8.17
Other
8.17.1 Dividend
The dividend in respect of financial year 2018 was determined at € 0.50 per share or as stock dividend during the General Meeting of Shareholders of 24 April 2019. After the period in which shareholders could report their preference, 36% of the shareholders opted for the stock dividend. On 17 May 2019 € 8.5 million was distributed as cash dividend and 196,691 shares were issued as stock dividend and added to issued share capital.
The Board of Management proposes to make available to the shareholders a dividend with stock option of € 0.30 per share with respect to the current year. The dividend proposal is subject to approval by the General Meeting of Shareholders on 22 April 2020 and is not reflected as a liability in these financial statements.
8.17.2 Off-balance sheet commitments
The total off-balance sheet commitments, presented at nominal value, consist of:
| Total 2019 | < 1 year | 1-5 year | > 5 year | Total 2018 | |
| € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | |
| Operational lease commitments | 711 | 374 | 330 | 7 | 35,036 |
| Property, plant and equipment ordered | 1,080 | 1,080 | - | - | 50 |
| Marketing and merchandising commitments | 2,060 | 2,055 | 5 | - | 3,792 |
| Other off-balance sheet commitments | 10,382 | 3,169 | 7,213 | - | 11,594 |
| Total | 14,233 | 6,679 | 7,548 | 7 | 50,472 |
Accell Group has commitments from operating lease agreements for buildings and land, IT equipment, machinery and vehicles for use in its normal business operations. The commitments arising from marketing and merchandising are primarily related to sponsoring obligations. The other liabilities not included in the balance sheet mainly include software licensing commitments and commitments related to e-commerce initiatives.
8.17.3 Contingent assets and liabilities
Accell Group’s most significant contingent assets and liabilities are described below.
Earn-outs
As at 31 December 2019, Accell Group holds a contingent liability for a conditional compensation for post combination services, with a maximum of € 1.5 million, which is payable to Velosophy management. The compensation is conditional on certain revenue and EBITDA targets for the start-ups Centaur Cargo and Carqon.
In the Stock Purchase Agreement between Accell North America and Beeline Bikes Acquisition Company, LLC is included an earn-out arrangement of 10% of the operation profit for each calendar year during the term 01.01.2021 - 31.12.2024.
In the Asset Purchase Agreement between (among others) Accell North America and Alta Cycling Group LLC is included an earn-out arrangement of 15% of the operating profits for each calendar year during the term 01.01.2022 - 31.12.2026, with a maximum amount of US$ 15 million.
Other contingent assets and liabilities
Per 31 December 2019 Accell Group holds a contingent claim of € 0.9 million in respect of custom duties and a contingent warranty claim of € 0.6 million. Furthermore there are a number of corporate/ parent guarantees, provided in the ordinary course of its business and a number of rental guarantees (€ 0.3 million).
8.17.4 Share-based payments
Accell Group has a restricted share plan and an option plan.
Restricted share plan
Accell Group has a restricted share plan whereby conditional shares can be granted to the members of the Board of Management and to directors of subsidiaries who contribute significantly to the result of Accell Group. Both share plans are share-based payments plans with vesting conditions. The grant-date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes. The conditions have been incorporated into the fair value at grant date by applying a discount to the valuation obtained.
The shares that have been conditionally granted comprise the following:
The fair value will be charged to the income statement according to the straight-line method spread over the period between the grant date and the time that the shares are made unconditional, whereby adjustment will be made for the expected number of shares to be distributed. After final award, a lock-up period of two years applies for members of the Board of Management and three years for directors of subsidiaries.
Option plan
The company has an option scheme for the Board of Management. The Supervisory Board bases awards pursuant to the option scheme on the realization of the targets agreed with the Board of Management. The outstanding and granted option rights are explained and specified in note 6.17.5.
