ANNUAL REPORT
2014
• A
PANDORA designs, manufactures and markets hand-finished and modern
jewellery made from genuine metals at affordable prices. PANDORA jewellery
is sold in more than 90 countries on six continents through approximately
9,900 points of sale, including more than 1,400 concept stores.
Founded in 1982 and headquartered in Copenhagen, Denmark, PANDORA
employs more than 11,400 people worldwide of whom approximately 7,900
are located in Gemopolis, Thailand, where the company manufactures its
jewellery. PANDORA is publicly listed on the Nasdaq Copenhagen stock
exchange in Denmark. In 2014, PANDORA’s total revenue was DKK 11.9
billion (approximately EUR 1.6 billion). For more information, please visit
www.pandoragroup.com.
CONTENTS
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THE PANDORA STORY 2014
BUSINESS STRATEGY
GOVERNANCE AND MANAGEMENT
Corporate governance
Corporate social responsibility
Intellectual capital
Risks
Board of Directors
Executive Management
SHAREHOLDER INFORMATION
FINANCIAL REVIEW
CONSOLIDATED FINANCIAL STATEMENTS
PARENT COMPANY FINANCIAL STATEMENTS
MANAGEMENT STATEMENT
INDEPENDENT AUDITOR’S REPORTS
MANAGEMENT’S REVIEW
FINANCIAL STATEMENTS
2 • THE PANDORA STORY 2014 PANDORA ANNUAL REPORT 2014
A PROSPEROUS YEAR
We have had a prosperous year, allowing us once again
to celebrate strong top-line performance and increased
profitability. 2014 delivered remarkable growth for
PANDORA both in terms of geographical areas and
products and with the opening of concept store number
1,400 we now have more branded stores in our network
than ever before.
In 2014, PANDORA moved into seven new markets,
and expanded further in existing markets. In our more
developed markets, the US, the UK, Germany and Australia,
we opened 96 concept stores, while our existing concept
stores in these countries delivered increasing sales-out
in all four quarters of the year, compared with the same
quarters in 2013. Most of our markets saw the same
trend – an increase in the number of concept stores and
positive developments in existing stores. In line with our
aim to expand PANDORA’s online sales, we continued
our eSTORE expansion in 2014, with the establishment
of PANDORA-owned eSTOREs in France, Italy, the
Netherlands and Poland. We now have our own eSTOREs
in a total of seven European countries.
With growth of more than 25% in revenue from charms
and charm bracelets in 2014, both the Moments collection
and the PANDORA ESSENCE COLLECTION continue to
be as successful as ever. Also, our second core category,
Rings, had a tremendous year. The focused effort on
growing this category resulted in revenue from Rings of
more than DKK 1 billion, which represents 10% of full-year
revenue compared with only 6% in 2013. During the year,
we entered into a strategic alliance with The Walt Disney
Company that resulted in the launch of 41 Disney-inspired
charms in the US in November. The charms have been very
well received by consumers.
We continued to expand our branded network in 2014.
Our main focus is to increase our share of revenue from
concept stores, in which we offer our customers the best
possible branded experience. During the year we opened
310 new concept stores, taking the total to 1,410 and
revenue from the store type increased by approximately
50% compared with last year. 56% of our revenue is
now generated in concept stores compared with 49% last
year. The total number of stores actually decreased during
the year, but the number of branded PANDORA stores
increased by 564, while the number of PANDORA-owned
stores also increased during the year.
We operate a strong franchisee model, but also operates
owned and operated branded stores in selected markets
when deemed beneficial. Examples of this in 2014 include
the acquisition of net 22 PANDORA stores in the US, the
forward integration of our operations in Japan, beginning
in January 2015 and taking over up to 78 commercial
store leases in prime locations in Germany, which we will
convert into PANDORA-owned concept stores in 2015.
We owe a substantial part of our success to our crafting
facilities in Thailand. In 2014, we produced around 91
million pieces of jewellery and in the process we hired
more than 3,100 new employees, bringing the total to
11,400, of whom approximately 7,900 are located at
our facilities in Thailand. In 2015, we plan to expand
production by at least one new facility to cater for future
demand.
Here on the threshold of an exciting 2015, we extend
a hearty ‘thank you’ to our people for their efforts and hard
work in the past year – without their dedicated and strong
performance we would not have been able to achieve
these results. On behalf of PANDORA’s Board of Directors,
Executive Management and employees, we would also
like to sincerely thank all our customers as well as our
shareholders for the interest and trust they have shown in
our company throughout 2014.
Peder Tuborgh Allan Leighton
Chairman Chief Executive Officer
FINANCIAL HIGHLIGHTS
DKK million 2014 2013 2012 2011 2010
Consolidated income statement
Revenue 11,942 9,010 6,652 6,658 6,666
Gross profit 8,423 5,999 4,429 4,860 4,725
Earnings before interest, tax, depreciation and amortisation (EBITDA) 4,294 2,881 1,658 2,281 2,684
Operating profit (EBIT) 4,072 2,681 1,475 2,058 2,416
Net financials -200 61 4 311 -164
Profit before tax 3,872 2,742 1,479 2,369 2,252
Net profit for the year 3,098 2,220 1,202 2,037 1,871
Consolidated balance sheet
Total assets 10,556 9,275 8,414 8,051 8,959
Invested capital 6,080 5,976 5,900 5,923 5,659
Net working capital 434 1,009 1,277 1,327 1,266
Net interest-bearing debt (NIBD) -1,121 -637 -183 209 1,102
Equity 7,032 6,462 6,038 5,411 4,315
Consolidated cash flow statement
Cash flows from operating activities 4,322 2,428 1,339 1,823 1,316
Cash flows from investing activities -632 -543 -231 -364 -304
Free cash flow 3,868 1,956 1,151 1,670 1,388
Cash flows from financing activities -3,259 -1,524 -943 -2,502 -644
Net increase (decrease) in cash 431 361 165 -1,043 368
Growth ratios
Revenue growth, % 32.5% 35.4% -0.1% -0.1% 92.6%
Gross profit growth, % 40.4% 35.4% -8.9% 2.9% 91.2%
EBITDA growth, % 49.0% 73.8% -27.3% -15.0% 70.7%
EBIT growth, % 51.9% 81.8% -28.3% -14.8% 69.7%
Net profit growth, % 39.5% 84.7% -41.0% 8.9% 86.2%
Margins
Gross margin, % 70.5% 66.6% 66.6% 73.0% 70.9%
EBITDA margin, % 36.0% 32.0% 24.9% 34.3% 40.3%
EBIT margin, % 34.1% 29.8% 22.2% 30.9% 36.2%
Other ratios
Tax rate, % 20.0% 19.0% 18.7% 14.0% 16.9%
Equity ratio, % 66.6% 69.7% 71.8% 67.2% 48.2%
NIBD to EBITDA, x -0.3 -0.2 -0.1 0.1 0.4
Return on invested capital (ROIC), % 67.0% 44.9% 25.0% 34.7% 42.7%
Capital expenditure (CAPEX), DKK million 455 490 276 269 262
Cash conversion, % 124.9% 88.1% 95.8% 82.0% 74.2%
Share information
Dividend per share, DKK *9.00 6.50 5.50 5.50 5.00
Total payout ratio (incl. share buyback), % *112.7% 68.6% 59.5% 35.1% 36.9%
Earnings per share, basic, DKK 25.0 17.2 9.2 15.7 14.8
Earnings per share, diluted, DKK 24.7 17.0 9.2 15.7 14.6
Share price at year-end, DKK 504.5 294.0 124.5 54.0 336.0
Other key figures
Average number of employees 9,957 6,910 5,753 5,186 4,336
* Proposed dividend per share for 2014.
4 • THE PANDORA STORY 2014 PANDORA ANNUAL REPORT 2014
EXECUTIVE SUMMARY
FINANCIAL REVIEW
In 2014, PANDORA delivered a solid performance in
revenue, margins and cash flow, which all exceeded full
year expectations. Strong revenue growth was seen across
all major regions.
• Group revenue in 2014 was DKK 11,942 million
compared with DKK 9,010 million in 2013:
• Americas increased by 19.3% (20.6% increase in
local currency)
• Europe increased by 41.1% (38.8% increase in local
currency)
• Asia Pacific increased by 53.5% (58.1% increase in
local currency)
• Gross margin was 70.5% in 2014 compared with 66.6%
in 2013
• EBITDA increased by 49.0% to DKK 4,294 million and
the EBITDA margin was 36.0% in 2014 compared with
32.0% in 2013
• EBIT increased by 51.9% to DKK 4,072 million,
corresponding to an EBIT margin of 34.1% in 2014
compared with 29.8% in 2013
• Net profit increased by 39.5% to DKK 3,098 million in
2014 compared with a net profit of DKK 2,220 million
in 2013
• Free cash flow was DKK 3,868 million in 2014
compared with DKK 1,956 million in 2013
• In 2014, PANDORA bought back 5,875,257 own shares
at a purchase price value of DKK 2,400 million
• For the financial year 2014, the Board of Directors
proposes a dividend of DKK 9.0 per share, correspon-
ding to a pay-out ratio of 35.1% compared with 37.1%
in 2013. Including the share buyback in 2014 the
total pay-out ratio was 112.7% compared with 68.6%
in2013.
FINANCIAL GUIDANCE FOR 2015
2015 2014
Guidance Actual
Revenue, DKK billion > 14 11.9
EBITDA margin approx. 37% 36.0%
CAPEX, DKK million approx. 800 455
Effective tax rate approx. 20% 20.0%
In 2015, PANDORA will continue to focus on driving like-
for-like growth in the existing stores, as well as expanding
the store network in newer as well as in more penetrated
markets. Revenue is expected to increase to more than
DKK 14 billion, with the two growth drivers expected
to contribute equally. The EBITDA margin is expected to
increase from 36.0% in 2014 to approximately 37% in
2015. The increase includes an expected gain from lower
hedged commodity prices compared to 2014, tempered by
continued investments in infrastructure. Expectations are
based on unchanged currency rates.
CAPEX for the year is expected to be approximately
DKK 800 million. The expected level of investments
includes development of the crafting facilities in Thailand,
investments in the Company’s distribution network,
including the announced accelerated expansion in
Germany, China and Japan, as well as significant IT
investments. CAPEX in the period 2016-2017 is expected to
continue to stay at an elevated level similar to 2015, due to
continued investments in the aforementioned areas.
PANDORA plans to continue to expand the store
network and expects to add more than 300 new concept
stores in 2015. This includes an expected opening of
around 60 new owned and operated concept stores in
Germany following the recent acquisition of up to 78 lease-
holds in the country. The geographic split of the remaining
concept store openings is expected to be similar to the
concept store openings in 2014.
THE PANDORA STORY 2014 • 5
A proposal will be presented to the Annual General
Meeting to reduce PANDORA’s share capital by DKK
5,818,651 by cancelling 5,818,651 treasury shares held by
the Company.
In 2015, an additional share buyback programme will
be launched, under which PANDORA expects to buy
back own shares to a maximum consideration of DKK
3,900 million. The programme will end no later than 31
December 2015.
The full share buyback programme is subject to the
approval of an extension of the current authorisation to
acquire own shares on behalf of the Company at the Annual
General Meeting on 18 March 2015. PANDORA has
bought back own shares corresponding to 7.2% of the share
capital under the current authorisation, which allows the
Company to acquire own shares with a total nominal value
of up to 10% of its share capital.
SHARE BUYBACK PROGRAMME
In the 2013 Annual Report, PANDORA announced its
intention to buy back own shares of up to DKK 2,400
million during 2014 in a share buyback programme.
At31December 2014, a total of 5,875,257 shares had
been bought back, corresponding to a purchase price of
DKK 2,400 million and an average purchase price of DKK
408.5. At 31 December 2014, PANDORA owned a total
of 7,216,058 treasury shares, corresponding to 5.6% of the
share capital.
The purpose of the share buyback programme is to
reduce PANDORA’s share capital, to adjust the capital
structure in accordance with the Company’s policy on
capital structure and to meet obligations arising from
employee share option programmes. At 31 December
2014, the total potential obligation amounted to 1,382,800
shares due to the annual allocation under the Company’s
employee share option programme.
6 • THE PANDORA STORY 2014 PANDORA ANNUAL REPORT 2014
KEY EVENTS IN 2014
Middle East
In March 2014, PANDORA signed an agreement to acquire
100% of the shares in Pan Me A/S. The transaction was
closed on 16 January 2015 upon fulfilment of certain
conditions. Pan Me A/S holds the rights to distribute
PANDORA jewellery in the UAE, Bahrain, Qatar and
Oman. PANDORA paid a one-time cash payment of DKK
110 million, primarily related to the rights to distribute
PANDORA jewellery in the UAE, Bahrain, Qatar and
Oman, and non-current assets and inventories related to 11
concept stores and three shop-in-shops in the UAE.
Japan
In September 2014, PANDORA signed an agreement with
Bluebell on joint distribution of PANDORA jewellery in
Japan from 1 January 2015. Through the cooperation,
PANDORA plans to accelerate the store roll-out, enhance the
retail focus and make significant marketing investments in
the Japanese market. Bluebell will contribute with in-depth
knowledge of the retail market and the Japanese consumer as
well as its insight into the Japanese real estate market.
As part of the agreement with Bluebell, PANDORA will
purchase the assets related to the distribution of PANDORA
jewellery in Japan in a non-cash transaction on 1 January
2015. The initial term of the agreement is five years. Upon
termination of the agreement, PANDORA will take over the
full distribution of PANDORA jewellery in Japan. The total
amount to be paid to Bluebell will depend on the realised
revenue in 2019 and will be in the range of HKD 74-220
million (or approximately DKK 52-156 million).
Hannoush (US)
In August 2014, PANDORA acquired 27 concept stores
from US jeweller Hannoush, as part of a process to refresh
the network in the Northeastern US, which has been
under performing relative to the rest of the US. Following
the transaction five of the stores located outside the
Northeast were sold to a franchisee, resulting in a net total
of 22 stores acquired.
The transaction value totalled USD 28 million (DKK 162
million), including locations, inventories and other assets.
Initial in-store remodelling costs are estimated at USD 6
million (DKK 37 million), bringing the total investment to
USD 34 million (DKK 199 million).
Organisational changes
Chairman of the Board of Directors
In March 2014, PANDORA announced that Marcello
Bottoli would be standing down from his role as Chairman
of the Board due to other professional commitments. At an
Extraordinary General Meeting in October, Peder Tuborgh
was elected as new member of the Board of Directors, and
the Board of Directors subsequently constituted itself with
Peder Tuborgh as new Chairman.
CEO
In August, PANDORA announced that Anders Colding
Friis will succeed Allan Leighton as CEO in March 2015.
At that time, Allan Leighton will be stepping down from
his role as CEO. At the next Annual General Meeting, the
current Board of Directors will recommend Allan Leighton
as new Co-Deputy Chairman of the Board.
CFO
Peter Vekslund, former Senior Vice President, Head of
Finance, succeeded Henrik Holmark as CFO of PANDORA
on 1 January 2015. As announced in August 2014, Henrik
Holmark stepped down from his role as CFO of PANDORA
to join Dr. Martens Airwair Group Ltd as CFO.
Indictment
In November, the District Court in Glostrup passed its
verdict in a case against PANDORA concerning potential
breach of section 27(1) of the Securities Trading Act, cf.
section 93(6), cf. subsection 1. PANDORA was found to
be in breach of this section in the Securities Trading Act
and the Company was to pay a fine of DKK 2 million.
PANDORA has appealed the verdict to the Eastern
HighCourt.
THE PANDORA STORY 2014 • 7
The verdict concerned a case dating back to 2011 and
relates to Company Announcement No. 30 of 2 August
2011, when the Company announced its downward
adjustment of its revenue growth expectations, two
weeks earlier than the ordinary reporting date for the
Q2 2011 results. The District Court in Glostrup found
that the Company was obliged to announce a downward
adjustment of the revenue growth expectations for 2011,
no later than 18 July 2011. As previously communicated,
PANDORA’s position is that:
• the Company acted properly during a swift and
unexpected downturn in sales by making a timely and
precise announcement adjusting its annual forecast in
light of new information and based on an analysis of the
changing market dynamics in July 2011,
• the Company has at all times been in full compliance
with all relevant rules and regulations for issuers of
shares.
EVENTS AFTER THE REPORTING PERIOD
Germany
In January 2015, PANDORA entered into an agreement
with DHG GmbH (DHG) to take over up to 78 commercial
leaseholds in Germany formerly trading under the BiBa
name (a ladies fashion brand). PANDORA will pay a
service fee to DHG for making the leaseholds available.
All 78 leaseholds concern stand-alone stores located in
prime locations in Germany that fit well with our existing
concept store expansion strategy in Germany. During 2015,
PANDORA will open owned and operated concept stores
in the new locations, some of which will be a relocation of
existing PANDORA-owned stores.
The total investment for the new owned and operated
stores, including establishment and relocation of stores
(including initial inventory in the stores), costs related to
temporarily inactive stores in the transition period, service
fees to DHG as well as all other costs related to store
implementation, is expected to be around EUR 50 million
(approximately DKK 370 million), of which the majority will
be recognised as CAPEX and inventories. The funds will be
spent over the course of 2015.
China
In February 2015, PANDORA entered an agreement with
Oracle Investment (Hong Kong) Limited (“Oracle”) about
joint distribution of PANDORA jewellery in China from
1 July 2015 to 31 December 2018. At the end of the
agreement, PANDORA will take over the full distribution of
PANDORA jewellery in China.
PANDORA plans, through the cooperation, to
accelerate the store roll-out, enhance the retail focus and
make significant marketing investments in the Chinese
market. Oracle will contribute with its in-depth knowledge
of the retail market and the Chinese consumer as well as
their insight into the Chinese real estate market, which will
aid PANDORA in securing the most attractive locations.
On 1 July 2015, PANDORA will, as part of the
agreement with Oracle, purchase the majority of Oracle’s
assets in China. The term of the agreement ends December
2018. The total amount to be paid to Oracle will depend on
the realised revenue in 2018 and part of the payment will
be delayed to end of the term of the agreement. The initial
payment to Oracle is expected to be approximately HKD
120 million (or approximately DKK 100 million), depending
on the value of the assets at the time of the completion of
the agreement. The total payment will be in the range of
HKD 200-500 million (or approximately DKK 170-420
million). The agreement is subject to certain conditions to
be fulfilled.
Major shareholder announcement
On 16 February 2015 PANDORA was notified by BlackRock
Investment Management (UK) Limited that BlackRock, Inc.
has increased its holding of shares in PANDORA A/S at 13
February 2015 to 6,434,446 shares, corresponding to 5.02%
of the share capital and the voting rights.
The PANDORA ESSENCE
COLLECTION has now
been launched worldwide
PANDORA Club
members reach
5,000,000
PANDORA announces
share buyback
programme of up to
2,400
DKK million
PANDORA Australia
celebrates its 10-
year anniversary
Q1 Q2 Q3
2014
PANDORA HIGHLIGHTS
100%
of waste glass from PANDORA’s
production is now being recycled
Q4
PANDORA and
Disney announce
strategic alliance
PANDORA acquires 27
concept stores in the
Northeastern US
PANDORA enters into
strategic alliance in Japan
Facebook
followers reach
3,000,000
Ring sales
exceed
1,000
DKK million
BUSINESS
STRATEGY
The idea of birthstones, gemstones associated with a
specific month, goes back centuries and is known from
many different cultures. PANDORA’s collection of official
birthstones features rings, charms and earrings. This is the
birthstone for August, peridot, set in rings.
10 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
consumer-centric and market-led design strategy building
on analysis ofconsumers’ buying patterns and sales-out
data from stores.
Build a global brand
Our global brand strategy focuses on creating brand
consistency across all communication channels and
markets. We invest a significant amount of revenue in
marketing and use targeted marketing approaches to
ensure we effectively reach our desired audience in
eachregion.
We increasingly use online marketing to promote our
brand, and we attract and retain customers by fostering
consumer loyalty through channels such as the PANDORA
Club and our Facebook fan pages.
FOUR STRATEGIC PILLARS
Our vision is to become the world’s most recognised
jewellery brand by offering women across the world high-
quality hand-finished jewellery at affordable prices. To
achieve this aspiration, we base our work on four strategic
pillars designed to strengthen our market position and
increase our revenue and profitability.
Capitalise on our product offering
We design, produce and sell affordable genuine jewellery
and continuously aim to improve our product portfolio to
meet consumer demands. To optimise the potential of our
product offering, we have seven yearly product launches
to ensure freshness in the stores and increase store traffic.
To ensure that our products stay relevant for
consumers, our product development is based on a
DESIGN AND PRODUCTS
Capitalise on our product offering through
seven yearly product launches and consumer-centric,
data-based design of new products
BRAND AND MARKETING
Build a global brand through the use of targeted
marketing and a consistent consumer experience
across borders
SALES CHANNELS
Focus on branded sales channels, particularly
increasing the number of concept stores
MARKET STRATEGIES
Adopt a tailored approach in new markets, using
proven distribution and marketing approaches from
prior market entries
BUSINESS STRATEGY • 11
Business model
Our business model is vertically integrated, which means
we control every step of the value chain, from design
and production to distribution and sales. We continually
gather and analyse data from different parts of the value
chain to ensure our organisation remains efficient. This
allows us to benefit from scalability and flexibility,
maintain a clear and complete overview of operations,
and develop products and activities to match changing
market needs.
Focus on branded sales channels
Our branded sales channels allow us to strengthen the
image of our brand in the retail environment and to invest
in an expanded product offering compared with our other
points of sale. By increasing the number of PANDORA
branded points of sale, particularly concept stores, we can
give customers the best, branded experience.
Adopt a tailored approach in new markets
We will continue to enter new geographical markets while at
the same time expanding our presence in existing markets.
We adopt a tailored approach in each new market in
terms of brand, marketing and the split between branded
and unbranded stores using proven distribution and
marketing approaches from previous market entries.
THE PANDORA BRAND DNA
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Affordable luxury
We provide a high-quality customer experience in
multiple ways: the materials and craftsmanship associated
with our products, our store environments and service,
and the sheer accessibility of our offering, available to a
wide global audience.
Personal storytelling
We enable women to express their uniqueness, style
and taste. PANDORA’s meaningful products provide
opportunities to tell a personal story – whether worn
personally or given as a gift to someone special.
Contemporary design
We embrace renewal and continually refresh our products
so that we are always relevant in the eyes of consumers.
Our brand universe is stylish and feminine, with a warm,
joyful and inspirational feel.
12 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
Consumer-centric and market-led design
Our retail insight system provides us with sales-out figures for
products in concept stores. This data is fed back into product
design. If a certain design or colour performs particularly
well, for example, we may create a number of variations of
that design for the next product launch.
This process is known as design-to-data. Since we
introduced this process in 2012, the sales-out share of new
products (defined as products launched within the last 12
months) has increased significantly, indicating that our design
team is able to meet consumer demand in terms of design,
colour, materials and price.
Launch strategy
In order to keep freshness and relevance in our collections,
we introduced a new launch structure in the second half of
2012. We now have seven product launches a year, arranged
around traditional fashion and gift-giving seasons to ensure
consumers have a constant variety of new PANDORA
products to choose from.
This launch strategy has contributed significantly to
PANDORA’s growth in like-for-like sales-out figures, as it
both refreshes the assortment and drives traffic into stores
throughout the year. In total, PANDORA introduced 387
PRODUCT DEVELOPMENT STRATEGY
Our strategy involves capitalising on our product offering
through consumer-centric, market-led design of new
products. Many factors, including sales-out data on
existing PANDORA products, raw material prices and
price points, are taken into account when deciding on
designs, and the themes for each collection are chosen
based on global trends and seasonality.
PANDORA’s primary focus is to continue to develop
the Charms and Bracelets categories. Our secondary
focus is the Rings category, which we believe holds
significant, untapped potential. It is the largest jewellery
category in the world, but rings generated just 6.1% of
PANDORA’s revenue in 2013. We therefore focused on
growing the Rings category, leading to a share of 10.0%
of revenue in 2014. Out of a total of 387 new pieces,
11.1% were rings.
