer suppliers GRASS • Chemicals • Polymers END-USER MARKETS CUSTOMERS SUPPLIERS RAW MATERIALS ISO9001 ISO14001(NL)/MVOPL(NL) FMHPR(T,USA) 36 |  TenCate annual report 2013  |  Business overview .. Sectors SAFETY SUSTAINABILITY QUALITY Safety guarantee refers to: ■■ Highly Protected Risk (HPR) status determined by FM Global Sustainability guarantee refers to: ■■ ISO 14001 environmental management systems ■■ CSR Performance Ladder (CSR PL), CSR management system for corporate social responsibility Quality guarantee refers to: ■■ ISO 9001 general quality management systems ■■ AS 9001 (US), EN 9100 (Europe), JISQ (Asia) aviation quality management systems
  • 41. 37TenCate annual report 2013  |  Business overview | MARKET GROUPS The Geosynthetics & Grass sector comprises two market groups: ■■ TenCate Geosynthetics Fabrics, grids and non-wovens for solutions and applications for infrastructure projects and the environmental market, as well as industrial fabrics for a range of applications, such as agribusiness, sport and recreation. TenCate Geosynthetics has production sites in Europe, North America and Asia. There are also 67 sites worldwide for sales and technical support, including over 30 in the United States. ■■ TenCate Grass Synthetic turf components and systems for applications such as football, hockey and other sports pitches, as well as landscaping. In addition to the companies producing fibres, woven synthetic turf and carpet backing (upstream activities), the Grass group includes a growing number of system development and marketing companies (downstream activities). TenCate Grass has production sites (upstream) in North America, the Netherlands and the Middle East. There are three marketing and sales organisations (downstream) with offices in countries including the Netherlands, Norway, Switzerland, New Zealand, Australia, the United Kingdom and the United States. GEOSYNTHETICS & GRASS The main end-markets in the Geosynthetics & Grass sector are: ■■ Infrastructure ■■ Water management ■■ Sport and leisure. TenCate Geosynthetics is the world’s largest producer of geosynthetics (geotextile fabrics, non-wovens, grids and liners, fabrics) for infrastructure, the construction industry and environmental applications. The market group has three distinct business units: infrastructure, water & environment and industrial fabrics. Geosynthetics products are mainly used to stabilise or separate soil layers and to support dyke bodies and dam walls. Geosynthetics (TenCate Geotube® ) are also used in the environmental market (filtration) and for the dewatering of polluted sludge. The portfolio also comprises industrial fabrics for the agriculture, horticulture and recreation sectors, among others. TenCate Grass develops, produces and markets synthetic turf components (fibres, outdoor backing and infill) and synthetic turf systems. The areas of application are top-flight and recreational sports as well as landscape applications (landscaping, infrastructure). The Grass group has a leading market position worldwide in terms of technology and market share. The market for landscaping is growing strongly and ultimately has equivalent if not greater potential than the sports market. TECHNOLOGY The Geosynthetics & Grass sector is concentrated around extrusion and non-woven technologies. The main raw materials used are polyethylene and polypropylene, as well as purchased synthetic yarns, such as nylon and polyester. TenCate Grass has also been producing synthetic turf based on 3D weaving technology for some time. This means the entire system is produced in-house under full internal quality control. This process innovation has also delivered logistical benefits.
  • 42. 38 |  TenCate annual report 2013  |  Business overview .. Sectors BUSINESS MODEL TENCATE GEOSYNTHETICS END-USER MARKETING ■■ Alliances with market participants ■■ Local collaboration with partners in emerging markets ■■ Geographic spread of distribution ■■ Positioning in sustainability (water management, environmental solutions, low CO2 footprint) ■■ Development of relationships in the Chinese and South American markets TECHNOLOGICAL INNOVATION ■■ TenCate GeoDetect™ solutions ■■ Dewatering and filtration technology ■■ Biopolymers PRODUCT DIFFERENTIATION ■■ Focus on differentiated, high-quality and functional products ■■ Focus on water management, environment and infrastructure COST LEADERSHIP ■■ Economies of scale (volume products) ■■ Process optimisation ■■ Focus on reduction of purchasing costs and control of volatility in raw material costs BUSINESS MODEL TENCATE GRASS END-USER MARKETING ■■ Alliances with market participants (downstream activities) ■■ Geographic spread of distribution ■■ Positioning and advantages of the sustainability aspect (water management, recycling) ■■ Increased quality awareness in end-markets ■■ Brand positioning (GreenFields, Edel Grass, TigerTurf) ■■ Relationships with sports federations ■■ Reduction of total cost of ownership of sports pitches ■■ Product and system warranties ■■ Creation of higher quality standard TECHNOLOGICAL INNOVATION ■■ Fourth-generation developments in synthetic turf for football ■■ Weaving technology ■■ Biomechanical characteristics (research project with third parties) PRODUCT DIFFERENTIATION ■■ System components, ‘Powered by TenCate’ ■■ Optimum support of downstream activities for development of new system concepts COST LEADERSHIP ■■ Economies of scale ■■ Process optimisation
  • 43. 39TenCate annual report 2013  |  Business overview | STRATEGY The strategy in the sector is derived from the group strategy, which is based on TenCate’s business model for value chain management. This strategy continued to be implemented in 2013. The market policy is based partly on the principle of ‘local for local’. Local standards and local market demand are factors in both the geosynthetics and synthetic turf markets. Cost leadership is a key pillar of the business model. For non-wovens, the geosynthetics market is mainly volume- driven. The same applies increasingly to the market for synthetic turf fibres. As a one-stop shop for the project market, TenCate nevertheless has an important competitive advantage. The company has cost- effective production sites in Asia (geosynthetics) and Dubai (synthetic turf yarns). The logistical lines to the market are short. Both market groups work to a large extent with partners in the chain. The TenCate Geosynthetics market group works closely with specialist consulting firms, dredging companies and construction firms, in order to strengthen the focus on end-solutions. In the synthetic turf market TenCate is almost at the beginning of the value chain. In the synthetic turf segment, the company has strengthened its position with regard to end-markets through a process of chain integration. Market competition is increasingly taking place in the area of end-solutions (systems). This is necessary on the one hand to gain greater control of the quality of sport systems in end-markets and on the other hand to safeguard the sustainability aspect more fully. This policy also results in growing co-operation with the TenCate Geosynthetics market group. VALUE PROPOSITION The value proposition for both geosynthetics and synthetic turf solutions is concentrated largely in the field of sustainability. Water shortages, or an overabundance of water, are important factors which determine demand in the global market. Governments are focusing increasing attention on the sustainability aspects of infrastructure, civil engineering and sports projects. In many cases geosynthetics have a demonstrably lower CO2 footprint than the more traditional construction materials (concrete, rockfill). The market is devoting increasing attention to the positive environmental aspects of geosynthetics. The use of environmental arguments and the reduction of negative environmental effects are therefore receiving greater emphasis in promotion, design and specifications. The rise of synthetic turf is mainly due to its greater playability, water savings and lower maintenance cost compared to natural grass. TenCate Geotube® Norfolk TenCate Geotube® technology was used to restore and strengthen a spit of land in Norwich (UK) between the River Bure and Salhouse Broad. Salhouse Broad resulted from the cutting of turf. The spit of land between this peat pool and the Bure has suffered greatly from erosion over the last sixty years. If the water separation were to give way, this landscape, which is an important habitat for wild animals, would suffer severe damage. It therefore had to be restored and strengthened. The work was carried out using TenCate Geotube® containers filled with local dredged material to form a 170-metre-long bank. Behind the containers dredge spoil was used to return 7,000 m² of reedland and the waterline to its original state. With stability, erosion protection and fauna in mind, TenCate Geotube® containers are being sown with reeds and grasses. This is vegetation which occurs frequently here and should therefore root quickly. The work itself had a minimal impact on the environment.
  • 44. 40 |  TenCate annual report 2013  |  Business overview .. Sectors STRATEGY Xennia Technology and TenCate Enbi occupy a separate position within the TenCate Group. Xennia Technology was acquired some years ago to facilitate technological development in the field of digital inkjet technology. This initiated key process innovation in the field of textile finishing. The first (trial) production based on this technology in TenCate Outdoor Fabrics began in 2013. Xennia Technology refined its strategy in 2013, with a focus on chemicals (ink formulations), software (control of printing systems) and specific solutions (industrial inkjet processes). Supplies of components for inkjet printers (print engines) were reduced. Xennia Technology develops inkjet systems and inks (coating fluids) particularly for functional additions to materials (smart materials) as well as the decoration of various substrates (paper, textiles, plastics, metal, ceramics and glass). Access to the market will be strengthened through partnerships and efforts will be made to accelerate growth in ink revenues. TenCate Enbi has staged a major turnaround in the last few years. With production sites in Europe, the United States and China, the company has a unique position in the supply of components to leading producers of printers and copiers. TenCate Enbi has also focused successfully on the Asian market, where significant revenue growth has been achieved in recent years. In view of the relatively low quality awareness among end-users in the synthetic turf market, TenCate continues to focus on higher quality standards and the total cost of ownership. An optimum and safe playing experience throughout the economic life of the product is of primary importance. TenCate has production sites in Europe, North America and Asia, enabling it to respond flexibly and effectively to demand from local markets. The collaboration with TenCate, a supplier of a wide portfolio of materials, provides market participants logistical and purchasing advantages. The value proposition is accompanied by extensive technical consulting on the processing of products in projects and systems. Quality, dependability and delivery reliability are key elements of the value proposition. TenCate presents itself as an innovative producer of high-quality materials. OTHER ACTIVITIES The Other Activities sector comprises three entities ■■ Xennia Technology Specialist inkjet technology for industrial applications, such as the printing, coating and finishing of materials. ■■ TenCate Enbi Technical rollers and components particularly for printers, copiers, fax machines, postal sorting machines and ATMs. ■■ Holding & Services Holding company activities Xennia Technology combines technology (hardware solutions) with operating systems (software) and internally developed ink formulations to create industrial production systems. The company focuses particularly on textile printing and finishing and on the decoration and coating of materials. TenCate Enbi occupies an important position in these markets as a leading supplier to major European, American and Asian printer and copier manufacturers. In addition to the office market, TenCate Enbi serves niche markets, such as postal sorting machines, ATMs, photo printers and insulation (based on foam).
  • 45. 41TenCate annual report 2013  |  Business overview | CORPORATE HUMAN RESOURCES TenCate’s human resources policy is based on: ■■ Ensuring a safe work environment for employees ■■ Increasing and maintaining employees’ skills, professional knowledge and knowhow ■■ Qualification, development and mobilisation of employees ■■ Retaining and stimulating talent ■■ Developing leadership and entrepreneurial qualities ■■ Promoting internal co-operation. GENERAL INFORMATION One of the key aspects of corporate human resources in 2013 was the refinement of the organisational structure and the development of the management. Salaries worldwide rose moderately in 2013. Increments determined under collective labour agreements, government-set minimum wages and promotions were respected. A critical assessment was again made of both the quality and quantity of the manpower factor. Steps were initiated to make the corporate organisational structure more market-oriented. The distinction in market dynamics between the various continents is one of the main motives for structuring the organisation, as well as the product market-technology combinations, on a more continental basis. The number of employees with employment contracts in the existing companies decreased by 198 FTEs in 2013. Employee numbers rose in America (48), Europe (as a result of the acquisition of Amber Composites) and the Middle East. At the end of 2013 TenCate employed 4,256 people worldwide (including the Edel Grass joint venture). ORGANISATIONAL DEVELOPMENT The absolute priorities are to increase TenCate’s commercial strength and the marketing and sales of the innovations which the company has developed in recent years. That requires a further strengthening of the sales and marketing competences within the existing organisation. The organisation will act as an enabler in this regard. Entrepreneurship remains central at all levels in the market groups and in each region/ continent. It is essential to translate and implement the strategy appropriately. MANAGEMENT DEVELOPMENT TenCate aims to fill at least 60% of vacant management positions internally. The continued development of management, including at senior levels, is essential. At the beginning of 2013 the continental management teams in North America took part in a concise and inspiring TenCate Executive programme aimed at strategic entrepreneurship, strategic marketing and leadership. The European management teams will take part in the same programme in early 2014. The annual update of the succession planning at international management level and the respective key specialists took place in 2013. TenCate has appropriate successors for over 60% of vital posts. A number of them can occupy the vacant positions immediately. Others will require around two more years to gain the necessary skills and experience. One-third of them have the potential and need to develop for another five years. The trainee programme was further expanded in 2013. It is currently being conducted in the Dutch businesses. The aim is to extend this programme further into the other countries/regions of the world in which TenCate is strongly represented. Young, academically trained Corporate information OWN EMPLOYEES (in number of staff years) Year-end 2008 Year-end 2009 Year-end 2010 Year-end 2011 Year-end 2012 Year- end 2013 Delta vs 2012 Netherlands 931 862 785 819 795 774 – 21 Other Europe 612 569 724 672 630 659 29 United States 1,573 1,314 1,542 1,604 1,547 1,595 48 Asia / Australia 936 777 878 1,030 1,211 935 – 276 Middle East 385 283 342 228 271 293 22 Total 4,437 3,805 4,271 4,353 4,454 4,256 – 198
  • 46. 42 |  TenCate annual report 2013  |  Business overview .. Corporate information Work began in 2013 on the more integrated deployment of competence management in HR processes with added value (recruitment, development, assessment and succession planning). EMPLOYMENT CONDITIONS TenCate offers its employees a comprehensive and market-compliant package of employment conditions. Annual benchmark assessments are carried out for this purpose, in collaboration with parties including Hay Group and local employer organisations. TenCate operates a uniform remuneration policy for the management of all businesses. The incentive system for senior management is also determined centrally, on the basis of the results of the respective TenCate market group and/or the Group as a whole. TenCate operates businesses in 25 countries worldwide, each of which has its own employment law, legal system and culture. The operating companies therefore conduct their own personnel policy geared to the local situation, taking into account both the conditions specified by the Group as a whole and the market group and the general principles. CORE VALUES One of TenCate’s core values is reliability. The integrity code applies to everyone employed by TenCate. The code is part of each individual contract of employment. A corporate compliance officer and a confidential adviser have been appointed to support the code. An employee satisfaction survey was conducted in the Dutch TenCate businesses in 2013. The response was positive and representative, with an overall satisfaction score of 7.5. OCCUPATIONAL SAFETY AND WELFARE TenCate’s policy is focused on implementing and/or organising all activities and processes in such a way as to prevent any personal injury or damage to health. This is the guiding principle for the health and safety policy which has been or is being implemented in every company. With annual campaigns focused on promoting safety, sustainability, quality and welfare, TenCate seeks to offer employees on all continents a safe and high-quality working environment. The objective is pursued jointly with the managements of the companies. and recently graduated people will be recruited for two years over and above the normal complement to carry our two or three projects in the field of business development, sales & marketing, R&D and/or operations. The aim is to acquire specific or updated knowledge, absorb innovative or refreshing insights and transpose these into TenCate’s strategy. After two years an assessment will be made as to whether the former trainees can be deployed within TenCate and, if so, in which regular posts. TenCate supplies materials for the Falcon 9 TenCate Advanced Composites supplied composites to Space Exploration Technologies Corp. (SpaceX) of the United States for the improved version of its Falcon 9 transport rocket. This is a two-stage rocket developed and built by SpaceX to transport satellites and the Dragon space capsule. The rocket was launched successfully on 29 September 2013 from Vandenberg Air Force Base in Santa Barbara (California, USA). The Falcon 9 and the Dragon were contracted by NASA to supply the ISS international space station. TenCate Advanced Composites USA is providing SpaceX among other things with more high-temperature prepregs for the structure of space craft and bulk moulding compound, a thermoset composite used for injection moulding processes.
  • 47. 43TenCate annual report 2013  |  Business overview | The focal points of the business development policy are: ■■ TenCate ABDS™ active blast countermeasure system ■■ TenCate automotive composite activities ■■ Inkjet technology ■■ Development of new synthetic turf systems and the associated market ■■ Growth activities in the Water & Environment market group (TenCate Geosynthetics) ■■ Development of activities in new geographic markets (China, Japan and South America) The buy & build strategy is co-ordinated from the corporate business development department. This means in particular that acquisition and divestment processes are controlled and co-ordinated at holding company level. CORPORATE BRANDING TenCate’s brand policy is focused on further strengthening and expanding its image in the market, relying on the strong TenCate corporate brand that forms the basis for corporate and market communication. The brand policy, based on the TenCate brand, is linked to the end-user marketing strategy pursued by the various market groups. The corporate brand is communicated in the same way in the market groups, in order to emphasise the links between them. TenCate also conducts an active patent policy. That applies both to the registration of new inventions and to the protection of existing intellectual property rights. The existing portfolio is regularly assessed to ensure that the available intellectual property is being used appropriately. TenCate innovates and develops constantly. The resulting intellectual property is appropriately registered and protected. TenCate also conducts an active protection policy. That applies to all its intellectual property. Action is taken if any infringements are identified, both independently and with the help of external specialists. CORPORATE INFORMATION TECHNOLOGY With the completion of the establishment of the three regional IT shared service centres in the North America, EMEA and Asia/Pacific regions, TenCate focused on the further improvement of information provision in 2013. The IT organisation was adapted, with the objective of further harmonising ERP systems. To this end an ERP competence centre was established to support local businesses in the implementation and support of these ERP applications. INVESTMENTS A number of ERP systems were replaced in 2013, including in the United States, further reducing the diversity of ERP systems in operation. Additional investment also took place in IT infrastructure. The final separate e-mail system is being replaced and brought within TenCate standard environment. GREEN IT Measures were again taken and investments made to develop the Green IT strategy in 2013: ■■ The purchasing of large copiers was brought under a single master agreement; immediate benefits include lower consumption of energy and materials by this green equipment ■■ The number of individual printers was further reduced ■■ More information is supplied digitally and via the intranet. CORPORATE BUSINESS DEVELOPMENT Corporate business development supports the development and implementation of the company’s strategic technology roadmap and co-ordinates activities relating to innovation grants. It also provides support for TenCate’s introduction to new geographic and other markets, in close collaboration with the operating business units.
  • 48. 44 |  TenCate annual report 2013  |  Business overview .. Corporate information DEVELOPMENTS IN 2013 Further work took place on the positioning of the corporate brand worldwide in 2013. The market groups are continuing to apply the co-ordinated brand strategy in a consistent manner. It was already evident in previous years that this strategy was also bearing fruit in terms of brand value. TenCate registered various new patents and thus further expanded its patent portfolio in 2013. This is appropriate for an innovative organisation that constantly develops new products incorporating new techniques or technologies. The brand portfolio can be viewed on the website. The patent portfolio is not disclosed, due to competition considerations. TenCate has more than 670 patents. CORPORATE SOCIAL RESPONSIBILITY TenCate’s sustainability policy forms an integral part of the pursuit of continuity in the company, which has existed for over 310 years. It is reflected in the common denominator and the common goal of the TenCate organisation: to protect people and their working and living environments – Protecting People. It is also based on the forward- looking vision, mission and strategy of the Executive Board. As a multinational company, TenCate is aware of the effect its actions have on the social environment. By maintaining the company on the basis of sustainable profitability, TenCate aims to play a part in ensuring that the social, ecological and economic environment remains available for future generations. TenCate is increasingly integrating sustainability into its operating processes, products, joint ventures, marketing and communication on the basis of corporate social responsibility (CSR). This creates shared awareness among both internal and external stakeholders, which in turn opens the way to constructive initiatives with buyers, customers, partners and institutions and stakeholders aimed at the responsible deployment of people in production processes and responsible use of commodities and materials. Having regard to the worldwide trends in safety and sustainability on which TenCate focuses, many underlying themes arise in relation to the protection that TenCate provides. Such sustainability themes include weight reduction, limitation of energy consumption, noise reduction, insulation, water management, reuse, recycling, waste water and sludge processing, wear and tear, resistance, bullet- and fragment- proofing and heat and flame resistance. Marsh island with geosynthetics Trial projects are being conducted in the Markermeer and IJmeer with the aim of creating a future-proof ecological system. One of the projects is a marsh between Trintelhaven and Lelystad. This involves an investigation into the feasibility of a marsh on a muddy bed. The edges of the marsh island are being built up with 180 units incorporating TenCate Geocontainer® technology. On top of the containers a layer of 60 units is being laid with TenCate Geotube® technology. TenCate Geocontainer® and TenCate Geotube® technology was chosen due to the duration, relatively low costs and environmental friendliness. The containers and tubes are being filled with sludge. The water drains out through the pores while the sand is left behind. As additional protection against floating ice and wave action, the outer edge is being covered with rubble. This layer will ultimately be covered with clay and reeds. That will help purify the water and give the island the appearance of a marsh. A measurement period will then begin. The results of the measurement of the trial marsh will be combined with the results of other experiments. The intention is that in 2015 all results will lead to a recommendation to the Government on possible action in the Markermeer and IJmeer.
  • 49. 45TenCate annual report 2013  |  Business overview | Numerous sustainability aspects arise to a greater or lesser extent in the management of the value chain. This applies to all cornerstones of TenCate’s business model. The technological innovation cornerstone is the most obvious. It is only by continuing to deliver (disruptive and sustaining) innovations in technological and technical fields that TenCate will be able to guarantee its continuity as a technology group and maintain sustainable development. CSR is the means by which TenCate integrates sustainability into its business operations. TenCate uses numerous management systems to make corporate social responsibility in particular visible, measureable and controllable. These range from environmental management systems (ISO certifications for quality, the environment and corporate social responsibility) to financial and non-financial accountability on the receipt of innovation funds and the awarding of sponsorship and donations. In the various value chains, TenCate plays an active part as a customer, producer, supplier and co-operation partner in delivering sustainable innovations in numerous fields. Open innovation and closed open innovation are the keywords for the ‘new competition’: sustainable co-operation. The theme of ‘sustainable procurement’ is also of growing importance in specific market groups. As market leader, TenCate aims to be among the front runners in the industry in terms of both safety and sustainability. The future availability of essential natural resources (biodiversity) remains an ever-growing concern for TenCate. The company aims to keep control of developments by focusing on individual areas such as an integrated environmental policy, the prevailing energy policy, the progressive policy on emission allowances, efficient and eco-efficient production, recycling and the bio-based initiatives currently being developed. This approach is in line with the industry’s sector objectives. According to the roadmap to 2030, by that time the technical textile industry must be able to fulfil the needs of customers and users in a flexible and sustainable way. TenCate has a leading position in the pursuit of this objective. By already working further on ground-breaking technologies and techniques for the processing of natural, synthetic, bio-based, biologically degradable, recyclable or secondary raw materials, TenCate will increasingly be able to manufacture biologically, chemically or mechanically recyclable products using cleaner and more efficient production techniques. TenCate’s technology and product road maps in particular chart the direction of future sustainable innovations. The corporate CSR team – which reports to the Executive Board – specifies the corporate objectives and the CSR programme each year. The objectives and results are assessed with the management and group managements as far as possible on a quarterly basis. If necessary, the group managements make adjustments to the implementation. Organisation of corporate social responsibility Executive Board ■■ Vision, mission, strategy, business model, including corporate social responsibility ■■ Defining and monitoring critical performance indicators (KPIs), i.e. ■■ General indicators ■■ Specific indicators (CSR) Corporate CSR team Corporate risk manager Group HR director Head of corporate communication Corporate information manager Corporate CSR controller Corporate investor relations manager ■■ Advice for Executive Board concerning corporate social responsibility ■■ Practical progress of CSR policy ■■ Definition and monitoring of specific indicators (CSR)
  • 50. 46 |  TenCate annual report 2013  |  Business overview .. Corporate information All four market groups in Nijverdal have been certified in accordance with the CSR Performance Ladder at level 3: TenCate Protective & Outdoor Fabrics by Bureau Veritas, TenCate Advanced Composites by LRQA and TenCate Geosynthetics and TenCate Grass by DEKRA. The CSR Performance Ladder is built around three core components based on the international CSR guidelines (ISO 26000). In the first place the certificate imposes requirements on the management system of each market group with regard to the introduction and development of corporate social responsibility. Stakeholder management and CSR indicators are guaranteed by procedures and monitoring of changes. Demonstrable co-ordination and dialogue also take place with stakeholders. Every market group reports to them regularly on CSR matters. The most relevant of the 33 CSR indicators (subdivided into seven core CSR themes, the same as in ISO 26000) have also been incorporated in the CSR management system for each market group. CSR Performance Ladder level 3 certification also requires the market group to involve indirect as well as direct stakeholders in the company’s activities. This underlines the value chain management which the group strives for on the basis of the TenCate business model. The CSR certification is based on at least one of the ISO 14001, ISO 9001 and AS/EN9100 certification standards. DEVELOPMENTS IN 2013 TenCate limited the environmental risks as fully as possible during the 2013 reporting year. The group managements were supported by the CSR team worldwide with initiatives and projects promoting corporate social responsibility. TenCate was active worldwide in numerous projects related to or aimed at corporate social responsibility, involving sponsorship, donations or participation in events. A full list can be found on the dynamic annual report website (www. tencateannualreports.com) and a summary appears on the corporate website (www.tencate.com) under CSR projects. TenCate provided sponsorship during the reporting year for a number of sporting events, for around ten student teams by providing composites and protective materials, for dozens of organisations, including veterans’ and firefighters’ support associations, and for a large number of events in local communities – partly through voluntary work. TenCate Grass partnered with the Coöperatie Eerste Divisie (Cooperation First Division) in 2013 in order to make high-quality synthetic turf systems more accessible to Dutch professional clubs. At the end of last year many first division clubs were playing on GreenFields® MX. In Europe, TenCate played an active part in around 20 innovation projects centred on sustainability and safety during the reporting year. A full list can be found on the TenCate website. TenCate was also active on numerous national and international committees during the year. The company has been working for decades with a number of universities in Europe, including, in the Netherlands, Delft University of Technology, the University of Twente and Saxion University of Applied Sciences in Enschede. In Germany, TenCate works with AZL Aachen, based at RWTH Aachen University in Aachen. In the United Kingdom, TenCate works with AMRC in Sheffield.
  • 51. 47TenCate annual report 2013  |  Business context | Business environment 48 Stakeholders 50 Materiality matrix 52 SWOT analysis 54 Risk management 56 Business context describes and explains the environment in which TenCate operates BUSINESS CONTEXT
  • 52. 48 |  TenCate annual report 2013  |  Business context Business environment BUSINESS ENVIRONMENT The context in which TenCate operates can be described as the ‘risk society’. Risks to human beings and society are to a large extent the basis for the development of materials which offer solutions to specific issues in society. TenCate is closely associated with this context through the theme of ‘Protecting People’. The worldwide trends on which TenCate focuses are safety and protection as well as sustainability and the environment. The company expects these markets to grow over the long term. In the short term, however, TenCate is dependent on the government as its end-customer for 47% of revenues (2013). The dependence on government spending in recent years has increased the uncertainty surrounding organic developments in markets of relevance to TenCate. Revenue trends are therefore difficult to assess and volatility has increased. In the past, the risk profile was reduced by the global spread of revenues, but pressure on government expenditure is now evident in many geographic markets. The company has nevertheless focused successfully on the development of private markets. TenCate recorded 7% growth in non-government-related revenues in 2013. In Europe, governments are under increased pressure to comply with the financial conditions set by the European Commission. In the United States, there were even automatic budget cuts (sequestration) in 2013. This impacted TenCate’s business environment. PERSONAL PROTECTION TenCate has a mission to protect people. This is reflected among other things in the production of protective fabrics and armour composites for personnel in wide range of jobs. The personal protection market is a long-term growth market. In the short term, growth is dependent on economic growth, which translates into the level of industrial output and the availability of government resources for emergency and safety services. DEFENCE Measured over the last 10 years, defence expenditure in Europe reached a low point in 2013. In the United States, the discussions on the government budget had a paralysing effect on expenditure. The American market is by far the most important defence market. The accelerated drawdown of US troops from foreign countries has led to a considerable fall in demand. TenCate nevertheless occupies a leading position in protective materials for army uniforms and armour materials. In a shrinking market, TenCate’s leading position in armour composites has been strengthened by a consolidation in the market and by the company’s long-term association with the market. MOBILITY The global trend towards weight-saving in aircraft and vehicles remains an important factor for a sustainable environment. There is a growing awareness that the availability of fossil fuels is finite. Weight savings make it possible to achieve a considerable reduction in fuel consumption. The new market for automotive composites is being driven by stricter regional legislation on CO2 emissions. TenCate Advanced Composites operates in the market for composites which can replace traditional heavy materials. The worldwide composites market is growing fast. The new markets are expected to accelerate this growth. INFRASTRUCTURE TenCate serves the infrastructure market through the production of geotextiles for infrastructure works and synthetic turf for landscaping. Investments in infrastructure works are largely dependent on government spending, although recent natural disasters and the phenomenon of global warming have increased the priority given to water management and coastal protection. This will be a growth market in the long term, partly in view of the increasing importance of infrastructure for economic growth. Personal protection Defence Mobility Infrastructure Watermanagement Sport & leisure Other 21% 8% 12% 30% 2% 21% 6% 2013 BUSINESS ENVIRONMENT
  • 53. 49TenCate annual report 2013  |  Business context | WATER MANAGEMENT TenCate produces geotextiles and systems for water management, maritime projects and dewatering. TenCate Geosynthetics has recorded strong growth in the worldwide Water & Environment business unit in recent years. For TenCate, the water management market is driven mainly by the increasing emphasis on protection of the environment against water and rising water levels. The company nevertheless also offers solutions for areas suffering from water shortages. SPORT AND LEISURE The business environment in the Sport and Leisure end-market comprises the markets for synthetic turf systems and outdoor fabrics. The synthetic turf market remains a growth market. The provision of sports facilities is generally seen as a regional or central government responsibility. Synthetic turf can also offer a solution where water is scarce. TenCate has secured a strong position with the new synthetic turf systems for sports, including at the top level, partly as a result of the Group’s innovative technology. The brands with which TenCate operates in local end-markets and the local business partners with which TenCate has associated are in the top segment of the market. TenCate has a strong quality image. SUSTAINABILITY The sustainability aspect is of constantly growing importance in the business environment in which TenCate operates. Not only are governments increasingly adopting ‘sustainable procurement’, but industrial partners are also imposing ever greater requirements. The automotive composites market, for example, which is relatively new to TenCate, is driven by the need for a sustainable mobility concept in the market. Another example is the need for further development of legislation on the sustainability and recycling of synthetic turf systems. TenCate is anticipating this with the launch of GreenFields® MX, the first synthetic turf system that is 100% recyclable. This will provide benefits not only for the customer, but also for the environment. These developments are making high demands in terms of sustainable production processes, recycling, sustainable energy consumption and the CO2 footprint. TenCate deliberately seeks out these trends, since they will lead to higher demands being made on the required materials, including greater sustainability. New developments will be necessary in the years ahead, both on the demand side and in production processes, in order to respond to this trend. However, this will be a gradual development process. It demands a global approach in all parts of the company. TenCate keeps this subject high on its agenda. TenCate puts first digital inkjet machine into service Digital finishing based on inkjet technology is a new process technology used to apply high-grade functionalities to a textile base. That is done by means of a drop-on-demand technique and pico droplets. This means that coatings and finishes can be applied extremely accurately to technical textiles. This development heralds a revolution in process technology. A wide variety of designs and characteristics can now be applied to different types of fabric at high speed. Compared to existing technologies, the new technology offers complete design freedom at low cost. New functionalities can be introduced rapidly into the production process. This delivers higher quality at lower production cost, logistical benefits and new marketing and sales possibilities. Digital inkjet technology also delivers savings of up to 60% in energy consumption, up to 80% in water consumption and up to 90% in dye and pigment consumption.
  • 54. 50 |  TenCate annual report 2013  |  Business context Stakeholders Major industrial partnerships in the value chain in which TenCate operates were announced in 2013. The collaboration with BASF in automotive composites, for example, was expanded with the addition of Owens Corning. The three companies, each with their individual capabilities, will jointly develop this new, promising market. Fundamental image and reputation management was pursued through end-user marketing and an active media policy. Relationships with governments were strengthened to persuade end-customers of the quality of TenCate products. Presentations were given to members of Congress in Georgia, in the United States. In the Netherlands, regular contact was maintained with the trade unions and the Central Works Council. MATERIALITY ANALYSIS On the basis of its business model, TenCate identified and grouped the respective stakeholders at corporate level in 2013 for each cornerstone or element of value chain management. Key stakeholders were selected in each group for the materiality analysis. In addition to the regular contacts and discussions, they were invited to take part in a two-yearly qualitative dialogue focused on discussion and prioritisation of material subjects. To that end a list of relevant subjects was drawn up for TenCate, based on the one hand on relevant standards for sustainable reporting and industrial guidelines (GRI, SASB, ISO) and on the other hand on material subjects for peers, suppliers and customers. TenCate applied quantitative and qualitative criteria to filter this list, arriving at a list of specific subjects of Stakeholder management within TenCate supports the organisation in achieving its strategic objectives. By informing and influencing external and internal stakeholders, TenCate aims to initiate a dialogue with them and create and maintain constructive relationships. The company does so by effectively managing the expectations and experiences of the stakeholders concerned. DIALOGUE TenCate took various initiatives in 2013 to maintain and strengthen relationships with numerous stakeholders. The company played an active part in many committees with a view to establishing, exploiting or intensifying open innovation and partnerships. Examples of partnerships are the ThermoPlastic composites Research Centre (TPRC), the Thermoplastic Affordable Primary Aircraft Structure consortium (TAPAS), the European Thermoplastic Automotive Composites (eTAC) consortium and the Aachener Zentrum für Integrativen Leichtbau (AZL). A list of the innovation networks in which TenCate participates can be found at www.annualreports.com. A Capital Markets Day for analysts and shareholders was held in November at the TenCate Advanced Armour production site in Primarette. Financial stakeholders were informed about developments in the strategy of the Advanced Armour group and the Grass group. Presentations were given at various financial centres in Europe during roadshows for financial stakeholders. The Annual General Meeting of Shareholders was held in the Heracles Almelo Business Club in April 2013. Shareholders and financial relations Media, policymakers and branche organisations Universities, colleges and institutions Governments Employees and representatives Customers Partners Suppliers Table of stakeholders of TenCate
  • 55. 51TenCate annual report 2013  |  Business context | relevance to TenCate and its stakeholders. The invited internal and external key stakeholders were asked during individual discussions to validate these material subjects and state the degree of importance to the stakeholders concerned or their organisation on the basis of a quantitative rating system. The relevance to TenCate’s strategy was determined by the company itself. The material subjects were then ranked in order of importance to TenCate’s strategy. On the basis of this ranking a materiality matrix was composed, as shown in this annual report. The corporate dialogue will be repeated internally and externally in 2014 with other groups of key stakeholders, with whom it will be repeated again two years later. The market group entities which were certified in accordance with the CSR Performance Ladder (level 3) have conducted their own annual dialogue with stakeholders of relevance to these business units since 2012. A materiality matrix will also be compiled for these units in 2014. This market group dialogue will now also be supported twice a year by a digital magazine covering all relevant CSR subjects. FOLLOW-UP The materiality analysis provides support for the control of TenCate’s value creation process. The value chain management business model plays a guiding role in this regard. The results of the corporate dialogue were discussed in the corporate CSR team, which then drew up recommendations for the Executive Board. The results of the market group dialogues were discussed by the CSR teams concerned. The responsible managements are involved in the continued follow-up of the results and action points. As well as setting objectives for social, ecological and economic aspects of corporate social responsibility, the company’s impact on the social environment will be made increasingly measurable. The current stakeholder dialogue, materiality analysis and materiality matrix will play a central role in this regard. They will provide an increasingly incisive view over the years, making it easier to identify the internal and external factors of importance to TenCate and to determine where the impact is greatest, what to aim for and where to make adjustments. The materiality analysis is robust and was devised with the involvement of many stakeholders. The subjects considered most material are those which have the greatest impact according to the analysis. TenCate realises that the insights obtained must be developed further as part of the value creation process to enable the ultimate impact to be measured.
