NORMA Group
Annual Report 2014

Plain-text annual report

E S p u o r G A M R O N 4 1 0 2 T R O P E R L A U N N A A N N U A L R E P O R T 2 0 14 NORMA Group is an international market and technology leader in engineered joining technology. The Company manufactures a wide range of innovative joining technology solutions in three product categories – CL A MP, CONNECT and FLUID – and offers more than 35,000 high-quality products and solutions to around 10,000 customers in 100 countries. NORMA Group’s joining products are used in various industries and can be found in vehicles, ships, trains, aircrafts, domestic appliances, engines and plumbing systems as well as in applications for the pharmaceutical and biotechnology industry. From its headquarters in Maintal near Frankfurt, Germany, the Company coordinates a global network consisting of 22 production facilities as well as numerous sales and distribution sites across Europe, the Americas, and Asia-Pacific. Overview of Key Figures 2014 Order situation Order book (31 December) Income statement Revenue Gross profit 1) Adjusted EBITA 1) Adjusted EBITA margin 1) EBITA Adjusted profit for the period 1) Adjusted EPS 1) Profit for the period EPS Cash flow Operating cash flow Operating net cash flow Cash flow from investing activities Cash flow from financing activities Balance sheet Totals assets Total equity Equity ratio Net debt Employees Core workforce Share data IPO Stock exchange Market segment ISIN Security identification number Ticker symbol Highest price 2014 3) Lowest price 2014 3) Year-end share price 31 Dec 2014 3) 2014 2013 Change in % EUR millions 279.6 236.7 18.1 EUR millions EUR millions EUR millions % EUR millions EUR millions EUR EUR millions EUR EUR millions EUR millions EUR millions EUR millions 694.7 405.6 121.5 17.5 113.3 71.5 2.24 54.9 1.72 96.4 103.2 2) – 265.1 57.7 635.5 371.4 112.6 17.7 112.1 62.1 1.95 55.6 1.74 115.4 103.9 – 43.4 51.7 9.3 9.2 7.9 n/a 1.0 15.1 15.0 –1.3 –1.1 –16.5 – 0.7 n/a 11.7 31 Dec 14 31 Dec 13 Change in % EUR millions EUR millions % EUR millions 1,078.4 368.0 34.1 373.1 823.7 319.9 38.8 153.5 30.9 15.0 n/a 143.1 4,828 4,134 16.8 April 2011 Frankfurter Stock Exchage, Xetra Regulated Market (Prime Standard), MDAX DE000A1H8BV3 A1H8BV NOEJ EUR 43.58 EUR EUR 30.75 39.64 Market capitalisation as at 31 Dec 2014 3) EUR millions 1,263 Number of shares 31,862,400 1) Adjustments are described in the notes to the consolidated financial statement. Notes, p. 133 2) Without balance sheet effects caused by the acquisitions of NDS and Five Star. 3) Xetra closing price. Date of publication: 25 March 2015 Two Strong Distribution Channels D I S T R I B U T I O N O F S A L E S B Y S A L E S C H A N N E L S in % Engineered Joining Technology 70 30 Distribution Services Tailored, high-tech products devel- oped to meet specific requirements of individual OEM customers High-quality standardised brand products for a variety of applications E N G I N E E R E D J O I N I N G T E C H N O LO GY ( E J T ) The business area of EJT focusses on customised, engineered solutions which meet the specific requirements of original equipment manufacturers (OEM). For these customers NORMA Group develops innovative, value-add- ing solutions for a wide range of application areas and various industries. No matter whether it is a single com- ponent, a multi-component unit or a complex system, all products are individually tailored to the exact require- ments of the industrial customers while simultaneously guaranteeing highest quality standards, efficiency and assembly safety. N O R M A Group’s EJ T products are built on the extensive engineering expertise and proven leadership in this field. D I S T R I B U T I O N S E R V I C E S ( D S ) In the area of DS, N OR M A Group sells a wide range of high-quality, standardised joining technology products for various applications through different distribution channels. Among the customers are distributors, O EM aftermarket customers, technical wholesalers and hardware stores. In the DS business area N O R M A Group benefits not only from its extensive geographic presence and global manufacturing, distribution and sales ca- pacities, but also from its well-known brands, the customised packaging and the high availability of its products at the point of sale. NORM A Group markets its joining technology products under its well-known brand names: p u o r G A M R O N | s e r u g i F y e K INNOVATIVE JOINING TECHNO- LOGY AND THE HIGHEST QUALITY STANDARDS HAVE SECURED NORMA GROUP’S MARKET POSITION FOR OVER 60 YEARS NOW. THE COM PANY OF FERS SOLUTIONS FOR MANY DIFFERENT INDUSTRIES WITH ITS ADVANCED PRODUCTS. IN FACT, NORMA GROUP RANKS AS ONE OF THE WORLD’S MARKET AND TECHNOLOGY LEADERS IN THE AREA OF JOINING TECHNOLOGY THANKS TO THE PERSONAL DE DICATION OF ROUGHLY 6,000 EMPLOYEES AND AN INTELLEC - TUAL PROPERTY RIGHTS PORTFOLIO THAT CONSISTS OF MORE THAN 800 PATENTS. AUSTRALIA T H E C O N T I N E N T O F E X T R E M E S Severe droughts meet up with heavy floods – this represents a huge challenge for Australia, especially for the farmers who make Down Under one of the biggest exporters of wheat and barley. Agriculture accounts for 70% of the world’s water consumption, and counting. Nevertheless, only 2.5% of the world’s water is actually fresh water. Sustainable joining solutions of the highest quality are therefore extremely important to efficient water management. K E Y F I G U R E S 7.7 million km2 of surface area – Australia is thus the sixth-largest country in the world. It is also the driest populated continent: nearly 20% of its surface is considered desert. 53% of this area is used for agriculture. In 2012 /13, water consumption by farms increased by 32% to 11.9 million megalitres compared to the previous year. 5.1 million of this volume flowed through irrigation canals. 19.1% of the world’s barley exports come from Australia. Only the EU exports more. Furthermore, Australia is the fifth-largest exporter of wheat and wheat products. In 2012, Australia experienced USD 1.2 billion in losses as a result of crop shortfalls caused by drought. Droughts even caused USD 6 billion in total economic damage in 1981. An Australian uses 630 m³ of water per year, while a German only uses 400 m³. INDIA G R O W T H R E Q U I R E S WAT E R The dynamic country of India continues to grow – the population as well as the degree of urbanisation and economic output. The consequence is an insufficient water in frastructure. Despite improvements, the rural population in particular still lacks permanent access to good quality drinking water. Experts estimate that USD 130 billion in investments will be made by 2030 to expand and modernise the respective infrastructure. K E Y F I G U R E S 1.25 billion people live in India, next to China the world’s most populated country. Experts project that India will have surpassed China by far by the year 2050 at the very latest. The real GDP rose by 5.8% in 2014 compared to the previous year. Only China recorded faster growth of 7.4%. The G20 nations on average: 3.2%. 64.9% of India’s population lacked access to basic sanitary facilities in 2011. 8.4% are still without an improved drinking water supply. 339,300 Indians died of diseases that were caused by dirty water, inadequate sanitary facilities, and poor hygiene in 2012. 58% more – experts believe this is how much the demand for water will rise in India in the year 2030 compared to 2005. MALAYSIA/ SINGAPORE A S T R O N G D U O O N T H E R I S E The geographic locations of Singapore and Malaysia, which are connected by a dam, are quite unique. While the city state has become a world-class hub, Malaysia is also experiencing strong growth. This also increases the pressure to invest. More and more buildings are being erected in Malaysia, which also supplies Singapore with drinking water via pipelines, and there is a growing demand for drinking and service water. Singapore also wants to invest: in a water supply that would make the country completely independent. K E Y F I G U R E S Singapore has a population of 5.4 million on 716 km² of area. 29.7 million live in Malaysia on 330,252 km². 71% urbanisation in Malaysia – this share has risen sharply. This figure was 62% in 2000, 50.7% in 1991, and only 34.1% in 1980. Singapore is a city state. According to the government, Malaysia’s GDP grew by 6% in 2014 compared to the previous year. This is a high value by global comparison. In Singapore, growth reached 2.9%. Singapore currently covers 40% of its water needs with help from Malaysia, but wants to be independent by 2061 – through investments in recycling facilities, rainwater, desalination of seawater, and savings. Singapore scored 5.65 points and thus came in 2nd place in the Global Competi- tiveness Index. Only Switzerland is considered to be more competitive. Malaysia came in 20th place and thus improved its position by four places compared to last year. CHINA A C O U N T RY G A I N S M O M E N T U M The Chinese car market is considered to be the largest in the world. While the economy continues to grow, the rising living standard is encouraging the population to invest in individual mobility. At the same time, environmental aspects are becoming increasingly important in the Middle Kingdom because China suffers more from the effects of air pollution than almost any other country. More stringent emission standards that require that the appropriate joining elements be used in engines are gradually coming into force. Small, lightweight, yet more sophisticated components help to significantly reduce fuel consumption in vehicles. K E Y F I G U R E S According to estimates, China accounted for 16.6% of the global GDP in 2014. It accounted for only 8.8% in 2004. 52 cars per 1,000 people in 2012 – car density is still relatively low. This figure is 532 in Germany. Around 19 million automobiles were sold in China in 2014 – more than anywhere else. Its share in the global market will probably grow from currently 20% to 30% by 2025. USD 5.02 billion could be saved in China each year by 2030 by using more efficient combustion engines. The added benefits in terms of a reduction in CO2 and fewer respiratory illnesses are valued at USD 950 million. Since January 2015 the Chinese equivalent to the EURO-4 emission standard applies for all commercial diesel vehicles. This means that China lags far behind the European standard. APAC IN FIGURES G R O W T H R E G I O N A S I A - PAC I F I C The region Asia-Pacific has again grown dynamically in financial year 2014. Every year, NORMA Group expands its activities in this region. The goal is to increase the sales share of APAC significantly in the medium-term. 710 2,500 employees and more customers in the Asia-Pacific region 9 % share of sales EUR mn. sales 62.5 5 12 % growth in sales manufacturing sites Sources: a u s t r a l i a : Australian government, http://www.australia.gov.au | Australian Statistics Office, http://www.abs.gov.au | US Department of Agriculture, Statista 2014 | EIA / Syngenta, Statista 2014 | Centre for Research on the Epidemiology of Disasters, Statista 2014 | Organisation for Economic Cooperation and Development, Statista 2014 | i n d i a : UN DESA (Population Division), Statista 2014 | IWF (World Economic Outlook Projections) | Organisation for Eco- nomic Cooperation and Development, Statista 2014 | The United Nations World Water Development Report 2014 | WHO, http://gamapserver.who.int | Various sources, Statista 2014 | m a l a y s i a / s i n g a p o r e : Federal Foreign Office, http://www.auswaertiges-amt.de | Department of Statistics Malaysia, http://www.statis- tics.gov.my | Ministry of Trade and Industry Singapore | International Monetary Fund, http://www.imf.org | Germany Trade & Invest, http://www.gtai.de | World Economic Forum, Statista 2014 | c h i n a : International Monetary Fund, Statista 2014 | EY/Datamonitor/IHS Global Insight, Statista 2014 | CAAM Center of Auto- motive Research at the University of Duisburg-Essen, Statista 2014 | Experts according to the World Bank, Statista 2014 | 2013 NORMA Group Annual Report 4 QUESTIONS TO… B E R N D K L E I N H E N S , B OA R D M E M B E R B U S I N E S S D E V E LO P M E N T Short profile, page 15 Mr. Kleinhens, how long has NORMA Group been active in the APAC region and what were the reasons for the market entry? We entered the Asian market in 2008 when we opened our first own plant in China. Prior to making this move, NORMA Group was mainly a European company with a strong focus on the automotive industry. Our declared goal has always been and still is to lower our dependency on specific industries and regions in order to achieve the greatest possible diversification with respect to end markets and regional presence. We consider Asia to be an extremely exciting market in this regard. We are growing by double-digit figures in this region and we are seeing strong demand for our products here. This is also the case with industrial original equipment manufacturers, among others, especially in countries like China and India that have a lot of catching up to do. Due to increased demand, we opened a second plant in Changzhou last year and started serial production of a new profile clamp for a major Japanese customer just a few months later. Besides the vehicle industry, we also see growth opportunities in new markets such as water management, for example, which we will obviously be looking to take advantage of. Now that you’ve mentioned water, NORMA Group has expanded its water business quite significantly in recent years. What were the reasons for this and what are typical application areas? Water is a scarce commodity and its efficient use is becoming more and more important, considering the steadily growing population figures. Innovative solutions that ensure a reliable water supply are thus in great demand. This is precisely where we can deliver added value with our products. Joining technology is used wherever water needs to be controlled and drained or fed efficiently, whether in agriculture, supplying or disposing of water, or in sewage and sanitary systems. Does APAC play a special role here? We see immense potential for our water business in the APAC region. One reason is that there are many places here that have either no or only poor access to drinking water. Take India, for example. On the other hand, there are many extremely dry regions like Australia, for instance, where irrigation systems play an important role in agriculture. We have thus gradually expanded our activities in the region and bolstered them by acquiring the Malaysian connecting technology specialist Chien Jin Plastic in 2012 and the two Australian companies Davydick and Guyco in 2013. What plans does NORMA Group have for the Asia-Pacific region in the future? We plan to continue expanding our business in APAC in the future. APAC currently accounts for around 9% of our total sales. Our goal is to significantly increase its share over the medium term. We do not rule out making further acquisitions in the region as a way of achieving this objective. 22 38 30 48 13 16 Letter from the Management Board 107 Consolidated Financial Statements 18 Acquisition of NDS 26 To Our Shareholders 26 NORMA Group on the Capital Market 34 Supervisory Board Report 42 Corporate Governance Report 53 Consolidated Management Report 54 Principles of the Group 65 Economic Report 85 Supplementary Report 86 Forecast Report 90 Risk and Opportunity Report 100 Remuneration Report for the Management and Supervisory Boards 102 Other Legally Required Disclosures 108 Consolidated Statement of Financial Position 110 Consolidated Statement of Comprehensive Income 111 Consolidated Statement of Cash Flows 112 Consolidated Statement of Changes in Equity 114 Segment Reporting 116 Notes to the Consolidated Financial Statements Appendix to the Notes to the Consolidated 168 Financial Statements 171 Responsibility Statement 172 Auditor’s Report 173 Further Information 173 Glossary 177 Overview by Quarter 2014 178 Multi-Year Overview Financial Calendar 2015 Contact Imprint E X P L A N AT I O N O F S Y M B O L S @ Internet Cross Reference J O H N S T E P H E N S O N W E R N E R D E G G I M D R . O T H M A R B E L K E R B E R N D K L E I N H E N S 15 The Management Board W E R N E R D E G G I M C H I E F E X E C U T I V E O F F I C E R ( C E O ) • Vice President and General Manager, TRW Automotive, USA • Managing Director / Board member of Peguform GmbH • Various executive management positions, thereof 7 years in the USA and Canada D R . O T H M A R B E L K E R C H I E F F I N A N C I A L O F F I C E R ( C F O ) • CFO (Division) of an internationally active automotive industry supplier • CEO of a Do-it-Yourself chain • CFO of a listed German company • Director at a listed investment company • Restructuring consultant at Roland Berger & Partner B E R N D K L E I N H E N S B O A R D M E M B E R B U S I N E S S D E V E L O P M E N T With NORMA Group since the beginning of his professional career: • Global Sales Director for Commercial & Passenger Vehicles • Business Area Sales Manager for NORMACL AMP • Marketing Manager Automotive • Development Engineer J O H N S T E P H E N S O N C H I E F O P E R AT I N G O F F I C E R ( C O O ) • Vice President Operations at Hayes Lemmerz International • Director of Operations for Northern Europe at Textron Fastening Systems • Plant Manager and Managing Director of APW Electronics • Various positions, among others in the area of project and production management at Valeo Further information regarding the professional career of the Management and the Supervisory Board can be found in the Investor Relations section at the NORMA Group website @ http://investors.normagroup.com. 16 Letter from the Management Board Dear shareholders, customers and business partners, 2014 proved to be an exceptionally successful financial year for NORMA Group. We achieved most of our goals and continued writing our growth story. We once again managed to set new records for both sales and earnings and contributed to our further diversification and expanded our business by making two strategic acquisitions. The economic recovery of the American market, which is of growing importance to us, in the second half of the year and the continued dynamic development in Asia further strengthened our growth. But let us begin by taking a look at the most important figures: We managed to increase our sales by 9.3% last year to EUR 694.7 million and recorded (adjusted) EBITDA of EUR 138.4 million. (Adjusted) earnings for the period rose by 15.1% to EUR 71.5 million. Besides the positive effects of declining oil prices and the economic recovery in North America, the acquisitions of the two US companies, Five Star Clamps and National Diversified Sales (NDS), also contributed to our results. By resolutely implementing optimisation measures in all areas of the Group, we also managed to keep the largest cost positions relatively stable – despite the fact that the business continues to grow. With an (ad- justed) EBITA margin of 17.5%, we again achieved a high level in 2014 that is well above the industry average. We were thus once again able to prove that our business is sustainably profitable. To cover the long-term financing of NDS, we issued another promissory note in December 2014 in the amount of around EUR 209 million. The high demand on the part of our bank partners, which resulted in clear oversubscription, but also the extremely low interest rates, again showed what an excellent reputation we have on the capital market. We have strengthened this even further in recent years by engaging in an intensive and transparent dialogue with our stakeholders on the financial market. In connection with the acquisition of NDS, our net debt increased to EUR 353 million, which equates a leverage of around 2.5. However, thanks to our strong cash flow and the positive prospects for further business development, we are optimistic that we will be able to reduce our net debt already in this financial year. The acquisitions of NDS and Five Star were extremely important strategic milestones for us in financial year 2014. Five Star is a family-run company in the field of joining technology and has been marketing high-quality clamps and coupling products to more than 50 different industries for nearly 30 years. With its broad product range, many years of experience and its focus on the highest quality and service, the company fits in perfectly with NORMA Group. By acquiring Five Star’s business activities, we were able to significantly expand our customer base in the US market and our product portfolio. Five Star posted sales of USD 6.2 million in 2014. With the second acquisition we made at the end of October 2014, a company called NDS that specialises in water management, we took an important step into the fast growing water market and thus clearly diversified our business and future sales profile. NDS manufactures and markets products in the area of rainwater management and landscape irrigation, but also joining elements for infrastructure in the area of water, and has been doing so for over 40 years. With its more than 500 employees, 5,000 products and sales of around USD 128 million in financial year 2013, the acquisition of NDS marked the largest transaction for NORMA Group since its IPO. NDS will make a significant contribution to the Group’s growth in the future. In fact, the company already contributed sales of close to EUR 14 million in the financial year that just ended. NORMA Group SE Annual Report 201417 Dear shareholders, we have repeatedly proven that we are a fast growing and profitable Company in recent years. Nevertheless, long-term success and competitiveness cannot be defined by using only financial figures. A convincing Company and convincing investment for you, ladies and gentle- men, also needs to distinguish itself through responsible corporate management that is compatible with the interests of all stakeholders. For this reason, we decided to anchor the topic of Corporate Responsibility in our Group strategy in recent years and defined long-term goals and key measures. In financial year 2014, we even published our own Sustainability Report for the first time. This report contains in-depth information on our Corporate Responsibility Strategy, but also many different per- formance indicators that we will use to evaluate ourselves and monitor our activities. NORMA Group in its current form is still a relatively young Company. For this reason, it would be presumptuous to claim that we are already perfect in all areas. Nevertheless, you can be sure that we will work very hard to increase our ambitious goals with respect to sustainability within the Group in the long term. We will continue writing NORMA Group’s success story during the current year as well. By focussing closely on innovations, we plan to continue to meet our customers’ high demands for specific system solutions and thus strengthen our leading market and technological position even further in the future. Due to the high catch-up potential in the Asian region in particular and the constant progression of industrialisation, we see significant chances for our business and have therefore decided to dedicate this Annual Report to the Asia-Pacific region. Furthermore, we expect stricter emission regulations to be passed in the future in all regions of the world that will continue to present our customers with new challenges and require new solutions and innovative technologies. The new regulation on fleets in the EU, which requires that the average CO 2 emissions per vehicle fleet with passenger cars be reduced by 5.1% per year from now until 2020 is just one example. Both, our business and our development work will focus on this and other mega- trends. With this focus and an annual R&D investment ratio of 5% of EJT-sales, we are optimistic that we will be able to defend our leading position with respect to innovation in the future and make a significant contribution to sustainable use of resources. Dear shareholders, by increasing in value by around 10% last year, our share once again performed much better than the overall market. At the end of the year, NORMA Group’s market capitalisation amounted to around EUR 1.3 billion. We would like to thank you for the trust you have shown in our Company. We are pleased to have you participate again appropriately in our good net profit that we earned in financial year 2014. For this reason, we will be proposing a dividend of EUR 0.75 for financial year 2014 at our Annual General Meeting to be held on 20 May 2015. Last, but not least, we would like to thank our close to 6,000 employees all over the world who contribute to the success of NORMA Group each day through their hard work. Moreover, we would like to thank our customers and business partners for our good and trusting relationships. We look forward to receiving your continued support. Sincerely Werner Deggim CEO Dr. Othmar Belker CFO Bernd Kleinhens Business Development John Stephenson COO Letter from the Management Board18 O C T O B E R 2 0 14 NORMA GROUP ACQUIRES NATIONAL DIVERSIFIED SALES LO C AT I O N S O F N D S Headquarters Manufacturing site Distribution center N AT I O N A L D I V E R S I F I E D S A L E S ( N D S ) NDS is a leading US-American supplier of water management solutions. The company based in Woodland Hills, California, just north of Los Angeles, manufactures and markets products for use in stormwater management and landscape irrigation, but also flow management components for water infra- structure. The product line of NDS includes more than 5,000 products, which the company markets via more than 7,700 retail and wholesale customer locations in the USA. NDS has more than 500 employees at two production sites and six warehouses in the United States. NORMA Group SE Annual Report 2014 Acquisition of NDS 19 “In light of the global scarcity of water, there is a growing need for efficient solutions for the water supply and infrastructure. By acquiring NDS, we expanded our product portfolio and geographic presence to respond to this trend.” Werner Deggim, CEO of NORMA Group S T R AT E G I C E X PA N S I O N O F T H E WAT E R B U S I N E S S NORMA Group acquired NDS for the equivalent of EUR 226 million at the end of October 2014. For NORMA Group, the acquisition of the company that specialises in water represents the largest transaction since its IPO and is an important step toward further expanding its water business. By acquiring NDS, NORMA Group has not only broadened its product portfolio in the promising water market, but also extended its customer base and increased its geographic presence. Due to its customer structure, strong brands and sales model, NDS fits in perfectly with NORMA Group’s existing Distribution Services business. The field of water management that NORMA Group has been active in for many years is to become a much stronger part of the DS business. NDS thus joins the acquisitions that have been made in Malaysia and Australia in the area of water in recent years and contributes to broader diversification with respect to NORMA Group’s end markets and executing its long-term growth strategy. 7,700 R E TA I L A N D W H O L E S A L E C U S TO M E R LO CAT I O N S With its two manufacturing sites and six distribution centres, NDS has a com- prehensive sales network that enables it to supply approximately 7,700 retail and wholesale customer locations in the USA. Services such as overnight delivery at any time, high delivery reliability and outstanding product quality are of the highest priority. 20 USD 4.0 BN. U. S. market potential in the area of water management 500 employees and a highly motivated management team 98 % on-time delivery NORMA Group SE Annual Report 2014Acquisition of NDS 21 5,000 P R O D U C T S NDS has a broad product portfolio that ranges from collection solu- tions for stormwater to irrigation systems, infiltration modules, valves and ground and subsurface drainage pipes. NDS’s customers truly appreciate its comprehensive product line and the chance it gives them to do ‘one-stop shopping.’ S TO R M WAT E R M A N AG E M E N T Excess rainwater that is not drained off properly can cause severe damages to streets and buildings and have a significant impact on the environment. In order to avoid negative effects on the environment, legislators in the United States are calling on communities, companies and private homeowners to implement efficient rainwater management systems. NDS offers efficient solutions for this purpose that collect rainwater and transport it directly into the municipal sewage system. E F F I C I E N T L A N D S C A P E I R R I G AT I O N Water shortages pose a huge problem in many dry regions of the world. Moreover, the situation is further exacerbated by the steadily growing population and old and leaky infrastructure. Efficient use of water as a resource is therefore a top priority. NDS has developed innovative irrigation solutions for these applications that allow for water to be transported across long distances without any leakages. The NDS drip irrigation systems also ensure that only as much water is released as necessary. F LO W M A N AG E M E N T Water also plays an important role in the construction industry. Dependable solutions are needed for sanitary and pool systems, for example. NDS offers a wide range of water infra- structure solutions for these purposes. AUSTRALIA SUSTAINABLE MANA GE - MENT OF RESOURCES IS BECOMING INCREAS- INGLY IMPORTANT. NORMA GROUP IS STRA- TEGICALLY EXPANDING ITS ACTIVITIES IN THE AREA OF INNOVATIVE AND EFFICIENT WATER MANAGEMENT – AN IMPORTANT STEP INTO THE FUTURE. and top service are extremely Group has been significantly expanding 2013, Leak-tight joining solutions of the highest quality important in the water market. NORMA its activities in Australia in the last few years. In NORMA Group acquired Davydick and Guyco, who have been in the business for around 20 YEARS. The Group has thus not only strengthened presence quite significantly. its product portfolio, but also its regional Both subsidiaries serve 700 CUS TOMERS.  Leak-tight joining solutions of the highest quality important in the water market. NORMA its activities in Australia in the last few years. In NORMA Group acquired Davydick and Guyco, and top service are extremely Group has been significantly expanding 2013, who have been in the business for around 20 YEARS. its product portfolio, but also its regional Both subsidiaries serve The Group has thus not only strengthened presence quite significantly. 700 CUS TOMERS. G L A S S F I B E R R E I N F O R C E D N Y LO N B A L L VA LV E F R O M G U YC O ® This glass fiber reinforced ball valve is a product from Guyco, the Australian subsidiary that was acquired in 2013. The valve is both UV- and corrosion- resistant and therefore ideally suited for use in landscape irrigation. 26 NORMA Group on the Capital Market • NORMA Group share rises by 10% and outperforms indices • Regionally highly diversified shareholder structure • First Sustainability Report published CA PITAL M ARKE TS CH AR ACTER ISED BY HIGH VOL ATILIT Y The world’s capital markets were very volatile in 2014. The many geopolitical crises, economic problems in the euro zone, the fear of the spread of the Ebola virus and the continued ex- pansionary monetary policies of central banks resulted in lively rises and falls on the stock market, particularly in the second half of the year. The DA X, which fell to a low of 8,354 points for the year in October, closed at a new record level of 10,093 points in early December. On the final trading days of the year, however, con- cerns about the political developments in Greece dimmed the sentiment on the German stock market once again so that the leading German index only recorded a meagre gain of 2.7% at the year’s end by closing at 9,805 points. Despite tempo- rary highs, the comparable MDA X index that is of relevance to NORMA Group also rose by only 2.2%. The US stock exchanges, on the other hand, performed some- what better. Supported by positive corporate data and the solid growth of the US economy, the major US indices even recorded new highs in the fourth quarter. The Dow Jones ended the year 7.5% higher at 17,823 points. The S&P 500 even rose by as much as 11.4% and closed at 2,058 points. NOR M A GROUP SH AR E ROSE BY ALMOST 10% NORMA Group’s share performed significantly better than the market in 2014 and continued its upward trend. At the end of the year, the share closed at a price of EUR 39.64 and thus achieved a profit of close to 10% over the closing price of the previous year (EUR 36.09). NORMA Group’s market capitalisation amounted to EUR 1.26 billion on 31 December 2014. The underlying number of shares remained unchanged at 31,862,400 compared to the previous year. Measured against the market capitalisation of relevance for S H A R E P R I C E P E R F O R M A N C E I N D E X E D T O 10 0 C O M PA R E D T O T H E M D A X A N D D A X in % 30 20 10 0 –10 – 20 NORMA Group SE MDAX DAX Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec NORMA Group SE Annual Report 201427 D I S T R I B U T I O N O F T R A D I N G A C T I V I T Y I N 2 0 14 F R E E F L O AT B Y R E G I O N in % 38 Block trades in % Rest of the world 13 32 USA 41 Official trading 13 France 8 Nordic 21 Alternative trading platforms 18 United Kingdom 16 Germany defining the index membership of the free float, which has been 100% since 2013, NORMA Group shares finished December 2014 unchanged compared to the previous year and came in 38th place in the MDA X. VOTING RIGHTS NOTIFICATIONS 2014 According to the voting rights notifications received in 2014, shares of NORMA Group designated as free floating and amount- ing to over 3% are held by the following institutional investors: SLIGHTLY LOWER TR ADING VOLUME The average Xetra trading volume of the NORMA Group share was 73,932 shares per day (2013: 86,570) in the period from January to December 2014. The NORMA Group share thus came in 47th place (2013: 46th) in the MDA X in December 2014. Though the value of the average daily Xetra trading volume was EUR 2.80 million (2013: EUR 2.53 million). The total average number of daily traded shares was 199,934 in 2014 (2013: 209,887). The percentage of shares traded on the regulated market re- mained unchanged compared to the previous year at 41%. The percentage of shares traded via alternative platforms on the other hand rose from 15% to 21%, while the shares traded by way of block trades declined from 43% to 38%.  Chart: Free float by region. BROADLY DIVERSIFIED SH AR EHOLDER STRUCTUR E The NORMA Group share has gained greater international re- cognition in recent years due to active investor relations work. As a result, foreign investors have become increasingly import- ant. In the meantime, NORMA Group now has a regionally highly diversified shareholder base with a huge share of international investors mainly from the USA, the UK, France and Scandinavia. German investors hold around 16% of the shares. Approximately 96% of NORMA Group shares are owned by in- stitutional investors, 2.42% (2013: 2.5%) by management, and 1.8% (2013: 1.5%) by private investors. The number of private investors (excluding management) increased from 2,149 to 2,510 over the course of financial year 2014. in % Ameriprise Financial Inc., Minneapolis, USA BlackRock, Inc., New York, USA Mondrian Investment Partners, Ltd., London, United Kingdom Allianz Global Investors Europe GmbH, Frankfurt, Germany BNP Paribas Investment Partners S.A., Paris, France Delta Lloyd N.V., Amsterdam, The Netherlands The Capital Group Companies, Inc., Los Angeles, USA T. Rowe Price International, Ltd., Baltimore, USA 9.96 5.70 5.34 5.02 3.15 3.08 3.05 3.02 As of 31 December 2014. More information regarding the voting rights can be found on page 168. All voting rights notifications are published on the Company’s website @ http://investors/normagroup.com. 2014 A NNUAL GENER AL MEE TING The Ordinary Annual General Meeting of NORMA Group SE was held on the premises of the DVFA Center in Frankfurt/Main on 21 May 2014. 18,356,839 of the 31,862,400 shares with voting rights, i.e. 57.6% of the share capital were represented at the meeting. The participating shareholders resolved a dividend of EUR 0.70 per share. This corresponded to a distribution rate of 35.9% based on NORMA Group’s adjusted net profit for the financial year of EUR 62.1 million. All items on the agenda were approved with majorities of more than 96%. To Our ShareholdersNORMA Group on the Capital Market 28 DIR ECTOR’S DE ALINGS The following Director’s Dealings took place in financial year 2014: A N A LY S T R E C O M M E N D AT I O N S Sell 1 Description of the financial instrument ISIN Issuer Person subject to mandatory reporting Reason Relationship Date Type of transaction Trading place Price Number of shares Total volume NORMA Group SE registered no-par value share DE000A1H8BV3 NORMA Group SE Katrin Belker Natural person in a close relationship Hold 6 Wife 18 November 2014 Sale Over the counter EUR 37.90 25,000 EUR 947,500 R ESE ARCH COVER AGE AT A HIGH LE VEL In 2014, 18 analysts from different banks and research firms followed NORMA Group. As of 31 December 2014, there were eleven recommendations to ‘buy,’ six to ‘hold’ and one to ‘sell.’ The average price target was EUR 41.34 at the end of Decem- ber 2014 and thus around 15% higher than the price target on 31 December 2013 (EUR 35.81). In February 2015, Benjamin Gläser from Jefferies started covering NORMA Group. In his initial study, he recommended buying the NORMA Group share with a price target of EUR 53. 11 Buy SUSTAIN ABLE IN VESTOR R EL ATIONS ACTIVITIES NORMA Group’s investor relations activities seek to further increase awareness of the Company on the capital market, strengthen confidence in its share and achieve a realistic and fair valuation. Therefore, the management and those responsible for IR hold many discussions with institutional investors, financial analysts and private shareholders over the course of the year. The Management Board and the IR team of NORMA Group conducted 43 roadshows in Europe and North America’s most important financial centres in 2014. Furthermore, NORMA Group attended the following conferences. • Kepler Cheuvreux German Corporate Conference, Frankfurt/Main • Goldman Sachs European Small and Mid Cap Symposium, A N A LY S T S C O V E R I N G N O R M A G R O U P London Baader Bank Bankhaus Lampe Bankhaus Metzler Bank of America Merrill Lynch Berenberg Bank Commerzbank Deutsche Bank DZ Bank Exane BNP Paribas Goldman Sachs Hauck & Aufhäuser HSBC Jefferies Kepler Cheuvreux Macquarie MainFirst NordLB Oddo Seydler Bank AG Warburg Research Peter Rothenaicher Christian Ludwig Jürgen Pieper Paul R. Hartley Kai Müller Ingo-Martin Schachel Tim Rokossa Jasko Terzic Gerhard Orgonas Will Wyman Philippe Lorrain Jörg-André Finke Benjamin Gläser Hans-Joachim Heimbürger Christian Breitsprecher Tobias Fahrenholz Frank Schwope Daniel Kukalj Christian Cohrs • Commerzbank German Mid Cap Investment Conference, Boston and New York • Deutsche Bank German, Swiss and Austrian Conference, Berlin • UBS Best of Germany Conference, New York • Commerzbank Sector Conference, Frankfurt/Main • Berenberg / Goldman Sachs German Corporate Conference, Munich • Baader Investment Conference, Munich • LBBW German Company Day, London • Exane BNP Paribas Midcap Forum, London • 12th Berenberg European Conference, Surrey SERVICE FOR SH AR EHOLDERS Shareholders and those interested can register in the investor relations section of the Company website @ http://investors. normagroup.com to receive the circular letter for investors from NORMA Group. They will be informed promptly by e-mail of any developments within the Group and automatically receive the regular publications. NORMA Group SE Annual Report 2014 29 Furthermore, comprehensive information on the NORMA Group share is published on the website. Besides financial reports and presentations that can be downloaded, all important financial mar- ket dates and details on how to reach the contact partners can be found there. The teleconferences on the quarterly and annual financial statements are recorded and offered in audio format. FIRST SUSTAIN ABILIT Y R EPORT PUBLISHED N O R M A Group published its first Sustainability Report on financial year 2013 in November 2014. The growing interest of stakeholders in ecological, societal and social topics has thus now been taken into account. The Sustainability Report entitled ‘Responsibility Connects’ contains further information on the Group’s Sustainability Strat- egy and presents figures on employee development, ecological aspects and the social and societal activities of NORMA Group. The report thus complements N O R M A Group’s Corporate Responsibility website @ www.normagroup.com/cr that was published back in February 2014 and is available for down- loading on the Company’s website. NOR M A GROUP 2013 A NNUAL R EPORT R ECEIVES NUMEROUS AWAR DS NORMA Group’s 2013 Annual Report excelled in numerous national and international competitions and received the fol- lowing awards: • L ACP Vision Award Bronze in the category ’Other Industries’ • 2014 FOX Awards Silver for the very good interplay between content and context • 2014 Good Design Award for outstanding design In the competition ‘Investor’s Darling’ that was held by manager magazin for the first time in 2014, NORMA Group came in 27th place out of 188 total entries for its capital market communications. K E Y F I G U R E S O F T H E N O R M A G R O U P S H A R E S I N C E T H E I P O Closing price on 31 Dec. (in EUR) Highest price (in EUR) Lowest price (in EUR) 2014 39.64 43.585 30.755 2013 36.09 39.95 21.00 2012 21.00 23.10 15.85 2011 8 April 20111) 16.00 21.58 11.41 21.00 2) n/a n/a Number of unweighted shares as of 31 Dec. 31,862,400 31,862,400 31,862,400 31,862,400 31,862,400 Market capitalisation as of 31 Dec. (in EUR millions) 1,263 1,150 669 510 73,932 86,570 54,432 46,393 2.80 1.72 2.24 0.75 1.9 33.4 23.05 2.53 1.74 1.95 0.70 1.9 35.9 20.7 1.04 1.78 1.94 0.65 3.1 33.5 11.8 1.45 1.19 1.92 0.60 3.8 33.2 13.4 669 n/a n/a n/a n/a n/a n/a n/a n/a Average daily Xetra volume Shares EUR million Earnings per share (in EUR) Adjusted earnings per share (in EUR) Dividend per share 3) (in EUR) Dividend yield (in %) Distribution rate 4) (in %) Price-earnings ratio Indices MDA X, CDA X, Classic All Share, Prime All Share, DA X International 100, DA Xsector Industrial, DA Xsubsector Products & Services, HDA X, MIDCAP MK T PR, MIDCAP MK T TR, ST XE TM Automobiles & Parts Index, ST XE TM Small Index, ST XE Total Market Index 1) IPO and first trading day of the NORMA Group share 2) Issuing price 3) in accordance with the Management Board’s proposal for the appropriation of net profit, subject to ap- proval by the Annual General Meeting on 20 May 2015. 4) in relation to adjusted net profit S H A R E P R I C E D E V E L O P M E N T S I N C E T H E I P O I N A P R I L 2 0 11 in EUR 45 40 35 30 25 20 15 10 2011 2012 2013 2014 To Our ShareholdersNORMA Group on the Capital Market INDIA ACCESS TO SUFFICIENT CLEAN WATER IS CRITI- CAL TO A COUNTRY’S HEALTHY GROWTH. NORMA GROUP HAS THE KNOW-HOW NEEDED TO BUILD A MODERN AND SUSTAINABLE INFRA- STRUCTURE. NORMA Group has been active in India in Pune since 2012. Connections for since 2009 and at the new plant hoses and pipes are manufactured have also been expanded strongly here. The Group Water’ in 2014. The objective is to enable 50 teachers at schools located the water supply and better hygiene. here on 6,500 m2 The areas of development and construction launched the aid programme ‘NORMA Clean 14,000 children and near Pune to benefit from improvements in N O R M AC O N N E C T ® FG R P I P E C O U P L I N G The FGR pipe coupling from NORMA Group allows for leak-free connection of pipes and is used for pipeline construction, shipbuilding and water industries, among other fields. NORMA Group has been active in India in Pune since 2012. Connections for since 2009 and at the new plant hoses and pipes are manufactured 6,500 m2 here on The areas of development and construction launched the aid programme ‘NORMA Clean 14,000 near Pune to benefit from improvements in children and of floor space. have also been expanded strongly here. The Group Water’ in 2014. The objective is to enable 50 teachers at schools located the water supply and better hygiene. 34 Supervisory Board Report The Supervisory Board of NORMA Group SE has monitored and advised on the activities of the Management Board in financial year 2014 in accordance with the rules of the German Stock Corporation Act, the German Corporate Governance Code and NORMA Group’s Articles of Association. The Management Board reports to the Supervisory Board regularly in written form on a monthly basis on the business development of NORMA Group SE and the Group and provides a forecast for the current financial year. The development of sales and earnings, incoming orders and order backlog are described in detail compared to the previous year and current targets. Other topics that are covered in the quarterly reports include the economic trend and significant operational perfor- mance indicators. In financial year 2014, NORMA Group’s Supervisory Board con- vened for four regular meetings which were also attended by the entire Management Board. Subsequent to this, the Supervisory Board convened without the Management Board. Additional Supervisory Board meetings, a total of four in financial year 2014, were also conducted as needed via teleconference on short notice. The Management Board provided extensive information about the current course of business at the Supervisory Board’s regular meetings. In particular, all key figures for the Group and NORMA Group SE were discussed and compared to the previous year’s figures and current targets. At every meeting, the Management Board provided the Supervisory Board with information concern- ing the order situation as well as its assessment of the economic outlook and market developments. At each regular meeting of the Supervisory Board, the Management Board also presents a risk report in which the probability of occurrence and potential effects of all relevant risks are assessed. This regular risk reporting pro- vides the Supervisory Board with a clear picture of which possible risks could have a negative impact on the Company’s assets, financial and earnings position. The Supervisory Board worked together with the Management Board to develop measures to avoid and reduce potential effects of the risks that were consid- ered highly relevant and likely to occur. In addition, the Super- visory Board and Management Board frequently discuss NORMA Group’s long-term strategic orientation and current M&A projects. In addition to these regularly recurring topics, the Supervisory Board also dealt with the following issues in financial year 2014: Supervisory Board meeting held on 26 March 2014 in Maintal The 2013 annual financial statements and management report of NORMA Group SE as well as the corresponding consoli- dated financial statements and group management report pre- sented by the Management Board were discussed in detail by the Supervisory Board with the auditors in attendance from the engaged auditing firm, PricewaterhouseCoopers Aktien- gesellschaft Wirtschaftsprüfungsgesellschaft. This discussion focused, among other matters, on the acquisitions made that year, the development of earnings and the further development of the internal control system in the respective Group sub- sidiaries. The members of the Audit Committee reported on their in-depth discussion with the auditors on 26 March 2014 and, among other topics, on changes in IAS 19 and DRS 20, the current impairment tests as well as the effects of the spin-off of NORMA Pennsylvania Inc. to NORMA Group SE. The consolidated financial statements of NORMA Group SE were prepared in accordance with section 315a of the German Commercial Code (Handelsgesetzbuch, HGB) on the basis of International Financial Reporting Standards (IFRS). The audi- tor issued an unqualified opinion for the 2013 annual financial statements and management report of NORMA Group SE as well as for the consolidated financial statements and group management report. The documents pertaining to the financial statements, the Management Board’s proposal for the appro- priation of net profit and both auditors’ reports were submitted to the Supervisory Board. The Supervisory Board accepted the auditor’s findings and had no objections. NORMA Group SE Annual Report 2014Supervisory Board Report 35 Chairman of the Supervisory Board Dr. Stefan Wolf The Supervisory Board then approved and adopted the annual financial statements of NORMA Group SE as well as the 2013 consolidated financial statements along with the associated management reports. The Supervisory Board also approved the Management Board’s recommendation on the utilisation of unappropriated net profits and an increase in the dividend to EUR 0.70 per ordinary share. As part of the report on current business trends, the Manage- ment Board presented different packages of measures, in- cluding a plan on how to improve the margin in the Asia-Pacific region over the medium term, the current status of implementa- tion of quality assurance measures in production and measures aimed at increasing productivity. The Management Board also discussed the repayment of foreign currency loans that took place in the first quarter. Furthermore, it announced that the closure of the production site of the Italian Nordic Metalblok Srl. is being considered and therefore a consultation process is to take place with the SE works council and regional employee representatives. The Supervisory Board discussed the purchase of leased land and buildings in the USA and agreed to purchase the property in St. Clair that is already being used. The Supervisory Board discussed the status of acquisition pro- jects and approved the acquisition of the business of the small company Five Star Clamps, Inc. in the USA. The Supervisory Board discussed the principles of NORMA Group’s IT strategy, in particular alternative ERP systems. The Supervisory Board’s examination of the efficiency of its activities specified in the German Corporate Governance Code was also carried out during the Supervisory Board meeting on 26 March 2014. Supervisory Board meeting held on 21 May 2014 in Frankfurt / Main The Supervisory Board meeting began immediately following the third annual shareholders’ meeting of NORMA Group SE with a review of the successfully concluded annual share- holders’ meeting. The detailed discussion of current business developments in- cluded in particular questions pertaining to sales, high and stable delivery performance and expectations on changes in freight and material costs. The quality level that has been achieved was also discussed. The Management Board presented the impact of current exchange rate volatility on NORMA Group. The Management Board also presented several major potential acquisition targets under the agenda item ‘Strategic Projects and Acquisitions.’ The Supervisory Board discussed the stra- tegic implications and their opportunities and risks. The cur- rent price levels were also discussed. The Supervisory Board prioritised the existing acquisition alternatives and encouraged the Management Board to implement the M&A strategy that it had proposed. The Supervisory Board discussed the considerations presented by the Management Board to finance potential acquisitions and agreed to the preparation of various financing components. The risks of business in Russia and compliance issues were among the items discussed under the topic of risk management. Supervisory Board meeting held on 19 September 2014 in Maintal The Management Board reported in detail on the Group’s busi- ness performance in the first eight months of 2014. The subse- quent discussion focused, among other topics, on the volatile business development and the special costs of implementing a To Our Shareholders36 new ERP system at an American site. In addition, the economic expectations were discussed as the basis of the preview of the year’s end. Additional investments in machine safety were planned as a result of a recent accident. reported on the status of other ongoing M&A activities. Due to high demand and the associated favourable financing terms, the Supervisory Board approved an increase in the volume of the new promissory note, which had already been approved in advance by circular resolution. The Management Board presented an update of its growth strategy for the Asia-Pacific region. Following the many years of hard work that John Stephenson has done to lay the founda- tion, Bernd Kleinhens is now the member of the Management Board who has also taken over the role of Regional President based in Singapore. The Supervisory Board discussed the multi-brand strategy that was presented, plans to form a reverse engineering team as well as the medium-term location of the regional headquarters. The new president of the EME A region introduced himself and explained his plans for the production site in Serbia. The new CIO of NORMA Group presented a detailed update on the IT strategy that focuses on gradual further standardisation of the heterogeneous application landscape that has historically grown through acquisitions. Following detailed discussion, the Supervisory Board took note of the strategic direction and ex- pressed its approval. The Management Board reported on the status of the acqui- sition negotiations and the acquisition process with respect to National Diversified Sales, Inc. in the USA (NDS). After detailed discussion, the Supervisory Board approved the acquisition. The Management Board presented the replacement of the ex- isting senior facility agreement (SFA, loan agreement) with a new credit agreement as well as the proposal of a bridge loan to cover a major acquisition. The Supervisory Board approved the financial measures presented after in-depth discussion. Supervisory Board meeting held on 26 November 2014 in Maintal After discussion of the current business development, the Management Board presented the Supervisory Board with the planning for financial year 2015 and the medium-term plan for the years 2016–2019. The planning is based on external data on the economic development of demand on a customer-spe- cific and national basis. The Supervisory Board discussed the opportunities and risks of the expected market development, the assumptions on the development of major cost items and also discussed accounting implications, alongside utilisation and investment issues. Besides the balance sheet planning, the development of cash flow was also discussed in great detail. The medium-term planning for 2016–2019 was then discussed. The 2015 budget and the medium-term planning were both ap- proved by the Supervisory Board. The Management Board presented the status of integration planning for NDS, which the Management Board is notified of at least once a month. Furthermore, the Management Board In 2014, all Supervisory Board members, Erika Schulte, Dr. Stefan Wolf, Lars M. Berg, Dr. Günter Hauptmann, Knut Michel- berger and Dr. Christoph Schug, participated in every Super- visory Board meeting. During the additional conference calls, the Supervisory Board essentially discussed the search for a new CFO. Because one member of the Supervisory Board could not participate in a conference call, this Board member had already spoken with the Chairman in advance. All members of the Supervisory Board participated in the remaining three conference calls. There were no conflicts of interest between the members of the Supervisory Board and the Company in financial year 2014. In addition to the regular monthly reporting and the Super- visory Board meetings, the Chairman of the Supervisory Board remained in constant contact with the Chairman of the Management Board by telephone and e-mail in financial year 2014. This communication dealt with assessments of the Com- pany’s economic situation, important business transactions and special incidents as well as M&A and financing projects. The Chairman of the Supervisory Board informed the other members of the Supervisory Board of the important and relevant issues that were discussed by the Chairman of the Supervisory Board and the Chairman of the Management Board by e-mail or by phone. The Management Board promptly alerted the Supervisory Board of all transactions requiring its approval in financial year 2014. The Supervisory Board made all of its decisions on the basis of detailed and well-founded documents. The General and Nomination Committee did not convene in 2014. Personnel issues were discussed directly with all mem- bers of the Supervisory Board. As the Chairman of the Audit Committee, Dr. Schug regularly reported on the committee’s meetings during several Super- visory Board meetings. The Audit Committee of NORMA Group convened four times in the financial year just ended. In addition, it held three detailed telephone conferences concerning the quarterly reporting and the annual audit and how it was to be prepared. All members of the Audit Committee, Dr. Christoph Schug as the Chairman and Lars Berg and Knut Michelberger, participated in all meet- ings of the Audit Committee. CFO Dr. Othmar Belker from the Management Board attended all the meetings, as did officers of the second management level to advise on technical issues in their areas of responsibility (including accounting, report- ing, treasury, controlling, risk management, taxes, integration, NORMA Group SE Annual Report 2014Supervisory Board Report 37 The Supervisory Board dealt with the declaration of conformity with the Corporate Governance Code and approved the version for financial year 2014 on 20 February 2014. NORMA Group’s declaration of conformity is available on the Company’s website @ http://investors.normagroup.com. The Supervisory Board would like to thank all employees of NORMA Group all around the world and the Management Board for their personal efforts and successful work once again in financial year 2014. The Supervisory Board is confident that NORMA Group will continue to grow successfully, also by in- cluding the newly acquired company NDS in California in finan- cial year 2015. Dettingen / Erms, 18 March 2015 Dr. Stefan Wolf Chairman of the Supervisory Board internal audit, legal and IT). The auditors Dr. Ulrich Störk and Benjamin Hessel from PricewaterhouseCoopers Aktienge- sellschaft Wirtschaftsprüfungsgesellschaft participated in the Supervisory Board meeting to approve the balance sheet as well as in five Audit Committee meetings and / or teleconfer- ences. The Audit Committee discussed the quarterly figures and accompanied the audit of the 2014 annual financial state- ments. Core controls and areas of audit emphasis as well as the preliminary and final results of the audit were also discussed with the auditors. The execution and results of the audit of the NORMA Group SE annual and consolidated financial statements as well as individual accounting issues were discussed in detail. The Audit Committee accompanied the planning process and budgeting and dealt with the compliance management system and current compliance topics as well as current topics from In- ternal Auditing, Treasury (specifically the renewal of the SFA and acquisition financing by issuing a promissory note), Controlling and the integration of newly acquired companies. In addition to the Audit Committee meetings, the Chairman of the Audit Committee was in regular personal and telephone contact with the CFO and held a separate meeting with the auditors and the CFO to discuss possible areas of emphasis for the audit of the 2014 annual financial statements. The 2014 annual financial statements for NORMA Group SE presented by the Management Board were audited by the auditing firm PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft along with the management report and the corresponding consolidated financial statements and group management report. The auditors were engaged on 4 August 2014. The consolidated financial statements of NORMA Group SE were prepared in accordance with section 315a of the German Commercial Code (Handelsgesetzbuch, HGB) on the basis of International Financial Reporting Standards (IFRS). The audi- tor issued an unqualified opinion for the 2014 annual financial statements and management report of NORMA Group SE as well as for the consolidated financial statements and group management report. The documents pertaining to the financial statements, the Management Board’s proposal for the appro- priation of net profit and both auditors’ reports were submitted to the Supervisory Board. The Audit Committee and the Super- visory Board in its entirety thoroughly examined the reports and discussed and scrutinised them in detail together with the auditor. The Supervisory Board accepted the auditor’s findings and had no objections. The Supervisory Board then approved the annual financial statements of NORMA Group SE and the 2014 consolidated financial statements together with their respective management reports at its meeting on 18 March 2015. The Supervisory Board approved the proposal on the appropriation of profits by the Management Board. NORMA Group SE’s annual financial state- ments are thereby adopted in accordance with section 172 of the German Stock Corporation Act (Aktiengesetz, AktG). To Our ShareholdersSINGAPORE/MALAYSIA BOTH COUNTRIES ARE HIGHLY DYNAMIC AND SERVE AS IM- PORTANT HUBS IN THE SOUTHEAST ASIAN REGION. NORMA GROUP MAKES A VITAL CONTRIBUTION TO THE DRINKING SUPPLY AND PROVIDES WATER TO BUILDINGS. Chien Jin Plastic became a NORMA Group in 2014. The innovative leakages and ensure that the valuable resource 250 DISTR in more than 30 countries. 100% products the Malaysian company supplies prevent water is used efficiently. Chien Jin Plastic supplies IBUTORS Equipping the 101 HECTARE with joining solutions can be considered a rather park ‘Gardens by the Bay’ in Singapore special project. subsidiary of products the Malaysian company supplies prevent water is used efficiently. Chien Jin Plastic supplies 100% IBUTORS 101 HECTARE with joining solutions can be considered a rather NORMA Group in 2014. The innovative leakages and ensure that the valuable resource 250 DISTR in more than 30 countries. Equipping the park ‘Gardens by the Bay’ in Singapore special project. F I S H ® P U S H F I T C O M P R E S S I O N F I T T I N G The FISH® brand compression fitting for non-potable applications enables fast and secure connection of polyethylene pipes for industrial, commercial or private use. The compression fitting manufactured in Malaysia provides for efficient irrigation in the Gardens by the Bay, a huge artificial park in Singapore. 42 Corporate Governance Report The following is the Management Board’s declaration of confor- mity in accordance with article 289a of the German Commercial Code (Handelsgesetzbuch, HGB) and section 3.10 of the Ger- man Corporate Governance Code. The declaration is part of the Consolidated Group Management Report. 1. DECL AR ATION OF CONFOR MIT Y WITH THE GER M A N COR POR ATE GOVER N A NCE CODE The Supervisory Board and Management Board of NORMA Group SE thoroughly examined which of the German Corpo- rate Governance Code’s recommendations and suggestions NORMA Group SE should follow and explains deviations from the recommendations and the reasons for deviating from the Code. The current declaration dated 20 February 2015 as well as all the other declarations are published on NORMA Group’s website @ http://investors.normagroup.com. The declaration dated 20 February 2015 is presented below: With the following exceptions, NORMA Group SE has complied with the recommendations of the German Corporate Gover- nance Code as amended on 24 June 2014, published by the Federal Ministry of Justice in the official section of the Federal Gazette (“Bundesanzeiger”) since its last declaration was sub- mitted and will continue to comply with the recommendations: I. With respect to the compensation of the members of the Management Board, the Supervisory Board does not take into account the compensation of the upper management or the workforce as a whole (Section 4.2.2 para. 2 of the German Corporate Governance Code). When determining the compensation of the Management Board, the Supervisory Board, advised by an external ex- pert, also took into account the compensation structure of the Company as well as the entire NORMA Group. Due to the NORMA Group’s dynamic development, the Super- visory Board has so far not explicitly defined the upper management or the relevant workforce and, therefore, does not take these groups or their development over time into account. II. The remuneration of the Management Board is not capped, either in total or in terms of its variable com- pensation elements (Section 4.2.3 para. 2 of the German Corporate Governance Code). The maximum gross option profit from the Matching Stock Programme (MSP) for the Management Board is limited in total to a percentage of the average annual EBITA during the vesting period; therefore a relative maximum limit that is dependent on the Company’s success is applied rather than a maximum monetary amount. The maximum amount of the long-term variable remuneration under the Long-Term- Incentive-Programme (LTI) is limited to 250% of the amount that results based on the three-year average value of the annual EBITA or the free cash flow that the Company has budgeted multiplied by the respective bonus percentages set in the employment contract. III. The remuneration of the Management Board is not to be disclosed on an individual basis (Section 4.2.5 para. 3 of the German Corporate Governance Code). The Annual General Meeting held on 6 April 2011 resolved not to disclose the remuneration for individual Management Board members between 2011 and 2015. The Board is committed to upholding this resolution. For this reason, the reference tables attached to the German Corporate Gover- nance Code cannot be used unchanged, but rather only the indi vidual components of remuneration each as a total sum for the entire Management Board. Both the Management Board and the Supervisory Board believe that this overview is sufficient in assessing the appropriateness of the remu- neration of the Management Board. NORMA Group SE Annual Report 2014 Corporate Governance Report 43 IV. Concrete objectives regarding the composition of the Supervisory Board are not set and, therefore, are not pub- lished in the Corporate Governance Report. There is no age limit. (Section 5.4.1 para. 2 of the German Corporate Governance Code). All members of the Supervisory Board will continue to com- ply with all pertinent legislation related to Supervisory Board nominations for new Supervisory Board members and take the professional and personal qualifications of candidates into account, regardless of their gender. Thereby they will take the number of independent members of the Super- visory Board, potential conflicts of interest, the international business of the Company and the diversity of the Super- visory Board into consideration. Because of this, the Com- pany sees no need to set concrete objectives in this area or to introduce an age limit. V. During the transformation of NORMA Group AG into an SE, the members of the Supervisory Board were not chosen in a separate election (Section 5.4.3 of the Ger- man Corporate Governance Code). All members of the first Supervisory Board of NORMA Group SE were elected as part of the transformation pursuant to Article 40 para. 2, 2nd sentence SE VO in accordance with the Articles of Association to ensure that the resolution on the election of the members of the Supervisory Board could not be challenged separately. Otherwise, the risk could not be ruled out that the Company would have no Supervisory Board or that the board would have an insufficient number of members after the transformation was entered in the com- mercial register. 