Both the Charms and Bracelets categories and the
Rings category saw significant growth in 2014. The Other
jewellery category, which includes earrings, necklaces
and pendants, completes the PANDORA product universe
and holds great long-term potential.
DESIGN AND PRODUCTS
PANDORA RELEASED 387
NEW PIECES IN 2014
NUMBER OF EMPLOYEES IN OUR
PRODUCTION FACILITIES EXCEEDS 7,900
BUSINESS STRATEGY • 13
new pieces in 2014. Slow-moving items were retired through
sales promotions on discontinued items, clearance through
outlets or permanent stock balancing programmes in selected
countries.
Our design team begins preparations for each launch
a year in advance. In order to ensure each launch has a
modern and innovative feel, our designers keep abreast of the
latest trends – not just within jewellery, but within all aspects
of consumer behaviour, from fashion and interior design to
cars and IT. Thisinformation is then combined with sales data
from our retail insight system to create a mood board that
sets the scene for the launch.
Once a theme has been settled on – the theme for
Autumn 2014, for example, was Mystical Fairytale – the
design work starts. Each piece of jewellery is drawn in 3D
at the PANDORA Innovation Centre in Thailand, a state-
of-the-art facility where design and crafting converge. The
centre’s development team creates prototypes of each piece
and analyses the new designs in order to establish the most
efficient crafting process.
For each launch, we develop a 360° marketing and sales
toolkit. The toolkit is designed around consumer touch points
and contains a full range of materials, from advertisements
and PR to point-of-sale materials and sales training. Prior
to and during a launch, we also promote the new products
through our digital channels, including social media, the
PANDORA Club and our blogging network.
Crafting
Developing the right designs requires access to the right
raw materials. PANDORA sources high-quality materials
from around the globe. These are crafted into finished
jewellery at our crafting facilities in Gemopolis, just outside
Bangkok, Thailand. The facilities combine standardised and
scalable modern production techniques with centuries-
old craftsmanship, and every piece is hand-finished
by experienced and skilled craftspeople. Collectively,
PANDORA Production Thailand employs more than
7,900people.
As we own our crafting facilities, we are able to ensure
a constant supply of high-quality products to the market
and to scale the production of different pieces up or down,
depending on demand. In 2014, we produced around 91
million pieces of jewellery, an increase of 16.5% compared
with 2013. In order to further expand capacity, we are
looking to open new facilities in Thailand. Detailed planning
for this will begin in 2015.
PRODUCT OFFERING IN SEVEN ANNUAL LAUNCHES
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Christmas
Autumn
High Summer
Spring
Valentine’s Day
Mother’s Day
Pre-Autumn
14 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
WELCOME
TO GEMOPOLIS
It’s 4.50pm in Gemopolis and the streets outside
PANDORA’s crafting facilities are buzzing. It’s shift change
time, and a fleet of PANDORA buses has just pulled up,
bringing in thousands of people from nearby Bangkok.
People fill the streets, chatting and laughing as they head
into the facilities to start work or board the buses to be
taken home. Welcome to Gemopolis.
At our crafting facilities in Thailand, love, care and
attention to detail are bestowed on every hand-finished
piece, bringing to life our design ideal of a contemporary
aesthetic fused with traditional artistry. Here, skilled
jewel-smiths, goldsmiths, silversmiths and stone-setters
use traditional tools and techniques to apply the finishing
touches, turning every piece of PANDORA jewellery into
a piece of affordable luxury.
We are committed to retaining, training and developing
our team of more than 7,900 people in Thailand and
have created an inclusive working environment where
everyone is valued, engaged and encouraged to improve.
PANDORA Radio, for example, went on air in 2012 to
provide entertainment, news and training for our people
and is run by volunteer employee DJs.
Other initiatives include the PANDORA Edutainment
Centre, an e-learning room and library with more than
15 computers and 10,100 books borrowed in 2014;
an Employee Shop that sells everyday provisions (the
stock is selected by our people) at prices lower than at
supermarkets and convenience stores; and a Savings
Cooperative managed by our people.
BUSINESS STRATEGY • 15
THE PANDORA PRODUCT UNIVERSE
PANDORA’s products are a direct reflection of our desire
to offer women a universe of high-quality, hand-finished
and modern jewellery at affordable prices. Each product
is a piece of personal storytelling, affordable luxury and
contemporary design – and the jewellery can be worn on
its own or combined with other PANDORA products to
create a unique and individual look.
Charms and Bracelets
PANDORA’s classic charm bracelet concept Moments
offers a selection of charms and bracelets that let women
wear mementos of their unforgettable moments on their
wrists. Equipped with patented ‘stoppers’ and ‘keepers’,
the bracelets enable women to add and combine charms
in any way they choose to create highly personalised
pieces of jewellery. As a result, almost no two PANDORA
charm bracelets are ever the same. In 2014, sales of
PANDORA’s Charms and Bracelets made up 78.4% of
revenue. 284 new charms were added to the collection
and 217 were discontinued.
With the launch of the PANDORA ESSENCE COLLECTION
in November 2013, we added a new dimension to our
Charms and Bracelets categories. The collection features a
range of new slender silver bracelets and an accompanying
assortment of charms representing personal values. It also
includes an innovative and patent-pending solution that
enables the wearer to position charms along the bracelet,
and keeps the charms in place through the use of a flexible
silicone grip inside the core of each charm. The collection
was developed using extensive research including the help
of thousands of women worldwide.
Rings
In line with our brand DNA, most PANDORA rings can
be stacked to create a personal look and are designed
to complement other PANDORA jewellery. The Rings
category was a key focus area in 2014. New initiatives
in this category, such as a ring marketing toolkit and
touch-and-feel in-store displays, proved very successful.
Ring sales doubled in 2014, and Rings made up 10.0%
of revenue compared with 6.1% in 2013. This has firmly
established Rings as our second core product category.
REVENUE BY PRODUCT CATEGORY
DKK million
7,933 Charms
1,427 Silver
and gold charm
bracelets
1,192 Rings
1,390 Other jewellery
STRATEGIC ALLIANCE WITH DISNEY
PANDORA signed a 10-year strategic alliance with
The Walt Disney Company in August 2014, allowing
PANDORA to create an original collection of Disney
inspired jewellery to be sold in the PANDORA North
American region. The first Disney inspired jewellery
collection launched in November 2014, with another
one due to launch in spring 2015.
CHARMS AND BRACELETS ACCOUNT FOR
78.4% OF PANDORA’S TOTAL REVENUE
REVENUE FROM CHARMS AND
BRACELETS ROSE BY 25.6%
16 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
Other jewellery
In addition to charms, bracelets and rings, we also design,
produce and sell necklaces, pendants and earrings. These
versatile collections can be combined with our other
product categories to create a unique and highly personal
REVENUE FROM RINGS ROSE BY 116.7%
FOLLOWING INCREASED FOCUS ON
THIS CATEGORY
REVENUE FROM OTHER JEWELLERY
INCREASED BY 37.6%, DRIVEN BY OTHER
BRACELETS, NECKLACES AND EARRINGS
look, or can be worn on their own. Other jewellery made
up 11.6% of PANDORA’s total revenue in 2014, compared
with 11.2% in 2013.
MOMENTS CHARM BRACELET
PANDORA ESSENCE COLLECTION
RINGS AND OTHER JEWELLERY
BUSINESS STRATEGY • 17
BRAND AND MARKETING
Connecting with consumers
In 2014, we continued to build and strengthen the
PANDORA brand. Broadly speaking, the typical PANDORA
consumer is a woman between 25 and 49 years of age,
and within this group of people we find several relevant
consumer segments, each with individual characteristics.
In addition to female consumers, we also connect with
men buying PANDORA jewellery as gifts for women. Aided
brand awareness in our female target group has reached a
high and stable level in our developed markets over time,
while we are still seeing healthy growth in awareness in our
newer markets.
We enjoy a close relationship with consumers, and
this is enhanced by continuous online engagement via
a variety of social media platforms such as Facebook,
the PANDORA Club and Instagram. The monthly online
PANDORA Magazine has around half a million visits per
month and our global Facebook page sees around 300 fan
posts per week.
FACEBOOK FOLLOWERS
ACTIVITIES ON FACEBOOK
PANDORA CLUB
INSTAGRAM
3,085,140
‘likes’ on the global page
61,448
interactions a week
6, 207,10 5
members
319,330
followers one year after launch
312
fan posts a week
PANDORA HEARTS OF TODAY
In 2014, we launched a new social cause
platform in the US called PANDORA Hearts of
Today. Many women work every day to make a
difference in their communities and the world at
large. PANDORA Hearts of Today celebrates these
women. Entrants are nominated by colleagues,
friends or family and a panel of inspirational
women selects the semi-finalists. The general
public then votes online to select the winners who
receive a donation to help the organisation they
work with.
18 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
Marketing
We constantly assess the media landscape and adjust our
media spread to increase the effectiveness of campaigns
to ensure we connect with consumers in the most
effective way. In recent years, we have shifted much of
our media spend from traditional print and broadcast
media to online. Online media gives us an opportunity
to both connect and interact with consumers. We create
online spaces where consumers can meet and share
their passions, jewellery designs and fashion tips – and
consumer feedback is monitored and fed back into the
design process.
In 2014, we spent 9.6% of our revenue on marketing
compared with 9.8% in 2013, an increase of 29.9%. In
addition, our global marketing spend was supplemented
by the marketing spend of franchisees, multi-brand
retailers and third-party distributors.
In 2014, we completed a target group segmentation
study providing deep insights into current and potential
customers. Information from the study will enable us to
target communication and products to different consumer
groups even more effectively.
More than 60% of the women who own PANDORA
jewellery receive it as a gift, and more than half of the gift
givers are men, and we dedicate a certain amount of our
marketing spend to men in order to support this position.
However, the majority of our efforts in the gift-giving
area focus on helping women indicate to gift buyers which
PANDORA jewellery they would like to receive. For
example, the PANDORA Club allows members to share
their wish lists with friends and family.
YEAR OF THE RINGS
PANDORA’S REVENUE FROM THE RINGS
CATEGORY SAW AN AMAZING INCREASE IN
2014. WHAT DROVE THIS GROWTH?
When we decided to increase focus on the Rings
category, we knew that the go-to-market materials
needed to be as well thought-out as the products
themselves. So at the end of 2013, we launched a
ring toolkit, a collection of best practices and sales
and marketing tools to promote the Rings category.
One of the toolkit’s focal points was to improve the
way rings were presented in stores. Today, at least
20% of the retail category space in each concept
store is dedicated to rings, and rings have experienced
increased attention from consumers as a result.
Sizing is important for consumers when buying
rings, so the toolkit includes various ways to help
consumers ensure they get rings of the right size.
This includes ring-sizing features on PANDORA’s
digital touch points. A PANDORA Club member, for
example, can include her ring size on her wish list
and share it with her friends and family through social
media channels.
All the combined efforts to grow ring sales meant
an increase in revenue from Rings of 116.7% to DKK
1,192 million in 2014.
BUSINESS STRATEGY • 19
MEETING CUSTOMERS
IN THE DIGITAL WORLD
When an image of the PANDORA
Valentine’s Collection 2015 was
posted on Instagram, it quickly
attracted more than 20,000 ‘likes’
and hundreds of comments from
followers, many of which were
recommendations to friends or hints
to boyfriends and husbands. What
drives so many women to follow us?
For PANDORA, the most
powerful marketing tool is the
women who share their lives and
personalities through our products,
and in many ways social media
is the perfect platform. It enables
women (around 95% of our
followers and fans are female) to
easily share their stories, style and
passion for our products with friends
and family, as well as with millions
of other women across the globe.
The cornerstones of our digital
presence remain Facebook and
the PANDORA Club. These are
supported by a strong presence
on Instagram, Pinterest, YouTube
and Twitter – and we are always
on the lookout for other relevant
digital platforms. Our Instagram
account was recently highlighted as
top performer in the watches and
jewellery industry by the digital
think tank L2, and our Facebook
pages were recognised for their high
level of organic fan engagement.
Our Facebook pages have nearly
five million ‘likes’, and between
200,000 and 300,000 people
interact with us on Facebook
each month, either through our
global Facebook page or one of
15 local pages. These interactions
vary from sharing personal stories
to simply ‘liking’ our content or
recommending it to others.
The PANDORA Club builds
a strong sense of brand loyalty
among its 6.2 million members by
offering regular newsletters with
sneak peeks and special content,
as well as member functionalities
on our website such as a ring
size saver. Members can even
create a PANDORA wish list and
share it with friends and loved
ones through other social media
channels.
This high level of digital
interaction enables us to develop
close connections with customers
and build buzz around new
products through sneak peeks and
special promotions. But above all,
we empower women from all over
the world to share their stories
and passion for our products with
each other, and spreading their
love for our brand.
20 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
Entering the PANDORA universe
When customers walk into a PANDORA concept store,
they are entering a complete PANDORA universe. Every
aspect of the in-store experience, from the lighting and
music to product displays and interaction with the sales
staff, is carefully thought through. This 360° approach has
made our concept stores, along with our other branded
sales channels, an increasingly important part of our
business model.
We continuously focus on expanding our network of
PANDORA branded sales channels, particularly concept
stores, and in 2014 we started to revamp the shop
experience with the Evolution store design concept. In
2015, all new PANDORA stores will feature the Evolution
concept and work on refitting existing stores with
Evolution will commence.
Our focus on our branded distribution network
includes opening owned and operated branded stores in
selected markets when deemed feasible. This improves
implementation of our branded network strategy, which
focuses on high-quality locations and strong in-store
execution. Examples from 2014 include the acquisition of
Hannoush stores in the US, the forward integration of our
operations in Japan and taking over up to 78 commercial
store leases in prime locations in Germany.
Concept stores, shop-in-shops and gold stores
Concept stores, shop-in-shops and gold stores are an
integral part of PANDORA’s business model. Here,
our products are displayed in a PANDORA-branded
environment, giving us full control over the consumers’
shopping experience. Branded store environments have a
positive impact on sales. In 2014, branded stores made up
85.6% of revenue, compared with 82.3% in 2013.
Our strategy is to increase the number of branded stores
in selected markets, by upgrading silver or white stores
where PANDORA products are selling well and by opening
new concept stores and shop-in-shops. In 2014, we opened
310 new concept stores and 183 shop-in-shops.
SALES CHANNELS
PANDORA’S POINTS OF SALE
Consumers can purchase our products through
9,906 points of sale in more than 90 countries. The
points of sale range from concept stores, shop-in-
shops and gold stores where products are displayed
in a PANDORA-branded environment, to silver and
white multi-brand stores where our products are
sold alongside products from other brands.
1,410 Concept stores
2,744 Silver stores
2,400 Gold stores
1,555 Shop-in-shops
1,797 White stores
Silver and white multi-brand stores
Silver and white stores have historically been an important
part of our strategy, especially in new and expanding
markets, as the stores enable us to reach a broader
customer base with low investment. As we move further
into branded sales, the number of silver and white stores
naturally decreases. In 2014, PANDORA jewellery was
available in a total of 4,541 silver and white stores,
compared with 5,478 in 2013.
BUSINESS STRATEGY • 21
Entering a PANDORA concept store is like meeting
an old friend. But people change over time, and the
PANDORA store has to evolve to stay relevant. That’s
where the Evolution store concept comes in.
The PANDORA concept store design is changed
approximately every five years to ensure the store
experience remains relevant to customers’ changing
demands and needs.
Created in collaboration with a Swiss architecture
and design firm, Evolution is an accessible and feminine
in-store environment with a warm and bright feel and
unique zoning colours that help customers find their way
to the products they seek. Every inch of the store has been
carefully designed to reinforce the unique PANDORA
aesthetic and improve the sales experience. The detailing
on the showcases, for example, uses bracelet-like patterns
to create a visual and tactile link to our signature product.
Details of this kind do not materialise overnight.
Work on Evolution began in early 2012 and the first ‘lab
store’ was created in Stuttgart, Germany, later that year.
After two years of development, testing, tweaking and
establishing an efficient procurement supply, the global
roll-out of Evolution began in 2014. Before an Evolution
store materialises, our in-house team of technical designers
draws the store in 3D and fits the Evolution elements to the
store’s unique size and shape.
Brings products closer to the customer
The Evolution design reflects our brand’s promise to help
women remember, cherish and share their unforgettable
moments. The traditional counters have been split up and
spread out across the store so that sales staff and customers
can stand side by side as they discuss the products. The
jewellery is beautifully framed in cabinets and displayed on
the walls to create a wall of memories. In addition, newly
designed fixtures allow customers to touch and feel the
products, giving them a tactile experience and a sense of
the products’ quality.
Fabulous and functional façades
The PANDORA store façade is the face of our brand – it is
what people recognise as they pass by in the street or in a
shopping centre. To enhance this reassuring moment, the
Evolution design highlights core elements of the brand’s
visual identity, including the ribbon image that appears on
many of our marketing materials.
EVOLVING THE
CUSTOMER EXPERIENCE
22 • BUSINESS STRATEGY PANDORA ANNUAL REPORT 2014
Seeking growth globally
With 9,906 points of sale across more than 90 countries,
PANDORA products are readily available to customers
almost anywhere on the globe. In 2014, we continued to
grow our presence in new markets, while at the same time
growing revenue in developed markets. We did this through
a continuous effort to renew and develop our product
offering and our store network.
Growing in new markets
Our aim is to reduce our dependency on individual markets
and seek growth opportunities by entering and expanding in
new markets. We apply a tailored approach to new markets
in order to best take advantage of opportunities, present our
brand the right way and mitigate risk. This tailored approach
also applies to marketing and the split between branded and
unbranded stores.
Italy, France and Russia are three of Europe’s largest
jewellery markets. Revenue in these three new markets for
PANDORA, constituting around 15% of total revenue in
2014, increased 57.0% compared with 2013. There is still
great growth potential in all three markets and we aim to
expand our business here.
Asia is still a very new region for PANDORA and holds
great potential for the Group. PANDORA has had a presence
in this region since 2009, but its presence in large jewellery
MARKET STRATEGIES
EUROPE
EBITDA
5,304
DKK million
2,298
DKK million
786
EBITDA
4,959
DKK million
2,053
DKK million
414
AMERICAS
Revenue
Concept stores
Revenue
Concept stores
BUSINESS STRATEGY • 23
markets like China and Japan is still limited. In 2015, we
will increase our focus on China and Japan, which together
represent almost one third of global jewellery sales.
The global jewellery market is currently worth
approximately DKK 1,700 billion (2013) and is predicted
to grow to DKK 2,200 billion by 2017, according to Euro-
monitor International. A very large proportion of this growth
will come from Asia, mainly driven by China and India.
Driving growth in developed markets
Our business model is as strong as our signature product,
the charm bracelet, encourages repeat purchase of charms.
However, we also see significant opportunities in leveraging
EBITDA
1,679
DKK million
831
DKK million
210
our brand recognition in other jewellery categories, especially
so in developed markets, where the PANDORA brand is
strong and well known.
The US, the UK and Australia are some of our most
developed markets, jointly making up 51% of the Group’s
total revenue in 2014. Although developed, these markets still
hold potential for growth. In 2014, revenue in the UK and
Australia grew by 42.8% and 18.4% respectively, driven both
by increasing sales of Charms and Bracelets and by a strong
performance in the Rings category. Revenue in the US grew
by 13.4%, driven by positive like-for-like sales in all areas
other than the Northeast, as well as the opening of new stores
on the West Coast.
Revenue
Concept stores
ASIA PACIFIC
PANDORA ESTORES
By the end of 2014, PANDORA had eSTOREs in
seven European countries. The first PANDORA
eSTORE in the UK has proven successful with
high traffic, high conversion rates and low return
rates. PANDORA eSTOREs appeal particularly
to male gift buyers, who may not find their way
to a physical PANDORA store. We will continue
to develop and open PANDORA eSTOREs in an
aim to offer PANDORA online sales globally.
GROWING IN BOTH NEW...
BUILDING A STRONG BRAND IN THE LAND OF DESIGN
Four years ago, almost no-one in Italy knew the
name PANDORA. Today, it is one of the best-known
jewellery brands in the country, with increasing
revenue and a blossoming reputation.
Italy is one of Europe’s largest jewellery markets, with an
annual retail value of almost DKK 28 billion according to
Euromonitor International. The Italian jewellery industry is
characterised by a large number of independent jewellers –
around 20,000. PANDORA chose to focus on the top1,000
jewellers as well as opening a number of own and operated
concept stores to showcase the brand.
The openings were followed by a number of brand
awareness campaigns and the brand rose to fame. One of
the first franchisees to sign an agreement with PANDORA
was the Songa Group – one of the biggest jewellery traders
in Italy – firmly establishing the PANDORA brand in Italy.
Today, PANDORA products are available through a
total of 749 points of sale across the country, including
36 concept stores and seven shop-in-shops. In 2014,
PANDORA Italy delivered sales-out growth of more than
40% compared with 2013.
...AND DEVELOPED MARKETS
DRAWING RINGS AROUND AUSTRALIA
How can you boost sales in one of your best-
performing and most developed markets? Give
consumers something they did not know they
wanted – rings.
PANDORA has been present in Australia since 2004.
Today, consumers can buy PANDORA products in more
than 393 stores across the country, and Australia is one
of our most developed markets. Yet, Australia delivered
like-for-like growth of 25.5% in 2014.
Ring sales have more than doubled in Australia since
2012, thanks to a clearly defined category strategy that
combines merchandising, sales and marketing, aligning all
commercial functions within the business. In 2014, for the
first time, more of PANDORA Australia’s revenue derived
from rings than from bracelets – even though the Charms
and Bracelets categories delivered revenue of DKK 504
million, an increase of 13.8% compared with 2013, the
Rings category contributed revenue of DKK 149 million,
anincrease of 52.0%.
GOVERNANCE
AND MANAGEMENT
The stone-setting method called pavé (French for ‘paved’) involves
considerable skill. Small stones are mounted into a piece of jewellery with
multiple tapered holes and set almost level with the surface. The stones
are placed close together to fill as much of the surface as possible, making
the piece look like it has been paved with stones.
26 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
The Board of Directors’ primary duties are to ensure that
PANDORA has a strong management team, an adequate
organisational structure, efficient business processes,
optimal capital structure, transparent bookkeeping and
practices, and responsible asset management.
The composition of the Board of Directors must
be such that, at any time, the combined competencies
of the Board of Directors enable it to supervise the
Company’s development and diligently address the specific
opportunities and challenges faced by PANDORA. The
Board of Directors, together with PANDORA’s Executive
Board, develops the Company’s overall strategies and
oversees that the competencies and resources are in place
to maximise the likelihood of PANDORA achieving its
objectives. Furthermore, the Board of Directors oversees
the financial development of PANDORA and the related
planning and reporting systems.
BOARD ACTIVITIES IN 2014
In 2014, the Board held seven ordinary Board meetings.
The total attendance rate was 85%. In 2014, the primary
commercial focus area for the Board was the continued
global expansion exemplified by a distribution agreement in
Japan, acquisition of concept stores in the US and a strategic
alliance with The Walt Disney Company.
Board Committees
The Board of Directors has established an Audit Committee,
a Remuneration Committee and a Nomination Committee.
The Board of Directors appoints Committee members and
the Committee chairman. The Committees’ terms of reference
are disclosed on the Company’s website.
The Audit Committee
The current members of the Audit Committee are Anders
Boyer-Søgaard (Chairman), Andrea Alvey, Nikolaj Vejlsgaard
and Michael Hauge Sørensen. The Audit Committee
reviews and assesses the Company’s financial reporting
and audit process as well as the internal control systems
RECOMMENDATIONS AND PRACTICE
PANDORA’s aim regarding good corporate governance is to
ensure transparency, accountability and that the Company
meets its obligations to shareholders, customers, consumers,
employees, authorities and other key stakeholders to the best
of its ability in order to maximise long-term value creation.