  • 56. 52 |  TenCate annual report 2013  |  Business context Materiality matrix •Technology innovation •Economic performance •Product differentation •Energy efficient products •Community involvement •Procurement •Product responsibility •Employee well-being •Greenhouse gas reduction •Water •Energy efficiency operations Waste • Diversity and equal opportunity • •Employee training and development •Life Cycle Analyses •Materials •Employee health & safety •Corporate governance • Social • Ecological • Economical • Technological •Cost leadership •End-user marketing Importanttocorestakeholders Important to TenCate +++ +++
  • 57. 53TenCate annual report 2013  |  Business context | The materiality matrix comprises material (relevant) subjects which affect TenCate’s performance. It establishes a connection between TenCate’s strategic objectives, value proposition and governance model. The greater the importance of the subject for both society and business operation, the greater the materiality. Material factors are plotted on the horizontal axis in respect of their importance to TenCate’s strategy, such as the approach to sustainability, innovation policy and value chain management. These factors are plotted on the vertical axis in respect of their importance to key and other stakeholders, such as customers, shareholders, partners and employees. By associating a relative value with these factors, it is possible to see which subjects are most relevant and where TenCate is working to improve performance and intensify the dialogue with all stakeholders. The matrix is used as a management mechanism in relation to the chosen critical performance indicators and CSR objectives. This approach helps in determining the most relevant focal points for sustainable business operation. Representatives from almost all groups of core stakeholders were approached for the corporate dialogue in 2013. The diagram shows the core stakeholders involved. The only group not included in the qualitative dialogue on this occasion was that of suppliers. For this group TenCate relies on the ongoing dialogue of the market groups covered by the CSR Performance Ladder. The corporate dialogue has given rise to a robust materiality matrix which clearly highlights the relevance of TenCate’s strategy. Both the external and internal stakeholders consider the company’s economic performance and – with minor differences of emphasis – the four cornerstones of TenCate’s business model to be of the greatest importance. Another striking feature of the matrix is that external and internal stakeholders focus to some extent on other areas. The subjects under ‘environmental management’ are deemed important mainly by the internal stakeholders and less so by the external stakeholders. This could indicate that external stakeholders are not yet sufficiently aware, or have not been made sufficiently aware, of the impact which TenCate’s products and solutions have on matters such as ‘energy efficiency’ and ‘greenhouse gas reduction’. This provides opportunities to intensify the existing end-user marketing, particularly with regard to sustainability aspects. The detailed results of this qualitative dialogue are analysed by the Executive Board, the managements concerned and the corporate CSR team. The results are taken into account in TenCate’s ongoing policy definition and implementation. The five most material subjects – technological innovation, economic performance, product differentiation, cost leadership and end-user marketing – are analysed in detail in this 2013 annual report.
  • 58. 54 |  TenCate annual report 2013  |  Business context SWOT analysis Strengths Weaknesses ■■ Innovation: the ability to use internal synergy by combining knowledge and skills on an extremely broad technological basis. TenCate is also well positioned to enter into co-operation with external partners (co-creation), in order to offer new solutions and accelerate time to market. ■■ Cost leadership: TenCate has leading market positions and is able to control costs through economies of scale. TenCate also has a flexible organisation and increasingly considers the outsourcing of all or part of production. ■■ Product differentiation: TenCate has a strong brand position in professional markets. Products meet the highest functional standards. Attractive business cases are used to demonstrate that TenCate materials genuinely make the difference. ■■ End-user marketing: TenCate is one of the few players in the technical textile industry to cover the entire global market. TenCate can respond to a wide range of functional requirements of user groups in local niche markets. ■■ TenCate offers its customers highly innovative products and solutions, but as a result of the fragmentation of markets with specific end-customer requirements, the sales organisation is still insufficiently developed to generate rapid revenue growth with new products. ■■ TenCate generates a relatively small proportion of revenues in emerging markets. 22% of revenues were generated outside Europe and the United States in 2013. ■■ Although government-related sales have declined in recent years as a proportion of total revenues, the dependence on this market remains high. These revenues are often project-based, which can result in shocks in periodic revenue reporting. ■■ As a manufacturing company, TenCate must ensure sufficient utilisation of production capacity even in the event of disappointing revenues. This may have consequences for margins in a particular period. Some volume production remains necessary. Opportunities Threats ■■ Business development covering a number of key points provides focus and ensures effective deployment of people and resources. ■■ The increasing attention paid to fuel savings and reduction of CO2 emissions in the aviation and automotive industries offers opportunities. ■■ TenCate has maintained its innovation policy under difficult market conditions and has further developed as a company, with consolidation taking place in certain market sectors. The consistency of its strategic policy has strengthened the competitive position. ■■ As a result of the extensive damage caused to local infrastructure by natural disasters, there is a growing awareness of the need for better protection. ■■ Emerging markets still lag behind in terms of standards and specifications in some fields. However, these markets are largely prepared to use modern technologies, enabling them to make up any lost ground. ■■ Macroeconomic uncertainty. Continuing pressure on European and US government budgets. Although the proportion of revenues generated in the defence market has decreased sharply in recent years, this market still provides an important source of profit, in view of the high-quality character of the products involved. ■■ A large part of TenCate’s revenues are generated by large projects. Any delay or cancellation of these projects may have a major impact on the composition of revenues and profitability in the short term. ■■ A low cotton price in the world market causes price pressure at the lower end of the market, which can work through to the higher-quality market segment on which TenCate concentrates. In some markets the end-customer may sacrifice functionality in favour of price. ■■ TenCate supplies innovative synthetic turf systems which offer the best solution for the customer. Buyers in the synthetic turf market often overlook the specific sporting performance and the associated sustainability requirements in favour of price. The SWOT analysis is a permanent part of the strategic planning of each market group within TenCate. The SWOT analysis included in the annual report is a translation of this analysis at Group level. The risk policy of each market group is concentrated primarily on combinations of organisational weaknesses and external threats (risk box). The Group’s strengths are concentrated mainly in the unique characteristics whereby the company can successfully implement its Vision, Mission and Strategy. These characteristics are summarised below under Strengths and flow directly from the key value drivers (see page 20). The improvement points stated here are a summary of the internal weaker points observed in the organisation.
  • 59. 55TenCate annual report 2013  |  Business context | Challenges Exploiting opportunities and/or averting threats from a position of strength ■■ TenCate’s strength flows from the business model comprising the four cornerstones of innovation, cost leadership, product differentiation and end-user marketing. The exploitation of these four cornerstones leads to sustainable value creation for stakeholders. ■■ TenCate supplies innovative solutions, such as composites, which can provide solutions for requirements such as fuel savings and reduced CO2 emissions in the aviation and automotive industries. ■■ There is increasing demand for high-quality protective fabrics for personnel. TenCate provides solutions which meet the highest standards and can limit safety risks. ■■ TenCate is well positioned to collaborate with external partners (co-creation) in order to offer new solutions and accelerate time to market. ■■ TenCate’s technological base enables it to initiate ground-breaking developments. ■■ The dependence on government spending can be reduced by means of marketing targeted at end-users, with a focus on the development of private markets. ■■ After a few years, products developed for the aerospace market, for example, also make their way into other markets which make high demands on functional materials. ■■ TenCate can respond to a wide range of functional requirements of user groups in local niche markets. ■■ TenCate products and solutions provide functional added value for the customer. End-customers can be persuaded to adopt new solutions by collaboration with bodies representing certain target groups. Improving weaknesses and averting threats ■■ A strengthening of the sales organisation and partnerships in Asia, the Middle East and South America can lead to a stronger position in new markets. Emerging markets are prepared to use modern technologies. ■■ A strengthening of marketing and sales activities, particularly for new, high-quality products with high added value. The aim of this is to achieve revenue growth in the short term through broad acceptance in the market by means of targeted end-user marketing. ■■ Reduced dependence on government spending through increased focus on private markets. The increase in revenues of TenCate Protective Fabrics from TenCate Tecasafe® Plus and the private end-markets of TenCate Geosynthetics are intended to reduce this dependence. ■■ The threat of constant pressure on government budgets in Europe and the United States can be limited by further geographic expansion. ■■ TenCate endeavours to maintain flexibility in production, with consideration increasingly given to partnerships and outsourcing of production.
  • 60. 56 |  TenCate annual report 2013  |  Business context Risk management TenCate operates worldwide in different markets and therefore has to contend with a variety of risks. TenCate aims to identify and control these risks as early as possible. Risk control models have been developed for that purpose, which are regularly updated by and discussed with the Group management. The main risks and the applicable risk control models are described briefly below. A full description of the risk management can be found on the TenCate website (www.tencate.com/nl/corporate-governance). STRATEGIC RISKS In order to assess the strategic risks, TenCate uses its own business model based on four cornerstones. This enables TenCate to clearly understand the strategic position of a business unit and adjust its course accordingly. A second model used is the SWOT analysis (see page 54). This analysis is used as a basis for agreements with the management on measures to reduce risks and identify opportunities in the markets. MARKET RISKS The major risk factor in demand for TenCate products is government expenditure. By building flexibility into cost structures, it is possible to offset the consequences of any drop in demand to a certain extent. OPERATIONAL RISKS TenCate’s organisational strategy is based on a decentralised model. The managements of market groups and operating companies are controlled on the basis of a regular planning and control cycle. Each operating company has its own systems for control and transaction processing in the main operating processes. Information security and back-up procedures are followed to minimise the risk of disruption to these systems. ENVIRONMENTAL RISKS TenCate’s environmental policy is based on limiting any impact on the environment as far as possible. Both the holding company and the managements of operating companies carry out regular audits and take measures to avoid environmental risks. Work also started in 2012 on quantifying the use of fossil raw materials, energy and waste in a context of corporate social responsibility. LEGAL AND TAX RISKS TenCate is involved in various legal proceedings resulting from normal business operations. The progress of these proceedings is monitored continuously. A summary is discussed in the Financial Committee of the Supervisory Board twice a year. FINANCIAL RISKS The financing of the company is for the most part centralised through corporate treasury. The main financing source is the syndicated loan. The original syndicated loan amounted to €  450.0 million and was reduced to € 400.0 million at the Group’s request. € 190.3 million of this facility was drawn as at 31 December 2013. This loan is due to mature on 8 December 2015. The Group’s policy is to arrange refinancing in good time. The main covenant concerns the net debt / EBITDA ratio. In view of the specific seasonal pattern in TenCate’s financing requirement, different quarterly debt / EBITDA ratios have been agreed, substantially reducing the risk of a breach of covenant. Since a substantial part of TenCate’s assets are intangible (principally goodwill), an impairment test is carried out on these assets at least once a year. This is shared with the Supervisory Board and the external auditor. The values of the intangible assets are assessed on this basis. This did not result in any impairment charge in 2013. Full details of the impairment test can be found in paragraph 37.2.
  • 61. 57TenCate annual report 2013  |  Business context | The risk of an interest rate rise in the subsequent years is hedged in principle to various percentages by means of derivative financial instruments. The effect of changes in the value of these derivative financial instruments on the company’s result is mitigated as far as possible by the use of hedge accounting. With regard to currencies, TenCate draws a distinction between competition, transaction and translation risk. The basic principle is that competition risk is hedged for at least the next six months by means of currency options or is offset internally against the translation risk. The foreign currency transaction risk is hedged by means of foreign exchange forward contracts or currency options. The translation risk on the results of subsidiaries outside the eurozone is offset where possible internally by euro-denominated revenues of subsidiaries outside the eurozone, as well as US dollar purchases by subsidiaries in the eurozone. TenCate has placed the pension provision for Dutch employees with Stichting Pensioenfonds Koninklijke Ten Cate. The pension fund has taken measures in its investment policy to lower the risk profile. TenCate uses the OCI method to take account of actuarial gains and losses, which can lead to substantial changes in Group equity. RISK MANAGEMENT AND CONTROL SYSTEMS A whistleblower scheme and a complaint scheme enable employees to inform the company management of any undesirable situations. It is important to maintain direct contact between the Executive Board, group managements and directors of operating companies. Extensive monthly reports are filed and the performance, results, outlook and certain risk management aspects are discussed once every quarter. The risk management also forms part of the consultations with the Financial Committee of the Supervisory Board. All managers and controllers sign a letter of representation twice a year declaring their compliance with financial reporting / internal control requirements. EVALUATION OF RISK MANAGEMENT AND CONTROL SYSTEMS The Executive Board is of the opinion that: ■■ The risk management and control systems provide reasonable assurance that the financial reporting is free of material misstatements; ■■ The risk management and control systems have operated correctly in the reporting year; ■■ There are no indications that the risk management and control systems will not operate correctly during the current year. However well designed the internal risk management and control systems are, they can never provide absolute certainty that objectives in the field of strategy, operation, reporting and compliance with laws and regulations will always be achieved. When taking decisions, TenCate is mindful that: ■■ Human errors of judgement may arise; ■■ Cost-benefit assessments are constantly made when assuming risks and taking control measures; ■■ Human failings and even simple errors or mistakes can have major consequences; ■■ Conspiracies by officials can lead to circumvention of internal control measures; ■■ The management of parts of the company can permanently or temporarily negate agreements made with the Executive Board. This statement should not be interpreted as being a statement in accordance with the requirements of section 404 of the Sarbanes Oxley Act in the United States, which does not apply to Royal Ten Cate.
  • 62. 58 |  TenCate annual report 2013  |  Business context .. Risk management CORPORATE RISK MANAGEMENT The aim of TenCate’s corporate risk management is to maintain safe and secure production sites worldwide, thereby guaranteeing business continuity and preventing any loss of production capacity. TenCate can then also safeguard its position as a dependable supplier to its customers. Safety aspects concern in particular the risk of fire, explosion and natural disaster, such as floods, earthquakes, storms and hurricanes. In co-operation with the insurer FM Global, the corporate risk manager conducts annual inspections of production sites of all market groups worldwide. If a location complies with all FM Global guidelines for damage prevention, the Highly Protected Risk status is attained and the FM Global Highly Protected Risk Award is presented. Other initiatives are also deployed to maintain a high level of safety culture within TenCate. Examples are refresher courses for the company emergency service and the handling of chemicals and highly inflammable materials. The corporate risk manager also deals with numerous related matters that affect the liabilities of the company, including product liabilities and other risks, as well as insurance cover. DEVELOPMENTS IN 2013 In the autumn of 2013, the insurer FM Global granted the Highly Protected Risk Award to three businesses. These were the TenCate Advanced Armour plant in Primarette (France) and the TenCate Protective Fabrics spinning and non-woven mill at Senoia (Georgia, USA). A total of nine TenCate production sites have received this award. Various refresher courses were organised in Nijverdal in the spring and autumn of 2013, including for the company emergency service. International Achievement Award for contribution to sustainable city Close to Tianjin (China), to the southeast of the capital Beijing, a new city is emerging: Tianjin Eco-City. It covers an area of 34 km2 and is based on sustainability. One of the constituent parts of the city is Qingjing Lake. TenCate Geosynthetics played a key part in transforming this 30-year-old polluted wastewater impoundment into a pristine lake using TenCate Geotube® technology. The tubes were filled with polluted sediments, dewatered, stacked in four layers and integrated into the landscape. This contribution was recognised by the presentation of the Outstanding Achievement Award to the Water & Environment business unit of TenCate Geosynthetics by the Industrial Fabrics Association International (IFAI). TenCate Geosynthetics has won an IFAI award every year for the past eight years. This is the fourth award for the Water & Environment business unit. The market increasingly appreciates the sustainability benefits of geotextiles (service life and low environmental impact).
  • 63. 59TenCate annual report 2013  |  Governance | Executive Board 60 Supervisory Board 61 Report of the Supervisory Board 62 Corporate governance 65 In Governance the company explains how management and supervision are organised within TenCate GOVERNANCE
  • 64. 60 |  TenCate annual report 2013  |  Governance as at 1 January 2014 Executive Board L. de Vries (1951), President and Chief Executive Officer Mr De Vries has been a member of the Executive Board since October 1998 and Chairman of the Executive Board since August 2000. Previous employers: ■■ Wilma Nederland ■■ Wilma Vastgoed ■■ Holec Nederland Other activities: ■■ Member of Strategy Board Twente ■■ Member of Industrial Board Advanced Materials Manufacturing Oost-Nederland D.C. Clarke BBA (1958), Group Director of TenCate Advanced Armour and TenCate Advanced Composites NA Group directors Corporate management F.J. Meurs MBA (1967), Group Director of TenCate Protective Fabrics and TenCate Advanced Composites EMEA E.J.F. Bos (1961), Corporate Director of Finance J.H.A.J. Gritter (1968), Corporate Director of Human Resources R.P. Janse (1967), Director of Corporate Legal Affairs, Secretary of the Company D.M. Olsen MBA (1954), Group Director of TenCate Protective Fabrics Americas & APAC W.L. Moore BSc (1963), Group Director of TenCate Geosynthetics G.J.M. Vliegen (1966), Group Director of TenCate Grass F.R. Spaan (1955), Corporate Director of Business Development At the beginning of 2014, the first steps were taken towards a new, continent-based management of businesses. The new organisational structure is consistent with the aim of more market-focused operation. Up-to-date details of the Group management can be found on the Company profile page on our website.
  • 65. 61TenCate annual report 2013  |  Governance | E. ten Cate (1945) 1 * Commenced in office 2004 End of current term 2016 Director of Bank ten Cate & Cie N.V. Chairman of the Supervisory Board of Hydratec Industries N.V. Chairman of the Supervisory Board of Rijksmuseum Twenthe Member of the Supervisory Board of Medisch Spectrum Twente P.F. Hartman (1949) 2 * Commenced in office 2013 End of current term 2017 Vice Chairman of Air France KLM Chairman of the Supervisory Board of Texel Airport N.V. Member of the Supervisory Board of Air France KLM S.A. Member of the Supervisory Board of Delta Lloyd Group N.V. Member of the Supervisory Board of Fokker Technologies Group B.V. Member of the Supervisory Board of CAI - Compagnia Aerea Italiana s.p.A. Member of the Supervisory Board of Kenya Airways Chairman of ACARE (Advisory Council for Aviation Research and Innovation in Europe) Chairman of the Executive Board of Connekt Until 1 July 2013, Chairman and Director of KLM N.V. All members of the Supervisory Board are of Dutch nationality. J.C.M. Hovers (1943) Chairman 1, 2 Commenced in office 2008 End of current term 2016 Chairman of the Supervisory Board of Plieger NV Non-executive board member of Teleconnect Inc Member of the Supervisory Board of Randstad Groep Nederland bv Former Chief Executive Officer of Stork NV and OCE NV P.P.A.I. Deiters (1943) Deputy Chairman 2 Commenced in office 1998 End of current term 2014 Member of the Supervisory Board of HVEG-Fashion Linq B.V., Amersfoort Member of the Supervisory Board of Tootal B.V. Consultant to the European Bank for Reconstruction and Development (EBRD) Former director of Berghaus International Fashion as at 1 January 2014 Supervisory Board 1 Member of the Financial Committee. 2 Member of the combined Remuneration, Selection and Appointments Committee. * Chairman. From left to right: E. ten Cate, P.P.A.I. Deiters, J.C.M. Hovers and P.F. Hartman.
  • 66. 62 |  TenCate annual report 2013  |  Governance ANNUAL REPORT We hereby present the 2013 annual report as prepared by the Executive Board, incorporating the financial statements. The financial statements have been audited by KPMG Accountants NV and were discussed with the Executive Board on 26 February 2014, in the presence of the auditor. The unqualified auditor’s report is included in this report in ‘Other information’. We are of the opinion that the annual report fulfils the transparency requirements and forms a good basis on which the Supervisory Board can account for its supervision. We propose that you adopt the financial statements, approve the dividend proposal and grant discharge to the Executive Board in respect of its policy and to the Supervisory Board in respect of its supervision. COMPOSITION The current members of the Supervisory Board are Messrs P.P.A.I. Deiters, E. ten Cate, J.C.M. Hovers and P.F. Hartman. Mr Hartman was appointed as a member of the Supervisory Board at the last General Meeting of Shareholders, held on 18 April 2013. At the end of the General Meeting to be held on 17 April 2014, Mr Deiters will retire as a member of the Supervisory Board upon the expiry of his fourth four-year term of office. We are very grateful to Mr Deiters for his contribution to the development of Royal Ten Cate into a modern industrial company. We shall miss his wealth of relevant experience and his unique entrepreneurial personality. The Supervisory Board is currently endeavouring to find a suitable candidate to be proposed as a successor to Mr Deiters. A vacancy arose on the Supervisory Board as a result of the departure of Mr Van Gelder on 4 March 2013. His successor will be proposed at the General Meeting of Shareholders of 17 April 2014. The nomination of the candidate followed extensive consultations within the Supervisory Board. Candidates were sought on the basis of the profile defined for members of the Supervisory Board. After a long and intensive process, supported by external experts, the Supervisory Board resolved to propose the candidate. If the General Meeting makes no recommendation(s), the Supervisory Board intends to propose Mrs M.J. Oudeman for appointment as a member of the Supervisory Board for a term of four years at the General Meeting of Shareholders of 17 April 2014. The company aims to conduct a policy under which at least 30% of members of the Executive Board and the Supervisory Board are female and at least 30% are male. The company acknowledges the importance of diversity, including with regard to the composition of its Executive Board and Supervisory Board. The proposed appointment of Mrs Oudeman to the Supervisory Board is already a step in the intended direction. The company will also endeavour to select female candidates when future vacancies arise. However, in view of the industry in which the company operates, it is difficult to find suitable candidates who also sufficiently fulfil the other required profile characteristics. SUPERVISION The Supervisory Board held plenary meetings with the Executive Board on seven occasions in 2013. It also met independently on three occasions. The meetings discussed the composition and performance of the Executive Board and the individual directors. Detailed consideration was also given to the succession of the CFO, who left the company on 1 September. The Supervisory Board also assessed its own performance, as well as that of the committees and the individual members of the Board. This assessment took place on the basis of a written survey completed by the individual supervisory directors and discussed by the full Supervisory Board. The principal conclusions concerned the appointment of a new secretary to the Supervisory Board, who would also serve as secretary to the company, the strengthening of knowledge in the company and among its senior executives through an increase in the number of company visits and more direct engagement of management development efforts. Increased diversity in a number of areas, such as gender, international experience, technical/ technological knowledge and age, was placed high on the agenda. Report of the Supervisory Board
  • 67. 63TenCate annual report 2013  |  Governance | COMMITTEES The Supervisory Board has two committees: the Financial Committee chaired by Mr Ten Cate and the combined Nomination, Remuneration, Selection and Appointments Committee chaired by Mr Hartman. Their task is to analyse matters within their specific remit and to prepare resolutions to be adopted in the plenary meetings of the Supervisory Board. Mr Deiters was succeeded by Mr Hartman as chairman of the combined Nomination, Remuneration, Selection and Appointments Committee in 2013. Financial Committee The Financial Committee met with the Executive Board of TenCate on four occasions in 2013. As preparation for the regular meetings of the full Supervisory Board, these meetings discussed in detail the 2012 annual figures, the 2013 first-quarter figures, the 2013 half-yearly figures, the 2013 third-quarter figures and the 2014 budget. A number of meetings were combined with meetings of the Supervisory Board. Consideration was also given to a number of specific subjects during the meetings. Particular attention was devoted to the impairment tests, debt and working capital, the tax position, risk management and claims, the management letter from the external auditor and the follow-up to his recommendations. Combined Nomination, Remuneration, Selection and Appointments Committee The Remuneration Committee met on three occasions in 2013, considering matters such as the current remuneration policy. The aim was to bring the current Executive Board remuneration policy more closely into line with pay in companies of similar type and size. In the view of the Supervisory Board, this would take proper account of the quality of the performance rendered. It was decided to leave the Executive Board remuneration policy unchanged pending the results of a new external evaluation, based partly on an updated peer group. The remuneration of the Executive Board will be clearly positioned as the upper end of the pay pyramid of the entire company. Corporate social responsibility The Supervisory Board is delighted with the Executive Board’s development of policy on corporate social responsibility. The Supervisory Board also held discussions with the external auditor independently of the Executive Board on two occasions. These discussions did not give rise to any particular measures. The Supervisory Board met in full on all occasions. During the joint meetings, the Supervisory Board considered matters such as the strategy of the sectors within TenCate, the SWOT analyses, risk management, proposed acquisitions, the valuation of TenCate’s balance sheet and the developments concerning recent acquisitions. The Supervisory Board made visits to operating companies in Denmark, France and the Netherlands. TenCate’s financial results were discussed on a quarterly basis. The figures for the first half of 2013 were discussed in the presence of KPMG, the external auditor. Particular consideration was given to the company’s debt, investments and working capital each quarter. Representatives of the Supervisory Board also attended consultative meetings of the Central Works Council. They participated in the discussions and took note of the activities and events within the company. CORPORATE GOVERNANCE The Supervisory Board and the Executive Board endorse the principles of the Corporate Governance Code. The company applies this code almost in full. The only variations from the code within Royal Ten Cate concern primarily the size of the company. These variations and the associated interpretations better reflect the company’s operating methods. The variations applied by TenCate can be viewed on the company’s website. INDEPENDENCE The Supervisory Board considers all its members to be independent within the meaning of best-practice clause III.2.2 of the Corporate Governance Code. No shares or options of Royal TenCate are held directly or indirectly by any members of the Supervisory Board.
  • 68. 64 |  TenCate annual report 2013  |  Governance .. Report of the Supervisory Board The members of the Executive Board were not granted any salary increase in 2013, nor any variable salary component (in respect of the 2012 financial year). The full report can be found on the website under Corporate Governance Documents. The remuneration of the Executive Board appears in note 54.2 on page 142 of this report. COMPOSITION OF THE EXECUTIVE BOARD Mr Cornelese left the company on 1 September. We are grateful to Mr Cornelese for his effort and commitment on behalf of TenCate over the past years. After extensive deliberations and assessments of various candidates, the Supervisory Board, in consultation with the Executive Board, resolved to propose Mr Eef Bos for appointment as a member of the Executive Board and as CFO for a term of four years at the General Meeting of 17 April 2014. Mr Bos was appointed as Corporate Director of Finance with effect from 1 July 2013, in which capacity he also performed the duties of CFO on a temporary basis. The Supervisory Board wishes to express its sincere gratitude to the management and employees of TenCate for their commitment and performance during 2013. Almelo, 26 February 2014 Supervisory Board J.C.M. Hovers, Chairman P.P.A.I. Deiters, Vice-Chairman E. ten Cate P.F. Hartman REMUNERATION POLICY Principles of the remuneration policy The Supervisory Board of Royal Ten Cate applies a remuneration policy in respect of the company’s management based on the following principles: ■■ The remuneration of the management must enable the company to attract and retain senior managers; ■■ The remuneration policy must conform to the company’s corporate governance policy; ■■ The remuneration must reflect the strategic and financial objectives and be to a large extent performance-oriented, with a proper balance between short- and long-term results and objectives; ■■ The remuneration must not include any incentives which give rise to behaviour promoting personal interests in conflict with the company’s interests; ■■ An annual scenario analysis is drawn up with regard to the possible outcomes of the remuneration policy. Remuneration report The 2013 remuneration report, including the plan to develop a new remuneration policy, has been published on the company’s website under Corporate Governance Documents. The posts of CEO and CFO of Royal Ten Cate were based on Hay levels in 2013. In the case of the CEO, Hay level 30 is applied. The variable remuneration component payable for target-level performance is 50% of the fixed salary. This is also the maximum level. Under the prevailing scheme, Mr de Vries was granted 60,000 options with an exercise price of € 17.73. For the CFO in office until 1 September 2013, a fixed annual salary at Hay level 26 was applied, with a variable salary component up to a maximum of 40% of the fixed salary. Under the prevailing scheme, Mr Cornelese was granted 40,000 options with an exercise price of €  17.73. The option rights granted to Mr Cornelese lapsed upon his departure from the company.
  • 69. 65TenCate annual report 2013  |  Governance | Corporate governance The Supervisory Board and the Executive Board endorse the corporate governance principles in the form currently applicable to Dutch listed companies operating internationally. The corporate governance structure is based on the voluntary application of the two-tier board structure. The main elements of this are: ■■ The financial statements are adopted by the General Meeting of Shareholders; ■■ Supervisory directors are appointed by the General Meeting of Shareholders on the basis of nominations by the Supervisory Board. The profile of the members of the Supervisory Board is first discussed at the General Meeting of Shareholders at the time of adoption and on each subsequent modification; ■■ The General Meeting of Shareholders and the Central Works Council can recommend persons to the Supervisory Board for nomination as supervisory directors; ■■ With an outright majority of votes, the General Meeting of Shareholders representing at least one-third of the issued share capital may reject the nomination by the Supervisory Board; ■■ The members of the Executive Board are appointed by the General Meeting of Shareholders on the basis of a binding nomination by the Supervisory Board. Full corporate governance documentation can be found on the TenCate website.
  • 70. 66 |  TenCate annual report 2013  |  Governance TenCate rolls out orange carpet for embassies The embassies of the Netherlands in Abu Dhabi, Beijing, London, Oman, Paris, Tokyo and Washington rolled out an orange carpet on Tuesday 30 April 2013. The Dutch embassies in Indonesia, Russia and Dubai and the consulate-general in Hong Kong followed soon afterwards. The occasion was the coronation on 30 April of that year. Each carpet was hand- made by GreenFields using textured polyethylene monofilament orange and white synthetic turf fibres from TenCate Grass. The two-by-four-metre carpet is suitable for outdoor use, as the synthetic turf fibre is UV-stabilised and colourfast. Each carpet bears the coat of arms of the Dutch government. These diplomatic representations have taken on an economic role, so there is increasing contact with the embassies and consulates general in these countries.