2 . R ELE VA NT INFOR M ATION ABOUT COR POR ATE GOVER N A NCE PR ACTICES Responsibility, honesty and mutual respect among manage- ment and employees define NORMA Group’s corporate culture. NORMA Group expects its managers and employees to not only comply with mandatory laws and regulations, but also ethical rules. The compliance documents are the most important re- sources for demonstrating to the employees their ethical and legal obligations. The central compliance documents, the ‘Code of Conduct’ and the two fundamental guidelines ‘Conflicts of Interest’ and ‘Anti-corruption’ are binding for all employees of NORMA Group. These documents are adjusted to reflect changes in legal requirements and current topics as necessary and regularly updated. Potential compliance infringements can be reported via a special e-mail address. The staff is trained in in-person meetings or online training courses on compliance- related issues. In addition, compliance risks are analysed as part of internal compliance risk assessments. The Supervisory Board monitors the Management Board’s ad- herence to compliance rules. The Compliance Officer of NORMA Group SE performs this function for the employees of NORMA Group SE. In the other Group companies, the Chief Compli- ance Officer of NORMA Group Holding GmbH is responsible for the observance and administration of the above-mentioned Code for all employees of NORMA Group Holding GmbH and its associated companies. Each Group company with busi- ness operations has its own compliance officer and the three regional compliance officers for the regions EME A, Americas and Asia-Pacific report to the Chief Compliance Officer. Among other things, the local Compliance Officers organise on-site compliance training measures for the employees. They are also responsible for ensuring that potential violations of compliance rules are reported, investigated, sanctioned, rectified and pre- vented in the future. NORMA Group encourages its employees to report violations of regulations and internal guidelines – skip- ping the chain of command if necessary – and to recommend measures for improvement. To Our Shareholders 44 3 . ALLOCATION OF COMPE TENCES BE T WEEN THE 4. M A N AGEMENT BOAR D A ND M A N AGEMENT A ND THE SUPERVISORY BOAR D R EGION AL M A N AGEMENT NORMA Group SE has a dual management system in which the management, i.e. the Management Board, is monitored by a separate Supervisory Board. The Management Board manages the Company under its own responsibility and determines the strategy in agreement with the Supervisory Board, while the Supervisory Board appoints, advises and monitors the Man- agement Board. This model corresponds to the organisation of a traditional German stock corporation and has not been changed with the transformation of NORMA Group AG into a Societas Europaea. The Management Board provides the Supervisory Board with regular updates about business policies and the position of the Company – in particular the development of sales and trans- actions that could have a significant impact on profitability or liquidity. The Management Board reports on a monthly basis the key figures of the Group and the current course of business to the Supervisory Board, in particular with regard to the published statements on the expected development of the Company. Based on the written documents that were submitted to the Supervisory Board in advance, the members of the Manage- ment Board report in great detail on business developments and provide an outlook on the expected future development of NORMA Group at the Supervisory Board meetings. Other re- curring topics at all meetings include the monthly and quarterly figures, risk analysis and measures aimed at minimising any risks that had been detected, reports by the respective Com- mittee Chairmen on the previous meetings held and strategic projects, especially acquisitions as part of the Group-wide M&A strategy. All Management Board members participate in the Supervisory Board meetings. The Supervisory Board convenes separately after meeting with the Management Board. The Chairman of the Supervisory Board and the Chairman of the Management Board coordinate the collaboration of the two boards. They also stay in regular contact between Super visory Board meetings and discuss current corporate governance issues. In accordance with the by-laws of the Management Board and NORMA Group’s Articles of Association, the Supervisory Board must approve certain important transactions. This applies not only for measures at NORMA Group SE, but also for measures at its subsidiaries. In order to ensure that the Management Board is promptly informed of corresponding matters involving subsidiaries so that it can request the approval of the Super- visory Board, a hierarchical system of approval requirements organised by functional areas, levels of responsibility and coun- tries applies worldwide at NORMA Group. The allocation of responsibilities and internal order of the Management Board are based on relevant legislation, NORMA Group SE’s Articles of Association and the Management Board by-laws enacted by the Supervisory Board as well as the in- ternal guidelines, including the compliance documents. The members of the Management Board are mainly responsible for Company functions. In general, Management Board resolutions are passed by simple majority. The Chairman has the deciding vote if the vote is tied. However, the members of the Management Board are obliged to make an effort to reach unanimous decisions. If a member of the Management Board cannot participate in a vote, his vote will be obtained at a later date. The entire Management Board is responsible in matters of particular importance. In accordance with the Management Board by-laws, these include the follow- ing matters: Producing the Management Board reports for the purpose of informing the Supervisory Board and the quarterly and half-yearly reports, fundamental organisational measures, including the acquisition or disposal of significant parts of com- panies and strategic and business planning issues, measures related to the implementation and supervision of a monitoring system pursuant to section 91(2) of the German Stock Cor- poration Act (Aktiengesetz, AktG), issuing the Declaration of Conformity pursuant to section 161(1) AktG, preparing the con- solidated and annual financial statements and similar reports, convening the Annual General Meeting and inquiries and recom- mendations by the Management Board that are to be handled and resolved by the Annual General Meeting. In addition, every Management Board member may request that a specific issue be dealt with by the entire Management Board. The Manage- ment Board did not form any committees. Every Board member is obliged to inform the Supervisory Board immediately, but also the other members of the Management Board, of any conflicts of interest. No such conflicts of interest arose for a Board member in 2014. No transactions took place between NORMA Group companies on the one hand and a member of the Management Board, related parties or businesses on the other hand. In accordance with the Management Board guidelines, the Supervisory Board must approve of such transactions, as well as any secondary activities by a member of the Management Board. The Management Board of NORMA Group SE was composed of four members on the balance sheet date: Werner Deggim (Chief Executive Officer), Dr. Othmar Belker (Chief Financial Officer), Bernd Kleinhens (Managing Director Business Development) and John Stephenson (Chief Operating Officer). Dr. Belker will be leaving the Company at the end of the first quarter of 2015. The new Chief Financial Officer is expected to take office by September 2015 at the latest. The Chief Executive Officer will attend to his duties until then. NORMA Group SE Annual Report 2014Corporate Governance Report 45 Local presidents in the three regions EME A, Americas and APAC are responsible for carrying out business on a daily basis. These three Presidents report directly to the CEO. The entire Management Board of NORMA Group SE meets at least once a year with the presidents and their managers at the local head- quarters – Singapore for the Asia-Pacific region, Auburn Hills, Michigan, for the Americas, and Maintal for the EME A region. In addition, individual members of the Management Board meet regularly with the local teams. The leading employees of NORMA Group work in a matrix structure in which they have both a disciplinary as well as a technical supervisor. 5. SUPERVISORY BOAR D The Supervisory Board of NORMA Group SE is comprised of the following members: • Dr. Stefan Wolf (Chairman of the Supervisory Board) • Lars M. Berg (Vice Chairman of the Supervisory Board) • Dr. Christoph Schug • Günter Hauptmann • Knut J. Michelberger • Erika Schulte All members of the Supervisory Board are independent as de- fined in Section 5.4.2 of the German Corporate Governance Code. No Supervisory Board member has ever served as a member of the Management Board of NORMA Group SE or been a member of management of any of its predecessor companies. All members of the Supervisory Board are obligated to report any conflicts of interest. No such conflicts of interest arose in 2014. Furthermore, no member of the Supervisory Board exer- cised an executive function or served as a consultant for a major competitor of NORMA Group. No consulting or other service contracts were concluded between any NORMA Group com- panies and a member of the Supervisory Board. In financial year 2014, the Supervisory Board of NORMA Group convened for four regular meetings. All members of the Super- visory Board and the Management Board took part in these meetings. In addition, four additional telephone conferences were held. One member of the Supervisory Board was unable to participate in one of the telephone conferences, but had already consulted with the Chairman of the Supervisory Board beforehand. All members of the Supervisory Board took part in the remaining telephone conferences. All members of the Supervisory Board were elected when NORMA Group AG was transformed into NORMA Group SE at the 2013 Annual General Meeting. Their term of office extends at least until the Annual General Meeting which resolves on the formal approval of the actions of the Supervisory Board members for the fourth financial year after the commencement of their term of office (financial year 2013 in which the term of office begins is not counted in this respect), however no longer than six years. This is presumably the Annual General Meeting for the fiscal year 2018, in May 2019 latest. The Chairman of the Supervisory Board represents the Super- visory Board externally. He organises the work of the Super- visory Board and chairs its meetings. The Supervisory Board can pass resolutions by simple majority, whereby the Chairman has the deciding vote if a vote is tied. The Supervisory Board formed two committees: the Audit Com- mittee and the General and Nomination Committee. The Audit Committee deals in particular with monitoring the accounting process and the effectiveness of the internal control and risk management systems as well as the audit of the annual financial statements, in particular the independence of the audi- tor, the additional services rendered by the auditor, engaging the auditor, determining areas of audit emphasis and agreeing to the auditor’s fees. The Audit Committee accompanies the collabo- ration between NORMA Group SE and the auditors and ensures that opportunities for improvement identified during the audit are promptly implemented. It is responsible for preparing the accounting documents and adopting the Supervisory Board’s resolution on the consolidated and separate financial statements. Moreover, it is responsible for compliance and reviews the com- pliance with statutory provisions and the internal guidelines. The Chairman of the Audit Committee is Dr. Christoph Schug and the other members are Lars M. Berg and Knut J. Michel- berger. The members of the Audit Committee have special knowledge and experience in the application of accounting policies and internal control processes due, in particular, to their many years of work as Chief Financial Officer, managing director or consultant. They are independent financial experts within the meaning of section 100(5) AktG. The Audit Committee of NORMA Group convened seven times in financial year 2014. Besides overseeing risk reporting, it also dealt with the internal control system and the quarterly reports to be published in 2014, particularly with the changes in the financing structure, first and foremost the financing plan on acquiring National Diversified Sales, Inc. and the new promis- sory note, but also current tax proceedings, legal disputes and compliance topics. The General and Nomination Committee prepares person- nel-related decisions and monitors the Management Board’s compliance with its by-laws. This committee has the following specific responsibilities: preparing Supervisory Board resolu- tions regarding the formation, amendment and termination of employment contracts with members of the Management Board in accordance with the remuneration system approved by the Supervisory Board, preparing Supervisory Board resolutions regarding legal applications to reduce the remuneration of a Management Board member pursuant to section 87(2) AktG, preparing Supervisory Board resolutions regarding the struc- ture of the remuneration system for the Management Board, acting as representatives of the Company to Management Board members who have left the Company pursuant to sec- tion 112 AktG, approving secondary employment and external To Our Shareholders46 activities for Management Board members pursuant to section 88 AktG, granting loans to the persons specified in section 89 AktG (loans to members of the Management Board) and sec- tion 115 AktG (loans to members of the Supervisory Board), approving contracts with members of the Supervisory Board pursuant to section 114 AktG and proposing suitable candidates to the Annual General Meeting when there is a vote on Super- visory Board members. In 2014, the Chairman of the General and Nomination Committee was Chairman of the Supervisory Board Dr. Stefan Wolf and the other members Dr. Christoph Schug and Lars M. Berg. No formal meeting of the General and Nomination Committee was held in 2014. 6. SH AR EHOLDERS A ND A NNUAL GENER AL MEE TING The shareholders of a Societas Europaea decide on the com- pany’s important and fundamental matters. The shareholders exercise their voting rights at the Annual General Meeting, which takes place at least once every year. The Annual General Meeting resolves among other topics on how earnings are to be distributed, the formal approval of the Management Board and the Supervisory Board, the selection of the auditor, but also on amendments to the Articles of Association and any capital-changing measures. Shareholders are entitled to vote if they are registered in the shareholders’ register of NORMA Group SE and provide NORMA Group SE or another location specified in the invitation with written notice, in German or English, at least six days before the Annual General Meeting that they will be attending. Each share entitles the bearer to one vote. NORMA Group SE publishes the invitation and all documents made available at the Annual General Meeting promptly on its website. Information regarding the number of attendees and the voting results are published there following the Annual General Meeting. 7. SH AR EHOLDINGS OF THE M A N AGEMENT BOAR D A ND SUPERVISORY BOAR D On 31 December 2014, the Management Board and the Super- visory Board jointly held 771,431 (2.4%) of the total 31,862,400 shares of NORMA Group SE. Members of the Supervisory Board held 87,083 (0.3%), and members of the Management Board 684,348 (2.1%). No member of the Management Board held more than 1% of the shares in NORMA Group SE. The mem- bers of the Supervisory Board and Management Board acquired most of these shares prior to the initial public offering, because they held interest in the former NORMA Group GmbH, which was transformed into NORMA Group AG prior to the initial public offering in 2011. Therefore, these acquisitions were never pub- lished as directors’ dealings. 8 . DIR ECTORS’ DE ALINGS According to section 15a of the German Securities Trading Act (Wertpapierhandelsgesetz, WpHG), members of the Manage- ment Board and the Supervisory Board and related parties are obliged to disclose Directors’ Dealings in NORMA Group SE shares if the value of these transactions reaches EUR 5,000 within a calendar year. The following transaction was reported in connection with Directors’ Dealings in 2014: Buyer / seller Type of transaction Date of transaction Price per share in EUR Number of shares Total value in EUR Katrin Belker Sale 18 November 2014 37.90 25,000 947,500.00 NORMA Group SE Annual Report 2014 Corporate Governance Report 47 9. STOCK OP TION PL A NS A ND EQUIT Y- BASED INCENTIVE PROGR A MMES The principles of the management remuneration are described in the remuneration report which is also part of the management report.  Remuneration Report, p. 100. In fiscal year 2013, a Long-Term-Incentive-Programme (LTI) was launched for the second management level, which involves the employees participating in NORMA Group’s success over the medium term. 10. OTHER M A NDATES In financial year 2014, the members of NORMA Group’s Su- pervisory Board sat on the Supervisory Boards or comparable supervisory committees of other companies: Supervisory Board member Dr. Stefan Wolf Other mandates Member of the Supervisory Board of Fielmann AG, Hamburg, Germany Member of the Supervisory Board of Allgaier Werke GmbH, Uhingen, Germany Member of the Board of Directors of Micronas Semi- conductor Holding AG, Zurich, Switzerland Lars M. Berg Chairman of the Supervisory Board of Net Insight AB, Stockholm, Sweden Chairman of the Supervisory Board of KPN OnePhone Holding B.V., Düsseldorf, Germany Member of the Supervisory Board of Ratos AB, Stockholm, Sweden Member of the Supervisory Board of Tele2 AB, Stockholm, Sweden Günter Hauptmann Member of the Supervisory Board of Geka GmbH, Bechhofen, Germany Chairman of the Advisory Board of GIF GmbH, Alsdorf, Germany Knut J. Michelberger Member of the Advisory Board at Gauff Management GmbH & Co. KG, Frankfurt, Germany Member of the Management Board of Kaffee-Partner Holding GmbH and its subsidiaries, Osnabrück, Germany Dr. Christoph Schug Member of the Supervisory Board of Baden-Baden Cosmetics AG, Baden-Baden, Germany Member of the Board of Directors of AMEOS Gruppe AG, Zurich, Switzerland Erika Schulte No seats on other boards To Our ShareholdersCHINA THE HIGH DEMAND FOR MOBILITY IS STILL UNDIMINISHED. NORMA GROUP SERVES THIS MARKET BY OFFERING SPE- CIALISED JOINING SOLU- TIONS AND HELPS ITS CUSTOMERS MEET THE STRICTER EMISSION STANDARDS. NORMA Group opened its first plant in and expanded manufacturing by opening 2008 Qingdao, China, in a second plant in Changzhou in May 2014. 45 MN. CLAMPS are manufactured each year for Asian and western commercial vehicle manufacturers on 8,000 m2 of floor space. The Group also plans to the economically strong country continue expanding its presence in of China in the future. V P P 13 8 C L A M P The VPP138 clamp is manufactured at the new plant that opened in Changzhou, China, in 2014. The fast-mountable clamp is a product from the EJT area that was designed specifically for a Japanese automotive customer. Here it is used in exhaust and cooling systems in particular. 2008 45 MN. CLAMPS Qingdao, China, in a second plant in Changzhou in May 2014. and western commercial vehicle 8,000 m2 continue expanding its presence in of China in the future. NORMA Group opened its first plant in and expanded manufacturing by opening are manufactured each year for Asian manufacturers on of floor space. The Group also plans to the economically strong country 52 IT IS NORMA GROUP’S EXPLICIT GOAL TO CONTRIBUTE TO AN ECOLOGICALLY AND SOCIALLY SUSTAINABLE SOCIETY IN ITS BUSINESS ENVIRONMENT. THUS THE QUALITY AND SAFETY OF PROCESSES ARE CONSTANTLY OPTIMISED. NORMA Group SE Annual Report 201453 54 Principles of the Group 86 Forecast Report Unique Selling Propositions and Competitive Situation 54 Business Model 54 Organisational Structure 56 Products and End Markets 57 58 Economic and Legal Factors of Influence 60 Goals and Strategy 61 Control System and Control Parameters 63 Research and Development 65 Economic Report 65 General Economic and Industry-Specific Conditions 67 Significant Developments in 2014 68 68 Actual Business Development Compared to Forecast General Statement by the Management Board on the Course of the Business and Economic Situation 69 Earnings, Assets and Financial Position 74 Segment Reporting 75 Sustainable Value Creation 76 Production and Logistics 78 Quality Management 78 Purchasing and Supplier Management 80 Employees 83 Environmental Protection and Ecological Management 84 Marketing 85 Supplementary Report General Economic and Industry-Specific Conditions 86 87 Future Development of NORMA Group 89 General Statement by the Management Board on the Probable Development 90 Risk and Opportunity Report 90 91 Opportunity and Risk Management System Internal Control and Risk Management System and Their Relation to the Group Accounting Process 92 Opportunity and Risk Profile of NORMA Group 99 Assessment of the Overall Profile of Opportunities and Risks by the Management Board 100 Remuneration Report for the Management and Supervisory Boards Remuneration of the Management Board 100 102 Remuneration of the Supervisory Board 102 Other Legally Required Disclosures 104 Report on Transactions with Related Parties 54 Consolidated Management Report 2014 Principles of the Group BUSINES S MODEL NORMA Group is an international market and technology leader in the area of advanced engineered joining and mounting tech- nology. With its 22 production sites and numerous sales offices, the Group has a global network with which it supplies more than 10,000 customers in over 100 countries. NORMA Group’s product portfolio includes approximately 35,000 high-quality joining products and solutions in the three product categories clamps (CL AMP), joining elements (CONNECT) and fluid sys- tems / connectors (FLUID). The products NORMA Group offers are used across industries in a wide range of applications, whereby the product specifications differ depending on the application and customer requirements. High customer satisfaction forms the foundation of NORMA Group’s continued success. The main factors here are the customised system solutions the Company offers, the global availability of products in consistently high quality and delivery reliability. By opening new plants and competence centres and making strategic acquisitions, NORMA Group has succeeded in ex- panding its international presence quite significantly in recent years while optimising its distribution channels and intensifying its cooperation with local customers. ORG A NISATION AL STRUCTUR E Corporate legal structure NORMA Group SE is the parent company of NORMA Group. It has its headquarters in Maintal near Frankfurt / Main, Germany. NORMA Group SE serves as the formal legal holding company of the Group. It is responsible for the strategic management of business activities. In addition, it is also responsible for commu- nicating with the Company’s most important target audiences. Group-wide functional management responsibilities such as Group Accounting and Group Controlling, IT, Internal Audit, and Treasury, are all based at the subsidiary NORMA Group Holding GmbH. Three regional management teams located in Auburn Hills, USA, Maintal, Germany, and Singapore steer the business activities in the regions. This is how the Company en- sures that subsidiaries are able to concentrate solely on every- day business. As of 31 December 2014, NORMA Group SE holds shares in 45 companies that all belong to NORMA Group either directly or indirectly and are fully consolidated.  Notes, p. 129. Acquisitions in 2014 In February 2014, NORMA Group acquired the remaining 15% of the shares in the Malaysian company Chien Jin Plastic Sdn. Bhd. and holds 100% of the shares in this company since then. Due to the fact that Chien Jin Plastic has been fully consolidated since the acquisition in November 2012, there were no changes in financial year 2014 compared to last year. N O R M A Group acquired the US-based joining technology manufacturer Five Star Clamps, Inc. (Five Star) in the second quarter of 2014 with economic effect as of 25 April 2014. The acquisition of National Diversified Sales, Inc. (NDS), a US com- pany that specialises in water management solutions, followed at the end of October. NDS was included in the group of con- solidated companies of NORMA Group on 1 November 2014.  Economic Report, p. 67. Simplifications of legal structure To reduce the complexity of its structures and costs, NORMA Group always strives to simplify its corporate structure while maintaining its focus on customer service. For this reason, the following corporate changes were made in 2014: In the Asia-Pacific region, the business activities of NORMA Ma- laysia were integrated into the company Chien Jin Plastic Sdn. NORMA Group SE Annual Report 201455 N O R M A G R O U P ( S I M P L I F I E D S T R U C T U R E ) A list of the Group companies and NORMA Group’s shareholdings as of 31 December 2014 can be found on page 129. NORMA Group SE NORMA Group Holding (Germany) NORMA Pennsylvania (USA) NORMA Group APAC Holding (Singapore) Craig Assembly (USA) NORMA Michigan (USA) R.G.Ray (USA) NORMA Group Mexico National Diversified Sales (USA) NORMA DS Mexico NORMA Singapore NORMA Australia Guyco (Australia) NORMA Brazil NORMA LLC (USA) Chien Jin Plastic (Malaysia) NORMA Thailand NORMA EJT (China) NORMA Korea NORMA Japan NORMA India NORMA Germany Groen BV (The Netherlands) NORMA Netherlands NORMA Italy NORMA France NORMA Sweden Connectors Verbindungs- technik AG (CH) Nordic Metalblok (Italy)1) NORMA Serbia NORMA Poland NORMA Czech NORMA Turkey NORMA Spain NORMA UK NORMA Russia NORMA China 2) 1) The company is currently under liquidation. 2) NORMA China is organisationally assigned to the APAC segment. In terms of company law, it belongs to NORMA Group Holding GmbH. Bhd. that was acquired in 2012 and is also based in Malaysia. NORMA Malaysia was then liquidated as a result of this move. Furthermore, the entity N O R M A Distribution and Services S. de R.L. de C.V. was formed in Mexico to handle the do- mestic business. The already-existing NORMA Group Mexico S. de R.L. de C.V. will continue its operation. The need for a second Mexican company was a result of changes in Mexico’s import / export laws. In line with the further consolidation of NORMA Group’s pro- duction activities worldwide, the Company closed the produc- tion in its Italian subsidiary Nordic Metalblok S.r.l. at the end of September 2014. For efficiency reasons parts of the production were transferred to NORMA Group’s headquarter in Maintal. Nordic Metalblok is currently under liquidation. The shares which the Swedish holding company DNL Sweden AB previously held in the two operating companies NORMA Italia S.p.A. and NORMA Czech s.r.o. were transferred over to NORMA Group Holding GmbH, a direct subsidiary of NORMA Group SE and DNL Sweden AB’s sole shareholder. The corporate changes mentioned will have no impact on the operational business. Group management NORMA Group SE has a dual management system that con- sists of a Management Board and a Supervisory Board. The Management Board manages the Company under its own re- sponsibility, while the Supervisory Board advises and monitors the Management Board. The Supervisory Board consists of six members who have been elected by the shareholders at Consolidated Management ReportPrinciples of the Group56 S I M P L I F I E D G R O U P S T R U C T U R E NORMA Group SE PARENT COMPANY UNDER COMPANY LAW EMEA Americas Asia-Pacific SEGMENTS Engineered Joining Technology (EJT) Distribution Services (DS) DISTRIBUTION CHANNELS the Annual General Meeting. Information on the composition of the Management Board and the Supervisory Board, as well as the distribution of responsibilities among themselves, can be found in the Corporate Governance Report, which forms part of the Management Report. The Statement of Corporate Gover- nance pursuant to section 289a HGB, including the Declaration of Conformity pursuant to Section 161 AktG, a description of the procedures of the Management Board and the Supervisory Board, and relevant information on corporate governance prac- tices, is also part of the Corporate Governance Report.  Cor- porate Governance Report, p. 42. The curriculum vitae of the Supervisory and Management Board members are published on NORMA Group’s website. @ http://investors.normagroup.com. Operative segmentation by regions NORMA Group’s strategy is based, among other things, on re- gional growth targets. In order to achieve these, the Group busi- ness is managed by the three regional segments EMEA (Europe, Middle East, Africa), the Americas (North, Central and South America) and Asia-Pacific (APAC). All three regions have net- worked regional and cross-company organisations with different functions. The internal Group reporting and control system that Management uses is also therefore quite regional in nature. The distribution service is based on regional and local priorities. PRODUCTS A ND END M AR KE TS Product portfolio The products that NORMA Group offers can basically be divid- ed into the three product categories clamps (CL AMP), joining elements (CONNECT) and fluid systems / connectors (FLUID). The clamp products (CL AMP) are manufactured from unalloyed or stainless steel and are generally used to join or seal elasto- mer hoses. The connection products (CONNECT) include connectors made of unalloyed or stainless steel that are partly equipped with elastomer or metal seals and are used as the joining and sealing elements of metal and thermoplastic pipes. FLUID products are either single or multiple layer thermoplastic plug-in connectors for liquid systems that reduce installation times, ensure reliable flow of liquids or gases and occasionally replace conventional products such as elastomer hoses. NORMA Group’s advanced engineered joining technology is used in all applications in which pipelines, tubes and other systems need to be connected together. Because joining technology plays a role in nearly all industries, NORMA Group serves many different end markets. Besides the automotive, commercial vehicle, and aviation industry, NORMA Group is also active in the construction industry, the pharmaceutical and biotechnology fields, agriculture and the drinking water supply and irrigation industry. NORMA Group products are also used in consumer products such as home appliances. By acquiring N DS in the USA at the end of October 2014, NORMA Group has substantially expanded its product range in the area of water management systems that collect and drain stormwater and irrigation solutions as well as joining products for use in flow management applications. NDS’s business has been completely integrated into NORMA Group’s Distribution Services division. This business unit’s share in sales will there- fore increase by NDS’s sales in the future. With the acquisition of NDS, the water market is becoming increasingly important as an end market for NORMA Group.  Significant developments in 2014, p. 67. The share of sales revenues in the water sector amounted to 18% on a pro forma basis in 2014. In 2013, it accounted for approximately 4%. NORMA Group SE Annual Report 201457 S A L E S B Y E N D M A R K E T S ( P R O F O R M A 2 0 14 * ) in % 2013 in brackets Industrial suppliers 25 (30) 18 (4) Water management EJT 58 (70) DS 42 (30) 8 (10) Commercial vehicles OEMs 24 (26) Distributors 25 (30) Passenger vehicles OEMs * In order to facilitate comparison with the previous year’s figures, the chart includes NDS sales for the full year 2014. The actual NDS sales since consolidation amounted to EUR 13.9 million. Two complementary distribution channels NORMA Group supplies its customers via two different sales channels: • Engineered Joining Technology – EJT and • Distribution Services – DS. The two distribution channels differ in terms of the degree of specification of the products, while having intersections in pro- duction and development that enable cost benefits and ensure quality assurance. The area of EJT includes sophisticated, customised joining tech- nology and is particularly characterised by close development partnerships with OEMs (original equipment manufacturers). During long term projects, NORMA Group’s central development departments and resident engineers work together with the cus- tomer on developing solutions for specific industrial challenges. Due to the constant proximity to customers in the area of EJT, NORMA Group’s engineers gain comprehensive knowledge and a deep understanding of the various challenges their end mar- kets and customers face. Such development partnerships result in high-technology products that are designed not only to meet the needs of customers with respect to efficiency and perfor- mance, but that also take aspects such as weight reduction and quick installation into consideration. As a result, they generate substantial added value for the customers and contribute to their economic success. Via its Distribution Services (DS), NORMA Group markets a broad range of high-quality, standardised brand products. In ad- dition to its own global distribution network, the Company also relies on multipliers such as sales representatives, retailers and importers. Its customers include, among others, distributors, specialised wholesalers, OEM customers in the aftermarket seg- ment, do-it-yourself stores and small application industries. The brands ABA ®, Breeze®, Clamp-All®, FISH ®, Five Star®, Gemi®, NDS ®, NORMA ®, R.G.R AY®, Serflex® und TORCA ® exemplify technological know-how, high quality and reliability and meet the technical standards of the countries in which they are sold. UNIQUE SELLING PROPOSITIONS A ND COMPE TITIVE SITUATION Economies of scale and synergies By combining expertise in developing customised solutions for industrial customers (EJT) and providing high-quality standard brand products through global distribution (DS), NORMA Group is not only able to realise cross-selling effects, but also many synergies in the areas of production, logistics and sales. In addi- tion, the Company benefits from significant economies of scale and scope due to the broad variety of its product offerings and high quantities and therefore differentiates itself clearly from smaller, usually more specialised competitors. Broad diversification with respect to products With its products, NORMA Group provides solutions for numer- ous industrial applications. Its expertise covers metal-based connection solutions and products (CL AMP and CONNECT) as well as thermoplastic materials (FLUID). Thanks to the unique combination of expertise in both metal and plastics processing Segment Main product categories Distribution channels End markets Brands EMEA Americas Asia-Pacific CL AMP CONNECT FLUID CL AMP CONNECT FLUID CL AMP CONNECT FLUID EJT DS EJT DS EJT DS Industrial suppliers, Passenger vehicle OEMs, Distributors, Commercial vehicle OEMs, Water management ABA ®, NORMA ®, Serflex®, Gemi® Industrial suppliers, Passenger vehicle OEMs, Distributors, Commercial vehicle OEMs, Water management Breeze®, R.G.R AY®, Five Star®, TORCA ®, NDS ®, Gemi®, NORMA ®, ABA ®, Clamp-All® Industrial suppliers, Passenger vehicle OEMs, Distributors, Commercial vehicle OEMs, Water management FISH ®, Gemi®, NORMA ®, Breeze®, ABA ® Consolidated Management ReportPrinciples of the Group 58 and the broad diversification of its product portfolio, NORMA Group can offer its customers a wide range of solutions to dif- ferent problems from a single source. Competitive environment In the area of Engineered Joining Technology, NORMA Group operates in a highly fragmented market, which is characterised by a very heterogeneous structure due to the abundance of spe- cia lised industrial companies. With its diversified product port folio and international business alignment, however, NORMA Group stands out from its mostly only regionally active competitors. Furthermore, NORMA Group sees itself as a provider of solu- tions that are based on the specific needs of its customers and generate significant value for them. With this approach, the Company differentiates itself particularly in the area of CL AMP and CONNECT from the large number of smaller competitors who specialise in marketing only specific groups of products. In the area of FLUID, NORMA Group finds itself facing mainly competitors that are globally active and mainly offer solutions that are based on rubber and elastomer products. NORMA Group, however, has focused more on innovative plastic-based solutions that generate significantly higher value for its cus- tomers due to their lower weight and price, as well as the en- vironmental compatibility of the materials used.  Research and Development, p. 63 In the much more standardised business area Distribution Services, NORMA Group is active in mass markets and com- petes primarily with providers of similar standardised products. It differentiates itself from them particularly through its strong brands that are the result of a deliberate brand policy that focuses on the regional needs of its customers. In addition, customers appreciate the high quality of service. NORMA Group offers its trade customers a complete range of products that meets all of their end users’ needs. These products are available on short notice, therefore the dealer is always in a position to meet his delivery obligations even with uncommon applications or if demand fluctuates. ECONOMIC A ND LEG AL FACTORS OF INFLUENCE Economic factors NORMA Group is active in many different industries and regions. Seasonal and economic fluctuations in individual countries or industries can have varying effects on customer demand and the order situation at NORMA Group. Thanks to its diversified product portfolio and broad customer base, NORMA Group is, however, perfectly equipped to compensate for temporary drops in demand. Temporary production peaks can be inter- cepted quite flexibly due to its efficient production structures and use of temporary workers. Additionally, the high proportion of long-term development partnerships makes NORMA Group more independent of short-term fluctuations in demand. Exchange rate fluctuations Due to NORMA Group’s international activities, exchange rate fluctuations also influence its business. While fluctuations between two non-euro currencies have only little impact on the operating result of NORMA Group as a result of regional production, exchange rate fluctuations against the euro as the reporting currency may have a greater impact on its results. Due to the fact that NORMA Group generated roughly 30% of its sales in US dollars in 2014, a value change of the dollar against the euro in particular would have more of an impact on the Group’s results. In 2015, the dollar revenue share will very likely be at least 40% mainly due to the consolidation of NDS. The Euro revenue share will account for around 30% while the remaining 20% will disperse to around 20 other currencies.  Risk and Opportunity Report, p. 93 and Notes, p. 130. Changes in personnel and material costs With respect to costs, the development of wages and salaries in particular has an effect on NORMA Group, as do changes in material costs. Because the majority of the companies that make up NORMA Group are not bound by a collective agreement, personnel costs are based mainly on the country-specific cost of living. For com- panies that have collective agreements such as Germany or Sweden, for example, personnel costs are influenced by the cost levels in the collective agreements or by the outcomes of local collective pay negotiations. Short-term fluctuations in material prices generally have less effect on earnings because the prices for important materials are set in long-term contracts – generally one year – when an order is placed. This pertains to both procurement as well as sales to customers. Negative developments on the cost side are absorbed in part with the help of the Global Excellence Programme which was launched back in 2009.  Global Excellence Programme, p. 60. Legal and tax-related aspects Due to the international focus of the business and against the background of its acquisition strategy, various legal and tax- related regulations are of relevance to NORMA Group. Among others, these include product safety and product liability laws, construction, environmental and employment-related regu- lations as well as foreign trade and patent laws.  Risk and Opportunity Report, p. 98. In addition, the growing degrees of regulation in the area of environmental law affect NORMA Group’s product strategy quite significantly. New emission standards, particularly in the automotive and commercial vehicle industry, increase the de- mand for innovative joining technology and thus contribute to NORMA Group’s business. For example, the introduction of the EURO-6 standard in September 2014 had a positive impact on NORMA Group SE Annual Report 201459 NORMA Group’s business, which was reflected primarily in the development of sales in the EMEA region in the first half of 2014. NORMA Group expects the gradual implementation of the appro- priate standards in other countries to have an equally positive ef- fect. In the world’s largest automobile market China the emission levels for all newly registered diesel commercial vehicles will now also be regulated as of January 2015. More strict emission stan- dards now apply for these vehicles. Since China lags behind the European countries in terms of introducing emission standards, the technologies needed to implement them are already available in Europe. European car manufacturers and suppliers in partic- ular will therefore benefit from the stricter regulations in China. NORMA Group also expects the new EU fleet regulation for passenger cars to have a positive effect on its business. According to it, maximum average emissions per vehicle fleet of 130 grams of carbon dioxide (CO 2) per kilometre and car will become mandatory in the EU starting in 2015. This value is to be reduced to 95 grams of CO 2 per kilometre by no later than 2021.  Chart: EU regulation of average emissions of vehicle fleets. The governments of other countries have already adopt- ed similar regulations. In order to achieve the emission targets set, vehicle manufacturers must develop innovative technologies that will lead to improvements in engine technology. NORMA Group products strongly support OEM customers in their efforts to meet these requirements. I N T R O D U C T I O N O F E M I S S I O N S TA N D A R D S F O R PA S S E N G E R C A R S Sources: Integer Research, DieselNet, ACEA, NORMA Group EURO 3 EURO 4 EURO 5 EURO 6 EPA ’00 EPA ’04 EPA ’07 EPA ’10 EPA ’15 JPN ’98 JPN ’02 JPN ’05 JPN ’09 JPN ’14 JPN ’19 EURO 1 EURO 2 EURO 3 EURO 4 EURO 5 EURO 6 EURO 1 EURO 2 EURO 3 EURO 4 EURO 5 EURO 1 EURO 2 EURO 3 EURO 4 EURO 4+ EURO 1 EURO 2 EURO 3 EURO 4 EURO 5 (big cities) EURO 6 (big cities) eu r o pe n a f ta ja pa n b r a zi l r u s s i a i n d i a c h i n a 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2019 E U R E G U L AT I O N O F AV E R A G E E M I S S I O N S ( C O 2) O F V E H I C L E F L E E T S ( PA S S E N G E R C A R S ) in g/km 2007 2009 2011 2013 2015 2017 2019 2020/21 158.7 g/km 130 g/km 95 g/km – 18% (2.5% p.a.) – 27% (5.1% p.a.) 0 50 100 150 200 Consolidated Management ReportPrinciples of the Group 60 GOALS A ND STR ATEGY N O R M A Group’s strategic goal in both sales areas and all regions is to continuously extend its business activities and increase its market shares in all business segments. Here, NORMA Group also relies on targeted acquisitions that will contribute to the diversification of the business and strengthen growth. Furthermore, the Group also focuses closely on high profitability and stable cash flows. Company’s long-term growth strategy. NORMA Group observes the market for engineered joining technology very closely and contributes to its consolidation through targeted acquisitions. NORMA Group has acquired nine companies since 2012 and successfully integrated them into the Group. NORMA Group strengthened its US business in 2014 by acquiring the two US companies Five Star Clamps, Inc. and National Diversified Sales, Inc.  Acquisitions, p. 54. By focusing on innovations and high service quality, the Com- pany seeks to sustainably increase the value of NORMA Group and achieve the highest level of customer satisfaction. The main focus of M&A activities is always on companies that help to realise the diversification objectives of NORMA Group and / or to generate synergies. The preservation of growth and high profitability also play an important role. Robust business model through broad diversification Broad diversification with respect to the products, regions and end markets that the Company operates in represents the core of NORMA Group’s growth strategy. The Company is able to expand and strengthen its business activities and international presence by constantly adding application solutions for existing EJT customers, identifying and signing up new EJT custom- ers, extending and deepening its customer base in the area of Distribution Services and entering new markets with attractive growth potential. NORMA Group sees immense growth potential especially in the emerging markets where demand for advanced engineered joining technology is on the rise in all industries due to the ongoing industrialisation and increasing quality re- quirements. To benefit from this growth trend, NORMA Group has positioned itself in the major Asian growth markets of India and China as well as in the emerging economies of South and Central America in recent years. In order to meet the increasing demand, the sites in these regions will be expanded even further in the mid-term. In identifying new end markets, NORMA Group places a stra- tegic focus on niche markets that are attractive with respect to margins, sophisticated with respect to products, fast-grow- ing with respect to sales and fragmented with respect to competition. By engaging in strategic knowledge transfer to new, fast-growing industries, the Company seeks to achieve broad diversification with respect to the end markets. This also strengthens the defensive earnings profile, independence from economic trends and contributes to the stability of the business. The large number of relevant growth trends in the end markets that NORMA Group serves offer the Company attractive growth potential.  Products and End Markets, p. 56. Furthermore, NORMA Group focuses on occupying technical niches in order to be able to enter into the application areas of existing customers in which no NORMA Group components are being used yet. The goal here is to achieve high market penetration within the various individual technical applications. Focus on high-quality joining technology and sustainable product solutions The technological requirements that end products for NORMA Group’s customers must meet constantly change. Increasing environmental consciousness, rising fuel costs and growing cost pressure also play key roles for virtually every industry. Other factors include binding targets by lawmakers that place special requirements on the materials used, particularly in the automotive and commercial vehicle industry, due to more strin- gent emission regulations or special requirements.  Economic and Legal Factors, p. 58. This marks the starting point for the development of new products. NORMA Group therefore fo- cuses on value-added solutions that assist its customers in reducing emissions, leakages, weight, space and installation time. Innovations play an important role in meeting customer requirements, which increase with each new production cycle. Therefore, NORMA Group employs more than 250 engineers who constantly work on developing new solutions and optimis- ing existing systems. NORMA Group invests around 5% of its EJT sales in research and development activities to sustainably strengthen its power of innovation.  Research and Develop- ment, p. 63. Highest quality standards and strong brands Although the joining products that NORMA Group sells make up a relatively small proportion of the final product, they are often mission-critical. Quality management therefore plays a crucial role for NORMA Group. The high quality standards are highly appreciated by customers and regularly receive awards.  Quality Management, p. 78. The area Distribution Services which offers and sells more standardised brand products is focused on a specific, region- ally-driven brand strategy that is based on the respective per- formance parameters of the well-known brands.  Marketing, p. 84. In this business unit, the focus is on ensuring high-quality service and the availability of products at all times. NORMA Group ensures this through its worldwide distribution network. Selective value-added acquisitions to supplement organic growth By making selected acquisitions, NORMA Group intends to contribute to the diversification of its business and strengthen its growth. Acquisitions are therefore an integral part of the Ongoing efficiency improvements In order to increase NORMA Group’s profitability, the focus is on continuously improving processes in all functional areas and regions. The Global Excellence Programme launched back in NORMA Group SE Annual Report 201461 2009 serves as an important tool for achieving this. As part of this programme, all internal processes are continuously op- timised. Projects on increasing efficiency are systematically recorded and monitored using a web-based programme. This makes it possible to quantify the monetary savings that result from a specific measure fairly accurately at the end of the 12-month project cycles. Senior management reviews the current status of all projects once a month and a steering com- mittee does so once a quarter. The aim of the programme is to be able to absorb and minimise both the unexpected negative cost developments and inflationary cost increases. CONTROL SYSTEM A ND CONTROL PAR A ME TERS The consistent focus on the Group objectives mentioned is also reflected in the internal control system at NORMA Group, which relies on both financial and non-financial control parameters. Important financial control parameters The most important financial control parameters for NORMA Group include the following value-oriented indicators that are directly related to value creation at NORMA Group: sales, profit- ability (adjusted EBITA margin) and net operating cash flow. NORMA Group strives to achieve short and medium term growth in sales that exceeds the market average. Due to the heteroge- neous industries that use joining technologies, the Management Board aligns its forecast of expected market development both on internal analyses and studies from important economic re- search institutes on the development of production and sales figures in the relevant customer industries. In addition, the cus- tomer order patterns in the area of Distribution Services and the order book also provide an indication of the expected revenue. The adjusted EBITA margin (EBITA as a percentage of sales) as another key performance indicator for NORMA Group pro- vides information on the profitability of its business activities. Both, performance in the past and the planning of the individual business units, are used in forecasting the EBITA target value. The target margin for the Group is determined as the weighted average of the divisions. They are adjusted for the amortisation effects from the purchase price allocation of acquired compa- nies as well as for integration and transaction costs in case of NDS.  Notes, Adjustments p. 133. Operating net cash flow is yet another target figure besides those already listed. By focusing on this financial indicator, NORMA Group ensures that the financial solidity of the Group is maintained in the future. It is calculated based on the EBIT- DA plus changes in working capital, less investments from the operational business. All financial indicators are planned and continuously monitored at the Group, regional and Group company levels. Deviations between forecasted and actually achieved targets are measured on a monthly basis inside all local companies. Detailed business plans are regularly projected based on existing monthly and quarterly results that perhaps include various scenarios. Important non-financial control parameters The most important non-financial control parameters for NORMA Group include the extent of market penetration, the Group’s power of innovation, the employee’s problem-solving behaviour and the sustainable overall development of NORMA Group as a whole. Sustainably securing its innovation capability is a key driver for the future growth of NORMA Group. The Group uses patents as a way of protecting its innovations. The number of patent applications per year is therefore part of the internal control system and an important indicator of NORMA Group’s innovative capacity. In addition, it is used to steer the long-term develop- ment strategy. The extent of market penetration is reflected in the organic growth of the Group in the medium term. NORMA Group stands for the highest possible reliability and quality of service. The reputation of its brands and reliability NORMA Group strategic goals Increase of company value Increase of market share High level of customer satisfaction Diversification Innovation Quality Efficiency Acquisitions Strategic focus Consolidated Management ReportPrinciples of the Group62 F I N A N C I A L C O N T R O L PA R A M E T E R S Group sales (in EUR million) Adjusted EBITA margin (in %) Operating net cash flow (in EUR million) 1) without balance sheet effects caused by the acquisitions of NDS and Five Star. N O N - F I N A N C I A L C O N T R O L PA R A M E T E R S Number of new patent applications Defective parts per million (PPM) Customer complaints per month of its products are key factors in the Company’s success. In developing and manufacturing products, the Group therefore relies on the highest quality standards. In order to minimise production losses and maximise customer satisfaction, NORMA Group measures and manages the problem solving behaviour of its employees by using two performance indicators: the average number of customer complaints per month and defective parts per million of manufactured parts (parts per million / PPM). The two metrics are collected and aggregated at Group level on a monthly basis.  Quality Management, p. 78. NORMA Group considers it to be its main responsibility to bring the effects of its business activity into balance with the ex- pectations and needs of society. For this reason, operational decisions are based on the principles of responsible company management and sustainable actions. NORMA Group’s strategy and goals are influenced by its Corporate Responsibility (CR) policies and described in detail in the 2013 Sustainability Report and the Corporate Responsibility website. Other non-financial performance indicators include employee and environmental indicators and indicators on occupational safety and healthcare within the Group. They are discussed in the respective chapters of this Management Report. Financial and liquidity management NORMA Group’s objectives with respect to central finance and treasury management have not changed since the previous year and are as follows: I. Ensuring solvency at all times The main financial objectives are maintaining the necessary liquidity for the Group’s operating business at all times, main- taining sufficient strategic liquidity reserves and thus ensuring NORMA Group’s long-term solvency. 2014 694.7 17.5 103.2 1) 2013 635.5 17.7 103.9 2012 604.6 17.4 81.0 2014 2013 2012 95 17 8 68 24 9 77 34 10 II. Limiting financial risks The Group Treasury division constantly identifies and assesses interest rate and currency risks as well as risks related to changes in the price of raw materials and selects suitable hedg- ing instruments to reduce these risks. III. Optimising the Group’s internal liquidity NORMA Group Holding GmbH is responsible for investing sur- plus liquidity as well as for intra-Group financing. Last year, NORMA Group also extended the possibilities of internal finan- cing by engaging in various projects in the Treasury area. The overall objective has been to place Group-wide financing on a broad and well-balanced foundation and thus further optimise the Group’s cash flow which is already quite strong. The main components of the policy on limiting financial risks include a clear definition of process responsibility, multilevel approval pro- cesses, and risk assessments, which have been adopted in a Treasury policy. The new EMIR (European Market Infrastructure Regulation) requirements have already been addressed as well. NORMA Group’s goal is to bundle the surplus liquidity of Group companies and allocate this money optimally within the Group or invest it outside the Group in order to make a profit. This is done using a professional treasury management system which provides an overview of the cash holdings of the most import- ant subsidiaries at all times. In addition, regional cash pools have been installed. More cash concentrations are performed in periodic intervals. Manually pooling funds allows for these funds to be invested with external institutions at better terms, whereby particular the local terms for international payments must be taken into account. NORMA Group SE Annual Report 2014 63 R ESE ARCH A ND DE VELOPMENT Research and development activities at NORMA Group are aimed at further expanding the Group’s innovation leadership in the area of joining technology and tapping into new groups of customers. The focus of development is orientated towards the specific industry challenges the end markets are facing. Customer demands with respect to installation safety, efficiency improvements and reductions in weight, for example, play an important role here. Strategic collaboration with customers and research institutes NORMA Group develops new products in the area of EJT in close cooperation with its customers. Thus, the Company can respond to the demands of the market immediately and seam- lessly turn these into new products. This allows for a high de- gree of customisation on the one hand and for fast marketing of product innovations on the other. NORMA Group also cooperates closely with research and higher education institutions such as material and other testing insti- tutes. For competitive reasons, however, the Company does not disclose the specific nature of these research partnerships. The Distribution Services division is purely a commercial unit; the market does not require the same type of technological research as is conducted in the EJT unit. Moreover, custom- ers of NORMA Group in this business division expect a strong brand image and the most complete product range. Therefore, the focus in the DS area lies on making useful additions to the product range and targeted marketing measures. Reorganisation of the R&D department NORMA Group has already built up extensive basic research capacities over the last few years. The areas of engineering and product development were reorganised in financial year 2014. The goal was to strengthen the Company’s expertise in the area of fundamental research and bundle customer-specific devel- opment topics. In doing so, R&D activities are to be aligned to address overlapping customer requirements to an even greater extent. By reorganising the R&D department, NORMA Group ex- pects to be able to increase its efficiency in the areas of product and customer development. Development focuses in 2014 The main focus of R&D activities in 2014 was on driving imple- mentation of the SCR (Selective Catalytic Reduction) systems with major automotive customers. To this end, optimised de- tailed solutions were developed, which could then be ex panded by using the building block system that is part of N O R M A Group’s SCR system. The Group was thus able to further in- crease the market potential for this product and improve the overall performance of the system. Its testing capacity has also been expanded by adding improved testing capabilities and an additional endurance test bench for SCR systems. In addition, NORMA Group continued to develop the Urea Transport System (UTS) even further in 2014. As a result, the robustness and per- formance of the pipeline system has been significantly improved, which was also reflected in newly acquired customer projects. Another focus during the reporting year was on improving the profile clamps. The goal here was to further optimise the toler- ance effect on the holding and sealing ability of profile clamp connections in order to increase the reliability of the connec- tions. Furthermore, NORMAQUICK XM quick connectors for charged air were validated for use in passenger cars in 2014. In this context, validation of the connection technology between the coupling element and the charge air hose / charge air pipe was also undertaken. In other projects that will continue in 2015, the transferability of this connection technology to the commer- cial vehicle sector will be examined. This technology has not been used thus far for this purpose. In the area of fundamental research, NORMA Group contin- ued to structure the development and validation of plastic materials. This significantly improves the informative value of using plastics in certain applications, for example in the area of cooling water. Here, the main focus will be on the compo- nent- and manufacturing-related properties of materials and material combinations. Know-how protected by patents Specific know-how in the area of engineered joining technol- ogy represents a key success factor for NORMA Group. The Company therefore uses patents to protect its innovations. As of 31 December 2014, the Group held 850 patents (2013: 867) and utility models in 154 patent families (2013: 161). In 2014, 95 new patent applications (2013: 68) were filed in 17 patent families (2013: 16). Licensing revenue plays a subordinate role since NORMA Group uses most of its licenses and rights itself for competitive reasons. R&D expenses Research and development expenses in the area of EJT totalled EUR 25.7 million in 2014 (2013: EUR 21.9 million). This repre- sents approximately 5.3% (2013: 4.9%) of sales in this area. The other own work capitalised amounted to EUR 3.6 million in the reporting period. This represents a share of 14.0% in relation to the R&D expenses. Apart from internal audits, audits are secured externally if nec- essary to meet the required audit extent in an economical man- ner. The audit costs incurred in the financial year amounted to EUR 4.2 million (2013: EUR 2.5 million). In 2014, NORMA Group received public funding support for Research and Development in the amount of EUR 231 thousands (2013: EUR 0 thousands). R&D employees As of 31 December 2014, 250 employees (2013: 205) worldwide worked for NORMA Group in the R&D department. This rep- resents approximately 5.2% of all permanent employees of the Group (2013: 5.0%). Most of the employees who work in R&D are engineers, technicians and technical draftsmen. Consolidated Management ReportPrinciples of the Group64 R & D K E Y F I G U R E S Number of R&D employees R&D employee ratio in relation to permanent staff (in %) R&D expenses in the area of EJT (in EUR millions) R&D ratio in relation to EJT-sales (in %) External R&D expenses excluding personnel costs (in EUR millions) R&D subsidies received (in EUR thousands) NORMA Group develops new and innovative products for va- rious types of applications each year. The most important new developments in recent years are listed in the following table. I M P O R TA N T P R O D U C T L A U N C H E S I N R E C E N T Y E A R S 2014 2013 2012 2011 250 5.2 25.7 5.3 4.2 231 205 5.0 21.9 4.9 2.5 0 190 5.1 22.1 5.1 3.2 55 174 5.1 16.8 4.1 3.0 58 Product Application Industry Next generation Push&Seal NORMAQUICK ® PS3 quick connector Diesel tank filling system ABA ® Mini W1 clamp Cooling water systems Tank systems Automotive industry Automotive industry Fuel, pneumatic and water systems Automotive industry, water industry NORMACL AMP® TORRO Tamper Proof Tank, air induction and cooling systems Agriculture, automotive industry, ship building, construction industry NORMAFLE X ® Low Emission Tubes Fuel systems Automotive industry NORMAQUICK ® T WIST III Charge air and cooling water systems NORMACONNECT® VPP profile clamp Flanged pipes, exhaust gas, cooling and filter systems Agriculture, automotive industry, ship building, construction industry Agriculture, automotive industry, ship building, construction industry Red Grip Electrical, hydraulics, air ducts, drainages Aviation industry Thermoplastic material for high temperature applications in cooling systems Cooling systems Agriculture, automotive industry, ship building, construction industry SCR Urea Generation II lines Dosing lines for SCR systems Agriculture, automotive industry Newly introduced products accounted for EUR 50.6 million (2013: 51.9 million) in sales in 2014. This corresponds to 7.3% of total sales (2013: 8.1%). NORMA Group SE Annual Report 2014 65 Economic Report GENER AL ECONOMIC A ND INDUSTRY- SPECIFIC CONDITIONS Global economy lacks momentum – extremely heterogeneous regional development In 2014, the world economy was supported on the one hand by the continued loose monetary policy of the central banks and the low inflation rates in the industrialised countries. On the other hand, the dynamics of the world’s largest economy, China, eased further over the course of the year. In addition, the economy has been slowed by significant uncertainties due to the numerous geopolitical crises. Thus, after starting the year off strongly, the economic development began to stagnate in the second quarter. With the sharp decline in oil prices beginning in the summer, sentiment has gradually improved again, particu- larly in the industrialised countries. According to the calculations of the International Monetary Fund (IMF), the world’s economic output has grown by 3.3% just as it did the previous year. According to the IMF and the Chinese Bureau of Statistics NBS, China grew by only 7.4% in 2014 (2013: 7.7%). The government’s strategy of aligning China to focus more on the private domestic economy rather than government infrastructure investments and exports has led to a slight decline in momentum, but it should strengthen the quality of growth in the long term. The over- heated real estate market stagnated noticeably, the increase in industrial production slowed to 8.3% (2013: 9.7%). While the pace of expansion in the Southeast Asian countries (ASE AN-5) flattened to 4.5% (2013: 5.2%), India’s economy picked up considerably and this resulted in GDP growth of 5.8% (2013: 5.0%). Brazil hardly grew at all at 0.1% (2013: 2.5%). The Russian economy sagged markedly as a result of the drop in oil prices, the massive capital outflows, the devaluation of the rouble, sharply higher inflation, and the economic sanctions. Growth still amounted to 0.6% (2013: 1.3%) only due to the record grain harvest. The IMF estimates that the growth of the developing and emerging economies slowed down to 4.4% in 2014 com- pared to 4.7% in 2013. After the US economy had shrunk at the beginning of the year due to the cold winter, the upward forces grew stronger. Private G D P G R O W T H R AT E S ( R E A L ) in % World USA China Euro zone Germany 1) 2014 2013 2012 + 3.3 + 2.4 + 7.4 + 0.8 + 1.6 + 3.3 + 2.2 + 7.8 – 0.5 + 0.1 + 3.4 + 2.3 + 7.7 – 0.7 + 0.4 Sources: IMF, 1) Federal Statistical Office (Destatis) consumption picked up and was supported by the recovery of the real estate markets, asset growth and low energy prices. According to the US Federal Reserve, industrial production rose by an average annual rate of nearly 5%, capacity utilisation in- creased by 1.2 percentage points through December to 79.7%. According to the IMF and the US Department of Commerce, the gross domestic product in the USA grew by 2.4% in 2014. In Japan, demand suffered and the economy stagnated (2014: 0.1%) because of the VAT increase. The United Kingdom de- livered robust growth at a rate of 2.6%, while the euro zone remained anaemic. According to the IMF, growth in the mature economies accelerated to 1.8% in total (2013: 1.3%). Sluggish growth in the euro zone The euro zone recovered somewhat in 2014, nevertheless growth remained sluggish despite the monetary stimulus. The recovery lost momentum after a strong start to the year, there- fore the IMF assumes that moderate growth of 0.8% (2013: – 0.5%) is all that remained for the year as a whole. The de- velopment remained very heterogeneous in the various coun- tries of Europe. On the one hand, the reforms of the peripheral countries bore fruits and Portugal, Ireland, Spain and Greece returned to a growth path. On the other hand, France and Italy dampened growth in the euro zone. Falling oil prices increased the trend of increasingly weak inflation in the second half of the year. The ECB lowered its key lending rate to a record low of 0.05% due to the continuing weak growth in the euro zone and to combat the risks of deflation early on. The euro came under significant downward pressure in the second half of the year. According to the Statistical Office of the European Union (Euro- stat), the unemployment rate in the euro zone remained high throughout the year and was seasonally adjusted in December at 11.3% (December 2013: 11.8%). Economic development was slowed down by the still high euro exchange rate up until the summer and above all by the growing uncertainties in the wake of numerous geopolitical crises. It thus came to a halt in invest- ment and industrial production starting in the early summer. The increase in gross capital investments slowed down over the course of the year from 2.6% initially (1st quarter) to 0.1% (3rd quarter). Industrial production in the euro zone showed an increase of 0.6% in 2014. Nevertheless, capacity utilisation improved slightly in the euro zone and reached 79.9% in the fourth quarter of 2014, (end of 