Annual Financial Statements For the year ended 31 December 2014

Transcription

1 Annual Financial Statements For the year ended 31 December 2014 These financial statements have been translated from the original statutory financial statements that have been prepared in the Greek language. In the event that differences exist between this translation and the original Greek language financial statements, the Greek language financial statements will prevail over this document. M.J.MAILLIS S.A. INDUSTRIAL PACKAGING SYSTEMS & TECHNOLOGIES P.C.S.A.2716/06/Β/86/43 TAKI KAVALIERATOU KIFISSIA, ATHENS

2 M.J.MAILLIS GROUP Annual Financial Statements For the period from 1 January to 31 December 2014 The present Annual Financial Statements were approved by the Board of Directors of M.J. MAILLIS S.A on the 31 th of March The present Annual Financial Statements are available on the company s website CONTENTS A) Board of Directors Report 3 B) Independent Auditor s Report 17 C) Annual Financial Statements 19 Statement of Financial Position 19 Income Statement 20 Statement of Comprehensive Income 21 Statement of Changes in Equity 22 Cash Flow Statement 23 D) Notes to the Consolidated Financial Statements General Information Summary of significant accounting policies Basis of preparation Changes in accounting policy and disclosures Consolidation Segment reporting Foreign currency translation Property, plant and equipment Intangible assets Impairment of non-financial assets Financial assets Derivative financial instruments and hedging activities Inventories Trade receivables Cash and cash equivalents Share capital Trade payables Borrowings Borrowing costs Compound financial instruments Current and Deferred income tax Employee Benefits Government Grants Provisions Revenue recognition 36 1

3 2.23 Leases Dividend Distribution Exceptional items New Standards & Interpretations Financial risk management Financial risk factors Capital management Fair Value Estimation Critical accounting estimates and judgements Critical accounting estimates and assumptions Critical judgments in applying the entity s accounting policies Segment Information Property, Plant and Equipment Intangible Assets Deferred Income Tax Investments in Subsidiaries and Joint ventures Joint ventures Financial instruments by category Inventories Trade and Other Receivables Cash and Cash Equivalents Share Capital and Premium Retained Earnings Other Reserves Borrowings Retirement Benefit Obligations Government Grants Trade and Other Payables Provisions for other liabilities and charges Related parties Income Tax Employee benefit expenses Expenses by nature Exceptional items Finance Income and Expenses Other income Net foreign exchange gains/losses Contingencies and commitments Encumbrances Distribution of profit Events after the reporting date 89 E) Summary Financial Statements for the period 1 st January to 31 st December

4 A) Annual Board of Directors Report of the M.J. MAILLIS S.A on the consolidated and company Financial Statements for the period from 1 st January to 31 st December 2014 Dear Shareholders, The present Board of Directors Report was prepared according to the provisions of article 136 of Law 2190/1920 for companies that prepare their Financial Statements according to International Accouting Standards adopted by the European Union. The present report contains information on the financial position and performance of the Group and the Company for the year ending , a description of significant events that took place during the previous year, their impact on the annual financial statements, a description of the most significant transactions between the Company, the Group and related parties, a description of the most important risks and uncertainties for the current year as well as qualitative information and estimates on the evolution of the Group s and the Company s activities in the current year. 1. Significant events that took place during 2014, and their impact on the Annual Financial Statements Financial restructuring The continuing negative impact of the international financial crisis of recent years has not allowed the Group to fully recover, despite the positive effect of September 2011 restructuring and created the need of a permanent debt restructuring. As a result and after extensive negotiations, on June 26th 2014, Board of Directors approved a Restructuring Agreement ( the Agreement ) with the Group of participating Lenders and the HIG Luxembourg Holdings 46 Sarl Investor ( the Strategic Investor ), who has significant experience and knowhow in the restructuring of companies. The main terms of the Agreement, which create the conditions for a substantial recovery and for the continuation of the Group s activity, are the following: -The transfer of the existing Lenders shares to the Strategic Investor. -The capitalization of 100% of the convertible bonds (with current value 97,1 million) and of 50% of the Senior bonds (with current value of 69,6 million) for achieving an equivalent reduction of the Company s debt. -The improvement of the main terms of the two existing ordinary bond loans, the Senior Bond Program and Super Senior Program, such as, extension of the repayment schedule and significant reduction of the applicable interest rate, that will cause a substantial decrease of the related financial cost, on an annual basis. -The further support of the Company s liquidity, by the issueance of new bond loan of ten million ( ), for working capital financing. In addition and as a consequence of the aforementioned agreement, the ownership structure of the company on June 27, 2014, changed as follows: -Alpha Bank S.A. transferred on June 27, 2014 the 33,162,415 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approximately 10.27%. 3

