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2013-2014/ANNUALREPORT
2/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
CONSOLIDATED BALANCE SHEET 3
CONSOLIDATED STATEMENT OF CASH FLOWS 4
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 5
CONSOLIDATED PROFIT & LOSS STATEMENT, BY NATURE 6
BOARD OF DIRECTORS REPORT 7
CHAIRMAN’S MESSAGE 8
BUSINESS ACTIVITY 9
COMPANY PERFORMANCE 18
EVOLUTION OF THE COMPANY 22
RISK MANAGEMENT POLICY 24
MATERIAL EVENTS SUBSEQUENT TO BALANCE DATE 25
PROPOSAL FOR DISTRIBUTION OF PROFIT 26
ACKNOWLEDGMENTS 27
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT 28
TABLE OF CONTENTS
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CONSOLIDATED BALANCE SHEET 31 DECEMBER 2014
NOTES 14/12/31 13/12/31ASSETSFIXED ASSETS
Tangible fixed assets 7 93,490,278 91,351,418 Investment properties 9 70,000 70,000 Goodwill - -Intangible assets 8 3,233,589 3,367,698 Capital work in progress 7 and 8 3,812,789 255,113 Investments in companies – equity method - -Investments in companies – other methods 11 24,763 1,683 Shareholders/ members - -Other financial assets 11 1,426,256 191,044 Other accounts receivable 11 14,404,524 16,683,562 Deferred tax assets 14 5,114,780 6,267,710
121,576,979 118,188,227 CURRENT ASSETS
Inventories 12 62,948,705 48,705,386 Biological assetsClients 10 and 13 63,404,110 66,192,116 Advances to suppliers 11 495,123 1,134,169 State and other public entities 17 506,260 591,069 Shareholders/ members 11 510,706 432,615 Other accounts receivable 11 2,909,963 1,633,749 Deferrals 18 15,635,626 18,742,903 Financial assets held for trading 11 96,986 166,921 Other financial assets 11 2,719 144,315 Fixed assets held for sale 7 - 867 Cash and bank accounts 4 24,987,698 19,709,961
171,497,897 157,454,071 TOTAL ASSETS 293,074,877 275,642,299 EQUITY & LIABILITIESEQUITY
Equity 16 60,014,370 60,014,370 Treasury stock - -Other equity instruments - -Issue premiums - -Legal reserves 16 8,029,563 7,615,496 Exchange Reserve 16 299,958 477,650 Retained earnings 16 42,939,874 34,934,014 Financial adjustments - -Revaluation reserves - -Other equity variations - -Net earnings for the year 16 27,243,834 8,352,141 Advance payment of dividends - -
138,527,599 111,393,671 Non-controlling interests 32 424,809 194,557
TOTAL EQUITY 138,952,408 111,588,229 LIABILITIESFIXED LIABILITIES
Provisions 29 710,579 1,352,849 Loans 33 90,877,329 105,283,860 Pension benefit obligations - -Deferred tax liabilities 14 2,940,202 3,476,101 Shareholders/members - -Other financial liabilities - -Other accounts payable - -
94,528,110 110,112,810 CURRENT LIABILITIES
Suppliers 11 25,289,697 24,024,177 Advance payments 11 31,139 26,711 State and other public entities 17 5,247,887 6,135,148 Shareholders/ members 11 11,111,655 5,068,829 Loans 33 45,290 538,707 Other accounts payable 11 17,067,499 17,360,419 Deferrals 18 801,191 787,268 Financial liabilities held for trading - -Other financial liabilities 11 - -Liabilities with current fixed assets held for sale - -
59,594,359 53,941,259 TOTAL LIABILITIES 154,122,469 164,054,069 TOTAL EQUITY & LIABILITIES 293,074,877 275,642,298
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
CONSOLIDATED STATEMENT OF CASH FLOWSPERIOD REPORTED TO 31 DECEMBER 2014
NOTES 2014 2013CASH FLOW FROM OPERATING ACTIVITIES – DIRECT METHOD
Receipts from clients 342,008,717 334,494,683
Payments to suppliers -225,231,557 -228,422,395
Payments to employees -67,282,105 -65,513,551
CASH GENERATED BY OPERATIONS 49,495,055 40,558,737
Income tax receipts / payments -2,884,374 -2,152,370
Other receipts / payments 13,977,515 3,376,014
CASH FLOW RESULTING FROM OPERATING ACTIVITIES (1) 60,588,195 41,782,381
CASH FLOW FROM INVESTING ACTIVITIES
Payments regarding:
Tangible fixed assets -29,251,214 -24,119,106
Intangible assets 0 0
Financial investments -8,150,484 0
Other assets 0 0
Receipts regarding:
Tangible fixed assets 489,598 382,163
Intangible assets 0 0
Financial investments 669,414 9,035,067
Other assets 0 0
Investment subsidies 1,766,318 0
Interest and similar income 32,744 80,448
Dividends 0 0
CASH FLOW RESULTING FROM INVESTING ACTIVITIES (2) -34,443,624 -14,621,428
CASH FLOWS FROM FINANCING ACTIVITIES
Receipts regarding:
Loans 0 0
Issuance & other equity instruments 0 0
Loss coverage 0 0
Donations 0 0
Other financing operations 0 0
Payments regarding:
Loans -17,886,637 -17,456,045
Interest and similar expenses -2,486,770 -3,763,838
Dividends 0 135,996
Capital decrease & other equity instruments 0 0
Other financing operations 0 0
CASH FLOW RESULTING FROM FINANCING ACTIVITIES (3) -20,373,407 -21,083,887
CASH FLOW VARIATION AND EQUIVALENT (1+2+3) 4 5,771,164 6,077,066
EFFECT OF EXCHANGE RATE CHANGES 0 0
CASH AND CASH EQUIVALENT, START OF PERIOD 4 19,171,244 13,094,186
CASH AND CASH EQUIVALENT, END OF PERIOD 4 24,942,408 19,171,253
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYPERIOD REPORTED TO 31 DECEMBER 2014amounts in euros
DESCRIPTION NOTES PAID-IN CAPITAL
TREASURY STOCK
OTHER EQUITY INSTRUMENTS
EXCHANGE RESERVE
LEGAL RESERVES
OTHER RESERVES
REVALUATION SURPLUSES
ADJUSTMENTS TO FINANCIAL ASSETS / LIABILITIES
OTHER EQUITY VARIATIONS
RETAINED EARNINGS
PROFIT / LOSS IN PERIOD TOTAL
NON-CONTROLLING INTERESTS
TOTAL EQUITY
OPENING POSITION 2013 1 60,014,370 - - 305,708 7,507,285 - - - - 33,331,407 1,736,434 102,895,204 - 102,895,204
Constitution of legal reserve - - - - 108,211 - - - - (108,211) - - - -
Transfer of profit for the year to retained earnings
- - - - - - - - - 1,736,434 (1,736,434) - - -
2 - - - - 108,211 - - - - 1,628,223 (1,736,434) - - -
CHANGES IN THE PERIOD
Financial statements conversion changes - - - 171,942 - - - - - (171,942) - - - -
Changes in scope (Tecnidelta, Toldiconfex and Nabeirorest)
- - - - - - - - - - - - - -
Changes in scope, non-controlling interests - - - - - - - - - - - - - -
3 - - - 171,942 - - - - - (171,942) - - - -
NET PROFIT FOR THE YEAR 4 - - - - - - - - - - 8,352,141 8,352,141 - 8,352,141
COMPREHENSIVE INCOME 5=3+4 - - - 171,942 - - - - - (171,942) 8,352,141 8,352,141 - 8,352,141
OPERATIONS WITH EQUITY HOLDERS - - - - - - - - - - - - - -
Other operations - - - - - - - - 146,326 - 146,326 194,557 340,883
6 - - - - - - - - - 146,326 - 146,326 194,557 340,883
CLOSING POSITION 2013 7=1+2+3+4+6 60,014,370 - - 477,650 7,615,496 - - - - 34,934,014 8,352,141 111,393,672 194,557 111,588,229
OPENING POSITION 2014 7 60,014,370 - - 477,650 7,615,496 - - - - 34,934,014 8,352,141 111,393,672 194,557 111,588,229
DISTRIBUTION OF INCOME
Constitution of legal reserve - - - - 414,067 - - - (414,067) - - - -
Transfer of profit for the year to retained earnings
- - - - - - - - - 8,352,141 (8,352,141) - - -
8 - - - - 414,067 - - - - 7,938,074 (8,352,141) - - -
CHANGES IN THE PERIOD
Financial statements conversion changes - - - (177,692) - - - - - 177,692 - - - -
Changes in scope (Tecnidelta, Toldiconfex and Nabeirorest)
- - - - - - - - - - ~ - - -
Changes in scope, non-controlling interests - - - - - - - - - - - - - -
9 - - - (177,692) - - - - - 177,692 - - - -
NET PROFIT FOR THE YEAR 10 - - - - - - - - - - 27,243,834 27,243,834 - 27,243,834
COMPREHENSIVE INCOME 11=9+10 - - - (177,692) - - - - - 177,692 27,243,834 27,243,834 - 27,243,834
Other operations - - - - - - - - - (109,906) - (109,906) 230,252 120,346
12 - - - - - - - - - (109,906) - (109,906) 230,252 120,346
CLOSING POSITION 2014 60,014,370 - - 299,958 8,029,563 - - - - 42,939,874 27,243,834 138,527,601 424,809 138,952,408
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CONSOLIDATED PROFIT & LOSS STATEMENT, BY NATURE PERIOD REPORTED TO 31 DECEMBER 2014
NOTES 14/12/31 13/12/31
INCOME & EXPENDITURE
Sales and services 19 307,085,082 288,187,509
Operating subsidies 15 322,641 66,133
Profit / loss of subsidiaries, associates and joint ventures 31 - -
Variation in production inventories 12 3,322,985 878,135
Works for the company 20 - 3,429
Cost of sales 12 (110,819,471) (111,901,696)
Supplies and services 21 (66,294,967) (62,071,087)
Personnel expenses 22 (69,180,158) (66,580,335)
Impairment inventories (losses / reversals) 30 (1,389,603) (385,805)
Impairment receivables (losses / reversals) 13 1,255,231 (3,597,098)
Provisions (increases / reductions) 29 (119,838) (683,329)
Impairment of non depreciable / amortizable investments (103,469) -
Fair value increases / write-downs 23 (87,885) 8,143
Other income and earnings 24 13,954,822 10,213,666
Other expenses and losses 25 (11,227,091) (12,479,805)
PROFIT AND LOSS BEFORE DEPRECIATION, FINANCIAL COSTS AND TAX 66,718,279 41,657,860
Amortisation & Depreciation expenses / reversals 26 (25,469,444) (24,079,380)
Impairment of depreciable / amortizable investments - -
OPERATING PROFIT(BEFORE FINANCIAL EXPENSES AND TAX) 41,248,835 17,578,480
Financial income 27 174,854 119,993
Financial expenses 27 (2,414,920) (4,151,446)
PROFIT BEFORE TAX 39,008,769 13,547,027
Income tax 14 (11,502,021) (5,057,888)
NET PROFIT FOR THE PERIOD 27,506,748 8,489,139
Income from discontinued activities (after tax)Included in the net profit for the period - -
NET PROFIT FOR THE PERIOD ASSIGNABLE TO:
Parent company equity holders 27,243,834 8,352,141
Non-controlling interests 32 262,914 136,998
27,506,748 8,489,139
7/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
BOARD OF DIRECTORS REPORT
In conformity with that established in articles 65 and 66 of the Portuguese Company Code, we hereby present the Board of Directors’ Report and the consolidated annual report of Delta Cafés – SGPS, S.A., regarding the 2014 financial year, to our Shareholders and any other public or private entities that wish to consult them.
The aim of this report is to complete the information provided in the Consolidated Financial Statements, in order to allow shareholders to appraise, vote and approve the annual reports and financial statements, as well as the proposal for distribution of profits.
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CHAIRMAN’S MESSAGE
Delta Cafés continues to merit the trust of the Portuguese people, according to a study by Readers Digest. We have increased and advanced along our value chain.We are committed to the development and growth of Portuguese brands, at home and abroad.The capacity to innovate should stimulate entrepreneurial capability, ensuring the levels of quality in goods and services offered to society. It should also guarantee a competitive base for companies. We believe that entrepreneurship cannot be dissociated from innovation.2015 is likely to show a steady rate of progress. We believe that we are now faced with a period of moderate economic recovery. Looking ahead to the future optimistically but coherently too, our team will surely reach its work targets, with attitude, dedication and a sense of responsibility. I would like to extend our thanks to our friends, and clients, employees, suppliers and all the stakeholders, for their trust, friendship and, above all, the healthy partnership that we cultivate every day.
Chairman of the Board, Nabeiro Group – Delta Cafés
The world is undergoing rapid and constant changes.Once again, 2014 was another year of hard work, highly demanding both in terms of controlling expenses and in implementing the investment plan. The frailty of economic activity in Portugal, together with the difficulties seen in the markets in which we operate determined our strategic plan – rigorous and steadfast. Our strategy certainly forced us to make an additional effort, but we continue to invest in our “people”, our human capital, because we believe that this is a decisive factor for the success of companies in the competitive field.We advance and we invest in the knowledge that companies should back their employees, who should feel capacitated and motivated to compete in global markets. Faced with adversity, we employed a creative, entrepreneurial spirit. We decided to define a strategic and global vision, in order to establish a course that would ensure gradual and, above all, sustainable growth in emerging markets. We continue to transform different occasions into real business opportunities. We work together, ensuring progression in our value chain, by means of investment in generating skills and technological development.
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1. BUSINESS ACTIVITY
THE NABEIRO/DELTA CAFÉS GROUPOur motto “A Customer, a Friend” applies to the entire Nabeiro Group, and is implemented by means of direct contact and physical proximity with customers in order to ensure an improved service and to respond rapidly to their needs. Proximity has implied a high level of investment in creating physical and human structures that permit this interaction but has achieved undeniable results: leadership in Portugal in the direct consumption segment and a solid presence in Spain, with a total of 38 commercial departments in the Iberian Peninsula.The creation of the different departments of Delta Cafés occurred, as has almost always happened, within a countercyclical context, seeing that during a time when companies were reducing their local operations and centralizing their business activities in larger cities or resorting to outsourcing, Delta Cafés opened more departments at several points in Portugal and in Spain, giving priority to proximity to customers. If, at that time, many thought this was a bad strategy, the truth is that the facts speak for themselves and the market rewarded the company for its audacity.The Nabeiro Group has always gone for diversification, with a presence in several markets with various brands and concepts for the different types of customers and targets that consume coffee. In the horeca sector, in addition to different coffee types of the Brand Delta Cafés, there are also the Brands Camelo, Cubano and Belíssimo, which correspond to distinct market segments. There are also solutions for the Take Home segment (Delta Q).Forming partnerships has also been an essential factor in the Group’s strategy, for complementary products assume an important role in the Group’s relationship with the market, with a diverse portfolio of products that complement coffee, such as water, juice, wine, tea, olives and liqueurs.
The Nabeiro Group has always adopted a proximity strategy in order to become the leader of the Portuguese coffee market, increasing the knowledge and understanding of customers’ interests, offering to help them overcome any commercial difficulties, offering terms which allow them to reach their goals. This has revealed a successful formula with regard to customer management, allowing the Group to earn the reputation and the prestige it has today.The internationalization process of Delta Cafés began during the 1980s. The first stage of internationalization arose within the context of a concern to increase our market, seeing that the domestic market was showing signs of saturation.As of the 1990s, the company adopted a more consistent internationalization strategy, directly investing in Spain in a perspective of organic growth of the company itself and market growth, investment in Angola by acquiring a manufacturing unit for producing the local brand (Ginga) and distribution of the Delta Cafés brand through local agents. The internationalization strategy for the French market was based on two distribution agents, but our strategy plan was remodelled in 2007 by acquiring the Paris distributor and commencing direct operations in that country. More recently, our internationalization has involved acquiring the portfolio of our distributor in Luxembourg, with which we had worked for about ten years. The aim of this acquisition was twofold: to create a closer relationship with customers and also to improve the services provided to them. Also in 2012, the group began to operate in Brazil, with the formation of Delta Foods Brasil and the acquisition of Q Brasil.
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1.2 MACROECONOMIC ANALYSIS
PORTUGALIn Portugal, there has been a clear inversion in the decline of gross domestic product (GDP): according to the Quarterly National Accounts issued by the Portuguese Statistics Institute (INE), it increased 0.9% overall during the full year of 2014, after the fall of 1.4% the year before. This was brought about by domestic demand, whose contribution towards the annual variation of GDP in 2014 was positive (2.0 p.p.) in contrast to 2013 (-2.4 p.p.), reflecting the recovery of private consumption and, to a lesser degree, investment. The contribution of net external demand, on the other hand, was negative in 2014 (-1.1 p.p.), after the positive contribution recorded in 2013 (1.0 p.p.), reflecting a more intense rise in the volume of imports of goods and services than of exports of goods and services (6.2% and 3.4%, respectively). Private consumption passed from a reduction of 1.4% in 2013 to growth of 2.1% in 2014, with a pronounced acceleration in the acquisition of durable goods, which climbed 14.8% (2% in 2013), mainly a reflection of an evolution in the automobile sector.Investments recorded growth of 5.2% in volume, after a fall of 6.5% in the previous year. In 2014, the annual average variation rate of the Portuguese Harmonised Index of Consumer Prices (HICP) fell to -0.2% (0.4% in 2013). During the same period, the Consumer Price Index (CPI) showed an average annual variation rate of -0.3% (0.3% in 2013). The fall in inflation between 2013 and 2014 was mainly determined by the evolution of non-processed foods, which went from 2.6% in 2013 to -2,1% in 2014.Energy products also contributed towards the fall of inflation in 2014, registering a variation rate of -1.4% in 2014 (-0.7% in 2013), mainly due to the decrease in fuel prices.