  • 71. 67TenCate annual report 2013  |  Performance | Report of the Executive Board 68 Sector revenues and results 72 PERFORMANCE In Performance the company provides a commentary on the results achieved during the reporting year
  • 72. 68 |  TenCate annual report 2013  |  Performance REVENUES Revenues declined by 4% to € 1,012 million in 2013 (organic decrease of 3%). The currency effect (particularly the decrease in the value of the US dollar against the euro) had a negative impact of 2% on revenues. The effect of acquisitions / divestments amounted to 1%. The decrease in revenues was almost entirely attributable to the lower revenues generated in defence markets. The continued decline in demand from the US Army for TenCate Defender™ M products was largely responsible for this decrease. The focus on growth in private markets resulted in a 7% increase in these market segments. Growth was achieved particularly in the TenCate Advanced Composites market Report of the Executive Board 2013 ANALYSIS BY SECTOR in millions of euros 2012* 2013 difference organic of which currency acquisi- tion/ divestment Net revenues Advanced Textiles & Composites 460.6 427.8 – 7% – 8% – 2% 3% Geosynthetics & Grass 518.7 517.8 0% 2% – 2% 0% Other activities 69.7 66.4 – 5% – 3% – 2% 0% 1,049.0 1,012.0 – 4% – 3% – 2% 1% Operating result before amortisation (EBITA) Advanced Textiles & Composites 23.5 21.3 – 9% – 10% – 3% 4% Geosynthetics & Grass 31.5 27.9 – 11% – 10% – 1% 0% Other activities – 4.9 – 0.5 90% 91% – 1% 0% 50.1 48.7 – 3% – 3% – 2% 2% Amortisation – 14.5 – 13.1 Operating result (EBIT) 35.6 35.6 0% Net financial expenses – 12.1 – 10.1 Result before profit tax 23.5 25.5 9% Profit taxes – 8.2 – 8.5 Results from ordinary operations after profit tax 15.3 17.0 11% Net result from associated companies – 0.3 0.1 Non-controlling interest – 5.9 – 1.9 Net income 20.9 19.0 – 9% * Adjusted for accounting policy change in pension system. EBITA margins 2012 2013 Advanced Textiles & Composites 5.1% 5.0% Geosynthetics & Grass 6.1% 5.4% Consolidated 4.8% 4.8%
  • 73. 69TenCate annual report 2013  |  Performance | group. Revenues in the industrial market for protective fabrics also developed positively. Revenues in the Advanced Textiles & Composites sector declined by 7% to € 428 million. In organic terms, these revenues declined by 8%. The currency effect was –2%. Acquisitions and divestments, particularly the acquisition of Amber Composites at the beginning of 2013, increased revenues by 3%. Revenues in the Geosynthetics & Grass sector remained almost unchanged overall. In organic terms, revenues rose by 2%. The currency effect was –2%. The Grass group recorded slight growth, whereas revenues in the Geosynthetics group fell short of expectations. The Asian markets showed the first decrease in demand for many years. There was also a decline in large public-sector infrastructure projects in these markets. After an initially mediocre start to the year due to the persistent winter weather, revenues in the United States and Europe picked up during the year. Revenues from other activities declined by 5% (organic –3%; currency effect –2%). Xennia Technology, under a partly new management team, reviewed its business portfolio in 2013, switching the focus to activities generating high added value. This resulted in lower revenues but a strong improvement in results. TenCate Enbi’s revenues held steady. The company was successful in obtaining new qualifications. OPERATING RESULT BEFORE AMORTISATION AND NET PROFIT Cost savings were insufficient to compensate fully for the further decline in defence revenues. The operating result before amortisation of intangible assets (EBITA) decreased to € 48.7 million. This amount includes €  5.9 million of non-recurring costs, mainly in TenCate Protective Fabrics. Normalised EBITA, taking into account the aforementioned non-recurring costs, amounted to € 54.6 million (2012: € 58.1 million before € 8.0 million of non-recurring costs). EBITA in the Advanced Textiles & Composites sector declined by 9% to € 21.3 million (2012: € 23.5 million). In organic terms, EBITA declined by 10%. The currency effect was –3%. The effect of acquisitions and divestments amounted to +4%. ■■ The further decline of revenues from TenCate Defender™ M had a considerable impact on the result of the TenCate Protective Fabrics market group. ■■ Despite the decline in revenues from vehicle armour projects, the TenCate Advanced Armour market group achieved higher EBITA as a result of cost measures. ■■ TenCate Advanced Composites achieved a higher result due to a good performance in the space market. EBITA in the Geosynthetics & Grass sector declined by 11% to € 27.9 million. In organic terms, EBITA declined by 10%. The currency effect was –1%. ■■ The decrease in EBITA was mainly caused by the TenCate Geosynthetics market group. The year got off to a difficult start due to persistent winter weather. In Asia, revenues declined due to a decrease in the project market (infrastructure). Higher prices in the commodities market also had a temporary negative effect on margins. ■■ The improvement in results in the Grass group stagnated due to temporarily high marketing costs associated with the market launch of new synthetic turf systems and volatile raw material costs. EBITA in the Other Activities sector improved considerably to –€ 0.5 million (2012: –€ 4.9 million). This improvement in results was mainly attributable to the change of strategy at Xennia Technology. EBIT remained steady at € 35.6 million in 2013. The Group’s net profit amounted to € 19.0 million in 2013 (2012: € 20.9 million). The decrease in profit was mainly due to the loss of a considerable part of the defence revenues. These revenues have above-average margins due to the high-quality nature of these products.
  • 74. 70 |  TenCate annual report 2013  |  Performance .. Report of the Executive Board WORKING CAPITAL Working capital decreased by € 7.0 million in 2013 compared to 2012, as a result of a decrease in revenues. The working capital measured in days remained unchanged at 93. in millions of euros 2012 days 2013 days Balance at end of previous year 277.1 93 237.4 93 Acquisitions / (divestments) 0.4 –1.2 Organic increase / (decrease) –39.3 7.9 Exchange rate differences –0.8 –13.7 Balance at end of year 237.4 93 230.4 93 INVESTMENTS A restrained investment policy was conducted in 2013. Total investments in 2013 amounted to € 14.4 million (2012: € 16.6 million). The level of investments rose considerably in the second half of the year compared to the first half. in millions of euros 2012 2013 Tangible fixed assets 12.0 9.8 Development costs and other intangible assets 4.6 4.6 16.6 14.4 The main investment projects in 2013 were: ■■ Development costs of TenCate Advanced Armor USA: TenCate ABDS™ active blast countermeasure system ■■ TenCate Grass: texturisation capacity ■■ TenCate Protective Fabrics USA: replacement of machine ■■ ERP systems of TenCate Advanced Composites and TenCate Advanced Armor USA. COMPOSITION OF THE COMPANY The following companies were acquired and interests increased in 2013: ■■ TenCate acquired Amber Composites Ltd of the United Kingdom in January 2013. Amber is a British producer of thermoset composites for industry and the automotive market. ■■ The interest in TigerTurf in TenCate Grass was increased from 80% to 100% in February 2013. ■■ The interest in Xennia Technology was increased from 78.95% to 90.88% in May 2013. PERSONNEL COSTS The number of staff years (excluding temporary personnel) decreased from 4,454 to 4,256 at the end of 2013. The largest reduction was in TenCate Protective Fabrics. Personnel costs amounted to €  217.6 million (2012: € 215.4 million). TAXES The effective tax rate decreased from 34.9% to 33.3% in 2013. The decrease is due particularly to lower losses in countries in which no full deferred tax assets are recognized. The decrease in the weighted average tax rate from 31.1% to 30.6% is due in particular to changes in the various countries’ share in the result before profit tax. Compared to 2012, a smaller share of the result was generated in countries with relatively high tax rates in 2013.
  • 75. 71TenCate annual report 2013  |  Performance | CASH FLOW AND FINANCING The cash flow from operating and investing activities decreased to € 42.6 million in 2013. This was mainly due to the lower movement in working capital compared to 2012. in millions of euros 2012 2013 Result after profit tax and associated companies 15.0 17.1 Depreciation 37.1 34.8 Amortisation 14.5 13.1 Other items 13.7 18.7 Cash flow before increase/decrease in working capital 80.3 83.7 Increase/decrease in working capital 38.3 13.5 Interest paid/taxes paid –16.8 –22.1 Cash flow from operating activities 101.8 75.1 Investments –16.6 –14.4 Divestments 0.3 0.8 Acquisitions –15.7 –22.2 Deconsolidation – 4.2 Other items –1.4 –0.9 Cash flow from operating and investing activities 68.4 42.6 TenCate in strategic alliance with BASF and Owens Corning BASF, Owens Corning and TenCate are jointly focusing on the large-scale use of thermoplastic composites in the automotive industry. Collaboration in the value chain is necessary for two reasons: to develop and introduce automated process technologies in this industry and to set standards in new materials. The aim is to develop optimum solutions in thermoplastic composites for mass production in the automotive industry. Auto manufacturers are increasingly interested in industrial applications for light, strong, energy- efficient and cleaner solutions, such as composites. Composites contribute to weight-saving in vehicles and hence lower CO2 emissions.
  • 76. 72 |  TenCate annual report 2013  |  Performance Advanced Textiles & Composites sector 19countries protect army units with TenCate Defender™ M 4-kilo lightweight aircraft seat with TenCate Cetex® technology TenCate innovates actively in more than 15knowledge networks
  • 77. 73TenCate annual report 2013  |  Performance | KEY FIGURES OF ADVANCED TEXTILES & COMPOSITES in millions of euros unless stated otherwise 2009 2010 2011 2012 2013 Revenues 397.3 448.4 538.4 460.6 427.8 Operating result before amortisation (EBITA) 31.7 43.8 70.3 23.5 21.3 EBITA margin (%) 8.0 9.8 13.1 5.1 5.0 Operating result (EBIT) 27.0 38.6 64.7 18.5 15.0 Investments 4.2 4.5 8.3 9.4 7.8 Depreciation and amortisation 14.2 15.2 15.3 15.7 16.6 Net invested capital (year-end) 234.0 281.7 314.3 286.5 284.6 Number of staff years (year-end) 1,340 1,519 1,582 1,697 1,542 EBITA as percentage of average net invested capital 12.0 16.7 23.6 7.5 7.9 Revenue growth of 12% was recorded in the industrial market for protective fabrics (TenCate Tecasafe® Plus). The strengthening of marketing and sales in the TenCate Protective Fabrics market group, focused on the end-markets, began to deliver benefits. The TenCate Advanced Composites market group recorded revenue growth of 16% in 2013. The market for space composites showed strong growth and TenCate made good progress with composites for the latest generation of aircraft. After the successful acquisition of Amber Composites in January 2013, the first successes were recorded in the development of composites for the Formula 1 market and the automotive industry. Important commercial and strategic alliances were also announced in this market. TenCate is confident that demand for new material solutions will increase strongly in the future. TenCate Advanced Armour recorded increased revenues in the market for personal ballistic protection (antiballistic vests, inserts, helmets and screens). The market group developed a new portfolio of lightweight protection products aimed at the police market (law enforcement). Sustainable innovation is one of the pillars underpinning TenCate’s strategy. Technological progress was made in July on the basis of the defined technology roadmap with the commissioning of the first machine based on digital inkjet technology for TenCate Protective & Outdoor Fabrics. REVENUES AND RESULTS OF THE ADVANCED TEXTILES & COMPOSITES SECTOR The Advanced Textiles & Composites sector recorded a 7% decline in revenues to € 427.8 million in 2013 (2012: € 460.6 million). The sector’s operating result before amortisation (EBITA) recorded a larger decrease in relative terms, declining by 9% to € 21.3 million. The EBITA margin of the Advanced Textiles & Composites sector amounted to 5.0% (2012: 5.1%). EBITA as a percentage of the average net invested capital amounted to 7.9% (2012: 7.5%). The decrease in revenues was mainly due to lower revenues from the defence market. The revenues of the Advanced Textiles & Composites sector in this end-market declined by 40% in 2013. The decline was reflected in the lower revenues from TenCate Defender™ M and the lower revenues from armour composites for vehicles in Europe and the United States. Lower government expenditure had a negative impact on defence budgets in the countries of importance to TenCate. In the United States, the defence budget was even subjected to an automatic cut in 2013 after prolonged uncertainty surrounding the government budget. This market development was unrelated to the company’s continued strong market positioning and the positive developments in the TenCate ABDS™ active blast countermeasure system. Demand for new developments in vehicle protection will ultimately be high, partly having regard to recent experiences in war zones. TenCate is therefore well positioned for upgrade and new vehicle programmes.
  • 78. 74 |  TenCate annual report 2013  |  Performance .. Advanced Textiles & Composites sector Revenues from TenCate Tecasafe® Plus rose strongly particularly in Asia and the EMEA region. The strengthening of the sales organisation, focused on new markets, led to a strengthening of the market position and revenue growth. In Asia, the activities of the TenCate-Union Protective Fabrics joint venture in Thailand were discontinued, with a negative impact on revenues and results. The relatively low cotton price in 2013 resulted in a large supply of competing finished cotton products in markets of relevance to TenCate. The lower cotton price had a negative impact on the profitability of the entire TenCate Protective & Outdoor Fabrics market group. Finished cotton products provide less protection and have shorter service lives. End-users often purchase them purely on the basis of price. PERFORMANCE OF THE TENCATE PROTECTIVE FABRICS & OUTDOOR FABRICS MARKET GROUP The revenues and profitability of the TenCate Protective Fabrics & Outdoor Fabrics market remained under pressure throughout the year, particularly as a result of lower revenues in the defence market in the United States and a relatively low cotton price in the world market. The TenCate Protective Fabrics & Outdoor Fabrics market group generated 63% of its revenues in the Americas. The American defence market, which is immensely important to TenCate, faced automatic budget cuts (sequestration) at the beginning of 2013, resulting in a 7.9% cut in the defence budget for that year. The sequestration had a major negative impact on US Army demand for TenCate Defender™ M after the first quarter. Although a large number of countries have qualified TenCate Defender™ M and placed initial or repeat orders, sales in these new markets were unable to reverse the overall sharp decline in volumes. The TenCate ABDS™ active blast countermeasure system is in the test phase. In this context, modest revenues were recorded. Business development activity, particularly in digital printing, automotive composites and the TenCate ABDS™ active blast countermeasure system, led to certain costs being incurred in 2013 without any significant countervailing revenues. Some of the business development costs were not capitalised and therefore depressed the EBITA of the Advanced Textiles & Composites sector. These developments are nevertheless expected to make an important contribution to results in the future. TENCATE PROTECTIVE FABRICS & OUTDOOR FABRICS Protective Fabrics Armour Composites Space / Aerospace Composites 61%17% 22% 56% 16% 28% 2012 2013 INDICATIVE BREAKDOWN OF REVENUES IN THE ADVANCED TEXTILES & COMPOSITES SECTOR GEOGRAPHIC REVENUES REVENUES BY CUSTOMER GROUP (INDICATIVE) REVENUES BY END-MARKET (INDICATIVE) America EMEA Asia Pacific 63% 6% 31% 2013 Governmental Non-governmental 39% 61% 2013 Personal protection Defence Sport & leisure 74% 20% 6% 2013
  • 79. 75TenCate annual report 2013  |  Performance | DEFENSE & TACTICAL TenCate’s revenues in the Defense & Tactical end-market decreased sharply in 2013, despite a good first quarter, as a result of contracting defence expenditure, mainly in the United States and Europe. There nevertheless remains an important focus on the protection of military personnel in the defence industry. TenCate Defender™ M, TenCate’s most important protective fabric for the defence industry, has patented, inherently heat and flame-resistant characteristics which will not wash out or wear off, combined with cost-efficient pricing. European defence budgets reached their lowest level in the last 10 years in 2013. In the wake of the financial crisis, European governments were faced with the need to make sustained spending cuts. The number of countries which have qualified TenCate Defender™   M rose further in 2013. An important breakthrough was achieved in South America with the order for the Colombian air force in collaboration with Complementos Industriales Ltda. The number of armed forces which have included TenCate Defender™  M in their standard personal equipment also increased in 2013. TenCate has supplied TenCate Defender™   M to 19 different countries. The list of wearing trials by different international armed forces remains long, but growth is expected to be moderate due to the geographic fragmentation of the market. The US Army nevertheless remains the largest potential market, in view of its size. EMERGENCY RESPONSE Revenues in the emergency response end-market remained at a level comparable to those of the previous year in 2013. The firefighting market in the United States, traditionally the most important market for TenCate in this market segment, remained sluggish as a result of savings, mainly by local authorities. With the TenCate Tecasystem™ and TenCate Tecashield® , TenCate supplies all components of firefighters’ clothing: the outer layer, the moisture-regulating inside layer, thermal protection fabric, thermal lining and reinforcement fibres. TenCate is responding to the government cost-cutting trend by offering cost-effective products with comparable or higher protection than more expensive traditional products. TenCate is the market leader in the firefighting market in the United States. Together with European partners, TenCate is also mobilising this expertise to raise the level of protection for firefighters in other geographic markets. For example, in addition to successes elsewhere in Europe, an order was received at the beginning of 2013 from two fire brigades in the Netherlands involving the use of TenCate Millenia light™ from the TenCate Tecashield® collection. As part of end-user marketing, various study days were organised to inform fire brigades about the possibilities offered by TenCate in this market. Progress was also made in Asia, where an order was won in Thailand from the Bangkok fire brigade. TenCate maintained its strong position with the Australian Wildland firefighters. An order was also received in Kuwait for the supply of protective fabrics for 20,000 new uniforms for the brigade’s officers and firefighters. The use of TenCate Tecasafe® Plus by firefighters in Kuwait demonstrates the growing demand for this product outside the industrial market. Wearing comfort is an important decision factor, particularly in the heat of the desert. TenCate’s portfolio of protection products is so broad that it can meet specific local conditions and market requirements worldwide. DEPLOYMENT OF MILITARY PERSONNEL BY THE UNITED STATES Afganistan Iraq 0 50 100 150 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Iraq Afghanistan x 1,000 Source: US Dept. of Defense
  • 80. 76 |  TenCate annual report 2013  |  Performance .. Advanced Textiles & Composites sector Sales activity for TenCate Tecasafe® Plus was also intensified in the Asian markets, where revenues grew mainly in the oil and gas industry. OUTDOOR TenCate Outdoor Fabrics develops and produces tent cloth and awnings and operates particularly in the European leisure and tent hire market. TenCate focuses particularly on the upper market segment and the professional market. Thanks to end-user marketing combined with TenCate’s strong brand position, strong revenue growth was achieved in 2013. Innovations based on digital production processes are intended to introduce a completely new customer-specific business concept enabling the entire value chain to undertake a major renewal process. This is reflected not only in new products, but also a new customer approach, potential for e-commerce and mass customisation. SUSTAINABILITY The CSR Performance Ladder certificate of the TenCate Protective Fabrics market group in the Netherlands was extended at level 3 in 2013. A series of stakeholders from the value chain were involved in an ongoing dialogue at the time of implementation in 2012. Discussions also took place on customer satisfaction and regular contacts were maintained concerning good practice in 2013. The required actions were defined by the management. The Plan-Do-Check-Act cycle is being implemented for three years in respect of all 33 CSR indicators. These indicators have been classified under one of the seven key CSR themes in the ISO 26000 guideline. For many years this market group has operated a code of conduct to be signed by foreign suppliers in the value chain, aimed at combating child labour, breaches of human rights and corruption as well as to ensure compliance with local laws and regulations. This is fully in line with ILO conventions and UN declarations. The validity of the signed declarations was confirmed on site with a number of suppliers in countries such as Pakistan. No breaches of this TenCate Protective Fabrics code of conduct were recorded in 2013. INDUSTRIAL SAFETY AND WORKWEAR The Industrial Safety market is the most important end-market of the TenCate Protective Fabrics and Outdoor Fabrics market group. The products provide protection for personnel in industry. TenCate’s revenues in this end-market declined slightly in 2013, despite a growing worldwide market share for TenCate Tecasafe® Plus in this market and new product launches. The strengthening of the sales organisation is one of the factors underpinning the success of TenCate Tecasafe® Plus. Product characteristics such as the wearing comfort, durability and safety of this protective fabric are usually seen as key advantages by industrial customers. The main industries in which TenCate Tecasafe® Plus is used for personnel protection are the oil and gas, chemical, petrochemical and metal industries. TenCate supplies composites for Airbus A350 XWB The Airbus A350 XWB made its first official flight on Friday 14 June 2013. This aircraft comprises 53% composites. By comparison, the A340 and the A380 comprise 15% and 23% composites respectively. The fuselage of the Airbus A350 is held together with thousands of clips made of TenCate thermoplastic composites. Fokker Aerostructures manufactured the wing valves. There are five different versions of the A350 family, ranging in length from 60.5 to 73.8 metres. The wing span is 64.0 metres.
  • 81. 77TenCate annual report 2013  |  Performance | TenCate Protective Fabrics in Nijverdal started using the 5S lean management method for optimum quality in processing in 2013. This will lead to further quality improvements, shorter completion times, cost reductions and increased safety in this market group. The ‘Excellence Performance’ project has led to a new logistical management concept which will ultimately contribute to lower inventories. Eco-TL lighting was also installed, the compressor air was reduced and the steam traps were optimised. The first digital inkjet machine for printing and finishing entered service in June 2013, initially for the awning products of TenCate outdoor fabrics. This innovative production method delivers a steep reduction in energy, water and chemical consumption. The introduction of environmentally responsible fibres has greatly reduced the antimony content of wastewater. This is beneficial for wastewater processing within TenCate. These environmentally responsible fibres were successfully incorporated in numerous products in the industrial clothing market in 2013 under the TenCate Tecasafe® Plus brand name. A concept was developed with partners during the past year for the recycling of fibres as part of the ‘closing the loop’ initiative. The company emergency personnel in the Nijverdal market groups were trained and given additional instruction where necessary last year. The combined production sites in Nijverdal-Noord have been using green electricity since the beginning of 2013, considerably reducing the CO2 footprint of these sites. These Dutch TenCate businesses jointly conducted an employee satisfaction survey and an employee health survey in 2013. Action points were defined on the basis of the results. An age-aware personnel policy was also jointly formulated. These business units also jointly played an active part in the TenCate Talent Program, as part of the corporate HR policy in the TenCate People Program. Finally, these market groups in Nijverdal organised wearing trials for the purchase of new industrial clothing for all these production sites. Ballistic protection for Daimler Zetros GLF TenCate Advanced Armour has been selected as a supplier to Daimler AG for the ballistic protection of the Daimler Zetros GLF. Hundreds of these trucks are being supplied to the German army. TenCate Advanced Armour developed the kits (a pack of protective panels) jointly with Daimler. This resulted from the strategic decision to supply to major customers in the automotive industry. The protective panels supplied by TenCate Advanced Armour were fixed to the front and sides of the cab. The market group also supplied spall-liners for the interior of the cab to protect the crew against splinters from the armour caused by projectile strikes. Spall-liners add only minimal weight to the vehicle and thus have limited impact on the manoeuvrability, speed and operating range.
  • 82. 78 |  TenCate annual report 2013  |  Performance .. Advanced Textiles & Composites sector PERFORMANCE OF THE TENCATE ADVANCED COMPOSITES MARKET GROUP The TenCate Advanced Composites market group recorded revenue growth of 16% in 2013, coupled with increasing profitability. The space market was the principal pillar supporting this growth. The increase in revenues is due partly to the strategic acquisition of the UK company Amber Composites, which was announced in January 2013. Amber Composites is a producer of thermoset composites for the industrial and automotive markets. The acquisition of Amber Composites led to an acceleration of activities in the European market in the field of thermoset composites, alongside the existing production of thermoplastic composites. TenCate had hitherto been active in thermoset composites predominantly in the United States. The supply lines to users of these materials have to be short, so TenCate had an interest in starting production additionally in Europe. The acquisition of Amber Composites therefore represents an important geographic expansion and brings greater balance to TenCate’s portfolio, in terms of geography, technology and product portfolio. The results of Amber Composites in 2013 were in line with forecasts made at the time of the acquisition. A slight decline in revenues was recorded in the market for composites for the aviation industry. After a delay in the first half of the year as a result of technical problems surrounding the market launch of aircraft, revenues improved in the second half. The market for space composites continued to develop strongly. TenCate occupies a strong position in this market, particularly in the United States. Progress was made in the development of the market for automotive composites with the announcement of various joint ventures. The development of new materials and new production processes will take a number of years to generate significant revenues in this market. Revenues in this segment began to flow in the Formula 1 and sports car markets in particular in 2013. TenCate can continue to build on these initial market positions to achieve the intended growth in this market segment. AEROSPACE COMPOSITES Revenues from composites for the aviation industry decreased in 2013 as a result of temporary delays in the value chain in the first half of the year. After lengthy delays in supplies for the Airbus A380 and A350 and the Boeing 787 in 2012 and early 2013, revenues increased in the second half of the year. The Airbus A350 is of great importance to TenCate, in view of the quantity of material used in a single aircraft. TenCate supplies material for thousands of clips to connect the fuselage sections. The successful test flights of the Airbus A350 since the summer of 2013 and the Airbus order book currently comprising more than 800 aircraft (combined A350 800/900/1000 order book) provide grounds for confidence in future revenues for this type of aircraft for TenCate. TENCATE ADVANCED COMPOSITES GEOGRAPHIC REVENUES REVENUES BY CUSTOMER GROUP (INDICATIVE) REVENUES BY END-MARKET (INDICATIVE) America EMEA Asia Pacific63% 8% 29% 2013 Governmental Non-governmental 22% 78% 2013 Personal protection Mobility 99% 1% 2013
  • 83. 79TenCate annual report 2013  |  Performance | Composites were supplied for the Falcon 9 rocket for SpaceX. The Falcon 9 is a two-stage rocket developed by SpaceX and built for the safe and reliable transportation of satellites and the Dragon space capsule. SpaceX is the first commercial company to reach the International Space Station (ISS). A thermoset composite frame was produced for the heat shield on the Curiosity Mars lander. Composites were supplied for the Mars Atmosphere and Volatile Evolution (MAVEN) space probe for Lockheed Martin. AUTOMOTIVE COMPOSITES The introduction of thermoplastic composites in the automotive industry is an important business development for the future in the TenCate Advanced Composites market group. Under pressure from the European Commission, CO2 emission standards have to be reduced by 40% in 2020 compared to the 2007 level. This legislation compels automobile manufacturers to seek weight savings. Compared to traditional materials, composites are 30-50% lighter and therefore ideal for achieving such savings. The acquisition of Amber Composites has given TenCate accelerated access to the automotive market, particularly for sports cars and motor racing. Thermoset composites are used almost exclusively in these markets. In contrast to these materials, thermoplastic composites, a technology in which TenCate has occupied a leading position in the aviation market for over 30 years, are ideal for use in serial production. A major obstacle which must be overcome is the adaptation of the product chain for structural and other components, since companies are not yet geared to processing this type of material. In March 2013, BASF and TenCate welcomed the glass fibre reinforcement manufacturer Owens Corning as a partner in the strategic alliance for thermoplastic automotive composites. The aim of this collaboration is to develop optimum solutions in thermoplastic composites for mass production in the automotive industry. This solution-focused approach from different technological perspectives is necessary in order to support and supervise the introduction of fibre- reinforced thermoplastics in all parts of the automotive industry. The Airbus A350 comprises over 50% composites. By comparison, composites in the A340 and A380 make up 15% and 23% respectively. The next generation of aircraft is expected to have an even higher percentage of composites. The further increase in the use of thermoplastic composites in the aircraft industry, particularly for Airbus, was emphasised with the extension of the Thermoplastic Affordable Primary Aircraft Structure (TAPAS) consortium in June. This joint venture linking eight Dutch companies and institutions in the aviation industry produced an innovative fuselage panel for Airbus made of TenCate Cetex® thermoplastic composites. A long-term agreement was signed with Fokker Aerostructures in June for the supply of thermoplastic composites. The material is being supplied to Fokker for use in the production of components for Airbus, Boeing, Gulfstream, Dassault and AgustaWestland. New initiatives were developed in 2013 outside the long-term contracts for the construction of the aircraft in which TenCate has been involved since the design stage. The ice protection panels for the Airbus A400 will be manufactured using TenCate Cetex® . The revenues of TenCate’s production facilities in the United States increased in 2013. The increasing availability of communication services during passenger flights, particularly in the United States, led to high demand for radomes manufactured from thermoset composites. The order book for the Boeing 787 (787-8/9/10), which is important to TenCate, now exceeds 900 aircraft. In China, further steps were taken in collaboration with local parties in the aviation industry in the development of thermoplastic composites in new Chinese-made aircraft. At the beginning of 2014, a marketing and development agreement was signed with Shanghai Leadgo-tech to support the market for composites for the Chinese aviation industry. SPACE COMPOSITES Demand from the space industry increased strongly in 2013. From its production site at Morgan Hill in the United States, TenCate supplies a wide range of advanced composites for the space industry, including high-quality prepregs for space structures to moulding compounds for use in fibre-reinforced injection-moulded components.
  • 84. 80 |  TenCate annual report 2013  |  Performance .. Advanced Textiles & Composites sector In September 2013 TenCate signed an initial co-operation agreement with Kringlan Composites to develop solutions for the manufacture of components based on thermoplastic composite technology. The main development which Kringlan Composites has initiated at present is the design and development of a fully carbon-reinforced composite wheel for vehicles in the upper segment. Such a wheel has a great weight- saving effect and reduces the unsprung mass of the vehicle. The co-operation was also entered into to support the market launch. The product was still in the demonstrator phase at the end of 2013. Kringlan Composites expects market release in 2014, after completion of all the necessary safety tests by automobile manufacturers. According to Kringlan Composites, limited serial production is possible approximately one year after market release. The solution developed by Kringlan will be the first series-produced composite wheel. It may also mark the introduction of TenCate thermoplastic composites in serial production in the automotive sector. The wheel currently fulfils standard safety and integrity requirements in terms of material stress. TenCate is also involved in a number of other projects (demonstrators) which should make their way into new types of vehicle in the future. INDUSTRIAL COMPOSITES The uses of thermoset and thermoplastic composites outside the above areas of application developed positively in 2013. Progress was made in the use of thermoplastic composites for pipelines in the oil and gas industry. The first steps were taken in the market for consumer electronics. Composites were also supplied to the sports market through PMC Baycomp, which was acquired in 2012. Tooling is also an attractive market for composites. TenCate focuses on the production of composites for moulds (tooling) used in a wide range of manufacturing processes, including in the aircraft and automotive industries. A joint venture was entered into with a local partner in China in 2013. An alliance was entered into with 3M in the United States for the American tooling market. Growth in the industrial composites market is expected to continue at a rapid pace from a still modest level in the TenCate portfolio. JEC 2013 Innovation Award In March 2013 the prestigious JEC Innovation Award was presented to the partners Fokker Aerostructures, AgustaWestland, TenCate Advanced Composites and Ticona GmbH at the JEC Composites Show in Paris for the first horizontal tailplane made of thermoplastic composites for the AgustaWestland AW 169, a new-generation helicopter. The value of the innovation lies primarily in a 15% weight saving compared to other composite solutions, resulting in lower NOx and CO2 emissions and lower fuel consumption. The development of the horizontal tail began in July 2011. Four AW169 helicopters were equipped with a new horizontal tail towards the end of 2012. The weight saving was achieved through the rigidity of the thermoplastic material. Fokker has designed and developed this integrated solution as a single- component torsion box. The production time and costs were reduced by the use of simple preforms. AgustaWestland expects the new AW169 to be highly successful in the business market.
  • 85. 81TenCate annual report 2013  |  Performance | TenCate was selected by Embraer for the design of the ballistic protection for the Embraer A-29 Super Tucano military aircraft. TENCATE ABDS™ ACTIVE BLAST COUNTERMEASURE SYSTEM A major focus of the development of new product-market-technology combinations is the TenCate ABDS™ active blast countermeasure system. This system is a cost-effective solution which can dramatically reduce the impact of a roadside bomb explosion. Good progress was made with the development of this system during the reporting year. In September 2013 a long-term agreement was signed with the US Army Research, Development and Engineering Command (RDECOM) for collaboration in research and development (CRADA). TenCate presented the TenCate ABDS™ active blast countermeasure system at the AUSA conference in October. TenCate is positioning the TenCate ABDS™ active blast countermeasure system as a survivability solution, potentially in combination with the existing production of vehicle armour. Orders being placed with TenCate at present are related to specific testing programmes. There will be continued demand from armed forces for improved vehicle protection in the years ahead. New generations of army vehicles will incorporate lighter solutions than traditional vehicle armour. PERFORMANCE OF THE TENCATE ADVANCED ARMOUR MARKET GROUP The TenCate Advanced Armour market group recorded a 16% decline in revenues in 2013. Government spending on vehicle armour in particular was under pressure during the reporting year. This market is historically the most important market for TenCate Advanced Armour. TenCate believes in the long-term potential of the market for vehicle armour, potentially in combination with the TenCate ABDS™ active blast countermeasure system (survivability solution). TenCate Advanced Armour was able to offset declining market demand for vehicle armour in part against increased revenues in the market for personal protection (law enforcement). The collaboration with DSM Dyneema was intensified for the launch of innovative products and in the provision of personal protection solutions. Sales activity was intensified on a geographic level. TenCate Advanced Armour opened a new marketing and sales office in Singapore to serve the Asian market more effectively. Since then, new orders have been received from shipbuilders and vehicle manufacturers in Asia. A three- year contract was announced with a shipbuilder in Singapore in September 2013 for the armouring of seagoing vessels for the Middle East. The market for aerospace armour solutions developed in line with expectations. Supplies for Eurocopter recovered somewhat after a cautious start in 2013. In the Brazilian market, good progress was made with Embraer. Aerotron Brazil, the main contractor for the Embraer KC-390 project, selected TenCate as its technical and industrial partner and as a supplier of materials and special processes. In November 2013 TENCATE ADVANCED ARMOUR GEOGRAPHIC REVENUES REVENUES BY CUSTOMER GROUP (INDICATIVE) REVENUES BY END-MARKET (INDICATIVE) America EMEA Asia Pacific 46% 1% 53% 2013 Governmental Non-governmental 98% 2% 2013 Personal protection Defence 50% 50%2013
  • 86. 82 |  TenCate annual report 2013  |  Performance .. Advanced Textiles & Composites sector SUSTAINABILITY The CSR Performance Ladder certificate of the TenCate Advanced Composites market group in the Netherlands was continued on level 3 at the end of 2013. Stakeholders in the value chain were involved in the introduction of this CSR management system and regular consultations took place on good practice last year. The Plan-Do- Check-Act cycle is also being implemented in this market group for three years in respect of all 33 CSR indicators. After the previous introduction of lean manufacturing for maximum value generation for customers with as little waste as possible, the 5S approach continued to be implemented in 2013. This approach comprises the complete separation, sorting, standardisation, systematisation and cleaning of production. The previously installed clean rooms for laminate production are making a major contribution to optimum production quality. Further attention was devoted to the recycling of thermoplastic composites in 2013. This is important partly because numerous new composites were qualified during the past year. The collaboration with knowledge institutions in the Netherlands, the United Kingdom and Germany was also intensified, including with the TPRC innovation centre in Enschede, the University of Sheffield Advanced Manufacturing Research Centre (AMRC) in Sheffield (United Kingdom) and the Aachener Zentrum für Integrativen Leichtbau in Aachen (Germany). In the production process in Nijverdal, a larger proportion of the process cooling water was reused, leading to energy savings.