5 -Eurobank Ergasias S.A. transferred on June 27, 2014 the 49,273,634 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approximately 15.26%. -BNP PARIBAS S.A. transferred on June 27, 2014, the 40,094,779 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approximately 12.42%. As a result of these transfers of shares, the share capital and voting rights of the above banks to the Company, is zero (0). -National Bank of Greece SA transferred on June 27, 2014, out of a total of 25,573,690 shares issued by the Company and the respective voting rights thereof, i.e. percentage of share capital and voting rights equal to 7.92%, 25,077,680 shares and corresponding voting rights, representing the share capital and voting rights of the Company equal to approximately 7.77%. As a result of that transfer of shares, the share capital and voting rights of the said Bank to the Company accounted at that time for , corresponding to (0.15%) of the share capital and voting rights of the Company. Also on June 30, 2014 the following changes were made in the ownership structure: -Grace Bay II Holdings Sarl (which directly held voting rights over the Company) transferred on June 30, 2014, the 87,961,646 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approx %, so the shares and the percentage of share capital and voting rights in the Company is now zero (0). H.I.G. Bayside Advisors II LLC and H.I.G. Europe Capital Partners GP Limited owns 50% each at Grace Bay II Holdings Sarl and have agreed to exercise joint control within the meaning of art. 3 paragraph 1 (cc) of Law 3556/ Company HIG Luxembourg Holdings 46 Sarl: a) on 27 June 2014 acquired 147,608,508 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approximately 45.71% and b) on June 30, 2014 acquired 87,961,646 shares issued by the Company and the respective voting rights thereof, which corresponds to the share capital and voting rights of the Company equal to approximately 27.24%. As a result, the company HIG Luxembourg Holdings 46 Sarl, acquired a total of 235,570,154 shares issued by the Company and the respective voting rights thereof, corresponding to a percentage of the share capital and voting rights of the Company equal to approximately 72.95%. According to these announcements, HIG Bayside Advisors II LLC and H.I.G. Europe Capital Partners GP Limited owns 50% each in IIG Luxembourg Holdings 46 Sarl (directly held voting rights of the Company) and have agreed to exercise joint control over it, within the meaning of art. 3 paragraph 1 (cc) of Law 3556/2007. After all the above transactions, the percentage of voting rights held directly in the Company by HIG Luxembourg Holdings 46 Sarl and indirectly, by H.I.G. Bayside Advisors II LLC and H.I.G. Europe Capital Partners GP Limited, amounts to approximately 72.95%. Finally, on June 30, 2014 the company under the name "HIG LUXEMBOURG HOLDINGS 46 Sarl" (the "Offeror") submitted to the Hellenic Capital Market Commission and the Board of Directors of the Company, a draft information memorandum for the mandatory public offer in order to acquire the common shares of the Company (Public Offer). - As part of the acceptance of the above proposal by the existing shareholders, the HIG Luxembourg Holdings 46 Sarl, on , held 95.41% of the total paid up share capital and voting rights. Therefore, they submitted on a request to the SEC for the activation of the right to redeem the remaining percentage, as provided by the Agreement. 4

6 - The Hellenic Capital Market Commission with decision no. 1/696 / of its Board of Directors, approved the proposer s HIG Luxemburg Holdings 46 Sarl request, dated , to squeeze out the other shares of the Company not acquired in the course of 30/06/2014 mandatory offer, in accordance with Articles 27 and 27a of Law. 3461/2006. According to the same decision, 18 November 2014 was set as the day of cessation of trading of the Company's shares on the Athens Stock Exchange. It is noted that the delisting of the Company from the Stock Exchange, had been provided by the Agreement. - Trading of the shares on the Athens Exchange ended on November 18, On November , the HIG Luxemburg Holdings 46 Sarl held, directly, a total of shares of the Company, which represent 100% of the total paid up share capital and the Company's voting rights. Second phase of financial restructuring was completed through the Agreement, and as a result of which, Company s borrowings were significantly decreased, and Group s Statement of Financial Position was reorganized in general. The implementation of this second phase provides a definitive solution to the problem of high debt and the Group's capital adequacy, so that the Company, in connection with the reduction of operating costs and increase productivity programs, maintaining its headquarters and production base in Greece, lays the foundation for further growth. Operational Performance In 2014, Group sales were negatively affected as a result of the partial shortage of working capital for the purchase of raw materials for consumer products in order to meet the growing demand. However, this decrease was partially offset by increased sales in the packaging machines mainly in North America. As a whole, the Group's turnover in 2014 amounted to million, compared with million in the corresponding period of 2013, a marginal decrease of 1.4%. As a result of the improvement in gross margin by 2.1 percentage points the operating profit before tax, depreciation and amortization (operating EBITDA) of the Group amounting to 14.1 million increased by 30.6% compared to the same period of Considerable was also the improvement of the published EBITDA, which increased by 12.3 million mainly due to the impairment of assets and restructuring costs incurred in the prior year. Company-wide sales fell by 3.7% while gross profit margin also increased by 4.1 percentage points. The decline in sales is mainly due to reduced demand of durable goods, due to the prolonged economic recession in Europe. 5