The unemployment rate stood at 13.9% in 2014, which corresponds to a decrease of 2.3 p.p. compared to 2013. In May 2014 Portugal concluded the Economic and Financial Adjustment Programme executed in 2011 with the European Commission, the ECB and the IMF. The Programme ended in an economic climate marked by a gradual recovery of activity, together with improved labour market conditions and the adjustment to the balance of payments. The austerity measures implemented in conformity with the constitutional restrictions in force led, even if only partially, to a reduction in public expenditure and a balancing of social security and the national health service (the ADSE and the SNS), essentially on the basis of increasing revenue by means of a considerable rise in taxation.
SPAINAgainst a backdrop of moderation in the budget adjustment process and progress in correcting macroeconomic imbalances, the Spanish economy grew 1.4% in 2014 (as opposed to -1.20% in 2013), driven by the rise in domestic demand, more jobs, recovery in confidence of economic agents and simultaneously, the normalization of conditions in the financial sector. Despite remaining high, there was a fall in unemployment figures during the year, from the 26.12% recorded in December 2013 to the 24.6% recorded in December 2014.The Consumer Price Index recorded a variation of 0.1% in 2014. Benefitting from the fall of the Euro risk premium, Spain’s financing costs via 10-year bonds fell from 4.151% in December 2013 to 1.611% in December 2014.In 2015, Spain’s GDP is estimated to increase to the order of 2.5%.
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1. BUSINESS ACTIVITY1.2 MACROECONOMIC ANALYSIS
FRANCEIn 2014, France lost its position as the fifth economic power in the world to the United Kingdom. The country revealed difficulties in dealing with the crisis and, in 2014, GDP growth was trivial (0.4%), due to the stagnation in household consumption and investment. The future remains uncertain, but the fall in oil prices has led to a positive review of the outlook on growth.The difficulties persisted in 2014, with the degradation of economic competitiveness, falling company margins, a steep public and trade deficit and general gloom. Although the initial results of tax were beneficial to competitiveness and employment (CICE), companies continue to suffer financial woes. France agreed to reduce its deficit (amounting to 85.6 billion euros 2014, in other words, 4.4% of the GDP), which does not comply with the rules of the European Commission, of only 0.5%. The targets for reducing the public deficit to 3.6% of the GDP were postponed to 2017. During the year, a “responsibility pact” was adopted in order to stimulate competitiveness and the profitability of companies to help employment, funded by a reduction of 50 billion euros in public spending by 2017. Several structural reforms will be needed in order to deal with the various financial challenges that the country faces: reducing the budget deficit, bringing rising public debt under control, promoting employment, aiding industrial development and ensuring intergenerational equity.Due to the crisis, unemployment and job insecurity have reached record levels. In 2014, the number of unemployed has leapt and, according to estimates, the unemployment rate, currently at 9.9%, is forecast to exceed 10% in 2015.
LUXEMBOURGIn annual terms, GDP increased by 3.0% in 2014, suggesting that the economy may have entered a relatively sustained period of growth. In sectorial terms, growth has been driven upwards mainly by recoveries in industry and construction, with production in the industrial sector returning close to 2011 levels, supported by the recovery of the export markets within the Eurozone.Prospectively, slow external economic growth and tensions regarding the profitability of the financial sector, caused by the need to adjust to new laws and regulations, may put some pressure on the exceptionally high financial sector growth rates in this country.In this context, GDP growth is expected to slow down to 2.6% in 2015, though it will accelerate back up to 2.9% in 2016, when the external economic environment gradually improve.On the supply-side, the activities associated with company support services are to remain robust. But the contribution by the financial sector to GDP growth on the other hand, will be lower during the next two years. In any case, the financial sector appears to be adapting to the new regulatory framework more rapidly than expected, although it is not yet clear if the sector’s growth potential will continue to be as high as it was in the past. The construction sector will continue to recover, although at a slower rate.Despite the recovery, the momentum of GDP growth will remain lower during the period 2015/19 (annual average growth of +2.8% is expected) than during the pre-crisis period of 2008/09 (between 2000 and 2007 GDP grew at an average annual rate of +5%). This is due to the dependence of Luxembourg’s exports on the Eurozone market which, although under recovery, will remain fairly weak while structural reforms and budget consolidation remain in effect.
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1. BUSINESS ACTIVITY1.2 MACROECONOMIC ANALYSIS
The inflation rate in 2014, in line with the rest of the Eurozone, decelerated to 0.7%, under pressure from low oil prices and international food products. Year-on-year inflation in January dropped to -1.1%, the biggest fall since July 09, although this petered out to -0.3% in February. Although the financial sector is likely to continue staff redundancies in 2014, job creation in the economy as a whole did increase to 2.1%, in line with the improving global economic outlook. After a good1st half, job creation slowed slightly during the 2nd half of the year. Employment grew little in the manufacturing industry, but remained particularly strong in the company services sector. Overall, the job market outlook should remain positive, whereby employment is expected to rise on average around 2% a year up to 2015/16, supported by a more solid economic outlook.
BRAZILIn 2014, Brazilian GDP increased by 0.2% (as opposed to 2.75% in 2013). The inflation rate remained above the Brazilian Central Bank’s target of 4.5%, registering an increase to 6.33% in 2014 (as opposed to 6.21% in 2013). The current account recorded a deficit of 3.95% of GDP. Inflation pressures and the devaluation of the Brazilian Real led to a change in the policy of the Central Bank, which started a cycle of interest rate rises, up to 11.75% in December 2014 (in contrast with 10% in December 2013).The Real ended the year approximately 10% down in relation to the dollar and unchanged in relation to the Euro.In 2015, the Brazilian economy is expected to contract by roughly 0.5%.
ANGOLAAccording to the International Monetary Fund, the Angolan economy grew 3.9% in 2014 (compared to 6.8% in 2013). This slowdown was caused by the fall in oil production that occurred during the first half due to maintenance downtimes in some oil operations and the considerable drop in crude oil prices during the last quarter of this year. Nonetheless, the rate of increase in non-oil products remains robust (estimated 7.3%), despite the slowed growth in the agricultural sector.In 2014, inflation reached historical lows, 7.3% (estimated) as compared to the 8.8% recorded in 2013. For 2015, the IMF expects the Angolan economy to grow approximately 5.9%.
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1.3 GROUP ACTIVITIES
ORGANIZATIONAL STRUCTURE OF THE GROUP
MANUEL RUI AZINHAISNABEIRO, LDA.RETAIL COFFEE SALES
NOVADELTA, S.A.ROASTED COFFEE
ANGONABEIRO, LDA. ROASTED COFFEE & RETAIL COFFEEANGOLA
DELTA CAFÉS MADEIRA, S.A.RETAIL COFFEE SALES
NOVADELTA ESPANHA, S.A. RETAIL COFFEE SALESSPAIN
TORREFACÇÃO CAMELO, LDA.ROASTED COFFEE & RETAIL COFFEE
NOVADELTA FRANCERETAIL COFFEE SALESFRANCE
NOVADELTA LUXEMBURGORETAIL COFFEE SALES
SIECRETAIL COFFEE SALESSPAIN
Q BRAZIL
JOÃO DOS SANTOS NABEIRO, LDA. ROASTED COFFEE & RETAIL COFFEE
DELTA FOODS BRASILRETAIL COFFEE SALESBRAZIL
TECNIDELTA, LDA.HOTEL EQUIPMENTINSTALLATIONS
TOLDICONFEX, LDA.AWNINGS, PARASOLS ANDOTHER APPAREL
Nabeiro/Delta Cafés Group, continuing on from previous years, has carried on its activity in conformity with the company s articles of association and the guidance of the board of directors, whose main purpose is to coordinate and supervise the activities and business of the companies which the Group controls. It is in these companies that the coffee business is concentrated and which continues to play a central role at the heart of the Nabeiro/Delta Cafés Group.
The following companies belong to the Group:• Novadelta, S.A.• Manuel Rui Azinhais Nabeiro, Lda.• Tecnidelta, Lda.• Toldiconfex, Lda.• Delta Cafés Madeira, S.A.• Torrefacção Camelo, Lda.• SIEC, SAU• João dos Santos Nabeiro, Lda.• Novadelta Espanha, SAU• Novadelta França, Lda.• Angonabeiro, Lda.• Novadelta Luxemburgo• Delta Foods Brasil• Q Brasil
DELTA CAFÉS, SGPS, S.A.incorporation 12/01/79
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1. BUSINESS ACTIVITYGROUP ACTIVITIES
Annual earnings increased significantly, essentially due to the improved results of the companies Novadelta, SA. and Manuel Rui Azinhais Nabeiro, Lda, resulting from the overall economic situation underlying the whole of the Portuguese market. It should be noted that because they are still at the investment stage, some of the international companies have obtained negative results.The Group also has an indirect holding in the company Angonabeiro, which is directly controlled by Novadelta, S.A., a company which is engaged in the production and sale of coffee in the Angolan market together with the companies SIEC, SAU and João dos Santos Nabeiro, Lda., through a direct majority holding in Torrefacção Camelo, Lda. The main business activity of SIEC, SAU is the sale of “Camelo” brand coffee in the Spanish market, while the main business activity of João dos Santos Nabeiro, Lda. is the production and sale of “Cubano” brand coffee in the Portuguese market. In addition, in 2014 we continued to invest in Brazil through Delta Foods Brasil and Q Brasil, which thus constituted another important step in the internationalization of the Nabeiro/Delta Cafés Group.At the end of 2014, Nabeirorest, Lda merged with Manuel Rui Azinhais Nabeiro, Lda as a means of creating a more centralized structure for the coffee business.
DELTA QIn 2014, Delta Q continued to follow the strategy established of investing in Innovation, in the development of its own sales channels and the consolidation of its position with the various stakeholders.As a specialist coffee brand, Delta Q invested further in Delta Q Qontrast during 2014, a blend created in order to accentuate and pay tribute to the importance of the art of roasting in defining the sensorial profile of the final product. Starting out with exactly the same blend but roasted according to two distinct profiles, Delta Q Qontrast offers coffee-drinkers – who are accusomed to a perfect espresso but appreciate novelty and experimentation – an extremely interesting sensory experience through the contrast between Delta Q Qontrast Light Roast and Delta Q Qontrast Dark Roast. The increased investment in this product was most visible in the marketing communication campaign that took place in July and several promotional events held at points of sale, encouraging a tasting experience.Paying close attention to the behaviour and needs of consumers, the brand launched a new blend inOctober this year – Delta Q breaQfast – aimed at a very specific type of consumption at breakfast-time. When the first meal of the day takes place in fact, there are two different moments of enjoyment: one as a drink accompanying the meal and another as the finishing touch to that same meal. What Delta Q seeks with Delta Q breaQfast is the perfect coffee to drink with milk in the morning.On the one hand, this product strengthens the brand’s status as a coffee specialist and on the other hand, its commitment to proximity to its consumers, attentive of their needs.The development of new business channels, with products of substantial value in order to reach consumers in different circumstances of consumption and purchase, was one of our key activities in 2014.As a result of the work developed in these two very specific areas, the sales of Delta Q Business – the brand product for penetrating the Horeca and Corporate channels – have already exceeded 8 million capsules
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1. BUSINESS ACTIVITYGROUP ACTIVITIES
along with our own store business which followed the same trend towards growth with a notable increase of 23% in sales through our online channel.Faithful to its principles of offering its consumers the highest quality in the products offered, in the simplest way possible and sharing with them the best moments of their life, Delta Q works to make this commitment increasingly unquestionable and evident. This work saw a number of developments during the year of 2014, such as the presentation on the brand’s new online portal, packaging restyling and a new multimedia communication campaign.Seeing that digital channels are an increasingly important point of contact between brands and their consumers, Delta Q invested significantly in renewing its presence in this channel, creating a new portal that is more in line with brand values and the user experience desired by the various visitors to the website.The digital “coffee house” is extremely informal and convivial, conveying the simplicity of the brand. With even more intuitive navigation, visiting the website and making purchases is extremely fluid, avoiding a formally separate online shopping area.The packaging of the blends was another aspect that was renewed during 2014. Aware of the importance of this packaging ito the way in which the consumer relates to the brand – as the most frequent point of contact – Delta Q provided the capsule packaging with a new image, powerful in its impact and easily understood. The packaging has a more transversal layout (instead of the previous longitudinal layout), presenting the brand’s identity more effectively; it is more colourful in order to simplify the selection process; the intensity is more clearly identified and the image is more contemporary and makes a greater impact. All this of course,leads to its losing the main identifying traits of the previous version, although the logotype itself has also evolved.
Following on from this positioning process, the 2014 communication campaign sets a new, more emotional tone, drawing closer to the consumer, identifying the lifestyle consumers share with the brand, making a claim
which is appropriate to the entire category: “Coffee tastes like life, coffee tastes like Delta Q” (“Café sabe a vida, o café sabe a Delta Q”).
Delta Q ended the year of 2014 with sales of 207.5 million capsules and 126,500 coffee machines. According to Nielsen data, in 2014 Delta Q achieved a market share in capsule units of 28% via the Hypermarket & Supermarket channel and a market share of 25% in volume of machines sold (GFK).
SALESThe large-scale distribution channel in 2014 witnessed an increase in the work that we had already begun during the previous year. Our market share and our shelf space in national markets for domestic consumption was the main focus of our work, which included not just coffees but also teas. It was also a year marked by an incisive market approach, enhancing our advertising plan for the Delta Cafés’ brand with consumers.
Also during 2014, the Horeca channel saw the inauguration of the Commercial Department in Guarda, which until then had been covered by the Viseu Sales hub.This was also the year of consolidation of the Delta Q Bussiness concept for the Horeca and Corporate channels, the quality and diversity of the “Coffee of coffees” is now provided to the same consumers but outside their homes and in a business context.
Delta Q Business is a concept that stands out due to its simplicity due to the capsule system being handy, convenient and practical, offering excellent results with every cup of coffee as well as being sophisticated, combining the prestige of a brand that is preferred by consumers with innovative solutions in terms of blends, equipment and accessories.
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1. BUSINESS ACTIVITYGROUP ACTIVITIES
MARKETING & ADVERTISINGContextualization of the Segment in 2014
During 2014, in large-scale distribution, a range of behaviours occurred which were decisive for the establishment of MKT’14 Plan, as follows:• Increased expenditure per visit and reduction
in number of visits to stores;• Increased marketing pressure in FMCG, without
increasing the amount per purchase;• Change of format, from ground coffee to capsules;• Discovery that a significant group of roast coffee
consumers use a variety of formats (ground, capsules and instant coffee).
In view of the economic context and the trends / conducts observed, the aims of the MKT Plan for large-scale distribution were:• Increase the brand recall index, thus enhancing
the influence on purchase decisions (investment in advertising and band association to determined events);
• Increasing brand communication with a younger target audience and therefore brand longevity;
• Improving visibility materials at points of sale;• Increase frequency of communication at points
of sale;• Launch the brand in the instant coffee subcategory.
In 2014, we launched the Delta Cafés instant coffee range, under the slogan “And the Day Gets you Stirring” (“E o Dia Começa a Mexer”). This launch included several tasting events and improved visibility at the points of sale. We decided to increase product visibility, helping the consumer to locate it and try it out. Outside stores, communication took place via a network of interactive billboards (Lisbon and Porto), placards at bus stops and publicity banners on Cofina Group media. Additionally, tasting events were held at six Metro stations in Lisbon.
During last year, two promotional events were held, Delta Clube de Portugal and the promotional event Delta Moídos, whose purpose was to increase average purchases of ground coffee, energizing points of sale and promoting brand loyalty with shoppers.Simultaneously, investment was increased in point of sale materialss, in order to “conquer” more space in stores, new placements, increasing brand visibility at the point of sale and causing an impact on shoppers.
TRADE FAIRS AND EVENTSThe participation in trade fairs and other individual structure events is one of the areas of direct responsibility of the Delta Cafés Marketing department.
In 2014, we were present at great exhibitions such as SISAB – International Exhibition for the Food & Beverage Sector, in Lisbon; and the Salon de Gourmet – Fine Food & Beverages Fair in Madrid. We attended events, with our own stands, including the Festival das Tasquinhas in Rio Maior, ExpoFacic in Cantanhede, ExpoMadeira in Funchal, National Gastronomy Festival of Santarém, Portimão Sardine Festival and Olhão Seafood Festival, Ovibeja,in Beja; Festa do Avante, in Seixal, etc.. This year, in order to draw closer to young people, we took part in the Meo Sudoeste and Super Bock Super Rock music festivals, where our activation events did not go unnoticed.
Delta Cafés was also present at dozens of smaller shows and events, using our fleet of mobile kiosks; and also attended over two thousand conferences, seminars, meetings and cultural events and supplying the coffee breaks.