  • 87. 83TenCate annual report 2013  |  Performance | Sector Geosynthetics & Grass 20sustainable drinking water systems for sanitation and sport in South Africa 14GreenFields® TX top-flight hockey pitches for 2014 Hockey World Cup in The Hague, the Netherlands Water Innovation Award 2013 for vertical sand-tight geotextile to combat piping
  • 88. 84 |  TenCate annual report 2013  |  Performance .. Sector Geosynthetics & Grass REVENUES AND RESULTS The revenues of the Geosynthetics & Grass sector remained almost unchanged at €  517.8 million in 2013 (2012: €  518.7 million). The operating result before amortisation (EBITA) declined by 11% to € 27.9 million (2012: € 31.5 million); EBITA as a percentage of the average net invested capital decreased to 7.0% (2012: 7.3%). The revenues of the TenCate’s geosynthetics market group declined slightly, while TenCate Grass showed a slight rise. Revenues in the infrastructure end-market in the Geosynthetics & Grass sector declined slightly. Revenues in Asia fell well short of expectations. The marketing focus on water management and environmental solutions generated revenue growth, although this revenue source is still of limited size at present. The Water Management end-market accounted for 6% of the total revenues of the TenCate Geosynthetics market group in 2013. The decrease in the operating result of the Geosynthetics & Grass sector was mainly attributable to a decrease in profitability of the TenCate Geosynthetics market group. The unfavourable composition of revenues and volatile input costs of polyethylene (PE) and polypropylene (PP) had a negative impact on profitability. The results in the Grass group were affected by high marketing costs and volatile raw material costs. The ongoing integration of the downstream activities had the effect of lowering costs. KEY FIGURES GEOSYNTHETICS & GRASS in millions of euros unless stated otherwise 2009 2010 2011 2012 2013 Revenues 392.1 469.3 525.9 518.7 517.8 Operating result before amortisation (EBITA) 16.8 31.4 26.3 31.5 27.9 EBITA margin (%) 4.3 6.7 5.0 6.1 5.4 Operating result (EBIT) 13.8 27.7 20.8 25.1 23.6 Investments 9.0 9.9 12.2 5.3 4.9 Depreciation and amortisation 25.3 26.2 28.9 30.7 25.9 Net invested capital (year-end) 332.7 380.8 429.5 399.7 369.1 Number of staff years (year-end) 1,795 2,128 2,160 2,102 2,034 EBITA as percentage of average net invested capital 4.1 8.2 6.2 7.3 7.0 TREND IN PRICES OF POLYETHYLENE AND POLYPROPYLENE Polyethy index Polyprop index 1,000 1,200 1,400 1,600 1,800 13-1-2012 28-6-20134-1-2013 Polyethy index Polyprop index In US$
  • 89. 85TenCate annual report 2013  |  Performance | The new GreenFields™ MX synthetic turf system had a good introduction into the market, bringing a clear improvement in terms of quality and sports characteristics. The market group is supplying synthetic turf to a growing number of professional clubs in the Jupiler League in the Netherlands. The GreenFields™ MX synthetic turf system is one of the pillars of the company’s innovation strategy. With the combination of weaving and extrusion technology within a single company, a distinctive system has been developed which is fully recyclable. GreenFields™ MX is being introduced into the United States in 2014. The production capacity for this unique system is scheduled to be expanded in 2014, building on this system’s growing revenue contribution within the total portfolio. Geosynthetics Grass upstream Grass downstream 57%25% 18% 57%25% 18% 2012 2013 INDICATIVE BREAKDOWN OF REVENUES IN THE GEOSYNTHETICS & GRASS SECTOR TenCate Grass in landscaping project in Riyadh The world’s largest landscaping project using synthetic turf was completed in March 2013 close to the King Khaled international airport in Riyadh (Saudi Arabia). It involves a two-colour landscape covering an area of 160,000 m2 . The site is a sand-strewn pitch of two-tone green monofilament yarns. These yarns have been developed specially for this project by the TenCate Grass R&D team in Dubai to fulfil a 10-year UV guarantee. Riyadh has the highest solar activity in the world. The client was the Arriyadh Development Authority (ADA). The ADA chose TenCate Grass and Hatko Sports of Turkey as the supplier and installer respectively. Hatko Sports and TenCate have already completed a number of projects in recent years. The project in Riyadh took just 150 days from supply through to installation.
  • 90. 86 |  TenCate annual report 2013  |  Performance .. Sector Geosynthetics & Grass Revenues over the reporting year as a whole rose slightly in the EMEA region, despite the slow start. Cost savings in the European companies were largely negated by rising wage costs at European production sites and higher input prices. AMERICAS Local and central governments were the largest customers for the Geosynthetics group in the United States. After a challenging second half of 2012 as a result of political uncertainty in the United States, barely any recovery took place in the market for geotextiles in 2013. According to the American Road & Transport Builders Association (ARTBA), expenditure on highways in the United States declined by 7% in 2013 to US$ 43 billion. Expenditure on bridges rose by 6% in the same period to US$ 30 billion. These markets are of great importance to TenCate Geosynthetics. An important milestone was reached in the United States with the completion of the TenCate Mirafi® RSi series. TenCate Geosynthetics introduced the TenCate Mirafi® RSi series to the United States in 2010 with strong geotextiles for subsoil reinforcement and stabilisation. This introduction was followed up in 2011 with the development of geotextiles for less heavy applications. The TenCate Mirafi® RSi series was complemented in May 2013 by geotextiles for the reinforcement of highway and railway projects. PERFORMANCE OF THE TENCATE GEOSYNTHETICS MARKET GROUP The year got off to a sluggish start in the TenCate Geosynthetics market group due to prolonged adverse weather in Europe and the United States. This delay was made up during the reporting year. Declining economic growth in Asia had a negative impact on the revenues of the Geosynthetics group as a whole. The sustained pressure on government budgets depressed revenues in the global market in geotextiles for infrastructure. In the Geosynthetics group, TenCate is 53% dependent on government markets. The dependence varies from region to region. The margins of the TenCate Geosynthetics market group were under pressure throughout the year, however, as a result of lower revenues in Asia, delays in major projects and volatility in raw material costs. EMEA The winter weather had a negative impact on the market in geotextiles for infrastructure in Europe, particularly in the first half of the year. According to the European Association of Geosynthetic product Manufacturers (EAGM), sales volumes of geotextiles fell by 6% during this period. TenCate Geosynthetics was able to hold its own in this challenging market with increased market shares in the United Kingdom, Scandinavia, Benelux, Russia and Eastern Europe. Government spending in Europe remained sluggish in the second half of the year, putting downward pressure on revenues. TENCATE GEOSYNTHETICS GEOGRAPHIC REVENUES REVENUES BY CUSTOMER GROUP (INDICATIVE) REVENUES BY END-MARKET (INDICATIVE) America EMEA Asia Pacific 40% 22% 38% 2013 Governmental Non-governmental53% 47% 2013 Infrastructure Watermanagement Sport & leisure 89% 6% 5% 2013
  • 91. 87TenCate annual report 2013  |  Performance | The Geosynthetics group is confident of future growth in Asia. The sales organisation in Asia was strengthened in 2013, with a particular focus on Indonesia, Thailand, Burma and China. The company made various changes to the management of the Asian activities in 2013, which should bear fruit in 2014. WATER & ENVIRONMENT The revenues of the worldwide Water & Environment business unit rose by 17% in 2013. In Europe and Africa in particular, TenCate Geosynthetics supplies products for attractive projects and achieved revenue growth. In order to strengthen the Geosynthetics group’s position in the water and environment market, a worldwide sales and marketing organisation was established for this market. This structure allows a faster response to growing demand for water management and environmental solutions. End-user marketing was strengthened in 2013 through collaboration with engineering firms which can experience the benefits of TenCate technology for their projects at an early stage. The Water & Environment business unit developed the TenCate Geotube® carbon footprint calculator in 2013 for use in dewatering and breakwater projects. This calculator determines the CO2 footprint of water management projects based on actual marketing and database information, enabling a quantitative assessment to be made of the sustainability benefits of TenCate Geotube® . TenCate expects sustainability to become an increasingly important criterion in projects. The market group made progress in South America, where the sales and marketing organisation was strengthened. In Brazil, TenCate Geosynthetics grew thanks to an increase in investments in infrastructure related to the football World Cup in 2014 and the Olympic Games in 2016. The revenues of the TenCate Geosynthetics market group in the Americas rose slightly in 2013, despite a negative exchange rate effect. The input costs of the most important materials, polyethylene (PE) and polypropylene (PP), were volatile particularly in the first quarter. This had a negative impact on profitability. The emphasis during the reporting year was placed on cost savings in order to compensate for the volatility of raw material costs. ASIA-PACIFIC TenCate Geosynthetics recorded a sharp decline in revenues in Asia in 2013. After a positive start to the year, revenues in Asia slumped in the second half. TenCate Geosynthetics had to contend with a weak market, particularly in China. In Southeast Asia, revenues were under pressure due to decreasing economic growth in the region. This had a negative impact on local infrastructure investments. Exchange rate effects associated with the strengthening of the euro also put downward pressure on revenues. 0 10 20 30 40 201320122011201020092008 26.1 25.1 27.3 27.4 28.6 30.4 US$ billion 0 20 40 60 80 201320122011201020092008 56.0 60.8 55.1 48.5 46.2 43.0 US$ billion VALUE OF INFRASTRUCTURE PROJECTS – HIGHWAYS VALUE OF INFRASTRUCTURE PROJECTS – BRIDGES Source: ARTBA Analysis of US Census Bureau Data Source: ARTBA Analysis of US Census Bureau Data
  • 92. 88 |  TenCate annual report 2013  |  Performance .. Sector Geosynthetics & Grass SUSTAINABILITY TenCate Geosynthetics in Nijverdal was certified in accordance with the CSR Performance Ladder at level 3 at the beginning of 2013. Stakeholders in the value chain were involved in the introduction of this CSR management system and regular dialogue took place on good practice last year. The Plan-Do-Check-Act cycle is also being implemented in this market group for three years in respect of all 33 CSR indicators. At the other two TenCate Geosynthetics production sites in Europe, both ISO 9001 and ISO 14001 have been implemented and certification took place in 2013. Last year a single haulier was selected, making it possible to increase the efficiency of transport movements, analyse CO2 emissions per shipment and reduce the impact where possible. Collaboration with suppliers has also been intensified in order to reduce waste and optimise the recycling of residual yarn. The collaboration with the European industry organisation EAGM and relevant knowledge institutions has been expanded to facilitate continuing innovation. A risk inventory and evaluation took place and the company emergency response plan in this market group in the Netherlands was updated in 2013. As part of the age-aware personnel policy, the shift roster was made flexible on the basis of altered working hours. Tests were conducted with biodegradable TenCate Geotube® containers for specific applications in 2013, with a view to the sustainability of the product portfolio. An initial trial installation was completed in the Markermeer. This special fabric proved to be reproducible and is expected to enter production in the year ahead. An analysis of waste flows will be made in 2014 to reduce the environmental impact. TenCate Geosynthetics declared joint winner of the Water Innovation Award 2013 The entry ‘Vertical sand-tight geotextile’ submitted by the Rivierenland Water Board in the Netherlands won the Water Innovation Award for 2013 in the Dry Feet category. Piping is a major failure mechanism in dykes, in which water seeps through an embankment, dyke or other engineering structure as a result of a huge difference in the level of the water on either side. The flow of water under the dyke may be so great that sand boils that carry along sand particles occur on the polder side of the dyke. Because sand is carried along with the flow, ‘pipes’ are created under the dyke that may cause it to burst. Vertical sand-tight geotextile is an innovative preventive measure used to avert piping. Together with Deltares, the Department of Waterways & Public Works in the Netherlands, TenCate Geosynthetics and others, the Rivierenland Water Board has developed and tested this vertical sand-tight geotextile. The protective principle of the vertical sand-tight geotextile is based on the fact that the geotextile filter allows water, but not sand, to pass through. A pipe which develops on the polder side is stopped by the geotextile, thus ensuring that the sand remains trapped under the dyke and that piping cannot occur. This solid solution is not dependent on a minimum requirement for seepage length. The innovative technique was derived from TenCate Geotube® technology.
  • 93. 89TenCate annual report 2013  |  Performance | The growth of the replacement market, particularly in the United States and Europe, also had a positive impact on revenues in the market group. TenCate Grass generated approximately 15% to 20% of revenues from the replacement of synthetic turf pitches. The third generation of synthetic turf football pitches achieved a breakthrough at the beginning of this century and the market developed rapidly. Many of these pitches are now due for replacement. The advantage for TenCate Grass and the customer is the relatively low installation costs for the replacement of a pitch. The replacement market is expected to grow further in the years ahead. The profitability of the upstream activities improved slightly in 2013. Higher production volumes resulted in better utilisation of production sites in Dubai, the Netherlands and the United States. The capacity for texturised fibres (fibres with a particular structure) at the production sites was almost doubled in 2013. The main markets for these fibres are landscaping and the hockey market. These fibres compact the surface and give the top layer a more natural look and feel. With the 2014 Hockey World Cup in prospect, TenCate Grass expects growing demand for these fibres. Matches will be played on the GreenFields® TX system during the tournament. TenCate Grass made good progress with the integration of the downstream activities. These are the GreenFields and TigerTurf subsidiaries and the 50% holding in Edel Grass. The costs of the downstream activities were reduced. TenCate Grass will continue to integrate these activities in 2014. The cost savings in the Grass group were nevertheless negated by temporarily high marketing costs and volatile raw material costs. PERFORMANCE OF THE TENCATE GRASS MARKET GROUP TenCate Grass recorded slight growth in revenues in 2013. This rise was mainly driven by volume growth in synthetic turf fibre production (upstream). The improvement in results of the Grass group stagnated due to temporarily high marketing costs and volatile raw material costs. TenCate Grass benefited from a cautious recovery in the synthetic turf market in 2013. In the United States, the more prosperous states increased their spending on sport. Market demand for sports pitches in Europe remained low. The situation in some countries, such as the Netherlands and Scandinavia, was an exception. Synthetic turf is on the rise particularly in densely populated urban areas and acceptance is growing. Climate can also be a decisive factor in the choice of synthetic turf. There is also increasing quality awareness in these markets. Government spending cuts in the main countries of southern Europe affected profitability in the synthetic turf industry. A number of companies in Europe in particular decided to discontinue fibre production and purchase from third parties. Companies in the installation market also discontinued their operations, enabling TenCate to capture a growing market share. TENCATE GRASS GEOGRAPHIC REVENUES REVENUES BY CUSTOMER GROUP (INDICATIVE) REVENUES BY MARKET THEME (INDICATIVE) America EMEA Asia Pacific 25% 19% 56% 2013 Governmental Non-governmental 60% 40% 2013 Sport & leisure Infrastructure 80% 20% 2013
  • 94. 90 |  TenCate annual report 2013  |  Performance .. Sector Geosynthetics & Grass SUSTAINABILITY The TenCate Grass market group extended the CSR Performance Ladder certificate at level 3 in the Netherlands during the reporting year. In this context it applies a code of conduct which aims to exclude child labour, breaches of human rights and corruption. At the same time a global mobility policy has been implemented, under which TenCate Grass customers have been supplied from the nearest geographic location since the beginning of 2013. Deliveries to customers from the site in Nijverdal have been made by trucks compliant with the Euro 6 exhaust gas standard since 2013. Preparations were also made for the replacement of the industrial clothing in the Nijverdal market group by conducting wearing trials. The 5S methodology was successfully completed in the course of 2013 for both yarn and backing production in the Netherlands. Increased attention was also devoted to personal protective equipment and investments were made in this area. Hearing protection at TenCate Grass in Nijverdal has now been standardised. Two themed months were organised last year, one concerning welfare and the other concerning sustainability. Adjustments were also made to a number of machines in order to increase process safety, such as fall protection in machinery. The inflow of recycled material was increased compared to 2012. Various activities were conducted to reduce rejects and waste. When machines and components are replaced, low-energy alternatives are deliberately chosen, such as texturing and compounding. The adapted three-shift roster was established in 2013, on the basis of constructive consultation with employees and the works council. Efforts were made last year to reduce the physical and mental stress on employees by using a new type of hyperbola for weight reduction and by making adjustments to the line planning. Market demand for synthetic turf products manufactured using the innovative weaving technology grew strongly during the reporting year, making the product portfolio sustainable. TenCate also conducted the skin-comfort innovation project with Radboud University in Nijmegen last year with the aim of further increasing the sliding friendliness of synthetic turf. Preparations also continued for the development of the next generation of synthetic turf systems in 2013, with the aim of achieving the ultimate balance in terms of characteristics and costs. LANDSCAPING MARKET The landscaping market accounted for approximately 20% of total revenues in 2013. These revenues have grown substantially in recent years due to an increasing focus on the look and feel of the projects. A number of attractive projects were completed with TenCate synthetic turf in 2013. The world’s largest landscaping project using synthetic turf was completed in March close to King Khalid International Airport in Riyadh (Saudi Arabia). It involved a two-colour landscape covering an area of 160,000 m2 . The clients appreciated the importance of the high quality of the TenCate synthetic turf for landscaping. This market is expected to see continued positive growth in the years ahead. GREENFIELDS® MX IN PROFESSIONAL FOOTBALL The acceptance of synthetic turf as a professional playing surface took off in 2013. GreenFields will supply synthetic turf to a growing number of Jupiler League clubs. The Grass group is increasingly positioning itself in high-quality synthetic turf systems. The awarding of this contract was important for the image of synthetic turf because it is the first professional football division to switch partly to synthetic turf pitches. GreenFields began laying the first pitches in the summer of 2013. A decisive factor for the winning of the tender was the natural playing experience provided by the GreenFields® MX system. This synthetic turf also looks natural on TV pictures. The GreenFields® MX system brings together a number of the company’s manufacturing capabilities. It is the first patented 3D woven synthetic turf system. This system makes it easy for a player to get his foot under the ball, as in the case of natural grass. It also allows unimpeded turning, acceleration and rotation, as on a natural surface. That prevents excessive stress on muscles. An important innovation in the GreenFields® MX system is that it is the first fully recyclable synthetic turf system. TenCate Grass expects an increasing focus on sustainability and recycling. The growing replacement market for synthetic turf systems is expected to strengthen this focus.
  • 95. 91TenCate annual report 2013  |  Performance | Other activities Xennia Technology’s inks are characterised by high quality, intense colours and low consumption. TenCate remains important for Xennia Technology in the development of digital solutions in the field of technical textiles. This market is still in the start-up phase. According to market assessments, digital processes are set to account for an increasingly important share of production processes in the global textile sector as a whole. Important factors for growth and further acceptance of this technology are lower ink prices, increased production speeds and increased reliability of production systems. These developments are also of importance for TenCate as a user of such systems. Xennia Technology can play an important role in this regard. Xennia Technology also contributed to the digitisation of production processes in other industries. It is a major challenge for the company to foster more support for these solutions in the market through a strengthening of marketing and sales activities, which will lead to revenue growth. REVENUES AND RESULTS The Other Activities sector comprises the companies Xennia Technology and TenCate Enbi and the Holding & Services activities. The revenues of the Other Activities sector amounted to € 66.4 million in 2013 (2012: € 69.7 million). EBITA amounted to – € 0.5 million (2012: – € 4.9 million). This improvement was mainly attributable to Xennia Technology. PERFORMANCE OF XENNIA TECHNOLOGY Xennia Technology saw revenues decline in 2013 compared to the previous year. The company completed its strategic reorganisation during the year. The business portfolio was given greater focus, with the emphasis placed on the marketing of developed products, knowledge and skills. Costs were also lowered. Xennia Technology consequently recorded an improved result during the year on lower revenues. Cash flow also improved strongly. Collaboration with business partners led to an increase in ink revenues in the second half of the year. An increased focus on ink revenues and partnerships is expected to sustain the growth in ink revenues. TenCate Protective & Outdoor Fabrics was the launch customer for Xennia Technology’s UV-curable inks in 2013. Third parties, including Reggiani Macchine, were also buyers of inks for the textile market. Xennia Technology has a flexible and high-calibre team of developers, particularly in the field of chemicals and software. It concentrates particularly on niche markets, where inks have high added value and are distinct from commoditised products. Xennia Technology is able to respond to customer-specific requirements in the market. KEY FIGURES OTHER ACTIVITIES in millions of euros unless stated otherwise 2009 2010 2011 2012* 2013 Revenues 52.7 66.8 74.5 69.7 66.4 Operating result before amortisation (EBITA) – 7.0 9.8 5.9 – 4.9 – 0.5 Operating result (EBIT) – 8.1 8.3 4.1 – 8.0 –3.0 Investments 4.1 6.9 5.2 1.9 1.7 Depreciation and amortisation 3.2 3.5 3.7 5.2 5.4 Number of staff years (year-end) 670 624 611 655 680 * Adjusted for accounting policy change pensions.
  • 96. 92 |  TenCate annual report 2013  |  Performance .. Other activities PERFORMANCE OF TENCATE ENBI The revenues of TenCate Enbi remained almost unchanged in 2013 compared to 2012. EBITA rose as a result of more efficient production and the focus on the growing production printing market. TenCate Enbi is mostly dependent on the market for rollers used in printers of major customers (OEMs). Good progress was made with the diversification strategy in new markets, such as the heating and insulation market. This strategy led to a rise in revenues in Europe. Revenues at the Asian production site rose as a result of successful qualifications among Asian OEMs. Production capacity at this site will have to be expanded in the near future. Lower revenues were recorded at the production sites in the United States. TenCate Enbi is well positioned in production printing, a growing market characterised by high recurrent volumes and margins. The long-term outlook for TenCate Enbi is positive. The company is qualified for various new printer platforms of Asian printer manufacturers. TenCate selected to design ballistic protection for Embraer A-29 Super Tucano The Brazilian aircraft builder Embraer selected TenCate Advanced Armour to design aerospace armour for the Embraer EMB 314. This military aircraft, also named the A-29 Super Tucano, is a turboprop aircraft for light attack, counter insurgency, air support, air reconnaissance missions and pilot training. The aircraft is currently being used by the air forces of Angola, Brazil, Burkina Faso, Chile, Colombia, Dominican Republic, Ecuador, Indonesia and Mauritania. Orders for the A-29 have been placed by Senegal and the United States. The US Air Force has already announced that it has selected the A-29 of Embraer Defesa & Segurança for its Light Air Support programme.
  • 97. 93TenCate annual report 2013  |  Outlook | Outlook for 2014 94 Action plans for 2014 95 Corporate initiatives in 2014 96 In Outlook the company provides details of the outlook and action plans for 2014 and subsequent years OUTLOOK
  • 98. 94 |  TenCate annual report 2013  |  Outlook STRATEGY AND OBJECTIVES The strategy will remain unchanged overall. Having regard to the buy & build policy, a restrained approach to acquisitions will remain appropriate in 2014. TenCate aims to strengthen its technology positions, particularly in the production of composites and related processes. This appears to be achievable particularly through organic growth. TenCate expects investments in this area to increase. The strategic objectives for 2014 are focused particularly on creating a stable basis for growth in promising geographic markets in which TenCate remains underrepresented. TenCate aims to make progress in local partnerships. The policy on the development of private markets will be vigorously pursued. The markets which hold promise for TenCate materials are oil and gas extraction, mining, the automotive industry, the aerospace sector and the electronics industry. The qualitative and quantitative strengthening of marketing and sales activities remains a priority in order to exploit opportunities in an improving market and to raise the quality of revenues. In times of economic decline, the proportion of volume products increases in relative terms, because good capacity utilisation is necessary in order to cover production costs sufficiently. GENERAL OUTLOOK According to the most recent forecasts by the International Monetary Fund (IMF) of January 2014, global economic growth will accelerate from 2.9% in 2013 to 3.7% in 2014. The IMF forecasts that mature markets will show accelerating growth, while emerging market growth will decrease. TenCate generates a relatively large proportion of revenues in the United States and Europe and expects to achieve revenue growth at least in line with the above growth estimate in most businesses. Revenue growth in composites as a whole is expected to be considerably higher. The market for automotive composites is still in the initial phase. The defence market is expected to fall short of the above growth estimate. Revenues within the TenCate Defender™ M portfolio will decline further due to the limiting of foreign deployments of US troops. This decrease will be only partly offset by growth in revenues outside the United States. As a result of the strengthening of the market position, TenCate believes it will achieve revenue growth in the armour composites market. The growth in protective fabrics for the industrial market is expected to continue. The revenue growth of TenCate Geosynthetics is expected to be in line with the above macroeconomic forecasts. The outlook for growth in the worldwide synthetic turf market is cautiously positive. The breakthrough by innovative synthetic turf systems in Dutch top-flight football (Jupiler League) has set a new standard. Outlook for 2014
  • 99. 95TenCate annual report 2013  |  Outlook | Action plans for 2014 ADVANCED TEXTILES & COMPOSITES SECTOR ■■ Further growth in industrial market for protective fabrics and international revenues (outside US) from TenCate Defender™   M portfolio. ■■ Revision of commercial strategy of TenCate Protective Fabrics EMEA with focus on core customers and brand values. ■■ Implementation of digital printing and finishing strategy. ■■ Strengthening of internal co-operation in TenCate Advanced Armour market group. ■■ Aim to accelerate market introduction of TenCate ABDS™ active blast countermeasure system. ■■ Progress in new business (automotive composites). GEOSYNTHETICS & GRASS SECTOR ■■ Strong growth in Water & Environment solutions with proactive market approach, focused on prevention and sustainability. ■■ Acceleration of growth in revenues from synthetic turf systems (solution-focused market approach targeted at ease of use, quality and sustainability). ■■ Continuation of profit recovery, particularly in Grass group. OTHER ACTIVITIES ■■ Development of organisations focused on independence and sustainable growth. ■■ Continuation of recovery in results at Xennia Technology and pursuit of co-operation with strong market participants to accelerate revenue growth. CORPORATE ■■ Organisational changes aimed at continent-based management to achieve more market-driven and flexible organisation, making use of local market knowledge. ■■ Further development of partnerships. ■■ Further increase in financial solidity. ■■ Strengthening of TenCate’s position in Asia (contacts with local operators, key projects, growth in share of revenues).
  • 100. 96 |  TenCate annual report 2013  |  Outlook CORPORATE SOCIAL RESPONSIBILITY The steps which TenCate took in 2013 to develop its corporate social responsibility will be continued in 2014. The integration of CSR data in the financial discipline will be continued in 2014. As in the previous year, the TenCate entities concerned will receive full feedback on their collective and individual CSR performance on two occasions in 2014. A comparison will again be made over several years and with comparable business entities. These insights can be used in order to refine the social, ecological and economic aspects of enterprise. At the same time, market groups will be requested to supply a plan detailing how they will further improve their sustainability performance in the years ahead to allow greater disclosure. The following CSR-related projects and activities are already planned for 2014: Industrial clothing The introduction of new protective industrial clothing for all four market groups in the Netherlands is scheduled for May 2014. The switch to technologically advanced TenCate protection products will contribute to the optimisation of personal protection. The organisation of washing and maintenance of clothing on a collective basis will also have positive environmental effects. Factory of the future A project is due to be launched in mid-2014 aimed at using technological innovations to introduce production processes with the lowest possible environmental impact. For that purpose TenCate is opening a field lab in which pilot production can take place and tests can be carried out. Smart factory A project group is being formed in 2014 to further optimise the product creation process in the Netherlands. This project, which is being promoted by the regional government and is fully in line with the Factory of the Future project, will involve co-operation with partners including Philips Consumer Lifestyle in Drachten, Fokker Aerostructures in Hoogeveen, the University of Groningen and the University of Twente. The ultimate aim of this project is to create an automated 24/7 ‘smart factory’. The sustainability aspect will be an increasingly important part of the design of future production processes. Stakeholder dialogue The policy in this field will be continued and, where possible, intensified further in 2014. The aim will be to establish a clear dialogue which, right across the organisation, is geared as closely as possible to the corporate dialogue in terms of content and practical arrangements. A digital magazine will be used to support the stakeholder dialogue. CSR Performance Ladder The certification of all three TenCate Geosynthetics production sites in Europe in accordance with ISO 14001 in 2013 laid the foundation for obtaining an international certificate for the CSR Performance Ladder at level 3. Preparations for this certification of corporate social responsibility covering the combined European activities of TenCate Geosynthetics are being made in 2014. Sponsorship TenCate and its subsidiaries are sponsoring organisations with a social and/or sporting background in numerous fields in 2014. TenCate Advanced Composites also aims to sponsor teams of technical students from universities and colleges in 2014 to increase their knowledge of these advanced materials and give them greater experience of the processing of the materials. At corporate level, TenCate will again support numerous local, regional, national and international initiatives and events through sponsorship, donations and practical support in 2014. Eco-innovation TenCate Digital Textiles in Nijverdal will continue to work on the digital printing and finishing of awning and other outdoor fabrics or substrates as part of the Digifin project in 2014 and 2015. This eco-innovation is being co-financed by the European Union under the Competitiveness and Innovation Framework Programme. This is being implemented by the Executive Agency for Competitiveness and Innovation in close collaboration with the Environment Directorate- General of the European Commission. Digital finishing by means of high-speed inkjet technology considerably improves the durability, flexibility and economic performance of the textile industry, including technical textiles. For further information see www.digifin.eu. CORPORATE RISK MANAGEMENT During the current year, the risk manager will work with the relevant parties to raise three to five other TenCate production sites to FM Global’s highest safety level. As preparation, the management of the production sites concerned will implement the required organisational and process changes relating to the relevant safety aspects. The risk manager will once again visit almost all production sites worldwide in 2014 in order to maintain the safety culture in TenCate. Corporate initiatives in 2014
  • 101. 97TenCate annual report 2013  |  Outlook | Statement by the Executive Board As the Executive Board of Royal Ten Cate, we have prepared the annual report and the financial statements for 2013. We declare that to the best of our knowledge: ■■ The financial statements give a true and fair view of the assets, liabilities and the financial position of the company and its consolidated businesses; ■■ The annual report gives a true and fair view of the position on the balance sheet date and the state of affairs of the company and its associated companies during the year and that the principal risks have been stated in the annual report. Almelo, Wednesday 26 February 2014 Executive Board L. de Vries, President and CEO
  • 102. 98 |  TenCate annual report 2013  |  Outlook
  • 103. 99TenCate annual report 2013  |  Financial statements | Financial statements 2013 100 Other information 151 Ten-year summary 154 Financial statements contain TenCate’s annual accounts and the accompanying explanatory notes FINANCIAL STATEMENTS
  • 104. 100 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Consolidated profit and loss account 102 Consolidated statement of comprehensive income 103 Consolidated balance sheet 104 Consolidated cash flow statement 106 Consolidated statement of changes in group equity 108 Notes to the consolidated financial statements 109 1 General information on royal Ten Cate nv 109 2 General principles for financial reporting 109 3 Principles for the preparation of the financial statements 109 4 Consolidation principles 109 5 Foreign currencies 110 6 Derivatives 111 7 Hedge accounting 111 8 Segment reporting 111 9 Revenues 111 10 Government subsidies 111 11 Presentation in the profit and loss account 112 12 Lease payments 112 13 Financial income and expenses 112 14 Profit tax 112 15 Earnings per share 113 16 New standards and interpretations not yet applied 113 17 Principles for the preparation of the cash flow statement 113 18 Intangible assets 113 19 Tangible fixed assets 114 20 Inventories 114 21 Trade debtors and other receivables 114 22 Cash and cash equivalents 115 23 Impairment 115 24 Share capital 115 25 Pension liabilities 116 26 Share-based payments 116 27 Provisions 116 28 Long-term debts 117 29 Trade creditors 117 30 Determination of fair value 117 Notes to the profit and loss account 118 31 Operating segments 118 32 Acquisitions and sale of participating interests 120 33 Personnel costs 120 34 General management costs 120 35 Net financial expenses 120 36 Profit tax 121 Notes to the consolidated balance sheet 122 37 Intangible assets 122 38 Tangible fixed assets 124 39 Investments in associated companies and financial fixed assets 125 40 Deferred profit tax assets and liabilities 126 41 Inventories 127 42 Trade debtors 127 43 Other receivables 127 44 Cash and cash equivalents 127 45 Total shareholders’ equity 128 46 Earnings per share 129 47 Long-term debts 129 48 Pension liabilities 131 49 Provisions 133 Other information 134 50 Financial instruments 134 51 Liabilities not shown in the balance sheet 141 52 Investment liabilities 141 53 Contingent liabilities 142 54 Related parties 142 55 Estimates and judgments made by the management 143 Financial statements 2013
  • 105. 101TenCate annual report 2013  |  FINANCIAL STATEMENTS  | Company financial statements 144 56 Company profit and loss account 144 57 Company balance sheet (before appropriation of the result) 144 Notes to the company financial statements 145 58 Financial fixed assets 145 59 Equity 146 60 Called and paid-up capital 146 61 Ordinary shares 146 62 Share premium reserve 146 63 Legal reserve 146 64 Other reserves 146 65 Option plan 146 66 Provisions 150 67 Long-term liabilities 150 68 Short-term liabilities 150 69 Auditor’s fees 150 70 Liabilities not shown in the balance sheet 150 Other information 151 Independent auditor’s report 151 Provisions of the articles of association relating to appropriation of profit 152 Proposed appropriation of profit 152 Ten-year summary 154 Glossary 156 Means of communication 158 Colophon 160
  • 106. 102 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS For the financial year ending on 31 December, in millions of euros Note 2012* 2013 Revenues 31 1,049.0 1,012.0 Cost of sales 843.6 809.2 Gross margin 205.4 202.8 Selling costs 67.5 72.2 Research and development costs 23.3 22.4 General management costs 34 79.0 72.6 Operating result (EBIT) 35.6 35.6 Financial income 35 0.4 0.5 Financial expenses 35 – 12.5 – 10.6 Net financial expenses – 12.1 – 10.1 Result before profit tax 23.5 25.5 Profit tax 36 – 8.2 – 8.5 Result after profit tax 15.3 17.0 Net result from associated companies – 0.3 0.1 Result after profit tax and associated companies 15.0 17.1 Result attributable to: Non-controlling interest – 5.9 – 1.9 Shareholders of the company (net income) 20.9 19.0 Weighted average number of shares x 1,000 46 25,895 26,225 Weighted average number of shares after dilution (x 1,000) 46 26,040 26,366 Net earnings per share (euro) 46 0.81 0.72 Diluted net earnings per share (euro) 46 0.80 0.72 * Adjusted for accounting policy change pensions. The notes in sections 1 to 70 form an integral part of these financial statements. Consolidated profit and loss account
  • 107. 103TenCate annual report 2013  |  FINANCIAL STATEMENTS  | For the financial year ending on 31 December, in millions of euros Note 2012* 2013 Result after profit tax and associated companies 15.0 17.1 Other comprehensive income (after profit tax) Currency translation differences for foreign activities 45 – 3.8 – 11.4 Effective portion of changes in hedging reserve (hedge accounting) 45 0.6 2.3 Actuarial gains and losses on pensions** – 16.6 13.6 Other comprehensive income after profit tax – 19.8 4.5 Comprehensive income after profit tax – 4.8 21.6 Comprehensive income attributable to: Non-controlling interest – 5.9 – 1.6 Shareholders of the company 1.1 23.2 * Adjusted for accounting policy change pensions. ** Items which are never reclassified to the profit and loss account. Other comprehensive income may be reclassified. The notes in sections 1 to 70 form an integral part of these financial statements. Consolidated statement of comprehensive income
  • 108. 104 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS In millions of euros Note 31 December 2012 31 December 2013 NON-CURRENT ASSETS Goodwill 37 214.5 214.6 Other intangible assets 37 54.9 55.6 Tangible fixed assets 38 196.7 165.7 Investments in associated companies 39 4.1 3.9 Financial fixed assets 39 12.9 14.2 Deferred profit tax assets 40 30.0 24.0 Total non-current assets 513.1 478.0 CURRENT ASSETS Inventories 41 226.4 223.8 Assets Trade receivables 42 140.0 128.7 Profit tax receivables 3.8 0.1 Other receivables 43 15.9 18.3 Cash and cash equivalents 44 26.7 21.6 Total current assets 412.8 392.5 Total assets 925.9 870.5 Consolidated balance sheet
  • 109. 105TenCate annual report 2013  |  FINANCIAL STATEMENTS  | in millions of euros Note 31 December 2012 31 December 2013 GROUP EQUITY 45 Share capital 66.2 67.0 Share premium reserve 43.4 42.6 Translation reserve 3.1 – 8.6 Hedging reserve – 3.9 – 1.6 Reserve for own shares – 15.1 – 14.1 Other reserves and undistributed result 363.5 389.0 Total shareholders’ equity 457.2 474.3 Non-controlling interest – 1.9 – 1.0 Group equity 455.3 473.3 NON-CURRENT LIABILITIES Long-term debts 47 220.3 195.1 Pension liabilities 48 42.3 24.1 Provisions 49 11.4 9.9 Deferred profit tax liabilities 40 8.8 7.5 Total non-current liabilities 282.8 236.6 CURRENT LIABILITIES Cash loans, overdrafts 44 35.4 14.7 Repayment of long-term debts 47 0.9 1.0 Trade creditors and other payables 142.4 139.2 Provisions 49 2.8 4.4 Profit tax liabilities 6.3 1.3 Total short-term debts 187.8 160.6 Total liabilities 470.6 397.2 Total group equity and liabilities 925.9 870.5 The notes in sections 1 to 70 form an integral part of these financial statements.