PANDORA will exercise good corporate governance at
all times and assess its practices according to the corporate
governance recommendations of the Danish Committee
on Corporate Governance. As a publicly listed company,
PANDORA is subject to the disclosure requirements laid
down by Nasdaq Copenhagen, which has included the
recommendations in its ‘Rule Book for Issuers of Shares’.
The Danish corporate governance recommendations were
updated in May 2013 with a minor revision in 2014, which
does not impact PANDORA’s reporting. In 2014, PANDORA
chose to deviate partly from Clause 3.4.6 as the Chairman
of the Nomination Committee is not the Chairman of the
Board. In PANDORA, the Nomination Committee elects a
chairman, who must be either the Chairman or the Deputy
Chairman of the Board. A new Chairman was appointed in
2014 and the Deputy Chairman was elected as Chairman
of the Nomination Committee. The Chairman and Deputy
Chairman of the Board share the Chairmanship and thus, in
practice, the Deputy Chairman represents the Chairman on
the Nomination Committee.
BOARD OF DIRECTORS
AND EXECUTIVE BOARD
Powers are distributed between the Board of Directors and
the Executive Board and independence exists between
these two bodies as is normal practice in Denmark. The
Board of Directors is elected at the General Meeting and
all Board members are up for election every year. The
Executive Board is appointed by the Board of Directors. The
Executive Board handles day-to-day management, while
the Board of Directors supervises the work of the Executive
Board and is responsible for the general strategic direction.
CORPORATE GOVERNANCE
GOVERNANCE AND MANAGEMENT • 27
Board in fulfilling its responsibilities with regard to the:
• description of the qualifications required for members of
the Board and the Executive Board
• nomination of candidates for approval by the Board to
fill vacancies on the Board and the Executive Board
• self-evaluation of the Board
• assessment of the performance of the Executive Board
and the cooperation between the Board of Directors
and the Executive Board
• succession planning for top executive positions
In 2014, the Nomination Committee met 3 times, with an
attendance rate of 83%. With the search for and recruitment
of a new Chairman, two new Board members as well as
a new CEO and CFO, 2014 was an unusual year for the
Nomination Committee.
Board self-evaluation
The Board conducts an annual self-assessment to
constantly improve its performance and its cooperation
with the Executive Board. The assessment is carried out by
each Board member completing a questionnaire followed
by a Board discussion where areas for improvement are
defined and agreed upon. Once a year, the CEO must
perform an assessment of the individual members of the
Executive Board.
Among the topics covered in the Board self-assessment
are Board composition, nomination process and the
competencies of the Board. Topics also include the Board’s
involvement in financial management and control, risk
management, cooperation with the Executive Board,
personal contributions and committee work.
The self-assessment conducted in 2014 identified the
following strengths and development areas for the Board:
in general, the Board demonstrates appropriate industry
knowledge and includes a diversity of experience and
backgrounds well fitted to PANDORA’s business and
strategy. Board structure and committee work are effective,
and the Board feels sufficiently involved in financial
oversight. The primary action item for 2015 is to allocate
time to further market visits and exposure to non-executive
management levels to gain further insight into the
PANDORA-specific market and business dynamics.
Additional information
The statutory report on corporate governance for 2014
cf. section 107b of the Danish Financial Statements
Act is disclosed on http://investor.pandora.net/
governancestatement.cfm.
and evaluates the adequacy of control procedures. More
specifically, the duty of the Audit Committee is to supervise
the following areas:
• financial reporting process
• internal control and risk management systems
• external audit
In 2014, the Audit Committee met seven times and had an
attendance rate of 93%. The main activities were:
• meetings with the Executive Board and external auditors
to review the audited annual report
• meetings with Management to review quarterly financial
statements, the key accounting policies and significant
accounting estimates
• review of the adequacy and effectiveness of the
Company’s internal controls and risk management
systems
• review of the Company’s significant financial risks
• assessment of the need for an internal audit function
• recommendation for the appointment of external
auditors, including evaluation of independence,
competencies and compensation
• the Audit Committee’s annual self-assessment
The Remuneration Committee
The current members of the Remuneration Committee are
Peder Tuborgh (Chairman), Bjørn Gulden, Andrea Alvey,
Torben Ballegaard Sørensen and Christian Frigast. The main
duties of the Remuneration Committee are:
• to prepare recommendations to the Board on the pay
and remuneration policy applicable to the Board and
the top 15 executives, including the Executive Board,
with respect to fixed and variable pay components
• to submit proposals to the Board for the total individual
pay and remuneration packages of the Board members
and the Company’s executive managers
• to verify that the information on remuneration in the
annual report is true, accurate and adequate
The Remuneration Committee met 4 times in 2014 and
had an attendance rate of 85%. The main activity was the
annual review of the remuneration policy and guidelines
on incentive pay as well as approval of the Company’s
overall pay regulation. The Committee also performed a
review of the Long Term Incentive Programme covering the
Company’s top management.
The Nomination Committee
The current members of the Nomination Committee are
Christian Frigast (Chairman), Anders Boyer-Søgaard, Ronica
Wang and Per Bank. The Nomination Committee assists the
28 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
CORPORATE SOCIAL
RESPONSIBILITY
Product, People, Planet
At PANDORA, we are committed to developing and
manufacturing our Product with integrity, providing a
great environment for our People, and taking action to
minimise our environmental impact on the Planet.
We believe that Corporate Social Responsibility
(CSR) and our aspiration to offer high-quality and
affordable jewellery go hand in hand. Responsibility is
reflected in our company values of pride, passion and
performance and integrated in our business model and
daily operations. In addition, we proactively engage in
initiatives that aim to raise the ethical performance of the
jewellery industry.
Product, People, Planet is our way of operationalising
and communicating our CSR philosophy, approach and
goals so they are easy to understand for consumers,
employees, industry peers and other stakeholders. Product,
People, Planet ensures consistency across all of the
Group’s communication channels, from websites and the
Annual PANDORA CSR Report to training and internal
presentations. In 2014, the PANDORA Group focused on:
• continuing to roll out the Group’s CSR and
compliance programme, PANDORA Ethics, across the
value chain
• developing further transparency of CSR issues through
the Product, People, Planet communication strategy
• reducing our CO2 emissions and environmental
footprint, including waste management at PANDORA
Production Thailand
CSR and compliance programme
PANDORA Ethics, our CSR and compliance programme,
covers all the Group’s ethical policies, guidelines and tools
within human rights, health and safety, environment and
climate, business ethics and supplier relations. PANDORA
Ethics is integrated into the entire value chain, from the
sourcing of materials and crafting of jewellery to the trading
of our jewellery at 9,906 points of sale around the world.
Find the PANDORA Ethics policies at
www.pandoragroup.com.
PANDORA Ethics fully covers the 10 principles defined
by the United Nations Global Compact, and the entire
PANDORA Group is certified compliant with the provisions
from the Responsible Jewellery Council’s (RJC) Code of
Practices, which includes the United Nations Guiding
Principles on Business and Human Rights. This demonstrates
that we either meet or exceed the standards for responsible
business practices in the jewellery value chain.
To strengthen the implementation of PANDORA Ethics,
we hired more people to our CSR department in 2014. Based
in Denmark, Thailand and Hong Kong, the strengthened team
will help further embed PANDORA Ethics in the Group’s
local and global culture and management structure.
Joint industry action
We are committed to advancing responsible business
practices, both internally and through active collaboration
with the jewellery industry. PANDORA is an active member
of the United Nations Global Compact and a certified
member of the RJC.
As a member of the RJC Executive Committee and
elected Chair of the multi-stakeholder RJC Standards
Committee (consisting of leading jewellery brands, a range
of experts and relevant civil society organisations), we
are actively working to set new and higher standards for
responsible business practices throughout the industry.
PANDORA is also a member of the RJC’s Steering
Group on Human Rights as well as the Steering Group
of the Danish Business Network for Human Rights.
Through these channels, we share approaches and lessons
learnt with peers in order to advance human rights in
dailyoperations.
Product
At PANDORA, responsible business practices begin in the
design phase with the choice of materials and continues
through ethical sourcing, procurement and manufacturing.
2014 was the first full year with CSR compliance as one of
the five pillars driving the PANDORA Group Procurement
strategy.
GOVERNANCE AND MANAGEMENT • 29
IN 2014, 10,100 BOOKS WERE BORROWED FROM OUR STAFF
EDUTAINMENT CENTRE IN BANGKOK
PANDORA’S INTERNAL RADIO AND TV BROADCASTS
PROVIDE BOTH KNOWLEDGE AND ENTERTAINMENT FOR
OUR PEOPLE EIGHT HOURS A DAY
When entering into a contractual agreement with
PANDORA, suppliers sign our Supplier Code of Conduct. To
ensure compliance with the code, we screen all suppliers,
taking into consideration a range of parameters, such as
business importance and product-related and country-related
risks as well as company-specific information. This screening
process is part of our four-step Responsible Supplier
Programme, which also includes training and auditing
suppliers and ensuring timely follow-up whenever non-
compliance is identified.
Thanks to the Responsible Supplier Programme, we were
able to meet one of our 2014 sourcing Key Performance
Indicators, which required that, in 2014, 80% of the total
sourcing value for PANDORA Production Thailand and 80%
of the purchasing value from group procurement categories
(such as fixtures and furniture, bags and boxes etc.) must
originate from companies that are either certified members of
the RJC or have been audited by independent consultants to
verify compliance with our Supplier Code of Conduct.
Over the course of 2014, our crafting facilities in
Thailand had management systems audited and re-certified
in accordance with the ISO 9001 (Quality Management),
ISO 14001 (Environmental Management) and OHSAS 18001
(Occupational Health & Safety Management) standards. In
addition, PANDORA Production Thailand was certified to the
ISO 50001 standard (Energy Management).
People
Maintaining a working environment in which everyone
has clarity, competence, confidence and commitment
remained the foundation of PANDORA Production Thailand’s
organisational development programmes in 2014. Over
the year, PANDORA Production Thailand welcomed an
additional 2,000 colleagues, who enjoy safe and healthy
working conditions and attractive compensation and benefits.
PANDORA Production Thailand’s Safety, Health &
Environment team (SHE) was expanded in 2013 and the
roll-out of SHE-related training continued in 2014. All our
people have received SHE-related training, using a number of
training methods and supported by communication channels
such as PANDORA Production TV and PANDORA Radio.
PANDORA Production Thailand’s Edutainment Centre,
where our people can borrow books and study during
breaks – received a total of 50,900 unique visits during the
year. Despite the unprecedented growth in the number of
jewellery pieces produced, PANDORA Production Thailand
managed to keep average weekly working hours in line with
ILO standards by hiring additional people and introducing
shift work.
We regard shop associates as front-line brand
ambassadors and take special pride in ensuring that they are
fully up to date with the latest PANDORA information and
training, and here e-learning is especially important.
As part of the PANDORA Ethics programme, we
continued our CSR and compliance-related training and
monitoring activities in 2014. PANDORA Ethics is now
included as modules in our e-learning system. PANDORA’s
50 in-house trainers conduct thousands of hours of face-to-
face training and coaching throughout the Group each year.
In addition, all shop associates and office team members
can access our e-learning platform to receive training on
a range of topics, from general sales techniques to visual
merchandising and specific jewellery collections.
We believe that a successful company benefits from
having a diverse management team. To this end, the Group
has set a number of management diversity objectives, and
progress is reviewed once a year. The objectives and recent
results are as follows:
• By 2020 at the latest, the gender split in senior
management positions (members of the Executive
Management, general managers and vice presidents)
should be 40%-60%. At the end of 2014, 34% of senior
management were women, up from 31% in 2013.
• The gender composition of the Group’s leadership
programmes for the years 2012-2015 should mirror the
gender composition of staff in vice president and director
positions (on aggregate). On 1 January 2014, women
accounted for 50% of this management group, and made
up 50% of the enrolment in our leadership programmes
in 2014.
30 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
general. In 2015, we will work in close cooperation with
our suppliers to develop responsible chain-of-custody
standards for silver mining.
PANDORA Production Thailand is our most energy
consuming entity by far, but we have a modern and energy
efficient production setup. The amount of energy used
here was up from 19,170,000 kWh in 2013 to 23,243,000
kWh in 2014. The rise in energy consumption reflects
the increase in complexity and the number of pieces of
jewellery produced. Besides the state-of-the-art burn-out
ovens used in the crafting process, the extensive use of
chillers ensuring a comfortably cool working environment
consumes a considerable amount of energy. Ovens and
chillers put together account for approximately 40% of the
energy consumption.
In Q2 2014, PANDORA Production Thailand achieved
the ISO 50001 certification on energy management through
which we define and monitor our goals, methodology and
performance in reducing our energy consumption. 2014
also saw several new pilot projects aimed at reducing our
energy consumption. Thus, solar panels have been installed
across the entire roof of one of the buildings, LED lights have
been tested in a relevant area with good results and will
be installed where appropriate. In addition, we are testing
how to optimise energy consumption in different processes.
Training in energy management awareness has been initiated
and will continue into 2015, when an expected 500 selected
people are to undergo training.
Finally, we have identified CO2 emissions from the
transport of our jewellery as a new focus area, and we
are investigating, in close cooperation with our transport
providers, how to gather data to minimise these emissions in
the future.
More information about PANDORA policies within
business ethics, human rights, working conditions and
environmental footprint, as well as the action taken to
implement these, can be found at: www.pandoragroup.
com/csr, where you can also find our PANDORA Ethics
2014 Report.
• It has been PANDORA’s objective that, by 2015, at least
35% of Board members elected at the Annual General
Meeting must be women. At the end of 2014, women
made up 20% of our Board members, which is well
above the average 11% for Danish listed companies,
but still below our 35% target. Subsequently we have
changed the target year from 2015 to 2018, and from
2015 we will work to reach our target.
Planet
As part of our commitment to continuously minimise our
environmental footprint, PANDORA Production Thailand in
2014 initiated a Life Cycle Assessment of its environmental
impact. The project is being run in collaboration with
the Eco-Efficient Engineering Research Laboratory (Eco-
Lab) at Mahidol University in Thailand and has already
resulted in a range of interesting findings. Under effective
environmentally controlled conditions, the reuse of
precious metals will considerably reduce carbon emissions
compared to mining.
Based on the Ecoinvent Database, Eco-Lab estimates
that reused gold results in CO2 emissions of as little as 5%
compared to gold mining. The corresponding figure for
silver is estimated to be 7%. This makes the use of reused
precious metals extremely efficient in terms of potential
CO2 reductions.
As part of our efforts to promote environmentally
responsible sourcing practices 90% of the gold grains used
in PANDORA products in 2014 originated from recycling.
The remaining 10% originated from mines certified either
according to the RJC’s Chain-of-Custody standard or the
‘Good Delivery Refinery’ standard issued by the London
Bullion Market Association.
When it comes to silver, 99% of the silver grains
sourced by PANDORA originate from reused sources. The
remaining 1% can be traced back to certified responsible
mining. Further, PANDORA is working with our specialised
silver product suppliers to ensure that the silver used in
their products also originates from reused sources. Reused
silver may enable us to guarantee the ethical origin
of silver sourced by PANDORA, but it does not help
solve potential problems related to the silver mining in
ALL GOLD USED BY PANDORA IS
CERTIFIED CONFLICT FREE
WE OFFER OUR SUPPLIERS TRAINING, ADVICE
AND ASSISTANCE TO HELP THEM COMPLY
WITH OUR CSR REQUIREMENTS
GOVERNANCE AND MANAGEMENT • 31
At PANDORA, waste is seen as a resource. In 2014, 81%
of the waste produced by our crafting facilities in Thailand
was reused or recycled, an increase of 24% compared
with 2013. Our waste management procedures were
improved with the help of recycling experts from Mahidol
University in Thailand.
The crafting of our jewellery generates three main
types of process waste: gypsum, glass and rubber. The
gypsum derives from the jewellery casting process, the
glass from making our Murano charms and the rubber
from jewellery moulds. Today, 90% of our gypsum waste is
recycled in the construction sector, 100% of our Murano
glass waste is recycled for producing glass tiles and 100%
of our rubber waste is used as fuel by the cement industry.
It is a great pleasure to see our waste being
transformed into something useful. The benefits are
twofold as we optimise the world’s resources and also
reduce our own waste.
FROM PURE WASTE
TO TRUE RECYCLING
of glass waste is used to make tiles
- up from 45% in 2013
of gypsum waste is reused in
the construction industry
- up from 46% in 2013
of rubber waste is used as fuel
- up from 29% in 2013
100%
90%
100%
32 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
PROTECTING THE PANDORA BRAND
The PANDORA brand is one of the most recognised in
the jewellery world, and protecting it is crucial to the
ongoing success of the PANDORA Group. This work entails
safeguarding intellectual property rights, such as trademarks
and patents, as well as retaining and training our people
and stopping the production and sale of counterfeit
jewellery.
Intellectual property rights and policies
PANDORA’s intellectual property rights are mainly vested
in trademarks, copyrights, patents and designs. They
are strengthened by business secrets, visually distinct
products, non-disclosure procedures and non-competition
regulations.
PANDORA’s intellectual property rights are crucial
to our business, competitive advantage and future
development. We therefore protect these intellectual
property rights using all available means, including a
comprehensive global surveillance, registration and control
programme. We have a zero-tolerance policy towards
infringement of PANDORA’s intellectual property rights
on the internet and towards counterfeit products and
trademarks in general. No distributors, dealers or others
are permitted to register or use PANDORA’s intellectual
property without prior agreement.
Patents
PANDORA’s international patent families encompass patent
rights relating to the functionality of the charm bracelet.
Patents have been granted by the member states of the
EU, the US, Australia, New Zealand, South Africa, China,
Switzerland and Norway. In general, these patents protect
a jewellery chain (a necklace or bracelet) with a stop joint,
known as a ‘stopper’, which prevents charms from falling
off the chain. The patents also protect a detachable holder,
known as a ‘keeper’. A keeper can be added to a jewellery
chain in order to divide the charms into groups and to
prevent the moveable charms from bundling at one end of
the chain. In the US, PANDORA’s patent expires in 2023
and in other jurisdictions in 2024.
PANDORA filed patent applications related to the
PANDORA ESSENCE COLLECTION in 2013. The first
patent was granted in 2014 in Australia and more patents
are expected to be granted in the first half of 2015.
Trademarks
PANDORA has word and figurative trademarks registered
in a number of jurisdictions worldwide, including the EU,
the US, Australia and Asia. The trademarks are registered
in various international goods and service classes, but
are primarily in international class 14, which covers
jewellery and watches. The trademark portfolio includes EU
registrations of the PANDORA name and crowned O logo
in various international classes, including the international
classes for jewellery, leather goods and clothing. At
the end of 2014, PANDORA’s trademark portfolio
consisted of approximately 1,000 trademark applications
and registrations. Of these, more than 100 trademark
applications were filed in 2014.
INTELLECTUAL CAPITAL
COUNTERING THE COUNTERFEITERS
Our unique designs are protected by either design
registrations or copyrights. However, the fight against
counterfeiters is an ongoing battle that entails,
among other strategies, visiting manufacturers,
wholesalers and retailers who sell counterfeit
jewellery, and removing counterfeit PANDORA
products from web outlets. In 2014, we succeeded
in removing more than 2,800 fake PANDORA
websites and more than 93,000 pieces of counterfeit
PANDORA jewellery from auction sites.
GOVERNANCE AND MANAGEMENT • 33
HR succession tool that will help identify candidates for
leadership positions around the globe and ensure we can
create a robust internal pipeline for the future. We are also
initiating a global graduate programme that will enable
high-performing young graduates to undergo a two-and-
a-half-year training programme working in four different
countries. The first pilot programme is being run in Group
Supply Chain in 2014 and 2015, and other departments are
also being considered for the programme.
The continual addition of new talent is essential to
a dynamic, growing organisation. To ensure that we can
continue to attract the best people, we initiated a number
of projects in 2014 that help us define the benefits and
opportunities that we offer our people.
HUMAN RESOURCES
Our people are the heart of the PANDORA Group and
their continual development has always been a main driver
of our success. To help every member of our global team
feel empowered in their daily work and prepare for future
challenges, we offer a number of training programmes
developed for various levels and areas within the
organisation.
Most training is run by local HR departments, ensuring
that content is directly related to our people’s daily work.
This locally offered curriculum includes a centrally
developed management training course designed to help
prepare the next generation of PANDORA leaders. The
course covers a range of topics, from personal effectiveness
to leadership, and almost 1,500 leadership training courses
were taken by managers around the world.
Global training programmes, which bring together
people from around the world, include the Life Leadership
Programme – a one-year development curriculum for vice
presidents and potential vice presidents launched in 2012.
In 2014, 20 leaders completed the programme, which
includes a module developed and facilitated specifically for
PANDORA by Harvard Business School.
Our e-learning platform, PANDORA on Demand (POD),
is another essential tool that enables more than 29,000 users
worldwide, including shop associates in non-PANDORA-
owned points of sale, to follow a broad selection of training
modules. More than 380,000 POD e-learning modules were
completed globally in 2014, up from 200,000 in 2013.
In 2014, we also began a number of initiatives to ensure
stability of succession and bolster our reputation as an
attractive place to work. In 2014, we started developing an
THE HEARTBEAT OF PANDORA
An employee satisfaction survey can tell you
many things, but perhaps the most important
is how engaged your people are. Conducted
globally between January and September 2014,
the Heartbeat Survey took the pulse of our people.
Here are the highlights:
• 86% of our people would recommend
PANDORA as a workplace
• 81% of our people see the PANDORA values in
the organisation
34 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
Taking action to mitigate risks
As a global company with central crafting facilities, a
global distribution network and points of sale across the
world, PANDORA needs to be fully aware of future risks
and opportunities. The Board of Directors makes regular
assessments of the overall and specific risks associated with
the Group’s business and operations to ensure all risk is
managed in a proactive and efficient manner. The Board
also develops long-term and short-term strategies to take
advantage of opportunities as they arise.
The Board of Directors regularly reviews the Group’s
established internal control systems – including a
whistleblowing function – to ensure that they remain
appropriate and sufficient. In the case of highly complex
transactions and contracts, we work with advisers to
mitigate risk.
The significant current risks are (no specific order):
RISKS
BRAND AND REPUTATION
Our sales are to a large extent dependent on the success of the PANDORA brand, and loss of brand value or damage to the
brand’s reputation could have an effect on the Group’s earnings.
Description Status
Our reputation and business could be affected by negative
events covered on social media, related to PANDORA’s
core business and values. PANDORA has not experienced
negative coverage on social media on a major scale.
In recent years, we have strengthened our presence in digital
media channels through our websites, eSTOREs, PANDORA
Club and social media. These channels enable us to engage
directly with end customers and respond quickly and
transparently to questions and comments.
Our reputation and business could be seriously affected
if the Group does not comply with applicable laws and
regulations, or if it is perceived by the public as failing
to meet certain Corporate Social Responsibility (CSR)
standards, including labour standards.
We have taken steps to align our CSR standards globally.
These steps include formally adhering to the United
Nations Global Compact, taking an active role in the
Responsible Jewellery Council, and integrating PANDORA
Ethics, our CSR and compliance programme, into our
entire value chain.
GOVERNANCE AND MANAGEMENT • 35
CONCENTRATION OF KEY FUNCTIONS IN THAILAND AND SUPPLY CHAIN DISRUPTION
Our production and product development are concentrated in Thailand and supply four distribution centres globally.
Description Status
We have concentrated key functions in Thailand, including
Production and New Product Development. In addition,
we have one of four global distribution centres located in
Thailand.
We set up a Thailand Business Continuity Management
Department in 2012 to monitor any factors that could
impact operations or production. The Business Continuity
Plan for production has been tested with satisfactory results.
Our operations are dependent on raw materials being
imported into Thailand and on the uninterrupted operation
of our facilities. In the past, political unrest in Thailand has
occasionally caused brief disruptions to our supply chain.
Supply chain disruptions have not had any significant
impact on production or product development to date.
We continuously evaluate the benefit and risk of
concentrating production and product development in
Thailand.
