The addition to goodwill relates to the acquisition of additional participating interest in Ahrend Gulf FZCO and the acquisition of associates, further reference is made to the note on financial fixed assets. As the initial allocation of the acquisition cost of one of the associates is provisional, the amount of goodwill may be adjusted if additional information becomes available regarding facts and circumstances that existed at the date of equity acquisition. The goodwill is amortised over a period of 20 years. 

In the beginning of the year, Royal Ahrend acquired a trademark. The trademark relates to the intellectual property rights of the Gispen Classics. Gispen Classics represents the Dutch design heritage collection of Gispen. The asset is amortised over a period of 20 years. 

The additions to software contain investments in various software solutions aimed at supporting and optimising Royal Ahrend’s operational processes, digital infrastructure and business applications. The construction in progress balance comprises capital expenditures primarily related to a multi-year, large-scale ERP implementation project replacing Royal Ahrend’s existing ERP systems. The remainder relates to other software solutions that were still under development at year-end. Intangible fixed assets under construction include internally generated development costs relating to the ERP project. Further details are disclosed in the operating expenses note.

The total net reclassification amount of €1,1mln has been transferred from tangible fixed assets under construction, where the intangibles under construction had been presented at 2024 year-end. 

At balance sheet date the presence of any indicators of assets being subject to impairments was analysed. 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 disposal of land and buildings concerns fully depreciated leasehold improvements relating to our showroom in Amsterdam, which were removed following the recent renovation. As the assets were fully depreciated, the disposal did not result in a gain or loss. Reclassifications of land and buildings mainly relate to completion of projects transferred from assets under construction, including leasehold improvements in the recent renovation of showroom Amsterdam and other capital expenditure to our buildings. 

Additions and reclassifications from assets under construction to machinery and equipment during the year mainly relate to investments in machinery, primarily for Presikhaaf in Arnhem. An amount of €0,1mln relates to consolidation of Ahrend Gulf. 

Other fixed operating assets primarily contain the investments in the CI lease asset portfolio and investments in new showroom furniture, including Amsterdam and our newly rented building in Düsseldorf, and hardware renewal.

As at year-end, the balance of assets under construction amounts to €1,1mln. The closing balance mainly consists of capital expenditure to our buildings, machinery, showrooms and IT hardware renewals. Upon completion of the projects the amounts will be reclassified to the relevant asset categories and depreciation will commence.

The total net reclassification amount of €-1,1mln has been transferred to intangible fixed assets, reference is made to note 1.

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 €11,5mln (2024: €11,9mln) 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, Circular Interiors BV may obtain bank guarantees for the term of the lease.

Circular Interiors BV is exposed to residual value risk on leased assets. This risk is managed through active remarketing, re-leasing and refurbishment of returned assets. Royal Ahrend as a group also benefits from an established second-hand furniture market within the wider group, which supports the realisation of residual values. Residual values are reviewed periodically and reflected in the carrying amount of the assets.

The new and remeasured lease contracts mainly relate to new real estate contracts and extension of existing contracts and new car leases, including the lease of the new office in Düsseldorf (Germany). The category "other" contains mostly car lease contracts. The cash outflow for leases in 2025 was €8,4mln (2024: €7,8mln). Next to the amounts shown in the table above the income statement 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. 

Royal Ahrend’s leasing activities and how these are accounted for
Royal Ahrend leases various offices, warehouses, showrooms, equipment and vehicles. Lease contracts are typically entered into for fixed terms of three to ten years and may include extension options and indexation clauses. 

Extension and termination options are included in a number of property and equipment leases across the Royal Ahrend group. These are used to maximise operational flexibility in terms of managing the assets used in the Royal Ahrend group’s operations. The majority of extension and termination options held are exercisable only by Royal Ahrend 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), Royal Ahrend is typically reasonably certain to extend (or not terminate).
• If any leasehold improvements are expected to have a significant remaining value, Royal Ahrend is typically reasonably certain to extend (or not terminate).
• Otherwise, Royal Ahrend 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 Royal Ahrend could replace the assets without significant cost or business disruption. 

The lease term is reassessed if an option is exercised (or not exercised) or Royal Ahrend 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. 

Similar to changes in the lease term, the leased area (e.g. square metres) or the lease payments (e.g. price increase due to indexation) may change, which need to be reflected in the value of the lease assets and liabilities through remeasurement. 

During the current financial year, the financial effect of revising lease terms to reflect the effect of exercising extension and termination options, indexation and changes in the leased object, was an increase in recognised lease liabilities and right-of-use assets of €+2,2mln. This remeasurement mainly relates to the extension and indexation of real estate rental contracts, including the lease of additional square meters at our premises in Veghel (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 3,60% (2024: 3,15%). In 2025 interest expenses of €70K were recognised and actuarial gains of €146K. 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.

Contingent consideration liability
In connection with the acquisition of an associate, Royal Ahrend has recognised a contingent consideration liability. The liability is measured at the present value of the expected future payments and forms part of the acquisition cost of the investment. The amount ultimately payable depends on the achievement of key measures to profitability and business activity over the period 2025 and 2029, and may be adjusted as new information becomes available over time.