  • 110. 106 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS For the financial year ending on 31 December, in millions of euros note 2012* 2013 CASH FLOW FROM OPERATING ACTIVITIES Result after profit tax 15.0 17.1 Adjustments for: Depreciation 38 37.1 34.8 Amortisation 37 14.5 13.1 Net financial expenses before exchange rate differences 35 12.2 10.1 Profit tax 36 8.2 8.5 Net result from associated companies 0.3 – 0.1 Result from sale of tangible fixed assets 34 – – 0.2 Costs of option scheme 2.0 1.6 Change in provisions and pension liabilities – 9.0 – 1.2 Cash flow from operating activities before movements in working capital: 80.3 83.7 Movements in working capital: Inventories 42.3 – 1.9 Receivables 18.7 7.7 Current liabilities – 22.7 7.7 38.3 13.5 CASH FLOW FROM OPERATING ACTIVITIES 118.6 97.2 Interest paid – 12.3 – 9.4 Profit tax paid – 4.5 – 12.7 Net cash flow from operating activities 101.8 75.1 * Adjusted for accounting policy change pensions. Consolidated cash flow statement
  • 111. 107TenCate annual report 2013  |  FINANCIAL STATEMENTS  | For the financial year ending on 31 December, in millions of euros note 2012* 2013 CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of tangible fixed assets 0.3 0.8 Interest received 0.1 – Acquisition of subsidiaries less cash acquired 32 – 15.7 – 22.2 Deconsolidation of subsidiary less cash 32 – 4.2 Investments in intangible assets 37 – 4.6 – 4.6 Investments in tangible fixed assets 38 – 12.0 – 9.8 Increase in long-term receivables – 1.5 – 0.9 Net cash flow from investing activities – 33.4 – 32.5 Net cash flow from operating and investing activities 68.4 42.6 CASH FLOW FROM FINANCING ACTIVITIES Income from exercise of share options 0.5 1.0 Repayment of long-term debts – 51.5 – 27.8 Drawing of long-term debts – 7.6 Dividend paid to shareholders – 12.2 – 7.6 Net cash flow from financing activities – 63.2 – 26.8 Change in cash and cash equivalents 5.2 15.8 Cash and cash equivalents on 1 January 44 – 12.7 – 8.7 Exchange rate and translation differences in cash and cash equivalents – 1.2 – 0.2 Cash and cash equivalents on 31 December 44 – 8.7 6.9 * Adjusted for accounting policy change pensions. The notes in sections 1 to 70 form an integral part of these financial statements.
  • 112. 108 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS in millions of euros Share capital Share premium Reserve for translation differences Hedging reserve Reserve for own shares Other reserves and undis- tributed result Total Non-­ controlling interests Group equity Balance as at 1 january 2012 64.8 44.8 7.0 – 4.5 – 15.6 369.3 465.8 3.7 469.5 COMPREHENSIVE INCOME Result after profit tax * ) 20.9 20.9 – 5.9 15.0 Actuarial gains and losses on defined benefit pension schemes * ) – 16.5 – 16.5 – 0.1 – 16.6 Currency translation differences – 3.9 – 3.9 0.1 – 3.8 Hedging result after profit tax 0.6 0.6 0.6 Total – – – 3.9 0.6 – 4.4 1.1 – 5.9 – 4.8 TRANSACTIONS WITH SHAREHOLDERS Dividend to shareholders 1.4 – 1.4 – 12.2 – 12.2 – 12.2 Share-based payment transactions 2.0 2.0 2.0 Issue of repurchased shares 0.5 0.5 0.5 Changes in non-controlling interest – 0.3 0.3 Total 1.4 – 1.4 – – 0.5 – 10.2 – 9.7 0.3 – 9.4 Balance as at 31 December 2012 / 1 January 2013 66.2 43.4 3.1 – 3.9 – 15.1 363.5 457.2 – 1.9 455.3 COMPREHENSIVE INCOME Result after profit tax 19.0 19.0 – 1.9 17.1 Actuarial gains and losses on defined-benefit pension schemes 13.6 13.6 – 13.6 Currency translation differences – 11.7 – 11.7 0.3 – 11.4 Hedging result after profit tax 2.3 2.3 2.3 Total – – – 11.7 2.3 – 32.6 23.2 – 1.6 21.6 TRANSACTIONS WITH SHAREHOLDERS Dividend to shareholders 0.8 – 0.8 – 7.6 – 7.6 – 7.6 Share-based payment transactions 1.6 1.6 1.6 Issue of repurchased shares 1.0 1.0 1.0 Deconsolidation of non-controlling interest – 1.7 1.7 Acquisition of non-controlling interest – 1.1 – 1.1 0.8 – 0.3 Total 0.8 – 0.8 – – 1.0 – 7.1 – 6.1 2.5 – 3.6 Balance as at 31 December 2013 67.0 42.6 – 8.6 – 1.6 – 14.1 389.0 474.3 – 1.0 473.3 * Adjusted for accounting policy change pensions. The notes in sections 1 to 70 form an integral part of these financial statements. Consolidated statement of changes in group equity
  • 113. 109TenCate annual report 2013  |  FINANCIAL STATEMENTS  | ACCOUNTING STANDARDS 1 GENERAL INFORMATION ON ROYAL TEN CATE Koninklijke Ten Cate nv (Royal Ten Cate) (the Company) is established in Almelo, the Netherlands. The consolidated financial statements of the Company comprise the financial statements of the Company and its subsidiaries (referred to collectively as the ‘Group’) and the Group’s interests in other (non-consolidated) participating interests, associated companies and proportionally consolidated joint ventures. The financial statements have been prepared by the Executive Board. The 2013 annual report and accounts were discussed at the meeting of the Supervisory Board on 26 February 2014. They were released for publication on 27 February 2014. They will be presented to the General Meeting of Shareholders for adoption on 17 April 2014. The parent company financial statements form part of Royal Ten Cate’s 2013 financial statements. Royal Ten Cate has made use of the exemption pursuant to article 2:402 of Book 2 of the Netherlands Civil Code with regard to the parent company financial statements. The original financial statements were drafted in Dutch. This docu- ment is an English translation of the original. In  the case of any discrepancies between the English and the Dutch text, the latter will prevail. 2 GENERAL PRINCIPLES FOR FINANCIAL REPORTING The consolidated financial statements have been prepared in accord- ance with International Financial Reporting Standards, as  adopted within the EU (hereinafter EU-IFRS) and with Part 9 of Book 2 of the Netherlands Civil Code. Changes to the principles for financial reporting The new standard IAS 19 (2011) has been applied with effect from 2013. The expected investment return as part of the pension expense is calculated on the basis of the discount rate used to determine the pension liability. The change of accounting policy has the following effect on the results and equity: 2012 2013 Cost of sales 1.3 1.3 Selling costs 0.2 0.2 Research and development costs 0.1 0.1 General management costs 0.3 0.3 Profit tax – 0.5 – 0.5 Total decrease in profit 1.4 1.4 Actuarial gains and losses 1.9 1.9 Taxes on actuarial gains and losses – 0.5 – 0.5 Total increase in other comprehensive income 1.4 1.4 Furthermore, the IFRS7 standard has been applied with effect from 2013. 3 PRINCIPLES FOR THE PREPARATION OF THE FINANCIAL STATEMENTS The financial statements are presented in millions of euros (the euro being the Company’s functional currency) unless stated otherwise. The financial statements have been prepared on the basis of histor- ical cost, except for derivative financial instruments (derivatives), which are carried at fair value. In preparing the financial statements, the Executive Board has used estimates and assumptions which affect the application of accounting standards and reported amounts stated in the consolidated financial statements (see note 55). The  actual results may differ from such estimates. The  estimates and underlying assumptions are continu- ously assessed. Revised estimates are stated in the period in which the estimates are revised and in future periods in which the revision has consequences. The accounting principles set out below have been applied consist- ently by the Group’s subsidiaries and joint ventures for the periods presented in these consolidated financial statements. Certain comparative information has been adjusted for the sake of compara- bility. 4 CONSOLIDATION PRINCIPLES 4.1 Business combinations Business combinations are recognised from the date on which control passes to the Group. Control means the Group is able to determine an entity’s financial and operational policy in order to obtain benefits from the entity’s activities. In  assessing control, the  Group takes account of potential voting rights which can be exercised at that time. Notes to the consolidated financial statements
  • 114. 110 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated financial statements Joint ventures are companies over which the Group has joint control and in which such control has been set forth in an agreement and in which strategic decisions on the financial and operational policy are taken on the basis of unanimity. Joint ventures are proportionally consolidated. Other participating interests over which no significant influence is exercised are carried at fair value and the dividend is stated in the profit and loss account when it is made payable. If no fair value is available and other methods do not result in a reasonable estimate, the investment is carried at cost less impairment. 4.5 Elimination of transactions on consolidation Intragroup balances and transactions between the subsidiaries in the Group and unrealised gains and losses on such transactions are elimi- nated in the preparation of the consolidated financial statements. Unrealised gains on Group transactions with proportionally consoli- dated joint ventures and investments are stated in accordance with the equity method and eliminated in proportion to the Group’s interest in the investment. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no indication of impairment. 5 FOREIGN CURRENCIES 5.1 Transactions in foreign currencies Receivables and liabilities denominated in foreign currencies are converted into euros at the rate prevailing on the reporting date. Transactions in foreign currencies are converted into euros at the estimated exchange rate on the transaction date. Currency trans­ lation differences are stated in the profit and loss account. Non-monetary assets and liabilities which are denominated in foreign currencies and valued on the basis of historical cost are converted at the exchange rate on the transaction date. 5.2 Subsidiaries and joint ventures outside the eurozone The revenues and expenses of subsidiaries outside the eurozone are converted into euros at the exchange rate on the transaction date. Assets and liabilities including goodwill and fair value adjustments in respect of acquisitions are converted at the rate on the reporting date. The  resulting translation differences are carried in other comprehensive income in equity. The  proportionate share of the currency translation difference is allocated to any non-controlling interests. If an activity outside the eurozone is fully or partly divested, the accumulated exchange rate difference is transferred from equity to the profit and loss account as part of the result of the sale. The Group determines the goodwill on the basis of the fair value of the consideration paid, the  carrying amount of any non-controlling interest in the acquired undertaking and, if applicable, the fair value of the prior interest in the acquiree. The net amount of the identified assets acquired and the accepted liabilities is then deducted. If the difference is negative, a book profit from an advantageous purchase is stated directly in the profit and loss account. Any non-controlling interests are carried at their proportionate share of the carrying amount of identifiable assets of the acquired undertaking on the acquisition date. The paid consideration includes no amount for the settlement of existing relationships. Any such amount is stated in the profit and loss account. Transaction costs other than those related to the issue of loans or equity instruments allocated to the Group as a result of acquisitions are charged to the result when they arise. 4.2 Acquisition of non-controlling interests Acquired non-controlling interests are stated as transactions with shareholders (directly as a charge to equity) and no goodwill is there- fore included. 4.3 Subsidiaries Subsidiaries are undertakings in which the Company directly and/or indirectly has a controlling interest. The  financial statements of subsidiaries are included in the consolidated financial statements from the first date on which control is exercised to the date on which such control ends. Non-controlling interests in the Group’s result and equity are stated separately. Losses in connection with non-con- trolling interests are allocated to the non-controlling interests, even if a deficit arises for the non-controlling interests in question. 4.4 Associated companies, joint ventures and other participating interests Associated companies are entities in which the Group has significant influence on the financial and operational policy, but in which it has no controlling interest. Significant influence is assumed to exist if the Group holds between 20% and 50% of the voting rights in another entity. Associated companies are accounted for using the equity method and are stated at cost including transaction costs on first-time inclusion. If the Group’s share in losses exceeds the carrying value of the associated company, the  carrying value is stated at zero and further losses are no longer stated, unless the Group has entered into a liability or has made payments on behalf of the associated company.
  • 115. 111TenCate annual report 2013  |  FINANCIAL STATEMENTS  | ating Decision Maker (CODM) committees, which take the important operating decisions in the segment. The operating results of an operating segment are assessed periodi- cally by the CODM committees in order to decide on the allocation of resources to the segment and for performance assessment. The investment expenses of a segment concern the total expenses incurred during the reporting period for the acquisition of tangible fixed assets and intangible assets with the exception of goodwill. The assets and liabilities of the segment concern items which are or may reasonably be allocated directly. Unallocated assets comprise profit tax receivables and cash and cash equivalents. The  unallocated liabilities comprise interest-bearing loans and profit tax liabilities. 9 REVENUES Revenues comprise the revenues from goods and services supplied to third parties. These are stated at the fair value of the consideration received or to be received, less taxes and any volume, trade or payment discounts due. Revenues from sales of goods are recognised in the profit and loss account when the main risks and benefits of ownership have been transferred to the purchaser. Revenues from services supplied are recognised in the profit and loss account in proportion to the extent of performance of the work applying on the reporting date. No revenues are recognised if the extent of the revenues cannot be reliably determined and if significant uncertainties remain with regard to the collection of the remuneration due, the associated costs or the possible return of goods, and also if there is a protracted manage- ment involvement with such goods. The Group also carries out projects to manufacture assets under contracts with third parties. The costs relating to a project are recog- nised when they are incurred. As soon as the result of a project in progress can be reliably estimated, revenues from that project are recognised in proportion to its degree of completion. Expected losses on projects are stated immediately in the profit and loss account. 10 GOVERNMENT SUBSIDIES Subsidies granted as compensation for expenses incurred by the Group are systematically stated as income in the profit and loss account in the same period as that in which the subsidisable expenses are incurred and as soon as there is a reasonable certainty that they will be received and that the Group will fulfil the attached conditions. Subsidies granted to compensate the Group for the cost of an asset The rates of the main currencies against the euro are as follows: Closing rate Average rate 2012 2013 2012 2013 US dollar 1.32 1.38 1.29 1.32 British pound 0.81 0.83 0.81 0.85 Danish krone 7.46 7.46 7.44 7.46 UAE dirham 4.86 5.05 4.73 4.86 Malaysian ringgit 4.04 4.51 3.98 4.15 Singapore dollar 1.61 1.74 1.61 1.65 Chinese yuan 8.22 8.34 8.12 8.15 Australian dollar 1.27 1.54 1.25 1.36 6 DERIVATIVES The Group uses derivatives in order to hedge exchange rate and interest rate risks resulting from operating, financing and investing activities. Examples are currency options and forward contracts as well as interest rate caps and swaps. In accordance with its treasury policy, the  Group does not use derivatives for trading purposes. Nor does it issue such derivatives. Derivatives are valued at fair value on first-time inclusion. The resulting income or expense is stated directly in the profit and loss account unless hedge accounting is applied (see section 7). The fair value of derivatives is the estimated amount which the Group would receive or would have to pay in order to terminate the deriva- tive on the reporting date, taking into account the current exchange rates, the current interest rate and the credit risk. 7 HEDGE ACCOUNTING The Group applies cash flow hedge accounting to interest rate deriva- tives. During the hedging relationship, the  effective portion of the changes in the fair value of the derivative is stated directly in other comprehensive income of the hedging reserve in equity. The ineffec- tive portion of the changes in the fair value of the derivatives is stated directly in the profit and loss account. If  the hedged future transactions are stated in the profit and loss account, the  transfer takes place from equity to the profit and loss account. 8 SEGMENT REPORTING An  operating segment is a part of the Group conducting business activities which can result in revenues and expenses, including reve- nues and expenses associated with transactions with other parts of the Group. The Group determines and presents operating segments on the basis of the information reported internally to the Chief Oper-
  • 116. 112 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated financial statements ready for use or sale) are capitalised as part of the costs of that asset. Dividend income from other participating interests is stated in the profit and loss account at the time at which the Group’s right to payment is established. 14 PROFIT TAX The tax on profit for the financial year includes the profit tax that is payable, available for set-off and deferred in respect of the reporting period. The profit tax is stated in the profit and loss account, except where it relates to items which are included directly in equity or in other comprehensive income. Profit tax that is payable and available for set-off in respect of the reporting period is the profit tax which is expected to be payable on the taxable result, calculated on the basis of tax rates which have been set on the reporting date, or on which a firm decision has been taken by the reporting date, and any correc- tions to profit tax payable in respect of previous years. Additional taxes on profit from dividend payments are stated at the same time as the liability to pay the respective dividend. A receivable / provision is recognised for deferred tax differences using the balance sheet liability method for temporary differences between the carrying value of assets and liabilities for the financial reporting and the fiscal carrying value of the items concerned. No  provision is formed in respect of two temporary differences: non-tax-deductible goodwill and the difference between the economic and fiscal value of subsidiaries, associated companies, joint ventures and other participating interests. The amount of the provi- sion for deferred profit tax liabilities is based on the method by which the carrying value of the assets and liabilities is expected to be real- ised or settled, using tax rates which, on  the reporting date, have been specified by law or in material terms. Deferred profit tax assets and liabilities are offset if there is a legally enforceable right to offset the profit tax assets and liabilities and such assets and liabilities relate to profit tax imposed by the same tax authority on the same taxable entity, or on different taxable entities which intend to offset the profit tax assets and liabilities or whose profit tax assets and liabilities are realised simultaneously. A deferred profit tax asset is only recognised in respect of unused tax losses, tax  income and deductible temporary differences to the extent that it is likely that future taxable profits will be available which can be applied for the realisation of the timing difference. Deferred profit tax assets are reviewed on each reporting date and are systematically stated as cost of sales in the profit and loss account during the useful life of the asset. 11 PRESENTATION IN THE PROFIT AND LOSS ACCOUNT The allocation of costs to the functional cost accounts can be ­specified as follows: ■■ Cost of sales: comprises all production costs (including raw material and energy costs) related to the recognised revenues. ■■ Selling costs: comprises the costs of marketing and sales of the products. ■■ Research and development costs: comprises research costs with the aim of acquiring new technological knowledge and develop- ment costs associated with the development of new products or processes for the start of commercial production. ■■ General management costs: comprises the strategic and management costs. The costs of support departments which do not relate directly to the other cost accounts are also included under general management costs. 12 LEASE PAYMENTS Lease payments in respect of operational leasing are stated in the profit and loss account on a straight-line basis over the lease term. Remuneration received as an incentive to effect leases is stated as an integral part of the total lease costs in the profit and loss account over the lease term. Financial lease payments are stated partly as financial expenses and partly as a repayment of the outstanding liability. The financing costs are allocated to each period of the total lease term in such a way that this results in a constant periodic interest rate on the residual balance of the liability. 13 FINANCIAL INCOME AND EXPENSES Financial income and expenses include the interest income and expenses on invested and borrowed monies, interest charges on financial lease payments, foreign exchange rate differences, divi- dends from other participating interests and results of derivatives for which no hedge accounting is used and the realised and ineffective portion of the change in the fair value of derivatives for which hedge accounting is used. Interest income and expenses are stated in the profit and loss account on the basis of the effective interest method. Material financial expenses in the construction period which are directly attributable to the acquisition, construction or production of an eligible asset (which will require a considerable period before it is
  • 117. 113TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 18 INTANGIBLE ASSETS 18.1 Goodwill Details of the valuation of goodwill on first-time inclusion can be found in note 4.1. Goodwill is valued at cost less accumulated impair- ments. The carrying value of the goodwill on investments in associ- ated companies is included in the carrying value of the respective investment. An  impairment loss on an associated company is allo- cated to the carrying value of the associated company investment. Goodwill is allocated to cash generating units and is tested each year on the reporting date to assess whether there is any indication of impairment. 18.2 Other intangible assets The other intangible assets consist of: Research and development Expenses for research activities carried out with a view to acquiring new scientific or technical knowledge and insights are stated as an expense in the profit and loss account when they are incurred. Expenses for development activities, in  which research results are used for a plan or design for the production of new or substantially improved products and processes, are capitalised if the development costs can be reliably determined, the product or process is technically and commercially feasible and the Group has sufficient resources to complete the development and use or sell the asset. The capitalised expenses include material costs, direct labour costs, financing costs and an appropriate portion of directly attributable overheads. Other development costs are stated as an expense in the profit and loss account when they are incurred. The capitalised development costs are valued at cost less accumulated amortisation and accumulated impairments (see note 23). Other intangible assets Other intangible assets acquired by the Group relate to customer rela- tionships, trademark rights, patents, software and similar rights. These intangible assets are valued at cost less accumulated amorti- sation and accumulated impairments (see note 23). Costs of internally generated goodwill and trademarks are stated as an expense in the profit and loss account when they are incurred. reduced if it is no longer likely that the associated tax benefit will be realised. 15 EARNINGS PER SHARE The Group presents ordinary and diluted earnings per share for the ordinary share capital. The net earnings per ordinary share are calcu- lated on the basis of the net result attributable to shareholders of the Group divided by the weighted average number of ordinary shares in issue during the reporting period (corrected to take account of own shares). In  the calculation of the diluted earnings, the  weighted average number of ordinary shares in issue during the reporting period is corrected to take account of the potential dilutive effect on the ordinary shares arising from the share options granted to employees. 16 NEW STANDARDS AND INTERPRETATIONS NOT YET APPLIED A number of new standards, amendments to standards and interpre- tations were not yet in force in 2013 and have therefore not been applied to these consolidated financial statements: ■■ IFRS 11 – Joint arrangements, which becomes compulsory in 2014 and may give rise to changes in the treatment of joint ventures and similar agreements. As  a result of this standard, interests in joint ventures will no longer be proportionally consolidated from 2014. The expected impact is limited. The other new or amended standards are not expected to have any material effect on the Group’s consolidated financial statements. 17 PRINCIPLES FOR THE PREPARATION OF THE CASH FLOW STATEMENT Cash flows from operating activities are presented on the basis of the indirect method. Cash flows in foreign currencies are converted at the exchange rate on the date of the cash flow or on the basis of aver- ages. Changes which have not resulted in cash flows, such as exchange rate differences, acquisitions, financial lease liabilities, changes in fair value, recognised share-related transactions and similar transactions are eliminated in this statement. Dividends paid to shareholders are included in the cash flow from financing activities. Dividends received are stated in the cash flow from investing activi- ties, and interest paid is stated in the cash flow from operating activi- ties. Overdrafts which are immediately repayable and form part of the Group’s cash management are included in the balance of cash and bank current accounts as part of the consolidated cash flow statement.
  • 118. 114 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated financial statements minimum lease payments at the inception of the lease, less accumu- lated depreciation (see note 19.4) and impairments (see note 23). Lease payments are stated as described in note 12. 19.3 Expenses after first-time inclusion Expenses incurred for the replacement of a component of a tangible fixed asset are capitalised provided the future economic benefits resulting from the asset accrue to the Group and the cost of such replacement expenses can be reliably determined. All other expenses are charged to the profit and loss account when they are incurred. 19.4 Depreciation Depreciation is calculated on the cost of an asset less the residual value. Depreciation is charged to the profit and loss account on the basis of the straight-line method over the estimated economic life of each component of a tangible fixed asset. Land is not depreciated. The estimated economic life is as follows: ■■ buildings 33 years ■■ fixtures and installations in buildings 10 years ■■ plant and equipment 7 – 10 years ■■ inventory 5 years ■■ computers and office equipment 3 – 5 years The depreciation method, economic life and residual value are assessed periodically and adjusted if necessary. 20 INVENTORIES Inventories are stated at the lower of cost or net realisable value. The cost of inventories is based on the FIFO (first in, first out) principle and includes the costs incurred for the acquisition of the inventories, their production or conversion and bringing them to the existing loca- tion and condition. In the case of inventories of finished products and work in progress, the cost includes in addition to the direct costs an appropriate portion of the indirect costs based on the normal produc- tion capacity. The net realisable value is the estimated sale price in ordinary operations, less the estimated costs of completion and the sale costs. 21 TRADE DEBTORS AND OTHER RECEIVABLES Trade and other receivables with a term of less than one year are stated at amortised cost less impairments. Projects in progress commissioned by third parties concern the gross amount yet to be charged that is expected to be collected from 18.3 Expenses after first-time inclusion Expenses after the first-time inclusion of capitalised intangible assets are capitalised only if they lead to an increase in the future economic benefits embodied in the particular asset to which they relate. All other expenses are charged to the profit and loss account when they are incurred. 18.4 Amortisation Amortisation is calculated on the cost of the asset, less the residual value. Amortisation costs are charged on a straight-line basis to the profit and loss account in accordance with the estimated useful life of intangible assets. Goodwill is tested each year on the reporting date to assess whether any impairment has arisen. The  amortisation of other intangible assets begins as soon as the assets are available for use. The estimated economic life is as follows: ■■ Development costs 5 years ■■ Other intangible assets 3 – 14 years ■■ The amortisation method, economic life and residual value are assessed periodically and adjusted if necessary. 19 TANGIBLE FIXED ASSETS 19.1 Owned assets Tangible fixed assets are valued at cost less accumulated deprecia- tion (see 19.4) and accumulated impairments (see note 23). The cost of self-manufactured assets comprises material costs, direct labour costs and any other costs attributable directly to the prepara- tion of the asset for use, any costs of dismantling and removing the asset, the costs of restoring the location in which the asset is held and capitalised financing costs. Where tangible fixed assets consist of components with differing useful lives, these are stated as separate items under tangible fixed assets. The profit or loss on the sale of a tangible fixed asset is determined by comparing the sales proceeds with the carrying value of the tangible fixed asset. The net difference is stated under general management costs in the profit and loss account. 19.2 Leased assets Leases in which the Group actually assumes all the risks and benefits of ownership are classified as financial leases. Tangible fixed assets which are acquired by means of financial leases are valued on first- time inclusion at the lower of fair value and the present value of the
  • 119. 115TenCate annual report 2013  |  FINANCIAL STATEMENTS  | ment are combined in such a way that the level at which such impair- ment is tested reflects the lowest level at which goodwill is moni- tored in internal reporting. Goodwill acquired in a business combination is allocated to groups of cash generating units which are expected to benefit from the synergy advantages of the combination. 23.1 Calculation of the realisable value The realisable value is the higher of the recoverable amount, less costs to sell, and the value in use. In determining the value in use, the  present value of the estimated future cash flows is calculated using a discount rate before tax which reflects both the current market valuations of the time value of money and the specific risks relating to the asset or cash generating unit. In the case of an asset which generates no cash receipts that are largely independent of other assets, the realisable value is determined for the cash gener- ating unit to which the asset belongs. 23.2 Reversal of impairments An impairment relating to goodwill cannot be reversed. In the case of other assets, an  assessment is made on the reporting date as to whether an impairment must be reversed if there is a change in the estimates on which the realisable value was based. An impairment is only reversed to the extent that the carrying value of the asset is not higher than the carrying value which would have been determined after the deduction of depreciation, if no impairment had been recognised. Goodwill which is part of the carrying value of an investment in an associated company is not recognised separately and therefore not tested separately for impairment. Instead, the  total amount of the investment in an associated company is tested for impairment as a single asset if there are objective indications that the investment in an associated company may be subject to impairment. 24 SHARE CAPITAL 24.1 Share capital The share capital is classified as equity. 24.2 Repurchase of own shares On  the repurchase of share capital which is stated in the balance sheet as equity, the  amount of the paid consideration, including directly attributable costs, is  stated as a change in equity. Repur- chased shares are classified in the reserve for own shares and presented as a deduction from total equity. customers for the contract work carried out up to the reporting date. This item is carried at cost plus the profit recognised up to that time less invoiced instalments in proportion to the progress of the project and recognised losses. The  cost includes all expenditure directly related to specific projects and an allocation of the fixed and variable indirect costs incurred. Projects in progress commissioned by third parties under contracts in which the amount of costs incurred plus the recognised profit is higher than the invoiced instalments are stated in the balance sheet under other receivables. If  the amount of invoiced instalments is higher than the costs incurred plus recognised profit, the difference is stated in the balance sheet under trade creditors and other payables. 22 CASH AND CASH EQUIVALENTS Cash and cash equivalents comprise cash balances and immediately claimable credit balances with an original term of three months or less. Overdrafts at banks which are immediately claimable and form an integral part of the Group’s cash management are included as part of the cash and cash equivalents for the purposes of the cash flow statement. 23 IMPAIRMENT The carrying value of the Group’s assets, except that of inventories (see note 20) and deferred profit tax assets (see note 14) is examined at each reporting date in order to determine whether there are indica- tions of impairment. If there are such indications, an estimate is made of the realisable value of the asset. In the case of goodwill and intan- gible assets which are not yet available for use, the realisable value is estimated at each reporting date. This also applies if there is an indi- cation of impairment. An impairment is recognised when the carrying value of an asset or the cash generating unit thereof is higher than the estimated realis- able value. It  is first charged to any allocated goodwill and then deducted proportionately from the carrying value of the other assets. For the testing of impairments, assets which cannot be tested individ- ually are combined into the smallest distinguishable group of assets which, as  a result of continuous use, generates cash flow that is broadly independent of the incoming cash flows from other assets or groups of assets (the cash generating unit). Taking into account the maximum size of an operating segment before aggregation (the ‘oper- ating segment ceiling test’), cash generating units to which goodwill has been allocated for the testing of goodwill with regard to impair-
  • 120. 116 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated financial statements options which will be exercised. The fair value of the granted options is determined on the basis of the binomial model, taking account of the conditions under which the options have been granted. Valuation factors include the share price on the valuation date, the  exercise price of the instrument, the expected volatility, the weighted average expected term of the instruments (based on past experience and the conduct of the instrument holders), the expected dividends and the risk-free interest rate (based on government bonds). 27 PROVISIONS A provision is recognised in the balance sheet if there is a legally enforceable or actual obligation as a result of a past event and it is likely that an outflow of resources will be required to settle such liability and such outflow can be reliably estimated. If the effect of this is material, the  provisions are determined by discounting the expected future cash flows using a discount rate before profit tax which reflects the current market valuations of the time value of money and, if  necessary, the  specific risks of the liability. Interest accrual is stated as a financial expense. 27.1 Claims and guarantees The provision for claims relates to damages claims and any litigation costs. The  provision for guarantees relates to goods and services supplied and is based on historical guarantee data. 27.2 Reorganisation Reorganisation provisions are included if the Group has formalised a detailed plan for the reorganisation and has begun or publicly announced the reorganisation. The reorganisation provision does not include costs incurred in relation to future activities. 27.3 Other personnel liabilities Long-service leave and other allowances such as anniversaries form part of the provisions under other personnel liabilities. These provi- sions are accumulated over the respective period as in the case of defined benefit pension schemes, except that actuarial gains or losses are recognised in the profit and loss account in the period in which they arise. 27.4 Environment In  accordance with the Group’s published environmental policy and the applicable legal obligations, a provision for the clearance of envi- ronmental pollution is recognised when the pollution occurs. 24.3 Dividend Dividend is stated as a liability in the period in which it is declared. 25 PENSION LIABILITIES 25.1 Defined contribution schemes Liabilities relating to contributions to defined contribution pension schemes are charged to the profit and loss account in the period to which they relate. 25.2 Defined benefit schemes The Group’s net liability in respect of defined benefit pension schemes is calculated separately for each scheme by estimating the amount of the future entitlement which employees have earned in the present and previous reporting periods in exchange for their services. This entitlement is discounted in order to determine the present value, with the fair value of the fund investments being deducted. The discount rate is the yield on the reporting date of bonds which have an AA credit rating and a period to maturity which approximates the term of the Group’s liabilities and are denominated in the currency in which the entitlements arise. The calculation is performed by an authorised actuary on the basis of the projected unit credit method. If the entitlements under a pension scheme are increased, the propor- tion of the higher entitlement which relates to employees’ past service is stated as an expense in the profit and loss account on a straight-line basis over the average period up to the vesting of the rights. If  the rights are vested immediately, the  expense is stated immediately in the profit and loss account. Actuarial gains and losses in respect of a pension scheme are cred- ited or charged directly to group equity. If the calculation results in a receivable for the Group, the recognised asset item is limited to an amount not exceeding any unrecognised back-service costs and the present value of economic benefits in the form of any future repayments by the fund or, if lower, future pension contributions. 26 SHARE-BASED PAYMENTS The option scheme enables the Group’s management to acquire shares in Royal Ten Cate. The fair value of the granted options is stated under personnel costs, with a corresponding entry in equity. The fair value is determined on the grant date and is allocated over the period up to the time at which the management acquires an unconditional right to the options. The  amount stated as costs is adjusted annually to the number of
  • 121. 117TenCate annual report 2013  |  FINANCIAL STATEMENTS  | ■■ Intangible assets The fair value of patents and trademarks acquired as part of a busi- ness combination is determined on the basis of the discounted esti- mated royalties which have been avoided as a result of ownership of the patent or trademark. The  fair value of customer relationships acquired in a business combination is determined using the excess earnings method over several periods, with the respective assets being valued after deduction of a real return on all other assets which jointly constitute the associated cash flows. The fair value of other intangible assets is based on the expected present value of the cash flow from the use and ultimate sale of the asset. ■■ Inventories The fair value of inventories acquired as part of a business combina- tion is determined on the basis of the estimated sale price in normal business operation, less the estimated costs of completion and the sale costs, plus a reasonable profit margin reflecting the completion and sale effort. ■■ Trade debtors and other receivables The fair value of trade debtors and other receivables, excluding projects in progress commissioned by third parties, is  estimated at the present value of the future cash flows, on the basis of the market interest rate applying on the reporting date. This fair value is deter- mined for information purposes or if the trade debtors and other receivables are acquired by means of a business combination. 27.5 Onerous contracts A provision is recognised in the balance sheet for onerous contracts if the benefits which the Group expects to obtain from a contract are lower than the unavoidable costs of fulfilling the liabilities under the contract. The provision is valued at the lower of the present value of the expected costs of terminating the contract and the present value of the expected net costs of continuing the contract. 28 LONG-TERM DEBTS When included for the first time, interest-bearing loans received are stated at fair value less directly attributable transaction costs. After first-time inclusion, interest-bearing loans are carried at amortised cost, with the difference between the cost and the redemption price being stated in the profit and loss account on the basis of the effec- tive interest method over the term of the loans. 29 TRADE CREDITORS Trade creditors and other payables are carried at amortised cost. 30 DETERMINATION OF FAIR VALUE A number of principles and the Group’s information provision require the determination of the fair value of both financial and non-financial assets and liabilities. For the purposes of valuation and information provision, the fair value is determined on the basis of the following methods. If applicable, further information on the principles for deter- mining the fair value is provided in the section of these notes applying specifically to the respective asset or the respective liability. ■■ Tangible fixed assets The fair value of tangible fixed assets included as a result of a busi- ness combination is the estimated amount for which an item of immovable property could be traded on the valuation date between a willing buyer and a willing seller in an arm’s length transaction after proper marketing in which the parties have each acted prudently and knowledgeably. The market value of other tangible fixed assets and inventories is based on the listed market prices of comparable assets and items where available, and  on replacement costs where appli- cable.