Thailand, including Bangkok, is occasionally hit by heavy
monsoon rain, which can result in severe flooding.
We currently have seven crafting facilities in Gemopolis,
an industrial zone outside Bangkok. This area is generally
well drained and protected from flooding. We have a
contingency plan in place should flooding occur, although
there have been no significant disruptions to date.
In addition, we are planning to establish a new crafting
facility in Northern Thailand. Detailed planning for this
facility will begin in 2015.
We operate four global distributions centres responsible
for supplying stores with merchandise throughout the year.
A major breakdown of IT or facilities with lengthy supply
chain outage as a result will impact PANDORA’s results.
Our global physical and information security requirements
ensure that our operations can be restored to minimise
impact on the business.
MAJOR MARKET DEPENDENCY
PANDORA’s revenue is to some extent exposed to the development in major markets.
Description Status
We are exposed to performance and development in the
major markets. The major markets have experienced solid
growth for a substantial period. In the event of a significant
market decline or loss of access to a market, this will have
an impact on Group results.
Major markets constituting 5% or more of the Group’s
revenue include the US, Canada, the UK, Italy, Germany,
Russia and Australia.
We continuously analyse the key drivers of potential growth
and failure in major markets.
We have developed market-specific strategies to ensure
continued growth in our major markets.
36 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
FLUCTUATIONS IN RAW MATERIAL PRICES
An increase in silver or gold prices may have an adverse material effect on PANDORA’s business.
Description Status
Raw materials make up the largest part of the Group’s cost
of sales. Our products are mainly made of silver and gold,
hence these metals account for a significant part of the cost
of sales. An increase in silver or gold prices could therefore
increase cost of sales significantly.
PANDORA’s financial policy requires that exposure to raw
material price fluctuations is mitigated, and the Group
uses financial instruments to hedge both silver and gold
exposure. The Group hedges approximately 100%, 80%,
60% and 40% of the risk for the following 1-3 months,
4-6 months, 7-9 months and 10-12 months respectively.
Actual production can deviate from the 12 month rolling
production plan. In case of deviations, the realised
commodity hedging ratio can deviate from the estimated
hedging ratio.
Since PANDORA needs to stay in the affordable luxury
segment, it may not be possible to transfer this increased
cost to end consumers, as jewellery competes with other
fashion, leisure and entertainment products for consumers’
discretionary expenditure.
These 12-month rolling hedges, combined with the time lag
from inventory turnover, mean that we can take raw material
prices into account when selecting the main materials to use
in upcoming product launches.
PRODUCT RISK
We are dependent on the performance of launched new collections throughout the year. A large part of our revenue is
driven by products launched in the last year.
We have a high exposure to the Charms & Bracelets category as it accounts for a significant part of revenue reported.
Description Status
Our ability to achieve future goals is dependent on our
ability to develop products aligned with market trends and
consumers’ preferences.
To provide consumers with new and contemporary
products, we have seven product launches a year.
When developing new collections, we use data from
various sources, including trendspotters, external global
design talent and our in-house designers, to ensure that our
designs are aligned with market trends.
In addition, we use a data retail insight system to
determine how to structure our collections. We also
apply product life cycle management, sales-out data and
portfolio analysis to ensure that we deliver the optimum
split between category, drops, metal and design into the
right pricing points.
GOVERNANCE AND MANAGEMENT • 37
TAX RISKS
Changes in the distribution of the Group’s profit could have significant impact on the Group’s consolidated tax payments.
Description Status
Due to significant differences in tax rates between Group
entities, a change in the distribution of the Group’s profit
could have significant impact on the Group’s consolidated
tax payments.
The risk mainly relates to differences in corporate
taxation in Denmark and Thailand. Corporate income tax
in Denmark is 24.5% (gradually to be reduced to 22% by
2016) while PANDORA Production Co. Ltd. is currently
subject to a BOI agreement that significantly reduces the
corporate tax rate in Thailand (many types of income are
free from taxation, while other types are subject to taxation
at 20%).
We maintain an ongoing dialogue with tax authorities,
including the Danish and Thai authorities, with regard to the
computation of taxable income. In Management’s opinion,
the tax recognised reflects the most likely amount required
to settle the present obligation, including potential tax cases.
38 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
INTERNAL CONTROLS AND RISK MANAGEMENT
SYSTEMS IN RELATION TO THE FINANCIAL
REPORTING PROCESS
Responsibility for PANDORA’s internal controls and risk
management systems in relation to the financial reporting
process rests with the Board of Directors and the Executive
Board.
The purpose of PANDORA’s internal controls and risk
management systems in relation to the financial reporting
process is to ensure that the financial statements give a
true and fair view, free from material misstatements, and
to ensure that the financial statements are presented in
accordance with IFRS as adopted by the EU and additional
Danish disclosure requirements for annual reports of listed
companies. While the internal controls and risk management
systems are designed and aim to ensure that material
misrepresentation of assets, losses and/or significant errors
or irregularities and omission in the financial reporting are
avoided, it provides no absolute assurance that all errors
are detected and corrected. Internal controls and risk
management systems are under continuous development.
Control environment
The Board of Directors has established an Audit Committee
that assists the Board of Directors in supervising the financial
reporting process and the efficiency of PANDORA’s internal
controls and risk management systems. The Audit Committee
reviews significant risks related to PANDORA’s business,
activities and operations as well as risks related to financial
reporting. The Audit Committee seeks to ensure that such
risks are managed proactively, efficiently and systematically.
The Executive Board is responsible for maintaining
controls and an effective risk management system and it has
taken the necessary steps to address the risks identified in
relation to financial reporting.
Risk assessment
The Board of Directors and Executive Board assess risks
on an ongoing basis, including risks related to financial
reporting and an assessment of measures to manage or
eliminate and/or reduce the identified risk. The Audit
Committee reviews certain high-risk areas quarterly,
including significant accounting estimates and material
changes to accounting policies.
At least once a year, the Audit Committee oversees a
review of the current internal controls to consider whether
they are effective in relation to the risks identified in the
financial reporting process.
Control activities
PANDORA operates with a global Finance Management
Forum that meets three to four times a year. This forum sets
the Finance Strategy for the Group. In addition, PANDORA
Finance Manager conferences are held in order to discuss
the latest developments in significant accounting matters and
best practice regarding internal controls.
Controlling functions in the corporate finance function,
reporting to the Chief Financial Officer, are responsible for
controlling the financial reporting from the Parent Company
and the subsidiaries, and monitor compliance with relevant
legislation on an ongoing basis.
The Group has adopted and defined an internal control
framework that identifies key processes, inherent risks and
control procedures, in order to secure accounting processes.
The control procedures include a variety of processes in
order to prevent any misrepresentation, significant errors,
omission and fraudulent behaviours. The control procedures
are tested bi-annually and reported to the Audit Committee
annually.
Information and communication
The Board of Directors has adopted an IR policy that
prescribes that all communication, including financial
reporting, to stakeholders must be conducted adequately,
timely, openly internally as well as externally and must be
conducted factually and truthfully and with consideration to
legislation and applicable regulations.
Monitoring
PANDORA’s internal controls and risk management systems
are continuously monitored, tested, documented and subject
to quality control. The Audit Committee monitors the internal
controls and risk management systems to ensure that any
weaknesses are eliminated and that any material errors are
corrected, including controls or procedures implemented to
prevent such errors.
PANDORA’s external auditors are appointed for a
term of one year at the Annual General Meeting upon
recommendation by the Board. Prior to recommendation,
the Board of Directors assesses, in consultation with the
Executive Board, the independence and competencies and
other matters pertaining to the auditors.
The framework for the auditors’ duties, including their
remuneration, audit and non-audit tasks, is agreed annually
between the Board of Directors and the auditors upon
recommendation by the Audit Committee.
GOVERNANCE AND MANAGEMENT • 39
Peder Tuborgh was born in 1963,
is a Danish citizen and currently
lives in Højbjerg, Denmark.
Peder Tuborgh has been
Chairman and a member of the
Board of Directors since October
2014 and is also Chairman of the
Remuneration Committee.
Peder Tuborgh is regarded as
an independent Board member.
The special skills possessed by Peder Tuborgh that are
important for the performance of his duties as a member of
Christian Frigast was born in
1951, is a Danish citizen and
currently lives in Klampenborg,
Denmark.
Christian Frigast has been
a member of the Board of
Directors of PANDORA A/S
since August 2010 and is also
Deputy Chairman of the Board,
Chairman of the Nomination
Committee and a member of the Remuneration Committee.
Christian Frigast is not regarded as an independent
Board member due to his position as Managing Partner
ofAxcel.
The special skills possessed by Christian Frigast that are
important for the performance of his duties as a member of
the Board of Directors of PANDORA A/S are his experience
in general management obtained through his numerous
directorships as well as his active involvement in a number
of retail and other companies.
the Board of Directors of PANDORA A/S are his experience
in global manufacturing and logistics, global branding,
sales and marketing as well as consumer sales and retail
marketing.
Peder Tuborgh holds an MSc in Economics and
Business Administration from Odense University, Denmark.
Currently, he is CEO of Arla Foods amba. In addition,
Peder Tuborgh is vice chairman of Aarhus University and
a Board member of Global Dairy Platform, The Denmark-
America Foundation, and the Fulbright Commission, Royal
Greenland A/S.
Christian Frigast holds an MSc in Political Science
and Economics from the University of Copenhagen.
Currently, Christian Frigast is Managing Partner of Axcel
Management A/S and CEO of Axcel III KS Invest ApS, Axcel
IndustriInvestor A/S, CCTC Invest ApS, MNGT1 ApS, MP-AX
I Invest ApS and MP-AX II Invest ApS. Further, Christian
Frigast is currently Chairman of the Boards of Directors of
Ax IV Exhausto Invest ApS, Ax No Invest ApS, Axcel II A/S,
Axcel II Management A/S, AxIII MP Holding ApS, KIFU-
AX II A/S, Management Invco A/S and MNGT2 ApS. In
addition, Christian Frigast is Deputy Chairman of the Boards
of Directors of DVCA Danish Venture Capital and Private
Equity Association and Royal Scandinavia A/S. Christian
Frigast is also a member of the Boards of Directors of Axcel
Management A/S, Nordic Waterproofing AB and CCTC
Invest ApS.
BOARD OF DIRECTORS
40 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
Andrea Dawn Alvey was born in
1967, is an American citizen and
currently lives in Raleigh, North
Carolina, USA.
Andrea Dawn Alvey has
been a member of the Board
of Directors of PANDORA A/S
since August 2010 and is also
a member of the Audit and
Remuneration Committees.
Andrea Dawn Alvey is regarded as an independent Board
member.
The special skills possessed by Andrea Dawn Alvey that are
important for the performance of her duties as a member of
the Board of Directors of PANDORA A/S are her experience
and insight into global supply chains, IT operations and
retail financing.
Andrea Dawn Alvey holds a BSc in Business Economics/
Statistics from Southern Connecticut State University.
Currently, Andrea Dawn Alvey is President of Kitabco
Investments, Inc. and Regional Developer for Peak
Franchising.
Torben Ballegaard Sørensen
was born in 1951, is a Danish
citizen and currently lives in
Højbjerg, Denmark.
Torben Ballegaard Sørensen
has been a member of the Board
of Directors of PANDORA A/S
since March 2008 and is also
a member of the Remuneration
Committee.
Torben Ballegaard Sørensen is regarded as an independent
Board member.
The special skills possessed by Torben Ballegaard
Sørensen that are important for the performance of
his duties as a member of the Board of Directors of
PANDORA A/S are his experience within international
sales and marketing and within branded goods, combined
with his knowledge of PANDORA A/S.
Torben Ballegaard Sørensen holds an MBA from
Aarhus School of Business and is an adjunct professor
in the Department of Management at Aarhus University.
Currently, Torben Ballegaard Sørensen is Managing
Director of Investeringsselskabet af 1. juli 2008 ApS.
Further, Torben Ballegaard Sørensen is Chairman of the
boards of directors of AS3 Companies, CAPNOVA A/S
Venture Fund, Tajco Group A/S, Realfiction A/S and
PowerBrands A/S. Torben Ballegaard Sørensen is Deputy
Chairman of Systematic A/S and a member of the Boards
of Directors of AB Electrolux, Egmont Fonden, and
Egmont International Holding A/S.
Nikolaj Vejlsgaard was born
in 1971, is a Danish citizen
and currently lives in Vedbæk,
Denmark.
Nikolaj Vejlsgaard has
been a member of the Board
of Directors of PANDORA A/S
since March 2008 and is also a
member of the Audit Committee.
Nikolaj Vejlsgaard is not
regarded as an independent Board member due to his
position as Partner of Axcel.
The special skills possessed by Nikolaj Vejlsgaard
that are important for the performance of his duties as a
member of the Board of Directors of PANDORA A/S are his
experience in general management and active involvement
in a number of retail and other companies obtained through
his numerous directorships, combined with his knowledge
of PANDORA A/S.
Currently, Nikolaj Vejlsgaard is a Partner of Axcel
Management A/S and Managing Director of Royal
Scandinavia Invest A/S, Waldorf & Statler ApS, AXIII
MPH Invest ApS and UIM Holding ApS. Further, Nikolaj
Vejlsgaard is currently Chairman of the Boards of Directors
of IP Gruppen Holding ApS and IP Development A/S.
Nikolaj Vejlsgaard is also a member of the Boards
of Directors of Royal Scandinavia Invest A/S, Royal
Scandinavia A/S, ERA Biler ApS, ERA A/S, ERA Ejendomme
A/S, Partsplexer ApS, IP Online A/S, IP Administration A/S
Royal Scandinavia II ApS, MNGT2 ApS, AXIII MP Holding
ApS, Axcel Management A/S, Axcel II A/S, KIFU-AX II A/S,
and Axcel II Management A/S.
GOVERNANCE AND MANAGEMENT • 41
Anders Boyer-Søgaard was born
in 1970, is a Danish citizen and
lives in Charlottenlund, Denmark.
Anders Boyer-Søgaard has
been a member of the Board
of Directors of PANDORA
A/S since March 2012 and is
also Chairman of the Audit
Committee and a member of the
Nomination Committee.
Anders Boyer-Søgaard is regarded as an independent
Boardmember.
The special skills possessed by Anders Boyer-Søgaard
that are important for the performance of his duties as
a member of the Board of Directors of PANDORA A/S
are his experience within general management in listed
companies, financial management in listed companies, as
well as global supply chain and manufacturing.
Anders Boyer-Søgaard holds an MSc (Finance and
Accounting) from Copenhagen Business School from
1997. Currently, Anders Boyer-Søgaard is CFO of GN Store
Nord A/S, GN ReSound A/S, Scanning Technology A/S
and Beltone Europe Holdings ApS. Furthermore, Anders
Boyer-Søgaard is a member of the Boards of Directors of
GN Ejendomme A/S, GN GROC Ltd., GN Hearing Benelux
B.V., GN Hearing s.r.l., GN Otometrics A/S, GN Hearing
Sverige AB, GN ReSound China Ltd., GN ReSound Japan
K.K., GN ReSound Norge as, GN ReSound Shanghai Ltd.
and Scanning Technology A/S.
Ronica Wang was born in 1962,
is a citizen of Hong Kong and is
currently based in Asia, where
she spends a large portion of her
time in China.
Ronica Wang has been a
member of the Board of Directors
of PANDORA A/S since March
2012 and is also a member of the
Nomination Committee.
Ronica Wang is regarded as an independent Board member.
The special skills possessed by Ronica Wang that are
important for the performance of her duties as a member
of the Board of Directors of PANDORA A/S include her
international experience within general management in
listed companies, consumer sales and retail marketing,
global and cross platform branding and the affordable
goods industry.
Ronica Wang holds an MBA from The Wharton
Business School, University of Pennsylvania, and a
Bachelor Degree in Applied Science and Engineering
(Industrial Engineering) from the University of Toronto. She
has also studied multinational management at The London
Business School.
Currently, Ronica Wang is the Chairman and Managing
Director of The InnoGrowth Group, Ltd., which she
co-founded in 2007. She is also a company Director and
member of the Board of Directors of Active Kidz Shanghai.
Bjørn Gulden was born in 1965
in Switzerland, is a Norwegian
citizen and currently lives in
Hattingen, Germany.
Bjørn Gulden has been
a member of the Board of
Directors of PANDORA A/S
since August 2013 and is also
a member of the Remuneration
Committee.
Bjørn Gulden is not regarded as an independent Board
member due to the fact that he served as CEO of
PANDORA A/S from 21 February 2012 until 1 July 2013.
The special skills possessed by Bjørn Gulden that are
important for the performance of his duties as a member of
the Board of Directors of PANDORA A/S are his substantial
skills related to global sourcing, consumer sales and
retailand comprehensive insight into the affordabel goods
industry.
Bjørn Gulden holds a BBA from the University of
Rogaland, Norway, and an MBA from Babson Graduate
School of Business in Boston, USA. Currently, Bjørn Gulden
is the CEO of Puma SE. Further, Bjørn Gulden serves on the
Boards of Directors of Tchibo GmbH, Ekornes AS, Dansk
Supermarked A/S and Deichmann SE.
42 • GOVERNANCE AND MANAGEMENT PANDORA ANNUAL REPORT 2014
Michael Hauge Sørensen was
born in 1973, is a Danish citizen
and lives in Hong Kong.
Michael Hauge Sørensen
has been a member of the Board
of Directors of PANDORA A/S
since March 2014 and is also a
member of the Audit Committee.
Michael Hauge Sørensen
is regarded as an independent
Board member.
The special skills possessed by Michael Hauge Sørensen
are his experience within consumer sales and retail
marketing, global and cross platform branding and the
affordable goods industry.
Michael Hauge Sørensen is an alumnus of Stanford
Graduate School of Business and has attended numerous
management programmes at INSEAD and IMD. Currently,
Michael Hauge Sørensen is the Chairman of Kwintet AB,
member of the Boards of Directors of Zebra A/S and IC
Group A/S and Director of Michaso Holding Limited.
Per Bank was born in 1967, is
a Danish citizen and lives in
Aarhus, Denmark.
Per Bank has been a member
of the Board of Directors of
PANDORA A/S since March
2014 and is also member of the
Nomination Committee.
Per Bank is regarded as an
independent Board member.
The special skills possessed by Per Bank are his experience
within general management in listed companies, consumer
sales and retail marketing and manufacturing.
Per Bank graduated as an industrial engineer from the
University of Southern Denmark in 1992. Currently, Per
Bank is the Managing Director of Dansk Supermarked A/S.
Further, Per Bank is currently Chairman of the Boards of
Directors of F. Salling A/S and Købmand Herman Sallings
Mindefond.
GOVERNANCE AND MANAGEMENT • 43
EXECUTIVE MANAGEMENT
Allan Leslie Leighton was born in 1953, is a British citizen
and currently lives in London, UK.
• Allan has been President, Chief Executive Officer since
July 2013.
• Allan attended Harvard Business School’s Advanced
Management Program. He has an Honorary Degree
from Cranfield University and an Honorary Fellowship
from the University of Lancashire.
• Currently, Allan is Chairman of Pace PLC, Entertainment
One Ltd., Office Ltd., and Matalan Ltd., and non-
executive director of Bighams Ltd.
Peter Vekslund was born in 1967, is a Danish citizen and
currently lives in Copenhagen, Denmark.
• Peter has been Executive Vice President,
Chief Financial Officer since January 2015.
• Peter holds a HD-R and an MSc (Business Economics
& Auditing), Copenhagen Business School, and an
E*MBA, SIMI, Scandinavian International Management
Institute.
Thomas Ryge Mikkelsen was born in 1972, is a Danish
citizen and currently lives in Copenhagen, Denmark.
• Thomas has been Executive Vice President at
PANDORA A/S since March 2008, and has held his
current role of Chief Marketing & Merchant Officer
since June 2013.
• Thomas holds an MSc (International Business).
• Currently, Thomas is a member of the Board of Directors
of Prokura P/S.
Enamel is one of the oldest ornamental techniques, adding striking
colours, depth and dimension to jewellery and providing it with a
durable finish. PANDORA uses an enameling technique in which
enamel is applied by hand using a needle – here a heart charm in
sterling silver and 14k gold with hand-applied enamel in soft pink.
SHAREHOLDER
INFORMATION
44 • SHAREHOLDER INFORMATION PANDORA ANNUAL REPORT 2014
PANDORA shares have been listed on the Nasdaq
Copenhagen stock exchange since 5 October 2010.
PANDORA is included in the blue chip index OMX C20.
In 2014, the lowest closing price was DKK 302 on 2
January 2014 and the highest closing price was DKK 531
on 28 November 2014. At the end of 2014, the share price
was DKK 504.5, corresponding to an increase of 71.6%
in 2014. By comparison, the OMX C20 increased 20.9%
during the year.
Around 225 million PANDORA shares were traded in
2014 with an average trading volume of approximately
900,000 shares per day. These numbers include placings of
existing shares by former main shareholders in PANDORA
through three accelerated book buildings during the year,
placing 31.9 million shares in total.
CAPITAL STRUCTURE
It is PANDORA’s capital structure policy to maintain an
NIBD/EBITDA ratio of 0-1x on a 12-month rolling basis.
The Board of Directors determines, on an ongoing basis,
whether any surplus capital should be distributed through
share buyback programmes or as an extraordinary dividend
in order to reach the optimal capital structure.
DIVIDEND
The Board of Directors aims to increase the nominal
dividend per share annually. For the financial year 2014,
the Board of Directors proposes a dividend of DKK 9.0 per
share.
PANDORA shares are traded ex-dividend the day after
the Annual General Meeting, which will be held on 18
March 2015. The dividend will be paid automatically via VP
Securities on 23 March 2015.
SHARE BUYBACK PROGRAMME
The Board of Directors is authorised to acquire own shares
on behalf of the Company until 17 September 2015 with
a total nominal value of up to 10% of PANDORA’s share
capital, according to a decision made at an Extraordinary
General Meeting held on 17 September 2010. The purpose
of the share buyback programme is to reduce PANDORA’s
share capital, to adjust the capital structure in accordance
with the Company’s policy on capital structure and to
meet obligations arising from employee share option
programmes.
Share buyback 2014
5,875,257 shares, corresponding to 4.6% of the share
capital, were bought back in 2014 at an average price
of DKK 408.5 and a total value of DKK 2.4 billion. At
the Annual General Meeting, the Board of Directors will
propose that the Company’s share capital be reduced by
a nominal amount of DKK 5,818,651 by cancellation of
5,818,651 own shares of DKK 1, equal to 4.5% of the
Company’s total share capital. The remaining treasury
shares may be used to meet obligations arising from
employee share option programmes. Total share options
outstanding at 31 December 2014 are 1,382,800.
Share buyback 2015
The Board of Directors of PANDORA has decided to
launch a share buyback programme in 2015, under which
PANDORA expects to buy back own shares to a maximum
consideration of DKK 3,900 million.
The share buyback programme is subject to approval
of an extension of the current authorisation to acquire own
shares on behalf of the Company at the Annual General
Meeting on 18 March 2015. PANDORA has bought back
own shares corresponding to 7.2% of the share capital
under the current authorisation, which allows the Company
to acquire own shares with a total nominal value of up to
10% of PANDORA’s share capital.
The Board of Directors intends to propose to
PANDORA’s shareholders at the Annual General Meeting in
2016 that PANDORA’s share capital be reduced by shares
purchased under the programme. PANDORA may also use
shares purchased under the programme to meet obligations
SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION • 45
arising from employee share option programmes issued
in 2015. The total obligation for the 2015 programme is
expected to be approximately 170,000 shares.
The share buyback programme is being implemented
in accordance with the provisions of the European
Commission’s regulation no. 2273/2003 of 22 December
2003 (‘safe harbour’), which protects listed companies
against violation of insider legislation in connection with
share buybacks.
The programme will end no later than 31 December
2015. PANDORA may terminate the programme at
anytime.
SHAREHOLDERS
PANDORA has no major shareholders that hold the
equivalent of or more than 5% of the share capital in
PANDORA.