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1. BUSINESS ACTIVITYGROUP ACTIVITIES
LIST OF HOLDINGS
BUSINESS UNIT BUSINESS ACTIVITY SHARE CAPITAL INCORPORATION % HOLDING
DELTA CAFÉS SGPS, SA Holding company 60,014,370.00€ 16-12-2002 100%
MANUEL RUI AZINHAIS NABEIRO, LDA Retail Coffee Sales 2,500,000.00€ 12-01-1979 99.99%
NOVADELTA, SA Coffee roasting 17,570,000.00€ 15-06-1984 99.99%
ANGONABEIRO Retail Coffee Sales 55,737.13€ 13-05-1998 85.71%
DELTA CAFÉS MADEIRA, SA Retail Coffee Sales 50,300.00€ 19-05-1995 99.96%
TORREFACÇÃO CAMELO, LDA Coffee roasting 2,000,000.00€ 07-02-1955 91.43%
JOÃO DOS SANTOS NABEIRO, LDA Coffee roasting 250,000.00€ 09-10-1970 51.43%
SIEC, SAU Retail Coffee Sales 3,000,000.00€ 23-03-2001 91.43%
NOVADELTA ESPANHA, SAU Retail Coffee Sales 14,098,500.00€ 08-10-1986 100%
NOVADELTA FRANÇA Retail Coffee Sales 500,000.00€ 31-01-2008 100%
NOVADELTA LUXEMBURGO Retail Coffee Sales 500,000.00€ 23-09-2011 100%
TECNIDELTA, LDA Manufacture, sale, maintenance and import of hotel equipment, such as coffee machines and grinders 500,000.00€ 22-12-1993 97.50%
TOLDICONFEX, LDA Manufacture and sale of illuminated advertising signs, awnings, parasols and other apparel 100,000.00€ 19-01-1998 95%
DELTA FOODS BRASIL Retail Coffee Sales 2,377,963.12€ 25-01-2012 98.98%
Q BRASIL Retail Coffee Sales 258,470.83€ 20-07-2012 75%
GOVERNING BODIES
BOARD OF DIRECTORS
CHAIRMANComendador Manuel Rui Azinhais Nabeiro
DIRECTORSJoão Manuel Gonçalves NabeiroHelena Maria Gonçalves Nabeiro Tenório
GENERAL MEETING
CHAIRAlice do Carmo Borrega Gonçalves Nabeiro
SECRETARYAntónio Miguel Chambel Paralta Ribeirinho
Statutory Auditor: in accordance with article 16, paragraph 4
of the Company’s Articles of Association, the appointed Auditor
is Ernst & Young Audit e Associados – SROC, S.A.
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2. COMPANY PERFORMANCE
2.1 FINANCIAL INFORMATION
In order to analyse the development of the company, we submit the following comparative information:
2014 2013 VARIATION
Cash Flow 52,715,542.14 32,431,520.70 62.54%
Operational Cash Flow (Ebita) 66,838,116.46 42,341,188.95 57.86%
Gross Sales Profitability 63.91% 61.17% 4.48%
Return on Equity 19.61% 7.48% 161.97%
Return on Assets 9.30% 3.03% 206.81%
Equity ratio 47.41% 40.48% 17.12%
Liquidity 2.88 3.22 -10.56%
Consolidated Financial Costs 2,414,920.18 4,151,446.14 -41.83%
Loans 90,877,329.05 105,283,859.82 -13.68%
Total Investment 96,793,866.91 94,789,115.43 2.11%
Sales 307,085,081.88 288,187,508.82 6.56%
EBT 39,008,769.35 13,547,026.93 187.95%
Annual net income 27,246,098.42 8,352,141.02 226.22%
Generally speaking, all the indicators were up from the previous year.In terms of cash flow and operational cash flow, this improvement was essentially due to the increase in the net profit of Novadelta, S.A. and of Manuel Rui Azinhais Nabeiro, Lda.The company’s financial autonomy increased to 47.41%. As mentioned earlier, the strong impact of net profit also resulted in an increased return on equity, which came to 19.61%, as well as increased return on assets of 9.30%.Liquidity decreased by 10.56% compared to the previous year.Total consolidated investment increased in relation to the previous year, which clearly reflects the concern to invest in customers. However, the Group also continued to invest in the development of the brand concept and production infrastructure, as was the case with Delta Q.
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2. COMPANY PERFORMANCEFINANCIAL INFORMATION
During the year, the value of the loan taken out with Nabeirogest SGPS, S.A. decreased, as did the loans granted to subsidiaries.
2014 TURNOVER, PER COUNTRY
MARKET VOLUME (%)
PORTUGAL 76%
SPAIN 14%
FRANCE 2%
LUXEMBOURG 1%
ANGOLA 6%
BRAZIL 1%
2014 TURNOVER, PER COMPANY
COMPANY VOLUME (%)
M.R.A.N 66%
NOVADELTA PORTUGAL 4%
TECNIDELTA 0%
TOLDICONFEX 0%
DELTA MADEIRA 2%
NABEIROGEST 0%
TORREFACÇÃO CAMELO 3%
JOÃO DOS SANTOS NABEIRO 0%
SIEC 5%
ANGONABEIRO 6%
NOVADELTA ESPAÑA 10%
DELTA CAFÉS - S.G.P.S. 0%
NOVADELTA FRANCE 2%
NOVADELTA LUXEMBURGO 1%
DELTA FOODS BRASIL 1%
Q BRASIL 0%
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2.2. NON-FINANCIAL INFORMATION
During the period under examination, there was a 2.44% reduction in the total number of employees. This situation was justified by a reorganization of services. Even so,The company has upheld its commitment to the community, despite the current socioeconomic situation, and has sought to return to the community all the value and recognition they have given to the company over the years, even if this sometimes implies decreasing margins.According to a geographical perspective, the number of employees per country is in line with our commercial strategy, whereby 80% of our employees are based in Portugal, 13% in Spain, 1.3% in France and 3.9% in Angola, while the remaining 1.3% are split between Luxembourg and Brazil.
Our Training Policy aims to respond to a dual objective: on the one hand, helping employees adapt to changes in working conditions resulting from technological progress and the development of the economic context and, on the other hand, to ensure and incorporate innovations and alterations that are necessary in order to guarantee the development of the Nabeiro Group.
The Comendador Rui Nabeiro International Postgraduate Centre, through the development of all its training projects and a considerable number of training hours provided has become a true strategic learning centre for employees, customers, consumers and the community, anticipating inroads for the future and preparing its human capital to competently master the challenges of the 21st Century.
2.2.1 HUMAN RESOURCESHuman Resources addresses the needs of the Delta Cafés Group by selecting, enhancing and capacitating the best talents. By actively addressing our employees’ needs, we hope to increase their skills and offer conditions for their personal and professional development, stimulating their creativity and personal initiative in pursuing the organisation’s goals.
Human resource management is geared towards a set of policies that are based on the following principles:• Professional development;• Equal opportunities;• Formation of new skills by virtue of a lifelong learning
model;• Health and safety;• Freedom of expression;• Employee involvement in research activities;• Respect for Human Rights established in the main
International Conventions;• A good work environment, centred on human
relations in the workplace;• Professional and social achievement;• Initiative and creativity;• Professional development by means of career
planning;• Non-discrimination.
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2. COMPANY PERFORMANCENON-FINANCIAL INFORMATION
2.2.2 ENVIRONMENTAL RESPONSIBILITY In the development of the respective environmental sustainability policy, the Group has implemented the following directives in all its projects:• General principle of environmental responsibility
and management;• Implementation of eco-efficiency and energy
optimization concepts;• Mitigation of waste, conserving and increasing
recycling.
In this way, the Environmental Management System, validated by means of certification according to the NP EN ISSO 14001 standard and registration of EMAS, which is a Community Eco-management and Auditing system, Regulation (EC) no. 1221/2009, continue to constitute the Group s main projects in productive systems.The Group’s aim, by implementing this regulation, is to support environmental protection and pollution prevention, in a perspective of ongoing improvement, maintaining a balance between economic requirements, protecting the environment and social development.
2.2.3 SOCIAL RESPONSIBILITY The Group is committed to the community by virtue of Ambassador & Sustainability and “Time to Give” (“Tempo para Dar”) projects. The first of these seeks to form a network of internal employees who can participate in the definition, implementation and supervision of water, energy, fuel and paper reduction plans and increase and promote a range of best practices with their colleagues. “Time to Give” aims to build a network of employee-based volunteers to work with social solidarity institutions whose mission focuses on close support to the elderly.
2.2.4 RESEARCH & DEVELOPMENT EXPENSESInnovation, Research & Development at the Delta Cafés Group is viewed as a vital requirement for the competitiveness of all business units, implying the creation of shared knowledge networks, both in the field of science and with regard to specific activities developed with recognized stakeholders.
In this context, Delta Serviços plays a pivotal role integrating ongoing R&D work in relation to products, services, processes and systems that directly affect the Groups’ business, namely with regard to solutions that help to improve quality and the launch of new products and services, modernizing infrastructures, improving control and management and the diversification of the services offered by the Group. TThis activity is particularly important for the ongoing improvement of industrial and commercial services, not to mention environmental and social responsibility policies.
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3.EVOLUTION OF THE COMPANY
COFFEE IS STILL MAINLY CONSUMED AWAY FROM HOME Most Portuguese people still drink their coffee out of the house. However, home consumption has increased over the last two years, whereby they now approach the coffee consumption habits found in the rest of Europe, in other words, a reduction of the weight of Horeca in total consumption.In a scenario of change in consumption habits, where the final consumer, a little all over the world, tends to drink more coffee at home without, however, totally discontinuing their former habits, retail sales have contributed towards energizing this sector. According to Nielsen date, there was an increase of +46% in value and +30% in volume with regard to capsules at the start of 2013, with shares of 105 million euros and 2,586 tons, respectively1.
1 source: http://www.hipersuper.pt/
COFFEE MARKET
THE SEGMENTIn an environment where roughly 80% of Portuguese people drink coffee daily, this drink is associated with social habits and traditions, a distinctive trait of Portuguese culture.In general, the Portuguese prefer espresso coffee, a type of coffee which, in Portugal, although it is prevalent in other south European countries, possesses unique characteristics that define the “Portuguese Espresso”.According to recent data issued by the European Coffee Federation (ECF) in relation to 2011, the difference in coffee consumption habits between the Portuguese and their European neighbours is more clear-cut: average consumption of coffee in Portugal is roughly 4.7 kg per person/year, while in European countries it is close to 6.4 kg per person/year.At the moment, according to Nielsen data, the coffee market in Portuguese is valued at 424,441,528 euros. Globally, coffee is the second most popular drink in the world and the second most sold commodity in the world (after oil).Constant reinvention in the sector and adaptability to market requirements – such as, for example the introduction of capsules into the home segment – as well as constant investment in foreign markets means there are rather positive sales dynamics in the sector.
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3. EVOLUTION OF THE COMPANYCOFFEE MARKET
DELTA CAFÉS GROUP The Group’s evolution has occurred naturally through the dynamics of its companies and in a sustained and progressive manner.
With regard to international markets, following the acquisition of Novadelta France in 2008, we began to market directly in the French market, obtaining a significant increase in sales in this market. The Group maintained its presence in the Spanish market, in the expectation that the results of Novadelta Espanha will develop progressively until they become positive.At the end of 2011, Novadelta Luxemburgo was formed in order to extend the Groups’ expansion into the European market, since it is likely that the internationalization process will continue to take place in Europe.Insofar as concerns Brazil and as expected, Delta Foods Brasil has started to take its first steps in the Brazilian market, together with its associate Q Brasil.
It is in this context of reorganization and restructuring the core business of Delta Cafés SGPS, that we see the appearance of these companies which will exclusively represent the brand Delta Cafés in Latin America, together with the considerable growth of Delta Q, which will also be one of the pillars for raising awareness of and the expansion of the Nabeiro/Delta Cafés Group.The Group has renewed its image, making it more modern, contemporary and innovative, in order to increase the globalization of the brand by entering new international markets.
The change of image of the Delta Cafés Group will take place gradually both domestically and internationally, whereby its image will be uniform all over the world. This innovation will involve changes to packaging as well as other communication materials. In this way, the Group is going to increase its investment in internationalization and export, with innovation as its support, in order to obtain sustained growth while maintaining all the characteristics that are inherent to the brand.
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4.RISK MANAGEMENT POLICY
Currently present in over 35 countries and spread overall five continents, the renovation of the image of Delta Cafés, which will become even more global and have an international nature, aims to ensure that international markets gain more relevance within the Group.Over the last two years, the materialization of risks concerning financial stability intensified substantially, both in Portugal and worldwide, reflecting the deterioration of the macroeconomic and financial environment, in a context of generalized tension in government debt markets in the Eurozone. These worsening economic and financial conditions led to a deterioration of the profitability of the Portuguese banking system, as well as an increase of credit and market risks. In the short term, this trend towards increased risks is likely to persist. However, there are several instruments that can help mitigate the shock-waves caused to the Portuguese financial system within the framework of the Economic and Financial Assistance Programme, particularly in terms of requirements for additional capital.Moreover, the Portuguese Central Bank constantly monitors the deleveraging of the Portuguese financial system, in order to ensure an ordered and gradual process that does not compromise financing the Portuguese economy.
It is within this framework that the Group finds itself subject to risks that could result in changes to its financial situation or changes to its financial income.The risk management policy related to the price of raw materials is applied by monitoring the global market position and paying special attention to currency exchange rates. The acquisition of raw materials can also be conditioned by natural calamities, climactic
conditions, political conflicts or economic circumstances, whose developments are constantly monitored.Risk management is carried out by the Board of Directors, according to the strategic plan defined for the Group. The Board of Directors identifies, evaluates and performs operations in a manner that minimizes the risks detected, defining internal goals and processes and establishing competencies and responsibilities with regard to the Group’s risk management.The Group permanently monitors all loans made.The Board of Directors supervises and pays close attention to interest rate and liquidity risks, always taking care to guarantee a liquidity ratio far above the average for this sector, obtaining interest coverage instruments through the parent company, Nabeirogest SGPS, SA.
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5. MATERIAL EVENTS SUBSEQUENT TO BALANCE DATE
After the balance date and until this time, no facts of material relevance in the company’s activity have occurred that influence the financial statements of the company for this year.
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6. PROPOSAL FOR DISTRIBUTION OF PROFIT
During the financial year of 2014, Delta Cafés SGPS, S.A. achieved consolidated profit of 27,243,834.09 euros and, individually, its profit amounted to 25,763,441.83 euros.
The Board of Directors proposes that the General Meeting which examines the individual and consolidated financial statements of this financialyear the Net Profit for which amounted to 25,763,441.83 euros, approve the transfer of 24,475,269.74 euros and 1,288,172.09 euros to Retained Earnings and Legal Reserves, respectively.
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7.ACKNOWLEDGMENTS
We would like to express our gratitude towards the Companies and Entities with which we maintain a close relationship and that honour us with their confidence and collaboration.We would also like to extend our thanks to all the employees who have directly or indirectly contributed towards the good performance of the company through their commitment and dedication.
Campo Maior, 15 April 2015
The Board of Directors
Manuel Rui Azinhais Nabeiro
Chairman of the Board of Directors
João Manuel Gonçalves Nabeiro
Director
Helena Maria Gonçalves Nabeiro Tenório
Director
This document contains the disclosures in accordance with the Portuguese Financial Reporting and Accounting Standards (NCRF), which comprise the Accounting Standards System (SNC) with reference to the financial year of 2014.
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
DECEMBER 2014 (AMOUNTS IN EURO)
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1.INTRODUCTION
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Delta Cafés SGPS, S.A. was incorporated on the sixteenth of December of two thousand and two with a view to seeking further improvement of intragroup operation efficiency, as well as to rationalize the integration process for business, communication and institutional policies with the various stakeholders identified throughout the value chain, with the strategic option of proceeding with the integrated development of the business, increasing response capabilities for provision of services and customer satisfaction in all markets.
Delta Cafés SGPS, S.A. is fully owned by the parent company of the Nabeiro/Delta Cafés Group, Nabeirogest, Sociedade Gestora de Participações Sociais, S.A., holder of tax identification number 506 210 499, with recorded office at Avenida Calouste Gulbenkian, in Campo Maior.
The recorded office of Delta Cafés SGPS, S.A. is in Campo Maior and its main corporate purpose is the management of company holdings. The Group’s main field of business is the sale and production of coffee and derivatives, operating in Portugal, Spain, France, Angola, Brazil and Luxembourg.The share capital of Delta Cafés, SGPS, S.A., amounts to 60,014,370 euros and Is fully paid-up.
The consolidated financial statements are authorized for issue on 15 April 2015.The issue of these consolidated financial statements was authorized by the Board of Directors.According to art. 68 of the Portuguese Company Code, the General Meeting of Shareholders may reject the proposal made by the members of the Board of Directors regarding the approval of the report, as long as there is a reasoned deliberation to draft completely new financial statements or to revise specific sections of those presented.
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2. ACCOUNTING FRAMEWORK FOR PREPARING FINANCIAL STATEMENTS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
2.1ACCOUNTING STANDARDS SYSTEM These consolidated financial statements were prepared in conformity with the Accounting Standards System (SNC) approved by Decree-Law no. 158/2009, by Ordnance 986/2009, and by Notices no. 15652/2009 and no.15665/2009.The financial statements were prepared taking into consideration the basis of going concern.
2.2EXEMPTIONS FROM THE SNCThe notes to the financial statements follow the order established in the Accounting Standards System approved by Decree-Law no. 158/2009 and Ordnance 986/2009, whereby the financial statements provide a trueand faithful report of the assets, liabilities, equity and earnings of the Group companies.There were no exemptions for the purpose of providing a true and faithful report of the financial position and the profit and loss of the Group.Please note that any notes that are not indicated herein do not apply or are not relevant in order to understand the financial statements under analysis.