  • 122. 118 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Notes to the profit and loss account 31 OPERATING SEGMENTS The Group consists of three segments, as described below. The segments offer a range of products and services, are managed sepa- rately and use various technologies. The summary below describes the activities of the various segments of the Group: ■■ Advanced Textiles & Composites Manufacture and sale of protective and safety fabrics for profes- sional wear, outdoor fabrics, composites for personal and vehicle protection and composites for industrial applications and technolog- ical applications in aerospace. ■■ Geosynthetics & Grass Manufacture and sale of fabrics, non-wovens and grids for civil engi- neering, environmental projects, recreational and industrial applica- tions and manufacture and sale of synthetic turf fibres, systems and backing for a range of applications. ■■ Other Activities Manufacture and sale of rubber and foam rollers for the office equip- ment industry and related products, development, production and sale of inkjet technology and related components for industrial appli- cations, as well as country holding companies and service companies. Limited transactions take place between the segments. The prices for these transactions are determined on an objective business basis. There is no segment in which the Group depends on sales to a single customer for all its revenues. Analysis by geographic location The segments operate on four continents, namely Europe, North America, Australia and Asia. In the presentation of information based on geographic segments, the revenues of the segment are based on the geographic location of origin. The assets of the segments are based on the geographic location of the assets. The following page contains an overview of each of the reporting segments. The performance is determined on the basis of the oper- ating result, as stated in the internal management report to the CODM. The CODM is formed by the Executive Board.
  • 123. 119TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 31.1. Analysis by operating segment in millions of euros Advanced Textiles & Composites Geosynthetics & Grass Other activities Eliminations between segments Consolidated 2012 2013 2012 2013 2012* 2013 2012 2013 2012* 2013 EXTERNAL REVENUES 460.6 427.8 518.7 517.8 69.7 66.4 – – 1,049.0 1,012.0 Revenue from transactions between segments – – – – – – – – – – Depreciation and amortisation – 15.7 – 16.6 – 30.7 – 25.9 – 5.2 – 5.4 – – – 51.6 – 47.9 Operating income 18.5 15.0 25.1 23.6 – 8.0 – 3.0 – – 35.6 35.6 Financial income 1 0.3 0.5 Financial expenses 1 – 12.5 – 10.6 Profit tax – 8.2 – 8.5 Net result of associated companies – – – 0.3 0.1 – – – – – 0.3 0.1 ASSETS AND LIABILITIES Assets of segments 341.9 334.7 454.8 426.6 65.0 60.3 – – 861.7 821.6 Investments in associated companies – – 4.1 3.9 – – – – 4.1 3.9 Unallocated assets – – – – – – – – 60.1 45.0 Total assets 341.9 334.7 458.9 430.5 65.0 60.3 – – 925.9 870.5 Liabilities of segment 2 62.7 67.3 74.8 78.4 61.7 32.7 – – 199.2 178.4 Unallocated liabilities – – – – – – – – 271.4 218.8 Total liabilities 62.7 67.3 74.8 78.4 61.7 32.7 – – 470.6 397.2 Investment expenditure 9.4 7.8 5.3 4.9 1.9 1.7 16.6 14.4 1 2012: excluding € 0.1 million of consolidated exchange rate differences (2013: € 0). 2 Excluding intercompany loans. * Adjusted for accounting policy change pensions. 31.2 Analysis by geographic location Revenues by origin Non-current assets by origin* 2012 2013 2012 2013 Netherlands 209.4 221.0 59.0 54.3 Other Europe 192.0 189.5 97.3 106.0 North America 468.9 449.7 153.2 140.8 Asia / Australia / Middle East 178.7 151.8 160.7 138.7 Total 1,049.0 1,012.0 470.2 439.8 * Non-current assets exclude financial instruments and deferred profit tax assets
  • 124. 120 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the profit and loss account The pension costs amount to € 10.1 million. This figure includes € 5.1 million (2012: € 1.6 million) in respect of defined benefit schemes (see note 48.3) and an expense of €  5.0 million (2012: €  4.5 million) in respect of defined contribution schemes. The income in respect of defined benefit schemes includes non-recurring income of €  0.1 million (2012: € 3.3 million) (see note 48). The average number of employees (permanent and temporary) in the Group in 2013 was 4,735 (2012: 4,941). 34 GENERAL MANAGEMENT COSTS The general management costs include the following other operating expenses and income. Government subsidies amount to € 1.1 million (2012: € 1.7 million) and relate particularly to subsidised research and development projects. In 2013 the book profit on the sale of tangible assets amounts to € 0.2 million (2012: € 0). 35 NET FINANCIAL EXPENSES 2012 2013 Interest income 0.3 0.5 Foreign currency exchange rate differences 0.1 – Financial income 0.4 0.5 Interest expenses – 8.9 – 7.4 Realised change in fair value of derivatives for which hedge accounting is applied – 3.4 – 3.0 Ineffective portion of change in fair value of derivatives for which hedge accounting is applied – 0.1 – 0.1 Result of derivatives for which no hedge accounting is applied – 0.1 – 0.1 Financial expenses – 12.5 – 10.6 Net financial expenses – 12.1 – 10.1 32 ACQUISITIONS AND SALE OF PARTICIPATING INTERESTS 32.1 Acquisitions On 15 January 2013 the Group acquired full control of Amber Compos- ites Ltd of the United Kingdom (100% interest). Amber is a British manufacturer of thermoset composites for industry and the automo- tive market. The acquisition will allow an acceleration of activities in the European thermoset composites market. For reporting purposes, this acquisition has been included in the Advanced Textiles & Composites sector. The acquisitions are being accounted for in accordance with the acquisition method (IFRS 3). The acquisition amounts have been allo- cated to the identified acquired assets and liabilities, based on the fair value. The expected synergy effects for the Group result in an amount of € 6.9 million of goodwill paid for the acquisition. The acqui- sition has no material impact on the assets and liabilities. In 2013 an amount of € 22.2 million was paid in respect of acquisi- tions, including € 5.0 million relating to acquisitions in prior years. The effect of the acquisition on 2013 revenues amounts to € 10.7 million. The effect of the acquisition on the 2013 result after tax is -€  0.3 million. The revenues and net results would not differ materially if the acquisition had taken place on 1 January 2013. The Group incurred expenses of €  0.6 million in connection with the acquisitions, comprising particularly external legal expenses and due diligence costs. 32.2 Deconsolidation TenCate – Union Protective Fabrics Asia Ltd was deconsolidated in 2013 because the Group no longer has control over the company. The deconsolidation did not generate a result. The cash flow from investing activities amounts to € 4.2 million as a result of the decon- solidation of a bank debt. 33 PERSONNEL COSTS 2012 2013 Wages and salaries 154.9 151.5 Social charges 32.3 31.6 Costs of option scheme 2.0 1.6 Pension costs* 6.1 10.1 Temporary personnel 14.5 15.7 Other personnel costs 5.6 7.1 215.4 217.6 * Adjusted for accounting policy change pensions.
  • 125. 121TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 36 PROFIT TAX 2012* 2013 Profit tax payable Current financial year – 10.6 – 12.3 Recognition of previously unrecognised tax losses 0.1 0.7 Underprovision (overprovision) in previous years – 10.5 – 11.6 Deferred profit tax Origination and reversal of temporary differences – 0.5 2.7 Recognition of previously unrecognised tax losses 0.1 – Change in unrecognised temporary differences 2.7 0.1 Change in tax rates – 0.3 2.3 3.1 Total profit tax charge in profit and loss account – 8.2 – 8.5 * Adjusted for accounting policy change pensions. Reconciliation with applicable profit tax rate 2012* 2013 Result before profit tax 23.5 25.5 Tax on profit at average weighted local profit tax rate 31.1% 7.3 30.6% 7.8 Non-tax-deductible costs 5.5% 1.3 3.9% 1.0 Tax-exempt income / deductions – 14.5% – 3.4 – 11.4% – 2.9 Change in tax rates 0.0% – – 1.2% – 0.3 Losses in reporting year for which no deferred tax asset has been recognised 31.6% 7.4 14.1% 3.6 Change in tax losses from previous years for which no deferred tax asset has been recognised – 0.9% – 0.2 – 2.7% – 0.7 Change in unrecognised deferred tax assets in respect of temporary valuation differences – 11.5% – 2.7 – 0.4% – 0.1 Other differences – 6.4% – 1.5 0.4% 0.1 Tax charge in the profit and loss account 34.9% 8.2 33.3% 8.5 * Adjusted for accounting policy change pensions. The decrease in the weighted average tax rate from 31.1% to 30.6% was due in particular to changes in the various countries’ shares in the result before profit tax. In comparison with 2012, a smaller share of the result was generated in countries with a relatively higher tax rate in 2013. The decrease in the effective tax rate from 34.9% to 33.3% is due particularly to the decrease in losses in countries in which no full deferred tax assets are recognized.
  • 126. 122 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS 37 INTANGIBLE ASSETS Goodwill Development costs Other intangible assets Total Cost Balance as at 1 January 2012 214.5 13.3 99.5 327.3 Acquired through business combinations 4.6 – 3.6 8.2 Additions – 4.2 0.4 4.6 Exchange rate differences – 2.1 – 0.1 – 0.4 – 2.6 Balance as at 31 December 2012 217.0 17.4 103.1 337.5 Acquired through business combinations 6.9 – 10.6 17.5 Additions – 3.3 1.3 4.6 Exchange rate differences – 7.0 – 0.6 – 2.9 – 10.5 Balance as at 31 December 2013 216.9 20.1 112.1 349.1 Amortisation Balance as at 1 January 2012 2.5 3.0 48.8 54.3 Amortisation – 2.6 11.9 14.5 Exchange rate differences – – 0.1 – 0.6 – 0.7 Balance as at 31 December 2012 2.5 5.5 60.1 68.1 Amortisation – 2.1 11.0 13.1 Exchange rate differences – 0.2 – 0.1 – 2.0 – 2.3 Balance as at 31 December 2013 2.3 7.5 69.1 78.9 Carrying value Balance as at 1 January 2012 212.0 10.3 50.7 273.0 Balance as at 31 December 2012 214.5 11.9 43.0 269.4 Balance as at 31 December 2013 214.6 12.6 43.0 270.2 37.1 Amortisation/impairment The Group recognised no impairment losses on intangible assets in 2013 (2012: € 0). 37.2 Impairment testing for cash generating units which include goodwill The following units include goodwill items: 2012 2013 TenCate Grass 118.4 114.4 TenCate Advanced Armour 58.2 57.2 TenCate Advanced Composites 24.3 30.2 Xennia 9.4 9.2 Other activities 4.2 3.6 214.5 214.6 Notes to the consolidated balance sheet The Group tested the existing goodwill for impairment. The  CGU structure for the Composites & Armour businesses was revised in 2013 as a result of a reorganisation and a change to the reporting structure due to acquisitions in prior years. As  a result of these changes, the level at which goodwill is tested was brought into line with the units of TenCate Composites (worldwide) and TenCate Armour (worldwide). This change has no consequences for the result of the impairment test. The realisable value has been determined on the basis of the value in use. The value in use is based on the future cash flows over the forth- coming four years, based on historical empirical data, market expec- tations and strategic plans. No growth rate is applied in the perpetual cash flow for the period beyond four years. The value in use in 2013
  • 127. 123TenCate annual report 2013  |  FINANCIAL STATEMENTS  | pressure. It is expected that the gross margin will rise in the years ahead as a result of the expected purchasing advantages and contin- uing reductions in production costs. TenCate Advanced Armour The assumptions used for the discount rate and revenue growth are 9.3% and 43% respectively. In the case of a discount rate of 12.9% and revenue growth of 28%, the  realisable value is close to the carrying value. If the assumed gross margin growth deviates by less than 3%, the realisable value still exceeds the carrying value. The success of the development of the TenCate ABDS™ active blast countermeasure system is expected to make an important contribu- tion to the growth of the TenCate Advanced Armour unit. Whereas ABDS generated no revenues in 2013, strong growth is expected in the years ahead. If the TenCate ABDS™ active blast countermeasure system is excluded, the realisable value is close to the carrying value. An impor- tant assumption in this regard concerns the expected 14% revenue growth with an unchanged gross margin. Revenues in the defence market have decreased sharply in recent years. As  a result of a strengthening of the market position, TenCate expects to achieve growth in the armour market in the years ahead. Xennia Technology The assumptions used for the discount rate and revenue growth are 9.4% and 18% respectively. In the case of a discount rate of 12.0% and revenue growth of 16%, the  realisable value is close to the carrying value. If the assumed gross margin growth deviates by less than 3%, the realisable value still exceeds the carrying value. Revenue growth and growth in the gross margin rate are expected in the future at Xennia Technology as a result of the successful comple- tion of the review of the business portfolio initiated in 2013 under a new management team. A sharper focus is being applied to activities with high added value. Other units With regard to the other units it was concluded that an adjustment to one of these assumptions would not reasonably result in the carrying value exceeding the realisable value. has been determined in the same way as in 2012. On the basis of this test, no  goodwill impairment has been recognised. The  changes in 2013 related to acquisitions and exchange rate differences. Principal assumptions made in estimating the present value of cash flows The principal assumptions made in calculating the realisable value concern discount rates, revenue growth and gross margins. Discount rate The discount rate is a pre-tax measure based on the risk-free interest rate on government bonds, adjusted for the risk premium for both the higher risk of securities investments and the Group’s systemic risk. The pre-tax discount rates used range from 9.2% to 9.4% (2012: 9.1% to 9.3%). Revenue growth The expected revenue growth is expressed as the compound annual growth in the first four years of the schedules used to test impairment and is based on past experience, market expectations and strategic plans. Gross margin percentage The gross margin is the margin based on cost prices (in accordance with the inventory valuation principles) as a percentage of expected revenues. Sensitivity to changes in assumptions The sensitivity of the principal assumptions has been investigated and is particularly important with regard to the TenCate Grass, TenCate Advanced Armour and Xennia Technology units, because in the event of a relatively small change in the assumptions the carrying value of these units exceeds the realisable value. The realisable value exceeds the carrying value of these units by at least 15%. TenCate Grass The assumptions used for the discount rate and revenue growth are 9.4% and 3% respectively. In the case of a discount rate of 10.6% and revenue growth of 1%, the realisable value is close to the carrying value. If the assumed gross margin growth deviates by less than 3%, the realisable value still exceeds the carrying value. In the TenCate Grass unit there were higher raw material costs during the reporting year, as a result of which the gross margin came under
  • 128. 124 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated balance sheet 38 TANGIBLE FIXED ASSETS Land and buildings Plant and equipment Other operating assets Assets under construction Total Cost Balance as at 1 January 2012 143.2 453.6 51.2 2.1 650.1 Acquired through business combinations – 1.1 0.1 0.6 1.8 Additions 0.8 8.5 2.6 0.1 12.0 Disposals – 0.2 – 4.2 – 1.4 – – 5.8 Exchange rate differences – 0.7 – 2.5 – 0.1 – – 3.3 Balance as at 31 December 2012 143.1 455.7 52.4 2.8 654.0 Acquired through business combinations – 1.5 0.3 – 1.8 Additions 0.6 6.1 1.9 1.2 9.8 Disposals – 0.2 – 6.9 – 1.4 – – 8.5 Deconsolidation – 1.7 – 3.2 – 0.4 – – 5.3 Exchange rate differences – 3.4 – 9.4 – 1.3 – 0.1 – 14.2 Balance as at 31 December 2013 138.4 443.8 51.5 3.9 637.6 Depreciation Balance as at 1 January 2012 67.2 320.1 40.9 – 428.2 Depreciation 5.8 27.7 3.6 – 37.1 Disposals – 0.2 – 4.0 – 1.3 – – 5.5 Deconsolidation – – 0.1 – – – 0.1 Exchange rate differences – 0.4 – 1.9 – 0.1 – – 2.4 Balance as at 31 December 2012 72.4 341.8 43.1 – 457.3 Depreciation 5.9 25.6 3.3 – 34.8 Disposals – 0.2 – 6.5 – 1.2 – – 7.9 Deconsolidation – 0.5 – 2.9 – – 0.3 – 3.7 Exchange rate differences – 1.4 – 6.6 – 0.6 – – 8.6 Balance as at 31 December 2013 76.2 351.4 44.6 – 0.3 471.9 Carrying value Balance as at 1 January 2012 76.0 133.5 10.3 2.1 221.9 Balance as at 31 December 2012 70.7 113.9 9.3 2.8 196.7 Balance as at 31 December 2013 62.2 92.4 6.9 4.2 165.7 38.1 Impairment and reversal of impairment The Group recognised no impairment of tangible fixed assets in 2013 (2012: € 0). No impairment losses were reversed during the year. 38.2 Leased buildings, plant and equipment The Group leases buildings, plant and equipment under a number of financial leases. The net carrying value of these assets as at 31 December 2013 was € 5.5 million (31 December 2012: € 4.2 million). The leased buildings, plant and equipment serve as collateral for the financial lease liabili- ties (see note 47).
  • 129. 125TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 38.3 Collateral As at 31 December 2013 no plant and equipment (2012: € 7.1 million) were pledged as collateral. 39 INVESTMENTS IN ASSOCIATED COMPANIES AND FINANCIAL FIXED ASSETS 39.1 Associated companies The associated companies item at the end of 2013 relates to the 30% interest in the shares of Hellas Construction Inc and the 25% interest in the shares of Landscape Solutions B.V. The 49% interest in Green- Fields (AllSports) UK ltd was sold at carrying value in 2013. The share in the net income of associated companies amounted to € 0.1 million (2012: -€ 0.3 million). The Group has the option from December 2011 of increasing its interest in Hellas by 7% per year at an acquisition price dependent on the development of the EBITDA of Hellas. The Group received no dividend payments from associated companies in 2013 (2012: € 0). The associated companies have a carrying value of €  3.9 million as at 31 December 2013 (31 December 2012: €  4.1 million). Associated companies and joint ventures The summary financial data have not been adjusted in respect of the percentage owned by the Group and can be analysed as follows as at 31 December: 2012 2013 Non-current assets 26.9 24.6 Current assets 30.7 34.5 Total assets 57.6 59.1 Current liabilities 21.4 24.8 Non-current liabilities 8.9 3.9 Total liabilities 30.3 28.7 Revenues 111.0 113.3 Costs 112.3 113.0 Profit/(loss) – 1.3 0.3 The changes in the associated companies were as follows: 2012 2013 Balance as at 1 January 4.6 4.1 Divestment – – 0.1 Result – 0.3 0.1 Exchange rate differences – 0.2 – 0.2 Balance as at 31 December 4.1 3.9 39.2 Financial fixed assets The financial fixed assets comprise long-term receivables and invest- ments. The main long-term receivables and investments concern invested pension assets at a number of American subsidiaries of € 10.0 million (2012: € 9.6 million) and an advance payment in connection with long- term lease rights in China and Malaysia amounting to € 2.0 million (2012: € 2.1 million).
  • 130. 126 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated balance sheet 40 DEFERRED PROFIT TAX ASSETS AND LIABILITIES The deferred profit tax assets and liabilities recognised in the balance sheet are attributable to the following items: Assets Liabilities Net 2012 2013 2012 2013 2012 2013 Intangible assets – – – 7.9 – 10.6 – 7.9 – 10.6 Tangible fixed assets – – – 11.4 – 9.4 – 11.4 – 9.4 Financial fixed assets – 0.1 – – – 0.1 Inventories 6.6 7.3 – – 6.6 7.3 Derivatives 1.3 0.5 – – 1.3 0.5 Other receivables – 0.1 – 0.3 – – 0.3 0.1 Pension provisions 7.5 3.2 – – 7.5 3.2 Other provisions 9.8 9.3 – – 9.8 9.3 Tax value of recognised loss carry-forwards 13.1 12.3 – – 13.1 12.3 Other items 2.5 3.7 – – 2.5 3.7 Deferred profit tax assets/liabilities 40.8 36.5 – 19.6 – 20.0 21.2 16.5 Set-off of assets and liabilities – 10.8 – 12.5 10.8 12.5 – – Net deferred profit tax assets/liabilities 30.0 24.0 – 8.8 – 7.5 21.2 16.5 The changes in the temporary differences during the financial year can be analysed as follows: Balance as at 1 January 2012 Recognised in profit and loss Recognised in other comprehen- sive income Acquired through business combinations Balance as at 31 December 2012 Recognised in profit and loss Recognised in other comprehen- sive income Acquired through business combinations Balance as at 31 December 2013 Intangible assets – 9.1 2.5 – – 1.3 – 7.9 – 0.3 – – 2.4 – 10.6 Tangible fixed assets – 13.1 1.3 – 0.4 – 11.4 2.0 – – – 9.4 Financial fixed assets 0.1 – 0.1 – – – 0.1 – – 0.1 Inventories 5.6 0.8 – 0.2 6.6 0.7 – – 7.3 Derivatives 1.9 – 0.4 – 0.2 – 1.3 – – 0.8 – 0.5 Other receivables 0.7 – 1.0 – – – 0.3 0.4 – – 0.1 Pension provisions 2.2 – 1.1 6.4 – 7.5 0.3 – 4.6 – 3.2 Other provisions 9.6 – 0.1 – 0.3 9.8 – 0.5 – – 9.3 Tax value of recognised loss carry-forwards 12.9 0.2 – – 13.1 – 0.8 – – 12.3 Other items 2.3 0.2 – – 2.5 1.2 – – 3.7 Deferred profit tax assets/ liabilities 13.1 2.3 6.2 – 0.4 21.2 3.1 – 5.4 – 2.4 16.5 The tax effect of the other comprehensive income in Group equity is € 5.4 million (2012: € 6.2 million) and relates to the actuarial results in respect of pensions and the hedging reserve.
  • 131. 127TenCate annual report 2013  |  FINANCIAL STATEMENTS  | Trade and other receivables with a term of less than one year are stated at amortised cost less impairments. Transfers to provisions for doubtful debts are included in the profit and loss account under cost of sales. As at 31 December 2013 trade debtors with a value of € 6.5 million (2012: € 6.5 million) were encumbered as security for credit facilities amounting to € 6.5 million (2012: € 6.5 million). € 6.5 million of this credit facility was utilised as at the end of 2013 (2012: € 6.5 million). 43 OTHER RECEIVABLES 2012 2013 Amount receivable in respect of other taxes 4.3 3.8 Derivatives at fair value 0.3 1.1 Construction contracts 2.1 1.7 Other receivables and prepayments 9.2 11.7 15.9 18.3 Amounts receivable in respect of other taxes relate mainly to reclaim- able VAT. As at 31 December 2013 the prepayments amounted to € 5.8 million (2012: € 6.0 million). As at 31 December 2013 the total costs and recognised profit associ- ated with projects in progress, less recognised losses, amounted to €  16.3 million (2012: €  20.2 million). Trade debtors included no amounts deducted in respect of projects in progress commissioned by third parties (2012: € 0) 44 CASH AND CASH EQUIVALENTS 2012 2013 Bank balances 26.6 21.5 Cash balances 0.1 0.1 Cash and cash equivalents 26.7 21.6 Cash loans, overdrafts – 35.4 – 14.7 Cash in cash flow statement – 8.7 6.9 All amounts were freely available at the end of 2012 and 2013. The realisation of the deferred profit tax assets depends on the future taxable profit being higher than the profit from the reversal of taxable temporary differences. On the basis of a projection of the estimated taxable profit and the existing fiscal planning possibilities, it  is considered likely that sufficient taxable profit will be generated in future to realise these deferred profit tax assets. Deferred profit tax assets not recognised in the balance sheet As  at 31 December 2013 there were €  97.6 million (2012: €  89.4 million) of unused losses available for set-off. No deferred profit tax asset has been recognised in respect of this amount because it is currently unlikely that future taxable profit will be available to the Group for the losses to be set off. The amount of profit tax concerned as at 31 December 2013 is € 23.5 million (2012: € 22.2 million). The expiry periods of the unused losses available for set-off are shown in the table below: 2012 2013 Up to 5 years 17.5 19.3 After 5 years 27.7 30.9 Unspecified period 44.2 47.4 Unused losses available for set-off 89.4 97.6 41 INVENTORIES 2012 2013 Raw materials and manufacturing supplies 60.0 64.2 Semi-manufactures 50.3 47.6 Finished products 116.1 112.0 Inventories 226.4 223.8 In 2013 the reduction in the inventory value included as an expense amounted to a net recoverable amount of € 8.1 million (2012: € 12.6 million). The reversal of the reduction in the inventory value in 2013 amounted to € 1.3 million (2012: € 0.2 million). The inventory value included as an expense and the reversal have been stated under cost of sales. 42 TRADE DEBTORS 2012 2013 Due from third parties 136.2 125.1 Due from associated companies 3.2 3.1 Due from joint ventures 0.6 0.5 Trade debtors 140.0 128.7
  • 132. 128 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated balance sheet Repurchase of own shares The General Meeting of Shareholders has granted the Executive Board the power to acquire fully paid-up shares in the Company (or certificates thereof) for the period ending on 17 October 2014. The maximum number of shares which may thus be acquired is 10% of the issued capital at the time of acquisition of the shares (or certifi- cates thereof). 45.3 Share premium The share premium reserve is to be considered as paid-up capital. 45.4 Translation reserve The translation reserve comprises all exchange rate differences which arise due to the translation of amounts relating to activities outside the eurozone. These exchange rate differences are carried in equity. The  accumulation of the respective amount began on 1 January 2004 and is not available for distribution to shareholders. 45.5 Hedging reserve The hedging reserve consists of the unrealised effective portion of the accumulated change in the fair value of the derivatives to which hedge accounting is applied and which are used to hedge the interest rate risk. The reserve is not available for distribution to shareholders. A negative reserve reduces the amount freely available for distribu- tion from the reserves. The balance of the hedging reserve after tax on 31 December 2013 is –€ 1.6 million (2012: -€ 3.9 million). The change in the hedging reserve before tax amounts to € 3.1 million. € 3.0 million of this change has been realised and € 0.1 million is the ineffective portion of the fair value change to which hedge accounting is applied. 45.6 Other reserves and undistributed result Subsequent to the reporting date the following dividend has been proposed, which has not yet been included in the balance sheet. It is proposed to set the dividend in respect of 2013 at € 0.50 per € 2.50 par value share (2012: € 0.50), payable optionally in cash or as stock dividend. 2012 2013 € 0.50 per ordinary share (2012: € 0.50) 13.0 13.1 45 TOTAL SHAREHOLDERS’ EQUITY A statement of changes in equity can be found on page 108. 45.1 Ordinary shares Number x 1,000 2012 2013 In issue and fully paid as at 1 January 25,929 26,498 Issued stock dividend 569 294 Other – – 1 In issue and fully paid as at 31 December 26,498 26,791 The authorised share capital amounts to € 200 million, divided into 80 million ordinary shares of a par value of € 2.50. The issued capital as at 31 December 2013 amounts to 26,791,367 ordinary shares of a par value of € 2.50 (as at 31 December 2012: 26,497,666 ordinary shares of a par value of € 2.50). The holders of ordinary shares are entitled to dividend as approved periodically by the General Meeting of Shareholders. They are also entitled to cast one vote per share at meetings of the Company. Issue of shares and limitation of pre-emptive right The General Meeting of Shareholders has granted the Executive Board the power to issue shares and to exclude or restrict the pre-emptive right for the period ending on 17 October 2014. The power to issue shares concerns 10% of the issued share capital plus a further issue up to a maximum of 10% of the issued share capital in the event that the issue takes place in the context of a merger or acquisition. The same applies to the power of the Executive Board, with the approval of the Supervisory Board, to  restrict or exclude the pre-emptive right. 45.2 Repurchased ordinary shares Number x 1,000 2012 2013 In issue and fully paid as at 1 January 620 584 Own shares for conversion of physical securities 3 – Exercise of options – 39 – 66 In issue and fully paid as at 31 December 584 518 Ordinary shares are repurchased to prevent earnings per share being diluted by the granting of options. No own shares were repurchased in 2012 and 2013.
  • 133. 129TenCate annual report 2013  |  FINANCIAL STATEMENTS  | Weighted average number of ordinary shares number x 1,000 2012 2013 Ordinary shares in issue on 1 January 25,929 26,498 Effect of ordinary shares held (including repurchased shares) – 620 – 584 Effect of shares issued in connection with stock dividend 569 294 Effect of shares issued as result of exercised option rights 17 17 Weighted average number of ordinary shares as at 31 December 25,895 26,225 46.2 Diluted earnings per share The calculation of the diluted earnings per share as at 31 December 2013 is based on the net income of € 19.0 million (2012: € 20.9 million) attributable to holders of ordinary shares and the weighted average number of outstanding ordinary shares during the 2013 financial year of 26,366,474 (2012: 26,040,448), calculated as follows: 2012 2013 Net profit for financial year attributable to holders of ordinary shares 20.9 19.0 Weighted average number of ordinary shares number x 1,000 2012 2013 Weighted average number of ordinary shares as at 31 December 25,895 26,225 Effect of outstanding option rights 145 141 Weighted average number of ordinary shares (after dilution) as at 31 December 26,040 26,366 47 LONG-TERM DEBTS 2012 2013 Syndicated loan 215.0 190.3 Financial lease liabilities 2.2 2.1 Other loans 4.0 3.7 Total 221.2 196.1 Less: repayment of loans in forthcoming years – 0.9 – 1.0 220.3 195.1 45.7 Objective with regard to equity and financing The objective with regard to equity and financing, as in 2012, is to guarantee the continuity of the Company by means of attractive returns for shareholders and by guaranteeing benefits for other stake- holders. The  capital structure is adjusted if necessary in line with economic developments and risks relating to assets. With regard to financing, the longer-term objective is a ratio of net debt to EBITDA of a maximum of 2.5. The calculation as at 31 December is as follows: 2012 2013 Long-term debts 220.3 195.1 Short-term portion of long-term debts 0.9 1.0 Cash loans, overdrafts 35.4 14.7 Total debt 256.6 210.8 Less: cash and cash equivalents 26.7 21.6 Net debt 229.9 189.2 EBITDA* 90.3 83.5 Net debt / EBITDA 2.55 2.27 * EBITDA in accordance with agreements with banks adjusted to take account of the effect of acquired and divested businesses, non-recurring items and some compo- nents of the net financial expenses, such as currency translation differences: effect in 2013 € 0 (2012: +€ 1.2 million). 46 EARNINGS PER SHARE 46.1 Ordinary earnings per share The calculation of the ordinary earnings per share as at 31 December 2013 is based on the net income of € 19.0 million (2012: € 20.9 million) attributable to holders of ordinary shares and a weighted average number of outstanding ordinary shares during the 2013 financial year of 26,224,821 (2012: 25,895,322), calculated as follows: 2012 2013 Net profit for financial year attributable to holders of ordinary shares 20.9 19.0
  • 134. 130 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated balance sheet The aforementioned syndicated loan is subject to a number of cove- nants, the principal of which are: ■■ total net debt/EBITDA less than 3.25 at the end of the first quarter of each year, less than 3.50 at the end of the second quarter of each year and less than 3.00 at the end of the third and fourth quarters of each year, with the once-only possibility of an increase of 0.25 for two successive quarters following an acquisition, but no higher than 3.50; ■■ EBITDA/net interest greater than 4; ■■ joint guarantee of subsidiaries with total assets of at least 60% of the Group total. The Group was meeting these covenants as at the reporting date. In the event of a change of control of the Company, the syndicated loan is immediately repayable if a two-thirds majority of the lenders so require. The financial lease liability relates to a building in Hungary and machinery in the United Kingdom. The USD loan with variable interest concerns a $4.0 million loan (2012: $4.0 million) from the Development Authority of Pike County Industrial Revenue Bonds. Repayment is due in full in 2018. Details of the hedging of the interest rate risk borne by the Group can be found in note 50.4. 2012 Total 2013 Total 2014 < 1 year 2015 1-2 years 2016/18 2-5 years 2019ff > 5 years Syndicated loan EUR variable interest 48.6 41.3 41.3 USD variable interest 166.4 149.0 149.0 Financial lease liabilities EUR fixed interest 8.0% 0.1 – EUR variable interest 2.0 1.5 0.5 0.5 0.5 GBP variable interest 0.1 – GBP fixed interest 5.4% - 7.6% – 0.6 0.2 0.2 0.2 Other loans USD variable interest 3.0 2.9 2.9 EUR interest-free 1.0 0.8 0.3 0.3 0.2 221.2 196.1 1.0 191.3 3.8 – The original syndicated loan amounted to €  450.0 million. It  was reduced to €  400.0 million in 2013 at the Group’s request. €  190.3 million of this facility was drawn as at 31 December 2013 (2012: €  215.0 million). The  loan is due to mature on 8 December 2015. Repayment is due in full on the maturity date. The loan is valued at amortised cost in accordance with the effective interest method. The interest rate payable is linked to the net debt/EBITDA ratio, which is calculated quarterly in respect of the preceding 12 months. The  EBITDA for acquired and divested businesses is annualised. In  accordance with the agreements entered into with the banks, the EBITDA is also adjusted to take account of non-recurring items and a number of components of the net financial expenses, such as currency translation differences. The interest margin above Euribor or Libor will be between 0.70% and 1.50%. A utilisation fee of 0.20% is payable if more than 50% of the facility is drawn. At the end of 2013 the interest margin was 1.20% (2012: 1.20%).