7 Sales Revenue per product (th. ) As illustrated in the diagram below, the Turnover was mainly affected by the reduced sales of machines (-2.3%) and steel strap (-3.4%), but was partly offset by the increase in sales of film (2,9%). Sales Revenue per geographic area (th. ) By geographical area, the total turnover had been mainly affected by the reduced sales in Italy (machines), which were partially offset by increased sales in Western Europe (Consumables) and North America (machines) where sales increased significantly. Operating Earnings before Tax, Interest and Depreciation (EBITDA) Despite the drop in turnover, the Group generated positive and improved Operating EBITDA at 14.1 million compared with 11.2 million in the corresponding period of 2013, mainly as a result of improved gross margin by 2.1 percentage points, reduced administrative expenses by 2.4 million and the positive impact of the movement in exchange rates during the year. 6

8 Results after Tax Profit after tax amounted to 14.9 million compared to losses of 30 million in 2013 mainly due to the benefits arising from the utilization of tax losses of prior years, as shown in the following table: mil Profit/(Loss) before income tax (3,4) (27,3) Income tax expense 21,6 (2,9) Deferred tax (3,4) 0,2 Profit/(Loss) for the year 14,9 (30,0) IFRS 11 Effect (0,0) Adjusted Profit/(Loss) for the year (30,0) Impairment Of Assets (0,5) (5,6) Restructuring Expense (2,0) (4,0) Other Non Recurring Expenses/ Income 0,7 (1,6) Adjusted Profit/(Loss) for the year 16,6 (18,9) At company level the adjusted losses after tax decreased as it seems below: mil Profit/(Loss) before income tax (5,5) (33,4) Income tax expense 24,8 (0,0) Deferred tax (2,1) 0,4 Profit/(Loss) for the year 17,2 (33,1) Bad Debt Provision for Intercompany Trade Receivables - (2,3) Impairment Of Assets (0,3) (3,3) Restructuring Expense (0,5) (3,0) Other Non Recurring Expenses 1,4 (0,7) Adjusted Profit/(Loss) for the year 16,7 (23,7) 7

9 2. Group Financial Review A) Income Statement (p.21 of the Financial Statements) Sales Group sales for the year ending amounted to m, showing a marginal decrease compared to 2013, which is derived from the following geographical areas: Variance % West Europe 69,9 67,6 3,4% Central Europe 47,2 47,3-0,3% Greece & East Europe 42,6 44,2-3,7% North America 43,7 40,9 6,8% Italy 49,9 56,6-12,0% Total 253,2 256,7-1,4% Cost of Sales The Group's cost of sales in the year 2014 amounted to million, representing a decrease of 3.9% compared to 2013, due to the reduced turnover too. Consolidated Gross Profit Margin (21.2%) increased by 2.1 percentage points compared to 2013 (19.1%). This increase in gross margin was due to broader participation in Group sales of consumable products, which are sold at a high profit margin. At Company level, the Gross Profit Margin increased by 4.1 percentage points. This increase was due to the improvement of the production process and increase in sales of Film, product group with high margin. Administrative and Distribution Expenses Administrative and Distribution decreased compared to 2013 by 6.9% ( 43.6 million in 2014 versus 46.7 million in 2013). The decrease was mainly due to reduced Restructuring expenses and the reduced provisions for assets impairment. Both were decreased by 5.3 million compared to Other Income and Expenses Other income increased by 34% ( 13,5 million in 2014 versus 10.1 million in 2013) mainly because of the higher positive foreign exchange differences arising from the valuation of assets and liabilities in foreign currency of the parent company and its subsidiary in England. The Other Group expenses amounted to 18.3 million; representing a decrease of 10% or 2.1 million. That decrease was mainly due to Restructuring provisions of 3m. that occurred during the previous year. The net effect in Other Expenses / Income was positive for the Group at 5.5 million compared with Provisions Additional amounts were provided for inventory impairment of 1.1 million, for doubtful debts 0.7 million and other provisions amounting to 3.0 million. EBITDA Published EBITDA: The reported earnings before interest, taxes, depreciation and amortization (EBITDA) in 2014 amounted to 12.3 million compared with 0,1 million in The increase of the published EBITDA was mainly due to the improvement in gross margin by 2,1 percentage points, the reduced 8