As of 31 December 2014, PANDORA A/S owned a total
of 7,216,058 treasury shares of nominally DKK 1 (in total
nominally DKK 7,216,058), corresponding to 5.6% of the
shares and thus more than 5% of the total share capital and
the total voting rights in the Company.
As of 31 December 2014, institutional investors in
Denmark held 13% of the share capital, institutional
investors in Europe held 38% of the share capital of which
21% was held by UK investors, and institutional investors in
North America held 17%. As of 31 December 2014, 9% of
the PANDORA shares were held by Danish retail investors.
As of 31 December 2014, PANDORA’s Board of
Directors and Executive Board held a total of 104,966 and
12,380 PANDORA shares respectively, corresponding to
0.1% of the total shares outstanding.
INVESTOR RELATIONS
The Executive Board is responsible for the existence of
an Investor Relations (IR) function, which is responsible
for PANDORA’s compliance with the Company’s Investor
Relations Policy. IR is organised as a separate unit and reports
directly to the Chief Financial Officer.
The purpose of PANDORA’s investor relations activities
is to ensure that relevant, accurate and timely information
is made available to the stock market to serve as a basis for
regular trading and a fair pricing of the share.
PANDORA will ensure that the Company is perceived as
visible, accessible, reliable and professional by the financial
markets and that PANDORA is regarded among the best
relative to peers. This will be achieved by complying with
the rules and legislation for listed companies on Nasdaq
Copenhagen and PANDORA’s internal policies.
PANDORA will endeavour to maintain a high and uniform
level of information from the Company and ensure that
information is channelled back from the stock market to the
Executive Board and the Board of Directors. Furthermore,
PANDORA will continuously ensure awareness of, and
confidence in, the Company’s vision, strategy, policies and
decisions in the capital market.
Spokespersons
The following functions are authorised to communicate
with the investment community (including analysts,
stockbrokers, individuals and institutional investors) unless
otherwise agreed:
• Chairman of the Board of Directors
• Executive Board
• Investor Relations
Company announcements
The publication of company announcements complies
with the rules in Danish legislation. Immediately after
publication, the information is published on PANDORA’s
website. Regulatory company announcements and
financial reports are published in English and Danish. To
ensure swift access to company announcements and press
releases, PANDORA invites all interested parties to sign
up to email alerts on the investor section of the Company’s
website.
Meetings
It is the Company’s policy to hold meetings with interested
investors and analysts regularly in both large and small
groups and individually. At such meetings, PANDORA’s
general circumstances are discussed, but insider
information is never disclosed.
When asked to review analyst draft reports, PANDORA
will limit its review and comments to the following:
• correcting historical factual information only
• pointing out information that is in the public domain
• provide information that PANDORA believes is clearly
non-material
• discussing general factors that might influence the
underlying assumptions used for future projections
In 2014, PANDORA held more than 300 meetings with
investors and analysts.
Silent period
For a period of four weeks prior to the planned release
of any interim financial reports, PANDORA does not
comment on matters related to financial results or
expectations.
46 • SHAREHOLDER INFORMATION PANDORA ANNUAL REPORT 2014
the Company’s website at the same time as the event or as
soon as possible afterwards. Planned activities and events
can be tracked via the online financial calendar on the
Company’s website.
Capital markets days and similar events
PANDORA holds capital markets days and similar events
as appropriate. All presentations are available on the
Company’s website at the same time as the event or as soon
as possible afterwards.
Conference call
Upon the release of the financial statements and other
major news, PANDORA holds conference calls or video
transmissions that can be followed from its website at
the same time as the meeting, along with accompanying
presentations.
External conferences and presentations
Presentations from conferences, road shows, investor
meetings and other investor-related events are available on
Financial calendar 2015
17 February 2015 Annual Report 2014
18 March 2015 Annual General Meeting
23 March 2015 Payment of annual dividend
12 May 2015 Interim report for the first quarter
of 2015
11 August 2015 Interim report for the second quarter
of 2015
10 November 2015 Interim report for the third quarter
of 2015
Share information
Exchange: Nasdaq Copenhagen
Trading symbol: PNDORA
Identification number/ISIN: DK0060252690
Number of shares: 128,115,820 of DKK 1
each with 1 vote
Share classes: 1
GICS: 25203010
Sector: Apparel, Accessories & Luxury
Goods
Segment: Large
SHARE PRICE DEVELOPMENT 2014
DKK
FebJan Mar Apr May June July Aug Sep Oct Nov Dec
300
275
250
225
400
375
350
325
500
475
450
425
600
575
550
525
200
SHAREHOLDER INFORMATION • 47
Analysts covering PANDORA
Firm Analyst Contact information
ABG Sundal Collier Michael V. Rasmussen Email: Michael.r[email protected]
Phone: +45 33 18 61 16
Alm. Brand Markets Jesper Christensen Email: [email protected]
Phone: +45 35 47 71 97
Bank of America Merrill Lynch Stephanie D’ath Email: [email protected]
Phone: +44 207 996 9204
Carnegie Lars Topholm Email: [email protected]
Phone: +45 32 88 03 53
Citi Research Christine Jensen Email: [email protected]
Phone: +44 207 986 4008
Danske Bank Poul Ernst Jessen Email: P[email protected]
Phone: +45 45 12 80 48
Goldman Sachs William Hutchings Email: [email protected]
Phone: +44 207 051 3017
HSBC Antoine Belge Email: [email protected]
Phone: +33 1 56 52 43 48
J.P. Morgan Cazenove Chiara Battistini Email: [email protected]
Phone: +44 207 134 5417
Jyske Bank Frans Høyer Email: F[email protected]
Phone: +45 89 89 70 33
Kepler Cheuvreux Stefan Billing Email: Sbilling@keplercheuvreux.com
Phone: +46 8 723 51 48
Nordea Patrik Setterberg Email: P[email protected]
Phone: +45 33 33 62 94
Nykredit Klaus Kehl Email: Kehl@nykredit.dk
Phone: +45 44 55 47 28
SEB Kristian Godiksen Email: [email protected]
Phone: +45 33 28 33 09
Sydbank Søren Løntoft Hansen Email: [email protected]
Phone: +45 74 37 44 64
• AV
All glass for PANDORA’s around 50 different Murano charm
designs originates from the Murano island, off the coast of Venice
in Italy. The glass is transported to our crafting facilities in Thailand,
where our craftspeople turn it into charms.
FINANCIAL
REVIEW
FINANCIAL HIGHLIGHTS
CONCEPT STORES
REVENUE
TAX RATE
CAPEXEBITDA MARGIN
FREE CASH FLOW
36.0%
3,868
DKK million
1,410
11,942
DKK million
20.0%
455
DKK million
Revenue
0
5,000
10,000
15,000
0%
20%
40%
60%
DKKm
EBITDA margin
2014
2013
2012
2011
2010
Concept stores
0
500
1,500
1,000
0%
50%
100%
Share of branded revenue
2014
2013
2012
2011
2010
Concept
stores
2014
2013
2012
2011
2010
0
4,000
3,500
3,000
2,500
2,000
500
1,000
1,500
0%
30%
60%
90%
150%
120%
Free cash flow
Cash conversion
DKKm
0
200
400
600
2014
2013
2012
2011
2010
CAPEX
DKKm
Revenue and EBITDA Cash flow CAPEX Concept stores
FINANCIAL REVIEW • 49
FINANCIAL HIGHLIGHTS
REVENUE BY GEOGRAPHY
30% US
11% Other Americas
5% Germany
7% Australia
7% Other Asia Pacific
26% Other Europe
14% UK
REVENUE 2014 REVENUE BREAKDOWN BY GEOGRAPHY
Growth
in local
DKK million 2014 2013 Growth currency
US 3,629 3,201 13.4% 13.0%
Other Americas 1,330 955 39.3% 46.1%
Americas 4,959 4,156 19.3% 20.6%
UK 1,654 1,158 42.8% 36.1%
Germany 578 544 6.3% 6.3%
Other Europe 3,072 2,058 49.3% 48.9%
Europe 5,304 3,760 41.1% 38.8%
Australia 806 681 18.4% 25.6%
Other Asia Pacific 873 413 111.4% 111.9%
Asia Pacific 1,679 1,094 53.5% 58.1%
Total 11,942 9,010 32.5% 32.7%
Revenue development
Total revenue for 2014 was DKK 11,942 million, an
increase of 32.5% or 32.7% in local currency, compared
with 2013. All major regions saw significant revenue
growth. The development was driven by significant
marketing investments, strong retail execution, global
network expansion and increasing share of branded sales
channels.
At the end of 2014, sales return provisions
corresponded to approximately 8% of revenue value which
was unchanged from 2013.
Like-for-like sales-out in concept stores in PANDORA’s
four major markets (US, UK, Germany and Australia)
developed positively in all quarters of 2014. The positive
development was driven by successful new product
launches and generally better execution in stores. About
one third of the concept stores’ sales-out was generated by
new products launched within the last 12months.
The Group’s revenue is realised in different currencies. A
10% deviation in the main currencies (1% deviation for
EUR) would have affected revenue by DKK 452 million for
USD, DKK 169 million for GBP, DKK 84 million for CAD,
DKK 31 million for EUR and DKK 81 million for AUD.
Due to the seasonal nature of the jewellery business,
higher revenue is historically realised in the second half of
the year. Refer to company announcement no. 217 for a
review of the development in Q4.
Revenue breakdown by geography
The geographical distribution of revenue in 2014 was
41.5% for the Americas compared with 46.1% in 2013,
44.4% for Europe compared with 41.7% in 2013 and
14.1% for Asia Pacific compared with 12.1% in 2013.
50 • FINANCIAL REVIEW PANDORA ANNUAL REPORT 2014
Growth in
local currency
Concept stores
in Americas
20.6%
414
STORE NETWORK,
NUMBER OF POINTS OF SALE
2014 2013 Growth
Concept stores 414 332 82
- hereof PANDORA owned 51 5 46
Shop-in-shops 683 572 111
- hereof PANDORA owned 2 - 2
Gold 881 849 32
Branded 1,978 1,753 225
Branded as % of total 58.5% 54.2%
Silver 1,094 1,056 38
White and travel retail 308 426 -118
Total PoS 3,380 3,235 145
GROWTH IN
LIKE-FOR-LIKE SALES-OUT
1
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013
vs. vs. vs. vs. vs.
Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
US 4.7% 3.7% 1.7% 8.5% 5.1%
1
Concept stores that have been open for more than 12 months
AMERICAS
Revenue in the Americas, constituting 41.5% of total
Group revenue, was up 19.3% to DKK 4,959 million in
2014 from DKK 4,156 million in 2013. Excluding foreign
exchange rate movements, the underlying revenue increase
was 20.6% compared with 2013. The increase was driven
equally by the US and Other Americas, which benefited
from the inclusion of Brazil in the region from 1 January
2014, adding DKK 171 million to revenue. The Disney
collection was launched in North America in November,
and has been very well received.
Revenue in the US, constituting 30.4% of total Group
revenue, was up 13.4% compared with 2013. The growth in
local currency was 13.0%. Growth was primarily driven by
increasing demand for PANDORA’s newer products, as well
as an improved store network. The focus on Rings in the US
supported growth, with revenue from this category having
more than tripled compared with 2013. During 2014, 38
new concept stores were opened in the US, bringing the
total number of concept stores to 315. In September 2014,
PANDORA purchased a net total of 22 concept stores in the
US from former franchisee Hannoush as part of a process
to refresh the store network. The impact of converting
wholesale revenue to retail revenue added around DKK 50
million to revenue in the US.
As in 2013, PANDORA experienced positive like-for-
like sales-out of US concept stores throughout 2014. The
strong sales-out performance was based on strong sales-
through for newly launched products.
Revenue from Other Americas was DKK 1,330 million,
an increase of 39.3% compared with 2013. The strong
development in the Canadian market continued in 2014
with revenue growth of 22% compared with 2013. Revenue
in Canada now accounts for more than 60% of revenue in
Other Americas.
The number of branded stores in Americas increased by
225 to a total of 1,978 stores during 2014. By the end of
the year, branded stores accounted for 58.5% of the total
number of stores compared with 54.2% at the end of 2013.
FINANCIAL REVIEW • 51
Growth in
local currency
Concept stores
in Europe
38.8%
786
STORE NETWORK,
NUMBER OF POINTS OF SALE
2014 2013 Growth
Concept stores 786 602 184
- hereof PANDORA owned 169 115 54
Shop-in-shops 677 628 49
- hereof PANDORA owned 68 60 8
Gold 1,380 1,332 48
Branded 2,843 2,562 281
Branded as % of total 48.6% 39.9%
Silver 1,577 2,058 -481
White and travel retail 1,431 1,794 -363
Total PoS 5,851 6,414 -563
GROWTH IN
LIKE-FOR-LIKE SALES-OUT
1
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013
vs. vs. vs. vs. vs.
Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
UK 20.6% 20.6% 26.2% 27.9% 17.9%
GER 2.3% 8.5% 10.0% 11.5% 5.7%
1
Concept stores that have been open for more than 12 months
EUROPE
Revenue in Europe, constituting 44.4% of total Group
revenue, was DKK 5,304 million corresponding to an
increase of 41.1% or 38.8% in local currency.
The UK is PANDORA’s largest single market in Europe,
accounting for 13.9% of Group revenue compared with
12.9% in 2013. Revenue in the UK was DKK 1,654 million,
up 42.8% or 36.1% in local currency compared with 2013.
Growth in the UK was primarily driven by positive sales-
out development, expansion of the store network and the
continued success of the UK eSTORE.
PANDORA experienced positive like-for-like sales-out
of UK concept stores throughout 2014. The strong sales-out
performance was driven by newness in the overall product
assortment driving a significant increase in transactions as well
as focus on the Rings category.
Germany accounts for 4.8% of 2014 Group revenue,
compared with 6.0% in 2013. Revenue in Germany was DKK
578 million and increased by 6.3% in 2014 compared with
2013.
PANDORA experienced positive like-for-like sales-out
of German concept stores throughout 2014, driven by
strong performance by PANDORA’s owned and operated
stores. As part of its ongoing efforts to improve its store
network, PANDORA opened 22 owned and operated
concept stores in Germany in 2014.
At the end of 2014, PANDORA owned and operated stores
made up 61 of the 84 concept stores in Germany.
Revenue in Other Europe was DKK 3,072 million, up
49.3% on 2013. The main drivers of growth were Italy,
France and Russia. Growth in these countries was driven by
expansion of the store network and continued high like-for-
like growth. However, growth in Russia slowed down in Q4.
Revenue for the three new markets constituted around 60% of
revenue from Other Europe in 2014.
During 2014, the number of branded stores in Europe
increased by 281 to a total of 2,843 stores, in line with
PANDORA’s overall strategy to increase branded sales. The
share of branded stores increased compared with 2013,
accounting for 48.6% of the total number of stores by the end
of 2014 compared with 39.9% in 2013.
The total number of stores in Europe decreased by 563 to
a total of 5,851 in 2014 due to the closing of 844 unprofitable
unbranded stores.
At the end of 2014, PANDORA had eSTOREs in seven
European countries.
52 • FINANCIAL REVIEW PANDORA ANNUAL REPORT 2014
STORE NETWORK,
NUMBER OF POINTS OF SALE
2014 2013 Growth
Concept stores 210 166 44
- hereof PANDORA owned 31 26 5
Shop-in-shops 195 172 23
- hereof PANDORA owned - - -
Gold 139 148 -9
Branded 544 486 58
Branded as % of total 80.6% 77.1%
Silver 73 73 -
White and travel retail 58 71 -13
Total PoS 675 630 45
GROWTH IN
LIKE-FOR-LIKE SALES-OUT
1
Q4 2014 Q3 2014 Q2 2014 Q1 2014 Q4 2013
vs. vs. vs. vs. vs.
Q4 2013 Q3 2013 Q2 2013 Q1 2013 Q4 2012
AUS 20.0% 22.9% 33.0% 33.6% 25.5%
1
Concept stores that have been open for more than 12 months
ASIA PACIFIC
Growth in
local currency
Concept stores
in Asia Pacific
58.1%
210
Revenue in Asia Pacific was DKK 1,679 million, constituting
14.1% of total Group revenue, and corresponding to an
increase of 53.5% or 58.1% in local currency compared
with 2013. Growth was driven by a positive development in
most of the region.
Revenue in Australia, constituting 6.7% of Group revenue,
increased by 18.4% in 2014 compared with 2013. In local
currency, the growth was 25.6%. The growth in Australia
reflected continued strong sales-out growth, fuelled by
successful new launches, as well as an expansion of the
branded store network. The Rings category is performing
well in Australia and revenue from this category was up 52%
compared with 2013. This category represented around 18%
of revenue for the year compared with 14% in 2013.
PANDORA experienced positive like-for-like sales-out of
Australian concept stores throughout 2014. The positive
development was primarily due to an increase in store
traffic driven by newness in the stores.
Revenue from Other Asia Pacific, constituting 7.3% of
total Group revenue, increased by 111.4% in 2014 compared
with 2013. The increase was primarily driven by Hong Kong,
Singapore and Taiwan in a combination of strong like-for-like
growth and improvement of the store network.
In Asia Pacific, the distribution network increased by 45
shops to a total of 675 in 2014. The increase was primarily
related to an increase in branded stores, which accounted for
80.6% of the total number of stores compared with 77.1% at
the end of 2013.
FINANCIAL REVIEW • 53
STORE NETWORK,
NUMBER OF POINTS OF SALE
2014 2013 Growth
Concept stores 1,410 1,100 310
- hereof PANDORA owned 251 146 105
Shop-in-shops 1,555 1,372 183
- hereof PANDORA owned 70 60 10
Gold 2,400 2,329 71
Branded 5,365 4,801 564
Branded as % of total 54.2% 46.7%
Silver 2,744 3,187 -443
White and travel retail 1,797 2,291 -494
Total PoS 9,906 10,279 -373
REVENUE BREAKDOWN BY
SALES CHANNELS
DKK million 2014 2013 Growth
Concept stores 6,741 4,451 51.4%
Shop-in-shops 2,008 1,648 21.8%
Gold 1,471 1,314 11.9%
Total branded 10,220 7,413 37.9%
Silver 791 749 5.6%
White and travel retail 538 575 -6.4%
Total unbranded 1,329 1,324 0.4%
Total direct 11,549 8,737 32.2%
3rd party 393 273 44.0%
Total revenue 11,942 9,010 32.5%
SALES CHANNELS
AND PRODUCT MIX
Direct distribution accounted for 96.7% of revenue in 2014
compared with 97.0% in 2013. The increase in distributor
revenue showed growth in all markets, but was primarily
driven by strong performance in Spain.
Branded sales accounted for 88.5% of total direct
sales compared with 84.8% in 2013. Underperforming
unbranded stores are being closed across all regions in
order to improve the quality of revenue and focus on
branded store performance and, as a consequence, the
number of unbranded points of sale decreased by 937
stores compared with 2013.
Concept stores accounted for 56.4% of total revenue in
2014 compared with 49.4% in 2013 and PANDORA opened
net 310 new concept stores and 183 shop-in-shops during
2014. The expansion of the store network in PANDORA’s
new markets continues, and the network increased by 137
concept stores and 53 shop-in-shops in 2014.
Revenue from PANDORA’s owned and operated stores,
including all PANDORA eSTOREs, increased 83%
compared to last year and corresponded to 17% of Group
revenue compared with around 12% in 2013. The growth
in retail revenue was driven by strong in-store execution
resulting in positive like-for-like growth as well as the
addition of 115 new owned and operated stores in 2014 to
a total of 251 concept stores and 70 shop-in-shops.
PRODUCT OFFERING
Revenue from Charms was DKK 7,933 million in 2014,
up 26.1% on 2013, while revenue from Silver and gold
charm bracelets increased by 23.3% compared with 2013.
The two categories represented 78.4% of total revenue in
2014 compared with 82.7% of total revenue in 2013. In
November, the Disney collection - comprising 41 Disney
54 • FINANCIAL REVIEW PANDORA ANNUAL REPORT 2014
PRODUCT MIX
Share of
revenue
DKK million 2014 2013 Growth 2014
Charms 7,933 6,293 26.1% 66.5%
Silver and gold charm bracelets 1,427 1,157 23.3% 11.9%
Rings 1,192 550 116.7% 10.0%
Other jewellery 1,390 1,010 37.6% 11.6%
Total revenue 11,942 9,010 32.5% 100.0%
products - was launched in North America, and initial
feedback has been positive.
Revenue from Rings was DKK 1,192 million, an
increase of 116.7% compared with 2013. The revenue
growth in most markets reflected the improved offering
as well as an increased commercial effort. This category
represented 10.0% of total revenue compared with 6.1%
in2013.
Revenue from Other jewellery was DKK 1,390 million,
an increase of 37.6% compared with 2013. The growth
was driven by all subcategories, in particular revenue from
other bracelets (including bangles), necklaces and earrings.
Other jewellery represented 11.6% of total revenue in 2014
compared with 11.2% in2013.
In 2014, the average sales price (ASP) recognised by
PANDORA was DKK 140, compared with DKK 130 in
2013. The increase in ASP was mainly driven by a higher
share of revenue from Rings, which are sold at higher
average prices compared to individual charms as well as
a proportionally higher share of revenue from PANDORA
owned and operated stores. Prices for each individual
product were virtually unchanged compared with 2013.
FINANCIAL REVIEW • 55
INCOME STATEMENT
COST DEVELOPMENT
Share of Share of
revenue revenue
DKK million 2014 2013 Growth 2014 2013
Cost of sales 3,519 3,011 16.9% 29.5% 33.4%
Gross profit 8,423 5,999 40.4% 70.5% 66.6%
Sales and distribution expenses 1,957 1,517 29.0% 16.4% 16.8%
Marketing expenses 1,143 880 29.9% 9.6% 9.8%
Administrative expenses 1,251 921 35.8% 10.5% 10.2%
Total costs 7,870 6,329 24.3% 65.9% 70.2%
GROSS PROFIT
Gross profit was DKK 8,423 million in 2014 compared with
DKK 5,999 million in 2013, resulting in a gross margin
of 70.5% in 2014 compared with 66.6% in 2013. The
increase in gross margin was mainly due to lower prices
for silver and gold, as well as a higher share of revenue
for PANDORA owned and operated stores, which have a
higher gross margin compared with wholesale revenue.
Cost of sales is impacted by hedging of raw
materials. Excluding hedging and the time lag effect from
inventories, the underlying gross margin would have been
approximately 73% based on the average gold (USD 1,266/
oz) and silver (USD 19.08/oz) market prices in 2014. Based
on these assumptions, a 10% deviation in quarterly average
gold and silver prices would impact our gross margin by
approximately +/- 1 percentage points. Reference is made
to note 4.4.
COST
Total costs for 2014, including depreciation and amortisation,
were DKK 7,870 million, an increase of 24.3% compared
with 2013. The increase was primarily due to increasing
sales. Costs corresponded to 65.9% of revenue for the year
compared with 70.2% in 2013.
OPERATING EXPENSES
Operating expenses in 2014 were DKK 4,351 million
compared with DKK 3,318 million in 2013, representing
36.4% of revenue in 2014 compared with 36.8% in 2013.
Sales and distribution expenses increased to DKK
1,957 million in 2014 from DKK 1,517 million in 2013, an
increase of 29.0%, and corresponding to 16.4% of revenue
in 2014 compared with 16.8% in 2013. The nominal
increase in sales and distribution expenses was primarily
driven by increasing sales efforts and an increase in the
number of PANDORA-owned stores (321 stores in 2014
compared with 206 stores in 2013).
Marketing expenses in 2014 were 9.6% of revenue
compared with 9.8% in 2013. Marketing expenses
increased to DKK 1,143 million in 2014 from DKK 880
million in 2013. The increase was due to higher PR and
media activity.
Administrative expenses amounted to DKK 1,251
million in 2014 compared with DKK 921 million in 2013,
representing 10.5% of revenue, up from 10.2% in 2013.