  • 135. 131TenCate annual report 2013  |  FINANCIAL STATEMENTS  | At the end of 2013 the bonds amounting to € 114.1 million comprised government bonds with a direct market listing. The other investments predominantly have derived market listings. 48.3 Charge stated in the profit and loss account 2012* 2013 Service costs – 4.3 – 4.1 Interest on liabilities – 14.2 – 12.5 Expected return on plan assets 13.6 11.4 Income from change to pension scheme 3.3 0.1 Pension (expenses)/income – 1.6 – 5.1 * Adjusted for accounting policy change pensions. The actual return on fund investments amounts to €  19.7 million (2012: € 26.4 million). Netherlands The defined benefit pension scheme concerns in particular the pension rights of the Dutch employees which have been placed with Stichting Pensioenfonds Koninklijke Ten Cate. In 2012 a change in the pension scheme was agreed whereby the accrual percentage was reduced from 2.1% to 1.79%. As  a result of the reduction in the accrual percentage, income of € 3.3 million has been recognised as a credit to the result for 2012. The main features of the scheme are: ■■ pension accrual based on average salary; ■■ accrual rate of 1.79%; ■■ conditional indexation, the target level being equivalent to 90% of wage growth for active members (employees) and 90% of price growth for inactive members (pensioners and members with paid-up entitlements); ■■ the employer contribution is increased by 50% if the cover ratio falls below 110%. The board of the pension fund has specified a 2.6% reduction in pension rights with effect from 1 April 2014 (2.3% from 1 April 2013). On the basis of the cover ratio as at 31 December 2013, no additional reduction is expected in 2015. As the expected reductions are taken into account in the indexation assumption, the  effects have been stated in Group equity through actuarial gains and losses. 48 PENSION LIABILITIES 2012 2013 Defined-benefit pension schemes Present value of defined benefit obligations 370.2 363.4 Fair value of plan assets 340.6 353.6 29.6 9.8 Asset ceiling 0.2 0.3 Present value of net liabilities of defined-benefit pension schemes 29.8 10.1 Other liabilities in respect of pensions 12.5 14.0 42.3 24.1 48.1 Changes in the valuation of the liability as at the reporting date 2012 2013 Balance as at 1 January 332.5 370.2 Service costs 4.3 4.1 Members' contributions 2.9 2.9 Interest costs 14.2 12.5 Benefits paid – 16.1 – 16.1 Income from change to pension scheme – 3.3 – 0.1 Actuarial differences 35.7 – 10.1 Balance as at 31 December 370.2 363.4 48.2 Investments 2012* 2013 Balance as at 1 January 321.0 340.6 Expected return 13.6 11.4 Employers' contributions 6.4 6.2 Members' contributions 2.9 2.9 Actuarial differences 12.8 8.3 Benefits paid – 16.1 – 15.8 Balance as at 31 December 340.6 353.6 * Adjusted for accounting policy change pensions. Analysis of plan assets as at 31 December 2012 2013 Bonds 176.9 167.5 Securities 119.2 138.0 Commodities 13.0 11.2 Real estate 24.1 21.7 Cash 0.8 8.3 Other assets 6.6 6.9 Plan assets 340.6 353.6
  • 136. 132 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the consolidated balance sheet Agreements have been entered into with the pension fund in respect of the contribution payable. The contribution percentage varies within an agreed range, depending on the pension fund’s cover ratio. The current agreements cover the period up to 31 December 2014. Other liabilities The other liabilities in respect of pensions relate to defined contri­ bution schemes and a number of specific old-age provisions. The prin- cipal defined contribution scheme is a 401K (savings) scheme in the United States. 48.4 Principles for defined benefit schemes The main actuarial assumptions as at the reporting date (in weighted averages) are as follows: 2012 2013 Discount rate as at 31 December 3.4% 3.5% Expected return on plan assets as at 31 December 3.4% 3.5% Future wage increases 2.5% 2.5% Future pension increases of inactive participants 0.6% 0.8% Assumptions with regard to future mortality figures are based on published statistical data and mortality probabilities. The  mortality tables used are the 2012-2062 forecast table of the Netherlands Actuarial Association with a correction factor dependent on age and gender. For  the valuation of partner’s pensions the age difference between men and women has been set at three years. The  total expected long-term return on the investments is 3.5% (2012: 3.4%). A 0.1% change in the discount rate would result in a change of approximately €  0.4 million in the annual expenses (2012: €  0.3 million). A 0.1% change in the discount rate would cause the liability to rise or fall by approximately € 6.0 million (2012: € 6.0 million). Historical information 2009 2010 2011 2012* 2013 Present value of defined benefit obligations 295.7 295.8 332.5 370.2 363.4 Fair value of plan assets 298.5 316.7 321.0 340.6 353.6 Present value of net liabilities – 2.8 – 20.9 11.5 29.6 9.8 Experience adjustments arising on obligations of the scheme 4.4 9.4 5.3 – 8.9 8.5 Experience adjustments arising on plan assets 11.8 8.1 – 6.0 12.8 8.3 * Adjusted for changes in pension system.
  • 137. 133TenCate annual report 2013  |  FINANCIAL STATEMENTS  | The Group expects to contribute € 6.3 million of employer’s contribu- tions to defined benefit pension schemes in 2014 (2013: € 6.3 million). The pension expense in respect of 2014 is estimated at € 5.0 million (2013: € 5.3 million). 49 PROVISIONS Guarantee / claims Reorgani­ sation provision Other personnel liabilities Environ­ mental Others Total Balance as at 1 January 2013 5.3 0.5 5.6 2.0 0.8 14.2 Provisions made during the year 5.3 0.7 0.6 – – 6.6 Released to result – 1.2 – – 0.1 – – 0.4 – 1.7 Expenditure in current year – 3.1 – 0.9 – 0.6 – – – 4.6 Exchange rate differences – 0.2 – – – – – 0.2 Balance as at 31 December 2013 6.1 0.3 5.5 2.0 0.4 14.3 Of which short-term as at 31-12-2012 1.6 0.4 0.3 – 0.5 2.8 as at 31-12-2013 3.9 0.2 0.3 – – 4.4 The amount released to the result has been included in the profit and loss account as follows: 2012 2013 Cost of sales 2.6 0.2 General management costs 3.3 1.5 Total 5.9 1.7 The guarantee provision relates to goods and services supplied and the provision for claims relates to claims for damages and possible legal costs. The release of € 1.7 million relates mainly to the lower- than-expected figure for guarantee claims. The provision for reorganisations relates to a number of reorganisa- tions which were nearly all completed during the financial year. The provision for other personnel liabilities has been formed for long-service awards and other benefits, such as anniversaries. The environmental provision has been formed for expected costs of decontamination of industrial sites, on the basis of functional decon- tamination (maintenance of business use).
  • 138. 134 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Other information 50 FINANCIAL INSTRUMENTS As part of its normal business operations, the Group incurs liquidity, credit, interest and currency risks. The risk of fluctuations, mainly in exchange rates and interest rates, is hedged using derivatives. 50.1 Fair value versus carrying value The fair value and carrying value of financial assets and liabilities stated in the balance sheet are as follows: 2012 2013 Carrying value Fair value Carrying value Fair value Assets carried at fair value Interest rate derivatives for which hedge accounting is used – – 0.1 0.1 Long-term receivables and investments 9.6 9.6 12.9 12.9 Other interest rate derivatives – – 0.1 0.1 Currency derivatives 0.3 0.3 0.9 0.9 9.9 9.9 14.0 14.0 Assets carried at amortised cost Trade debtors and other receivables 156.8 156.8 145.5 145.5 Cash and cash equivalents 26.7 26.7 21.6 21.6 183.5 183.5 167.1 167.1 Liabilities carried at fair value Interest rate swaps for which hedge accounting is used 5.2 5.2 2.1 2.1 Other interest rate derivatives 0.6 0.6 0.4 0.4 Currency derivatives 1.0 1.0 0.5 0.5 6.8 6.8 3.0 3.0 Liabilities carried at amortised cost Syndicated loan 215.0 215.0 190.3 190.3 Financial lease liabilities 2.2 2.2 2.1 2.1 Other loans 4.0 4.0 3.7 3.7 Trade creditors and other payables 135.6 135.6 136.2 136.2 Cash loans and overdrafts 35.4 35.4 14.7 14.7 392.2 392.2 347.0 347.0
  • 139. 135TenCate annual report 2013  |  FINANCIAL STATEMENTS  | The fair value of interest rate caps is divided into intrinsic value and time value. The intrinsic value is calculated by discounting the differ- ence between the contractual and the current interest, multiplied by the principal amount of the interest rate caps, for the residual term at the market interest rate. The time value of the caps is calculated on the basis of the Black & Scholes option valuation model with the intrinsic value requiring adjustment on the basis of the result. The result is periodically checked against bank statements. The fair value of long-term debts is calculated on the basis of the present value of expected future cash flows from repayments and interest payments. The fair value of financial lease liabilities is estimated on the basis of the present value of future cash flows, discounted at the interest rate for similar lease agreements. In the case of trade debtors, other receivables, trade creditors and other short-term debts due within one year, the  nominal value is deemed to reflect the fair value. The fair value of the syndicated loan is the same as the carrying value, because it has a variable interest rate and a margin consistent with market conditions. The changes in the value of the above assets and liabilities carried at fair value are stated in the profit and loss account under net financial expenses if no hedge accounting is applied. The financial instruments valued on the basis of fair value, and the fair value determination in the above table of financial instru- ments valued at amortised cost, fall into category 2 as in 2012: no quoted market price in an active market, with the fair value being determined indirectly. Details are given below of the main methods and assumptions used in estimating the fair value of financial instruments. The fair value of foreign exchange forward contracts with an under- lying value below € 5.0 million is based on statements supplied by the bank; in the case of higher amounts the Group’s own calculation model is used. In this model the difference between the contractual and the current forward rate is multiplied by the principal amount of the contract and discounted at the market interest rate. The fair value of options is determined on the basis of statements supplied by banks or on the basis of the Black & Scholes option valua- tion model. The fair value of interest rate swaps is calculated by discounting the difference between the contractual and the current interest, multi- plied by the principal amount of the interest rate swap, for  the residual term at the market interest rate. The  result is periodically checked against bank statements.
  • 140. 136 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Other information 50.2 Liquidity risk The liquidity risk is the risk of the Group being unable to meet its liabilities when they fall due. The  Group’s policy on control of the liquidity risk is to guarantee to the best of its ability that sufficient liquidities are available to meet its liabilities on time, in both normal and exceptional situations. The original syndicated loan amounted to €  450.0 million. It  was reduced to €  400.0 million at the Group’s request in 2013. € 209.0 million of this facility was unutilised as at 31 December 2013 (2012: € 233.6 million). The Group’s policy is to refi- nance on time. The term of the financial liabilities as at 31  December 2012 is as follows: Carrying value Expected cash flow (including interest) 2013 < 1 year 2014 1-2 years 2015/17 2-5 years 2018 and later > 5 years Financial liabilities (excluding derivatives) Total long-term debts 221.2 – 233.2 – 4.1 – 4.5 – 221.6 – 3.0 Cash loans, overdrafts 35.4 – 35.4 – 35.4 – – – Trade creditors and other payables 135.6 – 135.6 – 135.6 – – – Derivatives Interest rate swaps 5.8 – 5.8 – 3.2 – 1.9 – 0.7 – FX forward contracts 1.0 – 1.0 – 1.0 – – – Total 399.0 – 411.0 – 179.3 – 6.4 – 222.3 – 3.0 The term of the financial liabilities as at 31  December 2013 is as follows: Carrying value Expected cash flow (including interest) 2014 < 1 year 2015 1-2 years 2016/18 2-5 years 2019 and later > 5 years Financial liabilities (excluding derivatives) Total long-term debts 196.1 – 203.3 – 4.0 – 195.3 – 4.0 – Cash loans, overdrafts 14.7 – 14.7 – 14.7 – – – Trade creditors and other payables 136.2 – 136.2 – 136.2 – – – Derivatives Interest rate swaps 2.5 – 2.5 – 2.0 – 0.3 – 0.2 – FX forward contracts 0.5 – 0.5 – 0.5 – – – Total 350.0 – 357.2 – 157.4 – 195.6 – 4.2 –
  • 141. 137TenCate annual report 2013  |  FINANCIAL STATEMENTS  | The age of the trade debtors and the related impairments is as follows: 2012 2013 Gross Provision Gross Provision Not due – 60 days overdue 130.5 0.4 121.3 0.6 60 – 120 days overdue 6.3 0.1 5.7 0.4 120 – 360 days overdue 4.5 1.5 2.6 0.7 Over 360 days overdue 5.1 4.4 6.6 5.8 Balance as at 31 December 146.4 6.4 136.2 7.5 The movements in the provision for trade debtors are as follows: 2012 2013 Balance as at 1 January 7.0 6.4 Charged to profit and loss account 1.4 2.6 Released to result – 0.9 – 0.6 Written off during the year – 1.1 – 0.7 Exchange rate differences – – 0.2 Balance as at 31 December 6.4 7.5 The Group believes that, with the exception of the foregoing, no provision for impairment is required in respect of trade receivables which are not yet due or which are up to 60 days overdue. 50.3 Credit risk Credit risk is the risk of a financial loss for the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risks result in particular from trade debtors and, to a more limited extent, investments in securities and derivatives. The Group’s exposure to credit risk is mainly determined by the specific characteristics of the individual customers. Credit risk is limited by internal research into the creditworthiness of new and existing customers based on sources such as external reports, annual reports and payment history or by insuring the credit risk. The  internal credit limits specified on the basis of internal research are reviewed at least once a year. Customers for which no credit limit has been issued (internally or by the insurer) can only do business with the Group on the basis of guar- anteed payment. Goods are subject to reservation of ownership. In  the event of non-payment, the Group in most cases has a preferential claim to the extent that the goods have not been processed and are still present. The Group does not demand collateral for trade and other receivables. Impairments are stated in the profit and loss account as cost of sales. The Group has no particular concentration risks in respect of trade debtors. The carrying value of the financial assets reflects the maximum exposure to credit risk. The maximum exposure is as follows: 2012 2013 Trade debtors 140.0 128.7 Other (long-term) receivables 26.4 29.7 Cash and cash equivalents 26.7 21.6 FX forward contracts and options 0.3 0.9 Interest rate caps – 0.2 Total 193.4 181.1
  • 142. 138 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Other information 50.4 Interest rate risk 99% of the interest-bearing debts have a variable interest rate (2012: 100%). The risk of a rise in interest rates is in principle hedged 90% for the subsequent year and 75%, 50% and 25% respectively for the years thereafter. Both interest rate swaps and caps are used for this purpose. The impact of changes in the value of these derivatives on the Group’s result is limited as far as possible by the use of hedge accounting. The conditions applying to the interest-bearing debt are set out in note 47. At the end of 2013 the outstanding interest rate instruments are as follows: Instrument Maturity Principal Interest rate conditions Interest rate swap 02-01-18 $ 4 million received variable, payment 4.47% fixed Interest rate swap 31-12-14 € 30 million received variable, payment 2.81% fixed Interest rate swap 31-12-14 $ 45 million received variable, payment 2.60% fixed Interest rate swap 31-12-15 $ 60 million received variable, payment 1.19% fixed Interest rate cap 31-12-16 € 50 million exercise price 3% Interest rate cap 31-12-16 $ 50 million exercise price 3% The Group values the interest rate derivatives at fair value (see section 50.1). Of the fair value of the interest rate derivatives as at 31 December 2013, € 2.5 million has been included in trade creditors and other payables and € 0.2 million in Other receivables (2012: € 5.8 million in trade creditors and other payables). The table below shows the periods in which the cash flows relating to interest rate derivatives that are the subject of cash flow hedge accounting are expected to take place and in which they will affect the result. 2012 Carrying value Expected cash flow < 1 year 1-2 years 2-5 years Interest rate swaps Assets – – – – – Liabilities 5.2 – 5.2 – 3.1 – 1.8 – 0.3 2013 Carrying value Expected cash flow < 1 year 1-2 years 2-5 years Interest rate swaps Assets – – – – – Liabilities 2.1 – 2.1 – 1.9 – 0.2 – Interest rate caps Assets 0.1 – – – –
  • 143. 139TenCate annual report 2013  |  FINANCIAL STATEMENTS  | Competition risk The Group hedges the estimated currency risk of the expected purchases and sales for at least the forthcoming six months as far as possible. The  competition risk is offset where possible against the translation risk on the results of subsidiaries outside the eurozone. Any remaining risks are hedged using currency options. Translation risk The translation risk on the result of subsidiaries outside the eurozone is offset internally where possible against euro-denominated reve- nues of subsidiaries outside the eurozone, as  well as purchases in USD by subsidiaries in the eurozone. 50.5 Currency risk The Group incurs currency risks on sales and purchases denominated in currencies other than the functional currency of the respective subsidiary. The  currencies in which risk is incurred are mainly the euro, the US dollar and the British pound. Transaction risk The Group hedges orders, trade receivables and payables denomi- nated in foreign currencies, to the extent that these may have a mate- rial effect on the result. It uses foreign exchange forward contracts and currency options for this purpose. The forward contracts have a term of less than one year after the reporting date. If necessary they are extended. The forward contracts are carried at fair value. The principal amounts of the loans drawn in foreign currencies are used as far as possible to hedge intercompany loans in foreign curren- cies to subsidiaries which report in the respective currency. Remaining currency risks on loans to subsidiaries are hedged using foreign exchange forward contracts.
  • 144. 140 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Other information 50.6 Sensitivity analyses In  managing interest rate and currency risks, the  Group’s aim is to limit the effect of short-term fluctuations on the Group result. In the longer term, however, sustained changes in exchange rates and interest rates will have an effect on the consolidated result. The effect of a general interest rate rise of one percentage point on the pre-tax result in 2013 is estimated at -€ 1.0 million (2012: -€ 0.6 million). The effect of a general interest rate rise of one percentage point on equity is estimated at +€ 1.2 million before tax (2012: € 2.8 million) due to the use of hedge accounting. The effect of a general rise of one per cent in the value of the euro against other currencies on the result after profit tax in 2013 is € 0 (2012: € 0). The effect of a general rise of one per cent in the value of the euro against other currencies on equity at the end of 2013 is esti- mated at € 2.8 million (2012: € 3.1 million). Exposure The exposure to currency risks in respect of trading transactions of Group entities on the reporting date is as follows: 2012 2013 USD GBP EUR USD GBP EUR Transaction risk 1.9 1.8 2.7 6.7 0.8 1.1 Competition risk 3.4 2.2 20.6 – 5.1 2.0 29.7 Risk before hedging 5.3 4.0 23.3 1.6 2.8 30.8 Forward contracts 3.3 – 1.1 – 2.2 – 3.4 – 0.8 – 0.9 Option contracts 3.8 – 2.1 – 19.7 10.2 – 1.5 – 28.8 Risk after hedging 12.4 0.8 1.4 8.4 0.5 1.1 The foreign currencies have been converted into euros at the closing rate. The USD risk relates mainly to the expected revenues in USD of Asian subsidiaries and expected purchases and revenues in USD of Euro- pean subsidiaries. Due to financial market restrictions, the risk relating to Asian subsidi- aries is not hedged. The GBP risk relates mainly to trade receivables and expected reve- nues of European subsidiaries. The EUR risk relates mainly to trade receivables and expected reve- nues in euros of Ten Cate Thiolon Middle East. The Group carries options and foreign exchange forward contracts at fair value. The fair value of the options used to hedge future transac- tions as at 31 December 2013 is € 0 (2012: € 0.1 million). This amount has been included in other receivables. The  net fair value of the foreign exchange forward contracts is €  0.4 million (2012: -€  0.8 million). € 0.9 million of this amount has been included in other receiv- ables and € 0.5 million in other liabilities (2012: € 0.2 and € 1.0 million respectively).
  • 145. 141TenCate annual report 2013  |  FINANCIAL STATEMENTS  | In 2013 the Group included expenses of € 9.0 million in the profit and loss account in respect of operating leases (2012: € 8.8 million). 52 INVESTMENT LIABILITIES In 2013 the Group entered into contractual liabilities for the purchase of tangible fixed assets. The  amount of the liabilities as at 31  December 2013, after deduction of advance payments already made during the financial year, is € 2.0 million (2012: € 0.6 million). 50.7 ISDA master agreements The Group has entered into derivatives on the basis of International Swaps and Derivatives Association (ISDA) master agreements. Under these agreements, for  each derivative and each currency, the  net amount payable by a party to the counterparty on a particular date is settled. In certain circumstances, such as bankruptcy, all transactions under the master agreement are cancelled and the net value of all transactions is settled in a single amount. The ISDA master agreements do not fulfil the criteria for the netting of balance sheet positions, because the Group currently has no legally enforceable right to set off the outstanding amounts. The netting of the derivatives on the basis of ISDA master agreements is as follows: 2012 2013 Gross Set-off Net Gross Set-off Net Financial assets Interest rate caps – – – 0.2 – 0.2 Interest rate swaps – – – – – – Currency options 0.1 – 0.1 – – – FX forward contracts 0.2 – 0.2 – 0.9 – 0.3 0.6 0.3 – 0.2 0.1 1.1 – 0.3 0.8 Financial liabilities Interest rate swaps 5.8 – 5.8 2.5 – 2.5 FX forward contracts 1.0 – 0.2 0.8 0.5 – 0.3 0.2 6.8 – 0.2 6.6 3.0 – 0.3 2.7 51 LIABILITIES NOT SHOWN IN THE BALANCE SHEET Operating lease as lessee The expected cash flows under non-cancellable operating leases are as follows: 2012 2013 Less than one year 7.4 7.6 Between one and five years 17.7 20.0 More than five years 25.4 21.5 Net result 50.5 49.1 The Group leases buildings, plant, vehicles and office equipment under operating leases. The leased buildings have a term of ten to fifteen years. Lease payments are indexed annually. None of the leases include conditional lease payments. In  principle the Group does not act as a lessor. The term of the other leases is a maximum of five years.
  • 146. 142 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Other information 54.2 Directors’ remuneration The remuneration of the members of the Executive Board is as follows: in thousands of euros L. de Vries B. Cornelese1 2012 2013 2012 2013 Periodic remuneration 675 675 360 240 Results-related pay in respect of previous year 337 – 92 – Pension costs 221 226 105 56 Option costs 455 424 80 – 1,688 1,325 637 296 1 Up to 31 August 2013. The fixed remuneration paid to Mr De Vries is the same as in 2012. Mr  De Vries has a final-salary pension plan. Mr  De Vries’ results-­ related pay amounts to a maximum of 50% of the fixed salary. Mr De Vries received no variable salary component in 2013 in respect of 2012. The variable component paid to Mr Cornelese is a maximum of 40% of the fixed salary. Mr Cornelese received no variable salary component in 2013 in respect of 2012. As at 31  December 2013 Mr  De Vries held 208,726 shares in the Company (31  December 2012: 203,160 shares) and 480,000 options (31  December 2012: 420,000 options). In  2013 Mr  De Vries was granted 60,000 options (2012: 60,000) with an exercise price of € 17.73. In 2013 Mr Cornelese was granted 40,000 options (2012: 30,000) with an exercise price of € 17.73. These options lapsed in 2013 as a result of Mr Cornelese’s departure from the company. On 2013 salaries above € 150,000, a once-only crisis levy (employer’s charge) of 16% is payable to the Dutch Government. The crisis levy for the executive directors amounts to €  98,000 (2012: €  185,000), comprising € 84,000 (2012: € 139,000) for the CEO and € 14,000 (2012: €  46,000) for the former CFO. The  CEO was also provided with compensation of €  1.2 million in 2012 to resolve a legal dispute caused by the company in 1995. The total amount in 2013 for the CEO is € 1.4 million (2012: € 3.1 million) and for the former CFO € 0.3 million (2012: € 0.7 million). 53 CONTINGENT LIABILITIES The Group has received claims for damages arising from the conduct of business. With the exception of those stated below, the claims are not deemed to be substantial and provisions have been recognised to the extent necessary. A claim for damages has been made against Royal Ten Cate by United Fabrics NV, a company registered in the Netherlands Antilles (majority shareholder in Textielgroep Twenthe NV). The claim is based on an outsourcing and management agreement from 1998 and origi- nally amounted to € 56 million. The claim in respect of the outsourcing agreement has lapsed permanently as a result of a judgement by the Supreme Court in 2006. The plaintiff was ordered to demonstrate the damage suffered in respect of the management agreement. TenCate is confident with regard to the remainder of the proceedings. In the spring of 2011, FieldTurf Tarkett (“FieldTurf”) instituted legal proceedings against TenCate. These concerned alleged deficiencies in products mostly supplied to FieldTurf by Mattex Leisure Industries in Dubai, several years before TenCate acquired part of the assets and businesses of Mattex at the beginning of 2007. TenCate denies the existence of any legal basis for this claim and therefore rejects it. TenCate is confident with regard to the outcome of the legal proceed- ings and expects no material financial damage. 54 RELATED PARTIES 54.1 Identity of related parties The Group’s related parties are its subsidiaries, associated compa- nies and other participating interests, joint ventures, Stichting Pensioenfonds Koninklijke Ten Cate and the members of the Executive and Supervisory Boards.
  • 147. 143TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 55 ESTIMATES AND JUDGMENTS MADE BY THE MANAGEMENT The Executive Board has conducted discussions with the Financial Committee of the Supervisory Board on the critical principles for financial reporting and estimates, as well as the application of such principles and estimates. Information on assumptions and uncertain- ties regarding estimates which entail a substantial risk of a material adjustment in the subsequent financial year is included in the following notes: ■■ With regard to the pensions, the main actuarial assumptions are stated in note 48. ■■ With regard to guarantees and claims, provisions have been formed whenever there is an actual liability or it is likely that an outflow of funds will be necessary. The result of this is stated in note 49. ■■ With regard to impairments, an  examination has been carried out to determine whether the realisable value of any cash gener- ating unit is lower than the carrying value. This is not the case in 2013 and 2012. Future detrimental changes in the estimate as a result of changed assumptions may lead to the realisable value being lower than the carrying value. See note 37.2. ■■ Estimates with regard to the use of tax losses are included in note 40. Mr De  Vries is participating in the Group’s share option plan. The  costs of the options are charged to the result in three years. Further information can be found in note 65. The remuneration of the members of the Supervisory Board is as follows: in thousands of euros 2012 2013 J.C.M. Hovers – Chairman 1, 2 50 50 P.P.A.I. Deiters – Vice-Chairman 2 35 35 F.A. van Vught 3 9 – E. ten Cate 1* 35 35 R. van Gelder 1, 4 33 8 P.F. Hartman 2*, 5 – 18 162 146 1 Member of the Financial Committee. 2 Member of the combined Remuneration, Selection and Appointments Committee. 3 2012: Up to 19 April 2012. 4 2013: Up to 31 March 2013. 5 2013: From 1 July 2013. * Chairman. Mr Deiters received additional remuneration amounting to US$15,000 in 2012 and 2013 in respect of his supervisory directorship in Ten Cate Thiolon Middle East in Dubai. The members of the Supervisory Board held no shares or option rights of Royal Ten Cate at the end of 2013. 54.3 Transactions with associated companies, other participating interests and joint ventures During the 2013 financial year, associated companies, other (non-con- solidated) participating interests and joint ventures purchased goods from the Group amounting to € 14.4 million (2012: € 17.5 million). As at 31 December 2013 the outstanding trade receivables due to the Group from associated companies amounted to €  3.3 million (2012: €  3.2 million) and from joint ventures € 1.0 million (2012: € 1.2 million). As at 31 December 2013 outstanding trade liabilities to associated compa- nies and joint ventures amounted to € 0.5 million (2012: € 0). Transactions with associated companies, other participating interests and joint ventures take place on an objective, business basis. 54.4 Subsidiaries A list of (significant) subsidiaries and participating interests can be found inside the back cover of this report.
  • 148. 144 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS 56 COMPANY PROFIT AND LOSS ACCOUNT In millions of euros note 2012* 2013 Result from participating interests after profit tax 58 16.4 10.2 Other results after profit tax 4.5 8.8 Net income 20.9 19.0 57 COMPANY BALANCE SHEET (BEFORE APPROPRIATION OF THE RESULT) In millions of euros note 31 December 2012 31 December 2013 FINANCIAL FIXED ASSETS 58 Participating interests in subsidiaries 692.3 606.1 Loans to subsidiaries 114.7 181.5 Deferred profit tax assets 25.7 18.9 Total non-current assets 832.7 806.5 CURRENT ASSETS Due from subsidiaries 0.7 1.5 Other receivables 0.8 0.2 Cash and cash equivalents 1.0 1.4 Total current assets 2.5 3.1 Total assets 835.2 809.6 EQUITY Share capital 60 66.2 67.0 Share premium reserve 62 43.4 42.6 Legal reserve 63 1.9 –5.7 Other reserves 64 324.8 351.4 Undistributed result 20.9 19.0 457.2 474.3 Provisions 66 1.1 0.9 Non-current liabilities 67 219.4 190.3 Current liabilities 68 157.5 144.1 Total equity and liabilities 835.2 809.6 * Adjusted for accounting policy changes in pension system. Company financial statements
  • 149. 145TenCate annual report 2013  |  FINANCIAL STATEMENTS  | GENERAL INFORMATION Accounting policies The parent company financial statements of Royal Ten Cate form an inseparable whole with the 2013 financial statements of Royal Ten Cate and have been prepared in accordance with the statutory requirements of Part 9 of Book 2 of the Netherlands Civil Code. In determining the accounting policies for its parent company finan- cial statements, Royal Ten  Cate uses the option available under article 2.362 paragraph 8 of the Netherlands Civil Code. This means that the accounting principles for the parent company financial state- ments of Royal Ten  Cate are the same as those applying to the consolidated financial statements. Participating interests over which significant influence is exercised are valued in accordance with the equity method. The  consolidated financial statements have been prepared in accordance with the standards set by the International Accounting Standards Board and adopted by the European Union. A description of these standards can be found in the accounting policies applicable to the consolidated financial statements. The share in the results of associated companies includes the share of Royal Ten  Cate in the results of these companies. Results from transactions involving a transfer of assets and liabilities between Royal Ten Cate and its participating interests and between individual participating interests are not included to the extent that they can be considered to be unrealised. 58 FINANCIAL FIXED ASSETS Interest in subsidiaries Loans to subsidiaries Deferred profit tax assets Total Balance as at 1 January 692.3 114.7 25.7 832.7 Investments/capital contributions 20.4 – – 20.4 Actuarial gains and losses of pensions 18.2 – – 18.2 Translation differences – 11.5 – 4.4 – – 15.9 Loans granted – 114.1 – 114.1 Repayment of loans – – 42.9 – – 42.9 Results of participating interests 10.2 – – 10.2 Dividend of participating interests – 123.5 – – – 123.5 Change in deferred tax – – – 6.8 – 6.8 Balance as at 31 December 606.1 181.5 18.9 806.5 Royal Ten Cate is at the head of the Group and has capital interests in the subsidiaries stated on the cover. Notes to the company financial statements
  • 150. 146 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the company financial statements 63.3 Other legal reserves 2012 2013 Balance as at 1 January 3.3 2.7 Change – 0.6 1.8 Balance as at 31 December 2.7 4.5 The other legal reserves concern capitalised development costs, undistributable reserves of subsidiaries and the hedging reserve. Balance of legal reserves as at 31 December 1.9 – 5.7 64 OTHER RESERVES 2012 2013 Balance as at 1 January * 291.7 324.8 Actuarial gains and losses of pensions * –16.5 13.6 Transferred to Other legal reserves 0.6 –1.8 Added from 2011 / 2012 result 45.6 13.3 Share and option plans 2.0 1.6 Issue of repurchased shares for share savings plan/option plan 0.5 1.0 Acquisition of non-controlling interest – –1.1 Balance as at 31 December 324.8 351.4 * Adjusted for accounting policy change pensions. 65 OPTION PLAN Royal Ten  Cate operates a stock option plan for the management, established by the Supervisory Board. Those eligible for options are members of the Executive Board, the corporate and group directors and a number of officers of critical importance to the company. The  implementation of the share option plan is supervised by the compliance officer. The options are granted on a conditional basis. During the vesting period of three to five years, a performance condition must be fulfilled. This condition is that the earnings per share, adjusted to take account of non-recurring items, over the past three, four or five years must have increased on average by at least a percentage equal to inflation plus 3% per year. If  this performance condition has been fulfilled, the  options become unconditional and may be exercised, unless restrictions have been imposed by the Netherlands Authority for the Financial Markets. 59 EQUITY The equity in the parent company financial statements corresponds to the equity in the consolidated financial statements. A statement of changes in equity can be found on page 108. 60 CALLED AND PAID-UP CAPITAL 2012 2013 Authorised share capital 200.0 200.0 Of which not issued 133.8 133.0 66.2 67.0 61 ORDINARY SHARES 2012 2013 The authorised share capital consists of: 80,000,000 ordinary shares of € 2.50 200.0 200.0 Issued share capital Balance as at 1 January 2012 2013 Ordinary shares 25,928,914 and 26,497,666 64.8 66.2 Issued stock dividend 568,752 and 293,701 1.4 0.8 Balance as at 31 December 66.2 67.0 62 SHARE PREMIUM RESERVE 2012 2013 Balance as at 1 January 44.8 43.4 Issued stock dividend – 1.4 – 0.8 Balance as at 31 December 43.4 42.6 The share premium reserve is available for distribution to share- holders. 63 LEGAL RESERVE 63.1 Translation differences 2012 2013 Balance as at 1 January 7.0 3.1 Change – 3.9 – 11.7 Balance as at 31 December 3.1 – 8.6 63.2 Hedging reserve 2012 2013 Balance as at 1 January – 4.5 – 3.9 Change 0.6 2.3 Balance as at 31 December – 3.9 – 1.6
  • 151. 147TenCate annual report 2013  |  FINANCIAL STATEMENTS  | The term of the options totals eight years for the option series to 2007 and ten to twelve years for the option series from 2007 onward. The  exercise period is five years for the option series to 2007 and seven years for the option series from 2007. The  vesting period is three to a maximum of five years. The option exercise price is equivalent to the average price of the Royal Ten  Cate share on Euronext Amsterdam nv on the five stock exchange trading days following publication of the annual figures. Each granted option right lapses on termination of employment other than as a result of retirement. In  principle, options amounting to approximately 1.5% of the total number of shares in issue will be granted in any one year. The exer- cise of options is subject to the restrictions laid down in the Securi- ties Transactions Supervision Act. 65.1 Granting of options in 2014 On  26  February 2014 it was intended to grant 300,500 conditional options at the average market price during the five stock exchange trading days following publication of the annual results on 27 February 2014. The distribution is as follows: 01-03-2013* 27-02-2014** Members of the Executive Board 100,000 60,000 Management and management support staff 224,500 240,500 324,500 300,500 * Final. ** Provisional.