The fair value of the employee share options was measured using an option valuation model (Black-Scholes-Merton). Service and non-market performance conditions attached to the transactions were not taken into account in measuring fair value. The inputs used in the measurement of the fair values at the grant date of the equity-settled share-based payment plans were as follows:
| 2019 | 2018 | |
| Expected volatility (weighted-average) | 27.73% | 24.27% |
| Expected life (weighted-average) | 3.9 | 3.9 |
| Expected dividends | 2.70% | 2.10% |
| Risk-free interest rate (based on government bonds) | 0.22% | 0.71% |
Expected volatility was based on an evaluation of the historical volatility of the Accell Group N.V.’s share price, in particular over the historical period commensurate with the expected term. The expected term of the instruments is based on historical experience and general option holder behaviour.
The reconciliation to personnel expenses is as follows:
| 2019 | 2018 | |
| € x 1,000 | € x 1,000 | |
| Conditional shares management 2015 | - | 38 |
| Conditional shares management 2016 | 48 | 48 |
| Conditional shares management 2017 | 6 | 6 |
| Conditional shares Board of Management 2016 | - | 31 |
| Conditional shares Board of Management 2017 | 41 | 41 |
| Conditional shares Board of Management 2018 | 89 | - |
| Options Board of Management | 8 | 18 |
| Total expense recognized in personnel expenses | 192 | 182 |
In the event of the full exercise of the option entitlements granted to date and the vesting of the conditional shares the number of issued shares would increase by 0.2% (2018: 0.2%). According to company policy, the options and shares granted are not covered by the company’s purchase of its own shares. In the event of equity-settlement, new shares are issued by the company at the moment options are exercised.
Accounting policy
The grant-date fair value of equity-settled share-based payment awards granted to employees is recognized as an expense, with a corresponding increase in equity, over the vesting period of the awards. The amount recognized as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognized is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.
8.17.5 Remuneration of the Board of Management and the Supervisory Board
Board of Management
The company’s remuneration policy is reflected in the remuneration report that has been presented to the General Meeting of Shareholders for approval. The bonuses reflected in the financial statements relate to the financial year and depend on the targets set by the Supervisory Board. For 2019 a bonus varying between 20% and 45% of the salary will be paid.
The remuneration of the individual members of the Board of Management is as follows:
The stock option entitlements that have been granted comprise the following:
| Award date | Number at 01-01-19 | Issued in 2019 | Exercised 2019 | Forfeited in 2019 | Number at 31-12-19 | Exercise price | Expiration date | Liability at 31-12-19 | |
| A.H. Anbeek | 8-3-2018 | 1,850 | - | - | - | 1,850 | 21.68 | 8-3-2026 | 6,697 |
| R.S. Baldew | 6-3-2019 | - | 1,650 | - | - | 1,650 | 19.58 | 6-3-2027 | 5,247 |
| J.J. Both | 8-3-2018 | 2,950 | - | - | - | 2,950 | 21.68 | 8-3-2026 | 10,679 |
| J.J. Both | 9-3-2017 | 6,850 | - | - | - | 6,850 | 22.05 | 9-3-2025 | 18,564 |
| J.J. Both | 24-2-2016 | 7,850 | - | - | - | 7,850 | 18.96 | 24-2-2024 | 18,762 |
| 19,500 | 1,650 | - | - | 21,150 | 59,948 | ||||
After awarding the options, the options vest immediately but remain in lock-up for three years. After the lock-up period there is an exercise period of five years. At 31 December 2019 the intrinsic value of the options is € 109,421 as the share price of Accell Group N.V. was € 25.80, which is higher than the exercise prices of the options.