The increase in administrative expenses was primarily due
to costs related to relocation of offices, higher IT costs and
increased headcount.
56 • FINANCIAL REVIEW PANDORA ANNUAL REPORT 2014
REGIONAL
EBITDA MARGINS
2014
vs. 2013
2014 2013 (% pts)
Americas 41.4% 42.6% -1.2%
Europe 43.3% 36.1% 7.2%
Asia Pacific 49.5% 37.8% 11.7%
Unallocated costs -7.4% -7.4% -
Group EBITDA margin 36.0% 32.0% 4.0%
SENSITIVITY ANALYSIS
ON CURRENCY
1
Change in
DKK million exchange rate Revenue EBITDA
USD + 10% 452 164
CAD + 10% 84 73
AUD + 10% 81 60
GBP + 10% 169 138
EUR + 1% 31 21
THB +10% - -163
1
Revenue and EBITDA would have been impacted by the above
amounts if exchange rates in 2014 had been higher than the real-
ised exchange rates. The impact would have been the opposite if
exchange rates had been lower.
EBITDA
EBITDA for 2014 increased by 49.0% to DKK 4,294
million, resulting in an EBITDA margin of 36.0% compared
with 32.0% in 2013.
The EBITDA margin for Americas was 41.4%, down 1.2
percentage points compared with 2013. The decrease was
partially due to the inclusion of Brazil in Other Americas
(previously included in Other Europe), which had a diluting
effect on margins of approximately one percentage point.
Furthermore, EBITDA margin was negatively impacted by the
purchase of inventory from a net total of 22 concept stores
from US jeweller Hannoush at wholesale prices which will
continue to impact EBITDA negatively until sold out. The
EBITDA margin was also affected by the improvement in gross
margin from lower raw material prices, which was partially
offset by nominally higher customs cost in Canada and Brazil.
The EBITDA margin for Europe increased from 36.1% in
2013 to 43.3% in 2014. The increase in Europe was primarily
driven by the increase in gross margin as well as improved
leverage on the cost base from an increase in revenue -
primarily in the UK, Italy and France.
The EBITDA margin for Asia Pacific region improved by
11.7 percentage points to 49.5% in 2014. The improvement
was primarily driven by higher revenue in the region as well
as improved gross margin.
Unallocated costs were 7.4% of revenue in 2014
compared with 7.4% in 2013.
EBITDA is impacted by different currencies. A 10% increase
in average exchange rates for the main currencies (1%
deviation for EUR) would impact EBITDA by approximately
DKK 164 million for USD, DKK 138 million for GBP, DKK
73 million for CAD, DKK 21 million for EUR, DKK 60
million for AUD and DKK -163 million for THB.
EBIT
EBIT for 2014 increased to DKK 4,072 million (2013: DKK
2,681 million), an increase of 51.9% compared with 2013,
resulting in an EBIT margin of 34.1% for 2014 versus 29.8%
in 2013.
NET FINANCIALS
Net financials amounted to an expense of DKK 200 million in
2014 compared with income of DKK 61 million in 2013. The
decrease in net financials was mainly related to unrealised
exchange rate losses.
INCOME TAX EXPENSE
Income tax expense was DKK 774 million in 2014
compared with DKK 522 million in 2013, corresponding to
an effective tax rate of 20% for 2014 compared with 19%
in 2013.
FINANCIAL REVIEW • 57
DEVELOPMENT IN NET WORKING CAPITAL
Share of Share of
2014 vs. revenue revenue
DKK million 2014 2013 2013 (%) 2014 2013
Inventories 1,684 1,490 13.0% 14.1% 16.5%
Trade receivables 1,110 895 24.0% 9.3% 9.9%
Trade payables -804 -539 49.2% -6.7% -6.0%
Other -1,556 -837 85.9% -13.0% -9.3%
Total 434 1,009 -57.0% 3.6% 11.2%
BALANCE SHEET
AND CASH FLOW
PANDORA generated a free cash flow of DKK 3,868
million in 2014 compared with DKK 1,956 million in 2013
corresponding to a cash conversion of 124.9% compared
with 88.1% in 2013. The improved cash flow was primarily
driven by increasing profits as well as a favourable
movement in working capital.
Operating working capital at the end of 2014 was 16.7% of
revenue, compared with 20.5% at the end of 2013.
Inventories were DKK 1,684 million, up 13.0% on 2013,
primarily driven by higher production as a consequence of high-
er revenue. Compared with 2013, silver and gold prices affected
inventories with a decrease of approximately 17%. However,
this decrease was more than offset by the higher production.
Trade receivables increased to DKK 1,110 million in 2014
(9.3% of revenue) from DKK 895 million in 2013 (9.9% of
revenue).
Trade payables increased to DKK 804 million in 2014
compared with DKK 539 million in 2013. The increase was
primarily related to a higher level of activity.
PANDORA invested a total of DKK 455 million in
capital expenditure (CAPEX) in 2014, including intangible
assets of DKK 164 million mainly related to key money
in connection with the opening of PANDORA-owned
stores and IT investments. Investments in property, plant
and equipment of DKK 291 million mainly consisted of
investments in crafting facilities in Thailand, office reloca-
tions and leasehold improvements related to the opening
of several stores during the year. CAPEX was 3.8% of 2014
revenue.
During 2014, DKK 2,400 million was used to purchase
own shares related to the share buyback programme launched
on 18 February 2014. At 31 December 2014, PANDORA held
7,216,058 treasury shares, corresponding to 5.6% of the share
capital.
Interest-bearing debt was DKK 10 million at the end of 2014
compared with DKK 49 million at the end of 2013.
Cash amounted to DKK 1,131 million at the end of 2014
compared with DKK 686 million at the end of 2013.
Net interest-bearing debt (NIBD) at the end of 2014 was
DKK -1,121 million corresponding to a ratio of -0.3 to EBITDA
(NIBD/EBITDA).
At PANDORA, we carefully select the highest quality gold,
silver, gemstones, cultured pearls and stones and other
jewellery materials in order to design outstanding pieces of
jewellery, accessible to women all over the world.
FINANCIAL
STATEMENTS
58 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
DKK million Notes 2014 2013
CONSOLIDATED INCOME STATEMENT
Revenue 2.1, 2.2 11,942 9,010
Cost of sales 2.3 -3,519 -3,011
Gross profit 8,423 5,999
Sales, distribution and marketing expenses 2.3 -3,100 -2,397
Administrative expenses 2.3 -1,251 -921
Operating profit 2.2 4,072 2,681
Finance income 4.6 14 167
Finance costs 4.6 -214 -106
Profit before tax 3,872 2,742
Income tax expense 2.5 -774 -522
Net profit for the year 3,098 2,220
Attributable to:
Equity holders of PANDORA A/S 3,098 2,220
Net profit for the year 3,098 2,220
Earnings per share, basic (DKK) 4.2 25.0 17.2
Earnings per share, diluted (DKK) 4.2 24.7 17.0
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Net profit for the year 3,098 2,220
Items that may be reclassified to profit (loss) for the year
Exchange rate differences on translation of foreign subsidiaries 537 -355
- Commodity hedging instruments:
Realised in cost of sales -5 -
Realised in net financials 12 -
Realised in inventories 171 268
Value adjustments -172 -341
- Foreign exchange hedging instruments:
Realised in net financials 38 -9
Value adjustments -62 -16
Income tax on other comprehensive income 2.5 5 6
Other comprehensive income, net of tax 524 -447
Total comprehensive income for the year 3,622 1,773
Attributable to:
Equity holders of PANDORA A/S 3,622 1,773
Total comprehensive income for the year 3,622 1,773
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
CONSOLIDATED FINANCIAL STATEMENTS • 59
CONSOLIDATED
BALANCE SHEET
AT 31 DECEMBER
DKK million Notes 2014 2013
ASSETS
Goodwill 2,080 1,904
Brand 1,053 1,053
Distribution network 268 300
Distribution rights 1,047 1,042
Other intangible assets 411 318
Total intangible assets 3.1 4,859 4,617
Property, plant and equipment 3.2 711 497
Deferred tax assets 2.5 407 276
Other non-current financial assets 99 48
Total non-current assets 6,076 5,438
Inventories 3.3 1,684 1,490
Financial instruments 4.5 99 -
Trade receivables 3.4 1,110 895
Tax receivable 52 35
Other receivables 404 731
Cash 4.3 1,131 686
Total current assets 4,480 3,837
Total assets 10,556 9,275
EQUITY AND LIABILITIES
Share capital 4.1 128 130
Share premium 1,229 1,248
Treasury shares -2,679 -738
Reserves 729 205
Proposed dividend 1,088 823
Retained earnings 6,537 4,794
Total equity 7,032 6,462
Provisions 3.5 61 35
Deferred tax liabilities 2.5 430 471
Other non-current liabilities - 3
Total non-current liabilities 491 509
Provisions 3.5 678 471
Loans and borrowings 4.3 10 49
Financial instruments 4.5 268 148
Trade payables 804 539
Income tax payable 643 546
Other payables 630 551
Total current liabilities 3,033 2,304
Total liabilities 3,524 2,813
Total equity and liabilities 10,556 9,275
60 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER
Share Share Treasury Translation Hedging Proposed Retained Total
DKK million Notes capital premium shares reserve reserve dividend earnings equity
Equity at 1 January 2014 130 1,248 -738 348 -143 823 4,794 6,462
Net profit for the year - - - - - - 3,098 3,098
Exchange rate differences on translation of foreign subsidiaries - - - 537 - - - 537
Value adjustment of hedging instruments - - - - -18 - - -18
Tax on other comprehensive income 2.5 - - - - 5 - - 5
Other comprehensive income, net of tax - - - 537 -13 - - 524
Total comprehensive income for the year - - - 537 -13 - 3,098 3,622
Share-based payments 2.4 - - 36 - - - 134 170
Purchase of treasury shares - - -2,400 - - - -2 -2,402
Reduction of share capital -2 -19 423 - - - -402 -
Dividend paid 4.2 - - - - - -823 3 -820
Proposed dividend 4.2 - - - - - 1,088 -1,088 -
Equity at 31 December 2014 128 1,229 -2,679 885 -156 1,088 6,537 7,032
Equity at 1 January 2013 130 1,248 -38 703 -51 715 3,331 6,038
Net profit for the year - - - - - - 2,220 2,220
Exchange rate differences on translation of foreign subsidiaries - - - -355 - - - -355
Value adjustment of hedging instruments - - - - -98 - - -98
Tax on other comprehensive income 2.5 - - - - 6 - - 6
Other comprehensive income, net of tax - - - -355 -92 - - -447
Total comprehensive income for the year - - - -355 -92 - 2,220 1,773
Share-based payments 2.4 - - - - - - 64 64
Purchase of treasury shares - - -700 - - - - -700
Dividend paid 4.2 - - - - - -715 2 -713
Proposed dividend 4.2 - - - - - 823 -823 -
Equity at 31 December 2013 130 1,248 -738 348 -143 823 4,794 6,462
CONSOLIDATED FINANCIAL STATEMENTS • 61
CONSOLIDATED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
DKK million Notes 2014 2013
Profit before tax 3,872 2,742
Finance income 4.6 -14 -167
Finance costs 4.6 214 106
Amortisation, depreciation and impairment losses 222 200
Share-based payments 2.4 71 64
Change in inventories 91 -292
Change in receivables 63 -215
Change in payables and other liabilities 795 182
Other non-cash adjustments -208 169
Interest etc. received 7 3
Interest etc. paid -30 -29
Income tax paid -761 -335
Cash flows from operating activities 4,322 2,428
Acquisition of subsidiaries and activities, net of cash acquired 5.1 -174 -45
Divestment of businesses 5.1 19 -
Purchase of intangible assets 3.1 -164 -312
Purchase of property, plant and equipment 3.2 -291 -178
Change in other non-current assets -45 -25
Proceeds from sale of property, plant and equipment 23 17
Cash flows from investing activities -632 -543
Dividend paid 4.2 -820 -713
Purchase of treasury shares 4.1 -2,402 -700
Proceeds from loans and borrowings 560 41
Repayment of loans and borrowings -597 -152
Cash flows from financing activities -3,259 -1,524
Net increase (decrease) in cash 431 361
Cash at 1 January 686 341
Net exchange differences 14 -16
Net increase (decrease) in cash 431 361
Cash at 31 December 1,131 686
Cash flows from operating activities 4,322 2,428
- Interest etc. received -7 -3
- Interest etc. paid 30 29
Cash flows from investing activities -632 -543
- Acquisition of subsidiaries and activities, net of cash acquired 174 45
- Divestment of businesses -19 -
Free cash flow 3,868 1,956
Unutilised credit facilities 3,677 2,716
The above cannot be derived directly from the income statement and the balance sheet.
Accounting policies
Cash flows from operating activities are determined using
the indirect method.
Cash flows from investing activities mainly comprise
purchase of intangible assets and property, plant and equip-
ment, and business combinations.
Cash flows from financing activities comprise dividend
paid, proceeds and repayments of loans and borrowings,
and share buyback.
Cash flows in currencies other than the functional currency
are translated at the average exchange rates for the month
in question, unless these differ significantly from the rates at
the transaction dates.
NOTES
62 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
PANDORA is continuously developing the Group’s financial reporting. As part of this development, PANDORA has
restructured the consolidated financial statements in order to increase focus on what drives the Group’s performance.
The notes have therefore been grouped into five sections related to key figures. The notes contain the relevant financial
information as well as a description of accounting policies applied for the topics of the individual notes.
Section 1: Basis of reporting, p. 63
1.1 Basis of reporting, p. 63
Section 2: Results for the year, p. 65
2.1 Revenue, p. 66
2.2 Segment information, p. 67
2.3 Staff costs, p. 69
2.4 Share-based payments and employee shares, p. 70
2.5 Taxation, p. 73
Section 3: Invested capital and
working capital items, p. 75
3.1 Intangible assets, p. 76
3.2 Property, plant and equipment, p. 80
3.3 Inventories, p. 82
3.4 Trade receivables, p. 83
3.5 Provisions, p. 84
Section 4: Capital structure and
net financials, p. 85
4.1 Share capital, p. 86
4.2 Earnings per share and dividend, p. 87
4.3 Net interest-bearing debt, p. 88
4.4 Financial risks, p. 88
4.5 Financial instruments, p. 91
4.6 Net financials, p. 92
Section 5: Other disclosures, p. 93
5.1 Business combinations, p. 94
5.2 Contingent liabilities, p. 97
5.3 Related parties, p. 97
5.4 Fees to statutory auditor, p. 97
5.5 Approval of the Annual Report, p. 98
5.6 Companies in the PANDORA Group, p. 98
5.7 Financial definitions, p. 99
5.8 Events after the reporting period, p. 100
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 63
SECTION 1: BASIS OF REPORTING
This section introduces PANDORA’s accounting policies
and significant accounting estimates. A more detailed
description of accounting policies and significant estimates
related to specific reported amounts is presented in the
respective notes. This is done to provide full transparency
on the disclosed amounts, describing the relevant
accounting policy, significant estimates and numerical
disclosure for each note.
BASIS OF REPORTING
PANDORA A/S is a public limited company with its
registered office in Denmark.
The Annual Report for the period 1 January - 31
December 2014 comprises the consolidated financial
statements of PANDORA A/S and its subsidiaries (the
Group) as well as separate financial statements for the
Parent Company, PANDORA A/S.
The consolidated financial statements have been
prepared in accordance with International Financial
Reporting Standards (IFRS) as adopted by the EU and
additional Danish disclosure requirements for the annual
reports of listed companies.
The consolidated financial statements have been
prepared on a historical cost basis, except for financial
instruments, which have been measured at fair value.
The consolidated financial statements are presented in
Danish kroner and all amounts are rounded to the nearest
million (DKK million) except where otherwise indicated.
The accounting policies as described below and in
the respective notes have been used consistently for the
financial year and for the comparative figures.
Accounting policies
The overall accounting policies applied to the consolidated
financial statements as a whole are described below.
The accounting policies related to specific line items are
described in connection with the notes to which they relate.
The description of accounting policies in the notes
forms part of the overall description of accounting policies:
Revenue note 2.1
Staff costs note 2.3
Share-based payments note 2.4
Income tax note 2.5
Deferred tax note 2.5
Intangible assets note 3.1
Property, plant and equipment note 3.2
Inventories note 3.3
Trade receivables note 3.4
Provisions note 3.5
Dividend note 4.2
Net interest-bearing debt note 4.3
Financial instruments note 4.5
Net financials note 4.6
Business combinations note 5.1
The consolidated financial statements
The consolidated financial statements comprise the
financial statements of the Parent Company and its
subsidiaries. Subsidiaries are fully consolidated from the
date of acquisition, being the date on which PANDORA
obtains control, and continue to be consolidated until the
date that such control ceases. The financial statements
of the subsidiaries are prepared for the same reporting
period as the Parent Company, using consistent accounting
policies. All intercompany balances, income and expenses,
unrealised gains and losses and dividends resulting from
intercompany transactions are eliminated in full.
Foreign currency
The consolidated financial statements are presented in
DKK, which is also the functional currency of the Parent
Company. Each entity in the Group determines its own
functional currency, and items recognised in the financial
statements of each entity are measured using that functional
currency.
Transactions and balances
Transactions in foreign currencies are initially recognised
by the Group entities at their respective functional currency
rates prevailing at the date of the transaction. Monetary
assets and liabilities denominated in foreign currencies are
retranslated at the functional currency spot rate of exchange
ruling at the reporting date. All differences are recognised in
the income statement.
Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the
exchange rates at the dates of the initial transactions. Non-
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the
fair value is determined.
1.1
NOTES
64 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 1: BASIS OF REPORTING, CONTINUED
Group companies with another functional currency than DKK
The assets and liabilities of foreign operations are translated
into DKK at the rate of exchange prevailing at the reporting
date, and their income statements are translated at
exchange rates prevailing at the dates of the transactions.
Exchange differences arising on translation are recognised
in other comprehensive income. On disposal of a foreign
operation, the component of other comprehensive income
relating to that particular foreign operation is recognised in
the income statement.
The consolidated income statement
The consolidated income statement is presented based on
costs classified by function. Cost of sales comprises direct
and indirect expenses incurred to generate the revenue
for the year, comprising raw materials, consumables,
production staff and depreciation of production equipment.
Sales, distribution and marketing expenses comprise
expenses related to the distribution of goods sold and sales
campaigns, including packaging materials, brochures,
wages and salaries and other expenses related to sales
and distribution staff and depreciation of distribution
equipment.
Administrative expenses comprise expenses incurred in
the year to manage PANDORA, including expenses related
to administrative staff and amortisation, depreciation and
impairment losses.
The distribution of amortisation and depreciation is
presented in notes 3.1 and 3.2.
Implementation of new or amended standards and
interpretations
PANDORA has adopted all new or amended standards
(IFRS) and interpretations (IFRIC) as adopted by the EU and
which are effective for the financial year 1 January - 31
December 2014.
The implementation of the new or amended standards
has not had any material impact on PANDORA’s
consolidated financial statements.
Standards issued, but not yet effective
The IASB has issued a number of new IFRS standards,
amended standards, revised standards and IFRIC
interpretations, which are effective for financial years
beginning after 1 January 2014.
PANDORA is currently assessing the effect of implementing
IFRS 9 and IFRS 15 not yet adopted by the EU, expected
to be effective on 1 January 2018 and 1 January 2017
respectively. All other new or amended standards and
interpretations not yet effective are not expected to have
any material impact on PANDORA’s consolidated financial
statements.
Significant accounting estimates
In preparing the consolidated financial statements,
Management makes various accounting estimates and
assumptions which form the basis of the presentation,
recognition and measurement of PANDORA’s assets and
liabilities.
Determining the carrying amounts of some assets and
liabilities requires estimates and assumptions concerning
future events. Estimates and assumptions are based on
historical experience and other factors, which Management
assesses to be reasonable, but which by their nature involve
uncertainty and unpredictability. These assumptions may
have to be revised, and unexpected events or circumstances
may occur.
PANDORA is subject to risks and uncertainties which
may lead to actual results differing from these estimates,
both positively and negatively. Specific risks for PANDORA
are discussed in the relevant sections of the Management’s
review and in the notes.
Management regards estimates related to return
provisions, valuation of inventories and tax as key
estimates. However, all significant accounting estimates are
described in the following notes:
Taxation note 2.5
Impairment testing of intangible assets note 3.1
Valuation of inventories note 3.3
Provisions note 3.5
Litigation note 5.2
SECTION 2
RESULTS FOR THE YEAR
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 65
SECTION 2
RESULTS FOR THE YEAR
EBITDA
REVENUE GROWTH
NUMBER OF CONCEPT STORES
TAX RATE GROSS MARGIN
RINGS SHARE OF REVENUE
70.5%
10.0%
4,294
DKK million
32.5%
1,410
20.0%
This section comprises notes related to the results
for the year, including operating segment disclosures,
and provides additional information related to two of
PANDORA’s key targets: revenue and EBITDA.
In 2014, Group revenue was DKK 11,942 million
compared with DKK 9,010 million in 2013. The
continued growth in revenue across all major regions
was driven by a strong network roll-out strategy and
consistent, high like-for-like growth in all regions
supported by successful new product launches.
A detailed description of the results for the year is given
in the Financial review section of the Management´s
review.
2,053 Americas
2,298 Europe
831 Asia Pacific
EBITDA BY REGION
(DKK million)
NOTES
66 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
Accounting policies
Revenue is recognised to the extent that it is probable that
economic benefits will flow to PANDORA and the revenue
can be reliably measured and when the significant risks
and rewards of ownership of the goods have passed to the
buyer, usually on delivery of the goods. Revenue is meas-
ured at the fair value of the consideration received, exclud-
ing discounts, rebates, sales taxes and duties.
Provisions for rebates and discounts granted to
wholesalers are recognised as a reduction of revenue on the
basis of historical experience and the specific terms in the
individual agreements.
The effect of expected returns is recorded as a
reduction of gross profit, ie. revenue and cost of sales.
Where there is historical experience or a reasonably
accurate estimate of future returns can otherwise be made,
a provision for expected sales returns is recognised.
REVENUE
Revenue by product category
1
DKK million 2014 2013
Charms 7,933 6,293
Silver and gold charm bracelets 1,427 1,157
Rings 1,192 550
Other jewellery 1,390 1,010
Total revenue 11,942 9,010
1
Franchise fees of DKK 146 million (2013: DKK 118 million) are included in the above figures since it is allocated to the relevant product categories.
2.1
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
7,933 Charms
1,427 Silver and gold
charm bracelets
1,192 Rings
1,390 Other jewellery
Revenue by product category
DKK million
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 67
SEGMENT INFORMATION
PANDORA’s activities are segmented on the basis of
geographical areas in accordance with the management
reporting structure.
In determining reporting segments, a number of
segments have been aggregated. All segments derive their
revenue from the types of products shown in the product
information in note 2.1.
The Group operates with two performance measures,
both measured on business performance. EBITDA is the
primary performance measure and EBIT the secondary
performance measure.
Management monitors the segment profit of the
operating segments separately for the purpose of making
decisions about resource allocation and performance
management. Segment results are measured as EBITDA,
corresponding to ‘operating profit’ in the consolidated
financial statements before amortisation, depreciation and
impairment losses in respect of non-current assets.
Income statement
Unallocated Total
DKK million Americas Europe Asia Pacific cost Group
2014
External revenue 4,959 5,304 1,679 - 11,942
Segment profit (EBITDA) 2,053 2,298 831 -888 4,294
Amortisation, depreciation and impairment losses -222
Consolidated operating profit (EBIT) 4,072
2013
External revenue 4,156 3,760 1,094 - 9,010
Segment profit (EBITDA) 1,772 1,359 414 -664 2,881
Amortisation, depreciation and impairment losses -200
Consolidated operating profit (EBIT) 2,681
Unallocated cost mainly comprises costs at the Danish headquarters and the Thai crafting facilities.