  • 152. 148 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the company financial statements 65.2 Statement of movements in options of the Executive Board in 2013 L. de Vries Issued on Term until Number of options Exercise price Exercised/ lapsed to 2012 Exercised in 2013 Lapsed in 2013 Outstanding 31-12-2013 Exercisable 31-12-2013 22-02-05 22-02-13 50,000 15.17 50,000 – – – – 01-03-06 01-03-14 60,000 23.63 – – – 60,000 60,000 28-02-07 28-02-17 60,000 25.77 – – – 60,000 60,000 05-03-08 05-03-18 60,000 22.50 – – – 60,000 60,000 03-03-09 03-03-19 60,000 11.70 – – – 60,000 60,000 03-03-10 03-03-20 60,000 18.96 – – – 60,000 60,000 01-03-11 01-03-21 60,000 27.38 – – – 60,000 – 28-02-12 28-02-22 60,000 24.67 – – – 60,000 – 01-03-13 01-03-23 60,000 17.73 – – – 60,000 – 530,000 50,000 – – 480,000 300,000 27-02-14 27-02-24 60,000 B. Cornelese Issued on Term until Number of options Exercise price Exercised/ lapsed to 2012 Exercised in 2013 Lapsed in 2013 Outstanding 31-12-2013 Exercisable 31-12-2013 28-02-12 28-02-22 30,000 24.67 – – 30,000 – – 01-03-13 01-03-23 40,000 17.73 – – 40,000 – – 70,000 – – 70,000 – – No options were exercised by the Executive Board in 2012 and 2013. In  February 2014 it was intended to grant 60,000 options. 40,000 options in the 2009 series are reserved for outstanding performance, a decision on which will be taken in due course. These options are not included in the above statements.
  • 153. 149TenCate annual report 2013  |  FINANCIAL STATEMENTS  | The fair value of the granted options on the grant date has been determined on the following basis: 2012 2013 Price on grant date (15-day average) € 24.96 € 17.36 Exercise price € 24.67 € 17.73 Expected volatility 39.7% 40.1% Expected option term 8 years 10 years Expected dividend yield 2.35% 3.86% Risk-free interest rate 1.80% 1.05% 65.3 Statement of movements in options of management and management support staff in 2013 Issued on Term until Number of options Exercise price Exercised/ lapsed to 2012 Exercised in 2013 Lapsed in 2013 Outstanding 31-12-2013 Exercisable 31-12-2013 22-02-05 22-02-13 102,400 15.17 72,000 17,000 13,400 – – 01-03-06 01-03-14 141,200 23.63 52,400 – – 88,800 88,800 28-02-07 28-02-17 145,000 25.77 52,500 – – 92,500 92,500 05-03-08 05-03-18 207,000 22.50 79,000 2,000 – 126,000 126,000 03-03-09 03-03-19 176,250 11.70 34,500 34,000 – 107,750 107,750 03-03-10 03-03-20 226,500 18.96 16,500 13,500 7,500 189,000 189,000 01-03-11 01-03-21 246,000 27.38 16,500 – 7,500 222,000 – 28-02-12 28-02-22 219,500 24.67 1,000 – 8,000 210,500 – 01-03-13 01-03-23 224,500 17.73 – – – 224,500 – 1,688,350 324,400 66,500 36,400 1,261,050 604,050 27-02-14 27-02-24 240,500 65.4 Complete statement of movements in options in 2013 Issued on Term until Number of options Exercise price Exercised/ lapsed to 2012 Exercised in 2013 Lapsed in 2013 Outstanding 31-12-2013 Exercisable 31-12-2013 22-02-05 22-02-13 152,400 15.17 122,000 17,000 13,400 – – 01-03-06 01-03-14 201,200 23.63 52,400 – – 148,800 148,800 28-02-07 28-02-17 205,000 25.77 52,500 – – 152,500 152,500 05-03-08 05-03-18 267,000 22.50 79,000 2,000 – 186,000 186,000 03-03-09 03-03-19 276,250 11.70 34,500 34,000 – 207,750 207,750 03-03-10 03-03-20 286,500 18.96 16,500 13,500 7,500 249,000 249,000 01-03-11 01-03-21 306,000 27.38 16,500 – 7,500 282,000 – 28-02-12 28-02-22 309,500 24.67 1,000 – 38,000 270,500 – 01-03-13 01-03-23 324,500 17.73 – – 40,000 284,500 – 2,328,350 374,400 66,500 106,400 1,781,050 944,050 27-02-14 27-02-24 300,500 66,500 options were exercised in 2013 (2012: 38,750). The weighted average share price on the exercise date for share options exercised in 2013 was € 21.35 (2012: € 21.02).
  • 154. 150 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Notes to the company financial statements 69 AUDITOR’S FEES The following fees of KPMG Accountants N.V. and the other entities affiliated with the KPMG network have been charged to the Group, in accordance with article 382a Part 9 of Book 2 of the Netherlands Civil Code. Fees in thousands of euros 2012 2013 Examination of the financial statements 820 755 Other audit assignments 210 189 Other non-audit services 190 146 Total 1,220 1,090 70 LIABILITIES NOT SHOWN IN THE BALANCE SHEET The Company has issued a declaration of liability in accordance with article 403 of Book 2 of the Netherlands Civil Code on behalf of most of its Dutch subsidiaries. The Company forms a tax group together with the majority of the Dutch subsidiaries for corporation and sales tax. Each of these subsidiaries is severally liable for the tax payable by all the compa- nies included in the tax group. We also refer to the notes in section 53 concerning contingent liabili- ties. Guarantees have also been issued for a Dutch subsidiary and a number of foreign subsidiaries. Almelo, 26 February 2014 Executive Board L. de Vries, Chairman Supervisory Board J.C.M. Hovers, Chairman P.P.A.I. Deiters, Vice-Chairman E. ten Cate P.F. Hartman 65.5 Repurchased shares In principle the company will repurchase shares in order to prevent any dilution of earnings per share caused by the granting of options. number of shares 2012 2013 Balance as at 1 January 620,321 584,287 Own shares for conversion of physical securities 2,716 – Exercise of options – 38,750 – 66,500 Outstanding and fully paid as at 31 December 584,287 517,787 66 PROVISIONS 2012 2013 Guarantee and claims 1.1 0.9 Other items – – Balance as at 31 December 1.1 0.9 The term of the provisions exceeds one year. 67 LONG-TERM LIABILITIES 2012 2013 Syndicated loan 215.0 190.3 Other items 4.4 – Balance as at 31 December 219.4 190.3 The conditions of the syndicated loan can be found in note 48 in the notes to the consolidated balance sheet. 68 SHORT-TERM LIABILITIES 2012 2013 Cash loans, overdrafts 145.6 98.5 Owed to consolidated subsidiaries 4.9 42.3 Trade creditors and other payables 7.0 3.3 Balance as at 31 December 157.5 144.1 The short-term liabilities are due in less than one year.
  • 155. 151TenCate annual report 2013  |  FINANCIAL STATEMENTS  | INDEPENDENT AUDITOR’S REPORT To the General Meeting of Shareholders of Royal Ten Cate Report on the financial statements We  have audited the accompanying 2013 financial statements of Royal Ten Cate, Almelo, as set out on pages 100 to 150 of this report. The  financial statements include the consolidated financial state- ments and the company financial statements. The consolidated finan- cial statements comprise the consolidated balance sheet as at 31  December 2013, the  consolidated profit and loss account, the  consolidated statement of comprehensive income, the  consoli- dated statement of changes in group equity and the consolidated cash flow statement for the year then ended, and notes, comprising a summary of the significant accounting policies and other explanatory information. The company financial statements comprise the company balance sheet as at 31 December 2013, the company profit and loss account for the year then ended and the notes, comprising a summary of the accounting policies and other explanatory information. Management’s responsibility Management is responsible for the preparation and fair presentation of the financial statements in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code, and for the preparation of the management board report in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Furthermore, management is responsible for such internal control as it deems necessary to enable the prepara- tion of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s responsibility Our responsibility is to express an opinion on these financial state- ments based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An  audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In  making those risk assessments, the  auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circum- stances, but  not for the purpose of expressing an opinion on the effectiveness of the entity’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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion with respect to the consolidated financial statements In our opinion, the consolidated financial statements give a true and fair view of the financial position of Royal Ten Cate as at 31 December 2013 and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Netherlands Civil Code. Opinion with respect to the company financial statements In our opinion, the company financial statements give a true and fair view of the financial position of Ten Cate as at 31 December 2013 and of its result for the year then ended in accordance with Part 9 of Book 2 of the Netherlands Civil Code. Report on other legal and regulatory requirements Pursuant to the legal requirements under Section 2:393 sub 5 at e and f of the Netherlands Civil Code, we have no deficiencies to report as a result of our examination as to whether the annual report, to  the extent we can assess, has been prepared in accordance with part 9 of Book 2 of this Code, and whether the information as required under Section 2:392 sub 1 at b - h has been annexed. Further, we report that the annual report, to  the extent we can assess, is  consistent with the financial statements as required by Section 2:391 sub 4 of the Netherlands Civil Code. Amstelveen, 26 February 2014 KPMG ACCOUNTANTS N.V. T. van der Heijden RA Other information
  • 156. 152 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS .. Other information PROVISIONS OF THE ARTICLES OF ASSOCIATION RELATING TO APPROPRIATION OF PROFIT (Article 30) Summary of the provisions of the articles of association 1. Distributions on shares may not exceed the amount of the distributable equity. 2. Subject to the approval of the supervisory board, the executive board is authorized to determine the part of the profit that will be reserved. 3. The profit remaining after reservation pursuant to article 30.2 is at the disposal of the general meeting. 4. Profits will be distributed after adoption of the financial state- ments showing that this is justified. 5. Subject to the approval of the supervisory board, the executive board may decide to make interim distributions of dividends on shares, provided that the requirements of article 30.1 have been complied with as shown by an interim financial statement of assets and liabilities in accordance with applicable legal ­provisions. 6. Shares held by the company in its own capital shall be ­disregarded when calculating the amount of any distribution. 7. Sections 2:104 and 2:105 of the Dutch Civil Code apply to ­distributions to shareholders. PROPOSED APPROPRIATION OF PROFIT In millions of euros 2012* 2013 Net income 20.9 19.0 Added to other reserves in accordance with article 30, paragraph 2 of the articles of association – 8.1 – 4.5 12.8 14.5 Net change in legal reserves 0.6 – 1.8 13.4 12.7 Undistributed dividend balance from previous year – 0.4 13.4 13.1 Payment of € 0.50 and € 0.50 dividend to holders of ordinary shares in accordance with article 30 paragraph 3 of the articles of association – 13.0 – 13.1 Undistributed dividend balance at year-end, which is transferred to the relevant account 0.4 – * Adjusted for accounting policy change pensions.
  • 157. 153TenCate annual report 2013  |  FINANCIAL STATEMENTS  |
  • 158. 154 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Ten-year summary in millions of euros unless stated otherwise 20041 2005 2006 2007 2008 2009 2010 2011 20123 2013 CONSOLIDATED PROFIT AND LOSS ACCOUNT Revenues 641.0 686.5 770.5 886.0 1,032.6 842.1 984.5 1,138.8 1,049.0 1,012.0 EBITDA 53.8 57.8 73.2 102.1 126.1 75.4 119.5 137.5 87.2 83.5 EBITA 34.9 39.2 51.1 73.0 95.4 41.5 85.0 102.5 50.1 48.7 Operating result (EBIT) 34.6 38.5 50.1 69.4 83.8 32.7 74.6 89.6 35.6 35.6 Net financial expenses – 6.8 – 4.6 – 8.0 – 11.3 – 13.7 – 12.7 – 10.0 – 11.3 – 12.1 – 10.1 Profit tax – 9.2 –11.5 – 11.4 – 11.9 – 19.1 – 5.6 – 17.9 – 18.7 – 8.2 – 8.5 Share in net income of associated companies 5.1 8.1 45.4 0.3 – 8.7 – 1.3 – 1.3 – 0.3 0.1 Result after profit tax 23.7 30.5 76.1 46.5 51.0 23.1 45.4 58.3 15.0 17.1 Non-controlling interest – 0.1 – – 0.1 – 0.1 0.1 0.8 0.6 0.4 5.9 1.9 Net profit 23.6 30.5 76.0 46.4 51.1 23.9 46.0 58.7 20.9 19.0 Dividend 10.2 12.5 16.2 18.8 20.4 15.0 18.8 24.0 13.0 13.1 EBITA in % of revenues 5.4% 5.7% 6.6% 8.2% 9.2% 4.9% 8.6% 9.0% 4.8% 4.8% Return on average net invested capital 2 13.5% 15.3% 14.4% 13.1% 13.4% 5.7% 12.1% 13.1% 6.2% 6.4% 1 Figures based on Dutch GAAP. 2 Prior to 2007, based on net invested capital at year-end. 3 Adjusted for accounting policy change pensions.
  • 159. 155TenCate annual report 2013  |  FINANCIAL STATEMENTS  | 20041 2005 2006 2007 2008 2009 2010 2011 20122 2013 CONSOLIDATED BALANCE SHEET Intangible assets 12.1 13.8 12.4 136.8 212.1 203.8 242.8 273.0 269.4 270.2 Tangible fixed assets 118.8 161.4 165.8 218.1 247.4 214.7 214.2 221.9 196.7 165.7 Financial fixed assets 19.9 35.2 18.3 19.8 25.1 45.3 34.2 36.8 47.0 42.1 Total non-current assets 150.8 210.4 196.5 374.7 484.6 463.8 491.2 531.7 513.1 478.0 Inventories 138.6 157.5 157.7 176.2 211.5 155.0 216.9 267.9 226.4 223.8 Receivables 98.8 125.0 128.2 166.2 187.7 116.9 169.8 181.1 159.7 147.1 Securities and cash 2.7 4.6 6.7 4.8 5.4 12.8 11.6 22.7 26.7 21.6 Total current assets 240.1 287.1 292.6 347.2 404.6 284.7 398.3 471.7 412.8 392.5 Total assets 390.9 497.5 489.1 721.9 889.2 748.5 889.5 1,003.4 925.9 870.5 Equity 146.5 181.8 238.7 310.1 366.9 380.8 438.5 465.8 457.2 474.3 Non-controlling interest 0.1 – 0.2 0.3 5.1 4.1 3.8 3.7 – 1.9 – 1.0 Group equity 146.6 181.8 238.9 310.4 372.0 384.9 442.3 469.5 455.3 473.3 Provisions 52.1 56.1 43.8 40.8 43.5 40.5 32.0 50.6 65.3 45.9 Long-term debts 74.1 130.2 63.5 222.3 316.2 192.0 195.2 275.1 220.3 195.1 Banks and short-term loans 24.6 27.1 30.4 12.9 20.3 16.3 57.1 36.3 36.3 15.7 Other short-term debts 93.5 102.3 112.5 135.5 137.2 114.8 162.9 171.9 148.7 140.5 Total liabilities 390.9 497.5 489.1 721.9 889.2 748.5 889.5 1,003.4 925.9 870.5 Group equity/total equity 38% 37% 49% 43% 42% 51% 50% 47% 49% 54% Acquisitions /(de)consolidations 29.2 40.8 – 63.0 175.1 88.1 – 3.3 24.7 34.8 15.7 18.0 Investments in tangible and intan- gible fixed assets 12.0 26.2 43.0 62.9 48.0 17.3 21.3 25.7 16.6 14.4 Working capital 143.9 180.2 173.4 206.9 262.0 157.1 223.8 277.1 237.4 230.4 Depreciation and amortisation 19.2 19.3 23.1 32.7 42.3 42.7 44.9 47.9 51.6 47.9 Number of staff years at year-end 3,634 3,578 3,532 4,020 4,437 3,805 4,271 4,353 4,454 4,256 Number of shares outstanding at year-end (x 1,000) 20,472 20,784 21,063 23,556 23,967 25,068 25,502 25,929 26,498 26,791 Net earnings per € 2.50 share 1.17 1.48 3.66 2.04 2.18 0.97 1.84 2.31 0.81 0.72 Dividend per share in euros 0.50 0.60 0.70 0.80 0.85 0.60 0.75 0.95 0.50 0.50 Closing price in euros 13.55 21.50 23.21 21.27 16.05 18.43 28.00 21.26 19.87 22.90 1 Figures based on Dutch GAAP. 2 Adjusted for accounting policy change pensions.
  • 160. 156 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Business model TenCate’s business model focuses on the business model for value chain management based on four pillars: ■■ End-user marketing ■■ Technological innovation ■■ Cost leadership ■■ Product differentiation Buy & build strategy Acquisition and association of businesses and business units with complementary product portfolios, technologies and markets for operational and strategic synergy resulting in greater market opportunities and profitability. Composite A combination of two or more advanced materials (e.g. based on carbon fibre, glass fibre and aramid fabrics) which is stronger than the materials in themselves. Corporate governance Rules and conduct standards drawn up by the Tabaksblat Committee, to which compa- nies must adhere for good governance and on which they are accountable. Good, efficient and responsible management of a company, on which the company accounts to all its stakeholders. CSR Performance Ladder Certification standard with five levels for corporate social responsibility. Earnings per share (diluted) Net result divided by the weighted average number of diluted shares during the year. Earnings per share (ordinary) Net result divided by the weighted average number of ordinary shares during the year. EBIT Earnings before net financial expenses and profit tax. EBITA Earnings before net financial expenses, profit tax and amortisation. EBITDA Earnings before net financial expenses, profit tax, depreciation and amortisation. Fix it / exit strategy Making non-core parts of the company healthy or profitable with a view to sale. The proceeds are used for new acquisitions. FM Global Highly Protected Risk Award Certificate issued by FM Global to companies which fulfil all of this insurer’s guidelines for loss prevention. Geosynthetics Woven geotextile materials, non-wovens and grids based on polypropylene and polyeth- ylene. Global Reporting ­Initiative The Global Reporting Initiative (GRI) is an international organisation which draws up guidelines and definitions for sustainability reporting. Joint venture Form of co-operation in which TenCate forms a new company with one or more organisa- tions and develops new or existing joint activities from that company. Market group Clustering of subsidiaries (operating compa- nies) which co-operate in research and development, production, end-user marketing and sales. Market window The ideal time to launch a product on the market. Also: possible market application. Net debt position Long-term and short-term interest-bearing loans and other financial liabilities, less cash and cash equivalents. Net invested capital The capital made available to the company, comprising total equity plus loans and provi- sions made available, less the balance of cash and cash equivalents. Glossary
  • 161. 157TenCate annual report 2013  |  FINANCIAL STATEMENTS  | Net result Result after deduction of non-controlling interests (result attributable to shareholders of the company). Patent (pending and issued) Exclusive right to the invention in respect of a product or process. Prepreg Thin film of a substrate (usually fabric) which is pre-impregnated with a resin. Process ecotool A measuring instrument used to determine the CO2 footprint of the processes in the TenCate market groups as fully and clearly as possible (‘inside the gate’). Product ecotool Using specific parameters to determine the CO2 footprint of TenCate products (‘outside the gate’). Return on net invested capital Percentage of profit (before appropriation), including non-controlling interests and interest expenses relative to average net invested capital. Sector Technology cluster of market groups and business units in which the purchasing of raw materials is concentrated on the basis of distinctive technologies. Stakeholders Stakeholders of the company, including employees, suppliers, customers, end-users, shareholders, analysts, public authorities and residents in the surrounding area. Subsidiary (operating company) Unit (operating company) which is owned more than 50% by Royal Ten Cate. System approach Increasing desire/ability to provide co-ordi- nated components (e.g. fabrics) as part of a system. TenCate base technologies Fibre, weaving and finishing technology; market windows are protective fabrics, outdoor fabrics and composites for aero- space, automotive and armour. Non-woven, grid and extrusion technology; market windows are geotextiles, industrial fabrics and synthetic turf. Texturing Treatment of filament yarns giving them a permanent crimp and greater stretch and elasticity. Thermoplastic composite Composite which becomes soft when heated under pressure for a certain time and can thus be formed into the desired shape; a reversible and hence physical process. All thermoplastics are in principle recyclable. Thermoset composite Composite which remains hard and disinte- grates when heated; a chemical and hence irreversible process. Weighted average number of shares (diluted) The weighted average number of ordinary shares issued, including the effect of outstanding option rights. Weighted average number of shares ­(ordinary) The weighted average number of shares issued, including the weighted average number of exercised option rights, corrected for the weighted average of own shares held. Working capital The total of inventories and receivables less trade creditors and other payables and short- term profit tax liabilities. Working capital in days Working capital expressed in days of revenues over the last quarter (calculated on an annual basis).
  • 162. 158 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS This Annual Report concerns the 2013 calendar year. It was published on the TenCate website in PDF format on Wednesday 5 March 2014 and will also be available in limited quantities in printed form from Tuesday 25 March. The 2013 Annual Review, a summary version of the Annual Report, is available from Friday 28 March. From 2014, the Royal TenCate Annual Review will be sent by post automatically to stakeholders who had previously registered to receive what until recently was the printed Annual Report. New orders for the Annual Review can be sent to: royal@tencate.com. Means of communication Printed Annual Review 2013 Summary of 2013 Annual Report Including summary of 2013 financial statements Concerns 2013 calendar year Printed in Dutch and English Number of pages 56 To order: royal@tencate.com Type of reporting: inclusive (financial and non-financial) TenCate has opted not to publish a separate annual CSR review Publication date: 28 March 2014 Dynamic Annual Report 2013 Full 2013 Annual Report Excluding full 2013 financial statements Including CSR activities in 2013 Including GRI table 2013 Including glossary Concerns 2013 calendar year Archive of dynamic TenCate annual reports since 2010 Archive of TenCate annual reports in PDF since 1994 Dynamic version in Dutch and English See: www.tencateannualreports.com Type of reporting: inclusive (financial and non-financial) Publication date: 1 April 2014 Digital annual report 2013 Full 2013 Annual Report Including full 2013 financial statements Including glossary Concerns 2013 calendar year PDF version in Dutch and English Number of pages 160 See: www.tencate.com/jaarverslag2013 Type of reporting: inclusive (financial and non-financial) TenCate has opted not to publish a separate annual CSR report Publication date: 5 March 2014 Investor Relations app (IR app) Application for investor relations Financial background information Dynamic version in Dutch and English Current TenCate share price on NYSE Euronext Financial calendar Information on TenCate AGM Relevant IR presentations Relevant TenCate webcasts Archive of TenCate annual reports in PDF since 1994 See: irapp.tencate.com Press releases Financial press releases concerning quarterly and annual figures, acquisitions and major orders Non-financial press releases concerning news, current events and corporate social responsibility See: www.tencate.com/nieuws Subscribe: www.tencate.com/persberichten txtures stakeholder magazine Printed publication appearing four times a year Also application with additional information and pictures Including column by chairman of Executive Board concerning annual and quar- terly figures Number of pages: approximately 48 Publication dates 13 March, 22 May, 7 August and 6 November 2014 See: txturesapp.tencate.com To order printed version: royal@tencate.com TENCATE COMMUNICATION CHANNELS FOR REPORTING AND INVESTOR RELATIONS
  • 163. 159TenCate annual report 2013  |  FINANCIAL STATEMENTS  |
  • 164. 160 |  TenCate annual report 2013  |  FINANCIAL STATEMENTS Text Royal Ten Cate Translation VVH business translations, Utrecht Design Frontwise, Utrecht Realisation Domani B.V., Weesp Printing Lulof Druktechniek B.V., Almelo Illustrations Joost van Baars Marjo Baas Doug Bergen Dennis de Beurs Sean Clee Frans Dekker Mark Evans Hervé Gousse Paul Haverkort Norbert Hekkink Werner Helmich Truls Lötvedt Shaun Lowe Henrik Morlock Franz Pfluegl Roelof Pot Frank Uijlenbroek Adrian Waine Courtesy © Aérospatiale Westland Courtesy © Airbus Courtesy © AgustaWestland Courtesy © Boeing Courtesy © Cirrus Courtesy © Gulfstream Aerospace Corporation Courtesy © Fokker Aerostructures Courtesy © Mercedes-Benz (Daimler AG) Courtesy © Royal Danish Navy Courtesy © SpaceX Courtesy © Schiebel Colophon
  • 165. ADVANCED TEXTILES & COMPOSITES SECTOR Ten Cate Advanced Textiles bv Nijverdal, Netherlands Activities of the TenCate Advanced Textiles group in the Netherlands Ten Cate Protect bv Nijverdal, Netherlands Ten Cate Protective Fabrics USA inc Union City (Georgia), USA Ten Cate Protective Fabrics Canada inc Montreal (Quebec), Canada Fabrics for professional wear and safety clothing as well as outdoor applications Ten Cate - Union Protective Fabrics Asia ltd (50.65)% Bangkok, Thailand Fabrics for protective clothing Ten Cate Advanced Composites bv Nijverdal, Netherlands Advanced composites for the aviation industry and antiballistic applications Ten Cate Advanced Composites USA inc Morgan Hill (California), USA Phoenixx TPC inc Taunton (Massachusetts), USA YLA inc Benicia (California), USA Advanced composites for aerospace, aviation and industrial applications Performance Materials Corporation Camarillo (California), USA PMC Holding Corporation Camarillo (California), USA Baycomp Company Burlington (Ontario), Canada PMC Guangzhou Guangzhou, China T3 (51%) Taichung, Taiwan Thermoplastic composites and components for the automotive industry, oil & gas extraction and consumer electronics Ten Cate Advanced Composites ltd Nottingham, UK Advanced composites for industrial and automotive applications Ten Cate Advanced Armour UK (AML) Swindon, UK Ten Cate Advanced Armour sas Primarette, France Ten Cate Advanced Armour Danmark a/s Vissenbjerg, Denmark Advanced ceramics and composites for antiballistic applications Ten Cate Advanced Armor USA inc Newark (Ohio), USA Advanced composites for vehicle armour Ten Cate Active Protection ApS (ABDS) Vissenbjerg, Denmark Active protection systems for army vehicles AML India Private ltd (90%) Noida, India Ten Cate Protective India Private ltd Gurgaon, India Design and production of vehicle armour materials and fabrics for professional wear and safety clothing as well as outdoor applications GEOSYNTHETICS & GRASS SECTOR Nicolon Corp. (Ten Cate Geosynthetics North America) inc Atlanta (Georgia), USA Ten Cate Geosynthetics Austria GmbH Linz, Austria Ten Cate Geosynthetics France sas Bezons, France Ten Cate Geosynthetics Netherlands bv Nijverdal, Netherlands Ten Cate Geosynthetics Asia sdn bhd Kuala Lumpur, Malaysia TenCate Industrial Zhuhai co ltd Zhuhai, China Geosynthetics and industrial fabrics Ten Cate Geosynthetics sdn bhd (Malaysia) Kuala Lumpur, Malaysia Ten Cate Geosynthetics (Thailand) ltd Bangkok, Thailand Ten Cate Geosynthetics pte ltd Singapore Ten Cate Geosynthetics Italy srl Meda, Italy Ten Cate Geosynthetics (UK) ltd Telford, UK Ten Cate Geosynthetics Iberia sl Madrid, Spain Ten Cate Geosynthetics Deutschland GmbH Dietzenbach, Germany Ten Cate Geosynthetics Poland Sp zoo Kraków, Poland Ten Cate Geosynthetics CZ sro Prague, Czech Republic Ten Cate Geosynthetics Romania srl Bucharest, Romania Sales offices Ten Cate Thiolon bv Nijverdal, Netherlands Polyloom Corp. (Ten Cate Thiolon USA) inc Dayton (Tennessee), USA Ten Cate Thiolon Middle East (49%)1) Dubai, United Arab Emirates Synthetic turf components and systems Ten Cate Thiobac bv Nijverdal, Netherlands Backing for synthetic turf systems GreenFields Holding BV (90%) Genemuiden, Netherlands GreenFields BV Genemuiden, Netherlands (subsidiary of GreenFields Holding BV) Xtra Grass BV*) Kampen, Netherlands Bresco AS*) Molde, Norway GreenFields Swiss AG*) Schaffhausen, Switzerland GreenFields Sports Turf Systems (ME) Ltd (80%)*) Nicosia, Cyprus GreenFields West Africa SARL (65%)*) Cotonou, Benin GreenFields Sports Surfaces UK Ltd *) Bolton, UK GreenFields India FZC (51%)*) Sharjah, United Arab Emirates Marketing and installation of synthetic turf systems TigerTurf NZ, ltd Auckland, New Zealand TigerTurf Australia pty ltd Campbellfield, Australia TigerTurf (UK) ltd Hartlebury, UK Tiger Sports Americas inc Austin (Texas), USA Marketing and production organisations for synthetic turf systems Edel Grass bv (50%) Genemuiden, Netherlands Marketing and installation of synthetic turf systems *) Subsidiary of GreenFields BV. 1) Due to legislation in Dubai, 51% is held by a local partner. Royal Ten Cate has 100% economic ownership. Subsidiaries, associated companies and other interests as at 31 December 2013
  • 166. OTHER ACTIVITIES SECTOR Xennia Technology ltd (90.88%) Letchworth, UK Xennia Holland bv Nijverdal, Netherlands Specialist inkjet technology for industrial applications Ten Cate Enbi International bv Brunssum, Netherlands TenCate Enbi group holding company Ten Cate Enbi GmbH Leverkusen, Germany Ten Cate Enbi kft Rétság, Hungary Ten Cate Enbi inc Shelbyville (Indiana), USA Ten Cate Enbi inc Rochester (New York), USA Ten Cate Enbi pte ltd Singapore Ten Cate Enbi Zhuhai co ltd Zhuhai, China Technical rollers and components for printers, copiers, fax machines, postal sorting machines, ATMs, insulation and heating systems Ten Cate Assurantiën bv Almelo, Netherlands Insurance Ten Cate Nederland bv Almelo, Netherlands Royal Ten Cate (USA) inc Washington D.C., USA Ten Cate UK ltd London, UK Ten Cate France sas Paris, France Ten Cate Deutschland GmbH Opladen, Germany Ten Cate Danmark a/s Copenhagen, Denmark Royal Ten Cate Pacific ltd Hong Kong, China Royal Ten Cate China Holding ltd Hong Kong, China Country holding companies Ten Cate Finance AG Schaffhausen, Switzerland Financing company NON-CONSOLIDATED COMPANIES Landscape Solutions bv (25%) Goirle, Netherlands Marketing and production organisation for synthetic turf for landscaping use Hellas Construction Inc (30%) Austin (Texas), USA Production and construction of sports pitches The operating companies listed here are consolidated in the financial statements, with the exception of the companies shown as non-consolidated. Some interests of minor relevance to the overall picture have been omitted from the list, in accordance with article 379, paragraph 3, Book 2 of the Netherlands Civil Code. The companies are wholly owned unless stated otherwise.
  • 167. Protecting people In transit
  • 168. PROTECTING PEOPLE IN TRANSIT IN HABITATS AT WORK DURING LEISURE TenCate would like to hear from you. Please let us know your views by e-mailing ir@tencate.com, stating the market group or officer you wish to contact. You can also contact us using the details shown below. Drs Pieter Zwinkels, investor relations manager Royal Ten Cate Stationsstraat 11 P.O. Box 58 7600 GD Almelo, The Netherlands Telephone+31 (0)546 544 911 Fax +31 (0)546 814 145 www.tencate.com This annual report relates to the 2013 calendar year. The annual report was published on the TenCate website on Wednesday 17 March 2014 and is also available in printed form from Tuesday 31 March. Contact