2013: 79.2%). German economy in strong shape thanks to domestic demand According to the calculations of the German Federal Statistical Office, the gross domestic product in Germany grew by 1.6% in real terms (2013: 0.1%) in 2014. Thus, the German economy appeared to be quite robust in a difficult international environ- ment. It was supported by the positive net export contribution and, above all, by strong domestic demand. Private consump- tion rose by 1.1% in real terms compared to 0.8% the previous year. A new employment record, higher incomes, low interest rates and declining inflation contributed to this. Additional stimuli resulted from falling oil and fuel prices at the end of the year. Consolidated Management ReportEconomic Report 66 According to the Federal Statistical Office, gross fixed asset investments also increased by 3.1% compared to the weak pre- vious year (2013: – 0.6%). This development slowed down during the year, however. Fol- lowing a dynamic recovery in the first quarter due to the mild weather, the boom noticeably came to a halt starting in the spring of 2014. The residential real estate market cooled down unexpectedly. The bustling investment activities on behalf of the companies to start the year largely came to a halt. Industrial economic activity stagnated due to the Ukraine-Russia crisis and the decline in incoming orders. According to data from Eurostat, industrial production even fell below the level at the turn of the year 2013 / 2014. Due to the multi-year restraint on investment, the capacity utilisation of German industry improved slightly and rose to 84.1% in the last quarter of 2014 (2013: 83.7%). Mechanical engineering grew significantly worldwide, production and sales records in Germany According to the estimates of the industrial association VDMA, mechanical engineering gained momentum globally and achieved real sales growth of 5% (2013: 2%) in 2014. In line with the global economy, significant regional differences were observed. The two largest individual markets China (9% in real terms) and the USA (6% in real terms) grew accordingly. Japan and some Southeast Asian countries recorded strong, in many cases double-digit increases. The market in the United Kingdom grew by 7% and in the euro zone by 1% in real terms. This was offset by declines in Russia and Latin America. The Brazilian market even collapsed by 10% in real terms. In this environment, German manufacturers were able to in- crease production by 1% in real terms, according to a VDMA estimate. Sales rose by approximately 3% to EUR 212 billion in 2014. The previous record high levels from 2008 were thus exceeded. With an export share of 76%, German mechanical engineering has a strong global network. By the end of Novem- ber, exports had risen by 1.4% in nominal terms. In addition, the domestic market was very strong in 2014, although the capital investment restraint by industry dampened growth. Imports rose by 4.7% in nominal terms in the first three quarters. Domestic sales by German manufacturers increased by 3% by the end of October 2014. Furthermore, the order situation improved again slightly. Orders from within Germany and from abroad rose by 2% for the full year. The situation improved visibly towards the end of the year after getting off to a weak start due to the large- scale plant orders that were received. Car industry continues to grow – Western Europe recovered well According to an estimate published by the German industry association VDA in December, 74.7 million cars were sold world- wide in 2014, 2% more than the previous year. The US market research firm IHS Automotive says that the market for passenger cars and light trucks even grew by 4.6% to 78.9 million units. China, the largest single market, grew strongly again despite diminishing momentum. According to the Chinese associa- tion CA AM, car sales increased by 9.9% and car production by 10.2%. SUVs were in particularly high demand. In contrast, production and sales of commercial vehicles in China declined by around 6% in the wake of new emission regulations. The US market benefited from favourable financing, sales promotions and falling fuel prices. According to the VDA, 5.8% more pas- senger cars were sold in the United States than in the previous year. In Japan and India respectively, car sales rose slightly in 2014 (3.0% and 0.7%). In contrast, the downward trend contin- ued in Brazil (– 6.9%) and Russia (–10.3%). Following the turnaround at the end of the previous year, the Euro pean market recovered considerably in 2014 by recording an increase in sales of 5.4% to 13.0 million passenger cars (EU28 & EF TA), according to data from the European Asso- ciation ACE A. Sales rose by 5.7% in the EU alone, with above average growth in the Eastern European member countries (14.2%). Of the high volume markets, France lagged behind the development of other countries by recording an increase of only 0.3%. The car market grew by 4.2% in Italy, by 9.3% in the United Kingdom and by as much as 18.4% in Spain. In Germany, new registrations increased by 2.9% to 3.0 million cars. According to the VDA, German manufacturers managed to increase exports by 2.4% and domestic production by 3.2% to 5.6 million cars due to how well the export markets had re- covered. The VDA estimates that foreign production by German manufacturers most likely increased by around 6% to just under 9.2 million units. According to the ACE A’s figures, sales of trucks and buses on the European market increased by 7.3% to 1.9 million com- mercial vehicles. The increase was 7.6% in the EU. While sales in France (– 0.4%) dropped again, sales in Spain (31.6%), Italy (13.9%) and the United Kingdom (10.8%) increased at dou- ble-digit rates. In Germany, registrations of commercial vehicles rose by 4.8%. Growth in the European market was driven by the high-volume segment of light commercial vehicles up to 3.5 tons, which grew by about 11%. The other truck segments (over 3.5 tons and over 16 tons) declined. The bus segment grew by approximately 1%. Turnaround for European construction, rise in orders in Germany The European construction industry recovered in 2014 following a long period that saw some significant declines. According to the Ifo Institute and the industry network Euroconstruct, Euro- pean construction grew by 1.0% in real terms (West: 0.8%, East: 4.8%) due to low interest rates and pent-up demand. Commer- cial construction and civil engineering were the driving forces behind this. While residential construction virtually stagnated, expenditure on maintenance and modernisation developed positively. Construction production in Western Europe differed greatly from region to region, however. Construction output continued to decline in France, Italy and Portugal. Gains were recorded in the United Kingdom, Spain and Scandinavia. NORMA Group SE Annual Report 201467 According to the Federal Statistical Office, German construc- tion spending rose by 3.4% in real terms (2013: – 0.1%) in 2014. According to the IfW from Kiel, this development rested on a strong foundation thanks to price-adjusted growth in industrial construction (3.6%), public-sector construction (3.7%) and resi- dential construction (3.1%). In fact, construction spending grew by double-digit rates to begin with in 2014. Growth was barely registered from the spring on, however, as companies acted increasingly cautiously due to greater uncertainty. In addition, residential construction temporarily came to a halt, therefore continued impulses were lacking. According to the Federal Sta- tistical Office, orders in construction fell by 1.8% in real terms in 2014 (building construction: – 0.9%, civil engineering: – 3.0%). The industry associations ZDB and HDB estimate that the con- struction trade’s sales rose by 4.0% to EUR 99.1 billion in 2014 (+2.5% in real terms). SIG NIFICA NT DE VELOPMENTS IN 2014 Acquisition of remaining shares in Chien Jin Plastic, Malaysia In February 2014, NORMA Group acquired the remaining 15% of shares in Chien Jin Plastic Sdn. Bhd. in Malaysia and thus increased its share in the company to 100%. Chien Jin Plastic is a manufacturer of thermoplastic joining technology based in Ipoh, Malaysia. The company has been in the market for over 20 years and manufactures connecting elements for plastic and iron pipe systems that are used in a wide variety of different appli cations, most notably to supply drinking and industrial water, but also in irrigation systems. The complete acquisition of Chien Jin Plastic is in line with NORMA Group’s strategic goal of further expanding its presence in Asia. Due to the fact that the company has already been fully consolidated since its acquisition in November 2012, there were no effects on the operative figures for the fiscal year 2014. Production commences in Brazil and China In April 2014, NORMA Group commenced with production at its new plant in Atibaia, Brazil. The new production site lo- cated near São Paulo manufactures quick connectors and fluid systems for the automobile and commercial vehicle industry. Since June 2014, exhaust pipe couplings and V-band profile clamps are also being manufactured here for the South Ameri- can market. With this new plant, NORMA Group has expanded its business activities and improved its position in the emerging markets of South America. In May 2014, NORMA Group commenced the manufacturing of worm-drive hose clamps and profile clamps at its new plant in Changzhou, China. The new manufacturing site located near Shanghai is already N OR M A Group’s second plant in Chi- na and represents a reaction to the growing demand in the Asia-Pacific region. Acquisition of the business activities of Five Star Clamps in the USA At the end of April 2014, NORMA Group acquired the business activities of Five Star Clamps, Inc. (Five Star) in the USA. Five Star is a family-run business that manufactures and markets joining products for applications in over 50 different industries in both the area of EJT and DS. By acquiring the activities of Five Star, NORMA Group continued to expand its customer base and activities in the USA. Acquisition of water specialist National Diversified Sales in the USA In October 2014, NORMA Group acquired all shares in National Diversified Sales, Inc., (NDS) in the USA. The acquisition of NDS marks NORMA Group’s biggest transaction since its IPO in 2011 and will have an essential future impact on the Company’s sales. NDS’ product portfolio comprises more than 5,000 products including solutions for stormwater management, efficient land- scape irrigation and connecting flow management components for water infrastructure. The company has more than 500 em- ployees and sells its products to more than 7,700 retail and wholesale customer locations in the USA. The payment for the acquisition of all shares in NDS amounted to EUR 228.8 million (USD 285 million) in total, including the finan cial liabilities which were assumed and repaid in full with the help of a temporary bridge loan provided by the Landes- banken Hessen-Thüringen and Baden-Württemberg. With the acquisition of NDS, NORMA Group continues its ex- pansion in the water management market and contributes to the further diversification of the business. Placement of a second promissory note In order to increase its financial flexibility, NORMA Group issued a second promissory note in December 2014. The issue volume of EUR 150 million that was originally planned was heavily over- subscribed and therefore increased to around EUR 209 million (EUR 106 million / USD 128.5 million). The promissory note was allocated with terms of three, five, seven, and ten years. Loan tranches could be subscribed to in euros as well as US dollars, for the first time. The funds from the promissory note were used, among other purposes, to cover medium-term financing of the acquisition of NDS.  Financial management, p. 72. Consolidated Management ReportEconomic Report68 A C T U A L B U S I N E S S D E V E L O P M E N T C O M PA R E D T O F O R E C A S T Results 2013 Forecast March 2014 Forecast May 2014 Forecast August 2014 Forecast November 2014 Results 2014 3) Group sales (in EUR millions) 635.5 n/a n/a n/a n/a 694.7 Growth of Group sales 2.5% plus EUR 26.7 million from acquisitions solid organic growth of around 4% to 7%, in addi- tion, approximately EUR 5 million from acquisitions solid organic growth of around 4% to 7%, in addi- tion, approximately EUR 8 million from acquisitions 1) no adjustment 6.5% plus EUR 22.0 million from acquisitions solid organic growth of around 4% to 7%, in addi- tion, approximately EUR 20 million from acquisitions 2) Cost of materials ratio 42.4% Personnel cost ratio 26.7% Adjusted EBITA margin 17.7% Financial result (in EUR millions) Tax ratio (adjusted) –15.6 32.6% Earnings per share (in EUR) Operating net cash flow (in EUR millions) 1.95 (adjusted) 1.74 (reported) 103.9 no adjustment no adjustment no adjustment no adjustment no adjustment no adjustment 41.7% (adjusted) 27.1% (adjusted) no adjustment no adjustment no adjustment 17.5% around the same as in the two previous year gradual and contin- uous improvement sustainable at the same level as in previous years of more than 17% approx. –18 no adjustment no adjustment approx. – 20 2) –14.5 (reported) – 9.1 (adjusted) around 30% to 32% no adjustment no adjustment no adjustment 33.3% moderate increase no adjustment no adjustment no adjustment 2.24 (adjusted) 1.72 (reported) no adjustment no adjustment no adjustment 103.2 4) between the levels of the previous two years (EUR 81 million to EUR 103.9 million) Investments in R&D (related to EJT sales) Investment rate (excl. acquisitions) Dividend (in EUR) Payout ratio 4.9% 4.8% 0.70 35.9% around 4% no adjustment no adjustment no adjustment 5.3% operationally around the same level as the previous years of around 4.5% approx. 30% to 35% of adjusted annual Group earnings no adjustment no adjustment no adjustment 5.7% no adjustment no adjustment no adjustment 0.75 5) 33.4% 1) Adjustment due to acquisition of business acitivities of Five Star Clamps, Inc., USA. 2) Adjustment due to acquisition of National Diversified Sales, Inc., USA. 3) The adjustments refer to one-off effects from acquisitions.  Notes, adjustments, p. 133. 4) Without balance sheet effects caused by the acquisition of NDS and Five Star. 5) In accordance with the Management Board`s proposal for the appropriation of net profit, subject to the approval by the Annual General Meeting on 20 May 2015. GENER AL STATEMENT BY THE M A N AGEMENT BOAR D ON THE COURSE OF BUSINES S A ND ECONOMIC SITUATION Financial year 2014 was essentially in line with the Manage- ment Board’s expectations. With EUR 694.7 million and organic growth of 6.5%, the total sales that NORMA Group generated were in line with expectations. Additional sales from acquisitions totalled EUR 22.0 million and accounted for 3.5% of the Group’s growth. The forecast for acquisition-related sales was adjusted twice during the year due to the acquisition of the two US com- panies Five Star and NDS. As part of the Q3 report (November 2014), acquisition-related sales of around EUR 20.0 million were forecast, a figure that was exceeded slightly at EUR 22.0 million. This includes in particular the additional sales revenue from the acquisition of NDS at the end of October 2014 in the amount of EUR 13.9 million. In terms of sales distribution by segments, slight shifts occurred compared with the forecast. While the EME A region developed somewhat weaker than had been assumed, the Americas region grew faster than predicted. Overall, however, these effects off- set one another. As projected, the Asia-Pacific region showed strong growth all year round. The main cost positions also developed as expected overall. While the Company was once again able to lower its material costs, personnel costs increased slightly due to acquisitions. In total, adjusted operating profit (EBITA) increased again and the adjusted EBITA margin was maintained at a sustainable high level of 17.5%. NORMA Group SE Annual Report 2014 69 All in all, the Management Board is satisfied with how business developed. Most of the objectives set for 2014 were achieved. The two acquisitions contributed to the further expansion of ac- tivities and the customer base. Furthermore, with the acquisition of NDS, another important milestone was achieved on the way to further diversifying the business. The Management Board considers the economic situation of NORMA Group to be stable and sustainable. This assessment is based on the results of the balance sheet and NORMA Group’s individual results in 2014 and takes business development up until the drawing up of the Group management report 2014 into consideration. Business development through the start of 2015 has been in line with the Management Board’s expectations up until this Annual Report was prepared. As of 31 December 2014, the order book remained at a good level at EUR 279.6 million (2013: EUR 236.7 million), which sug- gests that 2015 is off to a good start. The Management Board therefore believes that NORMA Group will be able to continue to pursue its course of growth in the current year. E AR NINGS, AS SE TS A ND FIN A NCIAL POSITION Adjustments In 2014, acquisition-related costs in the amount of EUR 6.9 million, especially in connection with the acquisition of NDS, were adjusted within EBITDA. The adjustments reflect material expenses (EUR 2.2 million) resulting from valuation of acquired inventories performed within the purchase price allocation of the acquisition of NDS. Other acquisition-related operating ex- penses (EUR 4.5 million) and expenses for employee benefits (EUR 0.2 million) were also adjusted. Besides the adjustments described, the depreciation of fixed assets (EUR 1.3 million) and intangible assets (EUR 10.1 million) from purchase price allocations has been adjusted as in pre- vious years. In financial year 2014, NORMA Group also repaid parts of the syndicated loan that it has had since April 2011 valued at EUR 108.6 million. The associated hedging transactions (inter- est / currency swap and interest rate swap) as well as the dis- count deferred over its term to maturity were released to income at the time of repayment. These one-off expenses of EUR 5.4 million were adjusted within the financial results for 2014. Fictitious income taxes that arise from adjustments are calcu- lated using the tax rates of the respective affected local com- panies and included in adjusted earnings after tax. In financial year 2014, there were no direct adjustments of tax expenses. The following table shows the adjustments. adjusted adjustments reported Sales revenue (in EUR millions) EBITDA (in EUR millions) EBITDA margin (in %) EBITA (in EUR millions) EBITA margin (in %) EBIT (in EUR millions) Financial income (in EUR millions) Profit for the period (in EUR millions) EPS (in EUR) 694.7 138.4 19.9 121.5 17.5 116.2 – 9.1 71.5 2.24 6.9 8.2 18.3 694.7 131.5 18.9 113.3 16.3 97.8 5.4 –14.5 16.6 0.52 54.9 1.72 Sales and earnings performance The development shown below describes the changes in the essential items of the income statement during the year adjust- ed for the special effects mentioned. For comparison purposes, adjustments will be discussed separately in certain cases. All other adjustments are explained in the notes.  Notes, p. 133. Sales development Solid organic sales growth – additional growth through acquisitions The Group’s revenue in financial year 2014 amounted to EUR 694.7 million and was therefore 9.3% higher than in the previous year (2013: EUR 635.5 million). At 6.5% (2013: 2.5%), organic growth improved compared to the previous year and was bol- stered by the very good development of business in the Amer- icas and the dynamic development in the Asia-Pacific region in particular. The acquisitions made in 2013 and 2014 accounted for close to EUR 22.0 million or 3.5% of the Group’s sales growth. NDS, the company acquired at the end of October 2014, accounted for EUR 13.9 million of this amount. The economic recovery in the USA went hand in hand with the marked appreciation of the US dollar in the second half of the year. This had a positive effect on NORMA Group’s sales, which nearly made up for the negative currency effects from the first half of the year. For the full year, the currency effects had a slightly negative effect on sales development of – 0.6%. NORMA Group’s business development is subject to a certain seasonal fluctuation and is typically characterised by a strong Consolidated Management ReportEconomic Report 70 first half of the year compared to the second half. Since sales development in 2013 had followed a rather atypical course with an exactly opposite trend, the past financial year again showed the usual pattern. The opposite movement in 2013 and the re- sulting low or high base values in the first or second half of 2013 reinforced this trend and should be taken into account in the year-on-year comparison. ment across all regions. But from the second quarter on a partially heterogeneous development was seen in the various regions. While sales growth flattened in the EME A region due to the general downturn in the economy and the overall decline in industrial production in Europe, the regions Americas and Asia-Pacific developed very dynamically throughout the year.  Segment Reporting, p. 74. O V E R V I E W O F S A L E S C O N T R I B U T I O N S F R O M C O M PA N I E S A C Q U I R E D I N 2 0 13 A N D 2 0 14 Company First consolidation Share of sales contribution 2014* in EUR millions Davydick & Co. Pty. Limited, Australia January 2013 Variant S.A., Poland Guyco Pty. Limited, Australia June 2013 July 2013 Click Automotiva Industrial Ltda., Brazil September 2013 Five Star Clamps, Inc., USA April 2014 National Diversified Sales, Inc., USA November 2014 Total * until 12 months have expired following the acquisition 0.1 1.1 3.6 0.1 3.2 13.9 22.0 S A L E S G R O W T H I N 2 0 14 in EUR millions Organic growth in the area of EJT; DS bolstered by acquisitions NORMA Group generated total sales of EUR 484.5 million in the EJT unit in financial year 2014, an increase of 9.2% over the previous year (2013: EUR 443.9 million). At the beginning of the year, the new ramp-up due to the EURO-6 standard and the positive economic conditions worldwide had a positive impact. This resulted in strong organic growth in all three segments in the first half of the year. In the second half of the year, the EMEA region lost some of its momentum in this area, however this was offset by the solid performance in the Americas and Asia-Pacific. Revenues in the Distribution Services unit amounted to EUR 216.6 million in 2014 and thus increased by 11.9% over the pre- vious year. Here, too, the Americas turned out to be the main growth driver. There, especially revenue from the water business had a positive impact in the fourth quarter of 2014 due to the acquisition of NDS. 2013 2014 H1: 322.8 H2: 312.7 S A L E S D I S T R I B U T I O N B Y D I S T R I B U T I O N C H A N N E L S 635.5 in % H1: 353.0 H2: 341.7 694.7 0 500 1.000 30 DS E F F E C T S O N G R O U P S A L E S in EUR millions share in % EJT 70 Sales 2013 Organic growth Acquisitions Currency effects Sales 2014 635.5 41.3 22.0 – 4.1 694.7 6.5 3.5 – 0.6 9.3 Heterogeneous developments in the various regions Overall, the financial year for NORMA Group began with a strong first quarter in which the start-ups had a positive impact on the organic growth of the Group due to the EURO-6 emission standard in Europe and the robust macroeconomic environ- D E V E L O P M E N T O F T H E D I S T R I B U T I O N C H A N N E L S EJT DS 2014 2013 2014 2013 Sales (in EUR millions) 484.5 443.9 216.6 193.6 Growth (in %) Share of sales (in %) 9.2 70 3.8 70 11.9 30 11.0 30 NORMA Group SE Annual Report 2014 71 Development of earnings Adjusted cost of materials ratio improved – gross margin constant Thanks to targeted procurement management and the building of an effective Group purchasing structure, NORMA Group has been able to continuously improve its cost of materials ratio in recent years. In the reporting year 2014, the adjusted costs of materials amounted to EUR 289.9 million (2013: EUR 269.4 million). In terms of sales, this resulted in a significantly lower ad- justed material cost ratio of 41.7% (2013: 42.4%). After deducting changes in inventories (EUR – 2.9 million) and other own work capitalised (EUR 3.6 million) from sales, NORMA Group reported adjusted gross profit of EUR 405.6 million, an increase of 9.2% compared to the previous year (EUR 371.4 million). In relation to sales, this resulted in an unchanged high gross margin of 58.4% compared to 2013. C O S T O F M AT E R I A L S A N D C O S T O F M AT E R I A L S R AT I O Materials used (in EUR millions) – Cost of materials ratio (in %) 269.4 42.4 289.9 41.7 300 200 100 0 45 40 35 30 2013 2014 Adjusted operational results increased Other significant factors influencing the development of oper- ational results – earnings before interest, taxes, depreciation and amortisation (EBITDA) – include personnel costs and other operating income and expenses. In relation to sales, adjusted personnel expenses rose slightly disproportionately by 11.0% to EUR 188.3 million (2013: EUR 169.7 million) in the reporting year. The resulting slightly higher adjusted personnel expense ratio of 27.1% (2013: 26.7%) can be attributed to the increase in the average number of employees during the reporting year also as a result of the acquisitions. On the other hand, adjusted other income and expenses (EUR 78.9 million) showed a stable development compared to sales, which is reflected in a rate of 11.4%, unchanged to 2013. The more significant financial control parameter for NORMA Group, the adjusted EBITA, amounted to EUR 121.5 million in 2014, which is 7.9% higher than the adjusted EBITA of the previous year (2013: EUR 112.6 million). The resulting adjusted operating EBITA margin was 17.5% (2013: 17.7%). This means that NORMA Group’s business was sustainably profitable again in 2014. A D J U S T E D E B I TA A N D A D J U S T E D E B I TA M A R G I N Adjusted EBITA (in EUR millions) – Adjusted EBITA margin (in %) 112.6 17.7 121.5 17.5 120 80 40 0 20 15 10 0 2013 2014 Financial result The unadjusted financial result for financial year 2014 came to EUR –14.5 million (2013: EUR –15.6 million). This was mainly influenced by one-off effects from the reversal of the discount related to the partial repayment of the syndicated loan, but also to derivative hedging transactions (EUR – 5.4 million). Further- more, the development of the US dollar had a positive impact on the currency earnings from financing activities.  Notes, p. 136. The financial result adjusted for the one-off effects mentioned was EUR – 9.1 million. Adjusted net income after tax increased Adjusted net income after tax for the period amounted to EUR 71.5 million in 2014 and thus increased by 15.1% compared to the previous year (2013: 62.1 million). Adjusted income taxes amounted to EUR 35.7 million, resulting in an effective tax rate of 33.3%. Unadjusted net income in 2014 amounted to EUR 54.9 million and was 1.3% lower than in 2013 (EUR 55.6 million). Over- all, the adjustment effect after tax amounted to EUR 16.6 million. With an unchanged number of 31,862,400 shares compared to last year, this resulted in adjusted earnings per share of EUR 2.24 (2013: EUR 1.95). Unadjusted earnings per share amounted to EUR 1.72 (2013: EUR 1.74). Financial position and cash flows This resulted in adjusted earnings before interest, taxes, depre- ciation and amortisation (adjusted EBITDA) for the financial year of EUR 138.4 million, an increase of 7.1% over the previous year (2013: EUR 129.3 million). Total assets reflect acquisition of NDS Total assets amounted to EUR 1,078.4 million as of 31 Decem- ber 2014 and were thus 30.9% higher than in the previous year Consolidated Management ReportEconomic Report72 (EUR 823.7 million). They were mainly influenced by the acquisi- tion of the two US companies Five Star and NDS. The increase in liabilities reflected in particular the issuance of the promissory note in the amount of around EUR 209 million (EUR 106 million and USD 128.5 million) in the fourth quarter and the resulting rise in non-current liabilities. Non-current and current assets The acquisitions in the USA already mentioned resulted in an increase in non-current assets by 67.4% to EUR 754.3 million. Following the initial consolidation of the acquisitions, there was an increase in goodwill, which amounted to approximately EUR 78 million. Other changes in goodwill are attributable to currency effects. Furthermore the other intangible and tangible assets increased.  Notes, p. 141. Current assets, on the other hand, decreased by 13.1% from EUR 373.1 million as of 31 December 2013 to EUR 324.1 million. This resulted mainly from the decrease in cash and cash equiva- lents, which were primarily used to repay the existing syndicated credit line in the first quarter of 2014. Inventories and receivables for goods and services also increased due to the acquisitions. The share of non-current assets to total assets at the end of 2014 amounted to 70.0%. Consequently, current assets ac- counted for a 30.0% share. Equity ratio Consolidated equity as of 31 December 2014 amounted to EUR 368.0 million and thus rose by 15.0% compared to the previous year (2013: EUR 319.9 million). This increase resulted mainly from the net profit for the period of EUR 54.9 million and positive currency translation differences in the amount of EUR 14.3 million. In contrast, the dividends paid in the second quarter in the amount of EUR 22.3 million reduced equity. Due to the increased debt ratio as a result of the acquisition of NDS, the equity ratio at the end of financial year 2014 was 34.1% (2013: 38.8%). Net debt increased by acquisition financing Net debt after the acquisition of N DS and the issuance of the promissory note at the end of the reporting period was EUR 373.1 million (included herein are derivative and thus non- cash financial instruments in the amount of EUR 20.2 million), a significant increase compared to the previous year (2013: EUR 153.5 million). Gearing (net debt in relation to equity) was 1.0 (2013: 0.5).  Notes, p. 161. (Trade) working capital (Trade) working capital (inventories plus receivables minus liabil- ities, both primarily from trade payables and trade receivables) was EUR 141.8 million as of 31 December 2014, and thus 27.9% higher than the previous year (2013: EUR 110.9 million). The in- crease resulted primarily from the initial consolidation of NDS. In relation to sales, trade working capital was 20.4% (2013: 17.5%) on the balance sheet date. Considering NDS sales for the full year 2014, the (pro forma) working capital accounts for 18.1% of sales. Non-current liabilities Non-current liabilities amounted to EUR 555.1 million as of 31 December 2014 (2013: EUR 261.4 million), and were thus around 51.5% of total assets. This reflects in particular the increase in long-term debt of EUR 201.0 million at the end of 2013 to EUR 408.2 million as of the balance sheet date in 2014 due to the issuance of the promissory note in the fourth quarter. Furthermore, derivative financial liabilities increased in terms of valuation. In addition, deferred income tax liabilities of EUR 33.0 million in December 2013 increased to EUR 104.6 million as of the balance sheet date. This increase mainly resulted from the consolidation of NDS. Current liabilities Current liabilities amounted to EUR 155.3 million at the end of 2014 (2013: EUR 242.4 million) and were thus reduced by EUR 87.1 million or 35.9% compared to the previous year. This is mainly due to the repayment of the revolving credit facility in the first quarter of 2014 in the amount of EUR 101.4 million, which was still reflected under current liabilities in the balance sheet for the previous year. Furthermore, trade liabilities increased by EUR 21.8 million to EUR 80.8 million. Off-balance sheet financial instruments NORMA Group relies on rental agreements (so-called operat- ing leasing) for its financing, but only to a limited extent. These are not reflected in the consolidated financial statements.  Notes, p. 164. In addition, a variety of supply chain financing programmes are used to improve working capital, including a supplier-side reverse factoring programme. An attempt is also made to optimise working capital on the customer side using the appropriate instruments.  Notes, p. 151. In addition, there were no other off-balance sheet financial instruments during the reporting period January to December 2014. Unrecognised intangible assets NORMA Group’s rights to the brands it owns, if acquired ex- ternally, are recognised in the balance sheet as intangible as- sets together with its patents. However, the reputation of these brands and how well known they are among its customers also play important roles in its success, as does consumer confi- dence in NORMA Group’s products. Well-established customer relationships that are based on NORMA Group’s distribution network that has continually grown over the course of many years are equally important. The know-how and experience of NORMA Group employees also play important roles in the Com- pany’s success. The many years of research and development expertise and project management know-how are also seen as competitive advantages for NORMA Group. These values are not recognised in the balance sheet. Financial management Financial measures and capital costs Risks from changes in exchange rates are continuously mo- nitored and limited by using derivative structures. Furthermore NORMA Group strives to achieve a broad diversification of its NORMA Group SE Annual Report 2014A S S E T A N D C A P I TA L S T R U C T U R E in EUR millions Assets 2014 2013 754 451 240 84 179 194 Non-current assets Current assets Liquid assets Equity and liabilities 368 2014 2013 320 Equity 555 155 262 242 Non-current liabilities Current liabilities 73 1,078 824 1,078 824 financing instruments over the medium term in order to reduce risk. These also include prolongation of repayment obligations and an even distribution of the maturity profile. Most of the sup- ply and service relationships between individual currencies are simultaneously hedged over the course of the year. In financial year 2014, NORMA Group took further steps toward improving its financial structure. The credit line originally agreed to at the time of the IPO was renegotiated by September 2014 and continued with improved conditions. The new syndicated loan has a term of five years (with a double extension option) and a total volume of EUR 150 million. It includes a revolving line of credit in the amount of EUR 50 million and a loan facility in the amount of EUR 100 million. As of the reporting date 31 December 2014, no use was made of the revolving line. In order to achieve maximum flexibility, a so-called accordion facility was also negotiated in the loan agreement. This enables NORMA Group to take out loans from other banks up to a maximum vol- ume of EUR 250 million and thus extend the overall credit line. The entire syndicated loan that was issued solely on a variable euro basis was for the most part converted into a fixed-rate position in US dollars by using derivative instruments. This made it possible to minimise currency and interest rate change risks. The changes in value of the instruments chosen are recorded directly in the equity position as part of hedge accounting. A small portion of the credit line was intentionally not hedged to allow for special repayment options. NORMA Group considers the risk of a significant increase in interest rates in the short term to be relatively low. If this assessment changes, the interest rate risk will be limited by using the appropriate instruments. Following the successful placement of the first promissory note in 2013, NORMA Group issued another promissory note in the amount of EUR 209 million (EUR 106 million / USD 128.5 million) in late 2014. The new promissory note has a term of three, five, seven and ten years. Parts of the USD tranches are not secured and act as a natural hedging instrument and reduce the Group’s increased US dollar exposure. The funds raised through the issuance of the promissory note were partially used to repay the bridge loan that was provided by the Landesbank Hessen-Thüringen and the Landesbank Baden- Württem berg for a short time in connection with the acquisition of National Diversified Sales (purchase price payment in USD). The strong interest from the banking institutes resulted in a high oversubscription and therefore also an attractive credit margin. As with the first promissory note, hedging was performed using derivative structures as fixed interest payment positions to avoid the risk of a change in interest rates. With the new financing structure, the Company managed to achieve a significant ex- tension of the term and an even repayment profile. The average interest rate of the promissory note loan of 3.0% (EURIBOR plus margin) corresponds to the market assessment of an ‘Invest- ment Grade’ for NORMA Group. Consolidated Management ReportEconomic Report74 As of the balance sheet date in 2014, NORMA Group complied with all of the conditions contained in the loan contracts (finan- cial covenants: financial debt ratio and change of control). 2014. In addition, payments for the acquisition of the remaining shares of Chien Jin Plastic (EUR 0.9 million) and payments for finance leases (EUR 0.3 million) are reported in cash flow from financing activities. Further concrete financing steps will depend on the current changes in the financing markets and acquisition potentials. Development of cash flow Net operating cash flow In 2014, NORMA Group achieved an operating net cash flow of EUR 103.2 million. Compared to the previous year, the net cash flow is on a comparable high level (2013: EUR 103.9 million). Cash flow from operating activities Cash flow from operating activities in financial year 2014 amounted to EUR 96.4 million (2013: EUR 115.4 million) and was also affected by outflows from income taxes related to liabilities from previous years. In particular non-cash expenses from the stock option programme in the amount of EUR 0.5 mil- lion and non-cash interest expenses in the amount of EUR 2.5 million are reflected in other cash expenses and income. In addition, non-cash income from foreign currency translation, external financing liabilities and intragroup monetary items to- talling EUR – 4.4 million are included therein. Furthermore, the cash flows from the reverse factoring programme and the corre- sponding financial instruments on the customer side are shown in the cash flow from operating activities. Cash flow from investing activities increased Cash flow from investing activities amounted to EUR 265.1 million (2013: EUR 43.4 million) in financial year 2014. The significant increase over the previous year is primarily due to the acquisition of the two US companies Five Star and NDS. Overall, net payments for acquisitions amounted to a total of EUR 232.2 million. The investment ratio (tangible and intangible assets) was 5.7%. Cash flow from financing activities primarily impacted by the promissory note Cash flow from financing activities amounted to EUR 57.7 million (2013: EUR 51.7 million) in 2014. This mainly comprises pro- ceeds from borrowings, repayments of borrowings, payments made in connection with the repayment of hedging derivatives, payment of the dividend as well as cash flows resulting from interest paid. Proceeds from borrowings resulted from the issuance of the promissory note valued at EUR 209 million in December 2014 as well as from syndicated loans in the amount of EUR 20.1 million. Outflows, however, resulted from the repayment of a portion of the syndicated loan in the amount of EUR 123.0 million and the repayment of hedging derivatives in the amount of EUR 8.0 million in this context. Furthermore, a revolving credit facility in the amount of EUR 5.5 million, which was taken in claim on 31 December 2013, was repaid in full in the third quarter of Investment analysis NORMA Group invests the funds from its operating cash flow in its continued growth. Investments made in the reporting year 2014 pertained to the acquisition of the two companies Five Star and NDS, the acquisition of the remaining shares of the Malaysian company Chien Jin Plastic, but also investments in production facilities and expanding capacity. Furthermore, par- cels of land were purchased in the USA to achieve long-term reductions in operating costs.  Production and Logistics, p. 77. SEGMENT R EPORTING By developing new markets in line with the continuing strategy of internationalisation of NORMA Group, the share of sales real- ised internationally increased from 70.4% to 72.2%. The distribution of sales across the three segments EME A (Eu- rope, Middle East, Africa), Americas (North, Central and South America) and Asia-Pacific (APAC) has changed slightly due to currency effects and the acquisitions of the two US companies Five Star and NDS in financial year 2014 and is now as follows: S A L E S B Y S E G M E N T in % 2013 in brackets Asia-Pacific (9) 9 Americas (30) 34 57 (61) EME A Due to the fact that financing as a whole is controlled centrally, NORMA Group forgoes publishing a separate list of financing by segments. In every segment the aim is to achieve an investment ratio and cash generation that is in line with the Group average in the medium-term.  Financial and Liquidity Management, p. 62. EMEA External sales in the EME A region amounted to EUR 394.5 million in 2014, and thus increased by 1.7% over the previous year (2013: EUR 388.0 million). While the region showed solid organic growth in the first quarter due to the new ramp-ups as a result of the EURO-6 standard, the momentum slowed down during the year. The main reasons were the generally weaker NORMA Group SE Annual Report 2014 75 S A L E S B Y S E G M E N T EME A Americas Asia-Pacific in EUR millions 2014 2013 Δ 2014 2013 Δ 2014 2013 Δ External sales Contribution to consolidated sales Adjusted EBITDA 1) 394.5 57% 84.6 388.0 61% 83.9 1.7% 0.9% 237.8 34% 49.3 191.6 24.1% 30% 45.2 9.0% 62.5 9% 7.7 56.0 9% 6.5 11.6% 18.7% 1) The adjustments are described in the notes.  Notes, p. 133. economic environment and the overall decline in industrial pro- duction in Europe. The EME A region’s share of total sales de- clined slightly compared to the previous year from 61% to 57% due to currency effects and acquisitions in the USA. Adjusted EBITDA in the EME A region increased by 0.9% to EUR 84.6 million (2013: EUR 83.9 million). At 21.5%, the adjusted EBITDA margin remained at a sustained high level (2013: 21.6%). Assets increased by 1.2% compared to the previous year to EUR 496.4 million, mainly due to the growth of the business. Investments amounted to EUR 13.1 million, and were thus at the same level as last year. The funds were invested primarily in production facilities for the purpose of capacity expansion at the German plants and in Serbia, the Czech Republic, Sweden and the UK.  Production and Logistics, p. 76. The Americas The Americas segment generated EUR 237.8 million in sales in 2014, and thus increased by 24.1% over the previous year. Here, the generally improved economic situation in America in par- ticular, which was further strengthened by lower oil prices and the appreciation of the US dollar during the year, had a positive effect. In addition, the recovery of the US automotive market had a positive effect on sales growth in America. Consequently, the region experienced strong organic growth of 15.3%. Additional revenue from the acquisition of NDS in the amount of EUR 13.9 million also had an effect in the fourth quarter. Due to these developments, the share of sales of the Americas region of total sales increased to 34% (2013: 30%). Adjusted EBITDA was EUR 49.3 million in 2014, and thus 9.0% higher than the previous year (2013: EUR 45.2 million). This resulted in a lower adjusted EBITDA margin of 20.7% (2013: 23.6%) compared to the previous year. This was due, among other factors, to the start-up costs related to the opening of the plant in Brazil. Assets increased quite significantly compared to the previous year, mainly due to the acquisitions of Five Star and NDS, and amounted to EUR 574.9 million (2013: EUR 210.0 million) at the end of the year. Investments amounted to EUR 16.2 million and were also significantly higher than the previous year (2013: EUR 7.3 million). Investment priorities included the plant in Brazil. In addition, NORMA Group acquired parcels of land in the USA to lower its operating costs in the long term.  Production and Logistics, p. 76. Asia-Pacific Sales in the Asia-Pacific region amounted to EUR 62.5 million in 2014 and thus increased by 11.6% compared to the pre- vious year. The region once again experienced a very dynamic develop ment with solid organic growth over the course of the year, which was further supplemented by revenue from acqui- sitions (Davydick & Co. and Guyco) in the first half of the year. Adjusted EBITDA rose by 18.7% to EUR 7.7 million (2013: EUR 6.5 million). The adjusted EBITDA margin increased to 12.3% (2013: 11.6%). Assets increased from EUR 61.9 million by 16.2% to EUR 71.9 million during the reporting year. This was mainly due to the general growth of business operations in this region. Investments, which amounted to EUR 5.8 million (2013: EUR 6.7 million) in 2014, were mainly used to expand NORMA Group’s second site in China. SUSTAIN ABLE VALUE CRE ATION NORMA Group considers reconciling the effects of its busi- ness activities with the needs of society to be its primary responsibility. The management therefore takes the principles of responsible management and sustainable conduct into con- sideration in making company decisions. Corporate Responsibility, NORMA Group’s responsibility to so- ciety and the environment, is therefore an integral component of the corporate strategy. The CR steering committee that was founded in 2012 under the leadership of CEO Werner Deggim is responsible for setting and formulating long-term goals for CR and coordinates the respective cross-divisional activities. Consolidated Management ReportEconomic Report 76 Five key areas of Corporate Responsibility In order to serve the needs of all stakeholders, NORMA Group has systematised its CR activities in the following five key areas. • Responsible Management • Business Solutions • Employees • Environment • Community The main focuses of the individual areas of activity are dis- cussed in greater detail in the Sustainability Report that NORMA Group published for the first time in 2014. This report also provides information on many of the Group’s performance indicators and is orientated towards the latest standard of the Global Reporting Initiative (GRI 4). PRODUCTION A ND LOGISTICS N O R M A Group manufactures and markets approximately 35,000 different products and has 22 production sites all over the world. Furthermore, the Company has a network consisting of numerous distribution, sales and competence centres that supply to its customers in the respective regions.  Graphic: Production and Distribution sites. In financial year 2014, NORMA Group further expanded its global presence by opening two new production sites in Atibaia, Brazil, N O R M A G R O U P P R O D U C T I O N A N D D I S T R I B U T I O N S I T E S and Changhzou, China. Through the acquisition of National Diversified Sales in October 2014, the number of NORMA Group sites increased to include two more sites in the USA in the finan- cial year. The production operated by Five Star, the company acquired in April, on the other hand, was consolidated, and these operations were relocated to the NORMA Group plant in Michigan. Furthermore, production was discontinued at the Italian Nordic Metalblok site. A new distribution centre was also opened in Michigan to ensure higher performance, more flexible storage and even faster delivery times. Production and capacity utilisation The capacity utilisation of NORMA Group’s manufacturing and storage facilities varies from site to site. In markets such as the emerging countries of Asia and South America, where NORMA Group’s business is still being developed, the area-related utilisation of production plants is currently relatively low. This can be attributed to the fact that investment decisions are planned in advance to ensure that sufficient production space is available to be able to expand production capacity in a flex- ible manner. In industrial nations and the markets in which NORMA Group already has an established market position and the plants are largely working to capacity, an attempt is made to avoid investing in additional manufacturing space whenever possible. Instead, the goal is to optimise the current manufac- turing processes by improving efficiency in order to be able to use the existing space to create additional capacity. EMEA Czech Republic (P) France (P, D) Germany (P, D) Italy (D) Poland (P, D) Russia (P, D) Serbia (P) Spain (D) Sweden (P, D) Switzerland (P, D) The Netherlands (D) Turkey (D) United Kingdom (P, D) Americas Brazil (P, D) Mexico (P) USA (P, D) Asia-Pacific Australia (D) China (P, D) India (P, D) Indonesia (D) Japan (D) Korea (D) Malaysia (P, D) Philippines (D) Singapore (D) Thailand (P) Vietnam (D) NORMA Group SE Annual Report 201477 The capacity utilisation of manufacturing plants can be ramped up flexibly to suit customer demand and the order situation. With- in each product category, a wide variety of different products with different specifications can be manufactured at the existing plants by performing only minor conversion measures. Thus, production can be optimally adapted to suit customer demand. Investment in capacity expansion Apart from the acquisitions already mentioned, the following investments toward expanding capacities were made last year: Country Site Description Germany Maintal Refurbishment of tooling and production equipment, investment in a new assembly machine Sweden France Anderstorp Refurbishment of machinery and equipment in order to improve quality and productivity Briey Implemented overmoulding capability for UTS systems Czech Republic Hustopece Investment in hot gas testing and 3D metrology equipment Germany Gebershausen Expansion of the Eurocoupler capacity United Kingdom Newbury Installation of transfer presses for VPP clamp production China China Malaysia India USA Brazil USA Changzhou Start-up of a facility for manufacturing VPP clamps for a Japanese customer, investment in production equipment for coupler, QRC and Gemi products Qingdao Installation of new production equipment for UTS systems, fluid systems and V2 connectors Ipoh Pune Upgrade of an electrical substation in order to operate additional moulding machines Extension of the extrusion capacity Auburn Hills Purchase of land and buildings to reduce operating expenses, investments in additional production equipment Atibaia St. Clair Start-up of a facility for producing quick connectors for the local market, expansion of production capacity Purchase of land and buildings to expand capacity, purchase of two moulding machines Mexico Monterrey Implementation of an extrusion process to reduce the level of imports, expansion of UTS system capacity to support market growth Mexico Juarez Investment in new press capacity to support growth, implementation of safety systems on presses and welding equipment to reduce the risk of accidents Continuous optimisation of the entire value chain At NORMA Group, all internal processing steps in the value chain are constantly analysed for optimisation potential. The Global Excellence Programme that was introduced in 2009 represents an essential tool here that helps to analyse ex- isting processes, identify potential for improvements and introduce the appropriate measures for implementation. As a result, many processes have already been automated and standardised in recent years, so that significant economies of scale have been achieved. By introducing the NORMA Group Production System (NPS) at the beginning of 2014, yet another step towards becoming a value-oriented company has been taken. The NPS and the im- plementation of lean manufacturing associated with it are both aimed at making production even more efficient in the future, increasing productivity and achieving further cost savings. In this respect, NORMA Group also employs innovative methods to optimise its processes. These include, for example, statistical process regulation, kaizen, the 5S methodology on optimisation of workplaces, the Six Sigma method for analysing and elimi- nating defects in development and manufacturing, but also the daily Gemba Walk through the production halls. A uniform, Group-wide ERP system that was implemented start- ing in 2012 provides software-based support for all important business processes. The system was expanded step by step at further NORMA Group sites and divisions in 2013 and 2014. The roll-out is not yet completed and will be continued in future. By using a standardised system, NORMA Group is able to harmo- nise and integrate all processes, which is particularly important in light of the Group’s rapid growth and its many acquisitions in recent years. Customer focus and secure supply chain In order to optimise its logistics costs, NORMA Group always strives to keep the geographical distances in the value chain as short as possible and avoid non value-adding intermediate steps via other NORMA Group sites. The goal is therefore to always manufacture in the regions that its customers are based in. This not only optimises working capital and lowers logistics costs, but also minimises delivery risks and reduces negative impacts on the environment. Despite these efforts, cross-border deliveries are still indispens- able for NORMA Group in many places, therefore optimised and secure customs processes are extremely important. For Consolidated Management ReportEconomic Report78 this reason, NORMA Group participates in various customs and trade partnership programmes. By participating in an export control programme that is part of the global compliance pro- gramme, NORMA Group ensures that its supply chain meets all of the legal requirements. By reviewing all of its business partners at least once a year, NORMA Group is able to rule out deliveries to legally sanctioned third parties. In addition, com- pliance with the relevant legal regulations on export control is ensured through internal organisational procedures and regular checks. QUALIT Y M A N AGEMENT The products that NORMA Group supplies are often critical to the ability of its customers’ end products to function properly. It is therefore extremely important for NORMA Group to ensure that it delivers outstanding quality. In order to be able to offer the same high quality all over the world, the quality standards ISO 9001, TS 16949 are observed throughout the entire Group, with the exception of the plants that were acquired only recently or built during the financial year. Two sites that supply to the aviation industry have also been certified in accordance with EN 9100, and various product categories have been approved especially for the shipping and construction industry. Plants that are not yet connected to the quality management system are to obtain the appropriate certifications as soon as possible. Because customer needs vary in the many different regions and markets, regional standards and customer requirements are also taken into consideration in production. This know-how is shared inside the Group through close collaboration between the various sites and gradual implementation of quality manage- ment (CAQ) software. Through its integrated, holistic approach to quality manage- ment and extensive measures aimed at optimising processes, NORMA Group was also able to improve key figures that mea- sure customer satisfaction in 2014. The number of returned parts per million (PPM) was reduced to 17 (2013: 24). In addi- tion, the number of quality-related complaints per month was reduced to an average of 8 (2013: 9) Higher customer satisfaction is also reflected in the results of this year’s Customer Satisfaction Survey (CSS). This detailed survey covers all aspects of NORMA Group’s products, including quality, logistics, packaging and labelling, customer service and online presence. More than 550 customers took part in last year’s survey. The many awards that NORMA Group has received in recent years also clearly show how pleased customers are with the Company: • Received the Best Partner Award from General Motors in China • Honoured as the Best Medium Enterprise 2013 in Serbia • Recognised as a First-Class Supplier by FAW-Volkswagen Automobile Co., Ltd. in China • Received the 50 PPM Award from PACCAR • Recognised with the Komatsu Award for outstanding achievements and results as a supplier • Received the General Motors Supplier Quality Excellence Award • Recognised as the Top Supplier in China by General Motors and Ford PURCH ASING A ND SUPPLIER M A N AGEMENT Material costs represent the highest cost position for NORMA Group next to personnel costs. Because they significantly affect the Company’s profits, purchasing and supplier management both play a decisive role in the success of the Group. The most important goal for the purchasing department is to reduce price risk and leverage economies of scale within the Group through proactive management of the direct and indirect costs of ma- terials and services purchased. Purchasing and supplier management at NORMA Group is or- ganised primarily on the basis of the following three higher level commodity groups: • Steel and metal components (various grades / materials) • Granules and plastic products • Capital goods, non-production materials and services The commodity organisation is integrated into the NORM A Group plants worldwide in the form of a matrix structure. Addi- tional commodity responsibilities emerged in recent years in purchasing and supplier management, particularly in the areas of water infrastructure and pharmaceutical biotechnology, due to the Company’s continued growth, acquisitions and the re- lated expansion into new markets. M AT E R I A L P U R C H A S I N G I N 2 0 14 in % Alloy surcharges 9 17 Steel, wire Various 10 19 Metal components Indirect 25 materials Electronic 1 components 6 Granules 7 Plastic parts 6 Rubber moulded parts Global Group structure and regional expertise NORMA Group has established a powerful Group purchasing structure that also includes the area of non-production materials and services since 2013. Purchasing is controlled centrally for all domestic and foreign Group companies, while regional teams NORMA Group SE Annual Report 2014 79 contribute their specific knowledge of local market conditions and typical regional cost drivers. Commodities and services can be obtained extremely competitively and the related costs can be reduced significantly due to the higher degree of pro- fessionalism and the combination of global and regional pur- chasing management. This is also reflected in a significantly improved (adjusted) material purchasing rate of 41.7% in 2014 (2013: 42.4%).  Economic Report, p. 71. Development of material prices and prices of non-production materials The market prices for steel grades purchased were slightly lower in 2014. Improvements in the supplier selection process have made an additional positive value contribution. In contrast, the nickel price quotes which have a significant influence on the alloy surcharges of austenitic materials were considerably more volatile in 2014 than in the previous year. While they were at a relatively high level in the period June to October, they declined again towards the end of the year. Slightly higher expenditures were therefore recorded on an annual average.  Graphic: De- velopment of Nickel Prices. The prices of ferritic materials developed at a relatively stable rate throughout the year. The average of the quotations changed only slightly over the previous year. Because of the clearly improved economic and order situation in the USA in the second half of 2014, NORMA Group was tem- porarily faced with an increase in orders and had to purchase steel at the comparatively higher spot price in the short term to meet customer demand. In general, NORMA Group protects itself from the volatility of commodity prices by signing long-term contracts with suppliers. The market prices of most of the other commodities such as polyamides or polypropylene materials remained relatively stable or were even slightly lower. In the area of non-production ma- terials better overall conditions for the Group subcontracting agreements could also be achieved due to the specific market and competitive understanding of the buyers. Supplier management Constantly optimising the selection of suppliers is yet another key task of purchasing. This is done not only solely on the basis of traditional criteria such as quality, price, delivery times and loyalty, but also takes important aspects of risk management and sustainable development into consideration. With this in mind, NORMA Group published the Supplier Code of Conduct in 2014. These guidelines formulate NORMA Group’s expectations with respect to the sustainable economic activity of its suppliers and serve as a basis for additional sustainability criteria such as compliance with human and employee rights, workplace safety and ecological and ethical aspects when se- lecting suppliers. @ http://normagroup.com/cr. NORMA Group’s goal is to ensure that it acts responsibly throughout the entire value creation chain. By the end of 2014, all production material suppliers of strategic importance to NORMA Group had confirmed their commitment to the Code. The written consent of all large and medium-sized suppliers and suppliers from so-called high-risk countries (China, India, South East Asia, etc.) is to be obtained in 2015. To honour its suppliers’ commitment to sustainability, NORMA Group awarded the Global Supplier Recognition Award for the first time in 2014. This award for outstanding achievements and results was presented to the longstanding and reliable global supplier to NORMA Group, EMS Chemie Holding AG from Switzerland. Supplier structure Total production materials turnover amounted to approximately EUR 179 million in 2014. The top 10 suppliers accounted for roughly 28%, while the Company’s top 50 suppliers accounted for nearly 60% of the total volume. Thus there are no excessive dependencies on individual suppliers. D E V E L O P M E N T O F N I C K E L P R I C E S A N D T H E A L L OY S U R C H A R G E 1. 4 3 0 1 I N 2 0 14 – Alloy surcharge of flat products 1.4301 X5CrNi18-10 Europe in EUR – Nickel LME in EUR 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 16,000 15,000 14,000 13,000 12,000 11,000 10,000 9,000 Jan 2014 Apr 2014 Jul 2014 Oct 2014 Jan 2015 Consolidated Management ReportEconomic Report80 P E R S O N N E L D E V E L O P M E N T AT N O R M A G R O U P 4,828 4,134 3,759 3,415 2014 2013 2012 2011 1,147 813 726 837 5,975 4,947 4,485 4,252 Core workforce Temporary staff EMPLOYEES Personnel development NORMA Group employed a staff (core workforce including tem- porary staff) of 5,975 in total at the end of December 2014 and thus 21% more people than in the previous year (2013: 4,947). There were 1,147 temporary workers on this date. This equates to around 19% of the total workforce. NORMA Group recorded the highest increase in employees in the Americas region in 2014. The workforce here grew by 85% to 1,315 employees. The acquisition of the US company National Diversified Sales, the continued expansion of the Brazilian site in Atibaia and expansion of production in Mexico were the main reasons for this. In the Asia-Pacific growth region, the number of employees rose by 18% to 710 permanent employees. This can be attributed for the most part to the setup of the second Chinese site in Changzhou and the increase in production capacity at Chien Jin Plastics in Malaysia. There were 2,803 permanent employees in the EME A region at the end of the year, which means that the number of em- ployees in this region essentially remained stable compared to the previous year. Decentralised personnel management NORMA Group relies on a local personnel management organ- isation in order to be able to meet the various needs in different regions. In other words, the individual sites are largely respon- sible for selecting, training and deciding on the remuneration of their own employees. On the other hand, they must still observe the strategic and operational corporate guidelines on personnel policies and compliance. In light of the many acquisitions that the Company has made in recent years and consequently the rapid increase in the number of employees, the ‘HR Invent’ initiative was launched in 2014. The objective of this project is to analyse all processes in the human resources department for optimisation potential. The employer branding project which aims at increasing NORMA Group‘s appeal as an employer and, at the same time, encour- aging a uniform corporate culture within the entire Group is one component of the HR Invent initiative. Initial results of the em- ployer branding project are expected in the first quarter of 2015. Supporting diversity and internationality NORMA Group’s employees come from 40 different nations and have various ethnic and cultural backgrounds. NORMA Group believes that supporting the diversity of its employees gives the Company an important competitive advantage. The Company not only gains a better understanding of the changing markets, but also has access to an even larger talent pool. NORMA Group reaffirmed its position on diversity by signing the ‘Charter of Diversity’ in March 2013. Three regional diversity officers are em- ployed on a Group-wide basis to see to it that all employees ben- efit from receiving the same respect and equality of opportunity. More female expertise One objective of NORMA Group’s diversity strategy is to in- crease the share of female employees in management positions. On 31 December 2014, the Group employed 1,628 female em- ployees, which equates to roughly 34% of its total workforce. Women hold 24% of all management positions. NORMA Group offers a variety of programmes and working time models that make it easier for its female employees to reconcile work and family life. One example of this is a lifetime working time account that allows for the employees at German sites to set up wage credit accounts by saving parts of their monthly salaries, bonuses or remaining vacation days. The re- sulting credits can then be used to take time off to attend to their children, for example. Furthermore, NORMA Group gives its employees the chance to perform some or even all of their work-related tasks outside the Company at their home offices. NORMA Group SE Annual Report 201481 C O R E W O R K F O R C E B Y S E G M E N T EME A Americas Asia-Pacific Total 2014 in % 2013 in % 2,803 1,315 710 4,828 58 27 15 2,820 711 603 4,134 64 20 16 A G E S T R U C T U R E O F N O R M A G R O U P E M P L OY E E S 1) < 30 years 30 to 50 years > 50 years Average age 25% 54% 21% 37.5 years 1) 4,753 employees in total (98.4% of permanent staff in total). For legal reasons, report- ing on employees’ ages is not possible for all Group companies. L E N G T H O F S E R V I C E O F N O R M A G R O U P E M P L OY E E S up to 5 years > 5 years > 10 years Average length of service 57% 17% 26% 7.2 years Inclusion of the handicapped At NORMA Group, people who have handicaps are also given the chance to take part in normal work life. In fact, NORMA Group currently employs 46 handicapped men and women in Germany. Integration through cooperation Fostering diversity also means seeing to it that all parties are able to get along well in their immediate environment. People from 25 different countries work at NORMA Group’s head- quarters in Maintal alone. In order to also support effective integration outside the workplace, NORMA Group cooperates with a non-profit organisation in Germany that offers the foreign employees of the site in Maintal the opportunity to participate in German courses at no charge. Performance management Rewarding performance NORMA Group strives to attract and retain qualified and com- mitted employees. For this reason, particular importance is placed on fair remuneration. By holding regular benchmarks, NORMA Group ensures that its employees are paid market- oriented salaries and wages based on their responsibilities. The remuneration system also contains variable remuneration elements to encourage employees to take an interest in the further development of the Company and share in its economic success. Furthermore, we ensure that all of the remuneration and social contributions paid satisfy at least the local statu- tory standards. For tariff and non-tariff employees in Germany, this is based on important financial performance indicators, for example. Furthermore, achieving personal goals plays a role in evaluating employee performance. All of the remuneration and social contributions that NORMA Group pays satisfy at least the local statutory standards. Responsibility for temporary employees Temporary employment of workers represents an important instrument for manufacturing companies like those of NORMA Group that allows for temporary peaks in production and economic cycles to be compensated for in a flexible manner. Further more, it allows for special projects to be worked on and employees to be filled-in for. Temporary employment thus contributes to its operational results. Due to the fact that NORMA Group does not want to achieve this success at the expense of its temporary employees, the Company only works with temporary employment agencies in Germany that follow a valid collective labour agreement that has been signed by a workers’ organisation that is a member of the German Trade Union Federation. Knowledge as a resource In order to maintain its high degree of innovative capabilities and ensure that the Group continues its successful development in the future, NORMA Group invests heavily in the further educa- tion and training of its employees. The goal is to recruit as many expert employees from its own youth as possible and thus lower its dependence on the external job market. Numerous training opportunities for career entrants Training its young people represents an elementary compo- nent of NORMA Group’s personnel policy. In keeping with its global focus, the Company’s training and further education pro- grammes also have an international focus. Young employees participate in traineeships and exchange programmes at other national companies in order to prepare them for working in inter- national teams at an early point in time. NORMA Group has been giving its people the chance to obtain a combination of practical training and university studies in the fields of industrial engineering, mechanical engineering, mecha- tronics, and business administration since 2006. In addition, NORMA Group trains young people in various technical and commercial areas and offers internships for students in all of its departments and regions. In 2014, NORMA Germany employed 39 trainees, three of whom pursued dual studies. NORMA Group gave all of these trainees who successfully completed their training or studies in 2014 permanent employment. Due to the increasing complexity of the Group structures and the demand for qualified young employees in the area of infor- mation technology, NORMA Group started an A X Trainee Pro- gramme last year in cooperation with Microsoft for the first time. Consolidated Management ReportEconomic Report 82 Broad continued education offerings for employees NORMA Group’s success is also dependent on how quickly and effectively the Company can react to its customers’ changing technical requirement and external influencing factors. For this reason, NORMA Group must be able to ensure that its em- ployees are always up-to-date in all relevant areas. The Company therefore supports comprehensive measures on the continued personal development of its employees and works closely with universities such as the Frankfurt School of Finance, for example. Each and ever y employee who works for N O R M A Group was able to benefit from an average of 35 hours of additional occupational training in the reporting year 2014 (2013: 28 hours). 