10 administrative expenses by 2.4 million and the positive impact of the movement in exchange rates during the year. Operating EBITDA: Excluding extraordinary income and expenses arising from foreign exchange differences, impairment of assets, exceptional items and restructuring costs, the operating EBITDA for 2014 amounted to 14.1 million (versus 11.2 million in 2013). The adjustments for extraordinary income and expenses are analyzed in the following table: mil. December 2014 December 2013 Published EBITDA 12,3 0,5 IFRS 11 Effect -0,4 Adjusted Published EBITDA 0,1 FX Differences 1,3-0,6 Restructuring Expense -2,0-4,0 Non-Recurring Operating Expense -2,8-7,5 Non-Recurring Operating Income 1,7 0,9-1,8-11,1 Operating EBITDA 14,1 11,2 Change in EBITDA per geographic region is as follows: Variance % West Europe -3,7-3,3 12,2% Central Europe 5,2 1,7 200,4% Greece & East Europe -2,8-11,3-75,4% North America 9,1 7,4 23,6% Italy 4,6 5,6-18,5% Total 12,3 0, ,8% At Company level adjusted EBITDA improved as a result of better gross profit margins and lower operating costs, please refer to the table below: mil Published EBITDA 1,5-9,8 Bad Debt Provision for Intercompany Trade Receivables - (2,3) Impairment Of Assets (0,3) (3,3) Restructuring Expense (0,5) (3,0) Other Non Recurring Expenses 1,4 (0,7) Adjusted EBITDA 1,0 (0,4) 9

11 Impairment Losses There were no impairment losses during 2014, neither during Net Financial Expenses Net financial expenses were 17 million in 2014 versus 19.4 million in The decrease was the outcome of Company s improved financing terms, due to financial restructuring that took place in July of Losses before Tax The losses before tax of the Group amounted to 5.5 million versus 33.4 million in the corresponding period of The change compared to the previous year is analyzed below: mil Profit/(Loss) for the year before tax (3,4) (27,2) IFRS 11 Effect (0,1) Adjusted Profit/(Loss) for the year before tax (27,3) Impairment Of Assets (0,5) (5,6) Restructuring Expenses (2,0) (4,0) Other Non Recurring (Expenses)/ Income 0,7 (1,6) Adjusted Profit/(Loss) for the year before tax (1,7) (16,1) The losses before tax of the Company amounted to 3.4 million versus 27.3 million in the corresponding period of The change compared to the previous year is analyzed below: 10

12 mil Profit/(Loss) for the year before tax (5,5) (33,4) Bad Debt Provision for Intercompany Trade Receivables - (2,3) Impairment Of Assets (0,3) (3,3) Restructuring Expense (0,5) (3,0) Other Non Recurring Expenses 1,3 (0,7) Impairment of Loans to Subsidiaries - (7,5) Loss on impairment of investments - (0,3) Adjusted Profit/(Loss) for the year before tax (5,9) (16,3) Profits after Tax Profits after tax of the Group amounted to 14.9 million compared to losses of 30 million in the same period of For the Company, Earnings after taxes amounted to 17.2 million compared to losses of 33.1 million in the corresponding period of B) Financial Position (p.20 of the Financial Statements) Working Capital Inventories and trade receivables increased by 12.9% and 6.1% respectively. The successful completion of the 2 nd phase of the Debt Restructuring enabled the Group to proceed with higher purchases of raw materials which were not directly accompanied by higher sales. The short term liabilities (Trade & Other Payables and Tax Liabilities) increased by 17.7%. As a result, the Group s working capital increased in absolute amount by 3.5 million compared to 2013, representing 22.7% of sales or increased by 1.3 percentage points versus mil Variance (%) Inventories 49,5 43,8 12,9% Trade and other receivables 51,2 48,3 6,1% Short term liabilities 43,2 36,7 17,7% Reported Working Capital 57,5 55,4 3,8% Sales(annual basis*) 253,2 256,7-1,4% % on Sales 22,7% 21,6% 0,1pp 11

13 3. Important transactions with related parties The most important transactions of the Group with its related parties according to IAS 24 are presented in the tables below (related parties with the Group according to article 42e of the C.L. 2190/1920): Amounts in Euro '000 Sales of Goods and Services 1/1-31/12/2014 1/1-31/12/2013 Purchases of Goods and Services Sales of Goods and Services Purchases of Goods and Services Combi Total Amounts in Euro '000 Receivables balance 31/12/ /12/2013 Payables balance Receivables balance Payables balance Combi Total

14 The important transactions of the Parent Company with related parties are presented in the tables below: 1/1-31/12/2014 1/1-31/12/2013 Amounts in Euro '000 Sales of Goods and Services Purchases of Goods and Services Sales of Goods and Services Purchases of Goods and Services M.J. MAILLIS UK SANDER GMBH & Co KG M.J. MAILLIS SPAIN M.J. MAILLIS ROMANIA EUROPACK SA M.J. MAILLIS POLAND M.J. MAILLIS SLOVAKIA M J MAILLIS FRANCE SAS M.J.MAILLIS BENELUX NV/SA M.J.MAILLIS HUNGARY KFT SIAT SPA OTHER Total