The conditional shares that have been granted comprise the following:
| Award date | Number at 01-01-19 | Granted in 2019 | Vested 2019 | Forfeited in 2019 | Number at 31-12-19 | Vesting date | Fair value at award date | Liability at 31-12-19 | |
| A.H. Anbeek | 6-3-2019 | - | 12,155 | - | - | 12,155 | 6-3-2021 | 99,185 | 49,592 |
| A.H. Anbeek | 8-3-2018 | 1,830 | - | - | - | 1,830 | 8-3-2020 | 16,531 | 16,531 |
| R.S. Baldew | 6-3-2019 | - | 1,617 | - | - | 1,617 | 6-3-2021 | 13,195 | 6,597 |
| J.J. Both | 6-3-2019 | - | 8,044 | - | - | 8,044 | 6-3-2021 | 65,639 | 32,820 |
| J.J. Both | 8-3-2018 | 7,265 | - | - | - | 7,265 | 8-3-2020 | 65,627 | 65,627 |
| J.J. Both | 9-3-2017 | 6,802 | - | 3,401 | 3,401 | - | 9-3-2019 | 62,510 | - |
| 15,897 | 21,816 | 3,401 | 3,401 | 30,911 | 322,687 | 171,167 | |||
After vesting there is a lock-up period for the shares of two years for the shares.
At the end of 2019 Mr. Anbeek held 7,000 shares in Accell Group N.V. and Mr. Both held 7,399 shares.
Internal pay ratio
The pay ratio from continuing operations of the Board of Management compared to the average employee compensation during 2019 is 15:1 (2018 adjusted: 15:1). The pay ratios can vary over time as a result of the Accell Group’s annual performance. This performance impacts the remuneration of the Board of Management more than that of all other employees.
The ratio consists of the average remuneration of the Board of Management compared to the average cost of all other employees of Accell Group. The average remuneration of the Board of Management is calculated from the sum of the fixed salary, short-term incentives, share based payments, pensions and other benefits of the three members (3 FTEs) of the Board of Management. The average cost of all other employees is calculated from the personnel costs (see note 6.7.4) and the average number of employees during the year (3,410 FTEs) minus 3.
Supervisory Board
The remuneration of the individual members of the Supervisory Board is as follows:
8.17.6 Related parties
Identification of related parties
In addition to the Board of Management and the Supervisory Board (see note 6.17.5) Accell Group recognizes related party relationships with its associates and joint ventures (see note 6.20.3).
Associates and joint ventures
The transactions during the financial year and balances outstanding at year-end between group companies and associates and joint ventures are presented below:
| Transaction values for the year | Balance outstanding at year-end | |||
| 2019 | 2018 | 2019 | 2018 | |
| € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | |
| Sale of goods and services | ||||
| Atala SpA | 4,284 | 5,146 | 261 | 201 |
| Raleigh South Africa | - | 23 | - | - |
| Purchase of goods | ||||
| Atala SpA | 3,916 | 3,989 | 158 | 9 |
| Dividends received | ||||
| Atala SpA | 343 | 174 | - | - |
The amounts outstanding are not provided for and will be settled in cash and cash equivalents. No guarantees have been given or received. No expense has been recognized for bad or doubtful debts in respect of the amounts owed by related parties. All sales and purchases are prices on an arm’s length basis. Transactions and balances between Accell Group and its non-consolidated companies have not been eliminated for consolidation purposes.
8.17.7 Auditor fees
The total costs for the services rendered by KPMG Accountants N.V. and its network consist of:
| KPMG Accountants N.V. | Other KPMG network | Total KPMG | KPMG Accountants N.V. | Other KPMG network | Total KPMG | |
| 2019 | 2018 | |||||
| € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | € x 1,000 | |
| Audit of the financial statements | 754 | 463 | 1,217 | 691 | 538 | 1,229 |
| Other audit assignments | 20 | 2 | 23 | - | 10 | 10 |
| Tax services | - | 19 | 19 | - | 15 | 15 |
| Other non-audit services | - | - | - | - | - | - |
| Total costs | 775 | 484 | 1,259 | 691 | 563 | 1,254 |
8.17.8 Subsequent events
Corona virus outbreak
The full impact of the Corona virus outbreak on our business is unclear yet and we are monitoring the situation closely. Risk mitigating actions are being taken. Our current inventory levels provide for some buffer but we anticipate longer delivery times for certain components which may delay the introduction of several new innovative bike models.
New long term incentive plan
At 1 January 2020, 15,291 Accell Group N.V. shares were conditionally granted under a new long term incentive plan for a selected group of executives. The costs will be expensed in the income statement on a linear basis during the vesting period.