2.3ADOPTION OF THE FINANCIAL REPORTING AND ACCOUNTING STANDARDS The initial adoption of the Financial Reportingand Accounting Standards (NCRF) occurred for the first time in 2010, for which reason the transition date of the former Portuguese GAAP to the NCRF took place in January 2009, in conformity with that established in NCRF 3 – First time Adoption of NCRF.The 2014 financial statements were prepared using accounting principles consistent with those of the previous year, for which reason none of the financial statements, the Balance sheet or the Profit & Loss Statement have contents that are not comparable to those issued in the previous financial year.
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3.MAIN ACCOUNTING POLICIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
3.1BASES FOR MEASUREMENT USED IN PREPARING THE FINANCIAL STATEMENTS In preparing the financial statements to which these notes refer, the Group adopted:• Bases for Preparation of financial statements
specified in the appendix to Decree-Law no. 158/2009, of 13 July, which established the SNC;
• The NCRF in force on this date.
In this way, the consolidated financial statements were prepared taking into consideration the bases of a going concern, accrual basis, consistency of presentation, materiality and aggregation, not offsetting and comparative information.
BASED ON THAT ESTABLISHED IN THE NCRF, THE ACCOUNTING POLICIES ADOPTED BY THE GROUP WERE THE FOLLOWING:
(A) TANGIBLE FIXED ASSETSTangible fixed assets refers to assets used in the company’s business activity, the provision of services or administrative use.
The Group adopted the following deemed costs:• Fair value of the appraisal performed with reference
to the transition date although the company American Appraisal, who are qualified professional and independent appraisers with regard to basic equipment, directly related to production activities (production lines and their components).
• Fair value of the appraisal performed under the terms described in the above point regarding property and buildings.
• For the other Tangible Fixed Assets, the values specified in prior financial statements prepared according to the Portuguese GAAP (POC), which included revaluation reserves performed under various laws that considered currency devaluation coefficients.
• Assets acquired after the transition are measured at cost minus accumulated amortisation, subtracting accumulated impairments.
• The fair value of the appraisal of the abovementioned Tangible Assets considered that these were free of any lien or encumbrance and were determined through cash flow projections discounted on the basis of reliable estimates of future cash flows generated by the continued use of the assets applying discount rates reflecting current market evaluations regarding uncertainty and the timeliness of cash flows.
Subsequently, the Group decided to maintain the deemed cost for the basic equipment assessed. Except for real estate that is not depreciable, tangible fixed assets are amortized during their estimated service life and evaluated in terms of impairment whenever there is indication that the assets may be impaired. Amortisations are calculated on an annual basis, as of the time that the assets become available for their intended use, according to the following methods:
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
Amortisation rates are determined in a manner that allows full amortisation of the assets by the end of their estimated service life, as set forth below:
AMORTISATION METHODS
2014 2013
Buildings & other property Straight-line Straight-line
Basic equipment Straight-line Straight-line
Transport equipment Straight-line Straight-line
Administrative equipment Straight-line Straight-line
Other tangible fixed assets Straight-line Straight-line
It is assumed that the salvage value is zero, meaning that the depreciable value that the amortisations apply to coincides with the cost.
AMORTISATION METHODS
2014 2013
Buildings & other property 2,00-12,50 2,00-12,50
Basic equipment 5,00-25,00 5,00-25,00
Transport equipment 25,00-33,33 25,00-33,33
Administrative equipment 12,5-33,33 12,5-33,33
Other tangible fixed assets 12,5 12,5
Amortisation methods, the estimated service life and the salvage value are revised at the end of each year and the effects of the changes are treated as changes to estimates i.e. the effect of the changes is treated prospectively.• Expenses from amortisations are recognized in the
profit and loss statement in the item “Depreciation and amortisations expenditure / reversals”.
• Costs from maintenance and current repairs are capitalised as expenditure during the period in which they occur.
• Expenditure from replacements and overhauls are capitalised whenever they increase the service life of the tangible fixed asset they relate to and are amortised during the remaining service life of that asset.
• Any profit or loss resulting from writing down a tangible asset (calculated as the difference between the sale price less costs and the book value) is included in the results for the financial year during which the asset is written down.
• Tangible fixed assets in progress relates to assets that are still under construction or development and are measured at acquisition cost, whereby they are only amortised when they become available for use.
IMPAIRMENTThe Group evaluates whether there are any signs that an asset may be impaired at the end of the year. In the event of such signs, the Group estimates the recoverable value of the asset (the higher of the fair price of the asset or of a cash-generating unit minus the costs of selling and its value of use) and recognizes impairment in the profit and loss for the financial year whenever the recoverable value is lower than their book value.
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(B) INTANGIBLE ASSETSResearch & Development projects, intellectual property rights and computer software are recognized under this heading.
Intangible assets acquired separately are measured at cost price on their initial recognition date.After their initial recognition, intangible assets are presented at cost minus accumulated amortisation and accumulated impairment losses.The service life of intangible assets is finite.Intangible assets with finite service life are amortised during their estimated economic life and evaluated with regard to impairment whenever there are signs that an asset may be impaired.The impairment of the assets is determined based on the criteria described in paragraph a) tangible fixed assets.Reversals of impairment are recognized in profit and loss and do not exceed the book value of the asset that would apply if the asset had never been subject to impairment.For any intangible assets with a finite service life, amortisation methods, the estimated service life and the salvage value are revised at the end of each year and the effects of the changes are treated as changes to estimates i.e. the effect of the changes is treated prospectively.
Amortisations are calculated on an annual basis, according to the following methods:
AMORTISATION METHODS
2014 2013
Research & development projects Straight line Straight line
Computer software Straight line Straight line
Industrial property Straight line Straight line
It is assumed that the salvage value is zero, meaning that the depreciable value that the amortisations apply to coincides with the cost.
In evaluating whether there are signs of impairment, the following situations are taken into account:• During the period, the market value of an asset
decreased significantly more than would be expected due to the passage of time or through normal use;
• During the period, significant changes occurred or will occur in the near future, with a negative effect on the entity, regarding the technological, market, economic or legal environment in which the entity operates the asset or the market in which it is employed;
• Market interest rates or other market rates on investment returns increased during the period
• and thus these increases will probably affect the discount rate used in the calculation of the service value of an asset and materially decrease the recoverable value of the asset;
• The book value of the entity’s net assets is higher than its market capitalization;
• There is evidence of obsolescence or physical damage regarding an asset;
• Significant changes with adverse effects on the entity occurred during a period or are expected to occur in the near future, to the extent or not, that an asset is used or expected to be used. These changes include an asset that has become idle, there are plans to discontinue or restructure the operational unit to which the asset belongs, or plans to sell before the expected date;
• There is evidence in internal reports indicating that the economic performance of an asset is or will be, below what was expected.
Regardless of evidence of impairment, assets that are not yet available for use are tested annually.Reversals of impairment are recognized in profit and loss (unless the asset is recorded for the revalued amount, in which case it is treated as a revaluation excess) and do not exceed the book value of the asset that would apply if the asset had never been subject to impairment.
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Amortisation rates are determined in a manner that allows full amortisation of the assets by the end of their estimated service life, as set forth below:
AMORTISATION METHODS
2014 2013
Research & development projects 10 10
Computer software 33,33 33,33
Intellectual property 10 - 25 10 - 25
Expenses from amortisation of intangible assets are recognized in the profit and loss statement in the item “Depreciation and amortisations expenditure / reversals”. Any profit or loss resulting from writing down an intangible asset (calculated as the difference between the sale price minus costs and the book value) is included in the results for the financial year during which the asset is written down.
Some of the specificities of each type of Intangible Asset are described below.
(B.1) Research & development projectsResearch costs are considered expenses at the time that they occur.The costs from the development of a determined project are recognised as intangible costs when the Group is able to demonstrate:• The technical feasibility of completing the intangible
asset in such a manner that it will become available for use or sale;
• The intention to reach completion and that it has the conditions to use or sell the asset;
• How the asset will generate future economic benefits;
• Resources are available to complete the asset;• The capacity to reliably measure expenditure during
the development stage.
(B.2) Computer softwareComputer software acquired from third parties is recognised in this item.The internal costs related to maintenance and development of computer software are recognised as expenses at the time that they occur, because it is considered that they cannot be reliably measured and / or do not generate future economic benefits.
(C) INVESTMENT PROPERTIES The Group adopted the cost method for measurement of Investment Properties.The Group adopted as the deemed value, the fair valueof an appraisal performed with reference to that date by a qualified and independent entity.
The criteria applied by that company in order to determine fair value considered that the properties were free of lien or encumbrance and were the following:• Current prices in an active market with similar
properties;• Current prices in an active market with similar
properties in the same location and conditions, adjusted to any differences in nature, location or condition of the property;
• An investment property is initially measured: (i) at cost, which includes the acquisition price and any associated direct expenditure (for example, professional fees for legal services, property conveyance tax and other transaction costs).
• After their initial recognition, Investment Properties are presented at cost minus accumulated amortisation and accumulated impairment losses.
• The service life of Investment Properties is finite.• The impairment of Investment Properties
is determined based on the criteria described in paragraph a) tangible fixed assets.
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• For Investment Properties with a finite service life, amortisation methods, the estimated service life and the salvage value are revised at the end of each year and the effects of the changes are treated as changes to estimates i.e. the effect of the changes is treated prospectively.
(D) INCOME TAX(D.1) Income tax – currentCurrent tax is determined on the basis of the accounting and is adjusted according to the tax legislation in force and applicable to the Group.
Group companies pay corporate tax at a rate of 23%, plus “derrama” (municipal tax) of 1.5% on taxable profit, applicable from 2012 inclusively, rising to 3% applicable to the taxable profit that exceeds 1.5 million euros, and 5% on taxable profit exceeding 7.5 million euros.The national companies are part of the scope of consolidation of the parent company, Nabeirogest SGPS S.A. According to the legislation in force where the Group operates, the respective tax statements are subject to revision by tax authorities during a period of 4 years, which may be extended under certain conditions, namely when tax losses occur or inspections, complaints or judicial lawsuits take place.National companies within the group with Taxable Profit during the financial year of 2014 may be entitled to tax credits with regard to eligible investments according to Law 49/2013, of 16 July.The Group is also subject to Social Security review during a period of 10 years.The Board of Directors, based on the opinion of its tax consultants and considering recognised liabilities,believes that any revisions to tax statements that may occur will not result in material corrections to the tax statements.
(D.2) INCOME TAX – DEFERREDDeferred tax assets and liabilities arise from the calculation of temporary differences (deductible and taxable) between the accounting base and the tax base of the assets and liabilities of the Group.
Deferred tax assets reflect:• Deductible temporary differences to the extent that
the existence of taxable profit in the future is likely, regarding which the deductible difference can be applied;
• Unused tax losses and unused tax credits to the extent that future taxable profit may be available in the future against which they can be setoff.
Deductible temporary differences are temporary differences that result in amounts that can be deducted when calculating the taxable profit / tax losses in future periods when the book value of the asset or liability is recovered or paid.Deferred tax liabilities reflect temporary taxable differences.Temporary taxable differences are temporary differences that result in taxable amounts when calculating the taxable profit / tax losses in future periods when the book value of the asset or liability is recovered or paid.
The measurement of Deferred Tax Assets and Liabilities:• Is performed according to the rates expected to be
applied during the period that the asset is sold or the liability paid, based on the tax rates approved on the balance date;
• Reflects the tax consequences resulting from whether the Group expects, on the balance date, to recover or pay the book value of its assets and liabilities.
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(E) INVENTORIESInventory valuation and the respective inventory cost methods are the following:
VALUATION COST METHODS
Goods Acquisition cost (*) Average cost
Raw materials, by-products &consumables Acquisition cost (*) Average cost
Finished & partially finishedgoods Production cost (*) Average cost
Subproducts, waste, residues & refuse Net realizable cost Net realizable value
Products & work inprogress Production costs Average cost
(*) or net realizable value, if lower
The Inventory Costs include:• Acquisition costs (purchase price, import duties,
non-recoverable taxes, transport costs, handling and others directly associated to the purchase, deducting commercial discounts, rebates and other similar items);
• Other costs borne from placing inventories at their destination in the intended conditions;
• Whenever the net realizable value is lower than the acquisition or production cost, the value of the
• inventories is reduced, by acknowledging a loss due to impairment, which is reversed when the reasons that brought it about no longer exist.
• For this purpose, the net realizable value is the estimated price of sale under normal business activity, minus estimated costs for completion and the costs necessary to perform the sale. The estimates take into account variations related to events occurring after the end of the period to the extent that such events confirm the conditions existing at the end of the period.
(F) FINANCIAL INVESTMENTS OTHER METHODSThe Group uses the cost estimation model to measure financial investments in entities whose stock is not publicly traded and which are not Subsidiaries, Associates or Joint Ventures.
The Group uses the cost estimation model for financial investments in:• Other entities in which it is not required to use the
equity method nor the proportionate consolidation method and if it is unable to determine fair value in a reliable manner, for example in companies that are not listed.
• According to the cost estimation model, financial investments are recognised initially for their acquisition cost, including transaction cost, and their value is subsequently reduced in the event of impairment losses where these occur.
• Impairment is determined on the basis of the criteria defined in paragraph h).
(G) FINANCIAL ASSETS HELD FOR TRADINGThis item includes financial instruments held for trading and the fair value when positive of derivative financial instruments which, although acquired within the scope of the Group’s risk management policy, do not comply in terms of hedge accounting, either because they were not formally specified as such or because they are not effective according to that established in NCRF 27 (with subsidiary regimen according to IAS 39).
Financial assets held for trading include:• Publicly quoted equity instruments;• Other assets held for trading; • Rights and duties within the scope of an employee
benefits plan – at fair value according to profit and loss when disclosed, at cost under other circumstances;
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• Equity instruments quoted on the securities market are measured at fair value with the fair value variations that are recognised in the profit and loss for the financial year while the remainder are measured at cost value minus impairments.
• Impairment is determined on the basis of the criteria defined in paragraph h).
(H) FINANCIAL ASSETS NOT INCLUDED IN THE ABOVE PARAGRAPHS Financial assets are recognised when the Group is a party to the respective contract relationship.
Financial assets not included in the above paragraphs and that are not recognised at fair value are recognised at cost minus impairment losses, when applicable. At the end of the year, the Group evaluated the impairment of these assets. Whenever there is objective evidence of impairment, the Group recognised an impairment loss in the profit and loss statement.Objective evidence that financial assets or a group of assets may be impaired takes into account observable data that draw attention to the following loss-generating events:• Significant financial difficulties of the debtor;• Breach of contract, such as default or failure to pay
interest or amortize the debt;• It becomes probable that the debtor shall become
bankrupt or be subject to business recovery;• Observable information indicating that there has
been a decrease in the estimated measurement of future cash flows from a group of financial assets since they were initially recognized.
• The disappearance of an active market for a financial asset due to financial difficulties of the debtor.
• Individually significant financial assets were evaluated individually for impairment. The remainder were evaluated according to similar credit risk characteristics.
Some of the specificities of each type of Financial Asset are described below:
(H.1) ClientsAccounts receivable from Clients are measured for the initially recognised amount according to the measurement criteria for Sales and Provision of Services described in paragraph n), and are subsequently measured in the following way:• Clients c/a – cost minus impairment;• Client receivables – cost minus impairment.
Impairment is determined according to the criteria defined in paragraph o).
(H.2) Advances to SuppliersThese balances are presented at their respective cost, deducting impairment losses, whenever applicable, determined according to the criteria defined in paragraph h);
(H.3) Other Accounts ReceivableOther accounts receivable are accounted for in the following manner:• Staff – cost minus impairment;• Debtors due to accrued income – at cost;• Other debtors – cost minus impairment.
Impairment, in both cases, is determined according to the criteria defined in paragraph h).
(H.4) Cash and Bank AccountsThe values provided under this heading correspond to cash and current accounts, immediately obtainable.
These balances are measured in the following manner:• Cash – at cost;• Deposits without set maturity date – at cost;• Other deposits with fixed defined maturity – at cost.
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With regard to the statement of cash flows, the heading ‘‘Cash and cash equivalent’’, in addition to cash and bank accounts, also includes bank overdrafts included in the item “Loans”.
(I) STATE AND OTHER PUBLIC ENTITIESPositive or negative balances under this heading are calculated according to the law in force.In as far as concerns positive values, no impairment was recognized considering that this would not be applicable in view of the specific nature of the relationship.
(J) DEFERRED ASSETS AND LIABILITIES These items show transactions and other events regarding which it is inappropriate to assign full recognition to a single financial year, but should be recognised in future financial years.
(K) EQUITY ITEMS(K.1) EquityIn conformity with that set forth in article 272 of the Portuguese Company Code (CSC), the memorandum of association indicates the timeframe for paying in the equity that was not paid in on the deed execution date.
(K.2) Legal reservesAccording to art. 295 of the Portuguese Company Code, at least 5% of profit must be used to create the legal reserve or increase it until it corresponds to at least 20% of the share capital.The legal reserve is not available for paying out dividends, except under liquidation, but can only be used to absorb losses, after all the other reserves have been used up, or for incorporation into the share capital (art. 296 of the Portuguese Company Code).
(K.3) Retained earningsThis heading shows the earnings from previous periods available for distribution to shareholders as well as revaluation reserves that cannot be paid out.
(K.4) Net profit and loss for the financial yearThis item sets forth the income and expenses for the financial year.
(K.5) Exchange reserveThe currency in which the financial statements are presented is the Euro.This heading reflects the differences in translation of financial statements regarding entities encompassed by the consolidation, whenever their functional currency (main economic environment in which they operate) is not the Euro and which arise on the balance sheet date, due to:• Assets and liabilities in foreign currencies transposed
using the end of year exchange rate;• Equity transposed using the historical exchange rate;• Profit and loss transposed at the exchange rate on
the transaction date.