92% of its employees (2013: 97%) participated in at least one training activity. Targeted search for talent The development of its technical and managerial personnel is of high priority to NORMA Group. All supervisors are required to hold an assessment and qualification conversation with each individual employee at least once a year in order to be able to evaluate their staff’s performances, specialised knowledge and development potential. During these meetings, personal goals are set for the next year. PA R T I C I PAT I O N R AT E I N T H E E M P L OY E E S AT I S FA C T I O N S U R V E Y in % 2014 2012 2010 2008 90.1 89.6 80.4 81.9 0 50 100 possible to identify challenges and respond by initiating im- portant change processes. 90.1% of the entire workforce participated in the survey con- ducted in 2014. The results of the survey and the high partici- pation rate clearly suggest that NORMA Group’s employees are interested in actively designing changes as well as the further development of NORMA Group and are basically satisfied with their situation at work. Furthermore, so-called talent reviews help N OR M A Group to identify employees with potential at all levels of manage- ment on a regular basis. These so-called high potentials are given the opportunity to participate in a three-year talent programme in which they are trained in various strategic and entrepreneurial disciplines and taught special management and conflict solving skills. The fluctuation rate (voluntary departures) of 8.5% on a Group- wide basis suggests that employees are generally quite satis- fied. In the medium term, NORMA Group hopes to achieve a fluctuation rate of 3% to 5% at all sites with the exception of Mexico and the Asian region. Due to the special conditions in these regions (cultural peculiarities, high competition, low employer loyalty), the goal will be to achieve fluctuation of 10%. Exchanges of personnel: More communication, better understanding NORMA Group will continue to grow internationally in the future, both organically and through acquisitions. In order to be able to integrate new parts of the Group and for the individual sites to work together efficiently, communication that functions well is essential at all levels. To achieve this, NORMA Group offers a va- riety of exchange programmes for its employees, one to three- month so-called ‘bubble assignments,’ three to twelve month ‘short term assignments’ and ‘long-term assignments’ with a term of at least one year. Expert personnel and managers who participate in this initiative bring special skills and experience to the new sites and, at the same time, benefit from the know-how that their new colleagues have. Through these projects, NORMA Group promotes the internal transfer of knowledge, intercultural awareness, the establishment of networks and the individual development of the participants. Feedback culture – employees express their opinions NORMA Group has been conducting an employee survey every other year since 2008. This enables the Company to systemati- cally analyse its strengths and weaknesses from the perspective of its employees and represents the most important feedback instrument at the organisational level. The survey makes it The absence rate was 2.5% for the Group as a whole in 2014, compared to 4% in 2013. Healthy team – healthy company A productive company like NORMA Group depends on having healthy and satisfied employees. For this reason, N O R M A Group contributes to its employees’ health by conducting vari- ous activities, such as skin screening, intraocular pressure and blood fat measurements, tests on lung function, cardio vascular disease prevention and flu vaccinations. Furthermore, each and every workplace is analysed with respect to all possible work-related healthcare risks by conducting tours of all facilities on a regular basis. Furthermore, NORMA Group in Germany cooperates with an exter- nal healthcare consultancy, whose doctors, psychologists, social advisors and legal advisors are available to assist employees and their immediate family members around the clock and throughout the year to help them with any health-related, mental, social or family problems they might be having. The employees of NORMA India have been benefitting from a similar programme since 2013. NORMA Group’s medium-term goal is to set up medical facilities and offer healthcare programmes at all of its sites. NORMA Group SE Annual Report 201483 Occupational health and safety is of highest priority In order to prevent any potential hazards to its employees at work, NORMA Group invests heavily and systematically in the area of occupational health and safety. Thus the Company complies with all applicable laws and regulations that pertain to environmental health and occupational safety. In addition, NORMA Group also sees to it that all workplaces ensure maxi- mum safety and avoid accidents where possible through com- plementary policies and programmes. NORMA Group has been certifying the safety management systems at its sites in accordance with OHSAS 18001 (Occu- pational Health and Safety Assessment Series), and thus guar- antees a high standard of safety within the Group. Currently 20 sites were already rated accordingly (2013: 16). Certification of the remaining sites is planned for 2015. In 2014 NORMA Group extended the Value Based Safety Pro- gramme which has already been introduced in the US-Amer- ican sites in 2012 to 15 other locations. In the context of this programme the employees’ activities at work are analysed and potentially dangerous behaviours are determined as part of weekly security checks. The deficits found are permanently corrected using standardized and team-oriented problem solv- ing methods. Incident rate on a sustainable low level NORMA Group constantly monitors and analyses its incident rate. The number of occupational accidents is collected on a Group-wide basis each month and the trend is monitored using various key performance indicators (KPI). The incident rate, which reflects the number of accidents per 1,000 employ- ees, represents the most important indicator in this regard. The figure was 10 for the 2014 reporting year, which means that it remained at a low level compared to the previous year. NORMA Group’s goal with respect to the current initiatives is to have an accident-free working environment. I N C I D E N T R AT E Incidents / 1,000 employees 2014 2013 2012 2011 2010 2009 10 10 10 11 14 22 0 5 10 15 20 25 EN VIRONMENTAL PROTECTION A ND ECOLOGICAL M A N AGEMENT As a manufacturing company, NORMA Group is well aware of its environmental, economic, and social responsibility. Environmen- tally compatible and sustainable economic activity is therefore a central element of its corporate strategy. For this reason, the Company considers it important to systematically include environ- mental aspects in its business decisions. NORMA Group’s goal is to increase the efficiency of its production processes, lower its energy consumption over the long term, and reduce waste. The long-term cost savings associated with this contribute to the eco- nomic efficiency of the Group. The 2013 Sustainability Report also provides a detailed explanation of NORMA Group’s environmental strategy and includes examples of how it is being implemented. Group-wide environmental management system In 2014, NORMA Group continued with the introduction of the Group-wide Environmental Management System that the Com- pany had first introduced in 2013. At the end of the reporting period, 20 production sites had already been certified according to ISO 14001. In financial year 2014, the sites in Pune ( NORMA India) and Juarez, Mexico, were connected to the environmental management system. The plants in Brazil and China (Chang- zhou) that have not yet been connected and the new acquisition in financial year 2014 (NDS) are scheduled to obtain this certi- fication in 2015 / 2016. Improved energy and waste balance NORMA Group has been using a Group-wide reporting tool to record and track resource consumption, emissions and waste since 2013. As part of consistent implementation of its sustain- ability strategy, the Company succeeded in further reducing its energy consumption in 2014. Measures that have made a significant contribution to this cause include optimisation of transportation routes, improvement of the efficiency of produc- tion machines, heat recovery and the conversion of contracts to green energy. In addition, all compressed air systems were systematically examined for leaks and these were subsequently eliminated. After investing in a new master control system, the compressors are now being monitored and controlled automat- ically in an efficiency-oriented manner. These and other measures have helped to reduce CO 2 emissions from electricity and gas consumption in relation to production activity by 4.0% compared to the previous year. Power con- sumption in relation to production activity also dropped by 3.1%. By means of process optimisation and by making use of envi- ronmentally friendly resources, the Company has managed to reduce oily waste by 25%. In addition, the re-granulation of ex- trusion residue was extended to another material. This resulted in an overall improvement in the waste statistics in 2014. The key environmental indicators are shown in the subsequent table. Consolidated Management ReportEconomic Report2014 77.1 114.6 32.8 147.4 0.17 12.0 1.7 1.1 1.3 2013 Change 80.3 118.3 36.8 155.1 0.17 12.2 1.7 1.1 1.5 – 4.0% – 3.1% –10.9% – 5.0% - –1.6% - - –1.3% Marketing focus in 2014 Besides the annual Customer Satisfaction Survey  Quality Management, p. 78 key marketing priorities in 2014, among other activities, included further expansion of NORMA Group’s Internet presence. This comprised the optimisation of the cor- porate website and expansion of the contents to include ad- ditional languages. Furthermore, social media activities were also intensified. NORMA Group also attended a number of exhibitions again last year. In total, the Company participated in 63 international industry trade fairs and held 11 other customer events. The development of a new brand strategy that is even more orientated towards the values of the individual brands and the needs of its customers was yet another focus in 2014. This called for NORMA Group’s brand portfolio to be rearranged to focus on the brands that are of the highest strategic importance: ABA ®, Breeze®, Clamp-All®, FISH ®, Five Star®, Gemi®, NDS ®, NORMA ®, R.G.R AY®, Serflex® and TORCA ®. The new brand strategy is to be rolled out in 2015. 84 S P E C I F I C E N V I R O N M E N TA L I N D I C AT O R S CO 2 emissions from the consumption of electricity and gas (kg / EUR thousands of production activity) Electricity consumption (kWh / EUR thousands of production activity) Gas consumption (kWh / EUR thousands of production activity) Energy consumption (kWh / EUR thousands of production activity) Water consumption (t / EUR thousands of production activity) Metal waste (t / EUR of production activity) Non-metal waste (t / EUR of production activity) Paper waste (t / EUR per production activity) Residual waste (t / EUR per production activity) M A R KE TING In order to further increase awareness of NORMA Group’s prod- ucts all over the world, boost product sales, strengthen its cus- tomer relationships and thus contribute to the Group’s growth, the Company has developed a central marketing strategy over the past few years that focuses on achieving the following long- term objectives: • Building a strong NORMA Group image • Decentralisation of marketing activities • Optimisation of the brand portfolio • Optimisation of marketing tools In order to be able to focus on its end markets and cus tomers as much as possible, NORMA Group aligns its marketing activi- ties to address the local market conditions and consumer habits in the respective regions and markets. The regional marketing units are then responsible for executing the various activities and synchronising them with the operative objectives of NORMA Group. Marketing expenditures Marketing expenditures amounted to EUR 3.2 million in total in 2014, compared to EUR 2.9 million in 2013, and were thus 11.5% higher than in the previous year. The increase in marketing ex- penditures can be attributed for the most part to the continued growth of NORMA Group, the expansion of its business activities and the acquisition of NDS. Due to the growing importance of the Asia-Pacific region to NORMA Group’s business, marketing activities and related ex- penditures in this region were higher in the reporting year. On the other hand, the Company managed to lower its marketing expenses in the EME A region by establishing more efficient structures and implementing new instruments and processes. In relation to sales, marketing expenditures remained virtually unchanged at 0.5% compared to the previous year. A similar cost structure is expected for 2015. NORMA Group SE Annual Report 2014 Supplementary Report 85 M A R K E T I N G E X P E N D I T U R E S B Y S E G M E N T Supplementary Report in % Americas 30 39 EMEA Asia-Pacific 31 M A R K E T I N G E X P E N D I T U R E S B Y A C T I V I T Y in % Product communication 22 21 General marketing activities 57 Brand communication In the first quarter of 2015, NORMA Group announced that Dr. Othmar Belker, the current Chief Financial Officer of NORMA Group SE who has been in office since 2006, will be stepping down from the Management Board of NORMA Group SE on 31 March 2015. The Supervisory Board has appointed Dr. Michael Schneider to be NORMA Group’s new Chief Financial Officer. Dr. Schneider will succeed Dr. Belker by September 2015 at the very latest. Werner Deggim, Chief Executive Officer of NORMA Group, will attend to the tasks of the Chief Financial Officer on an interim basis. Dr. Michael Schneider has many years of experience working in the areas of finance and controlling in the automotive, chemical and pharmaceutical industries. He joins NORMA Group from F TE automotive GmbH, a globally active supplier of hydraulic brake and clutch systems for the automotive industry. As its CFO, Dr. Schneider was responsible for all areas of Finance, but also Purchasing and IT. Previous to this position, he served as the CFO of the automotive industry supplier Veritas AG. Dr. Schneider began his professional career in 1988 with Hoechst AG (now Sanofi SA) and left the company to join Degussa AG (today E VONIK Industries AG) in 1993. From 1997 until 2000, he was responsible for the areas of Controlling and Accounting at Degussa Brasil in São Paulo. Dr. Schneider has a degree in business administration and received his PhD in the area of economic sciences from Justus Liebig University in Gießen and from the Institute of Corporate Planning IUP, Gießen / Berlin. Consolidated Management Report86 Forecast Report GENER AL ECONOMIC A ND INDUSTRY- SPECIFIC CONDITIONS Industrial nations continue their recovery – euro zone with moderate growth In its updated outlook from January 2015, the International Mone tary Fund (IMF) revised its forecast for the future develop- ment of the world economy downwards because it assesses the growth prospects of the emerging markets in particular more conservatively. It now expects the global economy to recover moderately and grow by 3.5% (2014: 3.3%). Growth of 3.7% is expected in 2016. The low oil price is stimulating demand in the industrial and other oil-importing countries. The global economy remains regionally heterogeneous, however, and susceptible to setbacks. Besides the risk of the Ukraine-Russia conflict esca- lating further, the reform and consolidation course in the euro zone could be softened and thus endanger the stability of the euro and the currency zone in an extreme case. Furthermore, the monetary policy is drifting apart internationally. This could lead to turmoil on the financial and currency markets and trigger capital outflows in emerging markets. According to the IMF, the developing nations and emerging markets will grow again slowly in 2015 and gain greater mo- mentum in 2016 in the wake of a global economic recovery. The IMF estimates growth of 4.3% for these countries in 2015 and 4.7% growth in 2016. The further weakening of growth in China will have a dampening effect. For 2015 and 2016, growth of 6.8% and 6.3% seems likely. Structural problems continue to have an adverse effect on Latin America. According to the IMF, Brazil will grow by only 0.3% in 2015. With growth of 1.5% in 2016, it will not find its way back to its former strength either. India’s economy has picked up noticeably since the change in government. Infrastructure investments will continue to stimulate further growth. The IMF expects growth to accelerate to 6.3% in 2015 (2016: 6.5%). The Southeast Asian Nations (ASE AN 5) will return to steeper growth of 5.2% (2015) and 5.3% (2016) due to a revival of demand in the industrialised countries and increased investment spending. A recovery is also expected to take place in the euro zone, assuming that the risks do not thwart it. Consumption will most likely benefit from a slight improvement in the labour market. Investment activity is expected to pick up as low oil prices re- lieve the companies and the lower euro exchange rate boosts exports. The IMF expects the euro zone to grow by 1.2% in 2015 and 1.4% in 2016. The French economy should gradually regain traction although growth will remain subdued at 0.9% (2015) and 1.3% (2016). Italy should overcome the recession with growth of 0.4% in 2015 and recover more strongly in 2016 at a rate of 0.8%. The Institute for the World Economy (IfW) ex- pects the recent positive developments to continue in Portugal, Spain and the Netherlands. The IfW projects that the German economy will continue to gain momentum and grow by 1.7% in 2015 and 1.9% in 2016. Consumption will benefit from higher employment and increases in real wages. Given the already high capacity utilisation, investment activity will increase and become a catalyst of the recovery. Furthermore, residential construction, which has been showing weakness most recently, will increase again in 2015. The overall economic prospects for 2015 provide the basis for NORMA Group’s forecast and outlook. F O R E C A S T S F O R G D P G R O W T H ( R E A L ) In % World USA China Euro zone Germany 1) 2014 + 3.3 + 2.4 + 7.4 + 0.8 +1.6 2015e 2016e + 3.5 + 3.6 + 6.8 +1.2 +1.7 + 3.7 + 3.3 + 6.3 +1.4 +1.9 Sources: IMF, 1) Institute for the World Economy (IfW) Improved operating environment for important customer industries of NORMA Group The expected moderate recovery of the international econo- my in 2015 and 2016 will also improve the overall climate and the prospects for important customer industries that NORMA Group serves. Economic researchers unanimously agree that the economic recovery will continue in the established industrial countries. The low oil prices should have noticeable effects, especially in the months to come. The IMF estimates that these countries will grow by 2.4% in both 2015 and 2016. The prospects are looking particularly bright for the USA. The country is on track to achieve growth of 3.6% in 2015 and 3.3% in 2016 due to what is now a solid upturn and will thus be a key driver of the global economy. The IMF expects the Japanese economy to recover somewhat to 0.6% in 2015 and 0.8% in 2016. The United King- dom is projected to achieve strong growth of 2.7% again in 2015 and will thus remain on its expansion course in 2016 at 2.4%, despite the reversal of interest rates. Engineering Despite the risks, the German industry association VDMA is cautiously optimistic for the future due to the economic recovery in many parts of the world. The VDMA expects worldwide ma- chine sales to grow by 5% in real terms in 2015. The two most dominant markets China (8%) and the USA (5%) are expected to grow at a high level in real terms and further support this development. Of the major markets, only Russia will most likely shrink by an estimated 3%. Mainly robust growth is projected for the countries of Southeast Asia, and Latin America is ex- pected to return to moderate growth. The forecasts for Europe as a whole and the euro zone predict a real increase of 2%. For Germany, the VDMA expects a real increase in production NORMA Group SE Annual Report 2014 Forecast Report 87 of 2% due to the improvement in domestic and foreign orders (incoming orders in 2014: 2%, range: just under six months). The low external value of the euro will very likely further support this development. Industry sales are thus expected to grow by more than 1% to EUR 215 billion in 2015. In addition, further internationalisation and expansion of activ- ities in the Asia-Pacific region in particular continue to be key objectives. The Company thus hopes to be able to take advan- tage of the opportunities this important growth market offers and relocate value creation to the respective region and country. Automotive industry The prospects for the automotive industry seem to look positive against the backdrop of global economic acceleration. The re- search institute IHS Automotive (Polk) forecasts that the broad passenger vehicle market will grow by 2.2% to 80.6 million units in 2015. The industry association VDA expects a similar develop ment for the more narrowly defined global passenger car market. Sales should increase moderately by 2% to 76.4 million units. Nevertheless, the momentum is likely to slow down in the three major markets according to the VDA. China is thus expected to only grow by 6% and the USA by 2% in 2015. Western Europe will also grow by 2% and thus somewhat more slowly than most recently. The United Kingdom is considered to have hardly any potential, while only a slight increase is ex- pected for France and Italy. The VDA expects to see an increase of only 1% for Germany. German manufacturers will be able to increase production by 4% in 2015 (Germany: 2%, abroad: 5%), however, due to higher exports (2%). Construction industry The Ifo Institute and the industry network Euroconstruct proj- ect that the European construction industry will strengthen its positive trend and embark on a solid growth path. Construction output should increase by 2.1% in 2015 and by 2.2% in 2016 and 2017 respectively. The greatest impetus will probably come from residential construction, which will grow by almost 4% per year (2015 to 2017). Annual growth rates of an average of about 2% are expected for commercial construction and 2.5% for civil engineering. Greater dynamism in the forecast period is expect- ed to come from the Eastern European countries that generate impulses with infrastructure investments. For Western Europe, the experts predict average growth in construction activity to approach 2%. Despite the recent decline in orders, the IfW from Kiel expects construction activity in Germany to recover again due to favourable financing conditions and the improved economy. Thus, construction investment in 2015 should rise by 1.4% in 2015 and by 3.9% in 2016. The trade associations ZDB and HDB expect sales revenue in the construction sector to increase by 2.0% to EUR 101 billion (0.5% in real terms) in 2015. Residential construction should grow quite strongly by 3.0%. Moderate sales growth is expected in commercial construction (1.5%) and public-sector construction (1.0%). FUTUR E DE VELOPMENT OF NOR M A GROUP N O R M A Group currently has no plans to make significant changes to either its goals or its strategy. The main focus will continue to be on diversifying the business with respect to end markets, regions and customers in the future as well. Further acquisitions cannot be explicitly ruled out. As in the past, the main focus of M&A activities will continue to be on companies that either contribute to market consolidation or enable the Company to enter new high-margin markets. The area of Research and Development will continue to play an important role for the long-term preservation of the Company’s innovation capability. The focus of development activities will again be on innovative products that help solve industrial cus- tomers’ problems. Furthermore, by developing its Corporate Responsibility Strat- egy in 2012, NORMA Group laid the foundation for the Company to pursue sustainability to an even greater extent. Sales growth in 2015 For 2015, the NORMA Group Management Board currently (March 2015) expects the global economy to grow moderately, slightly above last year’s level, and essentially be driven by the industrial nations and emerging Asian countries. Geopolitical crises, continuing consolidation pressure in Europe, the ongoing volatile growth in China, as well as structural problems in Latin America pose potential risks. Due to its broad diversification, the NORMA Group Management Board believes the Company to be well positioned and therefore able to continue to benefit from the growth trends in various end markets and regions. NORMA Group expects to see the EMEA region develop slightly positive overall due to increased investments and consumption. Low oil prices and the lower euro exchange rate should result in additional positive impulses and economic growth. The end markets that NORMA Group is active in should also benefit from this development. The automobile industry in particular can be expected to increase its production volumes due to higher ex- ports as a result of the lower euro exchange rate. NORMA Group also expects to see positive effects in the medium-term because of new EU fleet-based measures for passenger vehicles that will require more advanced technology and higher engine efficiency in the future. All in all, NORMA Group expects the EME A region to achieve moderate organic growth in financial year 2015 com- pared to the previous year. Growth picked up quite strongly last year in the Americas region, especially in the United States. NORMA Group believes this dy- namic growth will continue in 2015 as well and be reflected in end markets of relevance to the Group. NORMA Group therefore expects to see solid organic growth in 2015 that will be strength- ened by acquisition-related sales, especially due to the acqui- sition of NDS, and positive currency effects as a consequence of the strong development of the US dollar against the euro and the increasing share of sales this currency accounts for. Despite the slightly weaker growth forecasts for China in 2015, the Asia-Pacific region’s dynamics will continue and also be driven by stricter emission regulations for cars and trucks. Consolidated Management Report88 Due to NORMA Group’s increasing business activities in the region, the Company expects to achieve double-digit growth again in 2015. The distribution of sales for the two sales channels EJT and DS will shift in 2015 due to the acquisition of NDS because the sales share of the DS area will increase by the share of the water business of NDS. NORMA Group expects to see solid growth in 2015 for both DS and EJT. In light of these assumptions, NORMA Group projects that it will achieve solid organic Group sales growth in financial year 2015 of around 4% to 7% compared to 2014. Furthermore, the Group anticipates additional acquisition-related revenue of ap- proximately EUR 110 million from the acquisitions of NDS and Five Star. Furthermore, the weakening of the euro will positively affect growth in foreign currencies. Development of the main cost positions NORMA Group assumes that the main relative cost positions (material and personnel expenses) will develop in a stable manner compared to the previous year. The continuous increase in the degree of professionalism in purchasing, the conclusion of long-term contracts, and the achievement of economies of scale have led to a continuous im- provement in the cost of materials ratio in recent years. NORMA Group believes it can maintain the current high level through 2015 as well and expects the cost of materials ratio to remain at approximately the same level as in previous years. Thanks to the Group’s ongoing growth and the fact that activities in the Asia-Pacific region have been intensified, NORMA Group expects personnel costs to rise constantly in relation to sales in 2015. This will result in a stable personnel cost ratio at the same level of recent years. Investment in Research and Development NORMA Group plans to invest 5% of its EJT sales in order to maintain its innovativeness and its ability to compete over the long term. The main focus of R&D activities will continue to be on developing innovative products that help meet its customers’ industrial challenges. Adjusted EBITA margin Maintaining its high level of profitability represents an important focus for NORMA Group. All business activities are therefore strategically aligned toward achieving this objective. Maintaining a strong margin also plays a significant role in acquiring new companies. Due to the many internal measures and ongoing op- timisation processes in all areas, NORMA Group firmly believes that the sustained high level of its margin can be maintained again in 2015. The goal is to have an adjusted EBITA margin at the same level as in previous years of more than 17.0%. Financial result of up to around EUR –18 million expected In total, N O R M A Group expects a financial result of up to EUR –18 million. This will include interest expenses on the Group’s gross debt for which the average interest rate is around 3% as well as expenses for currency hedges and trans- action costs. Higher adjusted earnings per share Adjusted earnings per share will show a solid growth in financial year 2015. Sales growth and a sustainable margin will contribute to this, but also the sales contributions from the companies acquired. Special effects are not taken into consideration here. Adjustments to earnings NORMA Group expects the costs of integrating NDS to amount to approximately EUR 5 million in financial year 2015, which are to be adjusted in EBITDA as a one-off expenditure. Included herein are up to EUR 2.5 million in write-ups on the histori- cal holdings of NDS which will most likely be adjusted in cost of materials. Furthermore NORMA Group expects adjustments for write-offs from purchase price allocations of approximately EUR 8 million on depreciable tangible and intangible assets from the acquisition of NDS. Together with the previous acquisitions the adjustments from purchase price allocations amount to EUR 17 million in total. Tax ratio of between 33% and 35% The tax ratio will increase compared to the previous year to be- tween 33% and 35%. This can be largely attributed to the high tax burden due to the good quality of earnings and acquired sales in the USA. Investment rate of around 4.5% the goal For financial year 2015, NORMA Group plans to invest around 4.5% of Group sales. By doing so, the Company will be finan- cing both maintenance investments and investments on ex- panding its business. One main focus will be on expanding activities in the Asia-Pacific region in particular and expanding the new plants located in Brazil, China and Serbia. Net operating cash flow As a result of the acquisitions in financial year 2014, net oper- ating cash flow is expected to be slightly higher than the level in recent years. Sustainable dividend policy To the extent that the future economic situation allows, NORMA Group plans to pursue a long-term dividend policy that is orientated towards a pay-out ratio of approx. 30% to 35% of the adjusted Group net profit. Market penetration and innovative capability The extent of market penetration is reflected in the Group’s organic growth in the medium term.  Sales forecast, p. 87. NORMA Group SE Annual Report 2014Forecast Report 2 0 15 F O R E C A S T 89 Consolidated sales solid organic growth of around 4% to 7%, in addition approximately EUR 110 million from acquisitions EME A: moderate organic growth Americas: solid organic growth, driven by acquisitions and positive currency effects APAC: over 10%, driven by stricter emission regulations among other factors DS: solid growth, driven by the acquisition of NDS EJT: solid growth roughly at the same level as in previous years roughly at the same level as in previous years sustainable at the same level as in previous years of more than 17.0% up to EUR –18 million around 33% to 35% Cost of materials ratio Personnel cost ratio Adjusted EBITA margin Net financial income Adjusted tax rate Adjusted earnings per share solid increase Investment rate (adjusted for acquisitions) operationally at around 4.5% Operating net cash flow slightly higher than the level of previous years (2013: EUR 103.9 million, 2014: EUR 103.2 million) Dividend approximately 30% to 35% of adjusted annual Group earnings Ensuring that it remains innovative is essential to N O R M A Group’s competitiveness and future. In order to secure its in- novations, these are protected by patents. Every year, NORMA Group strives to maintain its new patent registrations at the same high annual level. Problem-solving behaviour of its employees N O R M A Group employs key performance indicators, such as parts per million (PPM) and number of quality-related cus- tomer complaints, to measure and control its problem-solving behaviour. Independent of the product group, the Company strives to achieve a value of approximately 20 for the indicator PPM. The goal for 2015 is to lower the number of customer complaints even further despite the low level that has already been achieved. Sustainable company development (Corporate Responsibility) NORMA Group started 2012 by beginning to develop and grad- ually implement its Corporate Responsibility strategy. The ob- jective is to continue to achieve these goals in a consistent manner and lay even more important milestones for managing the Company more sustainably in 2015. GENER AL STATEMENT BY THE M A N AGEMENT BOAR D ON THE PROBABLE DE VELOPMENT At the time that the management report 2014 was prepared, the Management Board expected NORMA Group to achieve solid growth again in 2015. The Company’s management expects the economic situation to improve slightly in the EMEA region. More significant impulses for sales growth are expected to come from the US market in particular due to the current positive eco nomic development. Positive currency effects will play a role here due to the relative strength of the US dollar to the euro. The acquisi- tions of Five Star and NDS will also contribute to further growth. Due to its dynamic growth, the Asia-Pacific region will make an important contribution to the growth of the Group. In total and on the basis of its current forecast, the Management Board expects solid organic growth in sales in 2015. As a result of the ongoing optimisation of the processes in all areas of the Group, the Management Board expects its main cost positions to experience a stable development in relation to sales with yet another high adjusted EBITA margin of more than 17.0% in financial year 2015. Constantly observing the market and strategically searching for new acquisition targets continues to be an important component of the Company strategy, therefore the Management Board does not explicitly rule out further acquisitions in financial year 2015. Consolidated Management Report 90 Risk and Opportunity Report NORMA Group’s corporate group is exposed to a wide variety of risks and opportunities which can have a positive or nega- tive short-term or long-term impact on its financial position and performance. For this reason, opportunity and risk management represents an integral component of corporate management for NORMA Group SE, at both the Group management level and at the level of the individual companies and individual functional areas. Due to the fact that all corporate activities are associated with risks and opportunities, NORMA Group considers identi- fying, assessing, and managing opportunities and risks to be a fundamental component of executing its strategy, securing the short and long-term success of the Company and sustainably increasing shareholder value. In order to achieve this over the long term, NORMA Group encourages its employees in all areas of the Company to remain conscious of risks and opportunities. OPPORTUNIT Y A ND RISK M A N AGEMENT SYSTEM NORMA Group defines risks as the possibility of disadvanta- geous future developments, changes, or events that could have a positive or negative impact on the Group’s ability to meet its targets and achieve its business objectives. Analogous to the medium term planning, the Management’s focus with respect to possible deviations in specific risks and opportunities covers a period of five years. Opportunities and risks that affect the Company’s success beyond this period of time are recorded and controlled at the Group management level and taken into consideration in the Company’s strategy. Analogous to the medium term planning, the focus with respect to the valuation of specific risks and opportunities covers a period of five years. R I S K M A N A G E M E N T S Y S T E M The Management Board of NORMA Group SE is responsible for maintaining an effective Group risk management system. The Supervisory Board is responsible for monitoring the effective- ness of the Group risk management system. Checking compli- ance with the Group’s internal risk and opportunity management rules in the individual companies and functional areas is also integrated in the internal audit department’s periodic reviews. Risks are recorded on a Group-wide basis every quarter and categorised according to functional areas and individual com- panies and then reported to the individuals responsible for these functions and segment management, the Management Board and the Supervisory Board. Furthermore, risks that are identified during a quarter whose expected value will have a significant effect on the results of group divisions are reported to the Management Board on an ad hoc basis and, if necessary, even to the Supervisory Board. Operational opportunities are identified during monthly meetings held at the local and regional level, but also by the Management Board, and then documented and analysed. Measures aimed at capitalising on strategic and operational opportunities through local and regional projects are approved during these meetings. Regular forecasts are devel- oped as part of periodic reporting to record how successfully potential opportunities are taken advantage of. Strategic oppor- tunities are recorded and evaluated as part of annual planning. NORMA Group uses a systematic assessment procedure to evaluate the opportunities and risks that were identified, both in terms of their financial impact, i.e. gross and net impact on planned financial indicators, and their probability of occurrence. In order to analyse NORMA Group’s overall risk situation and ini- tiate suitable countermeasures, individual risks of local business units and Group-wide risks are aggregated in a risk portfolio. Track reporting Identification Risk management Risk identification Risk reporting Risk culture Risk strategy Methods Technologies Risk assessment Supervisory Board & Management Board Risk analysis Risk aggregation Countermeasures NORMA Group SE Annual Report 2014Risk and Opportunity Report 91 Here, the scope of consolidation in the area of risk management equates to the group of companies covered by the consoli dated financial statements. In addition, NORMA Group categorises risks according to type and the functional area they affect. This makes it possible to aggregate individual risk titles into risk groups in a structured manner. This aggregation enables NORMA Group to identify and control not only individual risks, but also trends and Company-specific types of risks and thus sustainably influence and reduce the risk factors with certain types of risks. Provided that not indicated differently, the risk assessment applies for all regional segments. NORM A Group’s risk management officers are responsible for checking on a regular basis whether all material risks have been identified, adjusting the risk identification procedure when required, analysing the risk portfolio and developing and im- plementing suitable countermeasures to mitigate risk. These comprise strategies to avoid, reduce or hedge against risk, i.e. measures that minimise the financial impact of risks as well as their probability of occurrence. Risks are managed in accordance with the principles of the risk management system as described in the Group risk management guidelines. The internal control system also safeguards the efficacy of the risk management system. The work of those individuals who are responsible for risks, the risk portfolio and the evaluation of risks and activities is reviewed by holding quarterly risk steering sessions. INTERNAL CONTROL AND RISK MANAGEMENT SYSTEM A ND THEIR R EL ATION TO THE GROUP ACCOUNTING PROCES S The relationship between NORMA Group’s internal control and risk management system and NORMA Group’s accounting and external financial reporting can be described using the fol- lowing main characteristics: The purpose of this system is to identify, analyse, evaluate and manage risks as well as monitor these activities. The Management Board is responsible for en- suring that this system meets the Company’s specific require- ments. Based on the allocation of responsibilities within the Company, the CFO is responsible for the Finance and Account- ing divisions, which are, in turn, responsible for accounting. These functional areas define and review the Group-wide account ing standards within the Group and compile the infor- mation used to produce the consolidated financial statements. The need to provide accurate and complete information with- in predefined timeframes represents a significant risk for the account ing process. Because of this, requirements must be clearly communicated and the affected units must be put in a position to meet these requirements. Posting transactions too early or too late or failing to comply with accounting regulations are some situations that can result in risks that could potentially impact the accounting process. In order to avoid errors, the accounting process is based on the separation of responsibilities and plausibility checks for re- porting. The preparation of the financial statements of those entities to be included in the consolidated financial statements as well as the consolidation measures based on this consoli- dated group are characterised by consistent observance of the “principal of dual control.” Comprehensive and detailed check- lists must be completed before the respective financial state- ment deadlines. The accounting process is fully integrated into NORMA Group’s risk management system. This ensures that accounting risks are identified early, allowing the Company to implement risk provisioning and countermeasures without delay. The internal control system ensures the accuracy of NORMA Group’s financial reporting with respect to its accounting pro- cesses. The Internal Audit department reviews the account- ing processes on a regular basis to ensure that the internal control and risk management system is effective. External specialists also support these efforts. Furthermore, the audi- tor conducts audit procedures during the audit of the annual financial statements based on the risk-driven audit approach, whereby material errors and violations are to be uncovered with reasonable assurance. The IFRS accounting system is defined in an accounting manual. All companies in the Group must base their accounting pro- cesses on the standards described in the accounting manual. The accounting manual contains binding definitions of important measurement methods, such as those used in the measurement of inventories, tools and receivables in accordance with IFRS. The Group also has system-supported reporting mechanisms to ensure that identical situations are handled in a standardised way across the Group. The consolidated financial statements and group management report are prepared according to a uniform time schedule for all companies. Each company in the Group prepares its sep- arate financial statements in accordance with the applicable local accounting guidelines and IFRS. Intra-Group deliveries and services are recorded in separately designated accounts by the Group companies. The net balances of Intra-Group offsetting accounts are reconciled on the basis of defined guidelines and schedules by means of balance confirmations. The companies in the Group use the COGNOS reporting system for reporting, which in addition to financial data also contains information that is particularly useful for the notes to the consolidated finan- cial statements. In accordance with NORMA Group’s regional segmentation, technical responsibility for the financial area is shared by both the financial officers in the Group companies as well as by the regional CFO for the respective segment. They are included in the quality assurance of the financial statements of the Group companies included in the consolidated financial statements. The comprehensive quality assurance of the finan- cial statements of the Group companies included in the consol- idated financial statements is carried out by Group Finance & Reporting, which is responsible for preparing the consolidated financial statements. In addition, the data and disclosures of the Group companies as well as the consolidation measures neces- sary for the preparation of the consolidated financial statements are verified through audit procedures conducted by external auditors under consideration of the associated risks. Consolidated Management Report92 The various IT systems that individual NORMA Group com- panies use to perform financial accounting will be gradually standardised. All systems have tiered access authorisation systems. The type and design of these access authorisations and authorisation policies are decided by local management in coordination with NORMA Group’s Head of IT. OPPORTUNIT Y A ND RISK PROFILE OF NOR M A GROUP As part of the preparation and monitoring of its risk and op- portunities profile, NORMA Group assesses risks and oppor- tunities based on their financial impact and their probability of occurrence. In the reporting year, the intervals used to assess the financial impact and probability of occurrence to accurately assess opportunities and risks were further subdivided from three into five categories. The financial impact of risks and opportunities are assessed based on their relation to EBITA. The following five categories were used here: • Minor: up to 1% of current EBITA • Low: more than 1% but less than 5% of current EBITA • Moderate: more than 5% but less than 10% of current EBITA • Significant: more than 10% but less than 25% of current EBITA • High: more than 25% of current EBITA The interval of the risk’s or the opportunity’s impact relates to the EBITA of the Group or segment provided that an individual assessment relates solely to a specific segment. The assess- ment of opportunities and risks whose financial impact has an effect on line items in the statement of comprehensive income below EBITA is also performed in relation to EBITA. The pre- sented impact always reflects the effects of (counter)-measures implemented. The probability of individual risks and opportunities occurring is quantified based on the following five categories: • Highly unlikely: up to 3% probability of occurrence • Unlikely: more than 3% but less than 10% probability of occurrence • Possible: more than 10% but less than 40% probability of occurrence • Likely: more than 40% but less than 80% probability of occurrence • Very likely: more than 80% probability of occurrence Financial opportunities and risks NORMA Group is exposed to an array of financial risks, includ- ing default, liquidity and market risks. The Group’s financial risk management strategy concentrates on the identification, evaluation and mitigation of risks, focusing on minimising the potential negative impact on the Company’s financial perfor- mance. NORMA Group uses derivative financial instruments to hedge particular risk items. The financial risk management strategy is implemented by Group Treasury. Group manage- ment defines the areas of responsibility and necessary controls related to the risk management strategy. Group Treasury is responsible for defining, evaluating and hedging financial risks in close consultation with the Group’s operating units. Capital risk management NORMA Group’s objective when it comes to managing its capital is primarily the long-term servicing of its debts and remaining finan cially stable. In connection with its financing agreements, the Company is obliged to maintain the financial indicator ( financial covenant), total net debt cover (debt divided by ad- justed consolidated EBITDA). These key figures and their main- tenance, but also net debt and the maturity structure of financial debt, are continually monitored. Default risks Default risks are risks of contractual partners not meeting their obligations arising from business and financial transactions. They result from deposits and other transactions concluded with credit and financial institutions, and primarily from the risk of customers defaulting on outstanding receivables or confirmed transactions. N ORM A Group reviews the credit- worthiness of new customers to minimise the risk of default on trade receivables. In addition, the Company only supplies to customers whose credit ratings are below Group standards or who have defaulted on payment if they pay in advance. A diver- sified customer portfolio reduces the financial reper cussions of default risks. For this reason, NORMA Group believes that it is possible for default risks to occur, while the potential finan cial repercussions would be minor due to the implemented counter- measures. Liquidity opportunities and risks Prudent liquidity risk management requires NORMA Group to hold sufficient cash funds and marketable securities, have sufficient financing from committed lines of credit and be able to close out market positions. Due to the dynamic nature of the underlying business, Group Treasury aims to maintain flexibility in financing by keeping committed credit lines avail- able. Therefore, NORMA Group’s primary objective is to en- sure the uninterrupted solvency of all Group companies. Group Treasury is responsible for liquidity management and therefore for minimising liquidity risks. As of 31 December 2014, NORMA Group’s liquid assets (cash and cash equivalents) amounted to EUR 84.3 million (2013: EUR 194.2 million). Furthermore, NORMA Group has a high level of financial flexibility thanks to a total of EUR 50 million in committed revolving credit lines with na- tional and international credit institutions. These lines were not drawn down at all as of 31 December 2014. In addition, NORMA Group has a so-called accordion facility in the amount of up to EUR 250 million that offers additional financial flexibility. Financial opportunities are seen, among other things, in NORMA Group’s high creditworthiness as well as its solid financial po- sition, financial performance and cash flows, which enable the Company to gradually reduce its capital costs. NORMA Group succeeded in further optimising its financial flexibility and cost of capital by issuing a promissory note in the amount of NORMA Group SE Annual Report 201493 EUR 125 million in the previous year. These funds were mainly used to repay the syndicated loan that the Company had taken out earlier than planned. In December 2014, yet another prom- issory note was issued in the amount of EUR 209 million with terms of maturity of three, five, seven and ten years that will pri- marily be used to finance the acquisition of National Diversified Sales, Inc. Due to NORMA Group’s excellent reputation on the capital mar- ket, liquidity-related opportunities are considered to be possible and would have a moderate impact on earnings. The Group’s financing agreements contain typical terms for credit lines (financial covenants). If NORMA Group does not adhere to these terms, the banks would be entitled to re-eval- uate the agreements and demand early repayment. Failure to comply with these loan covenants would have high potential financial repercussions. For this reason, NORMA Group contin- uously monitors its compliance with the financial covenants in order to implement suitable measures in advance and prevent the terms from being violated. By increasing NORMA Group’s financial flexibility compared to the previous year, the likelihood of liquidity risks negatively impacting the Company’s opera- tions have been further minimised. The risk of non-compliance with financial covenants is still considered to be very unlikely due to NORMA Group’s high profitability and strong operating cash flow. Foreign currency trends As an internationally operating company, NORMA Group is ac- tive in more than 100 countries and is thus exposed to foreign currency risks. The US dollar, British pound, Chinese renminbi, Indian rupee, Polish złoty, Swedish krona, Swiss franc, Serbian dinar and Singapore dollar are regarded to be the main risky currency positions. Foreign currency risks that cannot be offset against each other are hedged using futures and options whenever necessary (including the US dollar, Swedish krona, Japanese yen, Swiss franc and British pound). The high volatility of many major currencies and the particular influence of the US dollar on the Group’s financial position and performance represent a con- siderable risk that can only be partially hedged for a short-term period. In the medium term, NORMA Group will reduce foreign currency risks by taking an increasingly regional approach to production.  Production and Logistics, p. 76. hedging instruments due to its increased importance to the Group following the acquisition of National Diversified Sales, Inc. The resulting liquidity risks will be continuously monitored by Group Treasury. Here, the Company will make sure that suf- ficient liquid ity and approved credit lines are always available to cover any possible cash outflows. Translation effects from items in the statement of financial position and income statement of subsidiaries in foreign currency areas on the consolidated state- ment of financial position prepared in euros are unavoidable. Currency risks are likely to occur due to the ongoing exchange rate volatility. In addition, the expected rising share of NORMA Group’s business activities in foreign currency areas, in particu- lar in emerging markets, signifies additional currency risk for the Group. Nevertheless, the potential financial effects of currency risks are regarded to be moderate under consideration of the countermeasures. In contrast, the Company’s assessment of the opportunities for an advantageous development of foreign exchange rates is more cautious. A positive impact on NORMA Group’s busi- ness success is possible and the effect that this will have on the financial scope is estimated to be moderate. In addition, new opportunities in the area of foreign currencies are being explored by further localising production and the payment and currency flow of equivalent internal financing. This should re- duce currency exposure even further. Changes in interest rates Changes in global market interest rates affect future interest payments for variable interest liabilities and can therefore have an adverse effect on the Group’s financial position, financial performance and cash flows. NORMA Group’s interest change risk arises in particular from long-term loans. Many of the current loans have fixed interest rates and are there- fore not subject to interest rate risk. Loans that initially had variable interest rates were synthetically converted into fixed interest rate positions with the help of derivative instruments. NORMA Group currently bears such an interest rate risk only for the revolving credit line (EUR 50 million) and a small share of the syndicated loan (EUR 20 million), as well as a share of the promissory note (EUR 13 million) issued in 2014. NORMA Group will seek to hedge approximately 80% of the interest change risk arising from future medium-term utilisation of the committed revolving credit facility. Because the Group’s subsidiaries operate in the most import- ant countries with currencies other than the euro, it has suffi- cient cash-in and cash-out capabilities to absorb short-term exchange rate fluctuations via targeted income and expendi- ture management. In addition, currency risk is monitored in the Group and transferred to the euro over time on a rolling basis by means of derivative hedging instruments if the risk becomes too excessive. Translation risk, i.e. the risk of fluctuations in the value of the net assets of Group companies as a conse- quence of changes in exchange rates, will be hedged using Due to the fact that there are currently no signs of a more restric tive monetary policy in the euro region, NORMA Group regards the risk of interest rate hikes in the short term to be rather unlikely; however, the risk of higher interest rates is con- sidered to be possible in the medium term. This would only have a minor financial impact due to NORMA Group’s financing struc- ture, however. Due to the currently low interest rate level, the potential for opportunities that can arise from a falling interest rate level is considered to be unlikely and the financial effects of such a development to be minor. Consolidated Management ReportRisk and Opportunity Report94 Economic and cyclical opportunities and risks The success of NORMA Group depends heavily on macro- economic trends on its sales markets and its customers’ sales markets. Therefore, indicators for economic development world- wide are taken into account both in planning as well as in risk and opportunities management. In order to gauge the macro- economic trend, NORMA Group mainly uses the forecasts of widely regarded institutions such as the IMF, the Bundesbank and reputable economic research institutes. Accordingly, global growth of 3.5% can be expected in 2015. A positive develop- ment over and above this level is regarded to be an opportunity. As a result of its flexible production structures, NORMA Group can expand its capacities on short notice and thereby react to a general increase in demand. The Company considers it possible for the economic situation worldwide to improve considerably and thus have a moderately positive impact on earnings. Nevertheless, NORMA Group sees risks that can offset these forecasts, which is reflected in the Group-wide risk manage- ment. These risks include mainly geopolitical crises, continuing consolidation pressure in Europe, the ongoing volatile growth in China, as well as structural problems in Latin America. A nega- tive deviation of the global economy from the planning assump- tions is currently considered to be unlikely even if these risks are also taken into consideration. Nevertheless, should these factors have an adverse effect on global demand, the financial deviations from planning are still regarded to be moderate. Industry-specific and technological opportunities and risks Industry-specific opportunities and risks can arise for NORMA Group in particular due to technological and competitive changes. The increasing importance of new technologies, such as environmentally friendly drivetrain technologies, could also lead to increased competitive pressure and greater price pres- sure. NORMA Group counters these risks with continuous ini- tiatives to safeguard and expand its position as a technological and innovative leader as well as by focusing on customers and markets.  Research and Development, p. 63. NORMA Group focuses its product development on innovative solutions to the challenges its industrial customers face, which result from global megatrends. NORMA Group considers the de- mand for ‘green’ technologies that results from increased environ- mental consciousness and ever stricter emission requirements to be a chance. It can be assumed that further regulatory measures such as the EURO-6 standard on emissions and fleet-based programmes will also be established, which will lead to increased demand for environmentally friendly technologies and products. Furthermore, with its latest acquisitions in the area of water man- agement, NORMA Group is systematically addressing business opportunities that result from the increasing scarcity of water that can be observed in many regions of the world and the necessity of making responsible use of this important resource. NORMA Group regards the likelihood of future positive developments in this area that go beyond the scale of our planning as possible based on the current discussion on tightening environmental standards. This would have a moderate impact on the Company’s success. NORMA Group’s strong diversification in terms of customers in different industries is another element of the Company’s risk and opportunity management. NORMA Group counters long- term, industry-specific risks and opportunities through consis- tent innovation policy and regular market analyses. As a result, the occurrence of industry-specific or technological risks are considered unlikely. The potential financial effects are consid- ered to be minor. Risks and opportunities associated with corporate strategy The Group’s strategic orientation was advanced in 2014 through investments in growth markets, the expansion of ex- isting markets and the acquisition of the US-American compa- nies Five Star Clamps and National Diversified Sales, Inc. By acquiring National Diversified Sales, Inc., a leading US supplier of rain water management, landscape irrigation and joining components for infrastructure in the area of water, NORMA Group is continuing on its expansion course in the area of water management. The goal of these investments and acquisitions is to ex- pand the Company’s presence in existing markets and to develop new end markets with attractive growth potential. Furthermore, as a result of its global orientation, N O R M A Group can set up production processes that entail a more labour-intensive assembly in countries with lower wage costs, thereby securing and further increasing its profitabil- ity. The Company will also continue to observe the markets and identify opportunities for strategic acquisitions or equity holdings to complement its organic growth. NORMA Group uses targeted acquisitions to continuously strengthen its po- sition as a technology leader, exploit market opportunities, improve the services it offers its customers and expand its product range. In addition, N O R M A Group works together closely with its customers across all business processes. New products are created already in the product and application development phases in constant coordination with the customers. The two distribution channels, Engineered Joining Technology and Dis- tribution Services, are oriented toward the customer’s special needs. NORMA Group will continue to develop its markets in collaboration with its customers in the future. NORMA Group invests around 5% of EJT-sales in research and development every year. As a result of this focus on develop- ing new technologies, products and solutions, as well as on improving existing ones, NORMA Group is able to consolidate its competitive position as a technology leader and increase its innovative capacity, and thereby realise cost advantages in the medium term. This strategic orientation is considered to be the basis for cre- ating long-term potential for opportunities. Therefore, NORMA Group estimates the intermediate impact of its strategy to be moderate and expects a potential positive deviation from the plan to be possible. NORMA Group SE Annual Report 201495 Nevertheless, misjudgement with respect to the Group’s stra- tegic orientation and its market potential or customer rejection of newly developed products cannot be ruled out and can have a negative effect on NORMA Group’s competitive position and sales volume. In order to avoid strategic risks, NORMA Group observes its market environment and its competitors and con- ducts customer and supplier surveys for continual improvement. Therefore, strategic risks are considered to be unlikely, whereas the potential financial effects are regarded as moderate. The corporate strategy is adjusted in the individual segments to the individual market conditions; nevertheless, the general appraisal of strategic risks and opportunities in the regions is identical. Performance-related opportunities and risks Commodity prices The materials that NORMA Group uses, in particular the raw materials steel and plastics, are subject to the risk of price fluctuations. The price trend is also influenced indirectly by the further development of the world economic situation as well as by institutional investors. NORMA Group limits the risk of rising purchase prices through systematic material and supplier manage ment. In this context, an efficient Group purchasing structure was built up around the world in the previous years in order to utilise the Group’s economies of scale in the procure- ment of the most important product areas of steel, metal com- ponents, polyamides and rubber materials and to procure them as competitively as possible. This Group purchasing structure also enables NORMA Group to balance out the risks of indi- vidual segments with each other. NORMA Group also constantly strives to secure permanently competitive procurement prices by continuously optimising its selection of suppliers and apply- ing the best-landed-cost-approach. The Company also tries to reduce dependency on individual materials through constant technological advances and tests of alternative materials. Pro- tection against commodity price volatility is done by forming procurement contracts with a term of up to 12 months, whereby material supply risks are minimised and price fluctuations can be better calculated. Although NORMA Group considers it possible for prices to rise based on the positive growth forecasts for the global economy, this would only have a minor financial effect as a result of the countermeasures initiated. Since the Company can transfer a portion of changes in material prices to the customers through the structure of its contractual documents, falling commodity prices are also not a significant performance factor. Therefore, NORMA Group estimates the opportunities arising from falling commodity prices to be minor, whereby a declining global commodity price trend is possible in China due to poorer economic expectations. Suppliers and dependencies on key suppliers The loss of suppliers and dependencies of single suppliers can lead to material shortages and thus to negative impacts on the Group’s activities. In order to minimise this risk, NORMA Group only works with reliable and innovative suppliers who meet its high quality requirements. The ten most important suppliers are responsible for approximately 28% of the purchasing volume.  