2.2
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
NOTES
68 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
SEGMENT INFORMATION, CONTINUED
Geographic information, revenue
DKK million 2014 2013
US 3,629 3,201
Other Americas 1,330 955
Americas 4,959 4,156
UK 1,654 1,158
Denmark 48 32
Other Europe 3,602 2,570
Europe 5,304 3,760
Asia Pacific 1,679 1,094
Total revenue 11,942 9,010
No single external customer accounted for 10% or more of PANDORA’s revenue in 2014 or 2013.
Geographic information, assets
DKK million 2014 2013
US 1,411 1,286
Other Americas 45 45
Americas 1,456 1,331
Germany 619 621
Denmark 1,869 1,837
Other Europe 72 45
Europe 2,560 2,503
Australia 314 307
Thailand 494 445
Other Asia Pacific 35 31
Asia Pacific 843 783
Total intangible assets 4,859 4,617
Total property, plant and equipment
1
711 497
Deferred tax assets 407 276
Other non-current financial assets 99 48
Total current assets 4,480 3,837
Total consolidated assets 10,556 9,275
1
The crafting facilities in Thailand accounted for DKK 340 million (2013: DKK 308 million), corresponding to 47.8% of property, plant and equipment.
2.2
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 69
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
STAFF COSTS
DKK million 2014 2013
Wages and salaries 1,499 1,199
Pensions 78 62
Share-based payments 71 64
Social security costs 64 71
Other staff costs 205 105
Total staff costs 1,917 1,501
Staff costs have been recognised in the consolidated income statement:
Cost of sales 365 284
Sales, distribution and marketing expenses 947 784
Administrative expenses 605 433
Total staff costs 1,917 1,501
Average number of employees during the year 9,957 6,910
2014 2013
DKK million Base salary Bonus Shares Total Total
Compensation of key management personnel of PANDORA
Allan Leighton
1
8.7 8.0 4.0 20.7 7.1
Henrik Holmark
2
4.2 4.1 3.7 12.0 8.2
Bjørn Gulden - - - - 12.8
Sten Daugaard - - - - 21.0
Total compensation of key management personnel 12.9 12.1 7.7 32.7 49.1
DKK million 2014 2013
Compensation of Board of Directors
Peder Tuborgh, Chairman
3
0.3 -
Marcello Bottoli, former Chairman
3
1.2 1.7
Allan Leighton
1
- 1.3
Christian Frigast, Deputy Chairman 0.9 0.8
Torben Ballegaard Sørensen 0.6 0.6
Andrea Alvey 0.6 0.6
Nikolaj Vejlsgaard 0.6 0.6
Ronica Wang 0.6 0.6
Bjørn Gulden 0.6 0.2
Anders Boyer-Søgaard 0.7 0.7
Per Bank 0.5 -
Michael Hauge Sørensen 0.5 -
Total compensation of Board of Directors 7.1 7.1
1
Allan Leighton will be stepping down from his role as CEO in March 2015. As part of the severance agreement, a compensation of DKK 34.3 million in the notice
period through to end 2016 has been recognised in addition to the above. The compensation comprise DKK 10.2 million as base salary, DKK 12.0 million as bonus
and DKK 12.1 million as share-based payments. At the next general meeting, the current Board of Directors will recommend Allan Leighton as new Co-Deputy
Chairman of the Board.
2
Henrik Holmark stepped down from his position as CFO on 31 December 2014.
3
Peder Tuborgh succeeded Marcello Bottoli as Chairman of the Board on 9 October 2014.
2.3
The Group’s pension plans are primarily defined
contribution plans. PANDORA has defined benefit plans
relating to obligations to pay a defined benefit to employees
in Thailand and Italy. The defined benefit plans are
recognised at the present value of the actuarially measured
obligations. In 2014, these obligations amounted to DKK 20
million (2013: DKK 9 million). The increased obligation was
due to a combination of an increased number of employees
and increased wages and salaries.
NOTES
70 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
Executive Board Average exercise
and Board of Other price per
Directors employees Total option, DKK
Share options outstanding at 1 January 2014 263,495 1,248,090 1,511,585 0.93
Share options granted during the year 40,452 187,103 227,555 2.99
Share options exercised during the year -68,014 -102,770 -170,784 1.47
Share options lapsed during the year -25,655 -159,901 -185,556 1.71
Share options outstanding at 31 December 2014 210,278 1,172,522 1,382,800
Share options outstanding at 1 January 2013 233,870 874,253 1,108,123 0.70
Share options 2013 one-year programme - 103,295 103,295 2.10
Share options granted during the year 84,441 352,787 437,228 1.25
Share options lapsed during the year -54,816 -82,245 -137,061 0.93
Share options outstanding at 31 December 2013 263,495 1,248,090 1,511,585
Accounting policies
Wages and salaries, social security contributions, leave
and sick leave, bonuses and non-monetary benefits are
recognised in the year in which the services are rendered by
employees of PANDORA. Whenever PANDORA provides
long-term employee benefits, the costs are accrued to
match the rendering of the services by the employees.
Termination benefits are recognised at the time an
agreement between PANDORA and the employee is made
and no future service is provided by the employee in
exchange for the benefits.
SHARE-BASED PAYMENTS AND EMPLOYEE SHARES
The decision to grant share options is made by the Board
of Directors in accordance with general guidelines on
incentive payments for PANDORA A/S. Share options have
The total cost of share-based payments was DKK 71 million
(2013: DKK 64 million). The cost of share-based payments
is included in staff costs. In the remaining vesting periods,
an amount of DKK 62 million (2013: DKK 59 million) is
expected to be recognised in respect of the current share
option programmes.
As part of the severance agreement with Allan Leighton,
participation (pro rata) in the upcoming programmes
expected for 2015 and 2016 has been agreed. Salary costs
relating to this participation has been included in 2014 for
share-based payments with an amount of DKK 7 million.
For options exercised in 2014, the average share price
was DKK 354.5 at the time of vesting.
been granted to members of the Executive Board, selected
members of the Board of Directors and other key employees
in PANDORA.
Granted in 2014
In 2014, PANDORA granted a total of 227,555 share
options. The market value at the grant date was DKK 78
million. The value of the programme is recognised over the
vesting period based on the likelihood that targets for group
revenue and EBITDA for 2016 will be reached, and that the
share options will vest.
Granted in 2013
In 2013, PANDORA granted a total of 540,523 share
options in two different share-based programmes. One
programme comprises 103,295 options with a vesting
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
STAFF COSTS, CONTINUED2.3
2.4
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 71
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
SHARE-BASED PAYMENTS AND EMPLOYEE SHARES, CONTINUED2.4
period of only one year and a market value at the grant
date of DKK 14 million. The other share-based programme
comprises 437,228 options with a vesting period of three
years and a market value of DKK 64 million. The value
of the programmes is recognised over the vesting periods
based on the likelihood that targets for group revenue and
EBITDA for 2013 and 2015 respectively will be reached,
and that the share options will vest.
Granted in 2012
In 2012, PANDORA granted 1,009,977 share options.
The recognised value of the share options in the income
statement and in equity is based on the number of shares
expected to vest in February 2015 as the targets for this
programme are reached.
Number of shares in PANDORA A/S
Purchase of Sale
2013 shares of shares 2014
Executive Board
Allan Leighton 12,380 - - 12,380
Henrik Holmark 289,584 - -189,820 99,764
Total number of shares 301,964 - -189,820 112,144
Henrik Holmark -289,584 - 189,820 -99,764
Total number of shares 12,380 - - 12,380
Board of Directors
Peder Tuborgh - - - -
Marcello Bottoli 29,461 - -9,820 19,641
Christian Frigast 786,516 - -740,516 46,000
Torben Ballegaard Sørensen 12,674 - -11,000 1,674
Bjørn Gulden - 68,014 -58,000 10,014
Andrea Alvey 6,107 - - 6,107
Nikolaj Vejlsgaard 501,455 - -469,075 32,380
Ronica Wang 4,070 - - 4,070
Michael Hauge Sørensen - 600 - 600
Anders Boyer-Søgaard 4,121 - - 4,121
Per Bank - - - -
Total number of shares 1,344,404 68,614 -1,288,411 124,607
Marcello Bottoli -29,461 - 9,820 -19,641
Total number of shares 1,314,943 68,614 -1,278,591 104,966
PANDORA has established a share plan for the members of
the Board of Directors whereby the Chairman and the other
members of the Board are each required to own a minimum
number of shares corresponding to the amount of their
respective initial gross annual compensation. The members
of the Board of Directors must hold the shares for as long as
they are members of the Board of Directors of PANDORA.
NOTES
72 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
2.4 SHARE-BASED PAYMENTS AND EMPLOYEE SHARES, CONTINUED
Accounting policies
Key employees of PANDORA receive remuneration in
the form of share-based payment transactions, whereby
employees render services as consideration for equity
instruments (‘equity-settled transactions’).
Equity-settled transactions
The cost of equity-settled transactions with employees is
measured by reference to the fair value at the date on which
they are granted. The calculated fair values are based on the
Black-Scholes model for measuring share options. The cost
of equity-settled transactions is recognised together with a
corresponding increase in equity over the period in which
the performance and/or service conditions are fulfilled.
The cumulative expense recognised for equity-settled
transactions at each reporting date until the vesting date
reflects the extent to which the vesting period has expired
and PANDORA’s best estimate of the number of equity
instruments that will ultimately vest. The income statement
expense or credit for a period represents the movement in
cumulative expenses recognised at the beginning and end
of that period.
Purchase of Sale
2012 shares of shares 2013
Executive Board
Allan Leighton 12,380 - - 12,380
Sten Daugaard 10,785 - -10,785 -
Henrik Holmark 426,825 - -137,241 289,584
Total number of shares 449,990 - -148,026 301,964
Board of Directors
Marcello Bottoli 29,461 - - 29,461
Allan Leighton 12,380 - - 12,380
Christian Frigast 59,636 1,368,149 -641,269 786,516
Torben Ballegaard Sørensen 192,670 - -179,996 12,674
Andrea Alvey 6,107 - - 6,107
Nikolaj Vejlsgaard 57,630 837,158 -393,333 501,455
Ronica Wang 4,070 - - 4,070
Anders Boyer-Søgaard - 4,121 - 4,121
Total number of shares 361,954 2,209,428 -1,214,598 1,356,784
Allan Leighton transferred to Executive Board -12,380 - - -12,380
Total number of shares 349,574 2,209,428 -1,214,598 1,344,404
Assumptions
Assumptions concerning the calculation of fair value at date
of grant:
Given that the exercise price for one option equals 1%
of the market price of one share at grant date, the fair value
of one option almost equals the market value of one share
at grant date. The assumptions listed below therefore have
a very limited impact on the estimated fair value of the
options granted.
Exercise Expected Risk-free Dividend
Year of grant price volatility interest rate per share
2014 3-year 2.99 46% 0.47% 6.50
2013 1-year 2.10 48% 0.09% 5.50
2013 3-year 1.25 48% 0.16% 5.50
2012 3-year 0.52 100% 1.34% 5.50
For the above programmes, volatility is based on historical
volatility of the PANDORA share based on the preceding
two years.
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 73
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
2.5 TAXATION
Income tax expense
DKK million 2014 2013
Current income tax charge 786 561
Adjustment concerning previous years 35 136
Impact of change in tax rates 17 -57
Change in deferred tax -64 -118
Total income tax expense 774 522
Tax reconciliation
Profit before tax 3,872 2,742
Corporate tax rate in Denmark, 24.5% (2013: 25%) 949 686
Tax effect of:
Differences in foreign subsidiaries’ tax rates compared to Danish tax rate 18 52
Impact of change in tax rates 17 -57
Non-taxable income and non-deductible expenses -243 -292
Adjustment concerning previous years 35 136
Adjustments of deferred tax assets, net -2 -3
Total income tax expense 774 522
Effective income tax rate 20.0% 19.0%
Deferred tax
DKK million 2014 2013
Deferred tax at 1 January 195 362
Exchange rate adjustments -21 14
Change in deferred tax - recognised in income statement -64 -118
Change in deferred tax - recognised in statement of comprehensive income -5 -6
Change in deferred tax - recognised in statement of changes in equity -99 -
Impact of change in the Danish tax rate 17 -57
Deferred tax at 31 December 23 195
Deferred tax assets 407 276
Deferred tax liabilities 430 471
Deferred tax, net 23 195
Specification of deferred tax
Intangible assets 527 534
Property, plant and equipment -206 -13
Non-current assets and liabilities -298 -327
Tax loss carry-forwards 0 1
Deferred tax, net 23 195
Unrecognised share of tax loss carry-forwards 79 62
Latent tax liability on undistributed dividends
1
277 246
1
The latent tax liability on undistributed dividends relates to a dividend tax of 10%, which will be payable if retained earnings earned before 1 September 2012
are distributed as dividends from PANDORA Production Co. Ltd. to PANDORA A/S. At present, Management does not intend to distribute this dividend.
NOTES
74 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 2: RESULTS FOR THE YEAR, CONTINUED
Accounting policies
Income tax
The Group is taxed jointly with its Danish subsidiaries. These
subsidiaries are included in the joint taxation from the date
they are consolidated in the consolidated financial statements
and up to the date on which they are no longer consolidated.
Current tax assets and liabilities for current and prior periods
are measured at the amounts expected to be recovered from
or paid to the tax authorities. The tax rates and tax laws used
to compute the amount are those enacted or substantively
enacted, by the reporting date, in the countries where
PANDORA operates and generates taxable income.
Deferred tax
Deferred tax is provided using the balance-sheet liability
method on temporary differences at the reporting date
between the tax bases of assets and liabilities and their
carrying amounts for financial reporting purposes. Deferred
tax liabilities are recognised for all temporary differences,
except where the deferred tax liability arises from the
initial recognition of goodwill or of an asset or liability in
a transaction that is not a business combination and, at the
time of the transaction, affects neither the accounting profit
nor taxable profit or loss.
Deferred tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax credits
and unused tax losses to the extent that it is probable that
taxable profit will be available. The deductible temporary
differences and the carry-forward of unused tax credits and
unused tax losses can be offset against this profit except
where the deferred tax asset relating to the deductible
temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business
combination and, at the time of the transaction, affects
neither the accounting profit nor taxable profit or loss. In
respect of deductible temporary differences associated
with investments in subsidiaries, associates and interests
in joint ventures, deferred tax assets are recognised only to
the extent that it is probable that the temporary differences
will reverse in the foreseeable future and taxable profit will
be available against which the temporary differences can
be utilised. The carrying amount of deferred tax assets is
reviewed at each reporting date and reduced to the extent
that it is no longer probable that sufficient taxable profit will
be available to allow all or part of the deferred tax asset to
be utilised.
Deferred tax assets and liabilities are measured at the
tax rates that are expected to apply in the year when the
asset is realised or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively
enacted at the reporting date. Deferred tax items are
recognised in correlation to the underlying transaction
either in the statement of comprehensive income or directly
in equity. Deferred tax assets and deferred tax liabilities
are offset if the Group had a legally enforceable right to
offset current tax assets against current tax liabilities and the
deferred tax relates to the same taxable entity and the same
tax authority.
Significant accounting estimates
PANDORA is subject to income tax worldwide. Significant
estimates are required in determining the worldwide
accrual for income taxes, deferred tax assets and liabilities,
and provision for uncertain tax positions.
Due to significant differences in tax rates between the
Group entities, a change in the distribution of the Group’s
profit could have a significant impact on the Group’s
consolidated tax payments. For instance, the corporate tax
rate in Denmark is 24.5% (will gradually be reduced to
22% in 2016) while in Thailand PANDORA is subject to a
Board of Investment agreement (BOI) which significantly
reduces Thailand income taxes.
Under the Thailand BOI, many types of net income are
free from taxation, while other types of income are subject
to 20% tax. This rate applies to financial years beginning on
or after 1 January 2013. Before that the rate was reduced
from 30% to 23% in 2012. Under the tax legislation in
Thailand, the classification of different types of income and
expenses therefore determines the amount of tax payable.
(The BOI status of PANDORA Production Co. Ltd. has
currently been granted until Q3 2020).
PANDORA has ongoing dialogue with tax authorities
with regard to the computation of taxable income,
including the Danish and Thai authorities. In Management’s
opinion, the tax expense recognised reflects the most likely
amount required to settle the present obligation, including
potential tax cases.
2.5 TAXATION, CONTINUED
SECTION 3
INVESTED CAPITAL
AND WORKING CAPITAL ITEMS
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 75
SECTION 3
INVESTED CAPITAL
AND WORKING CAPITAL ITEMS
CAPEX
OPERATING WORKING
CAPITAL / REVENUE
16.7%455
DKK million
The notes in this section describe the assets that form
the basis for the activities of PANDORA and the related
liabilities.
Approximately 80% of invested capital is made up of in-
tangible assets, the value of which remains unchanged as
both the PANDORA brand and free cash flow continue
to grow.
Additions to invested capital in 2014 included the
acquisition of a net total of 22 concept stores from US
jeweller Hannoush, DKK 143 million.
Working capital at the end of 2014 was 16.7% of rev-
enue, compared with 20.5% at the end of 2013.
Financial risks are described in note 4.4.
Working capital
DKK million Notes 2014 2013
Inventories 3.3 1,684 1,490
Trade receivables 3.4 1,110 895
Trade payables -804 -539
Operating working capital 1,990 1,846
Other receivables 404 731
Provisions 3.5 -739 -506
Net tax payable -591 -511
Other payables -630 -551
Net working capital 434 1,009
Invested capital
DKK million Notes 2014 2013
Intangible assets 3.1 4,859 4,617
Property, plant and equipment 3.2 711 497
Other non-current financial assets 99 48
Net working capital 434 1,009
Net deferred tax liability 2.5 -23 -195
Invested capital 6,080 5,976
4,859 Intangible assets
711 Property, plant
and equipment
99 Other non-current financial assets
434 Net working capital
INVESTED CAPITAL
6,080
DKK million
INVESTED CAPITAL
NOTES
76 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
Distribution Distribution Other intangible
DKK million Goodwill Brand network rights assets Total
Cost at 1 January 2014 1,904 1,053 478 1,358 433 5,226
Acquisition of subsidiaries and activities 93 - - - 1 94
Disposal of subsidiaries and activities -6 - - - - -6
Additions - - - 5 159 164
Disposals - - - - -22 -22
Exchange rate adjustments 89 - - - 25 114
Cost at 31 December 2014 2,080 1,053 478 1,363 596 5,570
Amortisation and impairment losses at 1 January 2014 - - 178 316 115 609
Amortisation and impairment losses for the year - - 32 - 68 100
Disposals - - - - -1 -1
Exchange rate adjustments - - - - 3 3
Amortisation and impairment losses at 31 December 2014 - - 210 316 185 711
Carrying amount at 31 December 2014 2,080 1,053 268 1,047 411 4,859
Cost at 1 January 2013 1,922 1,053 478 1,358 195 5,006
Acquisition of subsidiaries and activities 30 - 3 - 13 46
Additions 44 - - - 268 312
Disposals - - -3 - -2 -5
Reclassifications - - - - -4 -4
Exchange rate adjustments -92 - - - -37 -129
Cost at 31 December 2013 1,904 1,053 478 1,358 433 5,226
Amortisation and impairment losses at 1 January 2013 - - 147 313 59 519
Amortisation and impairment losses for the year - - 34 3 63 100
Disposals - - -3 - - -3
Reclassifications - - - - -2 -2
Exchange rate adjustments - - - - -5 -5
Amortisation and impairment losses at 31 December 2013 - - 178 316 115 609
Carrying amount at 31 December 2013 1,904 1,053 300 1,042 318 4,617
The majority of the intangible assets have been acquired through business combinations.
There were no impairment losses in 2014 or 2013.
3.1 INTANGIBLE ASSETS
DKK million 2014 2013
Amortisation, depreciation and impairment losses for the year
Intangible assets 100 100
Property, plant and equipment 122 100
Total 222 200
Amortisation, depreciation and impairment losses have been recognised in the income statement:
Cost of sales 49 41
Sales, distribution and marketing expenses 92 83
Administrative expenses 81 76
Total 222 200
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 77
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.1 INTANGIBLE ASSETS, CONTINUED
Goodwill
Goodwill was acquired in connection with the acquisitions
of PANDORA Jewelry A/S, PANDORA Jewelry America ApS
(subsequently merged with PANDORA A/S), PANDORA
Production Co. Ltd. (Thailand) and Pilisar ApS on 7 March
2008, the acquisition of AD Astra Holdings Pty Ltd. in July
2009 and the acquisition of PANDORA Jewelry Central
Western Europe A/S in 2010. Additions in 2014 mainly
relate to the acquisition of a net total of 22 concept stores
from US jeweller Hannoush.
Brand
The brand ‘PANDORA’ is the only brand of the Group that
is capitalised as an asset in the financial statements. It is
built on a group of complementary intangible assets relating
to the brand, domain name, product, image and customer
experience related to products sold under the PANDORA
brand. The brand was acquired with the PANDORA core
business in 2008.
Distribution network
The distribution network covers PANDORA’s relations with
its distributors. The main part of the distribution network
was acquired with the PANDORA core business in 2008.
Distribution rights
Distribution rights are mainly related to the distribution
rights for PANDORA products in North America. They were
acquired with the American distributor in 2008 and the
carrying amount was DKK 1,034 million at 31 December
2014 (2013: DKK 1,034 million).
Other intangible assets
Other intangible assets mainly comprise software
implementation projects.
Accounting policies
All intangible assets are tested for impairment at least
annually. Reference is made to ‘Significant accounting
estimates’ below.
Goodwill
Goodwill is initially recognised at the amount by which
the purchase price for a business combination exceeds the
recognised value of the identifiable assets, liabilities and
contingent liabilities. Goodwill comprises future growth
expectations, buyer-specific synergies, the workforce in
place and know-how. Subsequent to initial recognition,
goodwill is measured at cost less accumulated impairment
losses. Goodwill is not amortised, and impairment losses
charged in previous years are not reversed.
Brand
Brand is measured based on the Relief from Royalty
method. The brand is considered to have an indefinite
useful life. Based on the very long future life expected for
the brand, any set time would be arbitrary.
Distribution network
The distribution network is initially recognised at fair value
based on an estimation of the costs the entity avoids by
owning the intangible assets and not needing to rebuild it
(the cost approach). The distribution network is amortised
over an expected life of 15 years.
Distribution rights
The distribution rights for PANDORA products in the North
American markets are measured based on a residual model,
since the distribution agreement underlying the distribution
rights is non-terminable. Consequently, the distribution
Carrying amount of recognised goodwill:
DKK million 2014 2013
PANDORA core business
1
751 713
PANDORA Jewelry America ApS, the American distributor 261 231
AD Astra Holdings Pty Ltd., the Australian distributor 307 295
PANDORA Jewelry Central Western Europe A/S, the German distributor 602 591
Other distributors 159 74
Total 2,080 1,904
1
PANDORA’s acquisition of all of the voting shares in PANDORA Production Co. Ltd. and the Danish companies Populair A/S and Pilisar ApS. The companies
comprise the Danish headquarters and the Thai crafting facilities.
NOTES
78 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.1 INTANGIBLE ASSETS, CONTINUED
rights are considered to have an indefinite usefullife.
Other acquired distribution rights are measured based
on the Multi-period Excess Earnings model and amortised
over their useful lives.
Other intangible assets
Software is measured at cost and amortised over three years.
Significant accounting estimates
At each reporting date, PANDORA assesses whether there
is any indication that an asset may be impaired. If any
indication exists, or when annual impairment testing of
an asset is required, PANDORA estimates the recoverable
amount of the asset.
The recoverable amount of an asset is the higher of the
fair value of the asset or cash-generating unit (CGU) less
costs to sell and its value in use. The recoverable amount
is determined for the individual asset, unless the asset does
not generate cash flows that are independent of those from
other assets or groups of assets. Where the carrying amount
of an asset or CGU exceeds its recoverable amount, the
asset is considered impaired and is written down to its
recoverable amount.
In assessing the value in use, the estimated future cash
flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of
the time value of money and the risks specific to the asset.