(K.6) Non-controlling interestsNon-controlling interests are the part of profit and loss and net assets of subsidiaries, under equity, that are not held, directly or indirectly via subsidiaries, by the parent company.This heading includes:• Equity;• Annual profit and loss;• Other equity items (including the respective annual
variations which, together with the years profit and loss, comprise the comprehensive income).
Comprehensive income includes profit due to revaluation reserves and fair value adjustments in financial instruments, financial investments and investment properties which, according to art. 32, no 2, of the Portuguese Company Code, will only be available for distribution when the elements or rights that gave rise to them are sold, exercised, extinguished or paid.
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(L) PROVISIONSThis heading reflects current obligations (legal or constructive) to which the entity is bound, resulting from past events, whose payment is expected to result in outflow of resources by the entity, incorporating economic benefits and whose value and time are uncertain but whose value can be reasonably estimated. Provisions are measured according to the best estimate for expenditure required to pay for a current obligation on the balance sheet date. Whenever currency fluctuation has a material effect, the provision corresponds to current expenditure expected, necessary in order to pay the obligation, using the discount rate before tax that reflects current market conditions of currency fluctuations and the specific risks of the liability but not reflecting the risks regarding which estimated future cash flows have already been adjusted.
(M) PERSONNEL EXPENSESPersonnel expenses are recognised when the service is provided by employees, regardless of the date of effective payment.Some of the specificities of each type of personnel expenses are described below:
(M.1) Employee benefitsThe Group does not offer a Pension plan, distribution of profit to employees, share-based pay or post-employment benefits.All employees are covered by a “Multicare” health insurance, which remains in force while they remain within the Group. The expenses are supported by the Group and recorded in the item “Other Expenses with Personnel”.
(M.1.1) Holidays and holiday subsidiesUnder the applicable employment law, employees become entitled to holidays and to holiday subsidy the year after services are provided. Consequently, an additional amount payable in the following year was recognised in the profit and loss statement, under the heading “Other Accounts Payable”.
M.1.2) Severance packagesNo specific benefits are defined or under contract in the event of job termination. The Group grants its employees and directors that established by law in the Portuguese employment code while also observing the respective accounting standards (NCRF).Therefore, no provisions have been created for this item. The Group makes payments to the Work Compensation Fund and to the Work Compensation Guarantee Fund, established under Law no. 70/2013, of 30 August.
(N) FINANCIAL LIABILITIESFinancial liabilities are recognised when they occur within the Group and are a party to the respective contractual relationship.
(N.1) Loans Loans are valued at cost and were taken out with the parent company, Nabeirogest-SGPS, S.A., which applies rates indexed to Euribor (plus a 1.75 spread), in conformity with the table below:
2014 2013
JANUARY 0.7210% 0.1170%
FEBRUARY 0.2700% 0.1170%
MARCH 0.2000% 0.1170%
APRIL 0.2330% 0.1170%
MAY 0.2690% 0.1170%
JUNE 0.2510% 0.1120%
JULY 0.1010% 0.1240%
AUGUST 0.0980% 0.1300%
SEPTEMBER 0.0680% 0.1800%
OCTOBER 0.0070% 0.1800%
NOVEMBER 0.0100% 0.1300%
DECEMBER 0.0200% 0.1700%
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
(N.2) SuppliersAccounts payable to suppliers are recognised at cost.
(N.3) Advance payments by clientsAdvance payments by clients are recognised at cost.
(N.4) Other financial liabilitiesOther financial liabilities are recognised at cost.
(N.5) Other accounts payableAccounts payable are measured in the following manner:• Staff – at cost;• Creditors due to accrued expenses – at cost;• Other creditors – at cost.
(N.6) Shareholders/ MembersShareholder accounts are recognised and measured at cost.
(O) SALES AND PROVISION OF SERVICESSales and provisions of services are measured for the fair value of the retribution received or to be received, deducting commercial rebates or bulk purchase discounts granted.
Although revenue is only recognised when it is probable that the economic benefits associated to the transaction flow to the Group, when any uncertainty arises regarding the collection of a sum already included under revenue, the amount that cannot be collected or that is no longer probably to be received is recognised as an impairment on the balance to be received and not as an adjustment to the initially recognised revenue. Some of the specificities regarding the recognition of sales and provision of services are described below:
(O.1) SalesRevenue obtained from the sale of assets is recognised when all of the following conditions have been met:• Any significant risks and advantages of owning the
assets are transferred to the buyer;• There is no continued involvement of management to
an extent usually associated with ownership or the effective control of the assets sold;
• The amount of revenue can be reliably measured;• It is likely that the economic benefits associated with
the transactions will flow to the entity;• The costs incurred or to be incurred relating to the
transaction can be reliably measured.
(O.2) Provision of servicesRevenue obtained from the provision of services is recognised when the completion of the transaction can be reliably estimated and when all the following conditions are met:• The amount of revenue can be reliably measured;• It is likely that the economic benefits associated with
the transactions will flow to the Group;• The percentage of completion on the balance date
can be reliably measured;• The costs incurred from the transaction and the
costs of completion of the transaction can be reliably measured.
(O.3) Loyalty bonusesLoyalty bonuses are awarded to customers based on the number of assets sold.According to the loyalty program called “Customer Fidelity Card”, for every 17€ sold to customers and paid in cash they earn 1 point and for customers who pay within 15 or 50 days, for every 20€ spent they earn 1 point, corresponding to 0.11€ for cash payment and 0.07€ for the 15 to 50 days method, which would be exchanged for assets on a future date.
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IFRIC 13 – Customer Loyalty Programmes is applied regarding the recognition of loyalty bonuses. In this sense:• The revenue corresponding to the awarded points
is deferred on the date the points are awarded;• Whenever points are redeemed the respective
revenue is recognised;• At the end of the reporting period, the deferred
income is adjusted to reflect the percentage of loyalty points that are expected to be redeemed and the probability that their redemption will take place within the permitted deadline.
(O.4) Operating subsidiesNon-refundable subsidies that are not related to assets are recognised under this heading.Subsidies are only recognised when there is reasonable certainty that the Group has met or will meet the respective conditions and the subsidy received.
(O.5) Environmental mattersAmounts spent with environmental matters are capitalised whenever assets or liabilities generate future economic benefits or losses, otherwise they are recognised as expenses. They are measured according to the cost estimation model.
(P) INTEREST AND SIMILAR EXPENSESExpenses from loans are recognised in the profit and loss statement for the period they relate to and include interest borne by virtue of loans received.
(Q) INTEREST AND FINANCIAL INCOME Financial income is recognised in the profit and loss statement for the period that they relate to and include interest obtained through loans granted.
(R) CONTINGENT ASSETS AND LIABILITIESContingent assets are potential assets resulting from past events and whose existence will only be confirmed by the occurrence or not of one or more uncertain future events that are not entirely within the control of the entity.Contingent Assets are not recognized in the financial statements so that they do not lead to the recognition of income that may never be effectively realized. However, they are subject to disclosure when the existence of a future economic flow is likely.
Contingent liabilities are defined as:• Any potential obligations arising out of past events
and whose existence will only be confirmed by the occurrence or otherwise of one or more uncertain future events not wholly under the control of the entity, or
• Current obligations arising out of past events but which are not recognized because:
• it is not likely that a flow of resources affecting economic benefits is necessary to settle the obligation, or
• the value of the obligation cannot be measured in a sufficiently reliable manner.
Contingent liabilities are not recognized in the financial statements so that they do not lead to the recognition of expenses that may never effectively occur. However, they are subject to disclosure when the existence of a future economic outflow is not entirely unlikely.
(S) SUBSEQUENT EVENTSAny subsequent events that provide additional information about the existing conditions on the balance sheet date are reflected in the financial statements. Any events that occur after the balance sheet date and which provide information about conditions occurring after the balance sheet date are reflected in the notes to the financial statements if they are materially relevant.
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
3.2 BASES FOR CONSOLIDATIONThe scope of consolidation for the Group comprises Delta Cafés SGPS, S.A. and the subsidiaries described in Note 6.
In conformity with art. 6 of Decree-law no. 158/2009, of 15 July, which approved the SNC, the entity presents the consolidated financial report for the Group comprised by itself and all the Subsidiaries, regarding which, irrespective of ownership of shares, either:• It can or effectively does exercise dominant influence
or control;• Management is exercised as if the two constituted
a single entity;
If a holder of share capital, where it:• Holds a majority of voting rights, except if it
demonstrates that those rights do not grant control;• Is entitled to appoint or dismiss a majority of the
members of the management of an entity with authority to manage the financial and operational policies of that entity;
• Exercises dominant influence over an entity by virtue of a contract entered into with that entity or a clause in its memorandum of association;
• Holds at least 20 % of the voting rights and a majority of the members of the management of an entity with authority to manage the financial and operational policies of that entity, which were in office during the reporting period of the consolidated financial statements or during the previous year and until the time that they are drafted, having been appointed exclusively as a consequence of exercising their voting rights;
• Posseses, itself or by means of an agreement between the shareholders of the entity, a majority of the voting rights of its shareholders.
The existence and the effect of potential voting rights that can be currently exercised or converted are considered when assessing whether control effectively exists or not.
Subsidiaries are consolidated by means of the full consolidation method since the date of acquisition, which is the date on which the Group obtained control, and continue to be consolidated until such time as they are no longer controlled. Non-controlling interests are presented separately.The acquisition method is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured according to the fair value of the assets delivered, the equity instruments issued and the liabilities assumed on the acquisition date, in addition to direct costs from the acquisition.The surplus of the Group’s share in the fair value of the acquisition cost of identifiable net assets and contingent liabilities acquired is recognised as Goodwill. If the acquisition cost is lower than that of the fair value of the net assets of the acquired subsidiary, the difference is recognised directly in the Profit and loss statement in the reporting period after revaluating the process of identification and measurement of fair cost of net assets and contingent liabilities.In the consolidation process, the transactions, balances and gains that were not realized in intragroup transactions and dividends distributed between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction reveals evidence of the existence of impairment in the transferred assets, which have not been sold. The accounting policies used by subsidiaries in preparing their individual financial statements were amended, whenever necessary, to ensure their consistency with the policies adopted by the Group.The provisions of NCRF 25 – Income Tax were applied to temporary differences arising from the elimination of the profit and loss due to intragroup transactions.
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
Equity and net profit of the subsidiaries that are held by third parties outside the Group are presented under the headings of Non-controlling Interests in the consolidated Balance sheet (separately within equity) and in the consolidated Profit and loss statement respectively. On the date that business mergers occur the values attributed to non-controlling interests are determined by applying the percentage of the interest they hold to the fair value of the identifiable net assets and contingent liabilities acquired.When the losses ascribed to non-controlling shareholders exceed their interest in the equity of the subsidiary, the Group absorbs that excess and any additional losses, except when the non-controlling shareholders are bound to and are able to cover said losses. If and when the subsidiary subsequently reports profits, the Group appropriates all such profits until the non-controlling share of the losses covered by the Group has been recovered.If an entity is subject to SNC, it is required to prepare the consolidated financial statements in Euros, regardless of whether or not the functional currency of some of the Group companies is the Euro.
For 2013, there were no changes in the functional currency of the parent company, whether in relation to the parent company specifically or in relation to each of the significant foreign operating units.
3.3 MAIN JUDGMENTS AND ESTIMATES USED IN PREPARING THE FINANCIAL STATEMENTS In preparing the financial statements according to the SNC, the Board of Directors used judgments, estimates and assumptions that affect the applicability of policies and the amounts reported.
Estimates and judgments are continually evaluated and are based on experience of past events and other factors, including expectations regarding future events that are considered probable under current circumstances on which the estimates are based or as a result of information or knowledge obtained. The actual effects may differ from the judgments and estimates performed, particularly with regard to the impact of costs and gains that may actually occur. The most significant accounting estimates reflected in the Group’s financial statements are the following:
(A) SERVICE LIFE OF TANGIBLE AND INTANGIBLE FIXED ASSETSThe useful service life of an asset is the period during which an asset is expected to be available for use by an entity, which must be reviewed at least at the end of each reporting period.The amortisation/depreciation method to be applied and the estimated losses arising from replacement of equipment before the end of its useful life for reasons of technical obsolescence, is essential to determine the service life of an asset.These parameters are defined in accordance with the best management estimates regarding the assets and business in question and also considering the practices adopted by the Group.
(B) DEFERRED TAX ASSETSDeferred tax assets are recognised for all recoverable losses when it is probable that taxable profits will exist, against which the losses can be offset.
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
Considering the context of crisis and the impact this may have on future profits, judgement is required from Directors to determine the amount of deferred tax assets that should be recognised, taking into account:• The probable date and amount of future taxable
profits, and• Future tax planning strategies.
(C) RECOGNITION OF SERVICES PROVIDED AND RELATED EXPENSES The Group recognizes the revenue and respective expenses when these become effective, i.e. when the services are effectively provided or the expense is incurred.
The use of this method requires the Group to estimate:• Revenue of services to be provided inherent to
effective expenses already recorded;• Expenses to be recorded inherent to services already
provided and already fully recognised as revenue during the reporting period.
(D) FAIR VALUE OF FINANCIAL INSTRUMENTS When the fair value of financial assets and liabilities on the balance date cannot be determined on the basis of active markets, it is determined using evaluation techniques including the discounted cash flows model or other models appropriate under the circumstances. The inputs for these models are taken, whenever possible, from variables visible in the market. If this is not possible, a certain degree of judgment is required in order to determine fair value, which includes considering liquidity risk, credit risk and volatility.
(E) DEVELOPMENT COSTSDevelopment costs are capitalised according to the accounting policy described in note 3, b1). Initial capitalization of cost is based on the judgment of the Board of Directors, confirming technical and economic feasibility, usually when a R&D project for a product has reached a specific milestone, according to the project model established by the Directors. In determining
the amounts to be capitalised, the Directors make assumptions regarding expected cash flows to be generated by the project in the future, discount rates to be applied and the expected duration of the benefits.
(F) IMPAIRMENT OF NON-FINANCIAL ASSETSImpairment occurs when the book value of an asset or a cash-generating unit exceeds its recoverable value, which is the higher of its fair value minus sale costs or its use value.The calculation of fair value minus sale costs is based on the information that contracts have already been executed in transactions of similar assets, with entities that are not interrelated or observable market prices minus incremental costs to sell the asset.Use value is calculated on the basis of a discounted cash flows model, considering a five-year budget that does not include restructuring activities regarding which no commitment exists nor significant future investments intended to improve future economic benefits that will result from the cash-generating unit that is being tested.
The recoverable value is particularly sensitive to:• Market share during the budget period • Volatility in the prices of raw materials• Gross margin• Growth rate used to extrapolate cash flows beyond
5 years • Discount rates used to perform the discount
on future cash flows.
(G) IMPAIRMENT OF ACCOUNTS RECEIVABLECredit risks regarding the balance of accounts receivable is assessed on each reporting date, taking into account debtor history and risk profile, as referred to in note 3.1, paragraph h).
45/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT3. MAIN ACCOUNTING POLICIES
The Group constitutes impairments for clients when debts are due and outstanding over 6 years, calculating for an adjustment of 100% of the outstanding debt.Accounts receivable are adjusted according to the evaluation of estimated collection risks on the balance date which may differ from the effective risk borne in the future.
(H) LOYALTY BONUSESThe deferred income regarding loyalty bonuses to clients that will be redeemed in the future are determined according to the likelihood that these credits will be redeemed and that this happens before the expiry of the deadline for doing so.Likelihood depends on future behaviour of clients and this may vary significantly in the context of the economic crisis.
(I) TAX PROVISIONSThe Group, based on the opinion of its tax consultants and considering recognised liabilities, believes that any revisions to tax statements that may occur will not result in material corrections to the consolidated tax statements that will require the constitution of any tax provisions.
(J) PROVISIONSThe recognition of provisions requires determining the likelihood of future outflows and measuring them reliably.These factors often depend on future events which are not always under the Group’s control, for which reason significant future adjustments may be necessary, either due to changes in the assumptions or due to recognition of provisions that had been considered beforehand as contingent liabilities.
46/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
4.CASH FLOWS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The balance of Cash and cash equivalent shown in the statement of cash flows is itemized in the following manner:
2014 2013
Cash 378,587 327,605
Current accounts 24,585,392 19,358,187
Other bank deposits 23,719 24,169
24,987,698 19,709,961
Cash and bank deposits of a discontinued unit
24,987,698 19,709,961
Bank overdrafts (45,290) (538,707)
24,942,408 19,171,253
47/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
5. ACCOUNTING POLICIES, ALTERATIONS TO ACCOUNTING ESTIMATES AND ERRORS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
During the current financial year, no changes were made to the NCRF in force, for which reason no new accounting standard was adopted. On the other hand, the Group did not make any voluntarily alteration of accounting policies during this year.
With regard to accounting estimates, no alterations with effects were made during the current period or in future periods. Additionally, no material errors or omissions from prior periods were detected.
48/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
6.RELATED PARTIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
COMPANIES INCLUDED IN THE CONSOLIDATIONOn 31 December 2014, the companies included within the scope of full consolidation, their recorded office and the percentage of equity held were as follows:
COMPANY/ RECORDED OFFICE INCORPORA-TION DATE BUSINESS ACTIVITY EQUITY
HELD
CONSOLIDATION CONDITIONS AND METHODS DECREE-LAW 238/ 91, OF 2 JULY
MANUEL RUI AZINHAIS NABEIRO, LDA.Av. Calouste Gulbenkian, 7370-025 Campo Maior
12/01/1979 Coffee, Tea, Cocoa and Spices Wholesaler.