15 Amounts in Euro '000 M.J. MAILLIS UK SANDER GMBH & Co KG Receivables balance 31/12/ /12/2013 Payables balance Receivables balance Payables balance M.J. MAILLIS SPAIN M.J. MAILLIS ROMANIA EUROPACK SA M.J. MAILLIS POLAND (33) MAILLIS STRAPPING SYSTEMS M.J. MAILLIS SLOVAKIA SIAT SPA Other Total The parent company has given guarantees for a total of 2.5 million towards obligations of the Group s subsidiary companies. 4. Major risks and uncertainties for the current financial year The Group operates in 16 countries, without including Greece, through subsidiaries and in other markets through exports or distributors. The major part of Group sales comes from sales outside Greece. Since the Group's strategy is to maintain and possibly strengthen its multinational activity, these sales represent a very significant proportion of total income. The risks of the international activity include indicatively: fluctuations in currency exchange rates restrictions on ownership and on repatriation of profits delays and interruptions in transportation political, social and economic instability governmental embargoes or foreign trade restrictions imposition of import duties and other trade restrictions audits on exports and imports strikes, work stoppages, trade union restrictions changes in legislation regarding the environment, licensing and employment law difficulties in staffing and managing of multinational companies possible adverse tax changes. If the Group is unable to successfully manage the risks associated with the operation and expansion of its international activities, these risks may materially affect the results and financial position of the Group. Moreover, the political developments during 2015 and discussions at national and international level regarding the reassessment of Greece's funding program terms, make macroeconomic and financial environment in the country variable. Returning to economic stability largely depends on the actions and decisions of institutional bodies in the country and abroad. Considering the nature of activities and the 14

16 financial position of the Group, any negative developments are not expected to significantly affect its operations. Nevertheless, the Management continually evaluates the situation and possible consequences, to ensure that all necessary measures and actions are promptly applied in order to minimize any negative impact on activities of the Company. In addition, The developments that have taken place in 2015 and the national and international discussions with respect to the terms of Greece's financing program have resulted in an unstable macroeconomic and financial environment in the country. The return to economic stability depends to a large extent on the actions and decisions of local and international institutions. Notwithstanding the above and given the nature of the Company s operations and its financial position, any negative developments are not expected to significantly affect the operations of the Company. Nevertheless, Management continually assesses the situation and its possible impact to ensure that all necessary actions and measures are taken in order to minimize any impact on the Company s operations. a) Market risk The Group is not materially affected by a potential decrease of demand in any individual market or segment, as it is not significantly exposed to any one specifically. Historically, we have not seen major movements in the relative positions between competitors in the markets we serve. There are no innovative technologies or applications which the Group does not already possess and which could risk our market shares. Our presence across different geographical regions limits the possible impact from a reduction in demand in any one individual market. The market risks that the Group faces relate mainly to the overall changes in the levels of global demand and activity, primarily in the industrial goods and secondarily in the consumer goods sectors. (b) Risk of raw material prices The possible negative impact from fluctuations in raw and auxiliary material prices on the financial performance of the Group is considered to be limited. Movements in raw material prices are passed on to the final selling prices relatively quickly in almost all markets in which we operate. The risk is relatively high for our steel products due to the fact that the production of both raw materials and final products has a relatively long lead time. As a result, the period between the placement of an order for raw materials and the sale of the final product is approximately four months. Any substantial movement in the prices of raw materials or final products during that period would have a significant impact on the final profitability. Although the ability to predict remains limited, we believe that these erratic changes in raw material prices could be repeated as a possible result of price fluctuation of oil and its products. (c) Credit risk The Group has no significant concentration of credit risk. Sales are diversified in terms of geography and industry sector and there are policies in place to ensure that sales of products are made to customers with an appropriate credit history. The Group does not have customers that represent more than 5% of its total sales. The credit risk related to our customers will remain significant as there is limited liquidity available in the global markets as a result of the financial crisis. Although there were no remarkable cases of payment default by customers, the Group has enhanced both the efforts for timely collection of its receivables and its credit control procedures. These efforts had a positive outcome so far. However, any possible failure of the most important customers of the Group to meet their obligations, are leading to provisions which negatively affect the financial results and the cash flows of the Group. This contributes to increased financial costs and thereby materially adversely affects the financial position and results of the Group. 15