Purchasing and Supplier Management, p. 78. These and other key suppliers are regularly observed and assessed as part of quality management. If the loss of a supplier appears imminent, NORMA Group evaluates alternatives immediately. As a result, the loss of suppliers is considered possible, but the potential financial impact is regarded as minor. However, NORMA Group also sees opportunities in this area as a result of its proactive approach both in terms of existing supplier relationships as well as identification of new suppliers and raw materials. But since an optimisation in the area of Purchasing is anticipated in the medium term, NORMA Group estimates the potential of the im- plemented measures for a positive deviation from planning to be possible with a minor impact. Quality and processes NORMA Group’s products are often mission-critical with respect to the quality, performance and reliability of the final product. Quality defects can lead to legal disputes, liability for damages or the loss of a customer. Therefore, the reliable guarantee of product quality is a key factor to ensuring NORMA Group’s long- term success, so that its products provide crucial added value for its customers. Maintaining the right balance between cost leadership and quality assurance is a constant challenge. To reduce this risk, far-reaching quality assurance measures and Group-wide quality standards are used. Furthermore NORMA Group focuses on innovative and value added joining solutions tailored to meet customer requirements. For this reason, the Company believes that it is possible for quality risks to occur, while the potential financial repercussions would be minor due to the existing insurance coverage. NORMA Group takes every opportunity to realise cost advan- tages to improve its competitive position. Thus the Company develops and implements initiatives focused on cost discipline, the continuous improvement of processes in all functions and regions and optimisation of supply chain management and pro- duction processes. These initiatives are expected to have a positive impact on NORMA Group’s business. Since NORMA Group pursues a continuous process of improvement, there are opportunities over and above planning for positive deviations in the area of these processes. This applies for all regions in which NORMA Group is active. The Company estimates the likelihood of cost-savings to be possible. Since planning already allows for continuous optimisation of production processes and NORMA Group’s processes are already extremely efficient, the short- term financial impact of a deviation from the plan as a result of improved production processes is minor. Customers Customer risks result from a company being dependent on important buyers for a significant proportion of its sales. They could take advantage of their bargaining power, which can lead to increased pressure on NORMA Group’s margins. Decreases Consolidated Management ReportRisk and Opportunity Report96 in demand from these customers or the loss of these customers can have a negative impact on the Company’s earnings. For this reason, NORMA Group continuously monitors incoming orders and customer behaviour so as to identify customer risks early. Due to its diversified customer portfolio, financial repercussions of customer risks are reduced. Accordingly, no single customer generated more than 6% of sales in 2014. Therefore, it is possi- ble that customer risks could have a negative impact on NORMA Group’s business, but the financial effects would be minor due to the diversified customer structure. However, based on NORMA Group’s strategy and the goal of further expanding its markets, the Company managed to ex- pand its customer portfolio compared to the previous year. As a result of its innovative solutions, new customers in all regions could be convinced of the products. Therefore, NORMA Group estimates the opportunities for positive deviations from planning to be possible with a minor impact on earnings based on a growing number of customers. Opportunities and risks of personnel management NORMA Group’s success is largely dependent on its em ployees’ enthusiasm, commitment to innovation, expertise and integ- rity. The Group’s personnel management serves to retain and expand this core expertise. The exit of employees with cru- cial skills as well as a shortage of suitable workers can have a negative impact on operations. The competition for the most talented employees as a result of demographic developments and the shortage of skilled labour in Western industrial nations is becoming more and more intense. NORMA Group counters these risks with far-reaching basic and advanced training as well as employee development pro- grammes. NORMA Group also encourages its employees to focus on the Company’s success through variable remuneration systems. In return, the employees contribute to the continu- ous further development of the Company in connection with employee surveys and improvement initiatives. Comprehen- sive representation rules and a division of responsibilities that promote mutual exchange secure the Group from risks that can arise due to the departure of employees. When identifying potential new employees that can make a crucial contribution to performance, NORMA Group seeks the advice of external human relations advisors. Since NORMA Group’s personnel policy is practiced worldwide, the risks and opportunities are consistent across the regions. Thus, the Company regards the probability of personnel risks occurring as possible, whereas the potential financial impact is minor due to the sustainable personnel policy. In addition, there are opportunities from the consistent fur- ther development of the employees. NORMA Group fosters its O P P O R T U N I T Y A N D R I S K P O R T F O L I O O F N O R M A G R O U P 1) Financial risks and opportunities Default risk Liquidity Currency Change in interest rates Risks Opportunities Risks Opportunities Risks Opportunities Economic and cyclical risks and opportunities Risks Opportunities Industry-specific and technological risks and opportunities Risks Opportunities Risks and opportunities associated with corporate strategy Risks Opportunities Operative risks and opportunities Commodity pricing Suppliers Quality and processes Customers Risks Opportunities Risks Opportunities Risks Opportunities Risks Opportunities Risks and opportunities of personnel management Risks Opportunities IT-related risks and opportunities Risks Opportunities Legal risks and opportunities Disregard to standards Social and environmental standards Property rights Risks Risks Opportunities Risks Opportunities very unlikely • Probability Impact unlikely possible likely minor low moderate significant high very likely Change in 2014 Change in 2014 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 1) Provided that not indicated differently, the risk assessment applies for all regional segments. unchanged higher lower NORMA Group SE Annual Report 2014 O P P O R T U N I T Y A N D R I S K P O R T F O L I O O F N O R M A G R O U P 1) Financial risks and opportunities Default risk Liquidity Currency Risks Opportunities Risks Opportunities Risks Opportunities Change in interest rates Economic and cyclical risks and opportunities Industry-specific and technological risks and opportunities Risks and opportunities associated with corporate strategy Risks and opportunities of personnel management Operative risks and opportunities Commodity pricing Suppliers Quality and processes Customers Risks Opportunities Risks Opportunities IT-related risks and opportunities Legal risks and opportunities Disregard to standards Social and environmental standards Property rights Opportunities Risks Risks Risks Opportunities Opportunities Opportunities Risks Risks Risks Risks Opportunities Opportunities Opportunities Risks Risks Risks Opportunities Opportunities very unlikely • 97 Probability Impact unlikely possible likely very likely Change in 2014 minor low moderate significant high Change in 2014 • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • 1) Provided that not indicated differently, the risk assessment applies for all regional segments. unchanged higher lower Consolidated Management ReportRisk and Opportunity Report 98 employees and offers them incentives to further develop their personal expertise through numerous educational and training opportunities as well as the targeted search for talent within the Group. In addition, employees are provided with a broad range of additional services (free health check-ups, flexible and family-friendly working time models, etc.) which contribute on the whole to a high degree of employee satisfaction – measured by means of a biennial employee survey – and a low turnover rate of only 8.5% Group-wide.  Employees, p. 80. NORMA Group actively promotes the retention and expansion of know-how in the Company through the aforementioned measures, wherein it sees an opportunity for the future devel- opment of the Group whose impact on its further success is regarded to be very likely. However, since its financial success beyond planning is oriented toward the very long term, NORMA Group estimates the financial impact of these opportunities to be minor. IT-related opportunities and risks Maintaining and exchanging complete, timely and appropriate information as well as being able to utilise functional and power- ful IT systems are of central importance for an innovative and global company such as NORMA Group. An extensive computer system failure could disrupt the Company’s operations or ex- pose sensitive corporate information. Therefore, NORMA Group has implemented appropriate measures to avoid and reduce this type of risk. These measures are collectively embedded in the IT risk management process and are adjusted in this context to changing conditions. NORMA Group controls identifiable IT risks, for example, by mirroring the database, maintaining de- centralised data and outsourcing data archiving to a certified ex- ternal provider. The Group’s data processing centre in Frankfurt is also used by other Group companies for their ERP systems. Another data centre is located in the USA, with smaller backup systems in Asia. The access of employees to sensitive informa- tion is ensured by means of authorisation systems customised for the respective positions, taking into account the principle of separation of functions. IT systems used in the area of produc- tion are being doubled in order to reduce risks. Potential risks are also taken into account through early planning as well as by creating suitable transition solutions. Based on global standards, N O R M A Group estimates the probability of IT-related risks occurring in all regions to be possi- ble and the potential financial impact to be minor. Opportunities in the area of IT arise in particular from the potential of pro- cess standardisation and optimisation across all companies of NORMA Group. For instance, the gradual replacement of older ERP systems with new, Group-wide uniform systems was once again advanced in 2014. NORMA Group regards the oppor- tunities arising from this standardisation to be very likely and expects the financial impact to be very minor. Legal opportunities and risks Risks related to violations of standards Future changes to legislation and requirements in general com- mercial law, liability law, environmental law, tax law, customs law and labour law, as well as changes in related standards, could have a negative impact on NORMA Group’s develop- ment. Violations of laws and regulations, but also of contractual agreements, can lead to penalties, restrictions or claims from damaged parties. Furthermore, defective products can lead to legal disputes and claims for damages. NORMA Group uses the existing compliance and risk manage- ment systems to ensure that it complies with constantly chang- ing laws and regulations and meets its contractual obligations. NORMA Group counters the risk of product defects through its Group-wide quality assurance programme. Consequently, NORMA Group considers risks related to violations of intellectual property rights as unlikely to occur and the potential financial impact to be moderate. Any legal risks that NORMA Group is aware of are taken into account through provisions recognised in the consolidated financial statements. The Company is not aware of any other significant risks. Social and environmental standards Violating social and environmental standards could damage the reputation of NORMA Group and result in restrictions, claims for damages or disposal obligations. NORMA Group has there- fore implemented corporate responsibility as an integral part of the Group strategy. In this context, a systematic environmental management system was introduced at NORMA Group so that corporate decisions can always be evaluated also considering the goal of avoiding emissions and conserving resources. The Company also invests in the area of occupational health and safety. Consequently, NORMA Group believes that negative developments remain unlikely to occur as a result of social and environmental risks and that the potential financial effects would be moderate. However, the investments in the area of Corporate Responsi- bility serve not only to ward off risks. The measures and initia- tives are also seen as having the potential to positively impact both the business environment as well as NORMA Group and its stakeholders. Therefore, NORMA Group estimates the opportu- nities in this area to be possible and assumes that the measures and initiatives will have a minor impact on its planning. Intellectual property NORMA Group’s position as a technology and innovation leader means that violations of its intellectual property rights could lead to lost sales and reputation. For this reason, the Company NORMA Group SE Annual Report 201499 Risks Opportunities O P P O R T U N I T Y A N D R I S K P O R T F O L I O O F N O R M A G R O U P S E Financial risks and opportunities Default Liquidity Currency Change in interest rates Economic risks and opportunities Industry-specific and technological risks and opportunities Risks and opportunities associated with corporate strategy Operative risks and opportunities Commodity pricing Supplier Quality and production Customer Risks and opportunities of personnel management IT-related risks and opportunities Legal risks and opportunities Disregard of standards Social and environmental standards Property rights ensures that its technologies and innovations are legally pro- tected. NORMA Group also minimises the potential impact by developing customer-specific solutions and through its speed of innovation. At the same time, it is also possible for NORMA Group to violate the intellectual property of third parties. For this reason, developments for potential patent violations are re- viewed at an early stage. Therefore, it is considered possible for the intellectual property to be violated. Due to the countermea- sures that NORMA Group has implemented, the potential impact of an intellectual property violation is regarded to be minor. In addition, NORMA Group also sees potential opportunities that can lead to a minor deviation from the medium term plan as a result of the consistent defence of the intellectual property and the expansion of legal unique selling points. AS SES SMENT OF THE OVER ALL PROFILE OF OPPOR- TUNITIES A ND RISKS BY THE M A N AGEMENT BOAR D The Group’s overall situation results from the aggregation of individual risks and opportunities from all categories of the business units and functions. After assessing the likelihood of risks occurring and their potential financial impact as well as in light of the current business outlook, NORMA Group’s Manage- ment Board does not believe that there is any individual risk or group of risks with the potential to jeopardise the continued ex- istence of the Group or individual Group companies as a going concern. Taking the aggregated opportunities into account, NORMA Group is in an excellent position with respect to both the medium and long terms to further expand its market position and grow globally. This assessment is reinforced by the good opportunities to cover the financing requirements. Therefore, NORMA Group has not made any effort to obtain a rating from a leading rating agency. General economic risks remain for NORMA Group in all areas, which is why setbacks on the way towards long-term realisation of our growth and profitability targets cannot be ruled out. In contrast, there are clear opportunities that NORMA Group is taking advantage of through its strategy and consistent oppor- tunity management, so that it is possible to even exceed the profitability targets. Compared to the prior year, the risks and opportunities from cur- rency have risen, while interest rate risks have declined. Never- theless, changes in individual risks and opportunities do not have a significant impact on NORMA Group’s overall risk profile. All other risks and opportunities have not changed since the previous year. Therefore, in the opinion of the management, the Group’s overall profile has essentially not changed since the previous year. Consolidated Management ReportRisk and Opportunity Report100 Remuneration Report for the Management and Supervisory Boards R EMUNER ATION OF THE M A N AGEMENT BOAR D Outline of the remuneration system for the Management Board The purpose of NORMA Group’s remuneration system is to provide the members of the Management Board with adequate remuneration for their activities and areas of responsibility as well as their personal performance in accordance with appli- cable legislation and to provide them with a long-term incentive to commit themselves to the success of the Company. In ad- dition to the criteria of the Company’s performance and future prospects, the decision as to what level of remuneration is appropriate is also based on the general levels of remuneration paid by comparable companies and NORMA Group’s remuner- ation structure. In accordance with the recommendations of the German Cor- porate Governance Code in the version dated 24 June 2014, the remuneration comprises a fixed element and variable elements. The basic remuneration is a fixed cash payment for the entire year based on the respective Management Board member’s area of responsibility. This basic remuneration is paid in the form of a monthly salary. The variable element comprises multiple components: 1. The annual bonus is a variable cash payment calculated on the basis of the quantifiable performance of the Company in the previous financial year. The parameters taken into consid- eration are whether or not the Company reaches its target for an earnings component (adjusted EBITA) and a liquidity com- ponent (operating free cash flow before external use). Each of the two indicators is calculated for a financial year based on figures taken from the Company’s consolidated financial statements and compared to the target set in advance by the Supervisory Board. The annual salary of the Management Board member is multiplied by a percentage between 0% and 200%, depending on the extent to which the targets for the components were met. The range limits the annual bonus to 50% of the member’s annual salary. It can be reduced to EUR 0 if the Company performs poorly. 2. The Company’s long-term incentive (LTI) plan is a component of a variable remuneration element designed to maximize the Company’s long-term performance. The LTI plan also comprises an EBITA component and an operating free cash flow before external use (FCF) component, each of which are observed over a period of three years (performance period). A new three-year performance period begins every year. Both components are calculated by multiplying the average annual EBITA and FCF values actually achieved in the performance period by the EBITA and FCF bonus percentages specified in the employment contract. In a second step, the actual value of a component is compared to the medium-term plan approved by the Supervisory Board to evaluate the Com- pany’s performance and adjustments are made to the LTI plan. The LTI plan is limited to two and a half times the amount that would be arrived at on the basis of the figures in the Company’s medium-term plan. If the actual value is lower than the planned value, the LTI plan is reduced on a straight-line basis down to a minimum of EUR 0 if the three- year targets are missed by a significant amount. 3. The Matching Stock Programme (MSP) provides a share price-based long-term incentive to commit to the success of the Company. The MSP is a stock option programme. To this end, the Supervisory Board specifies a number of stock options to be allotted each financial year with the pro- viso that the Management Board member makes a corre- sponding personal investment in the Company. The MSP is split into five tranches. The first tranche was allotted on the day of the initial public offering (8 April 2011). The other tranches will be allotted on 31 March each follow- ing year. The stock options relate to those shares allotted or acquired and qualified under the MSP as specified in the Management Board contract. The number of stock options is calculated by multiplying the qualified shares (for 2011, 2012, 2013 and 2014: 108,452 shares per year) held at the allotment date by the option factor specified by the Super- visory Board. The option factor is re-determined for each tranche and amounts to 1.5 for each of the tranches in 2011, 2012, 2013 and 2014. Therefore, 162,679 share options are to be taken into account in financial years 2011 to 2014. Every tranche will be recalculated taking changes in the influencing factors into consideration and balanced pro rata temporis over the vesting period. The vesting period is four years and ends on 31 March in 2015, 2016, 2017 and 2018 respectively for the 2011, 2012, 2013 and 2014 tranches. The options in a tranche can only be exercised within a period of two years after the vesting period expires. As a precondition for exercis- ing the options, the share price must exceed the exercise threshold when the options are exercised (basis: weighted average of the last ten exchange trading days before ex- ercising the option). The exercise threshold is set by the Supervisory Board when the respective tranche is allocated and equals at least 120% of the strike price. The exercise threshold was set at 120% of the strike price for the 2011, 2012, 2013 and 2014 tranches. The strike price for the 2011 tranche corresponds to the initial offering price at the time of the IPO; i.e. the issuing price set at the end of the book building phase for the shares offered publicly during the IPO. The weighted average closing price of the Com pany’s share for the last 60 exchange trading days directly preced- ing the allo cation of the respective tranche applies when NORMA Group SE Annual Report 2014 Remuneration Report for the Management and Supervisory Boards 101 determining the strike price of the other tranches. The value of the stock options is calculated based on generally ac- cepted business valuation models. When the options are exercised, the Company is free to de- cide whether to settle them in shares or in cash, the Com- pany assumes a settlement by equity instruments. M AT C H I N G S T O C K P R O G R A M M E ( M S P ) Tranches Option factor Number of options Exercise price (in EUR) End of the vesting period 2014 2013 2012 2011 1.5 1.5 1.5 1.5 162,679 162,679 162,679 162,679 40.16 23.71 17.87 21.00 2018 2017 2016 2015 The members of the Management Board are additionally com- pensated with a company car which they can also use for per- sonal purposes. Furthermore, Management Board members are reimbursed for any expenses and travel costs incurred while performing their duties for the Company in accordance with the Company’s respectively applicable guidelines. Inventor’s bo- nuses are also granted. The members of the Management Board arrange private insurance or are personally responsible for the statutory deductible of 10% of the loss for the D&O insurance policy carried for the Managing Directors of NORMA Group. Remuneration of the Management Board in the 2014 financial year The remuneration for the Management Board totalled EUR 3.2 million in fiscal year 2014 (2013: EUR 3.9 million.) according to § 315a in connection with § 315 para. 2 no. 4 and § 314 para. 1 no. 6 German Commercial Code (HGB). This figure comprises fixed elements in the amount of EUR 1.4 million (2013: EUR 1.4 million) and variable elements in the amount of EUR 1.8 million (2013: EUR 2.5 million). The variable elements comprise the short-term performance- based annual bonus and the two long-term performance-based LTI and MSP schemes. The Annual General Meeting held on 6 April 2011 resolved not to disclose the remuneration for individual Management Board members between 2011 and 2015 in accordance with sen- tences 5 to 9 of section 314(1) no. 6 letter a) of the German Commercial Code (HGB). In accordance with the German Corporate Governance Code in its version dated 24 June 2014, which draws a distinction between remuneration that is being granted for the year under review and inflow in or for the year under review, the remuner- ation of the Management Board is as follows: R E M U N E R AT I O N G R A N T E D Complete Management Board in EUR thousands 2013 2014 2014 (min) 2014 (max) Basic remuneration 1,300 1,300 1,300 1,300 Benefits Sum 76 68 68 68 1,376 1,368 1,368 1,368 One-year variable remuneration 325 325 0 0 0 0 0 650 2,120 1,911 2,814 2,956 0 764 0 638 933 0 669 0 1,727 1,927 0 0 0 10,451 0 0 3,103 3,295 1,368 11,819 Complete Management Board in EUR thousands 2013 2014 Multi-year variable remuneration LTI tranche 2014–2016 LTI tranche 2013–2015 MSP 2014–2018 MSP 2013–2017 Sum Pension expenses Total remuneration I N F L O W Fixed remuneration Benefits Sum One-year variable remuneration Multi-year variable remuneration LTI tranche 2011–2013 1,300 76 1,376 312 0 312 0 1,688 1,300 68 1,368 438 1,698 2,136 0 3,504 A provision was recognized for the variable compensation ele- ments. The stock options associated with the MSP scheme were reported as capital reserves in accordance with IFRS 2. Sum Pension expenses Total remuneration Consolidated Management Report 102 R EMUNER ATION OF THE SUPERVISORY BOAR D The remuneration for the Chairman and the Deputy Chairman of the Supervisory Board was calculated separately in accor- dance with the recommendations of the German Corporate Governance Code in the version dated 24 June 2014. The Chairman is paid double the remuneration of the other mem- bers of the Supervisory Board, and the Deputy Chairman is paid one and a half times this amount. In addition, the Chair- man and members of the Supervisory Board’s committees are remunerated separately. The Supervisory Board members will be remunerated for their activities on the day after the 2015 Annual General Meeting as follows: Supervisory Board member Membership / Chairmanship of a committee Remuneration (in EUR) Dr. Stefan Wolf Chairman of the Supervisory Board 110,000 Other Legally Required Disclosures An overview of the information required under section 315(4) of the German Commercial Code (Handelsgesetzbuch, HGB) is presented below: Section 315 (4) no. 1 HGB NORMA Group SE’s share capital totaled EUR 31,862,400.00 on 31 December 2014. This is divided into 31,862,400 registered shares with no par value. Each share entitles the bearer to one vote. There are no other classes of shares. NORMA Group SE holds no treasury shares. Section 315 (4) no. 2 HGB The Management Board of NORMA Group SE is not aware of any restrictions affecting voting rights or the transfer of shares or any agreements between shareholders which could result in such restrictions. Lars M. Berg Chairman of the General and Nomination Committees Deputy Chairman of the Supervisory Board Member of the Audit Committee Member of the General and Nomination Committees Günter Hauptmann Not a member of a committee Knut J. Michelberger Dr. Christoph Schug Member of the Audit Committee Chairman of the Audit Committee Member of the General and Nomination Committees Erika Schulte Not a member of a committee Total 95,000 50,000 60,000 95,000 50,000 460,000 Section 315 (4) no. 3 HGB There are no direct or indirect capital holdings exceeding one tenth of the voting rights other than those voting rights listed in the notes to the consolidated financial statements. Section 315 (4) no. 4 HGB There are no shares in NORMA Group SE that confer special control rights to the holder. Section 315 (4) no. 5 HGB There are no employee share schemes through which employ- ees can acquire shares of NORMA Group SE. Employees with shareholdings in NORMA Group SE exercise control rights in the same way as other shareholders in accordance with applicable legislation and the Articles of Association. No remuneration was paid to Supervisory Board members in financial year 2014 for services personally rendered (in particular advisory and brokerage services). Furthermore, the Supervisory Board members are reimbursed for any expenses and travel costs incurred while performing their duties for the Company in accordance with the Com- pany’s respectively applicable guidelines. The members of the Supervisory Board arrange private insurance or are personally responsible for the statutory deductible of 10% of the loss for the D&O insurance policy carried for the Management Board and the Supervisory Board of NORMA Group. Section 315 (4) no. 6 HGB Management Board members are appointed and dismissed in accordance with section 84 et seq. of the German Stock Cor- poration Act (Aktiengesetz, AktG). The Articles of Association of NORMA Group SE do not contain any provisions related to this issue that contradict the applicable legislation. The Supervisory Board is responsible for determining the actual number of mem- bers on the Management Board. It can nominate a Chairman and Deputy Chairman of the Management Board or a Manage- ment Board spokesperson and a deputy spokesperson. Changes to the Articles of Association are made by the Annual General Meeting in accordance with section 179 (1) AktG. In accordance with section 179 (1) sentence 2 AktG, the Annual General Meeting can authorise the Supervisory Board to make changes which affect only the wording of the Articles of Asso- ciation. The Annual General Meeting of NORMA Group SE has chosen to do so: According to Article 14 (2) of the Articles of Asso ciation, the Supervisory Board is authorised to make changes to the Articles of Association which only affect their NORMA Group SE Annual Report 2014Other Legally Required Disclosures 103 wording. In accordance with article 20 sentence 3 of the Articles of Association, a simple majority of votes submitted is sufficient for a resolution on changing the Articles of Association if at least half of the share capital is represented when the resolution is adopted and a different majority is not required under the law. If the Management Board exercises its right to retire treasury shares without a capital decrease and thereby increases the proportion of the share capital represented by the remaining shares, it is authorised to alter the number of shares in the Articles of Association. The Supervisory Board is authorised to alter the wording of the Articles of Association after capital increases from authorised capital 2011/II or following the expiry of the authorization period if this authorised capital is not used. Section 315 (4) no. 7 HGB Authorised capital 2011/II With the approval of the Supervisory Board, the Annual Gen- eral Meeting held on 6 April 2011 authorised the Management Board to increase the company’s share capital to a total of EUR 15,931,200.00 until 5 April 2016 through the issue of up to 15,931,200 new registered, no-par-value shares in exchange for cash or non-cash contributions (authorised capital 2011/II). Article 5 of NORMA Group SE’s Articles of Association adopts the provisions on the Company’s Authorised Capital 2011/II from article 5 of NORMA Group AG’s Articles of Association prior to the transformation. The only change compared to the Articles of Association of NORMA Group AG is the additional clarification that the Authorised Capital 2011/II only exists in NORMA Group SE to the extent remaining when the transformation went into effect, i.e. not yet used up. The Management Board is authorised, subject to the Super- visory Board’s approval, to disapply the pre-emptive rights of shareholders for one or more capital increases for the following reasons: in connection with the authorised capital for frac tional amounts resulting from the shareholders’ subscription ratio; for capital increases in exchange for non-cash contributions, in particular to acquire companies or shares in companies; for capital increases in exchange for cash contributions limited to a maximum of 10% of the share capital, provided the issue price is not significantly lower than the stock market price (simplified dis- application of pre-emptive rights in accordance with section 186 (3) sentence 4); to fulfil obligations resulting from conversion and option rights or profit participation rights or participating bonds. Contingent capital Article 6 of NORMA Group SE’s Articles of Association adopts the Contingent Capital 2011 from article 6 of NORMA Group AG’s Articles of Association prior to the transformation and also clarifies that the Contingent Capital 2011 only exists to the ex- tent remaining when the transformation went into effect, i.e. capital increases under article 6 of NORMA Group AG’s Articles of Association have not yet been carried out. The share capital was contingently increased by up to EUR 12,505,000.00 by issu ing up to 12,505,000 new registered, no-par-value shares with dividend rights from the beginning of the financial year in which they were issued (contingent capital 2011). With the approval of the Supervisory Board, the Management Board is authorised to issue bonds with warrants or convertible bonds and convertible profit participation rights one or more times until the end of 5 April 2016 and to grant the bondholders or creditors of the bonds conversion or option rights on up to 12,505,000 new shares of NORMA Group SE with a propor- tionate interest in the share capital of up to EUR 12,505,000.00. The purpose of the contingent capital increase is to grant shares to the holders or creditors of bonds with warrants or convertible bonds and profit participation rights with warrants or conversion rights which are issued by the Company or any company in which the Company owns a majority interest or which depends on the Company until the end of 5 April 2016 in accordance with the resolution of the Annual General Meeting held on 6 April 2011. The contingent capital increase is only carried out to the extent that holders of the aforementioned bonds with warrants or convertible bonds or profit participation rights with option or conversion rights exercise these options or conversion rights, or conversion obligations arising from such bonds are fulfilled and that the Company’s treasury shares or new shares from the authorized capital are used for this purpose. Authorisation to acquire treasury shares The Annual General Meeting held on 6 April 2011 authorised NORM A Group SE to acquire treasury shares up to a total of 10% of the share capital existing when the resolution was passed over the stock market or by means of a purchase offer extended to all of NORMA Group SE’s shareholders in accor- dance with section 71 (1) no. 8 AktG. This authorisation may be exercised as a whole or in partial amounts on one or several occasions until 5 April 2016. The acquisition price (excluding transaction costs) may not deviate by more than 10% from the arithmetic average of the closing price of the shares of NORMA Group AG in Xetra trading or a successor system of the Frankfurt Stock Exchange over the five trading days immediately preced- ing the acquisition or the assumption of an obligation to acquire shares over the stock market or the publication of a public offer. The authorisation may be exercised for any purpose permitted by law. The Management Board is authorised to retire all or part of the acquired shares with the approval of the Super- visory Board, whereby the Management Board may require the shares to be retired without a capital decrease, but is under no obligation to do so. Other than selling them on the stock market or offering them to all shareholders while partially or completely disapplying pre-emptive rights, the Management Board is also specifically authorised to use shares acquired on the basis of the aforementioned authorisation for any of the following purposes with the approval of the Supervisory Board: to disapply fractional amounts resulting from the subscription ratio from shareholders’ pre-emptive rights; for sale in exchange for non-cash contributions, in particular as part of the acquisi- tion of companies or shares in companies; for sale in exchange for cash contributions, provided the price is not significantly lower than the stock market price (simplified disapplication of Consolidated Management Report104 pre-emptive rights in accordance with section 186 (3) sen- tence 4 and section 71 (1) no. 8 sentence 5 half sentence 2 AktG, limited to a maximum of 10% of the share capital); to fulfil obligations resulting from conversion and option rights or conversion obligations. Report on Transactions with Related Parties The Management Board of NORMA Group SE has yet to make use of this authorisation. Apart from the reported, there were no significant transactions with related parties in financial year 2014. Section 315 (4) no. 8 HGB NORMA Group’s financing agreements including the contracts for the promissory notes include the typical Change of Control Clause. In the event of a takeover by a third party, the possibility that NORMA Group wouldn’t be able to finance itself at similarly favourable terms and conditions cannot be ruled out. Maintal, 17 March 2015 NORMA Group SE The Management Board Section 315 (4) no. 9 HGB NORMA Group SE has no agreements in place that provide compensation for members of the Management Board or em- ployees in the event of a takeover bid. Please see the remuner- ation report for further details. Werner Deggim Dr. Othmar Belker Bernd Kleinhens John Stephenson NORMA Group SE Annual Report 2014 Report on Transactions with Related Parties 105 Consolidated Management Report106 THE HIGH-QUALITY ENGINEERED JOINING SOLUTIONS THAT NORMA GROUP OFFERS HELP TO REDUCE EMISSIONS AND ENERGY CONSUMP- TION IN ITS END CUSTOMERS’ PRODUCTS. NORMA GROUP THUS CONTRIBUTES TO ENVIRONMEN - TALLY FRIENDLY USE OF RESOURCES. NORMA Group SE Annual Report 2014107 D E T A D I L O S N O C S T N E M E T A T S L A I C N A N I F 108 Consolidated Financial Statements 108 Consolidated Statement of Financial Position 110 Consolidated Statement of Comprehensive Income 111 Consolidated Statement of Cash Flows 112 Consolidated Statement of Changes in Equity 114 Segment Reporting 116 Notes to the Consolidated Financial Statements 136 139 Notes to the Consolidated Statement of Comprehensive Income Notes to the Consolidated Statement of Financial Position 162 Other Notes 168 Appendix to the Notes to the Consolidated Financial Statements 168 Notifications of Voting Rights 170 Corporate Bodies 171 Responsibility Statement 172 Auditor’s Report 173 Further Information 173 Glossary 177 Overview by Quarter 2014 178 Multi-year Overview 108 Consolidated Statement of Financial Position A S S E T S in EUR thousands Non-current assets Goodwill Other intangible assets Property, plant and equipment Other non-financial assets Income tax assets Deferred income tax assets Current assets Inventories Other non-financial assets Other financial assets Derivative financial assets Income tax assets Trade and other receivables Cash and cash equivalents Note 31 Dec 2014 31 Dec 2013 (19) (19) (20) (17) (18) (24) (25) (26) (22) (17) (23) (36) 324,496 262,460 154,490 782 933 11,137 754,298 114,877 10,545 2,198 3 4,505 107,717 84,271 324,116 233,239 92,910 115,367 0 1,533 7,515 450,564 79,770 8,114 0 92 827 90,138 194,188 373,129 Total assets 1,078,414 823,693 NORMA Group SE Annual Report 2014 109 E Q U I T Y A N D L I A B I L I T I E S in EUR thousands Note 31 Dec 2014 31 Dec 2013 Equity attributable to equity holders of the parent Subscribed capital Capital reserves Other reserves Retained earnings Equity attributable to shareholders Non-controlling interests Total equity Liabilities Non-current liabilities Retirement benefit obligations Provisions Borrowings Other non-financial liabilities Other financial liabilities Derivative financial liabilities Deferred income tax liabilities Current liabilities Provisions Borrowings Other non-financial liabilities Other financial liabilities Derivative financial liabilities Income tax liabilities Trade payables Total liabilities Total equity and liabilities (27) (27) (27) (29) (30) (31) (32) (33) (22) (18) (30) (31) (32) (33) (22) (17) (34) 31,862 216,468 2,496 116,218 367,044 969 368,013 12,271 6,207 408,225 1,790 3,763 18,177 104,647 555,080 8,142 22,721 26,015 2,445 2,043 13,126 80,829 155,321 710,401 31,862 215,927 –13,857 84,966 318,898 1,004 319,902 10,869 5,284 200,981 1,398 1,619 8,293 32,970 261,414 8,334 125,127 22,407 4,676 6,977 15,831 59,025 242,377 503,791 1,078,414 823,693 Consolidated Financial StatementsConsolidated Statement of Financial Position 110 Consolidated Statement of Comprehensive Income Note Q4 2014 Q4 2013 2014 2013 in EUR thousands Revenue Changes in inventories of finished goods and work in progress Other own work capitalised Raw materials and consumables used Gross profit Other operating income Other operating expenses Employee benefits expense Depreciation and amortisation Operating profit Financial income Financial costs Financial costs – net Profit before income tax Income taxes PROFIT FOR THE PERIOD Other comprehensive income for the period, net of tax Other comprehensive income that can be reclassified to profit or loss, net of tax Exchange differences on translation of foreign operations Cash flow hedges Other comprehensive income that cannot be reclassified to profit or loss, net of tax (8) (9) (10) (11) (12) (19, 20) (13) (16) (27) (27) Remeasurements of post employment benefit obligations, net of tax (27, 29) Other comprehensive income for the period, net of tax TOTAL COMPREHENSIVE INCOME FOR THE PERIOD Profit attributable to Shareholders of the parent Non-controlling interests Total comprehensive income attributable to Shareholders of the parent Non-controlling interests Undiluted earnings per share (in EUR) Diluted earnings per share (in EUR) (15) (15) 176,204 – 4,333 2,195 – 72,259 101,807 4,106 – 27,544 – 50,033 – 9,777 18,559 95 474 569 19,128 – 7,556 11,572 2,696 2,751 – 55 –1,166 –1,166 1,530 13,102 11,553 19 11,572 13,103 –1 13,102 0.36 0.36 152,804 – 318 2,275 – 61,996 92,765 2,690 – 20,424 – 43,252 – 7,780 23,999 232 – 4,596 – 4,364 19,635 – 7,008 12,627 – 2,110 –1,992 –118 – 567 – 567 – 2,677 9,950 12,617 10 12,627 10,047 – 97 9,950 0.40 0.39 694,744 – 2,907 3,647 – 292,073 403,411 9,355 – 92,739 –188,508 – 33,675 97,844 407 –14,876 –14,469 83,375 – 28,500 54,875 16,208 14,181 2,027 –1,166 –1,166 15,042 69,917 54,722 153 54,875 69,909 8 69,917 1.72 1.70 635,545 1,894 3,377 – 269,421 371,395 6,983 – 79,370 –169,689 – 29,799 99,520 555 –16,140 –15,585 83,935 – 28,319 55,616 – 5,383 – 7,712 2,329 – 567 – 567 – 5,950 49,666 55,557 59 55,616 49,683 –17 49,666 1.74 1.74 NORMA Group SE Annual Report 2014 Consolidated Statement of Comprehensive Income | Consolidated Statement of Cash Flows 111 Consolidated Statement of Cash Flows in EUR thousands Note Q4 2014 Q4 2013 2014 2013 Operating activities Profit for the period Depreciation and amortisation Gain (–) / loss (+) on disposal of property, plant and equipment Change in provisions Change in deferred taxes (19, 20) (30) (18) 11,572 9,777 1 345 – 923 12,627 7,780 43 861 329 54,875 33,675 33 174 –1,911 55,616 29,799 – 66 542 – 633 Change in inventories, trade account receivables and other receiv- ables, which are not attributable to investing or financing activities (23, 24, 25, 26) 24,880 12,440 – 5,437 – 4,732 Change in trade and other payables, which are not attributable to investing or financing activities Interest expenses of the period Expenses due to repayment of derivatives (CF-Hedges) Other non-cash expenses/income Net cash provided by operating activities (32, 34, 35) (36) thereof interest received thereof income taxes Investing activities – 5,858 2,902 0 – 3,429 39,267 56 –10,446 1,228 2,682 0 4,712 42,702 229 – 4,674 1,688 9,958 4,683 –1,377 96,361 275 – 37,360 Payments for acquisitions of subsidiaries, net (36, 40) – 226,404 Investments in property, plant and equipment and intangible assets (19, 20) Proceeds from sale of property, plant and equipment – 9,346 41 –1,167 –14,549 139 – 232,190 – 33,175 305 Net cash used in investing activities – 235,709 –15,577 – 265,060 Financing activities Reimbursement OPICP from shareholder Payments for shares in a subsidiary Interest paid Dividends paid to shareholders Dividends paid to non-controlling interests Proceeds from borrowings Repayment of borrowings Repayment of hedging derivatives Repayment of lease liabilities (27) (31) (31) 0 0 – 865 0 –15 229,553 – 7,258 – 3,011 – 77 0 0 –1,750 0 0 0 –16,705 0 – 77 Net cash provided by (+) / used in (–) financing activities (36) 218,327 –18,532 Net decrease (–) / increase (+) in cash and cash equivalents Cash and cash equivalents at beginning of the year Effect of foreign exchange rates on cash and cash equivalents Cash and cash equivalents at end of the period 21,885 62,482 – 96 84,271 8,593 186,209 – 614 194,188 0 – 907 – 9,492 – 22,304 – 43 229,870 –129,257 – 9,901 – 287 57,679 –111,020 194,188 1,103 84,271 12,424 11,408 0 10,993 115,351 485 –16,484 –13,210 – 30,528 376 – 43,362 1,067 0 – 9,773 – 20,711 0 128,118 – 46,598 0 – 453 51,650 123,639 72,389 –1,840 194,188 Consolidated Financial Statements 112 Consolidated Statement of Changes in Equity in EUR thousands Note Subscribed capital Capital reserve Other reserves Retained earnings Total Non-controlling interests Total equity Attributable to equity holders of the parent Attributable to equity holders of the parent Balance as of 31 December 2012 Changes in equity for the period Result for the period Exchange differences on translation of foreign operations Cash flow hedges, net of tax Remeasurements of post employment benefit obligations, net of tax Total comprehensive income for the period Stock options 1) Reimbursement OPICP by shareholders Dividends paid Total transactions with owners for the period Balance as of 31 December 2013 Changes in equity for the period Result for the period Exchange differences on translation of foreign operations Cash flow hedges, net of tax Remeasurements of post employment benefit obligations, net of tax Total comprehensive income for the period Stock options Dividends paid Dividends paid to non-controlling interests Total transactions with owners for the period (22) (27, 29) (28) (27) (27) (22) (27, 29) (28) (27) 31,862 213,559 0 0 0 1,301 1,067 2,368 31,862 215,927 0 0 0 541 541 Balance as of 31 December 2014 31,862 216,468 1) In 2013 the expenses from the stock option programme recognised in equity were reclassified from the retained earnings into the capital reserve in order to achieve the same disclosure in the Statutory Financial Statements of NORMA Group SE and the Consolidated Financial Statements of NORMA Group. – 8,550 – 7,636 2,329 – 5,307 0 –13,857 14,326 2,027 16,353 0 2,496 51,289 55,557 – 567 54,990 – 602 – 20,711 – 21,313 84,966 54,722 –1,166 53,556 – 22,304 – 22,304 116,218 288,160 55,557 – 7,636 2,329 – 567 49,683 699 1,067 – 20,711 –18,945 318,898 54,722 14,326 2,027 –1,166 69,909 541 – 22,304 0 – 21,763 367,044 1,021 59 – 76 –17 1,004 153 –145 0 0 0 0 0 0 8 – 43 – 43 969 289,181 55,616 – 7,712 2,329 – 567 49,666 699 1,067 – 20,711 –18,945 319,902 54,875 14,181 2,027 –1,166 69,917 541 – 22,304 – 43 – 21,806 368,013 NORMA Group SE Annual Report 2014 Consolidated Statement of Changes in Equity 113 in EUR thousands Note Subscribed capital Capital reserve Other reserves Retained earnings Total Non-controlling interests Total equity Attributable to equity holders of the parent Attributable to equity holders of the parent Balance as of 31 December 2012 Changes in equity for the period Result for the period Exchange differences on translation of foreign operations Cash flow hedges, net of tax Remeasurements of post employment benefit obligations, net of tax Total comprehensive income for the period Stock options 1) Dividends paid Reimbursement OPICP by shareholders Total transactions with owners for the period Balance as of 31 December 2013 Changes in equity for the period Result for the period Exchange differences on translation of foreign operations Cash flow hedges, net of tax Remeasurements of post employment benefit obligations, net of tax Total comprehensive income for the period Stock options Dividends paid Dividends paid to non-controlling interests Total transactions with owners for the period (22) (27, 29) (28) (27) (27) (22) (27, 29) (28) (27) 31,862 213,559 31,862 215,927 0 0 0 0 0 1,301 1,067 2,368 0 541 541 Balance as of 31 December 2014 31,862 216,468 – 8,550 – 7,636 2,329 – 5,307 0 –13,857 14,326 2,027 16,353 0 2,496 51,289 55,557 – 567 54,990 – 602 – 20,711 – 21,313 84,966 54,722 –1,166 53,556 – 22,304 – 22,304 116,218 288,160 55,557 – 7,636 2,329 – 567 49,683 699 1,067 – 20,711 –18,945 318,898 54,722 14,326 2,027 –1,166 69,909 541 – 22,304 0 – 21,763 367,044 1,021 59 – 76 0 0 –17 0 0 0 0 1,004 153 –145 8 – 43 – 43 969 289,181 55,616 – 7,712 2,329 – 567 49,666 699 1,067 – 20,711 –18,945 319,902 54,875 14,181 2,027 –1,166 69,917 541 – 22,304 – 43 – 21,806 368,013 Consolidated Financial Statements 114 Segment Reporting EME A Americas Asia-Pacific Total segments Central functions Consolidation Consolidated group in EUR thousands 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 Total revenue thereof inter-segment revenue 420,571 26,116 412,691 24,730 244,625 6,868 198,321 6,752 64,595 2,063 57,218 1,203 729,791 35,047 668,230 32,685 27,591 27,591 42,457 42,457 – 62,638 – 62,638 – 75,142 – 75,142 694,744 635,545 0 0 Revenue from external customers 394,455 387,961 237,757 191,569 62,532 56,015 694,744 635,545 0 0 694,744 635,545 Contribution to consolidated group sales Adjusted EBITDA 1) Depreciation without PPA depreciation Adjusted EBITA 1) Assets 2) Liabilities 3) CAPE X Number of employees 4) 57 % 84,643 – 9,603 75,040 496,433 145,082 13,057 2,636 61 % 83,920 – 9,803 74,117 490,322 196,079 13,055 2,546 34 % 49,266 – 4,544 44,722 574,897 346,317 16,215 1,270 30 % 45,216 – 4,133 41,083 210,047 121,336 7,317 664 9 % 7,678 –1,992 5,686 71,893 23,116 5,757 653 9 % 6,471 –1,991 4,480 61,895 20,385 6,716 567 1) For details regarding the adjustments, refer to  Note 7. 2) Including allocated goodwills, taxes are shown within the reconciliation. 3) Taxes are shown within the reconciliation. 4) Number of employees (average headcount) 100 % 141,587 –16,139 125,448 1,143,223 514,515 35,029 4,559 100 % 135,607 –15,927 119,680 762,264 337,800 27,088 3,777 –1,682 – 805 – 2,487 316,412 476,205 4,559 188 – 5,915 – 772 – 6,687 212,440 277,946 3,440 168 –1,462 – 373 –1,462 – 381,221 – 280,319 – 373 –151,011 –111,955 138,443 –16,944 121,499 1,078,414 710,401 39,588 4,747 129,319 –16,699 112,620 823,693 503,791 30,528 3,945 0 0 0 0 0 0 0 0 NORMA Group SE Annual Report 2014 Segment Reporting 115 EME A Americas Asia-Pacific Total segments Central functions Consolidation Consolidated group in EUR thousands 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 2014 2013 Total revenue thereof inter-segment revenue 420,571 26,116 412,691 24,730 244,625 6,868 198,321 6,752 64,595 2,063 57,218 1,203 729,791 35,047 668,230 32,685 27,591 27,591 42,457 42,457 – 62,638 – 62,638 – 75,142 – 75,142 694,744 635,545 0 0 Revenue from external customers 394,455 387,961 237,757 191,569 62,532 56,015 694,744 635,545 0 0 0 0 694,744 635,545 Depreciation without PPA depreciation Contribution to consolidated group sales Adjusted EBITDA 1) Adjusted EBITA 1) Assets 2) Liabilities 3) CAPE X Number of employees 4) 57 % 84,643 – 9,603 75,040 496,433 145,082 13,057 2,636 61 % 83,920 – 9,803 74,117 490,322 196,079 13,055 2,546 34 % 49,266 – 4,544 44,722 574,897 346,317 16,215 1,270 30 % 45,216 – 4,133 41,083 210,047 121,336 7,317 664 9 % 7,678 –1,992 5,686 71,893 23,116 5,757 653 9 % 6,471 –1,991 4,480 61,895 20,385 6,716 567 100 % 141,587 –16,139 125,448 1,143,223 514,515 35,029 4,559 100 % 135,607 –15,927 119,680 762,264 337,800 27,088 3,777 –1,682 – 805 – 2,487 316,412 476,205 4,559 188 – 5,915 – 772 – 6,687 212,440 277,946 3,440 168 –1,462 0 –1,462 – 381,221 – 280,319 0 0 – 373 0 – 373 –151,011 –111,955 0 0 138,443 –16,944 121,499 1,078,414 710,401 39,588 4,747 129,319 –16,699 112,620 823,693 503,791 30,528 3,945 Consolidated Financial Statements 116 Notes to the Consolidated Financial Statements 1. GENER AL INFOR M ATION NORMA Group SE is the parent Company of NORMA Group. Its headquarters are located at 63477 Maintal, Edisonstrasse 4 in the vicinity of Frankfurt, Germany, and the Company is regis­ tered in the commercial register of Hanau under the number HRB 94473. NORMA Group SE and its affiliated Group sub­ sidiaries operate in the market as ‘ NORMA Group.’ NORMA Group has been listed in the Prime Standard of Frank­ furt Stock Exchange’s Regulated Market since 8 April 2011. For a detailed overview of NORMA Group’s shareholdings, please refer to the appendix to the notes: voting rights. NORMA Group SE was established in 2006 as a result of the merger of Rasmussen GmbH and the ABA Group. Rasmussen was founded in 1949 as Rasmussen GmbH in Germany. It man­ ufactured connecting and retaining elements as well as fluid conveying conduits such as monolayer and multi layer tubes and corrugated tubes. All products were marketed globally under the NORMA brand. ABA Group was founded in 1896 in Sweden. The Group has since developed into a leading multi­national Company specialising in the design and produc­ tion of hose and pipe clamps, as well as connectors for many world­wide applications. In 2007, NORMA Group acquired Breeze Industrial Products Corporation (USA) to strengthen its foothold in the Americas. Breeze had expanded its product offering to include a wide range of worm­drive, T­bolt and V­clamps for the commercial and passenger vehicle, heavy­duty vehicle, aircraft and further industrial markets. In 2010, NORMA Group acquired two further companies in America, R.G.RAY Corporation and Craig Assem­ bly Inc., to become one of the country’s leading suppliers of fastening and fixing products. In the financial years 2012 and 2013, more acquisitions were made in accordance with our ac­ quisition strategy. In 2012, acquisitions were made in the regions of EME A and Asia­Pacific. In 2013, NORMA Group focused on the regions EME A, Americas and Asia­Pacific. On 31 October of financial year 2014, NORMA Group acquired National Diversified Sales, Inc. (“NDS”). By acquiring NDS, one of the leading US suppliers of stormwater management, land­ scape irrigation and connecting flow management components for water infrastructure, NORMA Group is continuing its expan­ sion course in the area of water management. Furthermore, NORMA Group acquired the business activities of Five Star Clamps, Inc. (“Five Star”), a manufacturer of high­quality clamps for different industries, in 2014. In past decades, NORMA Group has, driven by its successful acquisitions and continuous technological innovation with prod­ ucts and operations, developed into a group of companies of global importance. Today, NORMA Group markets its products to its customers via two different market channels: Distribution Services (DS) and Engineered Joining Technologies (EJT). For Distribution Services (DS) customers, NORMA Group of­ fers a wide range of standard fastening and fixing products. Furthermore, NORMA Group offers a broad technological and innovative product portfolio which includes brands like ABA ®, Breeze®, Clamp­All®, FISH ®, Five Star®, Gemi®, NDS ®, NORMA ®, R.G.RAY®, Serflex® and TORCA ®. For Engineered Joining Technology (EJT) customers, NORMA Group offers tailor­made solutions and special engineered join­ ing systems. To effectively fulfil special requirements, NORMA Group builds on extensive industry and application knowledge, a successful track record of innovation and long­standing re­ lationships with all its key customers. As a result, many joining systems and fluid conveying conduits have been developed in close cooperation with global OEMs and NORMA Group. 2 . BASIS OF PR EPAR ATION The principal accounting policies applied in the preparation of these Consolidated Financial Statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. NORMA Group SE Annual Report 2014117 The Consolidated Financial Statements of NORMA Group have been prepared in accordance with International Financial Re­ porting Standards as adopted by the EU (IFRS) as well as with the regulations under commercial law as set forth in Section 315a of the German Commercial Code (HGB) for the year ended 31 December 2014. The consolidated statement of comprehensive income has been prepared in accordance with the total cost method. The Consolidated Financial Statements of NORMA Group SE were prepared by the Management Board on 9 March 2015 and released for publication after they were approved by the Supervisory Board on 24 March 2015. The Consolidated Financial Statements of NORMA Group are being filed with and published in the German Federal Gazette (Bundesanzeiger). The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgement or complexity or areas where assumptions and estimates are significant to the Consolidated Financial Statements are disclosed in  Note 6. New and amended standards adopted by the Group for the first time in 2014 The following new standards or amendments to standards which are applied for the first time for the financial year be­ ginning 1 January 2014 did not have a material impact on NORMA Group’s financial positions, cash flows and financial performance. New or revised standards Amendments IFRS 10 Consolidated Financial Statements, IAS 27 Separate Financial Statements IFRS 10 replaces the portion of IAS 27 that addresses the accounting for Consolidated Financial Statements. It also address­ es the issues raised in SIC­12 Consolidation – Special Purpose Entities, which resulted in SIC­12 being withdrawn. IFRS 10 does not change consolidation procedures (i.e., how to consolidate an entity). Rather, IFRS 10 changes whether an entity is consolidated by revising the definition of control and also provides a number of clarifications on applying this new definition. IAS 27 Separate Financial Statements IAS 27, as revised, is limited to the accounting for investments in subsidiaries, joint ventures, and associates in separate finan­ cial statements. IFRS 11 Joint Arrangements IAS 28 Investments in Associates and Joint Ventures IFRS 12 Disclosure of Interests in Other Entities Amendments to IFRS 10, IFRS 11 and IFRS 12: Transition Guidance Amendments to IFRS 10, IFRS 12 and IAS 27: Investment Entities Amendments to IAS 32: Offsetting Financial Assets and Financial Liabilities Amendments to IAS 39: Novation of Derivatives and Continuation of Hedge Accounting IFRS 11 replaces IAS 31 Interests in Joint Ventures and SIC­13 Jointly­controlled Entities – Non­monetary Contributions by Venturers. IFRS 11 provides guidance for the accounting of joint arrangements. The core principle of IFRS 11 is to determine the accounting of joint ventures on the rights and obligations of the arrangement, rather than its legal form. Basically the stan­ dard classifies joint arrangements into two types, joint operations and joint ventures, which differ in the way of accounting for joint arrangements. A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets, and obligations for the liabilities, relating to the arrangement. A joint venture is a joint arrangement where­ by the parties that have joint control of the arrangement have rights to the net assets of the arrangement. IFRS requires a joint operator to recognise and measure the assets and liabilities in relation to its interest in the arrangement applicable to the particular assets, liabilities, revenues and expenses. A joint venture is required to recognise an investment and to account for that investment using the equity method according to IAS 28. Similar to the previous Standard, the new Standard deals with how to apply the equity method of accounting, but the scope of the revised Standard has been changed so that it covers Investments in Joint Ventures under IFRS 11. IFRS 12 unifies the disclosure requirements of IAS 27 and IFRS 10, IAS 31 and IFRS 11 and IAS 28 in one comprehensive standard. The standard provides guidance for disclosure requirements for any kind of interests in other entities, including joint arrangements, associates, structured entities, special purpose vehicles and off­balance sheet activities. The objective of IFRS 12 is to require disclosures that enable users of financial statements to evaluate the nature of, and risks associated with, its interest in other entities and the effects on its financial position, financial performance and cash flows. The amendment clarifies that the date of initial application of IFRS 10 is the beginning of the period in which the Standard is first applied. This has the consequence that decisions whether investments are accounted for using IFRS 10 or not, shall be made at the beginning of this period. It also clarifies that upon the initial application of the new consolidation rules comparative figures for the mandatory disclosure requirements of IFRS 12 relating to subsidiaries, associates and joint arrangements must be present only for the immediately preceding comparative period. The amendments to IFRS 10 define an investment entity and introduce an exception from the requirement to consolidate subsidiaries for an investment entity. In terms of the exception, an investment entity is required to measure its interests in subsidiaries at fair value through profit or loss. The exception does not apply to subsidiaries of investment entities that provide services that relate to the investment entity’s investment activities. Consequential amendments to IFRS 12 and IAS 27 have been made to introduce new disclosure requirements for investment entities. The amendments introduce additional application guidance under IFRS in applying the current offsetting principles. They clar­ ify that an entity currently has a legally enforceable right to set off if that right is enforceable both in the normal course of business and in the event of default, insolvency of the entity and all counterparties. The amendments to IAS 32 are to be ap­ plied retrospectively. The amendments provide an exception to the requirement to discontinue hedge accounting in certain circumstances in which there is a change in counterparty to a hedging instrument in order to achieve clearing for that instrument. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 118 Standards, amendments and interpretations of existing standards that are not yet effective and have not been adopted early by the Group The following standards and amendments to existing standards have been published and application is mandatory for all ac­ counting periods beginning on or after 1 January 2015. The Group has decided against an early adoption. 1) Standards, amendments and interpretations to existing standards that have already been endorsed by the EU (with reference to each respective EU effective date): New or revised standard EU endorse­ ment date Amendments IFRIC Interpretation 21 Levies 13 June 14 Amendments to IAS 19: Defined Benefit Plans: Employee Contributions 17 Dec 14 IFRIC 21 is effective for annual periods beginning on or after 17 June 2014. The new standard is applicable to all levies other than outflows that are within the scope of other standards (e.g., IAS 12 Income Taxes) and fines or other penalties for breaches of legislation. The interpretation clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. It also clarifies that a levy liability is accrued progressively only if the activity that triggers payment occurs over a period of time, in accordance with the relevant legislation. For a levy that is triggered upon reaching a minimum threshold, the interpretation clari­ fies that no liability is recognised before the specified minimum threshold is reached. The Group does not expect a material impact on its Consolidated Financial Statements from these amendments. IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. The amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. The amendments are effective for annual periods beginning on or after 1 February 2015. The Group does not expect a material impact on its Consolidated Financial Statements from these amendments. In December 2014, as part of its annual improvements project, the International Accounting Standards Board (IASB) issued Annual Improvements to IFRSs: 2011–2013 Cycle and Annual Improvements to IFRSs: 2010–2012 Cycle, which propose amendments to several International Financial Reporting Stan­ dards (IFRSs). The Annual Improvements to IFRSs: 2011–2013 Cycle was endorsed on 18 December 2014 and are effective for annual periods beginning on or after 1 January 2015. The amend­ ments are intended to clarify the requirements and not to change the accounting practice. The Annual Improvements to IFRSs: 2010–2012 Cycle was endorsed on 17 December 2014 and are effective for annual periods beginning on or after 1 February 2015. The amend­ ments are intended to clarify the requirements and not to change the accounting practice. NORMA Group SE Annual Report 2014 119 2) Standards, amendments and interpretations to existing standards that have not been endorsed by the EU: New or revised standards Amendments IFRS 9 Financial Instruments In July 2014, the IASB finalised the reform of financial instruments accounting and issued IFRS 9, which will supersede IAS 39 Financial Instruments: Recognition and measurement. The completed IFRS 9 contains the requirements for the classification and measurement of financial assets and liabilities, the impairment methodology, and the general hedge accounting. Classification and measurement of financial assets and financial liabilities IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for finan­ cial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the en­ tity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. Impairment methodology The impairment model under IFRS 9 reflects expected credit losses, as opposed to incurred credit losses under IAS 39. Under the impairment approach in IFRS 9, it is no longer necessary for a credit event to have occurred before credit losses are recog­ nised. Instead, an entity always accounts for expected credit losses and changes in those expected credit losses. Hedge accounting IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually uses for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The new standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The Group is currently assessing the impact of adopting IFRS 9 on the Group’s Consolidated Financial Statements. In May 2014, IFRS 15 was issued which established a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. IFRS 15 will supersede the current revenue recognition guidance. The core principle of IFRS 15 is that an entity should recognise revenue to depict the transfer promised goods or services to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Specifically, the Standard introduces a 5­step approach to revenue recognition: 1. Identify the contract(s) with a customer; 2. Identify the performance obligations in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations in the contract; 5. Recognise revenue when (or as) the entity satisfies a performance obligation. Under IFRS 15, an entity recognises revenue when (or as) a performance obligation is satisfied, i.e. when control of the goods or services underlying the particular performance obligation is transferred to the customer. Furthermore, extensive disclosures are required by IFRS 15. The new Standard is effective for annual periods beginning on or after 1 January 2017. The Group is currently assessing the impact of adopting IFRS 15 on the Group’s Consolidated Financial Statements. This amendment provides new guidance on how to account for the acquisition of an interest in a joint venture operation that constitutes a business. The amendments require an investor to apply the principles of business combination accounting when it acquires an interest in a joint operation that constitutes a ‘business.’ The amendments are applicable to both the acquisition of the initial interest in a joint operation and the acquisition of additional interest in the same joint operation. However, a pre­ viously held interest is not re­measured when the acquisition of an additional interest in the same joint operation results in re­ taining joint control. The amendments apply prospectively for annual periods beginning on or after 1 January 2016. The Group does not expect a material impact on its Consolidated Financial Statements from these amendments. This amendment clarifies that the use of revenue­based methods to calculate the depreciation of an asset is not appropriate because revenue generated by an activity that includes the use of an asset generally reflects factors other than the consump­ tion of the economic benefits embodied in the asset. This has also clarified that revenue is generally presumed to be an in­ appropriate basis for measuring the consumption of the economic benefits embodied in an intangible asset. The presumption may only be rebutted in certain limited circumstances. These are where the intangible asset is expressed as a measure of revenue; or where it can be demonstrated that revenue and the consumption of the economic benefits of the intangible asset are highly correlated. The amendments apply prospectively for annual periods beginning on or after 1 January 2016. The Group does not expect a material impact on its Consolidated Financial Statements from these amendments. IFRS 15 Revenue from Contracts with Customers Amendments to IFRS 11: Accounting for Acquisition of Interests in Joint Operations Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation Consolidated Financial StatementsNotes to the Consolidated Financial Statements 120 New or revised standards Amendments Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception Amendments to IAS 1: Presentation of financial statements On 18 December 2014, the IASB issued Amendments to IFRS 10, IFRS 12 and IAS 28: Investment Entities: Applying the Consolidation Exception, which address several application issues regarding the consolidation exception for investment en­ tities. Furthermore, the ISAB amends IFRS 12 to clarify that an investment entity that prepares financial statements in which all of its subsidiaries are measured at fair value through profit or loss have to present the disclosures required by IFRS 12 for in­ vestment entities. The amendments apply retrospectively for annual periods beginning on or after 1 January 2016. The Group does not expect a material impact on its Consolidated Financial Statements from these amendments. On 18 December 2014, the IASB issued Amendments to IAS 1: Presentation of financial statements. The amendments em­ phasise the concept of materiality to avoid several application issues. The amendments clarify that an entity must not reduce the understandability of its financial statements by obscuring material information with immaterial information or by aggregat­ ing material items that have different natures or functions. The aim of these clarifications is to relieve IFRS financial statements of non­essential information while promoting the exchange of relevant information. Furthermore, the understandability of finan­ cial statement information shall not be limited by summarising relevant and irrelevant information or by aggregating main items with different characteristics or functions. The amendments result in the deletion of a model structure of the notes towards consideration of company­specific relevance, whereby it is explicitly clarified that companies should take the impact on the readability and comparability of their IFRS financial statements into account in determining the structure of their notes. Further­ more, companies are expected to take the nature of their business and the methods by which the addressees most likely expect to receive information into consideration in determining the accounting policies to be listed. The amended standard also contains explanations on aggregation and disaggregation of items in the balance sheet and the income statement, and clarification as to how shares of other comprehensive income of companies to be accounted for using the equity method are to be presented in the statement of comprehensive income. The amendments are effective in reporting periods beginning on or after 1 January 2016. Earlier application is permitted, but requires an EU endorsement. The Company is currently assessing the impact of application of the amendments to its financial statements. In September 2014, as part of its annual improvements proj­ ect, the International Accounting Standards Board (IASB) is­ sued Annual Improvements to IFRSs: 2012–2014 Cycle, which contain five amendments to four standards, excluding conse­ quential amendments. The amendments are effective for annual periods beginning on or after 1 January 2016. The amendments are intended to clarify the requirements and not to change the accounting practice. The Group therefore does not expect a material impact on its Consolidated Financial Statements from these amendments. In addition, the IASB and the IFRIC have issued a number of other pronouncements that were not yet required to be applied as of 31 December 2014. However, the Group does not expect these changes to have a significant impact on the Consolidated Financial Statements. 3 . SUMM ARY OF SIG NIFICA NT ACCOUNTING PRINCIPLES 1. Consolidation (a) Subsidiaries Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Consolidation of an in­ vestee begins from the date the Group obtains control of the in­ vestee and ceases when the Group loses control of the investee. by the Group. The initial value recognised includes the fair value of any asset or liability resulting from a contingent consideration arrangement. On the acquisition date, the fair value of contin­ gent consideration is recognised as part of the consideration transferred in exchange for the acquiree. Acquisition­related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combi­ nation are measured initially at their fair value on the acquisition date. According to IFRS 3 (revised), for each business combi­ nation the acquirer shall measure any non­controlling interest in the acquiree either at fair value (full goodwill method) or at the non­controlling interest’s proportionate share of the acquiree’s net assets. The Group measures the non­controlling interest in the acquiree at the non­controlling interest’s proportionate share of the acquiree’s net assets. The excess of the consideration transferred, the amount of any non­controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the Group’s share of the identifiable net assets acquired, is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised immediately in the statement of comprehensive income. In a business combination achieved in stages, the Group re­ measures its previously held equity interest in the acquiree at its acquisition date fair value and recognises the resulting gain or loss, if any, in profit or loss. The Group uses the acquisition method of accounting to ac­ count for business combinations. The initial value for the ac­ quisition of a subsidiary is recognised at fair value of the assets transferred, the liabilities incurred and the equity interests issued Inter­company transactions, balances and unrealised gains or losses on transactions between Group companies are elimi­ nated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopt­ ed by the Group. NORMA Group SE Annual Report 2014 121 (b) Non-controlling interests Non­controlling interests have a share in the earnings of the re­ porting period. Their interests in the shareholders’ equity of sub­ sidiaries are reported separately from the equity of the Group. The Group treats transactions with non­controlling interests that do not result in a loss of control as transactions with equity owners of the Group. For purchases from non­controlling in­ terests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals of non­controlling interests are also recorded in equity. (c) Disposal of subsidiaries When the Group ceases to have control, any retained interest in the subsidiary is remeasured at its fair value, with the change in the carrying amount recognised in profit or loss. The initial carry­ ing amount is the fair value for the purposes of sub sequently ac­ counting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are account­ ed for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. 2. Valuation methods The following table shows the most important valuation methods: Position Assets Goodwill Valuation method Impairment­only approach Other intangible assets (except goodwill) – finite useful lives Amortised costs Other intangible assets (except goodwill) – indefinite useful lives Impairment­only approach Property, plant and equipment Derivative financial assets: Classified as cash flow hedge Inventories Other non­financial assets Other financial assets Trade receivables Cash and cash equivalents Liabilities Pensions Other provisions Borrowings Other non­financial liabilities Other financial liabilities (categories IAS 39): Financial liabilities at cost (FL AC) Derivative financial liabilities: Classified as cash flow hedge Classified as fair value hedge Contingent consideration Trade payables Amortised costs At fair value in other comprehensive income Lower of cost or net realisable value Amortised costs Amortised costs Amortised costs Nominal amount Projected unit credit method Settlement amount Amortised costs Amortised costs Amortised costs At fair value in other comprehensive income At fair value through profit or loss At fair value through profit or loss Amortised costs Consolidated Financial StatementsNotes to the Consolidated Financial Statements 122 3. Fair value estimation The amendment to IFRS 7 for financial instruments that are measured in the statement of financial position at fair value in accordance with IFRS 13 requires disclosure of fair value mea­ surements by level using the following fair value measurement hierarchy: Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in profit or loss within ‘financial income / costs.’ All other foreign exchange gains and losses are presented in profit or loss within ‘other operating income / expenses.’ Level 1: Quoted prices (unadjusted) in active markets for iden­ tical assets or liabilities, Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) and Level 3: Inputs for the asset or liability that are not based on observable market data (that is unobservable inputs). The level in the fair value hierarchy within which the fair value measurement is categorised in total is determined on the basis of the lowest level input that is significant to the fair value mea­ surement in total. The different hierarchy levels demand different amounts of disclosure. On 31 December 2014 and 2013, the Group’s derivative financial instruments carried in the statement of financial position at fair value (i.e. trading derivatives and derivatives used for hedging) are categorised in total within level 2 of the fair value hierarchy. Contingent considerations, recognised in the balance sheet as of 31 December 2014, measured at fair value, are within level 3 of the fair value hierarchy ( Note 21). The fair value of interest rate swaps and cross­currency­swaps is calculated as the present value of the estimated future cash flows. The fair value of forward foreign exchange contracts is determined using a present value model based on forward ex­ change rates. 4. Foreign currency translation (a) Functional and presentation currency Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary eco­ nomic environment in which the entity operates (‘the functional currency’). The Consolidated Financial Statements are prepared in ‘euros’ (EUR), which is NORMA Group SE’s functional and the Group’s presentation currency. (b) Transactions and balances Foreign currency transactions are translated into the functional currency using the actual exchange rates on the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year­end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in profit or loss. (c) Group companies The results and financial position of all the Group entities (none of which has the currency of a hyper­inflationary economy) that have a functional currency different from the presentation cur­ rency are translated into the presentation currency as follows: • Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate on the date of that consolidated statement of financial position; • income and expenses are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the trans­ action dates, in which case income and expenses are trans­ lated at the actual rate on the dates of the transactions); and • all resulting exchange differences are recognised as a sepa­ rate component of equity. Goodwill and fair value adjustments arising through the acquisi­ tion of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate. The exchange rates of the currencies affecting foreign currency translation are as follows: Spot rate Average rate per EUR 31 Dec 2014 31 Dec 2013 2014 2013 Australian dollar Brazilian real Chinese renminbi yuan Swiss franc Czech koruna 1.4829 3.2207 7.5358 1.2024 1.5396 3.1929 8.3342 1.2269 1.4726 3.1233 8.1872 1.2145 1.3748 2.9411 8.1614 1.2310 27.7350 27.3990 27.5355 25.9518 British pound sterling 0.7789 0.8328 0.8063 0.8495 Indian rupee Japanese yen 76.7190 85.1004 81.0565 77.5964 145.2300 144.5000 140.3813 129.4232 South Korean won 1,324.8000 1,453.3639 1,398.6418 1,451.3184 Malaysian ringgit 4.2473 4.5133 4.3459 4.1786 Mexican peso Polish złoty Serbian dinar Russian ruble Swedish krona Singapore dollar Thai baht Turkish lira US dollar 17.8679 18.0270 17.6665 16.9383 4.2732 4.1502 4.1857 4.1973 121.0000 114.1970 117.2599 112.5200 72.3370 45.2515 50.9998 42.2848 9.3930 1.6058 8.8263 1.7391 9.1011 1.6826 8.6391 1.6605 39.9100 45.0853 43.1518 40.7419 2.8320 1.2141 2.9453 1.3768 2.9068 1.3286 2.5269 1.3272 NORMA Group SE Annual Report 2014 123 5. Intangible assets (a) Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary on the date of acquisition. Goodwill on acquisitions of subsidiaries is included in ‘intangible assets.’ Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash­generating units for the pur­ pose of impairment testing. The allocation is made to those cash­generating units or groups of cash­generating units that are expected to benefit from the business combination in which the goodwill arose. (b) Development costs Costs of research activities undertaken with the prospect of gaining new scientific or technical knowledge and understand­ ing are expensed as incurred. Costs for development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, are capitalised if • development costs can be measured reliably, • the product or process is technically and commercially feasible, • future economic benefits are probable. Furthermore, NORMA Group intends, and has sufficient re­ sources, to complete development and use or sell the asset. The costs capitalised include the cost of materials, direct labour and other directly attributable expenditure that serves to pre­ pare the asset for use. Such capitalised costs are included in profit or loss in line ‘own work capitalised.’ Capitalised develop­ ment costs are stated at cost less accumulated amortisation and impairment losses with an amortisation period of generally three to five years. Development costs which did not meet the requirements are expensed as incurred. (c) Other intangible assets Separately acquired other intangible assets are shown at his­ torical cost less accumulated amortisation. Intangible assets acquired in a business combination are recognised at fair value on the acquisition date. Other intangible assets which have a finite useful life will be amortised over their estimated useful life. Amortisation is calculated using the straight­line method to allocate their cost. Other intangible assets which are determined to have indefinite useful lives as well as intan­ gible assets not yet available for use are not amortised, but instead tested for impairment at least annually. Furthermore, other intangible assets which are determined to have indefinite useful life and therefore are not amortised, will be reviewed each period to determine whether events and circumstances continue to support an indefinite useful life assessment for these assets. Other intangible assets which have an indefi­ nite useful life are mainly capitalised brand names which have been established in the market for a number of years and there is no foreseeable end to their useful life, therefore useful lives are indefinite. In general, the Group’s other intangibles are not qualifying as­ sets in accordance with IAS 23 and borrowing costs eligible for capitalisation therefore do not exist. The useful lives of other intangible assets acquired in a business combination are estimates based on the economics of each specific asset which were determined in the process of the purchase price allocation. The estimated useful lives for other intangible assets are as follows: • Patents: 5 to 10 years • Customer lists: 4 to 20 years • Technology: 10 to 20 years • Licences, rights: 3 to 5 years • Trademarks: indefinite or 20 years • Software: 3 to 5 years • Development costs: 3 to 5 years 6. Property, plant and equipment All property, plant and equipment are stated at historical cost less depreciation and impairment loss, if applicable. Historical cost includes expenditure that is directly attributable to the ac­ quisition of the items and, if any, the present value of estimated costs for dismantling and removing the assets, restoring the site on which it is allocated. Borrowing costs eligible for capitalisa­ tion in the sense of IAS 23 were not available. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is foreseeable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognised. All other repairs and maintenance expenses are charged to profit or loss during the financial period in which they are incurred. Land is not depreciated. Depreciation on other assets is calcu­ lated using the straight­line method to allocate their cost to their residual values over their estimated useful lives. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, on each balance sheet date. An asset’s carrying amount is written down to its recoverable amount if the asset’s carrying amount is greater than its esti­ mated recoverable amount. Consolidated Financial StatementsNotes to the Consolidated Financial Statements124 Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within ‘other operating income / expenses.’ In the current and in the previous financial year, all financial assets, except for derivative financial instruments, are classified to the category loans and receivables. The estimated useful lives for property, plant and equipment are as follows: • Buildings: 8 to 33 years • Machinery and technical equipment: 3 to 18 years • Tools: 3 to 10 years • Other equipment: 2 to 20 years • Land is not depreciated 7. Impairment of non-financial assets Assets that have an indefinite useful life, for example goodwill, are not subject to amortisation and are tested annually for im­ pairment, as well as whenever there are indications that the carrying amount of the cash generating unit (CGU) is impaired. If the impairment loss recognised for the CGU exceeds the carry­ ing amount of the allocated goodwill, the additional amount of the impairment loss is recognised through a pro­rata reduction of the carrying amount of the assets allocated to the CGU. As­ sets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash­generating units). Non­financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment on each reporting date. 8. Inventories Inventories are stated at the lower of cost or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated variable selling costs. Cost is determined using the weighted­average­method. The cost of finished goods and work in progress comprises of design costs, raw materials, direct labour, other direct costs and related production overheads (based on normal operating capacity). Inventories of the Group are not qual­ ifying assets in accordance with IAS 23, so that the acquisition or production costs do not include being capitalised borrowing costs. 9. Financial instruments Financial assets Classification The Group classifies its financial assets in the following catego­ ries: at fair value through profit or loss, loans and receivables, available­for­sale and held to maturity. The classification de­ pends on the purpose for which the financial assets were ac­ quired. Management determines the classification of its financial assets at initial recognition. Loans and receivables are non­derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for matur­ ities greater than 12 months after the balance sheet date. These are classified as non­current assets. The Group’s loans and receivables comprise ‘trade and other receivables’ ( paragraph 12) and ‘cash and cash equivalents’ ( paragraph 13) in the statement of financial position. Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade­date – the date on which the Group commits to purchase or sell the asset. Financial assets are initially recog­ nised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Loans and recei vables are carried at amortised cost using the effective interest method. Impairment of financial assets carried at amortised cost The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has (have) an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. The criteria that the Group uses to determine if there is objective evidence of an impairment loss include: • Financial difficulty of the issuer or obligor; • A breach of contract, such as a default or delinquency in in­ terest or principal payments; • The Group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a con­ cession that the lender would not otherwise consider; • It becomes probable that the borrower will enter bankruptcy or other financial reorganisation; • Observable data indicating that there is a measurable de­ crease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the indi­ vidual financial assets in the portfolio, including: i. Adverse changes in the payment status of borrowers in the portfolio; and ii. National or local economic conditions that correlate with defaults on the assets in the portfolio. NORMA Group SE Annual Report 2014 125 The Group first assesses whether objective evidence of impair­ ment exists. (a) Derivative financial instruments not designated as hedges The amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effec­ tive interest rate. The asset’s carrying amount is reduced and the amount of the loss is recognised in profit or loss. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. Gains and losses from derivatives that are not designated as hedges (trading derivatives) are recognised in profit or loss. Trading derivatives are classified as non­current assets or lia­ bilities in accordance with IAS 1.68 and 1.71 if they are due after more than one year; otherwise they are classified as current. (b) Derivative financial instruments designated as hedges Derivatives included in hedge accounting are generally desig­ nated as either: • Hedges of the fair value of recognised assets or liabilities or If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the pre­ viously recognised impairment loss is recognised in profit or loss. firm commitments (fair value hedge); • Hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge); or • Hedges of a net investment in a foreign operation (net invest­ Impairment testing of trade receivables is described in  para­ graph 12. Financial liabilities Financial liabilities primarily include trade payables, liabilities to banks, derivative financial liabilities ( paragraph 11), and other liabilities. a) Financial liabilities that are measured at amortised cost After initial recognition, financial liabilities are carried at amor­ tised cost using the effective interest method. In this category, in particular, trade payables, liabilities to banks and other financial liabilities are classified. b) Financial liabilities at fair value through profit and loss Financial liabilities at fair value through profit and loss include derivative financial instruments unless they are designated as hedges and contingent purchase price liabilities. Gains or losses on financial liabilities that are measured at fair value through profit and loss are included in profit or loss. 10. Offsetting financial instruments Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. In 2014 and 2013, no financial instruments were offset and there were no financial assets or liabilities with netting agreements, en­ forceable master netting agreements or similar agreements. 11. Derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re­ measured at their fair value. The method of recognising the resulting gain or loss depends on whether the derivative is desig nated as a hedging instrument, and if so, the nature of the item being hedged. ment hedge). The entities of NORMA Group use derivative financial instru­ ments for the hedging of future cash flows and for intragroup monetary items, which are between two Group entities that have different functional currencies. Derivatives such as Swaps and Forwards are used as hedging instruments. The accounting treatment of a change in the fair value of hedging instruments depends on the nature of the hedging relationship. In the case of hedges of future cash flows (cash flow hedges), the hedging instruments are measured at fair value. Gains and losses from remeasurement of the effective portion of the derivatives are initially recognised in the other reserves within equity, and are only recognised in the income statement when the hedged item is recognised in profit or loss; the ineffective portion of a cash flow hedge is recognised immediately in profit or loss. Amounts accumulated in other comprehensive income are reclassified to profit or loss in the periods when the hedged item affects profit or loss. In the case of a hedge against foreign exchange rate gains and losses on intragroup monetary items, which are not fully elim­ inated on consolidation (fair value hedges), gains and losses from the remeasurement of the hedging instruments as well as foreign exchange rate gains and losses of the hedged item are recognised in profit or loss. At the inception of the transaction, the relationship between the hedging instrument and hedged item is documented, as well as the risk management objectives and strategy for under­ taking the hedging transaction. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in the cash flows of hedged items. The full fair value of a hedging derivative is classified as a non­current asset or liability when the remaining maturity of the hedged item is more than 12 months and as a current asset Consolidated Financial StatementsNotes to the Consolidated Financial Statements126 or liability when the remaining maturity of the hedged item is less than 12 months. The fair values of derivative financial instruments used for hedg­ ing purposes and of those held for trading are disclosed in  Note 22. Movements on the hedging reserve in equity are shown in  Note 27. 12. Trade receivables Trade receivables are amounts due from customers for mer­ chandise sold or services performed in the ordinary course of business. If collection is expected within one year or less, they are classified as current assets. If not, they are presented as non­current assets. Trade receivables are classified as loans and receivables in ac­ cordance with IAS 39 and recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment. An allowance for doubtful accounts of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of the receivables. Significant financial difficulties of the debtor, the probability that the debtor will enter bankruptcy or financial re­ organisation, and default or delinquency in payments are con­ sidered indicators that the trade receivable is impaired. The amount of the allowance is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. In addi­ tion to the required individual bad debt allowances, the Group will determine a portfolio­based bad debt allowance considering the aging structure for trade receivables to cover general credit risk if this is applicable. 13. Cash and cash equivalents Cash and cash equivalents are measured at their nominal value and include cash in hand, deposits held at call with banks, and other short­term highly liquid investments with original maturities of three months or less and which are subject only to insignifi­ cant risk of change in value. Bank overdrafts are shown within borrowings in current liabilities on the consolidated statement of financial position. 14. Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non­current liabilities. Trade payables are recognised initially at fair value and subse­ quently measured at amortised cost using the effective interest method. amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effec­ tive interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw­down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre­pay­ ment for liquidity services and amortised over the period of the facility to which it relates. Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date. 16. Current and deferred income tax The tax expenses for the period are comprised of current and deferred tax. Tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehen­ sive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted on the balance sheet date in the countries where the Group’s subsidiaries operate. Management period­ ically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to inter­ pretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the Consolidated Financial Statements and on tax losses carried forward and not yet used tax credits. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantially enacted by the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the taxable entity or different taxable entities where there is an intention to settle the balances on a net basis. A surplus of deferred income tax assets is recognised only to the extent that it is probable that future taxable profit will be avail­ able against which the temporary differences can be utilised. 15. Borrowings Borrowings are recognised initially at fair value, net of trans­ action costs incurred. Borrowings are subsequently stated at For taxable temporary differences arising on investments in sub­ sidiaries and associates, deferred tax liabilities are recognised, NORMA Group SE Annual Report 2014127 except where the timing of the reversal of the temporary dif­ ference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future. the entity recognises costs for a restructuring that is within the scope of IAS 37 and involves the payment of termination bene­ fits. Benefits falling due more than 12 months after the balance sheet date are discounted to their present value. 17. Employee benefits (a) Pension obligations Group companies operate different pension schemes. NORMA Group has both defined benefit and defined contribution plans. A defined contribution plan is a pension plan under which the Group pays fixed contributions to a separate entity. The Group has no legal or constructive obligations to pay further contribu­ tions if the fund does not hold sufficient assets to pay all em­ ployees the benefits relating to employee service in the current and prior periods. A defined benefit plan is a pension plan that is not a defined contribution plan. The major defined benefit plan is the German benefit plan which defines the amount of pension benefit that an employee will receive on retirement to depend on years of service and compensation. The liability recognised in the consolidated statement of financial position with respect to defined benefit pension plans is the present value of the defined benefit obligation on the balance sheet date less the fair value of plan assets. The defined bene­ fit obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the es­ timated future cash outflows using interest rates of high­quality corporate bonds that are denominated in the currency in which the benefits will be paid and that have terms to maturity approx­ imating the terms of the related pension liability. Remeasurement gains and losses arising from experience ad­ justments and changes in actuarial assumptions, as well as returns on plan assets, which are not included within the net interest on the defined benefit liability, are recognised within retained earnings in the other comprehensive income (OCI). Past service costs are recognised fully in the period of the re­ lated plan amendment. For defined contribution plans, the Group pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The contributions are recognised as employee benefits ex­ pense when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in the future payments is available. (b) Termination benefits Termination benefits are payable when employment is terminat­ ed by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits as a liability and expense on the earlier date of: (a) when the entity can no longer withdraw the offer of those benefits; or (b) when (c) Short-term employee benefits Employee benefits with short­term payment dates include wages and salaries, social security contributions, vacation pay and sickness benefits and are recognised as liabilities at the repayment amount as soon as the associated job has been performed. (d) Provisions for other long-term employee benefits Provisions for obligations similar to pensions (such as anniversa­ ry allowances and death benefits) are comprised of the present value of future payment obligations to the employee less any associated assets measured at fair value. The amount of pro­ visions is determined on the basis of actuarial opinions in line with IAS 19. Gains and losses from the remeasurement are rec­ ognised in profit or loss in the period in which they are incurred. 18. Share-based payment Share­based payment plans issued in NORMA Group are ac­ counted for in accordance with IFRS 2 “Share­based payment.” In accordance with IFRS 2, NORMA Group in principle distin­ guishes between equity­settled and cash­settled plans. The financial interest from equity­settled plans granted on grant date is generally allocated over the expected vesting period against equity until the exit event occurs. Expenses from cash­settled plans are generally also allocated over the expected vesting period until the exit event occurs, but against accruals. A de­ scription of the plans existing within the NORMA Group can be found in  Note 28. 19. Provisions Provisions are recognised when the Group has a present legal or constructive obligation to third parties as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably esti­ mated. Provisions are not recognised for future operating losses. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small. Provisions are measured at the present value of the expendi­ tures expected to be required to settle the obligation taking into account all identifiable risks. Provisions are discounted using a pre­tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense. In addition to the expected amount of cash outflows, uncertain­ ties also exist regarding time of outflows. If it is expected that Consolidated Financial StatementsNotes to the Consolidated Financial Statements128 the outflows take place within one year, the relevant amounts are reported in the short­term provisions. When the Group expects a refund for a provision, this refund is recognised in accordance with IAS 37.53 as a separate asset. If the refund is in a close economic relationship with the recog­ nised provision, the expenses from the provision are netted with the income from the corresponding refund in profit or loss. 20. Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordi­ nary course of the Group’s activities. Revenue is shown net of value­added tax, returns, rebates and discounts and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the entity and when the significant risks and rewards, associated with ownership of the goods sold, have been transferred to the buyer. The above criteria are re­ gularly fulfilled if the beneficial ownership has been transferred to the customer in accordance with the agreed Incoterms. The amount of revenue is not considered to be reliably measurable until all contingencies relating to the sale have been resolved. The Group bases its estimates on historical results, taking into consideration the type of customers, the type of transaction and the specifics of each arrangement. 21. Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any in­ centives received from the lessor) are charged to profit or loss on a straight­line basis over the period of the lease. Leases where the Group has substantially all the risks and re­ wards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lesser of the fair value of the leased property and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in other financial liabilities. The interest element of the finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The property, plant and equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term. The Group’s leases include both, operating leases and finance leases, which relate mainly to property and equipment. 22. Government grants Government grants are not recognised until there is reasonable assurance that the conditions attached to them are complied with and that the grants will be received. Government grants for the compensation of expenses incurred are recognised in profit or loss on a systematic basis over the periods in which the related costs are expensed for which the grants are intended to compensate. Grants related to non­depreciable assets are recognised in profit or loss over the periods that bear the cost of meeting the obligations. Grants related to depreciable assets are recognised in profit or loss over the periods that bear the expense related to the depreciation of the underlying assets. 4. SCOPE OF CONSOLIDATION With NORMA Group SE, the Consolidated Financial Statements contain all domestic and foreign companies which NORMA Group SE controls directly or indirectly. The Consolidated Financial Statements of 2014 include seven domestic (31 December 2013: seven) and 39 foreign (31 De­ cember 2013: 38) companies. The composition of the Group changed as follows: As of 1 January Additions of which newly founded of which acquired Disposals of which no longer consolidated of which mergers As of 31 December 2014 2013 Total Domestic Foreign Total Domestic Foreign 45 2 1 1 1 1 0 46 7 0 0 0 0 0 0 7 38 43 2 1 1 1 1 0 3 2 1 1 0 1 39 45 8 0 0 0 1 0 1 7 35 3 2 1 0 0 0 38 NORMA Group SE Annual Report 2014 129 In 2014, National Diversified Sales, Inc. (USA) was acquired and NORMA Distribution and Services S. de R.L. de C.V. based in Mexico was founded. Furthermore, NORMA Pacific (Malaysia) SDN. BHD. was liquidated and thus deconsolidated. For further details, please refer to  Note 40 business combinations. For a detailed overview of NORMA Group’s shareholdings, please refer to the following chart: L I S T O F G R O U P C O M PA N I E S O F N O R M A G R O U P A S O F 3 1 D E C E M B E R 2 0 14 Registered address held by Share in % Direct parent company of NORMA Group SE Cur rency Equity1) Result1) Maintal, Germany Maintal, Germany Maintal, Germany 100.00 100.00 100.00 100.00 kEUR kEUR 42 – 2 106,428 20,111 No. Company Central Functions 01 02 03 NORMA Group SE NORMA Group APAC Holding GmbH NORMA Group Holding GmbH Segment EME A 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 NORMA Distribution Center GmbH Marsberg, Germany DNL GmbH & Co KG NORMA Germany GmbH NORMA Türkei Verwaltungs GmbH DNL France S.A.S Maintal, Germany Maintal, Germany Maintal, Germany Briey, France NORMA Distribution France S.A.S. La Queue En Brie, France NORMA France S.A.S. DNL UK Ltd. NORMA UK Ltd. Nordic Metalblok S.r.l. NORMA Italia SpA Groen Bevestigingsmaterialen B.V. NORMA Netherlands B.V. NORMA Polska Sp. z o.o. NORMA Group Distribution Polska Sp. z o.o. NORMA Group CIS LLC DNL Sweden AB NORMA Sweden AB Briey, France Newbury, Great Britain Newbury, Great Britain Riese Pio X, Italy Gavardo, Italy Ter Apel, Netherlands Ter Apel, Netherlands Slawniów, Poland Krakow, Poland Togliatti, Russian Federation Stockholm, Sweden Anderstorp, Sweden Connectors Verbindungstechnik AG Tagelswangen, Switzerland NORMA Group South East Europe d.o.o Fijaciones NORMA S.A. NORMA Czech, s.r.o. NORMA Turkey Baglanti ve Birlestirme Teknolojileri Sanayi ve Ticaret Limited Sirketi Subotica, Serbia Barcelona, Spain Hustopece, Czech Republic Besiktas, Istanbul, Turkey Segment Americas 27 28 29 30 31 32 33 34 35 Craig Assembly Inc. NORMA Michigan Inc. NORMA US Holding LLC NORMA Pennsylvania Inc. R.G. R AY Corporation National Diversified Sales, Inc. NORMA do Brasil Sistemas De Conexão Ltda. NORMA Group México S. de R.L. de C.V. St. Clair, USA Auburn Hills, USA Saltsburg, USA Saltsburg, USA Auburn Hills, USA Woodland Hills, USA São Paulo, Brazil Monterrey, Mexico NORMA Distribution and Services S. de R.L. de C.V. Juarez, Mexico Segment Asia 36 37 38 39 40 41 42 43 44 45 46 NORMA Pacific Pty. Ltd. Guyco Pty Limited NORMA China Co., Ltd. NORMA EJT (Changzhou) Co., Ltd. NORMA Group Products India Pvt. Ltd. NORMA Japan Inc. Chien Jin Plastic Sdn. Bhd. NORMA Korea Inc. NORMA Group Asia Pacific Holding Pte. Ltd. NORMA Pacific Asia Pte. Ltd. NORMA Pacific (Thailand) Ltd. Melbourne, Australia Adelaide, Australia Qingdao, China Changzhou, China Pune, India Osaka, Japan Ipoh, Malysia Seoul, Republic of Korea Singapore, Singapore Singapore, Singapore Chonburi, Thailand 01 01 03 03 03 03 03 08 08 03 11 03 03 03 20 03 17 03 03 20 03 03 03 03 07 30 30 30 01 30 30 30 28 28 44 36 03 44 44 44 44 44 01 44 44 94.80 100.00 94.90 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 60.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 90.00 100.00 100.00 100.00 kEUR kEUR kEUR kEUR kEUR kEUR kEUR kGBP kGBP kEUR kEUR kEUR kEUR kPLN kPLN 99.96 100.00 kRUR 100.00 100.00 100.00 kSEK kSEK kCHF 100.00 100.00 100.00 100.00 100.00 100.00 2,175 6,542 56,306 22 30,833 3,653 4,860 3,790 25,529 – 857 7,743 1,477 4,182 02) – 5 02) – 4 704 425 –1,286 – 230 5,330 –1,527 1,487 1,107 414 191,037 37,008 4,587 96,285 76,408 133,056 8,938 20 74,416 56,665 17,961 1,551 100.00 kRSD 1,384,337 – 490,110 100.00 100.00 kEUR kCZK 4,354 873 287,390 31,757 100.00 100.00 kTRL 1,933 419 100.00 100.00 100.00 100.00 100.00 100.00 97.40 99.40 99.00 100.00 100.00 100.00 100.00 99.99 60.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 100.00 kUSD kUSD kUSD kUSD kUSD kUSD kBRL kUSD 100.00 kMXN 100.00 100.00 100.00 100.00 100.00 60.00 kAUD kAUD kCNY kCNY kINR kJPY 100.00 kMYR 26,952 68,535 25,488 113,819 82,271 176,901 30,049 3,272 127 15,560 5,071 101,338 35,792 304,574 147,816 22,352 7,005 6,929 – 933 1,249 10,561 1,523 – 8,039 1,214 127 317 681 21,853 – 5,341 – 25,210 25,221 3,198 100.00 kKRW 224,689 119,405 100.00 100.00 100.00 kSGD kSGD kTHB 59,999 355 72,685 – 737 179 4,081 1) Reported values according to IFRS as of 31 December 2014; except for NORMA Group Holding GmbH, NORMA Germany GmbH, NORMA Distribution Center GmbH and DNL GmbH & Co. KG; these values are prepared according to German GAAP as of 31 December 2014 but not yet finally audited. The values are translated with the exchange rates according to Note 3.4. 2) A profit­pooling­contract exists. Consolidated Financial StatementsNotes to the Consolidated Financial Statements130 5. FIN A NCIAL RISK M A N AGEMENT 1. Financial risk factors The Group’s activities expose it to a variety of financial risks, including market risk, credit risk and liquidity risk. The Group’s financial risk management focuses on the unpredictability of financial markets and seeks to minimise its potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures. Financial risk management is carried out by a central treasury department (Group Treasury). The necessary responsibilities and controls associated with risk management are determined by Group management. Group Treasury identifies, evaluates and hedges financial risks in close cooperation with the Group’s operating units. Market risk (i) Foreign exchange risk NORMA Group operates internationally in around 100 different countries and is exposed to foreign exchange risk arising from the exposure to various currencies – primarily with respect to the US dollar, the British pound sterling, the Chinese renminbi yuan, the Indian rupee, the Polish złoty, the Swedish krona, the Swiss franc, the Serbian dinar and the Singapore dollar. The effects of changes in foreign exchange rates are analysed below for financial assets and liabilities denominated in foreign currencies. If the euro had strengthened / weakened by 10% against the US dollar, NORMA Group would show a profit before tax for the year 2014 of EUR 1,346 thousands lower / EUR 1,646 thousands higher (2013: EUR 172 thousands lower / EUR 211 thousands higher). If the euro had strengthened / weakened by 10% against the British pound sterling, NORMA Group would show a profit before tax for the year 2014 of EUR 653 thousands higher / EUR 799 thousands lower (2013: EUR 344 thousands higher / EUR 420 thousands lower). If the euro had strengthened / weakened by 10% against the Chinese renminbi, NORMA Group would show a profit before tax for the year 2014 of EUR 342 thousands lower / EUR 418 thousands higher (2013: EUR 8 thousands higher / EUR 9 thou- sands lower). If the euro had strengthened / weakened by 10% against the Indian rupee, NORMA Group would show a profit before tax for the year 2014 of EUR 137 thousands lower / EUR 168 thou- sands higher (2013: EUR 74 thousands lower / EUR 91 thou- sands higher). If the euro had strengthened / weakened by 10% against the Polish złoty, NORMA Group would show a profit before tax for the year 2014 of EUR 2,071 thousands higher / EUR 2,532 thousands lower (2013: EUR 755 thousands higher / EUR 922 thousands lower). If the euro had strengthened / weakened by 10% against the Swedish krona, NORMA Group would show a profit before tax for the year 2014 of EUR 615 thousands lower / EUR 752 thou- sands higher (2013: EUR 97 thousands higher / EUR 118 thou- sands lower). If the euro had strengthened / weakened by 10% against the Swiss franc, NORMA Group would show a profit before tax for the year 2014 of EUR 89 thousands higher / EUR 108 thousands lower (2013: EUR 201 thousands higher / EUR 246 thousands lower). If the euro had strengthened / weakened by 10% against the Serbian dinar, NORMA Group would show a profit before tax for the year 2014 of EUR 403 thousands higher / EUR 492 thou- sands lower (2013: EUR 386 thousands higher / EUR 472 thou- sands lower). If the euro had strengthened / weakened by 10% against the Singapore dollar, NORMA Group would show a profit before tax for the year 2014 of EUR 229 thousands lower / EUR 280 thousands higher (2013: EUR 197 thousands lower / EUR 241 thousands higher). The Group Treasury’s risk management policy is to hedge about 80% or more of anticipated operational cash flows in US dollar, British pound sterling and Swedish krona. NORMA Group has certain investments in foreign operations whose net assets are exposed to foreign currency translation risks. This translation risk is primarily managed through borrow- ings in the relevant foreign currency. (ii) Interest rate risk NORMA Group’s interest rate risk arises from long-term borrow- ings. Borrowings issued at variable interest rates expose the Group to cash flow interest rate risk which is partially offset by hedges (interest rate swaps). The Group’s policy is to maintain approximately 80% of its medium-term borrowings in fixed rate instruments. Below, the effects of changes in interest rates are analysed for bank borrowings, which bear variable interest rates, and for interest rate swaps included in hedge accounting. Borrowings that bear fixed interest rates are excluded from this analysis. On 31 December 2014, if interest rates on euro-de nominated borrowings had been 100 basis points higher / lower with all NORMA Group SE Annual Report 2014131 other variables held constant, profit before tax for the year would have been EUR 9 thousands lower / EUR 0 thousands higher (2013: EUR 55 thousands lower / EUR 55 thousands higher) and other comprehensive income would have been EUR 4,115 thousands higher / EUR 4,158 thousands lower (2013: EUR 2,525 thousands higher / EUR 2,584 thousands lower). including an option to further increase this amount up to EUR 250 million and a maturity of seven years. In addition, a borrow- ing facility in the amount of EUR 50 million is available for future operating activities and to settle capital commitments, which was not yet drawn on 31 December 2014. (iii) Other price risks As NORMA Group is not exposed to any other material eco- nomic price risks, like stock exchange prices or commodity prices, an increase or decrease in the relevant market prices within reasonable margins would not have an impact on the Group’s profit or equity. Hence, the Group’s exposure to other price risks is regarded as not material. Credit risk The credit risk incurred by the Group is the risk that counterpar- ties fail to meet their obligations arising from operating activities and from financial transactions. Credit risk arises from cash and cash equivalents and deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and committed transactions. Credit risk is monitored on a Group basis. To minimise credit risk from operating activities and financial transactions, each counterparty is assigned a credit limit, the use of which is reg- ularly monitored. Default risks are continuously monitored in the operating business. The aggregate carrying amounts of financial assets represent the maximum default risk. For an overview of past-due receiv- ables, please refer to  Note 23 ‘Trade and other receivables.’ Given the Group’s heterogeneous customer structure, there is no risk concentration. Liquidity risk Prudent liquidity risk management implies maintaining suffi- cient cash and marketable securities, the availability of funding through an adequate amount of committed credit facilities and the ability to close out market positions. Due to the dynamic nature of the underlying businesses, Group Treasury maintains flexibility in funding by maintaining availability under committed credit lines. With the IPO of NORMA Group in April 2011, all bank borrowings were refinanced with syndicated bank facilities in the amount of EUR 250 million, of which EUR 178 million had been repaid before 31 December 2014. In September 2014, the existing syndicated bank facilities were renegotiated with the result of an additional syndicated loan in the amount of EUR 100 million Furthermore, in July 2013, NORMA Group issued a promissory note valued at EUR 125 million with 5, 7 and 10 year terms. In the fourth quarter of 2014, an additional promissory note was issued with euro tranches in the amount of EUR 106 million with 3, 5, 7 and 10 year terms and USD tranches in the amount of USD 128.5 million with 3, 5 and 7 year terms. Liquidity is monitored on an ongoing basis with regard to the Group’s business performance, planned investment and re- demption of capital. The amounts disclosed in the table are the contractual, undis- counted cash flows. The early repayment in an amount of EUR 101.4 million is already considered within the maturity analysis as of 31 December 2013. Financial liabilities denominated in foreign currencies are translated at the closing rate on the bal- ance sheet date. Interest payments on financial instruments with variable interest rates are calculated on the basis of the interest rates applicable as of the reporting date. 3 1 D E C E M B E R 2 0 14 in EUR thousands Borrowings Trade payables Finance lease liabilities up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years 30,533 82,096 208,739 161,462 80,829 211 0 207 0 50 0 0 0 55 Other financial liabilities 1,274 3,460 3 1 D E C E M B E R 2 0 13 in EUR thousands Borrowings Trade payables Finance lease liabilities Other financial liabilities 112,847 85,763 208,789 161,517 up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years 133,495 26,728 119,043 79,692 59,025 342 4,367 0 236 508 0 158 736 0 0 0 197,229 27,472 119,937 79,692 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 132 The maturity structure of the derivative financial instruments based on cash flows is as follows: 6. CRITICAL ACCOUNTING ESTIM ATES A ND JUDGEMENTS 3 1 D E C E M B E R 2 0 14 in EUR thousands Derivative receivables – gross settlement Cash outflows Cash inflows Derivative liabilities – gross settlement Cash outflows Cash inflows Derivative liabilities – net settlement Cash outflows 3 1 D E C E M B E R 2 0 13 in EUR thousands Derivative receivables – gross settlement Cash outflows Cash inflows Derivative liabilities – gross settlement Cash outflows Cash inflows Derivative liabilities – net settlement Cash outflows up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years – 2,500 2,503 –102,811 100,768 – 677 –16,265 –1,160 – 2,717 –16,265 –1,160 – 75 – 75 up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years – 3,100 3,192 –1,176 1,126 – 6,927 – 6,885 – 8,293 0 – 8,293 0 2. Capital risk management The Group’s objectives when managing capital are to ensure that it will continue to be able to repay its debt and remain financially sound. The Group is subject to the financial covenant total net debt cover, which is monitored on an on-going basis. This financial covenant is based on the Group’s consolidated financial state- ments as well as on special definitions of the bank facilities agreements. There were no covenant breaches in 2014 and 2013. In the case of a covenant breach the Facility Agreement in- cludes several ways to remedy a potential breach by rules of exemption or shareholder actions. If a covenant breach occurs and is not remedied the syndicated loans may, but are not required to be, withdrawn. Estimates and judgments are continually evaluated and are based on historical experience, and expectations regarding future events that are believed to be reasonable under the circumstances. The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the respective actual results. The estimates and assumptions that have a significant risk of causing a ma terial adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below. Estimated impairment of goodwill NORMA Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in  Note 3.5. The recoverable amounts of cash-gen- erating units have been determined based on fair-value- less-costs-to-sell calculations. These calculations are based on discounted cash flow models, which require the use of estimates ( Note 19). In 2014 and 2013, no impairment of goodwill, which amounted to EUR 324,496 thousands on 31 December 2014 (31 Decem- ber 2013: EUR 233,239 thousands), was necessary. Even if the discount rate would increase by + 2% and the terminal value growth rate would be 0%, the change of these key assumptions would not cause in any CGU the carrying amount to exceed its recoverable amount. Income taxes The Group is subject to income taxes in numerous jurisdictions. Significant judgements are required in determining the world- wide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is un- certain. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made. On 31 December 2014, income tax liabilities were EUR 13,126 thou- sands (31 December 2013: EUR 15,831 thousands) and deferred tax liabilities were EUR 104,647 thousands (31 December 2013: EUR 32,970 thousands), including EUR 68,646 thousands from the acquisition of National Diversified Sales, Inc. in the fourth quarter of 2014. Pension benefits The present value of the pension obligations depends on a num- ber of factors that are determined on an actuarial basis using a number of assumptions. The assumptions used in determining the net cost (income) for pensions include the discount rate. Any changes in these assumptions will impact the carrying amount of pension obligations. NORMA Group SE Annual Report 2014 133 The Group determines the appropriate discount rate on the balance sheet date. This is the interest rate that should be used to determine the present value of estimated future cash outflows expected to be required to settle the pension obligations. In determining the appropriate discount rate, the Group consid- ers the interest rates of high-quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating the terms of the related pension liability. the accrued transaction costs were dissolved through profit or loss at the time of repayment. The related negative one-time items in the amount of EUR 5,406 thousands were adjusted within the financial result of financial year 2014. Furthermore, acquisition related expenses amounting to EUR 6,924 thousands, particularly associated with the acquisition of National Diversified Sales, Inc., were adjusted within EBITDA (Earnings before interest, taxes, depreciation and amortisation). Other key assumptions for pension obligations are based in part on current market conditions. Additional information is disclosed in  Note 3.17. Pension liabilities amounted to EUR 12,271 thousands on 31 December 2014 (31 December 2013: EUR 10,869 thousands). Useful lives of property, plant and equipment and intangible assets The Group’s management determines the estimated useful lives and related depreciation / amortisation charges for its property, plant and equipment and intangible assets. This estimate is based on projected lifecycles. These could change as a result of technical innovations or competitor actions in response to severe industry cycles. Management will increase the deprecia- tion charge where useful lives are less than previously estimated lives, or it will write-off or write-down technically obsolete or non-strategic assets that have been abandoned or sold. 7. AD JUSTMENTS In January and September 2014, NORMA Group early repaid parts of the existing syndicated bank facilities. This repayment amounted to EUR 108,600 thousands. The associated hedging instruments (cross-currency and interest rate swaps) as well as These adjustments within the EBITDA are related in an amount of EUR 2,210 thousands to expenses for raw materials and consumables used, which are a result of the remeasurement of acquired inventories within the purchase price allocation for the acquisition of National Diversified Sales, Inc. Furthermore, expenses in an amount of EUR 4,513 thousands were adjust- ed within the other operating expenses and in an amount of EUR 201 thousands within the employee benefits expense. Besides the described adjustments, depreciation in the amount of EUR 1,289 thousands (2013: EUR 496 thousands) and amor ti- sation in the amount of EUR 10,132 thousands (2013: EUR 7,661 thousands) from purchase price allocations were adjusted ad- ditionally as in previous years. The theoretical taxes resulting from the adjustments are calcu- lated using the respective tax rate of each Group entity and are considered within the adjusted earnings after taxes. In financial year 2013, EUR 910 thousands tax expenses from corporate re- structuring measures were adjusted within the position income taxes. In financial year 2014 no direct adjustments within the income taxes were made. The following table shows profit and loss net of these expenses: Consolidated Financial StatementsNotes to the Consolidated Financial Statements134 in EUR thousands Notes 2014 unadjusted Finance renegotiation M&A related costs Step-up effects from purchase price allocations Total adjustments 2014 adjusted Revenue (8) 694,744 Changes in inventories of finished goods and work in progress Other own work capitalised – 2,907 3,647 Raw materials and consumables used (9) – 292,073 Gross profit Other operating income and expenses (10, 11) 403,411 – 83,384 Employee benefits expense (12) –188,508 EBITDA Depreciation EBITA Amortisation Adjusted operating profit (EBIT) Financial costs – net Profit before income tax Income taxes Profit for the period Non-controlling interests Profit attributable to shareholders of the parent Earnings per share (in EUR) (13) 131,519 –18,233 113,286 –15,442 97,844 –14,469 83,375 – 28,500 54,875 153 54,722 1.72 0 0 0 0 5,406 5,406 –1,632 3,774 0 4,513 201 4,714 4,714 4,714 4,714 –1,422 3,292 2,210 2,210 2,210 1,289 3,499 10,132 13,631 13,631 – 4,113 9,518 3,774 3,292 9,518 16,584 0 0 0 2,210 2,210 4,513 694,744 – 2,907 3,647 – 289,863 405,621 – 78,871 201 –188,307 6,924 1,289 8,213 10,132 18,345 5,406 23,751 – 7,167 16,584 0 138,443 –16,944 121,499 – 5,310 116,189 – 9,063 107,126 – 35,667 71,459 153 71,306 2.24 NORMA Group SE Annual Report 2014 135 in EUR thousands Notes 2013 unadjusted Revenue (8) 635,545 Changes in inventories of finished goods and work in progress Other own work capitalised 1,894 3,377 Raw materials and consumables used (9) – 269,421 Gross profit Other operating income and expenses (10, 11) 371,395 – 72,387 Employee benefits expense (12) –169,689 EBITDA Depreciation EBITA Amortisation Adjusted operating profit (EBIT) Financial costs – net Profit before income tax Income taxes Profit for the period Non-controlling interests Profit attributable to shareholders of the parent Earnings per share (in EUR) (13) 129,319 –17,195 112,124 –12,604 99,520 –15,585 83,935 – 28,319 55,616 59 55,557 1.74 Step-up effects from purchase price allocations M&A related costs Total adjustments 2013 adjusted 0 0 0 0 0 0 0 0 496 496 7,661 8,157 0 8,157 –1,708 6,449 0 635,545 1,894 3,377 – 269,421 371,395 – 72,387 –169,689 129,319 –16,699 112,620 – 4,943 107,677 –15,585 92,092 – 30,027 62,065 59 0 0 496 496 7,661 8,157 8,157 – 2,618 5,539 5,539 6,449 62,006 1.95 0 0 0 0 0 910 910 910 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 136 Notes to the Consolidated Statement of Comprehensive Income The company acquired in 2014, NDS, contributed EUR 7,229 thousands to the material costs. The acquired business activ- ities of Five Star are fully integrated, therefore the contribution of these cannot be shown separately. 8 . R E VENUE Revenue recognised during the period related to the following: 10. OTHER OPER ATING INCOME Other operating income comprised the following: in EUR thousands 2014 2013 in EUR thousands 2014 2013 Engineered Joining Technology (EJT) Distribution Services (DS) Other revenue Deductions 484,484 216,558 2,245 – 8,543 443,874 Currency gains operational 193,617 Reversal of provisions 2,190 – 4,136 Grants related to employee benefits expense 694,744 635,545 Reimbursement of vehicle costs Other income from disposal of fixed assets Government grants Revenue for 2014 (EUR 694,744 thousands) was 9.3% above revenue for 2013 (EUR 635,545 thousands). Others 3,814 1,996 252 612 173 514 1,994 9,355 2,838 352 351 566 152 310 2,414 6,983 The sales figures for 2014 include sales of EUR 17,096 thou- sands from the companies acquired in 2014. The business activities of Five Star Clamps, Inc. (“Five Star”), which was acquired in April, contributed EUR 3,178 thousands, of which EUR 1,935 thousands are related to EJT, EUR 1,213 thousands are related to DS and EUR 30 thousands to other revenue. National Diversified Sales, Inc. (“NDS”), which was acquired in the fourth quarter of 2014, contributed EUR 13,918 thousands, of which EUR 15,679 thousands are related to DS and EUR 100 thousands are related to other revenue. Furthermore, deduc- tions in the amount of EUR 1,861 thousands are included. For the analysis of sales by region, please refer to  Note 37 “Segment reporting.” 9. R AW M ATERIALS A ND CONSUM ABLES USED Raw materials and consumables used comprised the following: in EUR thousands 2014 2013 Cost of raw materials, consumables and supplies Cost of purchased services – 264,387 – 242,717 – 27,686 – 26,704 – 292,073 – 269,421 The position “others” includes mainly reversal from accruals for variable components of remuneration for employees. 11. OTHER OPER ATING E XPENSES Other operating expenses comprised the following: in EUR thousands 2014 2013 Consulting and marketing –14,996 –11,003 Expenses for temporary workforce and other personnel related costs Freights Other administrative expenses Rentals and other building costs Currency losses operational Travel and entertaining Research & development Vehicle costs Maintenance Commission payable Non-income-related taxes Insurances IT and telecommunication Others –13,657 –12,940 – 4,545 – 7,480 – 3,328 – 7,043 – 2,691 – 2,912 – 2,675 – 3,355 –1,818 – 2,006 – 9,200 – 4,093 –12,326 – 8,308 – 5,274 – 6,965 – 3,156 – 6,073 – 2,505 – 2,691 – 2,223 – 3,028 –1,734 –1,993 – 9,059 – 3,032 – 92,739 – 79,370 The raw materials and consumables used increased dispro- portionately lower in relation to revenues leading to a ratio of 42.0% (2013: 42.4%), The company acquired in 2014, NDS, contributed EUR 3,088 thousands to other operating expenses. The acquired business activities of Five Star are fully integrated, therefore the contribu- tion of these cannot be shown separately. NORMA Group SE Annual Report 2014 137 12 . EMPLOYEE BENEFITS E XPENSE Employee benefits expense comprised the following: in EUR thousands 2014 2013 Wages and salaries and other termination benefits Social security costs Pension costs – defined contribution plans Pension costs – defined benefit plans –154,289 – 23,402 –10,381 – 436 –140,099 – 21,839 – 7,513 – 238 –188,508 –169,689 The total interest income calculated using the effective interest method for financial assets not measured at fair value through profit or loss amounts to EUR 276 thousands in 2014 (2013: EUR 485 thousands). Losses from the evaluation of derivatives amount to EUR 4,431 thousands and increased by EUR 4,291 thousands in com- parison to financial year 2013 (EUR 140 thousands). In finan- cial year 2014, one-time losses in the amount of EUR 4,169 thousands relating to the early repayment of the syndicated loans are included. Adjusted by these effects, losses from the evaluation of derivatives amount to EUR 262 thousands in financial year 2014. The company acquired in 2014, NDS, contributed EUR 3,083 thousands to employee benefits expenses. The acquired busi- ness activities of Five Star are fully integrated, therefore the contribution of these cannot be shown separately. Due to positive foreign exchange rate change effects, the foreign exchange result on financial activities shows in financial year 2014 income in the amount of EUR 3,377 thousands in comparison to EUR –1,355 thousands in financial year 2013. 13 . FIN A NCIAL INCOME A ND COSTS Financial income and costs comprised the following: in EUR thousands 2014 2013 Financial costs Interest expenses Bank borrowings Finance lease Expenses for interest accrued on provisions Expenses for interest accrued on pensions Foreign exchange result on financing activities Losses on evalution of derivatives Other financial cost Financial income Interest income on short-term bank deposits Other financial income –12,418 –13,118 – 38 – 201 – 266 3,377 – 4,431 – 899 –14,876 276 131 407 – 28 – 55 – 248 –1,355 –140 –1,196 –16,140 485 70 555 Net financial cost –14,469 –15,585 The total interest expenses calculated using the effective inter- est method for financial liabilities that are not measured at fair value through profit or loss amount to EUR 12,418 thousands in 2014 (2013: EUR 13,118 thousands). In financial year 2014, one- time interest expenses in the amount of EUR 1,238 thousands resulting from the early repayment of parts of the existing syndi- cated bank facilities are included in the interest expenses from bank borrowings. Adjusted by these effects, interest expenses in financial year 2014 amount to EUR 11,180 thousands and are decreased by EUR 1,938 thousands in comparison to financial year 2013, which is a result of the renegotiation of the financial debt of NORMA Group in financial year 2014. Transaction costs in connection with financing are netted with the bank borrowings in accordance with IAS 39.43. They are amortised over the financing period of the respective debt using the effective interest method. The value of transaction costs recognised in the balance sheet and amortised over the matur- ities of the bank borrowings amounted to EUR 2,565 thousands (2013: EUR 3,551 thousands). 