99.99% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
NOVADELTA COMÉRCIO E INDÚSTRIA DE CAFÉ, S.A.Av. Infante D. Henrique, n.º 151, A, Lisbon
15/06/1984 Roasted Coffee, Barley and Chicory.
99.99% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
TECNIDELTA, LDA.Av. Calouste Gulbenkian, 7370-025 Campo Maior
22/12/1993 Production, sale, maintenance and import of hotel equipment, such as coffee machines and grinders.
97.50% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
TOLDICONFEX, LDA.Av. Calouste Gulbenkian, 7370-025 Campo Maior
19/01/1998 Manufacture and sale of illuminated advertising signs, awnings, parasols and other apparel.
95% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
DELTA CAFÉS MADEIRA, COMÉRCIO DE CAFÉS, S.A.Sítio da Quinta, 9125-140 Caniço, Choupana, Funchal
19/06/1995 Coffee, Tea, Cocoa and Spices Wholesaler.
99.96% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
TORREFACÇÃO CAMELO, LDA.Rua de Portalegre, n.º 51, 7370-096 Campo Maior
07/02/1955 Coffee and Tea Industry. 91.42% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
NOVADELTA ESPANHA, SAUPolígono Industrial el Nevero, complejo embasa 19/20, 06006 Badajoz- Spain
08/10/1986 Retail coffee sales. 100% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
DELTA CAFÉS, SGPS, S.A.Av. Calouste Gulbenkian, 7370-025 Campo Maior
16/12/2002 Holding company. Holding
JOÃO DOS SANTOS NABEIRO & HERDEIROS, LDA.Zona Industrial, Rua B3, 7370 Campo Maior
09/10/1970 Roasted Coffee, Barley and Chicory.
51.43 % Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
SIEC - SOCIEDADE IMPORTADORA E EXPORTADORA DE CAFÉS, SLUPolígono Industrial el Nevero, complejo embasa 19/20, 06006 Badajoz- Spain
23/03/2001 Retail coffee sales. 91.42 % Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
NOVADELTA FRANCE, SARL94-98, Avenue Jean Memoz, France
31/01/2008 Retail coffee sales. 100% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
ANGONABEIRO, COMÉRCIO DE CAFÉS, LDA. Estada do Cacuaco Km 5, Luanda-Angola
13/05/1998 Retail coffee sales. 85% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
NOVADELTA LUXEMBURGO, SARL21.ª, Rue Gabriel Loppmann, L- 5365 – Munsbach- Luxembourg
23/09/2011 Retail coffee sales. 100% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
DELTA FOODS Av. Paulista n.º 35 4.º andar, sala 427 e 428 01311-902 São Paulo, Brasil
25/01/2012 Retail coffee sales. 100% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
Q BRASIL Av. Telma Rodrigues Ribeiro n.º 1251 Sala 07 Portal de Jacaraipe 29.173-795 Cidade da Serra, Estado do Espírito Santo Brazil
20/07/2012 Retail coffee sales. 75% Majority of shareholder voting rights (Art. 1, paragraph a)- Full consolidation method
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT6. RELATED PARTIES
NATURE OF TRANSACTIONS BETWEEN RELATED PARTIES
RELATED PARTYNATURE OF RELATIONSHIP(SERVICE PROVIDED / TRANSACTION PERFORMED)
NATURE OF RELATIONSHIP(SERVICE RECEIVED / TRANSACTIONS RECEIVED)
ADEGA MAYOR Acquisition of coffee machines and grinders and provision of technical support services necessary for equipment maintenance and repairs.Assignment of labour.
Assignment of labour. Acquisition of wine for retail
AGRODELTA Provision of technical support services necessary for equip-ment maintenance and repairs.Assignment of labour.
Acquisition of olives for retail.
DELTA SERVIÇOS Occasional acquisition of hotel equipment. Assignment of labour.
Provision of consultancy services in the following fields: administrative, juridical, financial, computing, marketing, environment and human resources.
NABEIRAUTO Provision of technical support services necessary for equip-ment maintenance and repairs.Redebit of expenses.
Provision of services related to vehicles and conveyance of vehicles and fuel.
NABEIRIMÓVEL Redebit of expenses. Provision of services related to vehicles and conveyance of vehicles and fuel.
NABEIRODIST Acquisition of coffee machines and grinders. Acquisition of tangible assets – basic equipment.Provision of technical support services necessary for equip-ment maintenance and repairs.Sale of coffee, tea, sugar.
Acquisition of office supplies and health and cleaning ma-terial. Assignment of labour.
NABEIROGEST - Provision of administrative services and interest from sha-reholder loans.
NABEIROTEL Provision of technical support services necessary for equip-ment maintenance and repairs.
Provision of accommodation and restaurant services.
NABEIROTRANS Assignment of labour. Provision of carriage of goods services by road.
NATURDELTA Acquisition of hotel equipment. Redebit of expenses. -
TRANSFORMAÇÃO DE FRUTAS Sale of miscellaneous goods. Acquisition of carob extract
SOCIEDADE DOMUZ Sale employee Christmas gifts. Acquisition of drinks (anisette, bitter almond).
JOAQUIM DOS SANTOS Sale employee Christmas gifts. Acquisition of refectory goods (bread, cakes etc.).
MONTE DA PINA Redebit of travel expenses. -
DELTA CIÊNCIA Redebit of amounts. Donations.
50/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT6. RELATED PARTIES
BALANCES AND TRANSACTIONS BETWEEN RELATED PARTIES
PURCHASE GOODS / SERVICES PURCHASE GOODS / SERVICES
SALES / PROVISION SERVICES DEBTOR BALANCE CREDITOR BALANCE
2014 2013 2014 2013 2014 2013 2014 2013
NABEIRODIST 924,220 745,693 356,591 325,547 558,340 64,180 156,174 303,560
TRANFORMAÇÃO DE FRUTAS 460,722 415,901 10,860 10,397 11,783 24,237 295,198 230,472
NABEIRAUTO 6,762,068 5,704,497 27,291 22,618 491,351 8,737 236,568 704,009
NABEIROTRANS 3,619,782 3,580,844 151,489 11,029 361,401 4,257 900,336 982,427
NABEIROTEL 231,333 199,557 36,726 24,177 57,609 11,387 25,887 26,136
ADEGA MAYOR 3,066,775 2,570,570 86,762 71,562 109,222 50,806 878,536 958,959
NABEIRIMÓVEL 2,425,369 2,394,271 63,563 56,827 1,089,981 208,189 530,271 908,697
AGRODELTA 1,348,865 1,359,799 25,063 20,025 133,997 22,334 376,965 364,848
DELTA SERVIÇOS 9,309,372 7,983,231 3,000,595 2,678,722 1,053,517 1,373,549 4,291,419 1,869,973
SOCIEDADE DOMUZ 125,656 181,422 77 5,860 14,016 8,841 59,518 115,434
JOAQUIM DOS SANTOS 61,993 45,808 18,406 33,506 14,578 19,121 22,758 12,820
MONTE DA PINA 21,142 21,142 3,599 1,383 2,355 5,455 1,376 0
NATURDELTA 16,257 15,511 27,397 4,947 19,197 11,870 24,937 2,537
DELTA CIÊNCIA 4,137 914,000 48,074 20,392 39,751 22,430 5,102 393
NABEIROGEST 3,539,342 1,479,424 0 0 52,540 186 511,743 743,224
51/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
7.TANGIBLE FIXED ASSETS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The reconciliation of book value at the start and end of the reporting period is provided in detail below:
LAND AND NATURAL RESOURCES
BUILDINGS AND OTHER PROPERTIES
BASIC EQUIPMENT
TRANSPORT EQUIPMENT
ADMINISTRATIVE EQUIPMENT
OTHER FIXED ASSETS
TANGIBLE ASSETS
CAPITAL WORK IN PROGRESS ADVANCES
TOTAL TANGIBLE ASSETS
COST1 JANUARY 2013 798,534 19,057,532 46,616,562 22,347,810 8,870,289 221,068,191 318,758,918 719,398 - 319,478,316
Increases - 135,763 1,226,751 1,302,989 477,644 17,360,996 20,504,144 440,482 - 20,944,626
Revaluations - - - - - - - - - -
Acquisition of a Subsidiary - - - - - - - - - -
Discontinued operations - - - - - - - - - -
Transfers - - 574,107 - (838) 365,288 938,557 (858,461) - 80,096
Sales - - (344,875) (827,662) (97,229) (1,523,963) (2,793,729) - - (2,793,729)
Write-off - (53,376) (41,037) (22,513) (50,235) (439,029) (606,190) - - (606,190)
Consolidation adjustments - 85,855 13,597 72,374 135,298 9,553,835 9,860,959 (52,905) - 9,808,054
31 DECEMBER 2013 798,534 19,225,774 48,045,105 22,872,999 9,334,929 246,385,318 346,662,659 248,513 - 346,911,172
Increases 207,302 1,201,426 998,755 1,940,253 661,322 21,133,134 26,142,193 6,515,437 - 32,657,630
Revaluations - - - - - - - - - -
Acquisition of a subsidiary - - - - - - - - - -
Discontinued operations - - - - - - - (30,724) - (30,724)
Transfers - - 767,610 (26,953) 25,000 2,051,355 2,817,011 (2,970,730) - (153,719)
Sales - (50,788) (19,455) (1,374,178) (24,073) (1,947,589) (3,416,084) (22,000) - (3,438,084)
Write-off - - (7,049) - (1,760) (440,708) (449,517) - - (449,517)
Consolidation adjustments - 44,692 57,705 (12,413) (76,899) 1,271,014 1,284,099 (105,352) - 1,178,747
31 DECEMBER 2014 1,005,837 20,421,104 49,842,670 23,399,708 9,918,519 268,452,525 373,040,363 3,635,145 - 376,675,508
AMORTISATIONS & IMPAIRMENT1 JANUARY 2013 - 10,662,918 15,680,153 19,496,478 7,221,330 172,405,598 225,466,477 - - 225,466,477
Amortisations (Note 26) - 1,034,008 3,774,422 1,305,032 673,290 19,284,136 22,773,318 - - 22,773,318
Revaluations - - - - - - - - - -
Discontinued operations - - - - - - - - - -
Transfers - - (1,849) - (279) - (2,128) - - (2,128)
Sales - - (287,643) (723,676) (76,917) (1,137,348) (2,225,584) - - (2,225,584)
Write-off - (2,669) 16,171 (3,872) (14,436) (425,045) (429,851) - - (429,851)
Exchange differences - - - - - - - - - -
Consolidation adjustments - - - - - 6,431,440 - - - -
31 DECEMBER 2013 - 11,694,257 19,181,254 20,073,961 7,802,988 196,558,781 255,311,242 - - 255,311,241
Amortisations (Note 26) - 1,031,337 3,896,176 1,395,764 644,810 17,147,290 24,115,376 - - 24,115,376
Revaluations - - - - - - - - - -
Discontinued operations - - - - - - - - - -
Transfers - - 156 (156) - - - - - -
Sales - (2,218) (11,194) (1,262,313) (21,363) (1,518,772) (2,815,860) - - (2,815,860)
WRITE-OFF - (928) (7,049) - (2,106) (415,821) (425,904) - - (425,904)
EXCHANGE DIFFERENCES - - - - - - - - - -
Consolidation adjustments - - - - - 3,365,232 3,365,232 - - 3,365,232
31 DECEMBER 2014 - 12,722,448 23,059,343 20,207,256 8,424,329 215,136,709 279,550,085 - - 279,550,085
NET ACCOUNTING VALUEON 31 DECEMBER 2014 1,005,837 7,698,656 26,783,327 3,192,452 1,494,190 53,315,816 93,490,278 3,635,145 - 97,125,423
ON 31 DECEMBER 2013 798,534 7,531,517 28,863,851 2,799,037 1,531,941 49,826,537 91,351,418 248,513 - 91,599,931
ON 1 JANUARY 2013 798,534 8,394,614 30,936,409 2,851,333 1,648,959 48,662,593 93,292,442 719,398 - 94,011,839
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8.INTANGIBLE ASSETS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The reconciliation of book value at the start and end of the reporting period is detailed in the table below:
DEVELOPMENT PROJECTS
COMPUTER SOFTWARE
INDUSTRIAL PROPERTY OTHERS INTANGIBLE
ASSETSINTANGIBLE ASSETS IN PROGRESS ADVANCES TOTAL INTANGIBLE
ASSETS
COST1 JANUARY 2013 694,271 1,211,631 196,486 1,404,953 3,507,341 - 1,428,803 4,936,144
Internal increases - - 97,326 663 97,989 - - 97,989
Issues rights awarded - - - - - - - -
Acquisitions 166,519 176,227 - 216,342 559,088 6,400 700,000 1,265,488
Acquisition of a subsidiary - - - - - - - -
Discontinued operations - - - - - - - -
Use of Issues rights - - - - - - - -
Transfers 379,110 - 2,128,603 - 2,507,713 - (2,128,603) 379,110
Sales - - - - - - - -
Write-off - (1,736) (1,849) (6,325) (9,910) - - (9,910)
Entry into scope – Q Brasil - - - - - -
Entry into scope – Delta Foods - - - - - - - -
CONSOLIDATION ADJUSTMENTS - 415,645 277,311 (155,665) 537,291 - - 537,291
31 DECEMBER 2013 1,239,900 1,801,767 2,697,877 1,459,968 7,199,512 6,400 200 7,206,112
Internal increases - - - - - - - -
Issue rights awarded - - - - - - - -
Acquisitions 68,217 945,887 66,413 31,636 1,112,152 177,644 - 1,289,797
Acquisition of a subsidiary - - - - - - - -
Discontinued operations - - - - - - - -
Use of Issue rights - - - - - - - -
TRANSFERS 153,381 6,400 - - 159,781 (6,400) - 153,381
Sales - - - - - - - - Write-off - 1,434 - (6,390) (4,956) - - (4,956)CONSOLIDATED ADJUSTMENTS - (25,464) (199) (25,663) - - (25,663)
31 DECEMBER 2014 1,461,498 2,730,024 2,764,290 1,485,015 8,440,827 177,644 200 8,618,671
AMORTISATIONS & IMPAIRMENT:1 JANUARY 2013 356,826 808,282 127,634 699,735 1,992,476 - - 1,992,476
Amortisations (Note 26) 350,599 330,380 175,157 452,496 1,308,632 - - 1,308,632 Discontinued operations - - - - - - - - Transfers - - - - - - - - Sales - - - - - - - - Write-off - (1,736) (1,849) (6,325) (9,910) - - (9,910)Impairment - - - - - - - - Entry into scope – Q Brasil - - - - -
Entry into scope – Delta Foods - - -
CONSOLIDATED ADJUSTMENTS - 540,616 - 540,616 - - 540,616 31 DECEMBER 2013 707,425 1,677,542 300,942 1,145,906 3,831,814 - - 3,831,814
Amortisations (Note 26) 424,466 536,066 213,017 180,520 1,354,068 - - 1,354,068 Discontinued operations - - - - - - - - Transfers - - - - - - - - Sales - - - - - - - - Write-off - - - - - - - - IMPAIRMENT - - - - - - - - CONSOLIDATED ADJUSTMENTS - 21,555 - - 21,555 - - 21,555
31 DECEMBER 2014 1,131,891 2,235,163 513,959 1,326,426 5,207,437 - - 5,207,437
NET ACCOUNTING VALUEON 31 DECEMBER 2014 329,608 494,861 2,250,331 158,589 3,233,389 177,644 200 3,411,234ON 31 DECEMBER 2013 532,475 124,225 2,396,935 314,062 3,367,697 6,400 200 3,374,298ON 1 JANUARY 2013 337,445 403,349 68,852 705,218 1,514,866 - 1,428,803 2,943,669
Computer software applications are not the Property of the Group, which merely holds the respective user rights under the terms specified in the contract entered into with the supplier.
53/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
9.INVESTMENT PROPERTIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
2014 2013
INVESTMENT PROPERTIES
Initial balance 70,000 70,000
Acquisitions - -
FINAL BALANCE 70,000 70,000
INVESTMENT ASSETS IN PROGRESS - -
ADVANCE PAYMENTS ON ACCOUNT OF INVESTMENTS
70,000 70,000
Impairment - -
70,000 70,000
The sum of 70,000€ relates to a plot of land owned by the Group member, João dos Santos Nabeiro, Lda.
Due to the nature of the plot and the activity performed there, no comparable assets exist which would allow fair value to be reliably estimated.