17 (d) Liquidity risk Prudent liquidity risk management requires maintaining sufficient cash, the availability of which depends also on adequate amount of committed credit facilities. Management monitors weekly the level of the Group s available liquidity (comprising undrawn facilities and cash and cash equivalents) based on forecasted cash flows. Certainly, following the agreed significant reduction in financial expenses which consists part of the new agreement and the reinforcement of the working capital by the new shareholder of the Group, liquidity risk has been significantly reduced. (e) Foreign exchange risk The Group operates internationally and as a result is exposed to foreign exchange risk related mostly to the US Dollar, the UK Pound, the Polish Zloty, the Romanian Lei and the Canadian Dollar. Foreign exchange risk arises mainly from future commercial transactions, assets and liabilities denominated in foreign currencies and net investments in foreign companies. Due to the debt restructuring, the Group cannot offset fully the currency risk with currency exchange futures. Part of this risk, especially due to U.S. Dollar is covered with natural hedge (natural hedging) or through the raw materials, where exports to the currency offset by imports of raw materials in the same currency, either by converting its existing loans from euro to the currency needed for hedging. (f) Fair value interest rate risk The operating profits and cash flows of the Group are substantially independent from interest rate fluctuations. Loans are of fixed interest and part of the interest is capitalized based on restructuring agreements. The borrowings of the Group are mainly at variable interest rates. Borrowings issued at variable rates expose the group to fair value interest rate risk. 5. Business activity evolution in the current year The performance of the Group is expected to continue to be affected by the decline in industrial activity and the weak economies in South Europe. However, the exporting profile of the Group and the existence of sufficient liquidity together with an improved balance sheet lays the foundation for further growth. The Group will nevertheless continue to focus on further optimization of production costs and control of expenses through an operational restructuring. The present Annual Report of the Board of Directors for the period from 1 January to 31 December 2014 has been posted on the Internet, on the website of the Company Kifissia, 31 March 2015 BOARD OF DIRECTORS CHAIRMAN OF THE BOARD OF DIRECTORS 16

18 [Translation from the original text in Greek] Independent Auditor s Report To the Shareholders of M. J. MAILLIS S.A. Report on the Separate and Consolidated Financial Statements We have audited the accompanying separate and consolidated financial statements of M. J. MAILLIS S.A. which comprise the separate and consolidated statement of financial position as of 31 December 2014 and the separate and consolidated income statement and statement of comprehensive income, statement of changes in equity and cash flow statement for the year then ended and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Separate and Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these separate and consolidated financial statements in accordance with International Financial Reporting Standards, as adopted by the European Union, and for such internal control as management determines is necessary to enable the preparation of separate and consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these separate and consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the separate and consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the separate and consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the separate and consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the separate and consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the separate and consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 17

19 Opinion In our opinion, the separate and consolidated financial statements present fairly, in all material respects, the financial position of the M. J. MAILLIS S.A. and its subsidiaries as at December 31, 2014, and their financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards, as adopted by the European Union. Reference on Other Legal and Regulatory Matters We verified the conformity and consistency of the information given in the Board of Directors report with the accompanying separate and consolidated financial statements in accordance with the requirements of articles 43a, 108 and 37 of Codified Law 2190/1920. Athens, 01 April 2015 THE CERTIFIED AUDITOR PricewaterhouseCoopers S.A. 268 Kifissias Avenue, Athens Dimitrios Sourbis SOEL Reg. No. 113 SOEL Reg. No

20 C) Annual Financial Statements STATEMENT OF FINANCIAL POSITION Amounts in Euro '000 GROUP COMPANY ASSETS Note 31/12/ /12/2013 (Restated) 31/12/2012 (Restated) 31/12/ /12/2013 (Restated) Non Current Assets Property, plant and equipment Intangible assets Investment property Investments in subsidiaries and asociates Deferred income tax assets Other receivables Current Assets Inventories Trade and other receivables Deferred income tax assets Cash and cash equivalents Total Assets EQUITY Equity Attributable to Company's Shareholders Ordinary Shares Share premium Other Reserves Retained losses Currency translation reserve Non-Controlling interests Total Equity LIABILITIES Non Current Liabilities Borrowings Deferred income tax liabilities Retirement benefit obligations Government grants Other non current liabilities Current Liabilities Trade and other payables Deferred income tax liabilities Current tax liabilities Borrowings Provisions for other liabilities and charges Total Liabilities Total Equity and Liabilities The notes on pages 25 to 89 are an integral part of these annual financial statements 19

21 Amounts in Euro '000 Note 01/01/ /12/2014 INCOME STATEMENT GROUP 01/01/ /12/2013 (restated) 01/01/ /12/2014 COMPANY 01/01/ /12/2013 Revenue Cost of sales Gross profit Gross profit margin % 21,2% 19,1% 15,9% 11,8% Other operating income Administrative expenses Distribution costs Other operating expenses Impairment of Loans to Subsidiaries Operating Profit/(Loss) Loss on impairment of goodwill and investments 8, Profit from share in associates Gain from financial restructuring Finance income Finance costs Profit/(Loss) before income tax Income tax expense Earnings/ (loss) after current income tax for the year Deferred tax 9, Profit/(Loss) for the year Profit attributable to: Owners of the parent Non-Controlling interests Other information Operating Profit/(Loss) Depreciation Impairment of Loans to Subsidiaries Earnings before tax, financial expenses, amortisation and depreciation (EBITDA) The notes on pages 25 to 89 are an integral part of these annual financial statements 20