14. NE T FOR EIG N E XCH A NGE G AINS / LOS SES The exchange differences recognised in profit or loss are as follows: in EUR thousands Note 2014 2013 Currency gains operational Currency losses operational Foreign exchange result on financing activities (10) (11) (13) 3,814 – 3,328 3,377 3,863 2,838 – 3,156 –1,355 –1,673 15. E AR NINGS PER SH AR E Earnings per share are calculated by dividing net income for the period attributable to NORMA Group’s shareholders by the weighted average number of shares issued during the period under review. NORMA Group has only issued common shares. In 2014, as in the previous year, the average weighted number of shares was 31,862,400. Options issued out of the matching stock programme (“MSP”) for the Board of NORMA Group had dilutive effects on earn- ings per share in financial year 2014. A detailed description of the MSP can be found in  Note 28 “Share based payments.” The dilutive effect on earnings per share is calculated using the treasury stock method. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 138 Earnings per share in 2014 and 2013 were as follows: Profit attributable to shareholders of the parent (in EUR thousands) 11,553 12,617 54,722 55,557 Q4 2014 Q4 2013 2014 2013 31,862,400 31,862,400 31,862,400 31,862,400 244,104 145,020 244,104 138,204 32,106,504 32,007,420 32,106,504 32,000,604 0.36 0.36 0.40 0.39 1.72 1.70 1.74 1.74 Number of weighted shares Effect of dilutive share-based payment Number of weighted shares (diluted) Earnings per share undiluted (in EUR) Earnings per share diluted (in EUR) 16. INCOME TA XES The breakdown of income taxes is as follows: in EUR thousands 2014 2013 Current tax expenses Deferred tax income Total income taxes – 29,836 1,336 – 30,077 1,758 – 28,500 – 28,319 NORMA Group’s combined Group income tax rate for 2014 amounted to 30.2% (2013: 30.2%), comprising corporate in- come tax at a rate of 15%, the solidarity surcharge of 5.5% on corporate income tax, and trade income tax at an average multiplier of 410%. The tax on the Group’s profit before tax differs from the theoret- ical amount that would arise using the Group tax rate applicable to profits of the consolidated entities of 30.2% as follows: in EUR thousands Profit before tax Group tax rate Expected income taxes Tax effects of: Tax losses and tax credits from actual year for which no deferred income tax is recognised Effects from deviation of Group tax rate resulting mainly from different foreign tax rates Non-deductible expenses for tax purposes Utilisation of tax losses and tax credits from prior year for which no deferred income tax asset was recognised Other tax-free income Tax effect of changes in tax rates Income taxes related to prior years Tax losses and tax credits from prior years for which income tax assets are recognised in actual year Impairment of tax assets Other Income taxes 2014 2013 83,375 30.2 % – 25,179 – 2,666 67 –1,680 173 157 – 494 1,488 0 – 82 – 284 – 28,500 83,935 30.2 % – 25,348 – 809 –1,515 –1,619 4 219 – 270 1,315 0 0 – 296 – 28,319 NORMA Group SE Annual Report 2014 139 The item ‘Income taxes related to prior years’ consists in par- ticular of the release of not-utilised tax provisions. The item ‘Other’ consists in 2014 and 2013 mainly of other in- come-based taxes (e.g., withholding tax). The income tax charged / credited directly to other comprehen- sive income during the year is as follows: 2014 2013 in EUR thousands Cash flow hedges gains / losses Remeasurements of post employment benefit obligations Other comprehensive income Before tax amount Tax charge / credit Net-of-tax amount Before tax amount Tax charge / credit Net-of-tax amount 2,989 –1,619 1,370 – 962 453 – 509 2,027 –1,166 861 3,314 – 726 2,588 – 985 159 – 826 2,329 – 567 1,762 Notes to the Consolidated Statement of Financial Position 17. INCOME TA X AS SE TS A ND LIABILITIES Due to changes in German corporate tax laws (“SE-Steuer- gesetz” or “SEStEG,” which came into effect on 31 December 2006) an imputation credit asset (“Körperschaftsteuerguthaben gem. § 37 KStG”) has been set up. As a result, an unconditional claim for payment of the credit in ten annual instalments from 2008 through 2017 has been established. The resulting receiv- able is included in income tax assets and amounted to EUR 1,327 thousands on 31 December 2014 (31 December 2013: EUR 1,737 thousands). In 2014, EUR 850 thousands are classi- fied as non-current (31 December 2013: EUR 1,260 thousands). 18 . DEFER R ED INCOME TA X The analysis of deferred tax assets and deferred tax liabilities due to maturity is as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Deferred tax assets Deferred tax assets to be recovered after more than 12 months Deferred tax assets to be recovered within 12 months Deferred tax assets Deferred tax liabilities Deferred tax liabilities to be recovered after more than 12 months Deferred tax liabilities to be recovered within 12 months Deferred tax liabilities Deferred tax liabilities (net) 1,061 10,076 11,137 1,035 6,480 7,515 102,090 32,565 2,557 104,647 93,510 405 32,970 25,455 The movement in deferred income tax assets and liabilities during the year is as follows: Consolidated Financial StatementsNotes to the Consolidated Financial Statements 140 in EUR thousands 2014 2013 Deferred tax liabilities (net) – as of 1 January Deferred tax income Tax charged to other comprehensive income Exchange differences Acquisition of subsidiaries Deferred tax liabilities (net) – as of 31 December 25,455 –1,336 509 5,198 63,684 26,879 –1,758 826 – 926 434 93,510 25,455 The analysis of deferred income tax assets and deferred income tax liabilities, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: D E F E R R E D TA X A S S E T S in EUR thousands 31 Dec 2014 31 Dec 2013 Intangible assets Property, plant and equipment Other assets Inventories Trade receivables Retirement benefit obligations / pension liabilities Provisions Borrowings Other liabilities, incl. derivatives Trade payables Tax losses and tax credits Deferred tax assets (before valuation allowances) Valuation allowance Deferred tax assets (before offsetting) Offsetting effects Deferred tax assets D E F E R R E D TA X L I A B I L I T I E S 3,501 240 768 1,607 472 1,630 952 6,202 4,304 396 3,648 23,720 – 2,458 21,262 –10,125 11,137 1,596 79 184 1,173 280 1,387 1,088 3,227 4,442 392 441 14,289 –19 14,270 – 6,755 7,515 Deferred income tax assets are recognised for all deductible temporary differences to the extent that it is probable that future taxable profits will be available against which the deductible temporary difference can be utilised. As of 31 December 2014 and also in the previous year, deferred tax assets were recog- nised for all deductible temporary differences, because suffi- cient taxable income will most likely be available to utilise these deductible temporary differences. In 2014 and prior years, the Group had tax losses at several subsidiaries in several countries. After offsetting the deferred tax assets with deferred tax liabilities, the deferred tax assets not subject to valuation allowances amounted to EUR 51 thousands for those foreign subsidiaries (31 December 2013: EUR 34 thou- sands). NORMA Group believes it is more likely than not that due to future taxable income, deferred tax assets which are not subject to valuation allowances can be utilised. Deferred income tax assets are recognised for tax losses carry-forwards to the extent that the realisation of the related tax benefit through future taxable profits is probable. The Group did recognise the following tax losses: in EUR thousands 31 Dec 2014 31 Dec 2013 Expiry within 1 year Expiry in 2–5 years Expiry later than 5 years Unlimited carry forward Total 0 297 3,336 1,692 5,325 0 31 2,628 475 3,134 The Group did not recognise deferred income tax assets in respect of losses amounting to EUR 13,241 thousands on 31 December 2014 (31 December 2013: EUR 5,579 thousands) that can be carried forward against future taxable income. The- oretically, the deferred tax assets on not recognised tax losses would be EUR 2,894 thousands on 31 December 2014 (31 De- cember 2013: EUR 1,058 thousands). in EUR thousands 31 Dec 2014 31 Dec 2013 The unrecognised losses expire as follows: Intangible assets Property, plant and equipment Other assets Inventories Trade receivables Provisions Borrowings 90,410 13,048 3,013 1,038 65 0 26,591 8,759 399 384 459 0 5,486 2,084 Other liabilities, incl. derivatives Trade payables Untaxed reserves Deferred tax liabilities (before offsetting) Offsetting effects Deferred tax liabilities Deferred tax liabilities (net) 853 0 859 114,772 –10,125 104,647 93,510 169 6 874 39,725 – 6,755 32,970 25,455 in EUR thousands 31 Dec 2014 31 Dec 2013 Expiry within 1 year Expiry in 2–5 years Expiry later than 5 years Unlimited carry forward Total 0 875 2,746 9,620 13,241 29 0 2,256 3,294 5,579 Taxable temporary differences amounting to EUR 175,920 thou- sands on 31 December 2014 (31 December 2013: EUR 113,059 thousands) associated with investments in subsidiaries are not NORMA Group SE Annual Report 2014 141 recognised as deferred tax liabilities since the respective parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. These unremitted earnings of non-German subsidiaries, the amount of which cannot be practicably computed, could become subject to additional tax if they were remitted as dividends or if the Group were to sell its shareholdings in the subsidiaries. 19. GOODWILL A ND OTHER INTA NGIBLE AS SE TS The acquisition costs as well as accumulated amortisation and impairment of intangible assets consist of the following: in EUR thousands Acquisition costs Goodwill Customer lists Licenses, rights Software Trademarks Patents & technology Internally generated intangible assets Intangible assets, other Total Amortisation and Impairment Goodwill Customer lists Licenses, rights Software Trademarks Patents & technology Internally generated intangible assets Intangible assets, other Total in EUR thousands Acquisition costs Goodwill Customer lists Licenses, rights Software Trademarks Patents & technology Internally generated intangible assets Intangible assets, other Total Amortisation and Impairment Goodwill Customer lists Licenses, rights Software Trademarks Patents & technology Internally generated intangible assets Intangible assets, other Total As of 1 Jan 2014 Additions Deductions Transfers Changes in consolidation Currency effects As of 31 Dec 2014 263,309 60,918 1,884 15,103 20,138 30,791 5,127 15,180 412,450 30,070 15,242 732 8,497 5,150 16,487 965 9,158 0 7 254 3,124 0 692 2,823 1,859 8,759 0 6,010 381 3,187 1,318 2,844 808 894 86,301 15,442 0 0 – 44 –10 0 0 0 –13 – 67 0 0 – 44 –10 0 0 0 –13 – 67 0 0 – 45 4,539 0 0 45 – 4,295 77,949 135,404 0 242 25,562 1,270 0 0 16,183 10,638 10 498 3,549 3,569 22 – 249 357,441 206,967 2,059 23,496 49,249 36,322 8,017 12,482 244 240,427 34,220 696,033 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2,875 1,497 3 185 753 2,188 54 –154 7,401 32,945 22,749 1,072 11,859 7,221 21,519 1,827 9,885 109,077 As of 1 Jan 2013 Additions Deductions Transfers Changes in consolidation Currency effects As of 31 Dec 2013 266,296 57,402 1,576 12,224 20,903 29,952 2,014 13,724 404,091 31,034 11,501 411 5,149 4,290 14,780 293 8,893 0 2 98 2,836 0 996 3,060 2,269 9,261 0 4,192 325 3,518 1,080 2,374 683 432 76,351 12,604 0 0 – 2 – 35 0 0 – 27 –111 –175 0 0 – 2 – 35 0 0 0 –111 –148 0 0 4 240 0 0 114 – 358 0 0 0 0 0 0 0 0 0 0 1,683 5,881 211 0 75 – 4,670 – 2,367 – 3 –162 – 840 1,120 –1,277 0 0 – 34 – 344 263,309 60,918 1,884 15,103 20,138 30,791 5,127 15,180 8,970 – 9,697 412,450 0 0 0 0 0 0 0 0 0 – 964 – 451 – 2 –135 – 220 – 667 –11 – 56 30,070 15,242 732 8,497 5,150 16,487 965 9,158 – 2,506 86,301 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 142 Carrying amounts in EUR thousands 31 Dec 2014 31 Dec 2013 Goodwill Customer lists Licenses, rights Software Trademarks Patents & technology Internally generated intangible assets Intangible assets, other Total 324,496 184,218 987 11,637 42,028 14,803 6,190 2,597 233,239 45,676 1,152 6,606 14,988 14,304 4,162 6,022 586,956 326,149 thousands (2013: EUR 0 thousands) resulting from the acqui- sition of National Diversified Sales, Inc. in the fourth quarter. From a market perspective, we assumed an indefinite useful life for these acquired trademarks, which mainly include the corporate brand N DS ®, because these brands have been established in the market for a number of years and there is no foreseeable end to their useful life, therefore useful lives are indefinite. On 31 December 2014 and 2013, the intangible assets are unsecured. Impairment tests for goodwill Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to geographical areas. A summary of the goodwill allocation is presented below. The item ‘Patents & technology’ on 31 December 2014 consists of patents worth EUR 3,331 thousands (31 December 2013: EUR 4,180 thousands) and technology worth EUR 11,472 thou- sands (31 December 2013: EUR 10,124 thousands). The item ‘Intangible assets, other’ consists mainly of pre- payments. Internally generated intangible assets mainly include tech- nologies. in EUR thousands CGU EME A CGU Americas CGU Asia-Pacific 31 Dec 2014 31 Dec 2013 154,273 154,141 164,606 73,598 5,617 5,500 324,496 233,239 The change in goodwill from EU R 233,239 thousands to EUR 324,496 thousands results from positive exchange differ- ences and from the acquisition of the business activities of Five Star Clamps, Inc. in the amount of EUR 2,563 thousands and the acquisition of National Diversified Sales, Inc. in the amount of EUR 75,386 thousands. Goodwill for the CGU Americas increased in 2014 due to the acquisition of the business activities of Five Star Clamps, Inc. in the amount of EUR 2,563 thousands and the acquisition of National Diversified Sales, Inc. in the amount of EUR 75,386 thousands. Other changes were driven by currency effects. Goodwill for the CGUs EME A and Asia-Pacific changed in 2014 solely due to currency effects. The change in goodwill is summarised as follows: in EUR thousands Balance as of 31 December 2013 Changes in consolidation Five Star Clamps, Inc. National Diversified Sales, Inc. Currency effect Balance as of 31 December 2014 The recoverable amount of a CGU is determined based on fair- value-less-costs-to-sell, which is calculated by discounting pro- jected cash flows. Based on the inputs used for this valuation technique, fair values are classified as level 3 fair values ( Note 3.3 “Fair value estimation”). These calculations use cash flow projections based on financial budgets approved by the man- agement covering a five-year period. Cash flows beyond the five-year period are extrapolated using the estimated growth rates stated below. The growth rate does not exceed our ex- pectations for the long-term average growth rate for the geo- graphical area of the respective CGU. 233,239 77,949 2,563 75,386 13,308 324,496 In 2014 and 2013, no material impairments for intangible assets or write ups were recognised. In the second quarter of 2014, the brand “Nordic Metalblok” in the amount of EUR 276 thousands was fully impaired, as NORMA Group no longer expects to use the brand in the future. The discount rates used are after-tax-rates and reflect the specific risk of each CGU. The respective before-tax-rates are 11.54% (2013: 13.36%) for the CGU EME A, 12.26% (2013: 14.74%) for the CGU Americas and 11.22% (2013: 13.16%) for the CGU Asia-Pacific. Besides the goodwill, there are intangible assets within trade- marks with an indefinite useful life in the amount of EUR 26,275 The key assumptions used for fair-value-less-costs-to-sell cal- culations are as follows: NORMA Group SE Annual Report 2014 31 December 2014 Terminal value growth rate Discount rate Costs to sell 31 December 2013 Terminal value growth rate Discount rate Costs to sell 143 CGU EME A CGU Americas CGU Asia-Pacific 1.50% 8.88% 1.00% 1.50% 8.17% 1.00% 1.50% 8.80% 1.00% CGU EME A CGU Americas CGU Asia-Pacific 1.50% 10.31% 1.00% 1.50% 9.62% 1.00% 1.50% 10.50% 1.00% Even if the discount rate would increase by + 2% and terminal value growth rate would be 0%, the change of these key as- sumptions would not cause the carrying amount to exceed its recoverable amount in any CGU. 20. PROPERT Y, PL A NT A ND EQUIPMENT The acquisition and manufacturing costs as well as accumu- lated depreciation of property, plant and equipment consist of the following: in EUR thousands Acquisition costs Land and buildings Machinery & tools Other equipment Assets under construction Total Depreciation and Impairment Land and buildings Machinery & tools Other equipment Assets under construction Total in EUR thousands Acquisition costs Land and buildings Machinery & tools Other equipment Assets under construction Total Depreciation and Impairment Land and buildings Machinery & tools Other equipment Assets under construction Total As of 1 Jan 2014 Additions Deductions Transfers Changes in consolidation Currency effects As of 31 Dec 2014 87,008 195,465 49,019 11,367 342,859 40,559 149,704 37,049 180 7,209 6,443 3,828 13,408 30,888 2,491 11,911 3,831 0 – 21 – 8,356 –1,650 4,512 6,426 898 –123 –12,080 1,083 19,229 386 1,320 1,134 5,218 394 924 100,925 224,425 52,875 14,816 –10,150 – 244 22,018 7,670 393,041 – 25 – 8,276 –1,526 0 1 0 –1 0 0 0 0 0 0 0 –10 2,462 182 19 43,016 155,801 39,535 199 2,653 238,551 227,492 18,233 – 9,827 As of 1 Jan 2013 Additions Deductions Transfers Changes in consolidation Currency effects As of 31 Dec 2013 84,890 186,804 46,415 9,886 1,227 7,157 3,649 9,234 327,995 21,267 38,853 144,191 35,689 183 2,388 11,017 3,790 0 –186 – 3,176 – 2,520 –187 – 6,069 –125 – 3,185 – 2,449 0 218,916 17,195 – 5,759 2,240 3,282 1,374 – 6,896 0 0 – 427 427 0 0 239 4,930 790 88 –1,402 – 3,532 – 689 – 758 87,008 195,465 49,019 11,367 6,047 – 6,381 342,859 0 0 0 0 0 – 557 –1,892 – 408 – 3 40,559 149,704 37,049 180 – 2,860 227,492 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 144 Carrying amounts Machinery includes the following amounts where the Group is a lessee under a finance lease: in EUR thousands 31 Dec 2014 31 Dec 2013 Land and buildings Machinery & tools Other equipment Assets under construction Total 57,909 68,624 13,340 14,617 154,490 46,449 45,761 11,970 11,187 115,367 in EUR thousands 31 Dec 2014 31 Dec 2013 Cost – capitalised finance leases Accumulated depreciation Net carrying amount 321 –143 178 661 – 431 230 On 31 December 2014, the item ‘Machinery & tools’ includes tools valued at EUR 18,196 thousands (31 December 2013: EUR 7,952 thousands). No material impairment and no material write ups were recog- nised on property, plant and equipment in 2014 and 2013. On 31 December 2014 and 2013, property, plant and equip- ment, except for finance lease assets, are unsecured. Land and buildings includes the following amounts where the Group is a lessee under a finance lease: in EUR thousands 31 Dec 2014 31 Dec 2013 Cost – capitalised finance leases Accumulated depreciation Net carrying amount 591 –12 579 523 0 523 Other equipment includes the following amounts where the Group is a lessee under a finance lease: in EUR thousands 31 Dec 2014 31 Dec 2013 Cost – capitalised finance leases Accumulated depreciation Net carrying amount 300 – 256 44 367 – 248 119 The Group leases various property, machinery, technical and IT equipment under non-cancellable finance lease agreements. The lease terms for machinery and other equipment are be- tween three and ten years, the lease terms for land and building are up to 50 years. NORMA Group SE Annual Report 2014 21. FIN A NCIAL INSTRUMENTS Financial instruments according to classes and categories were as follows: 145 Measurement basis IAS 39 Category IAS 39 Carrying amount 31 Dec 2014 Amortised Cost Fair value through profit or loss Derivatives used for hedging Measurement basis IAS 17 Fair value 31 Dec 2014 in EUR thousands Financial assets Derivative financial instruments – hedge accounting Foreign exchange derivatives Trade and other receivables Other financial assets Cash and cash equivalents Financial liabilities Borrowings Derivative financial instruments – hedge accounting Interest derivatives Cross-currency swaps Foreign exchange derivatives Trade payables Other financial liabilities Contingent considerations Other liabilities Finance lease liabilities Totals per category Loans and receivables (LaR) Financial liabilities at amortised cost (FL AC) n/a LaR LaR LaR 3 107,717 107,717 2,198 84,271 2,198 84,271 FL AC 430,946 430,946 n/a n/a n/a FL AC n/a FL AC n/a 2,554 15,623 2,043 80,829 3,314 2,445 449 194,186 514,220 194,186 514,220 3 2,554 15,623 2,043 3 107,717 2,198 84,271 442,614 2,554 15,623 2,043 80,829 3,314 2,445 459 194,186 525,888 80,829 2,445 3,314 449 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 146 in EUR thousands Financial assets Derivative financial instruments – hedge accounting Foreign exchange derivatives Trade and other receivables Cash and cash equivalents Financial liabilities Borrowings Derivative financial instruments – hedge accounting Interest derivatives Cross-currency swaps Foreign exchange derivatives Trade payables Other financial liabilities Contingent considerations Other liabilities Finance lease liabilities Totals per category Loans and receivables (LaR) Financial liabilities at amortised cost (FL AC) Measurement basis IAS 39 Category IAS 39 Carrying amount 31 Dec 2013 Amortised Cost Fair value through profit or loss Derivatives used for hedging Measurement basis IAS 17 Fair value 31 Dec 2013 n/a LaR LaR 92 90,138 194,188 90,138 194,188 FL AC 326,108 326,108 5,375 9,845 50 59,025 59,025 n/a n/a n/a FL AC n/a FL AC n/a 92 5,375 9,845 50 1,371 4,241 683 1,371 4,241 683 284,326 389,374 284,326 389,374 92 90,138 194,188 329,273 5,375 9,845 50 59,025 1,371 4,241 705 284,326 392,539 Financial instruments, that are recognised in the balance sheet at amortised cost and for which the fair value is stated in the notes, are also allocated within a three step fair value hierarchy. (EUR 316 thousands) in the fiscal year 2013 and from the acqui- sition of the business activities of Five Star Clamps, Inc. in the second quarter of 2014 (EUR 2,998 thousands) are included in the position other financial liabilities. The fair value calculation of the fixed-interest promissory note that is recognised at amortised cost and for which the fair value is stated in the notes, was based on the market yield curve according to the zero coupon method considering credit spreads (level 2). Interests accrued on the reporting date are included. Trade and other receivables and cash and cash equivalents have short-term maturities. Their carrying amounts at the re- porting date equal their fair values, as the impact of discounting is not significant. Furthermore, this position includes liabilities from the acquisition of National Diversified Sales, Inc. in the fourth quarter of 2014 in the amount of EUR 969 thousands. For details, please refer to  Note 40 ‘Business combinations’. The fair values of finance lease liabilities are calculated as the present values of the payments associated with the debts based on the applicable yield curve and NORMA Group’s credit spread curve. Trade payables and other financial liabilities have short times to maturity; therefore the carrying amounts reported approx- imate the fair values. On 31 December 2014, contingent con- siderations measured at fair value in the amount of EUR 3,314 thousands resulting from the acquisition of Guyco Pty. Limited Derivative financial instruments held for trading and those used for hedging are carried at their respective fair values. They have been categorised entirely within level 2 in the fair value hierarchy. None of the financial assets that are fully performing have been renegotiated in the last year. NORMA Group SE Annual Report 2014 147 The tables below provide an overview of the classification of financial assets and liabilities measured at fair value in the fair value hierarchy under IFRS 13 as of 31 December 2014 as well as 31 December 2013: in EUR thousands Recurring fair value measurements Assets Foreign exchange derivatives – hedge accounting Total Liabilities Cross-currency swaps – hedge accounting Interest swaps – hedge accounting Foreign exchange derivatives – cash flow hedges Foreign exchange derivatives – fair value hedges Other financial liabilities Total Level 11) Level 2 2) Level 3 3) Total as of 31 Dec 2014 0 0 3 3 15,623 2,554 172 1,871 0 20,220 3,314 3,314 3 3 15,623 2,554 172 1,871 3,314 23,534 1) Fair value measurement based on quoted prices (unadjusted) in active markets for these or identical assets or liabilities. 2) Fair value measurement for the asset or liability based on inputs that are observable on active markets either directly (i.e. as priced) or indirectly (i.e. derived from prices). 3) Fair value measurement for the asset or liability based on inputs that are not observable market data. in EUR thousands Recurring fair value measurements Assets Foreign exchange derivatives – hedge accounting Total Liabilities Cross-currency swaps – hedge accounting Interest swaps – hedge accounting Foreign exchange derivatives – cash flow hedges Other financial liabilities Total Level 11) Level 2 2) Level 3 3) Total as of 31 Dec 2013 0 92 92 9,845 5,375 50 0 15,270 0 1,371 1,371 92 92 9,845 5,375 50 1,371 16,641 1) Fair value measurement based on quoted prices (unadjusted) in active markets for these or identical assets or liabilities. 2) Fair value measurement for the asset or liability based on inputs that are observable on active markets either directly (i.e. as priced) or indirectly (i.e. derived from prices). 3) Fair value measurement for the asset or liability based on inputs that are not observable market data. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 148 No transfers between the different levels occurred in 2014 and 2013. The fair value of interest swaps and cross-currency swaps is calculated as the present value of estimated future cash flows. The fair value of forward foreign exchange contracts is determined using a present value model based on forward exchange rates. Level 3 includes fair values of financial liabilities from contingent consideration resulting from the acquisition of Guyco Pty Lim- ited and the acquisition of the business activities of Five Star Clamps, Inc. The agreement on the contingent consideration related to the acquisition of Guyco Pty Limited has committed NORMA Group to pay an amount depending on the gross profits made by the Guyco Pty Limited in the period from 1 July 2013 to 30 June 2014. On 30 June 2014, an adjustment of the fair value to an amount of EUR 1,174 thousands was made to reflect the achieved gross profit. The difference in the fair value in the amount of EUR 100 thousands was recognised in the financial income in the period. In the fourth quarter of 2014, parts of the outstanding liability were paid in the amount of EUR 1,036 thou- sands. The remaining liability as of 31 December 2014 amounts to EUR 316 thousands. The agreement on the contingent consideration related to the acquisition of the business activities of Five Star Clamps, Inc. commits NORMA Group to pay an amount depending on certain revenues made by Five Star in financial year 2015 in comparison with certain revenues made in financial year 2012. If the ratio of the revenues is below 100%, the contingent consideration will be reduced linearly by the calculated difference. Furthermore, the agreement includes an appropriate market interest on the contingent consideration. The fair value of the contingent con- sideration was determined on the acquisition date while taking into account the budget of the Company and setting the maxi- mum value at EUR 2,998 thousands. The parameter for which no observable market data is available is shown below: The contingent consideration related to the acquisition of Davy- dick & Co. Pty Limited existing on 31 December 2013 in the amount of EUR 97 thousands was settled with a payment of EUR 59 thousands in the first quarter of 2014. The difference in the amount of EUR 41 thousands was recognised in the finan cial result. The development of the financial assets that are recognised at fair value and assigned to level 3 of the fair value hierarchy is stated below: in EUR thousands Contingent consideration in business combinations Total Balance as of 1 January 2014 1,371 1,371 Acquisition of the business of Five Star Clamps, Inc. Gains and losses recognised in profit (+) or loss (–) Payments Currency effects Balance as of 31 December 2014 Total gains or losses for the period included in profit or loss, under 'Financial result' 2,630 2,630 141 141 –1,095 –1,095 549 549 3,314 3,314 141 141 In accordance with IFRS 7.20 (a), net gains and losses from financial instruments by measurement category are as follows: in EUR thousands 2014 2013 Loans and receivables (LaR) Financial liabilities at cost (FL AC) 67 – 9,186 – 9,119 – 33 –14,563 –14,596 Assumed revenue ratio: > 100% A decrease in the estimated revenue ratio to a value below 100% would lead to a lower value of the contingent consideration. Net gains and losses of loans and receivables comprise cur- rency effects, impairment of trade receivables, and interest income on short-term bank deposits. Net gains and losses of financial liabilities at cost comprise interest expenses and currency effects on loans, borrowings and bank deposits. NORMA Group SE Annual Report 2014 149 22 . DERIVATIVE FIN A NCIAL INSTRUMENTS The derivative financial instruments were as follows: in EUR thousands Assets Liabilites Assets Liabilites 31 Dec 2014 31 Dec 2013 Cross-currency swaps – cash flow hedges Interest rate swaps – cash flow hedges Foreign exchange derivatives – cash flow hedges Foreign exchange derivatives – fair value hedges Total Less non-current portion Cross-currency swaps – cash flow hedges Interest rate swaps – cash flow hedges Non-current portion Current portion Foreign exchange derivatives On 31 December 2014, foreign exchange derivatives with a positive market value of EUR 3 thousands and with a negative market value of EUR 172 thousands were classified as cash flow hedges. The notional principal amount was EUR 2,500 thousands and EUR 6,629 thousands. Furthermore, foreign ex- change derivatives with a negative market value of EUR 1,871 thousands and a notional principal amount of EUR 96,368 thou- sands were classified as fair value hedges. Interest rate swaps and cross-currency swaps In order to avoid interest rate fluctuations, NORM A Group has hedged parts of the loans against changes in the interest rates as well as changes in the exchange rates. The remaining part of NORMA Group’s financing was hedged against interest rate changes. The ineffective portion recognised in profit or loss amounts to EUR 0 thousands in 2014 (2013: loss of EUR 140 thousands). The effective part recognised in other comprehensive in- come reduced the equity in 2014 by EUR 3,339 thousands before taxes (2013: reduction of EUR 1,527 thousands). Of this amount, EUR –12,327 thousands are due to the measurement of the derivatives held as cash flow hedges and EUR 8,988 thousands are due to the change in value of the underlying. In the period, an additional EUR 6,328 thousands before tax were reclassified from the hedging reserve to profit or loss and thus increased other comprehensive income (2013: increase of EUR 4,841 thousands). This results in an overall increase of other operating income before tax of EUR 2,989 thousands (2013: EUR 3,314 thousands). 15,623 2,554 172 1,871 20,220 15,623 2,554 18,177 2,043 3 3 0 3 9,845 5,375 50 15,270 8,293 8,293 6,977 92 92 0 92 Amounts recognised in the hedging reserve in equity on 31 December 2014 will be released in profit or loss until the repay- ment of the loans. The notional principal amounts of the outstanding cross- currency-swap contracts on 31 December 2014 were EUR 73 million (31 December 2013: EUR 117 million). Interest rate de- rivatives had a notional principal amount of EUR 110 million (31 December 2013: EUR 199 million). On 31 December 2014 and 2013, the hedged fixed interest rate was between 0.981% and 4.04%; the variable interest rate was the 3-month EURIBOR. The maximum exposure to credit risk on the reporting date is the fair value of the derivative assets in the consolidated state- ment of financial position. 23 . TR ADE A ND OTHER R ECEIVABLES Trade receivables were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Trade receivables Less: allowances for doubtful accounts 109,457 –1,921 107,536 91,092 –1,638 89,454 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 150 All trade receivables are due within one year. The following ta- ble shows the maturity analysis for trade receivables and other current receivables that are not impaired: A S O F 3 1 D E C E M B E R 2 0 14 in EUR thousands Not past due < 30 days 30 to 90 days 91 to 180 days 181 days to 1 year > 1 year Total Trade receivables Other receivables 80,308 179 80,487 15,484 0 15,484 6,829 0 6,829 3,347 0 3,347 993 2 995 542 0 542 107,503 181 107,684 A S O F 3 1 D E C E M B E R 2 0 13 in EUR thousands Not past due < 30 days 30 to 90 days 91 to 180 days 181 days to 1 year > 1 year Total Trade receivables Other receivables 64,563 681 65,244 17,439 2 17,441 5,528 0 5,528 1,133 0 1,133 483 0 483 201 0 201 89,347 683 90,030 On 31 December 2014 and 2013, there was no indication that trade receivables that were not impaired could be irrecoverable. The amount of receivables that were impaired was as follows: All trade receivables were impaired by specific valuation allow- ances. There have been no general allowances. Movements on the Group provision for impairment of trade receivables are as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 in EUR thousands 2014 2013 Trade receivables impaired Allowances for doubtful accounts 1,954 –1,921 1,746 As of 1 January –1,638 Additions The carrying amounts of the Group’s trade and other receiv- ables are denominated in the following currencies: Amounts used Reversals Currency effects As of 31 December 1,638 445 –178 – 20 36 1,921 2,350 273 – 716 – 221 – 48 1,638 in EUR thousands 31 Dec 2014 31 Dec 2013 Euro US dollar Chinese renminbi British pound Australian dollar Swedish krona Swiss franc Indien rupee Malaysian ringgit Thai baht Russian ruble Other currencies 33,707 54,051 6,508 3,435 3,020 788 871 1,105 943 460 515 2,314 107,717 44,547 28,782 4,428 2,515 2,704 1,232 1,220 685 900 457 731 1,937 90,138 The creation and release of allowances for doubtful accounts have been included in ‘other operating income / expenses’ in the consolidated statement of comprehensive income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash. The other classes within trade and other receivables do not contain impaired assets. The maximum exposure to credit risk on the reporting date is the carrying amount of each class of receivables mentioned above. The Group does not hold any collateral as security. On 31 December 2014 and 2013, the trade and other receiv- ables are unsecured. NORMA Group SE Annual Report 2014 151 Receivables of EUR 770 thousands (2013: EUR 1,339 thou- sands) were sold in a factoring contract. On 31 December 2014, impairments on inventories amounting to EUR 2,415 thousands (31 December 2013: EUR 2,919 thou- sands) were made. Trade receivables include receivables of EUR 16,416 thousands from National Diversified Sales, Inc., which was acquired in the fourth quarter of 2014. ABS programme In 2014, NORMA Group entered into a revolving asset pur- chase agreement (Receivables Purchase Agreement) with Weinberg Capital Ltd. (special purpose entity). Within the agreed structure, NORMA Group sold trade receivables in the context of an ABS transaction which was successfully initiated in December 2014. Receivables are sold by NORMA Group to a special purpose entity. As of 31 December 2014, domestic NORMA Group entities had sold receivables in an amount of EUR 11.9 million under this asset-backed securities (ABS) programme with a maximum vol- ume of EUR 25 million. From the sold receivables EUR 1.9 million were retained as loss reserves and were not paid out. These assets were recognised as other financial assets. The basis for this transaction is the transfer of trade receivables of individual NORMA Group subsidiaries to a special purpose entity with a framework of undisclosed assignment. This special purpose entity (SPE) is not consolidated under IFRS 10, because neither the power over the SPE is attributable to the NORMA Group nor the NORMA Group has an essential self-interest and no connection between power and variability of the returns of the special purpose entity exists. The requirements for a receivables transfer according to IAS 39.15 are met, since the receivables are transferred accord- ing to IAS 39.18 a). Verification in accordance with IAS 39.20 shows that substantially all risk and rewards were neither trans- ferred nor retained. Therefore, according to IAS 39.30, NORMA Group’s continuing involvement must be recognised. This continuing involvement in the amount of EUR 320 thousands includes the maximum amount that NORMA Group could con- ceivably have to pay back under the default guarantee and the expected interest payments until the payment is received for the carrying amount of the receivables transferred. The fair value of the guarantee / interest payments to be assumed has been estimated at EUR 4 thousands, taken through profit or loss and recognised under other liabilities. 24. IN VENTORIES The inventories were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Inventories include inventories of EUR 26,490 thousands from National Diversified Sales, Inc., which was acquired in the fourth quarter of 2014. Thereof, EUR 12,523 thousands were measured at fair value less costs to sale. On 31 December 2014 and 2013, the inventories are unsecured. 25. OTHER NON - FIN A NCIAL AS SE TS Other non-financial assets were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Deferred costs VAT assets Receivables against factor Prepayments Reimbursement insurance contracts Other assets 1,558 5,115 222 2,557 170 1,705 11,327 1,019 2,751 767 1,061 1,141 1,375 8,114 26. OTHER FIN A NCIAL AS SE TS Other financial assets were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Receivables from ABS programme Other assets 1,866 332 2,198 0 0 0 Receivables from the ABS programme include reserves for the trade receivables sold  Note 23 ‘Trade and other receivables’. 27. EQUIT Y Subscribed capital The subscribed capital of the Company on 31 December 2014 and 2013 amounted to EUR 31,862 thousands and was fully paid in. It is divided into 31,862,400 shares with no par value and a notional value of EUR 1. The liability of the share- holders for the obligations of the Company to its creditors is limited to this capital. The amount of the subscribed capi- tal is not permitted to be distributed by the Company to its shareholders. Raw materials Work in progress Finished goods and goods for resale 30,418 16,163 68,296 114,877 25,134 7,271 47,365 79,770 With the change of the legal form of NORMA Group to a public Company on 14 March 2011, EUR 24,786 thousands, including acquired treasury shares, were reclassified from the capital re- serves to subscribed capital. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 152 In the course of the IPO on 8 April 2011, a capital increase of seven million shares was placed, leading to an increase in the subscribed capital of EUR 7,000 thousands. Capital reserve The capital reserve contains: Authorised and conditional capital The Management Board was authorised by the extraordinary shareholders’ meeting on 6 April 2011 for the period ending on 5 April 2016 to increase the Company’s registered share capital in one or more transactions by up to EUR 15,931,200 in aggregate by issuing up to 15,931,200 new no par value regis- tered shares against cash contributions or contributions in kind (authorised capital). With the resolution of the extraordinary shareholders’ meeting on 6 April 2011, the Company’s share capital has been condi- tionally increased by up to EUR 12,505,000 through the issu- ance of up to 12,505,000 new no par value registered shares (conditional capital). The conditional capital increase serves to issue shares to the holders or creditors of convertible or warrant-linked bonds as well as profit participation rights based on the authorisation approved by the extraordinary share- holders’ meeting of 6 April 2011. • amounts (premiums) received for the issuance of shares, • premiums paid by shareholders in exchange for the granting of a preference for their shares, • amounts resulted from other capital contributions of the owners. NORMA Group SE began trading on the Prime Standard of the Frankfurt Stock Exchange on 8 April 2011. The issue price for NORMA Group’s shares was EUR 21.00. In the course of the IPO, a capital increase of seven million shares with a value of EUR 147,000 thousands was placed, leading to an increase in the subscribed capital of EUR 7,000 thousands and an increase of the capital reserve of EUR 140,000 thousands. Costs for the Operational Performance Incentive Cash Pro- gramme (OPICP) of EUR 2,762 thousands were fully reimbursed in accordance with the agreement by the previous shareholders. In 2013, EUR 1,067 thousands were finally paid and recognised in the capital reserve. Retained earnings Retained earnings consisted of the following: in EUR thousands Balance as of 31 December 2012 Profit for the year Dividends paid Stock options Effect before taxes Tax effect Balance as of 31 December 2013 Profit for the year Dividends paid Effect before taxes Tax effect Retained earnings 53,110 55,557 – 20,711 87,956 54,722 – 22,304 Remeasure- ments of post employment benefit obligations IPO costs directly netted with equity Reimburse- ment IPO costs by shareholder Acquisition of non- controlling interest Effects from the application of IAS 19R Stock options – 874 602 – 4,640 4,681 – 2,429 839 – 602 0 – 4,640 4,681 – 2,429 839 – 726 159 –1,441 –1,619 453 Total 51,289 55,557 – 20,711 – 602 – 726 159 84,966 54,722 – 22,304 –1,619 453 Balance as of 31 December 2014 120,374 – 2,607 0 – 4,640 4,681 – 2,429 839 116,218 NORMA Group SE Annual Report 2014 153 A dividend of EUR 22,304 thousands (EUR 0.70 per share) was paid to the shareholders of NORMA Group after the Annual Gen- eral Meeting in May 2014, which reduced the retained earnings. Other reserves Other reserves consisted of the following: in EUR thousands Exchange differences on translating foreign operations Total Cash flow hedges Balance as of 1 January 2013 – 6,699 –1,851 – 8,550 price at the time of the Group’s IPO. The exercise price for the other tranches will be the weighted average of the closing price of the Group’s share on the 60 trading days directly preceding the allocation of each tranche. Dividend payments by the Group during the vesting period are deducted from the exercise price of each tranche. The value of the share option is calculated using a generally accepted valuation methodology (Monte- Carlo-Simulation). The Group used the historical volatility of the NORMA Group SE share to determine the volatility. The Group used the following parameters for its evaluation for the tranche of 2014: Currency translation Effect before taxes Tax effect Balance as of 31 December 2013 Currency translation Effect before taxes Tax effect Balance as of 31 December 2014 – 7,636 – 7,636 Expected duration until exercise in years 3,314 – 985 3,314 – 985 Exercise price in EUR Risk-free interest rate in % Expected volatility in % – 4,370 – 9,487 –13,857 14,326 14,326 Expected dividend payment in % Share price when granted in EUR 2,989 – 962 2,989 – 962 Expected Cap (2% of the average EBITA during the holding period) – 2,343 4,839 2,496 Share price as of 31 December 2014 reporting date in EUR 3.3 40.16 – 0.02 33.00 2.00 39.00 17.30 39.64 28 . SH AR E- BASED PAYMENTS Management incentive schemes The matching stock programme (MSP) for the Management Board provides a long-term incentive to commit to the success of the Group. The MSP is a share-based option. To this end, the Supervisory Board specifies a number of share options to be granted each financial year, in financial year 2015 for the last time, with the proviso that the Management Board member makes a corresponding personal investment in the Group. The shares involved in the share options are those shares allo- cated or acquired and qualified as part of the MSP defined in the Management Board contract. The number of share options is calculated by multiplying the qualified shares (2014: 108,452; 2013: 108,452) held at the time of allotment by the option fac- tor specified by the Supervisory Board. A new option factor is set for every tranche (the option factor for 2014 is 1.5; 2013: 1.5). The MSP is split into five tranches. The first tranche was allocated on the day of the IPO. The other tranches will be allocated on 31 March each following year. There are therefore 162,679 share options in the 2014 financial year (2013: 162,679 share options). The holding period is four years (on 31 March 2018 for the 2014 tranche, on 31 March 2017 for the 2013 tranche, on 31 March 2016 for the 2012 tranche and on 31 March 2015 for the 2011 tranche). The exercise price for the 2011 tranche is the issue Each tranche is calculated on the grant date, taking changes in influencing factors into account, and prorated over the vested period. The options of a tranche can only be exercised within a period of two years following the expiration of the holding period. In order for an option to be exercised, the weighted average of the last ten trading days must be at least 1.2 times of the ex- ercise price. The pay out is limited to 2% of the average EBITA (tranches 2011, 2012 and 2014) or EBITDA (tranche 2013) during the holding period. When the option is exercised, the Group can decide at its own discretion whether to settle the option in shares or cash. The tranches from 2011 to 2014 will likely be settled in equity instruments. The fair value was determined when the options were granted. Because the tranches will be settled in equity instruments, the fair value of the option rights will not be adjusted during the holding period (vesting period). The fair value of the option rights for 2014 was EUR 4.11 per option right when the option rights were granted (2013: EUR 7.33). The fair value of the 162,679 op- tion rights granted with the 2014 tranche came to EUR 668,611 (Tranche 2013: EUR 1,192,674). The resulting personnel expenses will be recorded over the course of the vesting period. They came to EUR 541,011 for the 2014 financial year (2013: EUR 698,531) assuming no staff turnover. This amount was allocated to capital reserve. The option rights granted under the matching stock programme (MSP) changed as follows in the 2014 and 2013 financial years: Consolidated Financial StatementsNotes to the Consolidated Financial Statements 154 Number of option rights outstanding Exercise price per right (in EUR) Contractual life in years Aggregated intrinsic value (in EUR) Balance as of 31 December 2012 Granted Exercised Lapsed / expired Balance as of 31 December 2013 Excercisable options as of 31 December 2013 * based on the closing share price as of 31 December 2013 Balance as of 31 December 2013 Granted Exercised Lapsed / expired Balance as of 31 December 2014 Excercisable options as of 31 December 2014 * based on the closing share price as of 31 December 2014 325,358 162,679 - - 488,037 - 488,037 162,679 - - 650,716 - 19.44 23.71 - - 20.86 - 20.86 40.16 - - 25.69 - 4.75 5.25 - - 4.25 - 4.25 5.25 - - 3.75 - - - - - 7,428,737* - - - - - 9,163,708* - The aggregated intrinsic value, based on the closing share price on 31 December 2014, was EUR 9,164 thousands, the tranche 2014 had an aggregated intrinsic value of EUR 0 thousands. the start of the performance period is adjusted based on the Com pany’s performance achieved, incorporating both the targets defined during the performance period and the Company / regional factor. The exercise prices of the option rights granted under the MSP are between EUR 17.87 and EUR 40.16 per right and are as follows: Number of option rights outstanding Exercise price per right (in EUR) Contractual life in years Tranche 2011 Tranche 2012 Tranche 2013 Tranche 2014 162,679 162,679 162,679 162,679 21.00 17.87 23.71 40.16 2.25 3.25 4.25 5.25 Long-Term Incentive Plan In financial year 2013, NORMA Group installed a share-based, long-term, variable compensation component for executives and certain other groups of employees (Long-Term Incentive Plan). The Long-Term Incentive Plan (LTI) is a share-based pay- ment, cash settled plan that takes into account both the per- formance of the Company and the share price development. The participants receive a preliminary number of share units (virtual shares) at the start of the performance period based on a percentage of the respective base salary multiplied with a conversion rate. The conversion rate is determined based on the average share price of the previous 60 trading days of the calendar year prior to the grant date. Once four years have elapsed, the number of share units granted at The goal achievement factor, measured by adjusted EBITA, as well as the Company / regional factor are applied as per- formance targets. The goal achievement factor is based on the adjusted EBITA of NORMA Group. The absolute adjusted EBITA target is determined for every year of the performance period based on the budgeted value. After conclusion of the four-year-period, the yearly recorded adjusted EBITA values are defined as a percentage in relation to the target values and averaged out over the four years. Allocation occurs above a goal achievement ratio of 90%. Between 90% and 100% goal achievement, every percentage point amounts to 10 percentage points of goal achievement factor. Between 100% and 200% goal achievement, the goal achievement factor grows by 1.5 percentage points per percentage point of goal achievement. The company factor is determined by the Group Senior Man- agement based on the development of the Company, as well as the development in relation to comparable companies. In addition to this, the development of free cash flows is taken into account when determining the factor. At the discretion of the Group Senior Management, unanticipated developments can also be taken into account and the company factor corrected either downward or upward accordingly. The factor can assume values between 0.5 and 1.5. The regional factor is defined by the Group Senior Management prior to pay-out and can assume a value between 0.5 and 1.5. The factor takes into account the results of the region, as well as any region-specific aspects. NORMA Group SE Annual Report 2014155 The value of the share units is then determined at the end of the fourth calendar year based on the average share price of the last 60 days of trading in this fourth year. In case the calculated Long- term Incentive pay-out exceeds 250% of the initial grant value, the maximum pay-out is capped at 250%. The value determined is paid out to the participants in cash in May of the fifth year. provision. In total, the provision for the LTI amounts to EUR 777 thousands as of 31 December 2014 (2013: EUR 285 thousands). 2 9. R E TIR EMENT BENEFIT OBLIG ATIONS Retirement benefit obligations result mainly from the German pension plan and a Swiss post-employment benefit plan. The LTI is a group-wide and global compensation instrument with a long-term orientation. Due to the coupling to the development not only of the stock price, but also the Company’s performance, the LTI provides an additional incentive to create value through value-based action, aligned with the goals of NORMA Group. The determination of fair value, which is the basis for determining the pro rata provision on the balance sheet date, was performed using a Monte Carlo simulation. Due to the cash settlement of the virtual share units, the fair value is measured on each balance sheet date and the resulting changes in the fair value are recognised in income or loss. The allocation of the expenses is made on a pro rate basis over the performance period. The share units granted under the LTI changed as follows in the 2014 and 2013 financial years: The German defined benefit pension plan was closed for new entrants in 1990 and provides benefits in case of retirement, disability, and death as life-long pension payments. The benefits entitlements depend on years of service and salary. The portion of salary that is above the income threshold for social security contribution leads to higher benefit entitlements compared to the portion of the salary up to that threshold. Although the plan was closed in 1990, NORMA Group is still exposed to certain actuarial risks associated with defined benefit plans, such as longevity and compensation increases. Due to the amount of the obligation and the composition of the plan participants, approximately 95% are pensioners, a significant change in the actuarial assumptions would have no significant effects on NORMA Group. Employees hired after 1990 are eligible under a defined contribution scheme. The contributions are paid into an insurance contract providing lump sum payments in case of retirements and death. 1st Tranche LTI 2013 2nd Tranche LTI 2014 Expected duration until exercise in years 2.00 3.00 Fair value per “Share Unit” in EUR as of 31 December 2014 Share price when granted in EUR 35.30 20.68 36.72 36.40 Balance as of 31 December 2013 37,122 Tentatively granted “Share Units” Exercised Lapsed Balance as of 31 December 2014 - - 5,238 31,884 Expected duration until exercise in years Fair value per “Share Unit” in EUR as of 31 December 2013 Share price when granted in EUR Balance as of 31 December 2012 Tentatively granted “Share Units” Exercised Lapsed Balance as of 31 December 2013 0 24,768 - 1,383 23,385 1st Tranche LTI 2013 3.00 30.73 20.68 0 43,394 - 6,272 37,122 Besides the German plan, there is a further benefit plan in Switzer land resulting from the Swiss “Berufliches Vorsorge- gesetz” law (BVG). According to the BVG, each employer has to grant post-employment benefits for qualifying employees. The plan is a capital-based plan under which the Company has to make contributions equivalent to at least the limits specified in the plan conditions employee contributions. These plans are administered by foundations that are legally separated from the entity and are subject to the BVG. The Group has outsourced the investment process to the Foundation, which sets the stra- tegic asset allocation in their group life portfolio. All regulatory granted obligations out of the plan are reinsured by an insurance company. This covers risks of disability, death and longevity. Furthermore, there is, for the retirement assets invested, a 100% capital and interest guarantee. In the case of a shortfall, the employer and plan participants’ contribution might be increased according to decisions of the relevant foundation board. Strate- gies of the foundation boards to make up for potential shortfalls are subject to approval by the regulator. Reconciliation of defined benefit obligations (DBO) and plan assets The amounts included in the Group’s Consolidated Financial Statements arising from its post-employment defined benefit plans are as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 In financial year 2014, expenses resulting from the LTI in the amount of EUR 492 thousands (2013: EUR 285 thousands) were recorded under personnel expense and within a corresponding Present value of obligations Fair value of plan assets Liability in the balance sheet 15,130 2,859 12,271 12,907 2,038 10,869 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 156 The reconciliation of the net defined benefit liability (liability in the balance sheet) is as follows: A detailed reconciliation of the changes in the fair value of plan assets is provided in the following table: in EUR thousands 2014 2013 in EUR thousands 2014 2013 As of 1 January Current service cost Administration costs Net interest expenses Remeasurments: Return on plan assets excluding amounts included in net interest expenses Actuarial (gains) losses from changes in demographic assumptions Actuarial (gains) losses from changes in financial assumptions Experience (gains) losses Employer contributions Benefits paid Business combinations, disposals and other Foreign currency translastion effects 10,869 10,319 As of 1 January 238 Interest income 0 Remeasurements: 248 Return on plan assets excluding amounts included in net interest expenses Employer contributions 0 Plan participants contributions Benefits paid Settlement payments Business combinations, disposals and other Liability administration costs Foreign currency translation effects Fair value of plan assets at end of year 2,038 46 – 95 176 989 – 344 0 0 0 49 2,859 0 0 0 0 0 0 0 2,038 0 0 2,038 As of 31 December 12,271 10,869 The other changes in financial year 2013 are due to the initial consolidation of the Swiss plan. A detailed reconciliation for the changes in the DBO is provided in the following table: Disaggregation of plan assets The allocation of the plan assets of the benefit plans is as follows: in EUR thousands 2014 2013 in EUR thousands 2014 2013 As of 1 January Current service cost Administration costs Interest expenses Remeasurments: Actuarial (gains) losses from changes in demographic assumptions Actuarial (gains) losses from changes in financial assumptions Experience (gains) losses Plan participants contribution Benefits paid Business combinations, disposals and other Foreign currency translation effects 12,907 10,319 Asset class 238 Insurance contracts 0 Cash deposit 248 Equity securities Total 2,822 1,956 33 4 80 2 2,859 2,038 Cash deposits and equity securities have quoted prices in ac- tive markets. The values for insurance contracts represent the redemption value, for these no quoted prices in an active market are available. Actuarial assumptions The principal actuarial assumptions are as follows: As of 31 December 15,130 12,907 The changes in the scope of consolidation and other in the fiscal year 2013 are due to the initial consolidation of the Swiss plan. in % The total defined benefit obligation at the end of financial year 2014 includes EUR 6,039 thousands for active employees, EUR 78 thousands for former employees with vested benefits and EUR 9,013 thousands for retirees and surviving dependents. Discount rate Inflation rate Future pension increases 2014 2013 1.62 1.71 1.70 2.85 1.77 2.00 436 17 266 95 1,236 307 –19 –176 – 776 0 16 436 17 312 1,236 307 –19 989 –1,120 0 65 – 51 –101 181 0 – 656 692 –1 – 51 –101 181 0 – 656 2,730 –1 NORMA Group SE Annual Report 2014 157 The biometric assumptions are based on the 2005 G Heubeck life-expectancy tables for the German plan and on the life-ex- pectancy tables of the BVG 2010 G for the Swiss plan. due to the changes. If the assumptions change at a different level, the effect on the DBO is not necessarily in a linear relation. Sensitivity analysis If the discount rate was to differ by + 0.25% / – 0.25% from the interest rate used on the balance sheet date, the defined bene fit obligation for pension benefits would be an estimated EUR 468 thousands lower or EUR 493 thousands higher. If the future pension increase used was to differ by + 0.25% / – 0.25% from management’s estimates, the defined benefit obligation for pension benefits would be an estimated EUR 241 thousands higher or EUR 232 thousands lower. The reduction / increase of the mortality rates by 10% results in an increase / deduc- tion of life expectancy depending on the individual age of each beneficiary. That means, for example, that the life expectancy of a male NORMA employee age 55 years as of 31 December 2014 increases / decreases by approximately one year. In order to determine the longevity sensitivity, the mortality rates were reduced / increased by 10% for all beneficiaries. The effect on DBO as of 31 December 2014 due to a 10% reduction / increase in mortality rates would result in an increase of EUR 838 thou- sands or decrease of EUR 856 thousands. When calculating the sensitivity of the defined benefit obligation to significant actuarial assumptions, the same method (present value of the defined benefit obligation calculated with the pro- jected unit credit method) has been applied as when calculat- ing the post-employment benefit obligation recognised in the Consolidated Statement of Financial Position. Increases and decreases in the discount rate or rate of pension progression which are used in determining the DBO do not have a symmet- rical effect on the DBO due to the compound interest effect created when determining the net present value of the future benefit. If more than one of the assumptions are changed simul- taneously, the combined impact due to the changes would not necessarily be the same as the sum of the individual effects Future cash flows Employer contributions expected to be paid to the post-employ- ment defined benefit plans in financial year 2014 are EUR 222 thousands. Expected payments from post-employment benefit plans are as follows: in EUR thousands Expected benefit payments 2015 2016 2017 2018 2019 2020–2024 in EUR thousands Expected benefit payments 2014 2015 2016 2017 2018 2019–2023 2014 793 779 764 750 736 3,485 2013 762 752 741 731 720 3,445 The weighted average duration of the defined benefit obligation is 10.9 years. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 158 3 0. PROVISIONS The development of provisions is as follows: in EUR thousands Guarantees Severance Early retirement Other personnel-related obligations Outstanding credit notes Outstanding invoices Others Total provisions in EUR thousands Guarantees Severance Early retirement Other personnel-related obligations Outstanding credit notes Outstanding invoices Others Total provisions in EUR thousands Guarantees Severance Early retirement Other personnel-related obligations Outstanding credit notes Outstanding invoices Others Total provisions As of 1 Jan 2014 Additions Amounts used Unused amounts reversed Interest accrued Changes in consoli- dation Foreign currency translation As of 31 Dec 2014 Transfers 2,144 549 2,883 3,963 1,391 802 1,886 13,618 173 955 1,717 1,749 985 1,010 1,005 7,594 – 206 – 472 –1,390 –1,817 – 616 – 307 – 619 – 739 0 0 – 34 – 466 – 541 – 216 0 0 111 90 0 0 0 – 5,427 –1,996 201 0 0 0 0 0 0 0 0 0 – 30 0 247 0 0 0 19 2 0 8 – 9 85 37 1,391 1,004 3,321 4,206 1,285 1,049 2,093 217 142 14,349 As of 1 Jan 2013 Additions Amounts used Unused amounts reversed Interest accrued Changes in consoli- dation Foreign currency translation As of 31 Dec 2013 Transfers 1,652 621 2,755 2,611 1,653 839 1,170 578 437 2,136 1,565 532 269 837 –131 – 507 – 2,060 – 217 – 659 –182 – 532 11,301 6,354 – 4,288 – 4 0 0 –115 –113 – 99 – 21 – 352 0 0 52 3 0 0 0 55 95 0 0 217 0 0 510 822 0 0 0 0 0 0 0 0 – 46 – 2 0 –101 – 22 – 25 – 78 2,144 549 2,883 3,963 1,391 802 1,886 – 274 13,618 31 December 2014 31 December 2013 Total 1,391 1,004 3,321 4,206 1,285 1,049 2,093 14,349 thereof current thereof non-current 1,085 1,004 0 1,830 1,285 1,049 1,889 8,142 306 0 3,321 2,376 0 0 204 6,207 Total 2,144 549 2,883 3,963 1,391 802 1,886 13,618 thereof current thereof non-current 1,835 549 0 2,289 1,391 802 1,468 8,334 309 0 2,883 1,674 0 0 418 5,284 NORMA Group SE Annual Report 2014 159 Employees at NORMA Group in Germany can engage in an early retirement contract (“Altersteilzeit”). The employee reduces his / her working hours in preparation of his / her retirement. In the first phase, the employee works 100% (“Arbeitsphase”). In the second phase, he / she is exempt from work (“Freistellungs- phase”). The employees receive half of their payment for the total early retirement-phase as well as top-up payments (includ- ing social security costs paid by the employer). The duration of the early retirement has a maximum of six years. The accounting for early retirement (“Altersteilzeit”) is based on actuarial valuations taking into account assumptions such as a discount rate of 0.61% (2013: 1.75%) as well as the 2005 G Heubeck life-expectancy tables. For signed early retirement contracts, a liability has been recognised. The liability includes top-up payments (“Aufstockungsbeträge”) as well as deferred salary payments (“Erfüllungsrückstände”). Provisions for guarantees include provisions due to circum stan- ces where a final agreement has not yet been achieved and pro- visions based on experience (customer claim quota, amount of damage, etc.). Future price increases are considered if material. Provisions for severance payments include expected severance payments for NORMA Group employees due to circumstances where a final agreement has not yet been achieved. The pro- visions will be paid out in the following financial year and are therefore reported under the current provisions. Other personnel-related obligations include incentives in the amount of EUR 1,637 thousands (2013: EUR 2,113 thousands), which are due to a variable element of the board compensation (LTI) of the Management Board and provisions due to the share- based, variable compensation component for executives and certain other groups of employees (Long-Term Incentive Plan) in the amount of EUR 777 thousands (2013: EUR 285 thousands). A detailed description of the MSP can be found in  Note 28 “Share-based payments.” The Company’s long-term incentive (LTI) of the Management Board is a component of a variable remuneration element de- signed to maximise the Company’s long-term performance. The LTI plan also comprises an EBITA component and an operating free cash flow before external use (FCF) component, each of which are observed over a period of three years (performance period). A new three year performance period begins every year. Both components are calculated by multiplying the aver- age annual adjusted EBITA and FCF values actually achieved in the performance period by the adjusted EBITA and FCF bonus percentages specified in the employment contract. In the second step, the actual value of a component is compared to the medium-term plan approved by the Supervisory Board to evaluate the Company’s performance and adjustments are made to the LTI plan. The LTI plan is limited to two and a half times the amount that would be arrived at on the basis of the figures in the Company’s medium-term plan. If the actual value is lower than the planned value, the LTI plan is reduced on a straight-line basis down to a minimum of EUR 0 if the three year targets are missed by a significant amount. Due to the calcula- tion of the variable remuneration based on future results of the Group, uncertainties exist regarding the amount of the future outflows. Parts of the long-term compensation component will be paid out in the first half of the following financial year and are therefore reported under the current provisions. Furthermore other personnel-related provisions include provi- sions for short term bonuses in the amount of EUR 455 thou- sands, which are due to the short term variable remuneration element (STI) for the Management Board, jubilee provisions in the amount of EUR 675 thousands (2013: EUR 585 thousands) and provisions for payable income tax and social security contribu- tions in foreign countries and other personnel-related provisions. Jubilee provisions are based on actuarial valuations taking into account assumptions such as a discount rate of 1.45% as well as the 2005 G Heubeck life-expectancy tables. Provisions for outstanding credit notes in the amount of EUR 1,285 thousands (2013: 1,391 thousands) include obliga- tions for subsequent price adjustments for past periods due to ongoing negotiations with customers. There are uncertainties regarding the amount and timing of the outflows. However, it is expected that this results within a year in payments. The position “Other” includes provisions for dismantling obli- gations in the amount of EUR 503 thousands (2013: EUR 1,117 thousands), as well as provisions in connection with the planned shutdown of Nordic Metalblok S.r.l. in the amount of EUR 542 thousands. 31. BOR ROWINGS The borrowings were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Non-current Bank borrowings Current Bank borrowings Revolving credit facility Other borrowings (e.g. factoring and reverse-factoring) Total borrowings 408,225 408,225 21,478 0 1,243 22,721 430,946 200,981 200,981 117,856 5,500 1,771 125,127 326,108 Bank borrowings As of 31 December 2014, NORMA Group’s financing consists in the amount of EUR 92.8 million of syndicated bank facilities (2013: EUR 195.0 million). As part of the renegotiation of the syndicated bank facilities, EUR 20.8 million were borrowed with a maturity until 2016 (including the option to extend until 2019 or 2021). Consolidated Financial StatementsNotes to the Consolidated Financial Statements 160 In financial year 2014, the repayment of the syndicated bank facilities amounts to EUR 123.0 million (2013: EUR 25.0 million). Furthermore, NORMA Group issued a promissory note valued at EUR 125.0 million with 5, 7 and 10 year terms in 2013. Ad- ditionally, NORMA Group issued a second promissory note valued at EUR 106.0 million with 3, 5, 7 and 10 year terms and at USD 128.5 million (value in EUR on 31 December 2014: 105.8 million) with 3, 5, and 7 year terms. A revolving credit line used in the amount of EUR 5.5 million as of 31 December 2013 and was fully repaid in financial year 2014. The maturity of the syndicated bank facilities and the promissory note on 31 December 2014 is as follows: in EUR thousands up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years Bank borrowings, net 19,200 73,600 0 0 Promissory note, net 0 0 185,926 150,914 Total 19,200 73,600 185,926 150,914 Factoring NORMA Group has sold a portion of its receivables (EUR 770 thousands) and payables (EUR 473 thousands) to a factor. NORMA Group still bears the opportunities and risks resulting from the receivables. The transactions are therefore shown as financial liabilities. 