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10.CLIENTS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The concentration of credit risk with regard to clients can be seen through the length of time that the debt has been outstanding, which breaks down as follows:
2014 2013
OUTSTANDING DEBT
< 180 days 11,919,647 13,646,006
181-365 days 19,920,290 15,767,213
366-545 days 2,218,474 (3,542,403)
546-730 days 2,262,159 1,147,713
> 731 days 18,057,336 4,445,673
DEBT NOT OUTSTANDING 9,026,203 34,727,913
TOTAL 63,404,110 66,192,116
Clients are measured at cost minus impairment, according to the table below:
2014 2013
CLIENTS
Book value 63,404,110 66,192,166
Accumulated impairment 21,480,328 22,735,559
Cost 84,884,438 88,927,674
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11.OTHER FINANCIAL ASSETS AND LIABILITIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Other financial assets are itemized according to the different categories of financial assets as follows:
2014 2013
NON-CURRENT
Financial investments – other methods 24,763 1,683
Shareholders - -
Other financial assets 1,426,256 191,044
Other accounts receivable 14,404,524 16,683,562
CURRENT
Advances to suppliers 495,123 1,134,169
Shareholders 510,706 432,615
Other accounts receivable 2,909,963 1,633,749
Financial assets held for trading 96,986 166,921
Other financial assets 2,719 144,315
Cash and bank accounts 24,987,698 19,709,961
44,858,738 23,987,129
With regard to the amount specified under “Shareholders”, this relates to 472,500 Euros of advance payments / profits to several members of Torrefacção Camelo, Lda, and 38,205 Euros also advance payments / profits to members of João dos Santos Nabeiro, Lda.For the purposes of disclosure in 2014, it was decided to recognize the deferrals of exclusivity contracts of more than one year as non-current assets. This reclassification relates to the Group member Manuel Rui Azinhais Nabeiro, Lda.
The itemization of “Other accounts receivable” is provided in the following table:
2014 2013
CURRENT
Clients with loans (above 1 year) - -
NON-CURRENT
Clients with loans - -
Deferrals 13,951,013 16,110,889
Clients with loans (above 1 year) 453,511 572,673
14,404,524 16,683,562
CURRENT
Receivables from suppliers 985,910 -
Clients with loans (below 1 year) 723,193 733,203
Personnel 536,489 514,283
Accrued income 70,191 185,233
Advances to personnel 171,632 42,068
Other operations with personnel 192,051 158,962
Other debtors 230,497 -
2,909,963 1,633,749
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT11. OTHER FINANCIAL ASSETS AND LIABILITIES
The item “Other debtors” relates to operations such as insurance companies, fees, rents, personnel, etc.
The statement of financial assets held for trading is displayed in the following table:
FINANCIAL ASSETS HELD FOR TRADING
2014 2013
Banco Espirito Santo Shares - 69,934
Vera Cruz Safari, S. A. 997 997
EMBOPAR 3,492 3,492
Agência de Desenvolvimento Alentejo 19,952 19,953
Centro Nacional de Embalagem 20,102 20,102
COTEC 15,000 15,000
Incubadora D.Dinis-Associação Promoção Empreendedor 2,500 2,500
IDEF - Inst. para Desenvolvimento e Estudos Economico Financeiros 34,944 34,944
96,987 166,921
Financial liabilities are itemized according to the different categories of financial liabilities as follows:
2014 2013
CURRENT
Suppliers 25,289,697 24,024,177
Advance payments by clients 31,139 26,711
Shareholders 11,111,655 5,068,829
Other accounts payable 17,067,499 17,360,149
Financial liabilities held for trading - -
Other financial liabilities - -
53,499,990 46,480,135
The Shareholders heading relates to consolidated tax owed to Nabeirogest – SGPS, S.A., the Group parent company and results from the companies included in the Corporate Group Special Tax Regime.
The itemization of “Other accounts payable” is provided in the following table:
OTHER ACCOUNTS PAYABLE
2014 2013
CLIENT DEBT BALANCES
Current 2,023 37,389
Investment suppliers 5,917,750 4,283,503
Personnel 126,328 900,180
Creditors due to accrued expenses
Accrual for holidays & subsidies 7,068,085 5,470,105
Other accruals 857,020 3,418,286
Other creditors 3,096,294 3,250,955
17,067,499 17,360,419
“Other creditors” relates to operations such as insurance companies, fees, rents, personnel, etc.The heading “Other accruals” essentially comprises bulk discounts offered to clients.Accounts payable to suppliers are recognized at cost (note no. 2).
57/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
12.INVENTORIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The total inventory valuation and the amounts recorded under the appropriate classifications are displayed in the following table:
2014 2013
Goods 18,943,690 16,757,695
Raw materials, by-products &consumables 32,313,935 23,369,049
Finished & partially finished goods 11,568,952 8,550,228
Subproducts, waste, residues & refuse - -
Products & work in progress 122,128 28,413
62,948,705 48,705,386
The Group does not measure inventories at fair value, for which reason the inventories are recognized as costs during the reporting period according to the following tables:
COST OF SALES
GOODS RAW MATERIALS, BY-PRODUCTS AND CONSUMABLES TOTAL
STOCKS ON 1 JANUARY 2013 13,672,609 27,060,700 40,733,309
Acquisitions 43,139,948 73,309,098 116,449,046
Impairment 1,026,270 - 1,026,270
Inventory adjustments (2,522,279) (1,605,365) (4,127,644)
STOCKS ON 31 DECEMBER 2013 16,757,695 23,369,049 40,126,744
36,506,312 75,395,384 111,901,696
STOCKS ON 1 JANUARY 2014 16,757,695 23,369,049 40,126,744
Acquisitions 46,635,103 82,305,414 128,940,517
Impairment 2,295,407 120,466 2,415,874
Inventory adjustments (3,676,175) (898,116) (4,574,291)
STOCKS ON 31 DECEMBER 2014 18,943,690 32,313,935 51,257,625
38,477,525 72,341,946 110,819,471
VARIATION IN PRODUCTION
FINISHED & PARTIALLY FINI-SHED GOODS
SUBPRODUCTS, WASTE, RESIDUES & REFUSE
PRODUCTS & WORKS IN PROGRESS
BIOLOGICAL ASSETS TOTAL
BALANCE ON 1 JANUARY 2013 10,491,320 - 27,749 - 10,519,069
Adjustments 3,325,713 - (507,151) - 2,818,562
BALANCE ON 31 DECEMBER 2013 8,550,228 - 28,414 - 8,578,642
1,384,622 - (506,486) - 878,135
BALANCE ON 1 JANUARY 2014 8,550,228
- 28,414 - 8,578,642
Adjustments 204,438 - 6,109 - 210,547
BALANCE 31 DECEMBER 2014 11,568,952 - 122,128 - 11,691,080
3,223,162 - 99,823 - 3,322,985
58/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
13.ASSET IMPAIRMENT
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The main categories of assets affected by impairment losses and reversal of impairment losses during the financial years of 2014 and 2013 are those presented in the table below:
COLLECTIVE IMPAIRMENT TOTAL
BALANCE ON 1 JANUARY 2013 19,138,460 19,138,460
Annual increase 6,946,427 6,946,427
Use (1,880,421) (1,880,421)
Reversals (1,468,908) (1,468,908)
BALANCE ON 31 DECEMBER 2013 22,735,559 22,735,559
Annual increase 3,640,119 3,640,119
Use (104,586) (104,586)
Reversals (4,790,763) (4,790,763)
BALANCE ON 31 DECEMBER 2014 21,480,328 21,480,328
This note only reflects client impairments.Impairment regarding other categories of assets is disclosed in the respective note.
59/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
14.TAX
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Expenses (income) arising from current and deferred tax related to the origin and reversal of temporary differences are those indicated in the following table:
2014 2013
CURRENT TAX
Corporate tax 11,216,173 4,844,990
Tax savings _ -67,534
DEFERRED TAX
Caused by and subject to reversal due to temporary differences 285,848 280,432
Other movements - -
11,502,021 5,057,888
BALANCE SHEET ACCOUNTS P&L ACCOUNTS OTHER EQUITY ITEMS
2014 2013 2014 2013 2014 2013TEMPORARY DIFFERENCES
Retained Earnings - - - - - -
Client Impairments Not Accepted for Tax purposes 89,313 - (70,573) (27,091) - -
Good points Deferral 1,751 - (1,339) - - -
Research & Development Expenses - 31,410 (746) (36,525) (3,935) (3,935)
Industrial Property Expenses - 7,201 (7,201) (7,960) (36,537) (36,537)
Inventory impairments 228,184 169,942 47,088 (9,512) - -
Impairment of Receivables 2,600,867 2,245,538 365,691 (394,358) 76,993 76,993
Cartão Delta Points deferral 5,666 10,938 (5,272) (2,311) - -
Others 387,505 85,951 134,837 (515,570) 275,979 (6,075)
Impairment of depreciable assets 473,114 675,295 (202,181) 179,942 - -
Impairment of Financial Investments 493,683 518,484 (57,939) (37,708) - -
Good Points Deferral 96,243 196,180 (96,847) (10,612) - -
SNC transition adjustments 2,764 - - - - -
Consolidation Adjustments 735,690 2,326,771 678,475 349,368 - -
TOTAL 5,114,780 6,267,710 783,994 (512,337) 312,500 30,446
DEFERRED TAX LIABILITIES
Subsidies 98,980 10,801 88,179 -6,739 125,093 36,914
Revaluation of tangible fixed assets 393,324 3,352,018 -71,048 -505,487 36,663 2,929,618
Retained under Portuguese GAAP 0 97 -97 -111 1,374 1,374
Others 2,373,066 0 -516,949 0 2,363,436 0
Consolidation Adjustments 74,832 113,185 0 - 0 02,940,202 3,476,101 (498,146) (512,337) 2,526,566 2,967,906
60/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
15. GOVERNMENT SUBSIDIES AND SUPPORT
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The nature and extent of the Government subsidies recognized in the financial statements are displayed in the following table:
RECOGNISED UNDER EQUITY 2014 2013
GROSS VALUE DEFERRED TAX NET VALUE GROSS VALUE DEFERRED TAX NET VALUE
INITIAL BALANCE 39,275 (10,801) 28,475 59,456 (17,540) 41,916
Received during the year 2,074,221 (528,926) 1,545,295 48,965 (13,465) 35,500
Transferred to profit & loss (1,725,341) 439,962 (1,285,379) (69,146) 19,015 (50,131)
FINAL BALANCE 388,156 (99,765) 288,390 39,275 (11,990) 27,285
Reversal deferred tax initial balance - 786 786 - 1,189 1,189
- - 289,176 - - 28,474
RECOGNISED IN ANNUAL PROFIT & LOSS
2014 2013
Investment subsidies 1,417,438 20,181
Operating subsidies 322,641 66,133
1,740,079 86,314
The Group did not benefit directly from any other form of State aid.
There are no conditions that have not been met nor any other contingencies related to Government support, for which reason the Subsidies have been recognized under Equity as Non-refundable subsidies.
61/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
16.EQUITY
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The Group’s share capital has been fully paid-up and is constituted by 12,002,874 Shares with a par value of 5 Euros each.There were no acquisitions or transfers of Shares during the reporting period or during the previous financial year.
RESERVES AND PROFIT & LOSSThis heading is itemized in the following manner:
EQUITYLEGAL RESERVES
OTHER RESERVES
RETAINED EARNINGS
NET PROFIT OF THE YEAR
NON-CONTROLLING INTERESTS
TOTAL
BALANCE ON 1 JANUARY 2013 60,014 370 7,507,285 305,708 33,331,407 1,736,434 - 102,895,204
Creation of legal reserve - 108,211 - 1,628,223 (1,736,434) - -
Dividends - - - - - - -
Remainder for distribution of profit - - - - - - -
Annual profit - - - - 8,352,141 - 8,352,141
Revaluation for the year - - - - - - -
Distributions - - - - - - -
Entry into the scope of consolidation Angonabeiro - - - - - - -
Reversal due to impairment losses - - - - - - -
Adjustment of errors due to business combinations - - - - - - -
Share based payments - - - - - - -
Transposition differences in financial statements
- - 171,942 (171,942) - - -
Other - - - 146,326 - 194,557 340,883
BALANCE ON 31 DECEMBER 2013 60,014,370 7,615,496 477,650 34,934,014 8,352,141 194,557 111,588,229
BALANCE ON 1 JANUARY 2014 60,014,370 7,615,496 477,650 34,934,014 8,352,141 194,557 111,588,229
Creation of legal reserve - 414,067 - 7,938,074 (8,352,141) - -
Dividends - - - - - - -
Remainder for distribution of profit - - - - - - -
Annual profit - - - - 27,243,834 - 27,243,834
Revaluation for the year - - - - - - -
Distributions - - - - - - -
Entry into the scope of consolidation Angonabeiro - - - - - - -
Reversal due to impairment losses - - - - - - -
Adjustment of errors due to business mergers - - - - - - -
Share based payments - - - - - - -
Transposition differences in financial statements
- - (177,692) 177,692 - - -
Other - - - (80,841) - 230,252 149,411
60,014,370 8,029,563 299,958 42,968,939 27,243,834 424,809 138,981,474
BALANCE ON 31 DECEMBER 2014 60,014,370 8,029,563 299,958 42,968,939 27,243,834 424,809 138,981,474
62/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
17.STATE AND OTHER PUBLIC ENTITIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This item breaks down in the manner described in the following table:
2014 2013
RECEIVABLE
Income tax 33,010 13,872
Income tax withholdings - -
VAT 310,279 316,829
Recoverable corporate tax - -
Other taxes 162,970 260,368
506,260 591,069
PAYABLE
Income tax 1,048,271 1,070,272
VAT 2,936,005 3,866,571
Other taxes 73,314 11,714
Social security contributions 1,190,296 1,186,590
5,247,887 6,135,148
63/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
18.DEFERRALS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Expenses and income to be recognized is itemized as follows:
2014 2013
EXPENSES TO BE RECOGNISED
Insurance 71,878 89,599
Sales discounts & rebates 22,350 26,682
Contracts with Clients 14,843,641 17,330,129
Multi-annual Maintenance 0 0
Early Quota Payments 0 0
Other Deferred Costs 2,815,968 3,393,166
Consolidated adjustments -2,118,210 -2,096,673
15,635,626 18,742,903
INCOME TO BE RECOGNISED
Cartão Delta points 393,366 730,294
Other income to be recognised 407,826 56,973
801,191 787,268
Contracts with clients are usually deferred during a 4-year period. The value of the deferral is recorded against Sales Discounts.
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19.REVENUE
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Amounts of revenue are itemized in the following table:
SALES AND SERVICES PROVIDED
2014 2013
SALES
National Market 252,419,795 250,362,683
EU Market 59,857,771 59,663,506
Other Markets 31,764,957 22,046,812
Sales Returned (11,069,033) (8,887,985)
Sales Discounts (30,905,456) (38,632,767)
302,068,034 284,552,248
SERVICES PROVIDED
National Market 2,768,392 2,209,074
EU Market 1,682,869 1,212,606
Other Countries 754,613 308,430
Returned Services - -
Discounts and rebates (188,825) (94,850)
5,017,049 3,635,261
307,085,082 288,187,509
65/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
20.WORKS FOR THE COMPANY
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This item breaks down in the manner indicated in the table below.
2014 2013
WORKS FOR THE COMPANY REGARDING:
Tangible fixed assets (Note 7) - 3,429
- 3,429
66/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
21.SUPPLIES AND SERVICES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This heading contains the items below.
2014 2013
Subcontracts 572,868 443,991
Specialized works 14,808,085 14,558,767
Publicity & advertising 16,308,187 15,334,581
Security & surveillance 1,044,174 814,509
Fees 1,070,123 933,067
Commissions 159,100 141,508
Maintenance & repairs 5,638,133 5,465,883
Rapid wear tools & utensils 317,816 288,614
Books & technical docs. 5,266 5,156
Office supplies 263,580 381,944
Gift articles 666,876 557,179
Other 248,022 266,361
Electricity 1,160,092 1,138,841
Fuel 4,568,582 4,512,437
Water 93,502 75,791
Other fuels 8,316 10,718
Travel & accommodation 2,717,696 2,361,299
Personal transport 1,598 2,829
Carriage of goods 4,237,769 3,584,387
Carriage of valuables 100,991 92,742
Rents & leases 6,216,349 5,754,968
Communication 1,226,035 1,350,969
Insurance 1,231,916 1,196,074
Royalties 43,009 -
Litigation and notary charges 130,163 122,472
Entertainment expenses 452,553 588,655
Cleaning, hygiene & comfort 302,141 201,691
Other services 2,702,027 1,885,654
66,294,967 62,071,087
The amount included in specialized works relates essentially to the value debited by the Group member Delta Serviços, which operates as the Group’s shared services centre.
With regard to publicity and advertising, the sum mainly regards promotional events, meetings, sports sponsorship and expenses with creative agencies. The advertising awnings recorded in Spain were reclassified as tangible assets, for a sum of 994,519.12€.
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22.PERSONNEL EXPENSES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
PERSONNEL EXPENSES
2014 2013
Remuneration of governing bodies 954,721 969,012
Payroll 51,843,045 49,513,225
Payroll charges 12,298,171 11,658,473
Workers’ compensation 410,519 431,368
Social action expenses 2,182,788 2,158,378
OTHER PERSONNEL EXPENSES
Severance packages 356,545 298,782
Workplace healthcare 61,811 9,223
Multicare Insurance – Group 475,897 543,448
Other Insurances 11,408 41,386
External Training 66,783 76,170
Other expenses with personnel 518,472 880,870
69,180,158 66,580,335
68/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
23.FAIR VALUE INCREASES / WRITE-DOWNS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This heading is itemized in the following manner:
LOSSES DUE TO WRITE-DOWN IN FAIR VALUE OF FINANCIAL INSTRUMENTS
2014 2013
ASSETS
Held for trading – listed companies- BES shares 87,885 -
87,885 0
The basis for determining fair value for these instruments were the stock market price on 31.12.2014.
