The reclassification in software relates to the completion and implementation of software solutions that have initially been classified as ‘under construction’ in tangible fixed assets. An amount of €60K of the new software solutions relate to software-as-a-service contracts, amongst others a new time registration system and further development of our commercial, supplier and product database. 

At balance sheet date the presence of any indicators of assets being subject to impairments was analyzed. No indicators for impairment were identified. 

A right of pledge has been established on all intellectual property rights of the Dutch members of the Group, being Ahrend APAC BV, Gispen Nederland BV, Ahrend Onroerend Goed BV, Koninklijke Ahrend BV, Ahrend Group B.V. and Presikhaaf Schoolmeubelen BV. The right of pledge applies to the credit facility of Koninklijke Ahrend BV.

The assets under construction ultimo 2024 are primarily related to software investments and the installation of new machinery at Presikhaaf in Arnhem. The additions to machinery and equipment consist mainly of investments in the wood hub machinery in Prague. Other fixed operating assets primarily contain the investments in the CI lease asset portfolio. 

A first ranking mortgage is applicable on the properties located at Sint-Oedenrode (Ahrend) and the remaining property located at Culemborg (Gispen). A right of pledge has been established on all business equipment of the Dutch group companies, Ahrend NV (Belgium) and Ahrend a.s. (Czech Republic). A mandate to the first ranking floating charge (pand handelszaak) is present on all Belgian members of the group and will be converted in a first ranking pledge on business equipment (pand op ondernemingsgoederen). 

Leasing arrangements Circular Interiors BV
The other fixed operating assets includes €9.4mln (2023: €7.7mln) of furniture assets leased to tenants with monthly rental payables. The lessor Circular Interiors BV remains the juridical owner of theses leases (2:366 lid 2 BW). Lease payments for some contracts include CPI increases, but there are no other variable lease payments that depend on an index or rate. Where considered necessary to reduce credit risk, the group may obtain bank guarantees for the term of the lease.

Although the group is exposed to changes in the residual value at the end of the current leases, the group typically enters into new operating leases and therefore will not immediately realise any reduction in residual value at the end of these leases. Expectations about the future residual values are reflected in the fair value of the properties. 

The new and remeasured lease contracts mainly relate to new real estate contracts and extension of existing contracts and new car leases. The category "other" contains mostly car lease contracts. The cash outflow for leases in 2024 was €7.8mln (2023: €6.9mln). Next to the amounts shown in the table above the statement of profit and loss also includes the costs related to short-term leases and low-value leases. These leases are not capitalised on the balance sheet as the expedient is applied. 

The group’s leasing activities and how these are accounted for
The group leases various offices, warehouses, showrooms, equipment and vehicles. Rental contracts are typically made for fixed periods of 3 years to 10 years, but may have extension options.

Variable lease payments
No lease contracts with variable payments.

Extension and termination options
Extension and termination options are included in a number of property and equipment leases across the group. These are used to maximise operational flexibility in terms of managing the assets used in the group’s operations. The majority of extension and termination options held are exercisable only by the group and not by the respective lessor.

In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

For leases of warehouses, retail stores and equipment, the following factors are normally the most relevant:

• If there are significant penalties to terminate (or not extend), the group is typically reasonably certain to extend (or not terminate).
• If any leasehold improvements are expected to have a significant remaining value, the group is typically reasonably certain to extend (or not terminate).
• Otherwise, the group considers other factors including historical lease durations and the costs and business disruption required to replace the leased asset.

Most extension options in offices and vehicles leases have not been included in the lease liability, because the group could replace the assets without significant cost or business disruption. 

The lease term is reassessed if an option is exercised (or not exercised) or the group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a significant change in circumstances occurs, which affects this assessment, and that is within the control of the lessee. During the current financial year, the financial effect of revising lease terms to reflect the effect of exercising extension and termination options was an increase in recognised lease liabilities and right-of-use assets of €+13.6mln. This remeasurement mainly relates to the extension and indexation of real estate rental contracts, including the lease of the current Amsterdam, Arnhem and Veghel offices and buildings in The Netherlands.

Provisions are recognised based on the best estimate of the expenditure required to settle the present obligation at balance sheet date. Provisions for one-off events (restructuring, environmental clean-up, settlement of a lawsuit, etcetera) are measured at the most likely amount.

Jubilee provision
The jubilee provision is recorded to cover gratifications to be paid on certain jubilee dates. The provision is calculated actuarially taking into account employee records, life expectancy and chance of meeting the employment terms. The discount rate used is 3.15% (2023: 3.15%). In 2024 interest expenses of €69K were recognised and actuarial gains of €60K. The jubilee provision has a long term duration (primarily longer than 5 years).

Warranty provision
The warranty provision is recorded to cover warranty costs that arise during and after a sales event. In general a warranty period of 1 till 5 years is applied based on the type of product or services. The provision is measured at a probability-weighted expected value. It is expected that the provision will be used between 1 and 5 years after reporting date.

Environmental provision
The environmental provision is recorded to cover the costs keeping the environmental situation regarding a specific production facility at the current situation. The provision is based on a best estimate based and it is expected that the provision will be used in more than 5 years after reporting date.