32 . OTHER NON - FIN A NCIAL LIABILITIES Other non-financial liabilities are as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Non-current Government grants Other liabilities Current Non-income tax liabilities Social liabilities Personnel-related liabilities (e.g. holiday, bonus, premiums) Other liabilities Deferred income 1,756 34 1,790 2,337 3,929 17,588 917 1,244 26,015 27,805 1,163 235 1,398 2,859 3,021 14,827 1,547 153 22,407 23,805 The maturity of the syndicated bank facilities and the promissory note on 31 December 2013 is as follows: Total other non-financial liabilities in EUR thousands up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years Bank borrowings, net 115,800 19,200 60,000 0 Promissory note, net 0 0 52,000 73,000 Total 115,800 19,200 112,000 73,000 Costs directly attributable to financing were netted with the bank borrowings in accordance with IAS 39.43. They are amortised over the financing period using the effective interest method. The total amount, which was amortised over the remaining finan cing period, amounts to EUR 2,565 thousands as of 31 De- cember 2014 (2013: EUR 3,551 thousands). The syndicated bank facilities are hedged against foreign ex- change rate and interest rate changes. Furthermore, tranches of the promissory note with variable interest rates are hedged against interest rate changes. The derivative liability was in- creased from EUR 15,220 thousands on 31 December 2013 to EUR 18,177 thousands on 31 December 2014. The bank borrowings are unsecured on 31 December 2014. With renegotiations of the credit facilities in the fourth quarter of 2012, the established securities for the existing credit lines were fully released. NORMA Group received government grants amounting to EUR 2,270 thousands, of which EUR 1,756 thousands were not rec- ognised in profit or loss. They consist of grants in cash as well as land. The grants are bound to capital expenditures and em- ployees. NORMA Group recognises the government grants as income over the period in which related expenses occur. In 2014, EUR 514 thousands were recognised as income (2013: EUR 310 thousands). 3 3 . OTHER FIN A NCIAL LIABILITIES Other financial liabilities were as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Non-current Finance lease liabilities Acquisition liability Other liabilities Current Finance lease liabilities Outstanding credit notes Acquisition liability Other liabilities Total other financial liabilities 248 2,998 517 3,763 201 227 1,286 731 2,445 6,208 375 544 700 1,619 308 225 2,956 1,187 4,676 6,295 NORMA Group SE Annual Report 2014 161 The future aggregate minimum lease payments under non-can- cellable finance leases and their respective present values are as follows: 3 1 D E C E M B E R 2 0 13 in EUR thousands up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years in EUR thousands 31 Dec 2014 31 Dec 2013 Borrowings 125,127 19,326 108,619 73,036 Gross finance lease liabilities – minimum lease payments Up to 1 year Later than 1 year and up to 5 years Later than 5 years Future finance charges on finance lease Present value of finance lease liabilities Up to 1 year Later than 1 year and up to 5 years Later than 5 years 211 258 0 469 20 201 248 0 449 343 395 0 738 55 308 375 0 683 Lease liabilities are effectively secured because the rights to the leased assets will revert to the lessor in the event of default. 3 4. TR ADE PAYABLES All trade payables are due to third parties within one year. For in- formation regarding trade payables, please refer to  Note 3.14. Trade payables include trade payables of EUR 9,698 thousands from National Diversified Sales, Inc., which was acquired in the fourth quarter of 2014. 3 5. FIN A NCIAL LIABILITIES A ND NE T DEBT The financial liabilities of NORMA Group have the following maturity: 3 1 D E C E M B E R 2 0 14 in EUR thousands Borrowings Trade payables Finance lease liabilities up to 1 year > 1 year up to 2 years > 2 years up to 5 years > 5 years 22,721 71,883 185,514 150,828 80,829 202 0 200 0 47 0 0 0 56 105,995 75,543 185,561 150,884 Other financial liabilities 2,243 3,460 Trade payables Finance lease liabilities Other financial liabilities 59,025 309 4,367 0 221 508 0 153 737 0 0 0 188,828 20,055 109,509 73,036 Net debt of NORMA Group is as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Bank borrowings, net Derivative financial liabilities – hedge accounting Other borrowings (e.g. factoring and reverse-factoring) Finance lease liabilities Other financial liabilities Financial debt Cash and cash equivalents Net debt 429,703 324,338 20,220 15,270 1,243 449 5,759 457,374 84,271 373,103 1,770 683 5,612 347,673 194,188 153,485 The financial debt of NORMA Group increased by 31.6% from EUR 347,673 thousands as of 31 December 2013 to EUR 457,374 thousands as of 31 December 2014. The increase is mainly due to the issue of a promissory note valued at EUR 106,000 thou- sands and USD 128,500 thousands in the fourth quarter of 2014, which was mainly used for the financing of the acquisition of National Diversified Sales, Inc. Furthermore, in the context of the renegotiation of the existing syndicated bank facilities, an addi- tional EUR 20,800 thousands were borrowed. Conversely, parts of the syndicated bank facilities in the amount of EUR 123,000 thousands and the associated derivative financial liabilities in the amount of EUR 8,007 thousands were repaid in 2014. In addition, a revolving credit line used in the amount of EUR 5,500 thousands as of 31 December 2013 was repaid in the third quarter of 2014. The net debt of EUR 373,103 thousands increased in compari- son to 31 December 2013 (EUR 153,485 thousands) due to the financing of the acquisition of National Diversified Sales, Inc. in the fourth quarter of 2014. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 162 Other Notes 3 6. INFOR M ATION ON THE CONSOLIDATED STATEMENT OF CASH FLOWS The net payments for acquisitions of subsidiaries in 2014 and 2013 were as follows: In the statement of cash flows, a distinction is made between cash flows from operating activities, investing activities and finan cing activities. in EUR thousands 2014 2013 Net cash provided by operating activities is derived indirectly from profit for the period. The profit for the period is adjusted to eliminate non-cash expenses from depreciation and amor- tisation as well as expenses for which the cash effects are in- vesting or financing cash flows and to eliminate other non-cash expenses and income. Net cash provided by operating activi- ties of EUR 96,361 thousands (2013: EUR 115,351 thousands) represents changes in current assets, provisions and liabilities (excluding liabilities in connection with financing activities). Acquisition liability at the beginning of the period Payment obligations from acquisitions Acquired cash and cash equivalents Other Changes Less acquisition liability at the end of the period Less payments for shares in a subsidiary1) 3,500 244,588 –11,139 432 4,284 907 0 16,819 –109 0 3,500 0 Net payments for acquisitions of subsidiaries 232,190 13,210 1) Net cash used in / provided by financing activities The Group participates in a reverse-factoring-programme as well as in an ABS programme. The payments to the factor and from the ABS programme are included in cash flows from oper- ating activities, as this represents the economic substance of the transactions. Furthermore, cash flows from investing activities include trans- actions relating to the acquisition and disposal of non-cur- rent assets in the amount of EUR 30,152 thousands (2013: EUR 32,870 thousands). Other non-cash expenses and revenues included in net cash provided by operating activities in financial year 2014 mainly include non-cash expenses from the stock option programme amounting to EUR 541 thousands (2013: EUR 699 thousands) and non-cash interest expenses from the amortisation of ac- crued costs, directly attributable to the refinancing, amounting to EUR 2,498 thousands (2013: EUR 1,710 thousands). Furthermore, non-cash income (–) / expenses (+) from foreign exchange rate gains and losses on intragroup monetary items in the amount of EUR – 4,398 thousands (2013: EUR 1,355 thousands) are included in other non-cash expenses and revenues. Cash flows resulting from interest paid are disclosed as cash flows from financing activities. Net cash provided by operating activities in financial year 2014 was influenced by outflows from income taxes, relating to tax liabilities from prior years. Cash flows from investing activities in 2014 in the amount of EUR – 265,060 thousands include the cash effects from the pur- chase of the business activities of Five Star Clamps, Inc. in the amount of EUR 4,587 thousands and the purchase of National Diversified Sales, Inc. in the amount of EUR 225,262 thou- sands. In 2013, cash effects from acquisitions in the amount of EUR 13,210 thousands were recognised. Cash flows from financing activities comprise proceeds from borrowings (2014: EUR 229,870 thousands, 2013: EUR 128,118 thousands), repayments of borrowings (2014: EUR –129,257 thousands; 2013: EUR – 46,598 thousands), outflows resulting from repayment of hedging derivatives in the amount of EUR 9,901 thousands, the dividend payment (2014: EUR – 22,304 thousands, 2013: EUR – 20,711 thousands), as well as cash flows resulting from interest paid (2014: EUR – 9,492 thousands, 2013: EUR – 9,773 thousands). The proceeds from borrowings result from the promissory note issued in the fourth quarter of 2014 in the amount of EUR 209,742 thousands and from the syndicated bank facilities in the amount of EUR 20,128 thousands in connection with the acquisition of National diversified Sales, Inc. in the fourth quarter of 2014 ( Note 40 “Business combinations”). The repayments of borrowings mainly include the cash outflows from the repayment of parts of the syndicated bank facilities in the amount of EUR 123,000 thousands and the associated derivative financial liabilities in the amount of EUR 8,007 thou- sands. Furthermore, borrowing facilities in the amount of EUR 5,500 thousands were repaid in the third quarter of 2014. Additionally, payments for shares in a subsidiary in the amount of EUR 907 thousands (2013: EUR 0 thousands) and repay- ments from finance lease liabilities in the amount of EUR 287 thousands (2013: EUR 453 thousands) are disclosed as cash flows from financing activities. NORMA Group SE Annual Report 2014 163 The changes in balance sheet items that are presented in the consolidated statement of cash flows cannot be derived directly from the balance sheet, as the effects of currency translation are non-cash transactions and changes in the consolidated Group are shown directly in the net cash used in investing activities. Segment assets comprise all assets less (current and deferred) income tax assets. Taxes are shown in the reconciliation. Seg- ment assets and liabilities are measured in a manner consistent with that used in the statement of financial position. Cash is comprised of cash on hand and demand deposits of EUR 84,047 thousands on 31 December 2014 (31 December 2013: EUR 192,603 thousands), as well as cash equivalents with a value of EUR 224 thousands (2013: EUR 1,585 thousands). Cash from China, Serbia, Brazil and Malaysia (31 December 2014: EUR 3,904 thousands, 31 December 2013: EUR 9,272 thousands) cannot currently be distributed due to restrictions on capital movements. 37. SEGMENT R EPORTING NORMA Group segments the Group at a regional level. The reportable segments of NORMA Group are EME A, the Ameri- cas and Asia-Pacific. NORMA Group’s vision includes regional growth targets. Distribution Services are focused regionally and locally. EME A, the Americas and Asia-Pacific have linked re- gional intercompany organisations of different functions. As a result, the Group’s management reporting and controlling sys- tem has a regional focus. The product portfolio does not vary significantly between these segments. Revenues of each segment are generated from the three prod- uct categories clamps (CL AMP), joining elements (CONNECT) and fluid systems / connectors (FLUID). NORMA Group measures the performance of its segments through profit or loss indicators which are referred to as “ad- justed EBITDA” and “adjusted EBITA.” “Adjusted EBITDA” comprises revenue, changes in inventories of finished goods and work in progress, other own work capi- talised, raw materials and consumables used, other operating income and expenses, and employee benefits expense, ad- justed for material one-time effects. EBITDA is measured in a manner consistent with that used in the statement of compre- hensive income. “Adjusted EB I TA” includes, in addition to the EB I T DA , the depreciation adjusted for depreciation from purchase price allocations. In 2014, acquisition related expenses, mainly in connection with the acquisition of National Diversified Sales, Inc., in the amount of EUR 6,924 thousands were adjusted within EBIT- DA and the EBITA. Furthermore, in 2014, as already in 2013, EBITA was also adjusted by depreciation from purchase price allocations. Details regarding the adjustments can be found in  Note 7 “Adjustments.” Assets of the “Central Functions” include mainly cash and inter- company receivables. Segment liabilities comprise all liabilities less (current and de- ferred) income tax liabilities. Taxes are shown in the reconcilia- tion. Segment assets and liabilities are measured in a manner consistent with that used in the statement of financial position. Liabilities of the “Central Functions” include mainly borrowings. Capex equals additions to non-current assets (without additions to finance lease transactions). The reconciliation of the segments’ adjusted EBITDA to the profit before tax is as follows: in EUR thousands 2014 2013 Total segments’ adjusted EBITDA Depreciation without PPA depreciation Total adjusted EBITA of the Group Adjusted acquisition costs Depreciation from PPA EBITA of the Group Amortisation Financial costs, net Profit before tax 138,443 –16,944 121,499 – 6,924 –1,289 113,286 –15,442 –14,469 83,375 129,319 –16,699 112,620 0 – 496 112,124 –12,604 –15,585 83,935 Current and deferred tax assets and liabilities are shown in the consolidation. On 31 December 2014, EUR 22,942 thousands (31 December 2013: EUR 13,105 thousands) tax assets and EUR 115,345 thousands (31 December 2013: EUR 43,217 thou- sands) tax liabilities were shown in the consolidation. External sales per country, measured according to the place of domicile of the company which manufactures the products, are as follows: in EUR thousands 2014 2013 Germany USA, Mexico, Brazil Other countries 192,957 237,757 264,030 188,414 191,569 255,562 694,744 635,545 Inter-segment revenue is recorded at values that approximate third-party selling prices. The non-current assets per country include non-current assets less deferred tax assets, derivative financial instruments, and shares in consolidated related parties. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 164 in EUR thousands 31 Dec 2014 31 Dec 2013 Germany USA, Mexico, Brazil Sweden Other countries Consolidation 118,018 450,402 51,804 136,376 –13,439 118,879 152,854 53,239 129,463 –11,386 743,161 443,049 • Connectors Verbindungstechnik AG (Switzerland): lease- term from 2012 to 2016, soonest termination in 2016, • National Diversified Sales, Inc. (USA): lease-terms from 2012 to 2016, soonest termination in 2016; 2013 to 2015, soonest termination in 2015; 2013 to 2020, soonest termination in 2020 and 2014 to 2016, soonest termination in 2016. Lease expenditure (including non-cancellable and cancellable operating leases) amounting to EUR 8,737 thousands in 2014 (2013: EUR 8,345 thousands) is included in profit or loss in ‘ other operating expenses.’ 3 8 . CONTINGENCIES The Group has contingent liabilities in respect of legal claims arising in the ordinary course of business. The following table shows the future aggregate minimum lease payments (nominal value) under non-cancellable operating leases: NORMA Group does not believe that any of these contingent liabilities will have a material adverse effect on its business or any material liabilities will arise from contingent liabilities. 3 9. COMMITMENTS Capital commitments Capital expenditure (nominal value) contracted for on the bal- ance sheet date but not yet incurred is as follows: in EUR thousands 31 Dec 2014 31 Dec 2013 Property, plant and equipment 3,358 3,358 1,443 1,443 There are no material commitments concerning intangible assets. Operating lease commitments The Group leases various vehicles, property and technical equipment under non-cancellable operating lease agreements. The lease terms are between 1 and 15 years. The Group also leases various technical equipment under cancellable operating lease agreements. NORMA Group has significant operating lease arrangements with annual lease payments of more than EU R 200 thou- sands, concerning the leasing of land and buildings. Except for usual renewable options, the lease contracts do not com- prise other options. The lease arrangements are held by the following companies: • NORMA UK Ltd. (Great Britain): lease-term from 2006 to 2016, prolonged to 2028, soonest termination in 2023, • NORMA Pacific Pty Ltd. (Australia): lease-term from 2013 to 2017, soonest termination in 2017, • NORMA Michigan Inc. (USA): lease-term from 2013 to 2019, soonest termination in 2019, • NORMA Pennsylvania Inc. (USA): lease-term from 2011 to 2016, soonest termination in 2016, in EUR thousands 31 Dec 2014 31 Dec 2013 No later than 1 year Later than 1 year and no later than 5 years Later than 5 years 6,113 12,638 6,356 5,191 9,780 6,053 25,107 21,024 40. BUSINES S COMBIN ATIONS Business combinations in the financial year In 2014, NORMA Group acquired the business activities of Five Star Clamps, Inc. (USA) and 100% of the shares in National Diversified Sales, Inc. (USA). In the purchase price allocation, mainly immaterial assets were identified. Customer lists were evaluated using the ‘Multi Period Excess Earnings Method’ amounting to EUR 135,404 thousands. Trademarks were evaluated using the ‘Relief from Royalty Method’ amounting to EUR 25,562 thousands. Patents & technology of EUR 1,270 thousands were evaluated with the ‘Relief from Royalty Method.’ All assets and liabilities that arose from the acquisitions in 2014 are allocated to the cash-generating unit (CGU) “Americas” be- cause it is expected that they will benefit from the business combinations. The acquired assets and liabilities are shown in detail in the following section. Five Star Clamps, Inc. Effective 25 April 2014, NORMA Group acquired the business activities of Five Star Clamps, Inc. (“Five Star”) in the United States. Five Star with its headquarters in Crest Hill near Chicago, Illinois, has been selling joining products since 1987. The high-quality clamps from the owner-managed business are distributed to customers in over 50 different industries. In financial year 2013, NORMA Group SE Annual Report 2014 165 Five Star generated revenues of about USD 5.5 million. Five Star has many years of expertise in the markets for joining technol- ogy. The acquisition will strengthen NORMA Group’s market position in the US region and we will expand our manufacturing footprint and distribution activities. Goodwill of EUR 2,563 thousands derives from the acquisition which mainly relates to the extended product range and the strengthening of NORMA Group’s market position. Of the consideration of EUR 7,218 thousands, EUR 4,588 thou- sands were paid in cash and EUR 2,630 thousands consist of incurred liabilities as per 25 April 2014 (31 December 2014: EUR 2,998 thousands). The incurred liabilities consist entirely of a contingent consid- eration agreement according to IFRS 3.39. Under the contin- gent consideration agreement, NORMA Group is obligated to pay a specific amount depending on certain revenue made by Five Star in financial year 2015 compared to financial year 2012. The potential not discounted future amount resulting from the contingent consideration is between EUR 0 thousands and EUR 2,998 thousands. Based on the financial forecast of the Company, the Group ex- pects the contingent consideration to be paid in the total amount. This leads to a fair value in the amount of EUR 2,998 thousands. Change of the primarily purchase price allocation of the business activities of Five Star Clamps, Inc. acquired in the second quarter of 2014 The purchase price allocation was adjusted in the fourth quarter of 2014 based on the final determination of the Trade Working Capital Adjustment and new information regarding facts and circumstances that existed as of the acquisition date. Had this information been available at the time, it would have had an effect on the allocation of the purchase price. The following table summarises the consideration paid for Five Star and the amounts of the assets acquired and liabilities assumed recognised on the acquisition date and on 31 December 2014: in EUR thousands Initial purchase price allocation Corrections within the evaluation period Adjusted purchase price allocation Consideration on 25 April 2014 Acquisition-related costs (included in other operating expenses in the consolidated financial statement of comprehensive income) Recognised amounts of identifiable assets acquired and liabilities assumed Property, plant and equipment Trademarks Customer lists Inventory Trade and other receivables Trade payables Provisions Deferred tax assets Total identifiable net assets Goodwill 7,111 54 680 241 3,399 252 431 –165 –184 68 4,722 2,389 7,111 107 69 0 0 0 0 0 0 0 – 68 – 68 174 107 7,218 123 680 241 3,399 252 431 –165 –184 0 4,654 2,563 7,218 Consolidated Financial StatementsNotes to the Consolidated Financial Statements 166 The fair value of trade and other receivables is EUR 431 thou- sands and includes trade receivables with a fair value of EUR 436 thousands, of which EUR 5 thousands are expected to be uncollectible. purchase price adjustments, which result from the final deter- mination of the Trade Working Capital as well as other financial figures on the acquisition date. Due to the acquisition of the business activities of Five Star on 25 April 2014, the determination of the fair values of the acquired assets and liabilities on the balance sheet date could not be completed. The consolidation is therefore based on a preliminary purchase price allocation. This concerns in particu- lar the fair value of the acquired identifiable intangible assets in the amount of EUR 3,640 thousands; this item mainly includes customer relationships. The provisions mainly consist of personnel-related and warranty provisions. The revenue included in the consolidated statement of com- prehensive income contributed by Five Star was EUR 3,178 thousands since 25 April 2014. NORMA Group acquired in- dividual assets, liabilities and processes. Therefore, no profit and revenue can be shown for the period from 1 January to 24 April 2014. National Diversified Sales, Inc. On 31 October 2014, NORMA Group acquired all shares in National Diversified Sales, Inc. (“NDS”). NDS has its headquarters in Woodland Hills, California, located just north of Los Angeles. The Company has been operating its business for over 40 years and has more than 500 employees at two production sites and six warehouses. NDS manufac- tures and sells water management systems that collect and drain stormwater, irrigation solutions including drip irrigation; as well as joining products for use in flow management ap- plications. The product portfolio comprises drainage products including valve boxes, catch basins, channel drains and sub- surface drains; as well as automated drip irrigation systems and connecting fittings and valves. NDS offers more than 5,000 products in total, which the Company sells via more than 7,700 retail and wholesale customer locations in the USA. NDS had sales of approximately USD 127 million (approximately EUR 96 million) in financial year 2013. Goodwill of EUR 75,386 thousands derives from the acquisition, which mainly relates to unpatented technologies and know-how that do not meet the recognition criteria according to IFRS 3 as well as other intangible assets like expertise of the employees and to a small extend expected synergy effects. None of the goodwill recognised is expected to be deductible for tax purposes. The following table summarises the consideration paid for National Diversified Sales, Inc. and the amounts acquired and the liabilities assumed recognised on the acquisition date: in EUR thousands Consideration on 31 October 2014 140,991 Acquisition-related costs (included in other operating expenses in the consolidated financial statement of comprehensive income) 4,162 Recognised amounts of identifiable assets acquired and liabilities assumed Cash and cash equivalents Property, plant and equipment Trademarks Customer lists Patented technology Software Inventory Trade and other receivables Trade payables and other liabilties Loans Finance lease liabilities Personnel related liabilities Tax assets Deferred tax assets Deferred tax liabilties Total identifiable net assets Goodwill 11,139 21,338 25,321 132,005 1,270 242 27,472 17,737 – 9,867 – 87,065 – 793 –10,285 777 4,852 – 68,536 65,605 75,386 140,991 Due to the acquisition of NDS on 31 October 2014, the determi- nation of the fair values of the acquired assets and liabilities on the balance sheet date could not be completed. The consoli- dation is therefore based on a preliminary purchase price allo- cation. This concerns in particular the fair value of the acquired identifiable intangible assets in the amount of EUR 158,839 thousands; this position mainly includes customer relationships and trademarks. The position trademarks mainly includes the corporate brand NDS ®. The fair value of trade and other receivables is EUR 17,737 thousands and includes trade receivables with a fair value of EUR 17,001 thousands. The book value of trade receivables is EUR 17,027 thousands, whereof EUR 26 thousands are impaired. Of the consideration of EUR 140,991 thousands, EUR 140,022 thousands were paid in cash and EUR 969 thousands consist of incurred liabilities. The consideration is exposed to future Other personnel related liabilities mainly relate to outstanding bonus payments, also in connection with the acquisition of NDS by NORMA Group. NORMA Group SE Annual Report 2014167 Loans and finance lease liabilities were fully repaid by NORMA Group on 31 December 2014. Including those payments, the total payments for the acquisition amounted to EUR 228,848 thousands. Fees for the auditor Fees for the auditor, PricewaterhouseCoopers AG Wirtschafts- prüfungsgesellschaft, Frankfurt am Main were expensed as follows: The revenue included in the consolidated statement of compre- hensive income contributed by NDS was EUR 13,918 thousands since 31 October 2014 (acquisition date). Over the same period, NDS also contributed a gain of EUR 1,147 thousands (the report- ed result does not include the step-up effects of the purchase price allocation of NDS). Had NDS been consolidated from 1 January 2014, the con- solidated statement of comprehensive income would show revenue of EU R 101,984 thousands and N DS would have contributed a gain of EUR 3,947 thousands, including one-off expenses in the amount of EUR 10 million (the reported result does not include the step-up effects of the purchase price allocation of NDS). 41. R EL ATED - PART Y TR A NSACTIONS Sales and purchases of goods and services In 2014 and 2013, no management services were bought from related parties. There are no material sales or purchases of goods and services from non-consolidated companies, from the shareholders of NORMA Group, from key management or from other related parties in 2014 and 2013. Details regarding the compensation of the Management Board can be found on  pages 100 to 102 and  Notes 28 and 42. Reimbursement claim to 3i funds Costs for the Operational Performance Incentive Cash Pro- gramme (OPICP) were reimbursed by the previous shareholders; in 2013 the last part of the costs for the OPICP in the amount of EUR 1,067 thousands was paid by the previous shareholders and recognised in the capital reserve in accordance with the agreement ( Note 27). 42 . ADD ITION AL DISCLOSURES PURSUA NT TO SECTION 315A (1) OF THE GER M A N COMMERCIAL CODE (HGB) Compensation of board members The remuneration of the Management Board and Supervisory Board of NORMA Group GmbH was as follows: in EUR thousands 2014 2013 Total Management Board Total Supervisory Board 3,235 460 3,695 3,923 450 4,373 in EUR thousands 2014 2013 Audit fees Audit-related fees Other fees 531 24 106 661 356 18 111 485 Headcount The average headcount breaks down as follows: Number Direct labour Indirect labour Salaried 2014 2013 2,205 1,167 1,375 4,747 1,833 931 1,181 3,945 The category ‘direct labour’ consists of employees who are directly engaged in the production process. The numbers fluc- tuate according to the level of output. The category ‘indirect labour’ consists of personnel that do not directly produce prod- ucts, but rather support production. Salaried employees are employees in administrative / sales / central functions. Consolidation Name, place of domicile and share in capital pursuant to section 313 (2) No. 1 HGB of the consolidated group of companies is presented in  Note 4. Proposal for the distribution of earnings The Management Board proposes that a dividend of EUR 0.75 be paid as a dividend per bearer of shares, leading to a total dividend payment of EUR 23,896,800. Corporate governance (Section 161 AktG) The Management Board and Supervisory Board have issued a corporate governance declaration pursuant to section 161 of the German Stock Corporation Act (Aktiengesetz) and made it available to shareholders on the website of NORMA Group. @ http://investors.normagroup.com 4 3 . E VENTS AF TER THE BAL A NCE SHEE T DATE As of 9 March 2015, no events were known that would have led to a material change in the disclosure or valuation of the assets and liabilities as of 31 December 2014. Consolidated Financial StatementsNotes to the Consolidated Financial Statements 168 Appendix to the Notes to the Consolidated Financial Statements NOTIFICATION OF VOTING RIGHTS According to section 160 (1) No. 8 Stock Corporation Act (AktG), information regarding voting rights that have been notified to the Company pursuant to section 21 (1) or (1a) of the German Securities Trading Act (WpHG) have to be disclosed. The following table gives an overview of all voting rights that have been notified to the Company as of 9 March 2015. It contains the information of the last notification of each shareholder. Please note that the percentage and shares may have changed in the meantime. All notifications of voting rights by the Company in the reporting period and beyond are available on the website @ http://investoren.normagroup.com. 1) The voting rights attributed to the notifying party are held by the following shareholder whose share in the voting rights in NORMA Group SE exceeds 3% or more: Thread- needle Investment Funds ICVC. 2) The total amount does not necessarily equal the sum of the detailed attributed hold- ings. This results from voting rights having multiple attributions within the BlackRock Group structure. 3) The statement does not reflect a change in BlackRock’s current holdings of voting rights. The statement simply updates information regarding BlackRock’s holdings in NORMA Group SE and has been agreed with BaFin. Furthermore, the statement does not signify any change in investment strategies pursued. Notifying party Allianz Global Investors Europe GmbH, Frankfurt am Main, Germany Ameriprise Financial Inc., Minneapolis, USA 1) Atlantic Value General Partner Limited, London, United Kingdom Atlantic Value Investment Partnership LP, Wilmington, Delaware, USA A X A Investment Managers S.A., Courbevoie, France A X A S.A., Paris, France Bank of America Corporation, Wilmington, DE, USA BlackRock (Luxembourg) S.A., Senningerberg, Luxembourg 2) Achievement of voting rights Notification Share Number of Pursuant to limit in % shares section 22 WpHG January 21, 2014 5% exceedance 1,601,001 thereof 0.50% (157,764 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG May 9, 2013 10% shortfall 3,172,259 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG June 15, 2012 3% & 5% exceedance 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG June 15, 2012 3% & 5% exceedance 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG February 9, 2015 February 9, 2015 May 13, 2014 November 24, 2014 3% exceedance 3% exceedance 3% shortfall 3% shortfall 960,777 § 22 (1) sent. 1 no. 6 WpHG 961,337 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 328,779 § 22 (1) sent. 1 no. 1 WpHG 938,957 § 22 (1) sent. 1 no. 6 WpHG 5.02 9.96 5.34 5.34 3.02 3.02 1.03 2.95 BlackRock Advisors Holdings, Inc., New York, USA 2) November 26, 2014 5% shortfall 4.98 1,586,635 4.10% (1,307,837 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock Financial Management, Inc., New York, USA 3) September 25, 2014 5.73 1,825,591 to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock Group Limited, London, United Kingdom 2) November 25, 2014 5% shortfall 4.99 1,592,919 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock Holdco 2, Inc., Wilmington, USA 3) September 25, 2014 5.73 1,825,591 sent. 2 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock International Holdings, Inc., New York, USA 2) November 26, 2014 5% shortfall 4.98 1,586,635 to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock Investment Management (UK ) Limited, London, United Kingdom 2) BlackRock Luxembourg Holdco S.à.r.l., Senningerberg, Luxembourg 2) November 24, 2014 November 26, 2014 5% shortfall 3% shortfall 4.90 2.99 1,562,271 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 951,887 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock, Inc., New York, USA 3) September 25, 2014 5.73 1,825,591 no. 6 in connection with sent. 2 WpHG BNP Paribas Investment Partners S.A., Paris, France April 17, 2014 3% exceedance 3.15 1,004,048 (349,923 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and thereof 1.32% (419,539 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG, 0.03% (10,070 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG, 4.36% (1,390,577 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130 voting rights) according to § 22 (1) sent. 1 no. 2 in connection with sent. 2 WpHG and according thereof 0.87% (275,611 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 4.13% (1,317,308 thereof 1.32% (419,539 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG, 4.40% (1,400,647 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130 voting rights) according to § 22 (1) sent. 1 no. 2 in connection with thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and 4.10% (1,307,837 voting rights) according thereof 0.84% (267,790 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 4.06% (1,294,481 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG and 1.04% (332,341 voting rights) according to thereof 1.32% (419,539) according to § 22 (1) sent. 1 no. 1 WpHG, 4.40% (1,400,647) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130) according to § 22 (1) sent. 1 no. 2 in connection with sent. 2 WpHG and according to § 22 (1) sent. 1 thereof 2.05% (654,125 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and also 1.1% thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and 4.10% (1,307,837 voting rights) according BR Jersey International Holdings, L.P., St. Helier, Jersey, Channel Islands 2) Capital Research and Management Company, Los Angeles, CA, USA Columbia Management Investment Advisers LLC, Boston, USA Delta Lloyd Asset Management N.V., Amsterdam, The Netherlands Delta Lloyd N.V., Amsterdam, The Netherlands DL AM Holding B.V., Amsterdam, The Netherlands Merrill Lynch Europe Limited, London, United Kingdom Merrill Lynch International Incorporated, Wilmington, DE, USA Merrill Lynch International, London, United Kingdom Merrill Lynch UK Holdings, London, United Kingdom MIPL Group Limited, London, United Kingdom MIPL Holdings Limited, London, United Kingdom ML EME A Holdings LLC, Wilmington, DE, USA ML UK Capital Holdings, London, United Kingdom MLEIH Funding, London, United Kingdom Mondrian Investment Partners Limited, London, United Kingdom NB Holdings Corporation, Wilmington, DE, USA SMALLCAP World Fund, Inc., Los Angeles, CA, USA T. Rowe Price Associates Inc., Baltimore, Maryland, USA T. Rowe Price Group, Inc., Baltimore, Maryland, USA T. Rowe Price International Discovery Fund, Inc., Baltimore, Maryland, USA T. Rowe Price International Ltd., London, United Kingdom TAM UK Holdings Limited, London, United Kingdom 1) TC Financing Limited, London, United Kingdom 1) The Capital Group Companies, Inc., Los Angeles, CA, USA Threadneedle Asset Management Holdings Limited, London, United Kingdom 1) Threadneedle Asset Management Holdings SARL, Luxembourg, Luxembourg 1) Threadneedle Asset Management Limited, London, United Kingdom 1) Threadneedle Holdings Limited, London, United Kingdom 1) Threadneedle Investment Funds ICVC, London, United Kingdom Threadneedle Investment Services Limited, London, United Kingdom 1) November 26, 2014 1,586,635 to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 973,100 § 22 (1) sent. 1 no. 6 WpHG 1,036,183 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 980,700 § 22 (1) sent. 1 no. 6 WpHG 980,700 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG and § 22 (1) sent. 1 no. 1 WpHG 980,700 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG June 15, 2012 3% & 5% exceedance 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG June 15, 2012 3% & 5% exceedance 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG June 15, 2012 3% & 5% exceedance 1,700,937 § 22 (1) sent. 1 no. 6 WpHG March 7, 2014 June 19, 2012 October 8, 2014 October 8, 2014 October 8, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 October 30, 2014 August 5, 2011 August 5, 2011 August 8, 2011 August 5, 2011 October 20, 2014 October 20, 2014 October 20, 2014 October 20, 2014 October 20, 2014 October 20, 2014 October 17, 2013 October 17, 2013 5% shortfall 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% shortfall 3% shortfall 3% shortfall 3% shortfall 3% shortfall 3% shortfall 3% shortfall 3% shortfall 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% exceedance 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 4.98 3.05 3.25 3.08 3.08 3.08 0.99 0.99 0.99 0.99 5.34 5.34 0.99 0.99 0.99 5.34 1.03 3.05 3.02 3.02 4.76 4.76 3.05 4.76 4.76 4.76 4.76 4.94 4.94 3.023 3.025 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 328,779 § 22 (1) sent. 1 no. 1 WpHG 970,940 964,148 963,303 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 963,303 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 963,303 § 22 (1) sent. 1 no. 6 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,575,121 1,575,121 § 22 (1) sent. 1 no. 6 WpHG March 7, 2014 3% exceedance 973,100 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG NORMA Group SE Annual Report 2014 Appendix to the Notes to the Consolidated Financial Statements 169 Notifying party Allianz Global Investors Europe GmbH, Frankfurt am Main, Germany Ameriprise Financial Inc., Minneapolis, USA 1) Atlantic Value General Partner Limited, London, United Kingdom Atlantic Value Investment Partnership LP, Wilmington, Delaware, USA A X A Investment Managers S.A., Courbevoie, France A X A S.A., Paris, France Bank of America Corporation, Wilmington, DE, USA BlackRock (Luxembourg) S.A., Senningerberg, Luxembourg 2) Achievement of voting rights Notification limit Share in % Number of shares Pursuant to section 22 WpHG January 21, 2014 5% exceedance May 9, 2013 10% shortfall June 15, 2012 3% & 5% exceedance June 15, 2012 3% & 5% exceedance February 9, 2015 February 9, 2015 May 13, 2014 November 24, 2014 3% exceedance 3% exceedance 3% shortfall 3% shortfall 5.02 9.96 5.34 5.34 3.02 3.02 1.03 2.95 1,601,001 thereof 0.50% (157,764 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG 3,172,259 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 960,777 § 22 (1) sent. 1 no. 6 WpHG 961,337 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 328,779 § 22 (1) sent. 1 no. 1 WpHG 938,957 § 22 (1) sent. 1 no. 6 WpHG BlackRock Advisors Holdings, Inc., New York, USA 2) November 26, 2014 5% shortfall 4.98 1,586,635 BlackRock Financial Management, Inc., New York, USA 3) September 25, 2014 5.73 1,825,591 BlackRock Group Limited, London, United Kingdom 2) November 25, 2014 5% shortfall 4.99 1,592,919 BlackRock Holdco 2, Inc., Wilmington, USA 3) September 25, 2014 5.73 1,825,591 BlackRock International Holdings, Inc., New York, USA 2) November 26, 2014 5% shortfall 4.98 1,586,635 thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and 4.10% (1,307,837 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 1.32% (419,539 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG, 0.03% (10,070 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG, 4.36% (1,390,577 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130 voting rights) according to § 22 (1) sent. 1 no. 2 in connection with sent. 2 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 0.87% (275,611 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 4.13% (1,317,308 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 1.32% (419,539 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG, 4.40% (1,400,647 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130 voting rights) according to § 22 (1) sent. 1 no. 2 in connection with sent. 2 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and 4.10% (1,307,837 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock Investment Management (UK ) Limited, London, United Kingdom 2) BlackRock Luxembourg Holdco S.à.r.l., Senningerberg, Luxembourg 2) November 24, 2014 November 26, 2014 5% shortfall 3% shortfall 4.90 2.99 thereof 0.84% (267,790 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 4.06% (1,294,481 voting rights) according to § 22 (1) sent. 1 no. 6 WpHG and 1.04% (332,341 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,562,271 951,887 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BlackRock, Inc., New York, USA 3) September 25, 2014 5.73 1,825,591 BNP Paribas Investment Partners S.A., Paris, France April 17, 2014 3% exceedance 3.15 1,004,048 thereof 1.32% (419,539) according to § 22 (1) sent. 1 no. 1 WpHG, 4.40% (1,400,647) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.0009% (275) according to § 22 (1) sent. 1 no. 1 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG, 0.02% (5,130) according to § 22 (1) sent. 1 no. 2 in connection with sent. 2 WpHG and according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG thereof 2.05% (654,125 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and also 1.1% (349,923 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG BR Jersey International Holdings, L.P., St. Helier, Jersey, Channel Islands 2) Capital Research and Management Company, Los Angeles, CA, USA Columbia Management Investment Advisers LLC, Boston, USA Delta Lloyd Asset Management N.V., Amsterdam, The Netherlands Delta Lloyd N.V., Amsterdam, The Netherlands DL AM Holding B.V., Amsterdam, The Netherlands Merrill Lynch Europe Limited, London, United Kingdom Merrill Lynch International Incorporated, Wilmington, DE, USA Merrill Lynch International, London, United Kingdom Merrill Lynch UK Holdings, London, United Kingdom MIPL Group Limited, London, United Kingdom MIPL Holdings Limited, London, United Kingdom ML EME A Holdings LLC, Wilmington, DE, USA ML UK Capital Holdings, London, United Kingdom MLEIH Funding, London, United Kingdom Mondrian Investment Partners Limited, London, United Kingdom NB Holdings Corporation, Wilmington, DE, USA SMALLCAP World Fund, Inc., Los Angeles, CA, USA T. Rowe Price Associates Inc., Baltimore, Maryland, USA T. Rowe Price Group, Inc., Baltimore, Maryland, USA T. Rowe Price International Discovery Fund, Inc., Baltimore, Maryland, USA T. Rowe Price International Ltd., London, United Kingdom TAM UK Holdings Limited, London, United Kingdom 1) TC Financing Limited, London, United Kingdom 1) The Capital Group Companies, Inc., Los Angeles, CA, USA Threadneedle Asset Management Holdings Limited, London, United Kingdom 1) Threadneedle Asset Management Holdings SARL, Luxembourg, Luxembourg 1) Threadneedle Asset Management Limited, London, United Kingdom 1) Threadneedle Holdings Limited, London, United Kingdom 1) Threadneedle Investment Funds ICVC, London, United Kingdom Threadneedle Investment Services Limited, London, United Kingdom 1) November 26, 2014 March 7, 2014 June 19, 2012 October 8, 2014 October 8, 2014 October 8, 2014 May 13, 2014 May 13, 2014 May 13, 2014 May 13, 2014 5% shortfall 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% shortfall 3% shortfall 3% shortfall 3% shortfall June 15, 2012 3% & 5% exceedance June 15, 2012 3% & 5% exceedance May 13, 2014 May 13, 2014 May 13, 2014 3% shortfall 3% shortfall 3% shortfall June 15, 2012 3% & 5% exceedance May 13, 2014 October 30, 2014 August 5, 2011 August 5, 2011 August 8, 2011 August 5, 2011 October 20, 2014 October 20, 2014 3% shortfall 3% exceedance 3% exceedance 3% exceedance 3% exceedance 3% exceedance 5% shortfall 5% shortfall March 7, 2014 3% exceedance October 20, 2014 October 20, 2014 October 20, 2014 October 20, 2014 October 17, 2013 October 17, 2013 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 5% shortfall 4.98 3.05 3.25 3.08 3.08 3.08 0.99 0.99 0.99 0.99 5.34 5.34 0.99 0.99 0.99 5.34 1.03 3.05 3.02 3.023 3.025 3.02 4.76 4.76 3.05 4.76 4.76 4.76 4.76 4.94 4.94 thereof 0.87% (278,692 voting rights) according to § 22 (1) sent. 1 no. 1 WpHG and 0.0003% (106 voting rights) according to § 22 (1) sent. 1 no. 2 WpHG and 4.10% (1,307,837 voting rights) according to § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,586,635 973,100 § 22 (1) sent. 1 no. 6 WpHG 1,036,183 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 980,700 § 22 (1) sent. 1 no. 6 WpHG 980,700 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG and § 22 (1) sent. 1 no. 1 WpHG 980,700 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 316,660 § 22 (1) sent. 1 no. 1 WpHG 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,700,937 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 316,660 § 22 (1) sent. 1 no. 1 WpHG 1,700,937 § 22 (1) sent. 1 no. 6 WpHG 328,779 § 22 (1) sent. 1 no. 1 WpHG 970,940 963,303 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 963,303 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 964,148 963,303 § 22 (1) sent. 1 no. 6 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 973,100 § 22 (1) sent. 1 no. 6 in connection with sent. 2 and 3 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 WpHG 1,517,146 § 22 (1) sent. 1 no. 6 in connection with sent. 2 WpHG 1,575,121 1,575,121 § 22 (1) sent. 1 no. 6 WpHG Consolidated Financial Statements 170 Corporate Bodies MEMBERS OF THE M A N AGEMENT BOAR D MEMBERS OF THE SUPERVISORY BOAR D Werner Deggim Chief Executive Officer (CEO) Master’s degree in Mechanical Engineering Dr. Othmar Belker Chief Financial Officer (CFO) PhD in Economics Bernd Kleinhens Managing Director Business Development Master’s degree in Mechanical Engineering John Stephenson Master of Science, Chief Operating Officer (COO) Dr. Stefan Wolf (Chairman) • Chief Executive Officer (CEO) of ElringKlinger AG, Dettingen, Germany • Member of the Supervisory Board of Fielmann AG, Hamburg, Germany • Member of the Supervisory Board of Allgaier Werke GmbH, Uhingen, Germany • Member of the Board of Directors of Micronas Semiconductor Holding AG, Zurich, Switzerland Lars M. Berg (Deputy Chairman) • Independent Consultant • Chairman of the Supervisory Board of Net Insight AB, Stockholm, Sweden • Chairman of the Supervisory Board of KPN OnePhone Holding B.V., Duesseldorf, Germany • Member of the Supervisory Board of Ratos AB, Stockholm, Sweden • Member of the Supervisory Board of Tele2 AB, Stockholm, Sweden Günter Hauptmann • Independent Consultant • Member of the Supervisory Board of Geka GmbH, Bechhofen, Germany • Chairman of the Advisory Board of GIF GmbH, Alsdorf, Germany Knut J. Michelberger • Independent Consultant • Member of the Advisory Board of Gauff Management GmbH & Co. KG, Frankfurt/Main, Germany (until March 2015) • Member of the Management Board of Kaffee-Partner Holding GmbH and its subsidiaries, Osnabrück, Germany • Member of the Advisory Board of Rena Technologies GmbH, Guetenbach, Germany (since March 2015) Dr. Christoph Schug • Consultant • Member of the Supervisory Board of Baden-Baden Cosmetics AG, Baden-Baden, Germany • Member of the Board of Directors of AMEOS Gruppe AG, Zurich, Switzerland Erika Schulte • Director of Hanau Wirtschaftsförderung and Liquidator of Technologie und Gründerzentrum Hanau GmbH • No seats on other boards NORMA Group SE Annual Report 2014171 Responsibility Statement Responsibility Statement To the best of our knowledge, and in accordance with the applicable reporting principles, the consoli- dated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group, and the Group Management Report includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group. Maintal, 9 March 2015 NORMA Group SE The Management Board Werner Deggim Dr. Othmar Belker Bernd Kleinhens John Stephenson Consolidated Financial Statements 172 Auditor’s Report We have audited the consolidated financial statements prepared by the NORMA Group SE, comprising the statement of financial position, the statement of comprehensive income, statement of changes in equity, cash flow statement and the notes to the consolidated financial statements, together with the group management report for the business year from January 1 to December 31 2014. The prepara- tion of the consolidated financial statements and the group management report in accordance with the IFRSs, as adopted by the EU, and / or the additional requirements of German commercial law pursuant to § (Article) 315a Abs. (paragraph) 1 HGB (“Handelsgesetzbuch”: German Commercial Code) is the responsibility of the parent Company’s Board of Managing Directors. Our responsibility is to express an opinion on the consolidated financial statements and on the group management report based on our audit. We conducted our audit of the consolidated financial statements in accordance with § 317 HGB and German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Those standards require that we plan and perform the audit such that misstatements materially affecting the presentation of the net assets, financial position and results of operations in the consolidated financial statements in accordance with the applicable financial reporting framework and in the group management report are detected with reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations as to possible misstatements are taken into account in the determination of audit procedures. The effectiveness of the accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements and the group management report are examined primarily on a test basis within the framework of the audit. The audit includes assessing the annual financial statements of those entities included in consolidation, the determination of the entities to be included in consolidation, the accounting and consolidation principles used and significant estimates made by the Company’s Board of Managing Directors, as well as evaluating the overall presentation of the consolidated financial statements and the group management report. We believe that our audit provides a reasonable basis for our opinion. Our audit has not led to any reservations. In our opinion based on the findings of our audit the consolidated financial statements comply with the IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315a Abs. 1 HGB and give a true and fair view of the net assets, financial position and results of operations of the Group in accordance with these requirements. The group management report is consistent with the consolidated financial statements and as a whole provides a suitable view of the Group’s position and suitably presents the opportunities and risks of future development. Frankfurt am Main, March 17, 2015 PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft Dr. Ulrich Störk Wirtschaftsprüfer (German Public Auditor) [ppa.] Benjamin Hessel Wirtschaftsprüfer (German Public Auditor) NORMA Group SE Annual Report 2014Glossary 173 5S ME THOD OLOGY 5S is a method to organise a work space for efficiency and effectiveness in order to reduce industrial accidencts. comply with the code of conduct. A code of conduct is more of a personal commitment to follow or abstain from certain patterns of behaviour and ensure that nobody gains an unfair advantage by circumventing these patterns. A F TER M ARKE T SEGMENT The market concerned with the maintenance / repair of invest- ment goods or long-life final goods (e.g. vehicles) or the sale of replacement parts or complementary parts for the goods. This involves the sale of services and / or parts that are directly related to the previous sale of the goods. APAC Abbreviation for the region Asia-Pacific. AUSTENITIC STEELS Austenitic steel is a stainless steel that normally contains an alloy of 15–20% chromium and 5–15% nickel. Other alloy components can have an impact on these figures. Austenitic steels cannot be hardened by way of heat treatment and are usually not mag- netisable. They can be used in environments with high chloride levels. There are several types of chloride in technical chemistry, all of which vary in terms of their impact on austenitic steels. CAQ - SOF T WAR E Software for quality assurance. COMPLIA NCE Conforming to rules: companies adhering to codes of conduct, laws and guidelines. COR POR ATE GOVER N A NCE A set of all international and national rules, regulations, values and principles which apply to companies and determine how these companies are managed and monitored. COR POR ATE R ESPONSIBILIT Y A form of corporate self-regulation integrated into a business model by taking societal and environmental aspects into account. COVER AGE The regular assessment of the economic and financial situation of a listed company by banks or financial research institutions. CROS S - SELLING EFFECTS The action or practice of selling an additional product or service to an existing customer. CODE OF CONDUCT A set of policies which can / should be applied in a wide range of contexts and environments depending on the situation. In contrast to a rule, the target audience is not obliged to always DISTRIBUTION SERVICES (DS) One of NORMA Group’s two ways to market, which provides a wide range of high-quality, standardised joining products for a broad range of applications and customers. Further InformationGlossary174 E AR NINGS BEFOR E INTER EST, EUROPE A N M AR KE T INFR ASTRUCTUR E R EGUL ATION TA XES A ND A MORTISATION (EBITA ) Earnings before interest, taxes and amortisation of intangible assets. E AR NINGS BEFOR E INTER EST, TA XES, DEPR ECIATION A ND A MORTISATION (EBITDA ) Earnings before interest, taxes, depreciation (of property, plant and equipment) and amortisation (of intangible assets). It is a measure of a company’s operating performance before invest- ment expenses. EL ASTOMERS Stable but elastic plastics which are used at a temperature above their glass transition temperature. The plastics can de- form under tensile load or compressive load, but then return to their original undeformed shape. (EMIR) EU regulation that regulates the over-the-counter market with derivative products. The main stipulation of this regulation obligates market participants to clear their over-the-counter standard derivative transactions through a central counterpart and report these transactions to a transaction registry. FER RITIC STEELS Ferritic chromium steel is a stainless steel that normally cannot be hardened. It is magnetisable and is used in environments containing little or no chloride. FR EE CASH FLOW Indicates the amount of money that is available to pay dividends to shareholders and / or repay loans. EME A Abbreviation for the economic area of Europe (made up of Western and Eastern Europe), the Middle East and Africa. GEMBA WALK Daily walk through the production halls in order to inspect in- dividual processes in the opposite order of the workflow and analyse potential opportunities for improvements. ENGINEER ED JOINING TECHNOLOGY (E JT ) One of N O R M A Group’s two ways to market. It provides customised, highly engineered joining technology products pri- marily, but not exclusively, for industrial OEM customers. GLOBAL E XCELLENCE PROGR A MME A cost optimisation programme that was started in 2009. It coordinates and manages all of NORMA Group’s sites and busi- ness units. EURIBOR Reference rate for time deposits in the interbank business (currency: EUR) INITIAL PUBLIC OFFERING (IPO) First offering of shares of a company on the organised capital market. NORMA Group SE Annual Report 2014175 INTER N ATION AL SECURITIES IDENTIFICATION NUMBER (ISIN) A 12-digit alphanumerical code used to identify a security traded on the stock market. ISO 140 01 An international environmental management standard that specifies the internationally accepted requirements for an envi- ronmental management system. ISO 9 0 01 International standard that defines the fundamentals of quality management systems. ISO/ TS 16 9 49 An international standard that combines the existing general demands on quality management systems of the (mostly North American and European) automotive industry. K AIZEN Kaizen refers to activities that continually improve all functions. It also applies to processes, such as purchasing and logistics, that cross organisational boundaries into the supply chain. LE A N M A NUFACTURING A systematic method for the elimination of waste within a manufacturing process. N ATION AL BUR E AU OF STATISTICS (NBS) Chinese Bureau of Statistics. OHSAS 18 0 01 Abbreviation for Occupational Health and Safety Assessment Series; used in many countries as a basis for certification of occupational health and safety management systems. The structure is closely linked to the ISO 9001 and ISO 14001 stan- dards. ORIGIN AL EQUIPMENT M A NUFACTUR ER (OEM) A company that retails products under its own name. PRIME STA NDARD A segment of the regulated stock market with higher inclusion requirements than the General Standard. It is the private law segment of the Frankfurt Stock Exchange with the highest transparency standards. All companies listed in the DA X, MDA X, TecDA X and SDA X must be included in the Prime Standard. R E VERSE FACTORING A financing solution initiated by the ordering party in order to help his suppliers to finance their receivables more easily and at a lower interest rate than what they would normally be offered. ROADSHOW A series of corporate presentations made to investors by an issuer at various financial locations to attract investment in the company. SELECTIVE CATALY TIC R EDUCTION (SCR) Selective catalytic reduction is a method to reduce particle and nitrogen oxide emissions. Further InformationGlossary176 SENIOR FACILIT Y AGR EEMENT (SFA ) Loan agreement. SIX SIGM A A management system for process improvement using analy- tical and statistical tools. ECONOMIES OF SCALE Defined in business economics’ production theory and micro- economics as the connection between the scale of a company’s output and the number of factors of production that it uses. SOCIE TAS EUROPAE A (SE ) A legal form for stock companies in the European Union and the European Economic Area. With the SE, the EU started allowing for companies to be founded in accordance with a largely uni- form legal framework at the end of 2004. THER MOPL ASTICS (ALSO K NOWN AS PL ASTOMERS) Plastics which become elastic (thermoplastic) in a particular temperature range, whereby this process is reversible. SECURITIES ID NUMBER ( WK N) A six-character combination of numbers and letters used in Germany to identify securities. XE TR A An electronic trading system operated by Deutsche Börse AG for the spot market. NORMA Group SE Annual Report 2014Overview by Quarter 2014 177 Overview by Quarter 2014 1) Income statement Revenue Gross profit 2) Adjusted EBITA 2) Adjusted EBITA margin 2) EBITA Adjusted profit for the period 2) Adjusted EPS 2) Profit for the period EPS Cash flow Cash flow from operating acitivities Operating net cash flow Cash flow from investing activities Cash flow from financing acitivities Balance sheet Total assets Equity Equity ratio Net debt Q1 2014 Q2 2014 Q3 2014 Q4 2014 EUR millions EUR millions EUR millions % EUR millions EUR millions EUR EUR millions EUR EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions % EUR millions 177.8 102.4 32.6 18.4 32.4 19.6 0.61 13.6 0.42 16.8 18.7 – 6.6 –111.4 748.1 336.1 44.9 147.3 175.2 100.5 30.5 17.4 30.2 17.1 0.53 15.4 0.49 22.0 25.1 –10.2 – 31.4 740.8 332.4 44.9 164.0 165.5 98.7 29.2 17.6 27.4 17.1 0.54 14.4 0.45 18.3 17.6 –12.5 –17.9 752.1 354.8 47.2 166.8 176.2 104.0 29.2 16.6 23.3 17.7 0.55 11.6 0.36 39.3 41.9 3) – 235.7 218.3 1,078.40 368.0 34.1 373.1 1) By adding the figures for the single quarters slight differences from the full year figures 2014 may arise as a result of rounding. 2) Adjusted by the acquisition effects described in the notes to the consolidated statement.  Notes, adjustments, p. 133. 3) Without balance sheet effects caused by the acquisitions of NDS and Five Star. Further Information178 Multi-Year Overview Order situation Order book (31 Dec) Income statement Revenue thereof EME A thereof Americas thereof Asia-Pacific EJT DS Gross profit 3) Adjusted EBITA 3) Adjusted EBITA margin 3) EBITA Adjusted profit for the period 3) Profit for the period Adjusted EPS 3) EPS Financial result Tax rate 4) R&D expenses R&D ratio Cost of materials 3) Cost of materials ratio 3) Personnel expenses 5) Cash flow Cash flow from operating activities Operating net cash flow Cash flow from investing activities 7) Cash flow from financing activities Balance sheet Total assets Equity Equity ratio Net debt Working capital Working capital ratio Employees Core workforce Total workforce incl. temporary staff Share Number of shares (weighted) Number of shares (year-end) 2014 1) 2013 2012 2) 2011 2010 EUR millions 279.6 236.7 215.4 218.6 188.0 EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions % of sales EUR millions EUR millions EUR millions EUR EUR EUR millions % EUR millions % of EJT-sales EUR millions % of sales EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions EUR millions % EUR millions % of sales 694.7 394.5 237.8 62.5 484.5 216.6 405.6 121.5 17.5 113.3 71.5 54.9 2.24 1.72 –14.5 33.3 – 25.9 5.3 – 289.9 41.7 188.3 96.4 103.2 6) – 265.1 57.7 1,078.4 368.0 34.1 373.1 141.8 20.4 4,828 5,975 635.5 388.0 191.6 56.0 443.9 193.6 371.4 112.6 17.7 112.1 62.1 55.6 1.95 1.74 –15.6 32.6 – 21.9 4.9 – 269.4 42.4 –169.7 115.4 103.9 – 43.4 51.7 823.7 319.9 38.8 153.5 110.8 17.4 4,134 4,947 604.6 367.5 193.3 43.8 427.6 174.5 344.4 105.4 17.4 105.1 61.8 56.6 1.94 1.78 –13.2 30.3 – 22.1 5.1 – 263.5 43.6 –156.5 96.1 81.0 – 58.1 – 34.1 691.8 289.2 41.8 199.0 115.9 19.2 3,759 4,485 581.4 372.7 173.0 35.7 411.5 170.3 322.6 102.7 17.7 84.7 57.6 35.7 1.92 1.19 – 29.6 30.0 –16.8 4.1 – 262.3 45.1 –143.7 71.7 66.8 – 33.7 – 0.5 648.6 256.0 39.5 198.5 106.2 18.3 3,415 4,252 490.4 336.6 123.8 30.0 323.6 168.3 274.7 85.4 17.4 64.9 48.2 30.3 1.93 1.21 –14.9 27.0 –16.6 5.1 – 220.5 45.0 –124.4 62.1 51.7 – 56.6 – 3.1 578.8 78.4 13.5 344.1 86.7 17.7 3,028 3,830 31,862,400 31,862,400 31,862,400 30,002,126 24,862,400 31,862,400 31,862,400 31,862,400 31,862,400 24,862,400 1) In 2014 adjustments were made which especially relate to the acquisition of NDS. 3) Adjusted in 2014.  Notes, adjustments, p. 133. These adjustments are described in the notes.  Notes, adjustments, p. 133. 4) 2011: Tax rate adjusted by deferred tax liabilities of EUR 2.8 million resulting from 2007. 2) 2012: The accounting rules changed in 2013 due to the first-time use of IAS 19R. In order to better compare the earnings, assets and financial positions, the 2012 figures 5) from 2008 to 2011 and 2014 adjusted by one-off effects. 6) Without balance sheet effects caused by the acquisitions of NDS and Five Star. have been adjusted to suit the new accounting rules and may therefore deviate from 7) 2010, 2012, 2013 and 2014 including acquisitions. the figures published in the 2012 Annual Report. NORMA Group SE Annual Report 2014 Annual Review w e i v e R l a u n n A | p u o r G A M R O N J A N U A R Y – M A R C H 2 0 14 A P R I L – J U N E 2 0 14 Start of production in Brazil Acquisition of business activities from joining technology manufacturer Five Star Clamps in the US Start of production in new plant in China NORMA Group earns Best Partner Award from General Motors in China Large order receipt for the second-generation of NORM AFLE X fluid pipes Acquisition of remaining 15 % of the shares in Malaysian subsidiary Chien Jin Plastic NORMA Group receives Best Medium Enterprise 2013 award in Serbia NORMA Group certified A-Class Supplier by FAW-Volkswagen Automobile in China NORM A Group receives PACCAR 50 PPM Award NORM A Group receives Komatsu Award for outstanding suppliers O C T O B E R – D E C E M B E R 2 0 14 Acquisition of specialised water management company National Diversified Sales in the USA Launch of development aid program NORM A Clean Water in India Release of first Sustainability Report for the year 2013 Placement of promissory note valued at EUR 209 million J U LY – S E P T E M B E R 2 0 14 Opening of new Distribution Center in Lake Orion and expansion of DS business NORM A Group earns General Motors’ Supplier Quality Excellence Award NORM A Group in China recognized as top supplier by General Motors and Ford J A N U A R Y – M A R C H 2 0 1 5 Large order receipt for PS 3 quick connectors from a German supplier to the automotive industry Financial Calendar 2015 25.03.2015 Publication of Full Year Results 2014 06.05.2015 Publication of Q1 Interim Results 2015 20.05.2015 Annual General Meeting in Frankfurt/Main 05.08.2015 Publication of Q2 Interim Results 2015 04.11.2015 Publication of Q3 Interim Results 2015 We constantly update our financial calendar. Please visit the Investor Relations section on our website @ www.normagroup.com for up-to-date information. Contact and Imprint If you have any questions regarding NORMA Group or would like to be included in our distribution list, please contact the Investor Relations team: E-mail: ir@normagroup.com Andreas Trösch Vice President Investor Relations Phone: + 49 6181 6102 741 Fax: + 49 6181 6102 7641 E-mail: andreas.troesch@normagroup.com Vanessa Wiese Senior Manager Investor Relations Phone: + 49 6181 6102 742 Fax: + 49 6181 6102 7642 E-mail: vanessa.wiese@normagroup.com E D I TO R NORMA Group SE Edisonstraße 4 63477 Maintal, Germany Phone: + 49 6181 6102 740 E-mail: info@normagroup.com www.normagroup.com C O N C E P T A N D L AYO U T 3st kommunikation, Mainz Print compensated Id-No. 1436967 www.bvdm-online.de Note on the Annual Report This Annual Report is also available in German. If there are differences between the two, the German version takes priority. Note on rounding Please note that slight differences may arise as a result of the use of rounded amounts and percentages. Forward-looking statements This Annual Report contains certain future-oriented statements. Future-oriented statements include all statements which do not relate to historical facts and events and contain future-oriented expressions such as “believe”, “estimate”, “assume”, “expect”, “forecast“, “intend”, “could” or “should” or expressions of a similar kind. Such future-oriented statements are subject to risks and uncertainties since they relate to future events and are based on the Company’s current assumptions, which may not in the future take place or be fulfilled as expected. The Company points out that such future-oriented statements provide no guarantee for the future and that the actual events including the financial position and profitability of NORMA Group SE and developments in the economic and regulatory fundamentals may vary substantially (particularly on the down side) from those explicitly or implicitly assumed in these statements. Even if the actual assets for NORMA Group SE, including its financial position and profitability and the economic and regulatory fundamentals, are in accordance with such future-oriented statements in this Annual Report, no guarantee can be given that this will continue to be the case in the future. Sources Page 38: Saigon Photography, Shutterstock.com E S p u o r G A M R O N 4 1 0 2 T R O P E R L A U N N A NORMA Group SE Edisonstraße 4 63477 Maintal, Germany Phone: +49 6181 6102 740 E-mail: info@normagroup.com www.normagroup.com 

Continue reading text version or see original annual report in PDF format above