22 STATEMENT OF COMPREHENSIVE INCOME Amounts in Euro '000 Note 01/01/ /12/2014 GROUP 01/01/ /12/ /01/ /12/2014 COMPANY 01/01/ /12/2013 Profit/(Loss) for the year Items that may be reclassified subsequently to profit or loss: Currency translation differences Gain from loans restructuring Items that will not be reclassified to profit or loss: Actuarial Gain/(Losses) net of deferred taxes Other comprehensive for the period, net of tax Total comprehensive income/(loss) for the period, net of tax Attributable to: Owners of the parent Non-Controlling interests The notes on pages 25 to 89 are an integral part of these annual financial statements 21

23 STATEMENT OF CHANGES IN EQUITY Amounts in Euro '000 Share Capital Attributable to equity holders of the company Share Premium Other Reserves Currency Translation Reserve GROUP Retained Earnings Total Non Controlling interest Total Equity COMPANY Attributable to equity holders of the company Share Capital Share Premium Other Reserves Retained Earnings Total Equity Balance at 01/01/2013 (Restated) Unrecognized Gain/(Losses) net of deferred taxes Balance at 01/01/2013 (Restated) Profit/ (Loss) for the year Fair value reserves Unrecognized Gain/(Losses) net of deferred taxes Exchange difference adjustments Total comprehensive income for the year Reserves transfers Balance at 31/12/2013 (Restated) Amounts in Euro '000 Share Capital Attributable to equity holders of the company Share Premium Other Reserves Currency Translation Reserve GROUP Retained Earnings Total Non Controlling interest Total Equity COMPANY Attributable to equity holders of the company Share Capital Share Premium Other Reserves Retained Earnings Total Equity Balance at 01/01/ Earnings / (Losses) per income statement Translation Gain from Loans restructuring Remeasurements of post employment benefit liabilities net of tax Total comprehensive income Share Capital Increase Cost of equity issue Capitalisation of Financial Liabilities Reserves transfers Variation of non-controlling interest Balance at 31/12/ The notes on pages 25 to 89 are an integral part of these annual financial statements 22

24 CASH FLOW STATEMENT GROUP COMPANY Amounts in Euro '000 Note 31/12/ /12/ /12/ /12/2013 (Restated) Cash generated from operations Earnings/(Losses) before tax Adjustments for: Depreciation and amortisation 7, Impairment of tangible and intangible assets Provisions Exchange differences Other Losses/Gains Gain from loan restructuring Net financial expenses/(income) Share of profit from Joint Venture Working capital changes Decrease / (Increase) in inventories Decrease / (Increase) in receivables Increase / (Decrease) in payables (excluding banks) Less: Interest paid and other related expenses Income tax paid Net cash generated/(used) from/(in) operating Activities (a) Cash Flows from Investing Activities Acquisition of subsidiary, related companies, joint ventures and other investments Purchase of intangible assets, property, plant and equipment 7, Proceeds of sale of tangible and intangible assets Interest received Dividends received Net cash generated/(used) from/(in) investing activities (b) Cash Flows from Financing Activities Proceeds of issuance of share capital Proceeds of loans issued Repayments of borrowings Payments of finance lease liabilities Dividends paid Net cash generated/(used) from/(in) financing activities (b) Net increase/(decrease) in Cash and Cash Equivalents (a) + (b) + (c) Cash, cash equivalents and bank overdraft at beginning of year Absorption of Affiliate Exchange gains/(losses) on cash and cash equivalents Cash and Cash Equivalents at end of year The notes on pages 25 to 89 are an integral part of these annual financial statements 23