GAINS DUE TO INCREASE IN FAIR VALUE OF FINANCIAL INSTRUMENTS
2014 2013
ASSETS
Held for trading – listed companies- BES shares - (8,143)
0 (8,143)
69/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
24.OTHER INCOME AND EARNINGS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This heading breaks down in the manner indicated in the following table:
2014 2013
Supplementary gains 4,386,071 3,538,240
Cash payment discounts obtained 47,679 57,544
Debts recovered 31,906 51,239
Stock gains 76,165 112,576
Extraordinary gains - -
Income from share holdings - -
Sale of fixed tangible assets 69,078 97,332
Benefits from contract penalties 3,169,342 3,435,653
Corrections regarding previous years 1,714,910 2,079,989
Investment subsidies 1,417,438 20,181
Tax estimates 58,180 3,743
Others, unspecified 2,984,053 817,170
13,954,822 10,213,666
Supplementary gains essentially relate to the assignment of workers, sale of scrap and energy sales.Benefits from contract penalties correspond to defaults by clients regarding agreed coffee consumption.Others unspecified, essentially refers to operating currency exchange rate differences.
70/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
25.OTHER EXPENSES AND LOSSES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This heading breaks down in the manner indicated in the following table:
2014 2013
Tax 1,065,495 1,035,570
Tariffs - -
Cash payment discounts granted 1,531,386 1,589,140
Vending discounts - -
Bad debts 1,984,899 607,047
Inventory losses 45,884 79,683
Other - -
Expenses and losses in non-financial investments - -
Sales 46,756 72,155
Accidents - -
Corrections in relation to previous financial years 1,053,958 782,150
Donations 1,313,209 2,958,779
Contributions 127,534 140,435
Inventory samples and gifts 3,654,902 3,754,892
Other expenses and losses 403,067 1,459,955
11,227,091 12,479,805
The heading “Other expenses and losses” includes expenses for banking services, tax and non-tax fines, contract penalties, non-compliance penalties, and others that are not relevant, unspecified.
71/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
26. AMORTISATION & DEPRECIATION EXPENSES / REVERSALS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This item is described in the manner indicated below.
2014 2013
AMORTISATION & DEPRECIATION EXPENSES
Investment properties - -
Tangible fixed assets (Note 7) 24,115,376 22,773,318
Intangible assets (Note 8) 1,354,068 1,306,062
25,469,444 24,079,380
72/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
27.FINANCIAL PROFIT & LOSS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
This heading is itemized in the manner described in the table below.
FINANCIAL INCOME
2014 2013
INTEREST EARNED
From savings 128,718 33,788
From other loans - -
OTHER SIMILAR INCOME 46,137 86,205
174,854 119,993
The item “other similar income” essentially includes currency exchange differences adjusted on 31 December of third party accounts and other minor income not included in other items.
FINANCIAL EXPENSES
2014 2013
INTEREST PAID
Due to loans - -
At cost 2,361,724 3,959,660
INTEREST ON BANK OVERDRAFTS
At cost 53,196 191,786
OTHERS
2,414,920 4,151,446
73/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
28.LEASES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
FINANCIAL LEASESTHE GROUP AS THE LESSORThe Group has financial lease contracts for several Transport Equipment items. These contracts are renewable and contain purchase options. The leased assets can only be subleased with the express consent of the lessor, which is given on a case-by-case basis, following justified request by the Group.
The net book value of the assets under financial lease on the balance sheet date, per category of asset, is specified in the following table:
2014 2013
Basic equipment - -
Transport equipment - -
- -
On 31 December, no sum is outstanding.
74/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
29.PROVISIONS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
WARRANTY PROVISIONS
PROVISIONS FOR PENDING LAWSUITS OTHER PROVISIONS TOTAL
1 JANUARY 2013 - - 637,796 637,796
Acquisition of a subsidiary - - - -
Uses during the year - - - -
Reversals during the year - - (77,354) (77,354)
Increases during the year 604,273 - 156,410 760,683
Increases due to penalties - - - -
Consolidation adjustments - - 31,725 31,725
31 DECEMBER 2013 604,273 - 748,576 1,352,849
1 JANUARY 2014 604,273 - 748,576 1,352,849
Acquisition of a subsidiary - - - -
Uses during the year - - 30,366 30,366
Reversals during the year (250,334) (674,625) (1,502) (926,461)
Increases during the year 228,526 744,765 42,641 1,015,932
Increases due to penalties - - - -
Consolidation adjustments - - (762,108) (762,108)
31 DECEMBER 2014 582,466 70,140 57,974 710,579
75/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
30.INVENTORY IMPAIRMENT
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
LOSSES / REVERSALS
2014 2013
IMPAIRMENT LOSSES
Goods -1,356,492 -410,586
Raw materials, by-products & consumables
-33,112 -10,120
Finished & partially finished goods - -
Subproducts, waste, residues & refuse - -
Products & works in progress - -
REVERSALS OF IMPAIRMENT LOSSES
Goods 0 34,900
Raw materials, by-products & consumables
- -
Finished & partially finished goods - -
Subproducts, waste, residues & refuse - -
Products & works in progress - -
(1,389,603) (385,805)
76/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
31. GAINS / LOSSES FROM SUBSIDIARIES, ASSOCIATES & JOINT VENTURES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
Measurement criteria are described in paragraph g) of point 3.1.
During the financial year of 2014 no dividends were received regarding the financial assets held for trading.
77/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
32.NON-CONTROLLING INTERESTS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
NON-CONTROLLING INTERESTS IN SHARE CAPITAL
2014 2013
MANUEL RUI AZINHAIS NABEIRO, LDA 1,856 975
NOVADELTA, S.A. 8,098 6,339
TECNIDELTA, LDA 238,087 239,005
TOLDICONFEX, LDA 55,545 47,824
DELTA MADEIRA, S.A. 1,057 1,169
NABEIROREST, LDA - -89
TORREFACÇÃO CAMELO 628,227 406,222
JOAO DOS SANTOS, LDA -50,380 -122,021
SIEC, SA 225,834 173,120
ANGONABEIRO -472,868 -478,029
DELTA FOODS BRASIL 5,910 -17,653
Q BRASIL -216,558 -62,307
NON-CONTROLLING INTERESTS – BALANCE SHEET 424,809 194,557
NON-CONTROLLING INTERESTS IN PROFIT & LOSS
2014 2013
MANUEL RUI AZINHAIS NABEIRO, LDA 845 334
NOVADELTA, S.A. 1,643 507
TECNIDELTA, LDA 49,082 16,652
TOLDICONFEX, LDA 7,721 4,102
DELTA MADEIRA, S.A. 308 224
NABEIROREST, LDA - -30
TORREFACÇÃO CAMELO 216,934 115,059
JOAO DOS SANTOS, LDA 70,970 62,277
SIEC, SA 62,146 5,389
ANGONABEIRO 32,025 52,337
DELTA FOODS BRASIL -16,918 -53,206
Q BRASIL -161,841 -66,649
NON-CONTROLLING INTERESTS – PROFIT & LOSS 262,914 136,998
78/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
33.FINANCIAL RISK MANAGEMENT POLICIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
GENERAL PRINCIPLESFinancial risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate and an unexpected result will be obtained, whether positive or negative, changing the equity value of the Group.
In the course of its day-to-day activities, the Group is exposed to a variety of financial risks liable to change its equity value which, depending on their nature, can be grouped into the following categories:
• Market risk• Interest rate risk• Currency exchange risk• Other price risks• Credit risk• Liquidity risk
The management of the risks referred to above - risks that arise, to a great extent, from the unpredictability of financial markets - requires the careful application of a series of rules and methodologies approved by the Directors, ultimately aimed at minimising their potential negative impact on equity value and on the Group’s performance.With this goal in mind, the entire management is geared towards dealing with two essential concerns:
• Reducing, whenever possible, fluctuations in results and cash flows subject to risk;
• Limiting deviations from estimated results by means of rigorous economic and financial planning, based on multi-annual budgets.
As a rule the Group does not adopt speculative positions, for which reason any operations made in connection with financial risk management seek to control existing risks to which the Group is already exposed. The Directors define principles for risk management as a whole and policies that cover specific areas such as interest rate risk, liquidity risk, credit risk, the use of derivatives and other non-derivative financial instruments and the investment of excess liquidity. Financial risk management – including identification, assessment and coverage – is conducted by the Group’s Finance Department in accordance with policies approved by the Directors.
The Group’s Finance Department evaluates and covers financial risks in strict cooperation with the Group’s operational units that possess specialized teams in terms of competencies, experience and supervision of derivatives.
The Internal Auditing Department monitors the implementation of risk management policies defined by the Board of Directors in order to ensure that financial risks are identified, measured and managed in accordance with these policies.
79/ 2013-2014/ ANNUAL REPORT/ DELTA CAFÉS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT33. FINANCIAL RISK MANAGEMENT POLICIES
The statement of current and non-current loans measured at cost and the respective conditions are displayed in the table below:
2014 2013
NON-CURRENT
LOANS
NABEIROGEST SGPS, SA 84,849,274 102,735,912
CAIXA GERAL DE DEPÓSITOS - -
IAPMEI 6,028,055 2,517,587
LEASING (LUXEMBOURG) - 30,360
CURRENT
LOANS 44,914
CURRENT ACCOUNT OVERDRAFTS 376 538,707
90,922,619 105,822,566
On 31 December 2014 and 31 December 2013, the development of the value of Non-current Loans with exposure to interest rate risk according to maturity or refixing date is that indicated below:
2014 2013
LOANS NABEIROGEST SGPS, SA 84,849,274 105,283,859
FINANCIAL CHARGES 2,361,724 3,959,660
The sensitivity of profit and loss during the financial year (due to the impact of loans at variable interest rates) to potential reasonable changes in interest rates, while all other variables remain constant, can be seen in the table below:
RATE FORECAST 2015
INTEREST USING FOLLOWING FINAL 2014 RATE (EURIBOR + SPREAD) 1.770% 1,522,691
INTEREST USING FOLLOWING FINAL 2014 RATE (EURIBOR + SPREAD) 2.770% 2,382,968
INTEREST USING FOLLOWING FINAL 2014 RATE (EURIBOR + SPREAD) 3.770% 3,243,246
INTEREST RATE RISKThe interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates, changing the equity value of the Group.
The exposure of the Group to interest rate risk derives from the existence on its balance sheet of financial assets and liabilities at a fixed rate or variable rate of interest. In the first case, the Group faces a risk of variation in the “fair value” of these assets or liabilities, insofar as any change in the market rates involves an opportunity cost (positive or negative). In the second case, this change has a direct impact on the value of interest received/paid, consequently causing variations in cash.
Changes in interest rates were as follows:
CHANGES IN MONEY MARKET RATES IN THE EUROZONE
2014 2013
EURIBOR 12M 0.327% 0.556%
EURIBOR 6M 0.171% 0.389%
EURIBOR 3M 0.078% 0.287%
EURIBOR 1M 0.019% 0.216%
The decision to apply variable rates to bank loans is due to the fact that, in the Group’s opinion, their short maturity does not allow recovery from the negative rate differential initially paid due to the steep yield curve, particularly for shorter terms.
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT33. FINANCIAL RISK MANAGEMENT POLICIES
CURRENCY EXCHANGE RISKCurrency exchange risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.
Exposure to currency risk arises especially due to the operating activities of the Group (with expenses, income, assets and liabilities expressed in currencies other than the reporting currency) and the net investments in foreign subsidiaries:
• The prices of some products in the world market are traditionally listed in USD, for which reason the evolution of the euro in relation to the USD may have an impact on future Group sales, regardless of whether the sales are performed in euros or another currency;
• Tourism is an important source of revenue for the Autonomous Region of Madeira, which helps increase the sales of the Group.
• The fluctuation of exchange rates in Angola (AOA), may affect the Group’s accounts in the future, due to the inconstant changes.
• The fact that the main raw material that the Group works with (coffee) is quoted worldwide with its value in USD affects all operating purchase transactions and renders the Group rather vulnerable to exchange rate fluctuations.
CREDIT RISKCredit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to perform an obligation.
The Group is subject to credit risk in the following activities:• Operating activities – Clients and other accounts
receivable.• Loan activities – Deposits in banks and other
financial institutions;
Credit risk management with regard to clients and other accounts receivable is performed as follows:• Adhering to policies, procedures and controls
established by the Group for each operational unit;• Credit limits are established for all clients based on
internal evaluation criteria;• Each client’s creditworthiness is based on credit
notations provided by the sales department of the Group;
• Outstanding debts are regularly monitored.
Credit risk management with regard to deposits in banks and other financial institutions is performed in the following manner:• By the Group’s Financial Department, according
to Group policies;• The limits are established to minimize the risk
of concentration and thus mitigate any financial losses that may arise from potential defaults by counterparties;
With regard to the management of credit risk regarding other financial assets, in particular debts receivable from clients and others, the Group performs an annual measurement of that risk according to market information and information from the sales staff that monitor the debtors.
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NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT33. FINANCIAL RISK MANAGEMENT POLICIES
LIQUIDITY RISKThe aim of the liquidity risk management policy is to ensure that the Group has sufficient financial resources available even if under adverse market conditions:• Comply with its payment obligations to the extent
that they become mature and;• Ensure timely funding adjusted to the development
of its business and market strategy.
For this purpose, the Group intends to maintain a flexible financial structure, for which reason the liquidity management process within the Group involves the following fundamental aspects:
• Optimization of financing functions within the company;
• Financial planning based on cash flow estimates according to different timespans;
• Financial control system in the short and medium-term that permits timely identification of deviations, anticipating the need for loans and identifying refinancing opportunities;
• Diversified financing sources and counterparties;• Various maturities for debt issued, avoiding excessive
concentration of debt amortisation at any given point in time.
Regular monitoring by the Board of Directors permits effective implementation of the Group’s risk data aggregation policy, as well as rapid, direct and centralized intervention.
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34.CONTINGENT LIABILITIES
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The Group, within its scope of consolidation, possesses bank guarantees that are not reflected in the balance sheet, according to this table.
During the 2013 financial year, due to obtaining the industrial patent for Delta Q capsules, the company was opposed by the company Nestec S.A. insofar as concerns the registration of the patent in the European market and at the balance sheet date this process is still pending.
The Board of Directors are convinced that it is unlikely for the company to have to pay any amounts by virtue of that opposition.
BENEFICIARY ENTITY 2014 2013
MANUEL RUI AZINHAIS NABEIRO, LDA.
SETUBAL CUSTOMS CGD 25,000 25,000
INATEL CGD - -
SETUBAL CUSTOMS CGD 100,000 100,000
SETUBAL CUSTOMS CGD 500,000 500,000
REAL ESTATE INVESTMENT TRUST CGD 32,897 32,897
REAL ESTATE INVESTMENT TRUST CGD 21,432 21,432
REAL ESTATE INVESTMENT TRUST CGD 30,000 30,000
MINISTRY FOR HOME AFFAIRS CGD 16,750 19,000
PORTUGAL TELECOM CGD 26,000 26 000
CENTRO HOSPITALAR DO OESTE CGD 4,800 -
TOTAL - 756,879 754,329
NOVADELTA, S.A.
CGD GUARANTEE CGD 1,600,000 1,600,000
BANK LOAN GUARANTEE /AVAL CGD 500,000 500,000
CGD BANK GUARANTEE /AVAL (MINIST. HOME AFFAIRS) CGD 16,750 -
CGD BANK GUARANTEE /AVAL (REG. AGRIC. DIRECTORATE) CGD 2,000 -
CGD BANK GUARANTEE /AVAL (IAPMEI) CGD 1,246,409 -
TOTAL 3,365,159 2,100,000
TECNIDELTA - EQUIPAMENTOS HOTELEIROS, LDA
CUSTOMS DIRECTORATE GEN. & SPECIAL CONSUMPTION TAX - 50,000 50,000
TOTAL - 50,000 50,000
TORREFACÇÃO CAMELO, LDA
CUSTOMS CLEARANCE CGD 100,000 100,000
DOCUMENTARY CREDIT PAYMENTS - 91,392 81,792
TOTAL - 191,392 181,792
DELTA CAFÉS MADEIRA, S.A.
CUSTOMS DIRECTORATE GEN. & SPECIAL CONSUMPTION TAX CGD 1,000 1,000
GOVERNMENT OF AUTONOMOUS REGION OF MADEIRA - - -
TOTAL - 1,000 1,000
JOÃO DOS SANTOS NABEIRO & HERDºS., LDA
CUSTOMS CLEARANCE CGD 17,458 17,458
EDP - - -
TOTAL - 17,458 17,458
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35.SUBSEQUENT EVENTS
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
The consolidated financial statements are authorized for issue on the 15 April 2015. After that date no further information was received regarding conditions existing on the balance sheet date and that would require adjustments or disclosure in the financial statements.
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36.DISCLOSURES REQUIRED BY LAW
NOTES TO THE BALANCE SHEET AND THE PROFIT & LOSS STATEMENT
DISCLOSURE REQUIRED ACCORDING TO ART. 66, NO. 1, OF THE PORTUGUESE COMPANY CODE No operations exist that are not included in the Balance sheet, for which reason there is no need to disclose the respective nature, commercial objective, financial impact and risks or benefits.
Fees invoiced during the financial year by the statutory auditor are those indicated below:
2014 2013
STATUTORY AUDITOR’S REPORT 8,700 8,700
ASSURANCE SERVICES 1,900 1,900
10,600 10,600
The Accountant
Humberto Martins
Professional licence no. 50 824
The Board of Directors
Manuel Rui Azinhais Nabeiro
Chairman of the Board of Directors
João Manuel Gonçalves Nabeiro
Director
Helena Maria Gonçalves Nabeiro Tenório
Director
If you require any further information, please contact:
Delta Cafés. SGPS, S.A.
Avenida Calouste Gulbenkian
7370 Campo Maior
Tel: 268 699 200 / 268 680 000 Fax: 268 688960
www.delta-cafes.pt