25 D) Notes to the Consolidated Financial Statements 1. General Information These financial statements include the financial statements of the parent company M.J.Maillis SA (the Company ) and the consolidated annual financial statements of the Company and its subsidiaries (the Group ). The names of the subsidiaries are presented in Note 10 of the financial statements. Τhe Group is involved in the manufacture and distribution of end-of-line industrial solutions. Maillis Group serves customers in more than 52 countries worldwide,through a network of 25 owned Affiliate companies and more than 350 independent distributors. The company is domiciled in Greece. The address of its registered office is Taki Kavalieratou 7, Kifissia and its internet site is 2. Summary of significant accounting policies 2.1 Basis of preparation The Company and the Group Financial Statements have been prepared by management in accordance with International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European Union. Certain reclassifications have been made in the prior year s figures in order to make them comparable to the current year s figures. Any differences between amounts in the primary financial statements and similar amounts detailed in the explanatory notes are due to rounding of figures. Going concern These financial statements have been prepared on the assumption that the Company and the Group will continue to operate as a going concern and that both the Company and the Group will have sufficient financial resources to meet the Company s and Group s financial and operating requirements for the foreseeable future. The Extraordinary General Meeting held on July 21, 2014 approved the June 26, 2014 Restructuring Agreement ( "the Agreement" ), with the Group of participating Lenders and the HIG Luxembourg Holdings 46 Sarl Investor ( the Strategic Investor ), who has significant experience and know-how in the restructuring of companies. The main terms of the Agreement, which create the conditions for a substantial recovery and for the continuation of the Group s activity, are the following: -The transfer of the existing Lenders shares, to the Strategic Investor. -The capitalization of 100% of the convertible bonds (with current value 96.3 million) and of 50% of the Senior bonds (with current value of 69,4 million), for achieving an equivalent reduction of the Company s debt. -The improvement of the main terms of the two existing ordinary bond loans, the Senior Bond Program and Super Senior Program, such as, extension of the repayment schedule and significant reduction of the applicable interest rate, that will cause a substantial decrease of the related financial cost, on an annual basis. 24

26 -The further support of the Company s liquidity, by the issue of new bond loan of ten million ( ), for working capital financing. -HIG Luxembourg Holdings 46 Sarl until expiry of the acceptance period ie October 3, 2014 held 95.41% of the total paid up share capital and voting rights of the company. Therefore, it has asked the Hellenic Capital Committee for the activation of the right to redeem the remaining percentage. The Hellenic Capital Market Commission with decision no. 1/696 / of its Board of Directors, approved the proposer s HIG Luxemburg Holdings 46 Sarl request, dated , to squeeze out the other shares of the Company not acquired in the course of 30/06/2014 mandatory offer, in accordance with Articles 27 and 27a of Law. 3461/2006. According to the same decision, 18 November 2014 was set as the day of cessation of trading of the Company's shares on the Athens Stock Exchange. It is noted that the delisting of the Company from the Stock Exchange, had been provided by the Agreement. - Trading of the shares on the Athens Exchange ended on November 18, On November , the HIG Luxemburg Holdings 46 Sarl held, directly, a total of shares of the Company, which represent 100% of the total paid up share capital and the Company's voting rights. Second phase of financial restructuring was completed through the Agreement, and as a result of which, Company s borrowings were significantly decreased, and Group s Statement of Financial Position was restructured in general. The implementation of this second phase provides a definitive solution to the problem of high debt and the Group's capital adequacy, so that the Company, in connection with the reduction of operating costs and increase productivity programs, maintaining its headquarters and production base in Greece, lays the foundation for further growth. The effect of the debt restructuring in the annual financial statements of December 31, 2014 is disclosed in note Changes in accounting policy and disclosures The accounting principles that have been used in the preparation of the Annual Financial Statements are in accordance with those used for the preparation of the Company and Group Financial Statements as at 31 December 2013 with the exception of revised IFRS 11 Joint Arrangements, effective 1/1/2014. Group has a joint arrangement to entity Combi Packaging Systems, established in the USA. According to IAS 31, this is a Joint Venture and is consolidated to Group Accounts with the Equity method. The effect of the revised standard is as follows: 25

27 Effect on the Statement of Financial Position: Amounts in Euro '000 ASSETS Non Current Assets 31/12/2013 (Restated) 31/12/2013 Variance 1/1/2013 (Restated) 31/12/2012 Variance Tangible assets Intangible assets Investments in subsidiaries and associates Current Assets Inventories Trade and other receivables Deferred tax assets Cash and cash equivalents EQUITY Retained losses / earnings Translation differences reserve Current Liabilities Trade and other payables Current tax liabilities Effect on the Income Statement: (Restated) Variance Sales Gross profit Earnings/(loss) before tax and financial and investment results Earnings/(loss) before tax, financial expenses, amortisation and depreciation (EBITDA) Profit from share in associates Current tax and other tax Deferred tax Effect on Statement of Cash flows: 31/12/2013 (Restated) 31/12/2013 Variance Total Cash Inflows / (Outflows) from Operating Activities Total Cash Inflows / (Outflows) from Investing Activities Τhe financial statements have been prepared under the historical cost convention. The preparation of the Financial Statements in accordance with IFRS requires the use of estimates and assumptions which affect the balances of the assets and liabilities disclosed in the financial statements as well as the amounts of contingencies and the amounts of the income and expenses relating to the period from 1st January 2013 to 31 December These estimates are based to the best knowledge of the Company s and Group s management in relation to the current situation (See note 5). 26