In determining fair value less costs to sell, an appropriate
valuation model is used.
Goodwill and distribution rights are allocated to five
CGUs: Americas, UK, Central Western Europe, Australia
and distributors & travel retail. The recoverable amount has
been based on a calculation of the value in use using cash
flow estimates based on budgets and expectations for the
next three years. The long-term growth rate in the terminal
period has been set to equal the expected long-term rate of
inflation of 2.0% (2013: 2.0%).
The brand is applied and supported globally in all of
the Group’s entities. Through common strategy and product
development at Group level and marketing in the individual
sales entities, the brand is maintained and preserved.
Therefore, the brand is tested for impairment at Group level.
The calculations of the recoverable amounts of the
CGUs or groups of CGUs are based on the following key
assumptions:
Discount rates reflect the current market assessment of
the risks specific to each CGU. The Group discount rates
have been estimated based on a weighted average cost of
Allocation of intangible assets on CGUs
Other
Distribution Distribution intangible
DKK million Goodwill Brand network rights assets Total
2014
Americas 605 - - 1,034 46 1,685
UK 43 - - - - 43
Central Western Europe 705 - - 13 16 734
Australia 482 - - - 6 488
Distributors & travel retail 207 - - - 13 220
Group 38 1,053 268 - 330 1,689
Total 2,080 1,053 268 1,047 411 4,859
2013
Americas 448 - - 1,034 22 1,504
UK 36 - - - - 36
Central Western Europe 700 - - 8 18 726
Australia 461 - - - 12 473
Distributors & travel retail 226 - - - 4 230
Group 33 1,053 300 - 262 1,648
Total 1,904 1,053 300 1,042 318 4,617
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 79
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.1 INTANGIBLE ASSETS, CONTINUED
Discount rates and growth rates in terminal period
Central Western Distributors &
Americas UK Europe Australia travel retail Group
2014
Discount rate before tax 12.2% 10.8% 14.9% 14.1% 11.8% 12.1%
Growth rate in the terminal period 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
2013
Discount rate before tax 11.9% 10.9% 12.6% 13.4% 12.7% 12.5%
Growth rate in the terminal period 2.0% 2.0% 2.0% 2.0% 2.0% 2.0%
capital for the industry. The rates have further been adjusted
to reflect the market assessment of any risk specific to
theCGU.
The EBIT figures used in the impairment test are based
on the budget for next year, prepared and approved by
Management, and the expectations for the two subsequent
years. The EBIT margin in the budget of the individual CGU
is based on historical experience and expectations to:
• revenue growth considering development in network
(store openings, retail/wholesale share), product mix
and market share
• cost of sales based on metal consumption and average
lagged hedge commodity prices at the time the budget
is prepared
• OPEX development
• currency rates are based on actual rates at the time the
budget is prepared.
The net working capital in the budget for next year,
relative to the revenue of the individual CGUs, is based on
historical experience and is maintained for the remainder of
the expected lives. The working capital is thus increased on
a linear basis as the level of activity increases.
The impairment tests did not show any need for
impairment losses to be recognised. In Management’s
opinion, no probable change in any of the key assumptions
mentioned above would cause the carrying amount of the
Group or CGUs to exceed its recoverable amount.
NOTES
80 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.2 PROPERTY, PLANT AND EQUIPMENT
Land and Plant and Assets under
DKK million buildings equipment construction Total
Cost at 1 January 2014 280 478 21 779
Acquisition of subsidiaries and activities - 9 - 9
Disposal of subsidiaries and activities - -1 - -1
Additions 8 207 82 297
Disposals -1 -57 - -58
Reclassifications 15 12 -27 -
Exchange rate adjustments 40 38 2 80
Cost at 31 December 2014 342 686 78 1,106
Depreciation and impairment losses at 1 January 2014 51 231 - 282
Depreciation for the year 19 103 - 122
Disposals - -43 - -43
Exchange rate adjustments 11 23 - 34
Depreciation and impairment losses at 31 December 2014 81 314 - 395
Carrying amount at 31 December 2014 261 372 78 711
Cost at 1 January 2013 232 405 65 702
Acquisition of subsidiaries and activities - 9 - 9
Additions 20 129 33 182
Disposals -1 -50 -7 -58
Reclassifications 52 19 -63 8
Exchange rate adjustments -23 -34 -7 -64
Cost at 31 December 2013 280 478 21 779
Depreciation and impairment losses at 1 January 2013 43 187 - 230
Depreciation for the year 13 87 - 100
Disposals - -35 - -35
Reclassifications -1 7 - 6
Exchange rate adjustments -4 -15 - -19
Depreciation and impairment losses at 31 December 2013 51 231 - 282
Carrying amount at 31 December 2013 229 247 21 497
Useful lives, years 20-50
1
3-5 -
1
Land is not depreciated.
PANDORA has pledged assets at a total value of DKK 0 million (2013: DKK 0 million).
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 81
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.2 PROPERTY, PLANT AND EQUIPMENT, CONTINUED
Operating leases
Land and Plant and
DKK million buildings equipment Total
Future minimum lease payments on existing contracts at 31 December
Within 1 year 303 23 326
Between 1- 5 years 826 27 853
After 5 years 371 1 372
Total 2014 1,500 51 1,551
Within 1 year 182 50 232
Between 1- 5 years 417 15 432
After 5 years 128 - 128
Total 2013 727 65 792
PANDORA has a large number of individually insignificant
leases. The leases are mainly for stores, offices and copy
machines etc. The increase in commitments in 2014 is
mainly related to new owned and operated concept stores,
including the stores acquired from US jeweller Hannoush,
and the lease for a new Danish headquarters from April
2016.
Accounting policies
Property, plant and equipment is stated at cost, net of
accumulated depreciation and/or any accumulated
impairment losses. Depreciation is calculated on a straight-
line basis over the estimated useful life of the asset.
Leases
The determination of whether an arrangement is, or
contains, a lease is based on the substance of the
arrangement at the inception date: whether fulfilment of
the arrangement is dependent on the use of a specific asset
or the arrangement conveys a right to use the asset.
Operating lease payments are recognised as expenses
in the income statement on a straight-line basis over the
lease term.
NOTES
82 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
3.3 INVENTORIES
DKK million 2014 2013
Raw materials and consumables 412 327
Work in progress 71 78
Finished goods 1,054 948
Point of sale materials 147 137
Total inventories at 31 December 1,684 1,490
Inventory write-downs at 1 January 300 208
Write-downs during the year 227 265
Utilised in the year -264 -168
Reversal of write-downs in the year -17 -5
Inventory write-downs at 31 December 246 300
The write-downs of inventories are recognised in Cost of sales DKK 130 million (2013: DKK 209 million), and Distribution expenses DKK 80 million
(2013: DKK 51 million).
Inventories at 31 December 2014 include inventories at
a nominal value of DKK 1,930 million (2013: DKK 1,790
million), which have been written down to DKK 1,684
million (2013: DKK 1,490 million).
Silver and gold prices decreased in 2014, leading to losses
on re-melting of goods, with a negative impact on gross
profit of DKK 136 million (2013: DKK 189 million).
Accounting policies
Inventories are valued at the lower of cost and net realisable
value. Costs incurred in bringing each product to its present
location and condition are accounted for as follows:
• raw materials – purchase costs on a first-in, first-out
basis
• finished goods and work in progress – cost of direct
materials and labour and a proportion of production
overheads based on normal operating capacity, but
excluding borrowing costs.
Significant accounting estimates
Net realisable value
Net realisable value is the re-melt value or the estimated
selling price less estimated costs of completion and
distribution. The re-melt value is based on the weight of
silver and gold in the products and the market prices for
silver and gold on the reporting date. Future changes in the
market prices of silver or gold will result in changes in the
re-melt value.
PANDORA divides inventories into four categories:
introduction, released-for-sale, phasing-out and
discontinued. Group Supply Chain monitors the sales-out
of all products and, based on sales ratios, some products
may be regarded as slow-moving and thus assigned to
the categories phasing-out or discontinued. The part of
discontinued inventory that is not expected to be sold is
written down to re-melt value. Inventories in the phasing-
out category can be sold on normal terms or transferred
to the discontinued category, and the amount expected to
be transferred to discontinued is therefore written down as
described above.
Sales forecasts are used to assess which products in
the released-for-sale category need to be written down.
Inventories exceeding estimated demand for the next 12
months are written down.
Historically, PANDORA has not made any significant
write-downs as a result of damaged goods.
Capitalised production overheads
Capitalised production overheads are calculated using
a standard cost method, which is reviewed regularly
to ensure relevant assumptions concerning capacity
utilisation, lead times and other relevant factors. The
carrying amount of capitalised production overheads
was DKK 39 million at 31 December 2014 (2013: DKK
24million).
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 83
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
TRADE RECEIVABLES
DKK million 2014 2013
Analysis of trade receivables that were past due at 31 December
Up to 30 days 177 144
Between 30 and 60 days 34 58
Between 60 and 90 days 26 19
Over 90 days 1 21
Total past due 238 242
Not past due 872 653
Total trade receivables at 31 December 1,110 895
Analysis of movements in bad debt provisions
Provisions at 1 January 33 32
Additions 6 6
Utilised -6 -5
Unused amounts reversed -9 -1
Exchange rate adjustments -1 1
Provisions at 31 December 23 33
3.4
Trade receivables at 31 December 2014 include receivables
at a nominal value of DKK 1,133 million (2013: DKK 928
million), which have been written down to DKK 1,110
million (2013: DKK 895 million).
Historically, PANDORA has not suffered any significant
bad debt losses.
Accounting policies
Receivables are non-derivative financial assets with fixed
or determinable payments that are not quoted in an active
market. Subsequent to initial recognition, such financial
assets are measured at amortised cost using the effective
interest rate method, less impairment. Any losses arising
from impairment are recognised in the income statement as
administrative expenses.
A write-down for bad or doubtful debts is made if there
is any indication of impairment of a receivable or a
portfolio of receivables. The write-down is calculated as the
difference between the carrying amount and the present
value of estimated future cash flows associated with the
receivable. The discount rate used is the effective interest
rate for the individual receivable or portfolio.
SECTION 4
CAPITAL STRUCTURE
AND NET FINANCIALS
NOTES
84 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 3: INVESTED CAPITAL AND WORKING CAPITAL ITEMS, CONTINUED
PROVISIONS
Earn-outs, Sales
acquisition of return and
non-controlling warranty Other
DKK million interests provisions provisions Total
Provisions at 1 January 2014 - 458 48 506
Provisions made in 2014 - 774 86 860
Utilised in the year - -543 -7 -550
Unused amounts reversed - -75 -29 -104
Reclassifications - 33 -33 -
Exchange rate adjustments - 23 4 27
Provisions at 31 December 2014 - 670 69 739
Provisions are recognised in the consolidated balance sheet:
Current - 670 8 678
Non-current - - 61 61
Total provisions at 31 December 2014 - 670 69 739
Provisions at 1 January 2013 - 416 54 470
Provisions made in 2013 - 492 35 527
Utilised in the year - -423 -7 -430
Unused amounts reversed - -20 -34 -54
Exchange rate adjustments - -7 - -7
Provisions at 31 December 2013 - 458 48 506
Provisions are recognised in the consolidated balance sheet:
Current - 458 13 471
Non-current - - 35 35
Total provisions at 31 December 2013 - 458 48 506
3.5
Sales return and warranty provisions
In 2014, provisions for warranty claims were reclassified so
that they are now presented together with return provisions.
This is due to a change in the handling of warranty claims,
which now mainly lead to replacements instead of repairs.
PANDORA only provides return rights to customers
in some countries. Sales return provisions in 2014 mainly
related to the Americas, DKK 460 million (2013: DKK
353million).
Other provisions
Other provisions include a provision for onerous contracts
due to the future relocation of PANDORA’s office in
Denmark which may lead to a period of rent payments for an
empty location.
Earn-outs, acquisition of non-controlling interests
The earn-out payment provision DKK 0 million (2013: DKK
0 million) relates to the acquisition of the non-controlling
interests in PANDORA Jewelry Central Western Europe A/S.
Accounting policies
Provisions are recognised when PANDORA has a present
obligation (legal or constructive) as a result of a past event and
it is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation. The
expense relating to any provision is recognised in the income
statement net of any reimbursement.
A provision for estimated sales returns is recognised when
there is historical experience or when a reasonably accurate
estimate of expected future returns can otherwise be made. The
provision is recognised at the gross margin on the expected
returns.
Significant accounting estimates
In some countries, PANDORA has provided return rights
to customers. The provision is to a large extent based on
historical return patterns and changes in future return patterns
may therefore result in changes compared to the provision
recognised. Provisions are also made on a case by case basis
when PANDORA expects to take back specific goods for
commercial reasons.
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 85
SECTION 4
CAPITAL STRUCTURE
AND NET FINANCIALS
CASH CONVERSION TOTAL PAYOUT RATIO
SHARE BUYBACK
2,400
DKK million
124.9% 112.7%
This section includes notes related to PANDORA’s
capital structure and net financials, including financial
risks (see note 4.4). As a consequence of its operations,
investments and financing, PANDORA is exposed to a
number of financial risks that are monitored and man-
aged via PANDORA’s Group Treasury. PANDORA uses a
number of financial instruments to hedge its exposure to
fluctuations in commodity prices and similar. Financial
instruments are described in note 4.5.
The basis of PANDORA’s capital management is the
NIBD/EBITDA ratio, which Management seeks to main-
tain between 0 and 1. At 31 December 2014, the ratio
was -0.3. PANDORA’s ability to keep this low ratio is
based on the high cash conversion. The cash conversion
was 124.9% in 2014 compared with 88.1% in 2013.
14% GBP
38% USD
8% Other
26% EUR
7% CAD
7% AUD
1-3 months ahead
4-6 months ahead
7-9 months ahead
9-12 months ahead
100
90
80
70
60
50
40
30
20
10
0
%
90-100%
MIN.
MAX.
MIN.
MAX.
MIN.
MAX.
MIN.
MAX.
70-90%
50-70%
30-50%
COMMODITY HEDGE RATIO REVENUE BREAKDOWN BY CURRENCY
NOTES
86 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
4.1 SHARE CAPITAL
Shares Nominal
Share capital (number) value (DKK)
Balance at 1 January 2014 130,143,258 130,143,258
Reduction of share capital -2,027,438 -2,027,438
Balance at 31 December 2014 128,115,820 128,115,820
Balance at 1 January 2013 130,143,258 130,143,258
Balance at 31 December 2013 130,143,258 130,143,258
Shares Nominal Purchase
Treasury shares (number) value (DKK) price % of shares
Balance at 1 January 2014 3,539,023 3,539,023 738,413,909 2.7%
Used to settle share options -170,784 -170,784 -35,861,172 -0.1%
Reduction of share capital -2,027,438 -2,027,438 -423,023,083 -1.6%
Acquisition of treasury shares 5,875,257 5,875,257 2,399,991,096 4.6%
Balance at 31 December 2014 7,216,058 7,216,058 2,679,520,750 5.6%
Balance at 1 January 2013 182,925 182,925 38,414,250 0.1%
Acquisition of treasury shares 3,356,098 3,356,098 699,999,659 2.6%
Balance at 31 December 2013 3,539,023 3,539,023 738,413,909 2.7%
At 31 December 2014, the share capital comprised
128,115,820 shares with a par value of DKK 1. No shares
have special rights.
In 2014, PANDORA launched a share buyback
programme under which PANDORA expected to buy
back own shares of DKK 2,400 million or a maximum of
9,475,303 shares.
In 2014, PANDORA bought 5,875,257 treasury shares
equal to a purchase price of DKK 2,399,991,096.
Treasury shares
All treasury shares are owned by PANDORA A/S. Treasury
shares includes hedges for share-based incentive plans and
restricted stock grants to the Board of Directors and key
employees.
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 87
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
4.2 EARNINGS PER SHARE AND DIVIDEND
DKK million 2014 2013
Profit attributable to the equity holders of PANDORA A/S 3,098 2,220
Weighted average number of ordinary shares 124,092,966 129,120,685
Effect of share options 1,382,800 1,372,577
Weighted average number of ordinary shares adjusted for the effect of dilution 125,475,766 130,493,262
Basic earnings per share, DKK 25.0 17.2
Diluted earnings per share, DKK 24.7 17.0
There have been no transactions between the reporting date and the date of completion of these financial statements involving shares that would have signifi-
cantly changed the number of shares or potential shares in PANDORA A/S.
Dividend
At the end of 2014, proposed dividend (not yet declared)
was DKK 9.0 per share (2013: DKK 6.5 per share),
corresponding to DKK 1,088 million. Declared dividend of
DKK 6.5 per share, corresponding to DKK 823 million in
2013, was paid to the shareholders in 2014. No dividend
was paid on treasury shares.
Distributable reserves
When calculating the amount available for distribution
of dividends, treasury shares are to be deducted from
distributable reserves.
Accounting policies
Proposed dividends are included in equity until they are
recognised as a liability at the date of their adoption at the
Annual General Meeting (declaration date). Extraordinary
dividends are recognised as a liability at the declaration date.
NOTES
88 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
4.3
4.4
NET INTEREST-BEARING DEBT
DKK million 2014 2013
Loans and borrowings, current 10 49
Cash -1,131 -686
Net interest-bearing debt -1,121 -637
Capital management
The principal objectives of PANDORA’s capital management
are to ensure shareholders a competitive return on their
investment and to ensure that PANDORA will be able to
meet all the commitments set out in the loan agreements
with the banks. The basis of PANDORA’s capital
management is the NIBD/EBITDA ratio. It is the policy of
the Group that this ratio should be between 0 and 1 on a
12-month rolling basis. At 31 December 2014, the NIBD/
EBITDA ratio was -0.3 (2013: -0.2).
In February 2014, PANDORA obtained a new revolving
credit facility in the amount of DKK 1,000 million. Total
committed credit facilities amount to DKK 3,500 million
(2013: DKK 2,500 million) and are committed until July
2018.
Accounting policies
Subsequent to initial recognition, interest-bearing loans
and borrowings are measured at amortised cost using
the effective interest rate method. Gains and losses are
recognised in the income statement when the liabilities are
derecognised as well as through the effective interest rate
method. Amortised cost is calculated by taking into account
any discount or premium at inception and fees and costs.
FINANCIAL RISKS
As a consequence of its operations, investments and
financing, PANDORA is exposed to a number of financial
risks that are monitored and managed via PANDORA’s
Group Treasury.
To manage financial risks, PANDORA uses a number
of financial instruments, such as forward contracts, silver
and gold swaps, currency and interest rate swaps, options
and similar instruments within the framework of its current
policies. Financial risks are divided into commodity price
risk, foreign currency risk, credit risk, liquidity risk and
interest rate risk.
Financial risk related to commodity prices
PANDORA’s raw material risk is the risk of fluctuating
commodity prices resulting in additional costs. The most
important raw materials are silver and gold, which are
priced in USD by suppliers.
It is the policy of PANDORA to ensure stable,
predictable raw material prices. Based on a rolling
12-month production plan, the policy is for Group Treasury
to hedge approximately 100%, 80%, 60% and 40% of the
risk for the following 1-3 months, 4-6 months, 7-9 months
and 10-12 months respectively. Any deviation from the
policy must be approved by the Group CFO and the Audit
Committee. Commodity hedging is updated at the end of
each month or in connection with revised 12-month rolling
production plans. Actual production can deviate from the
12 months rolling productions plan. In case of deviations,
the realised commodity hedging ratio can deviate from the
estimated hedging ratio. For fair value of hedging instruments
see note 4.5.
Hedge ratio for the coming 12 months:
Months ahead Commodity All major currencies
1-3 90-100% 100%
4-6 70-90% 80%
7-9 50-70% 60%
10-12 30-50% 40%
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 89
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
Analysis of assets and liabilities
31 December 2014 31 December 2013
Change in Profit (loss)
Profit (loss)
DKK million exchange rate before tax Equity before tax Equity
USD -10% 156 305 171 59
USD +10% -156 -305 -171 -59
CAD -10% 1 39 - 32
CAD +10% -1 -39 - -32
AUD -10% 4 37 4 6
AUD +10% -4 -37 -4 -6
GBP -10% 15 104 11 21
GBP +10% -15 -104 -11 -21
EUR -1% -11 -11 -12 -7
EUR +1% 11 11 12 7
THB -10% - -154 - -93
THB +10% - 154 - 93
The movements in the income statement arise from monetary items (cash, borrowings, receivables and payables) where the functional currency of the entity is
different to the currency that the monetary items are denominated in. The movements in equity arise from monetary items and hedging instruments where the func-
tional currency of the entity is different to the currency that the hedging instruments or monetary items are denominated in.
Foreign currency risk
PANDORA’s presentation currency is DKK, but the
majority of PANDORA’s activities and investments are in
other currencies. Consequently, there is a substantial risk
of exchange rate fluctuations having a negative impact
on PANDORA’s reported cash flows, profit (loss) and/or
financial position in DKK.
The majority of PANDORA’s revenue is in USD,
CAD, AUD, GBP and EUR. A drop in the strength of
these currencies against DKK will result in a decline in
the translated future cash flows. A substantial portion of
PANDORA’s costs are related to raw materials purchased
from suppliers that price their products in USD. PANDORA
also purchases raw materials and pays other costs in
THB. Exchange rate increases will result in a decline
in the translated value of future cash flows. PANDORA
finances the majority of its subsidiaries’ needs for cash via
intercompany loans denominated in the local currency of
the individual subsidiary. A drop in the strength of these
currencies against DKK will result in a foreign exchange
loss in the Parent Company. PANDORA owns foreign
subsidiaries where the translation of equity into DKK
is influenced by exchange rate fluctuations. Declining
exchange rates will result in a foreign exchange loss in the
Group’s equity.
Exchange rate fluctuations may lead to a decrease
in revenue and an increase in costs and thus declining
margins. In addition, exchange rate fluctuations affect the
translated value of the profit or loss of foreign subsidiaries
and the translation of foreign currency assets and liabilities.
It is PANDORA’s policy to hedge foreign currency risks
related to the risk of declining net cash flows resulting
from exchange rate fluctuations. PANDORA basically does
not hedge balance sheet items or ownership interests in
foreign subsidiaries. It is PANDORA’s policy for its Group
Treasury to hedge 100% of the risk 1-3 months forward,
80% of the risk 4-6 months forward, 60% of the risk 7-9
months forward and 40% of the risk 10-12 months forward,
based on a rolling 12-month liquidity budget. Foreign
currency hedging is updated at the end of each quarter or in
connection with revised 12-month rolling cash forecasts.
Below is an illustration of the impact in DKK million on
the net profit and changes in equity resulting from a change
in the Group’s primary foreign currencies after the effect of
hedge accounting.
FINANCIAL RISKS, CONTINUED4.4
NOTES
90 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
FINANCIAL RISKS, CONTINUED4.4
Liabilities fall due as follows:
Falling due Falling due Falling due
DKK million within 1 year within 1-5 years after 5 years Total
2014
Financial instruments 268 - - 268
Loans and borrowings 10 - - 10
Trade payables 804 - - 804
Other payables 630 - - 630
Total liabilities at 31 December 2014 1,712 - - 1,712
2013
Financial instruments 148 - - 148
Loans and borrowings 49 - - 49
Other non-current liabilities - 3 - 3
Trade payables 539 - - 539
Other payables 551 - - 551
Total liabilities at 31 December 2013 1,287 3 - 1,290
Credit risk
PANDORA’s credit risk is primarily related to trade
receivables, cash and unrealised gains on financial
contracts. The maximum credit risk related to financial
assets corresponds to the carrying amounts recognised in the
consolidated balance sheet.
It is PANDORA’s policy for subsidiaries to be responsible
for credit evaluation and credit risk on their trade receivables.
In case of deviation from standard agreements, Group
Treasury and/or the CFO must approve any significant
transactions related to direct distributors and local key
customers.
Note 3.4 includes an overview of the credit risk related to
trade receivables.
Credit risks related to PANDORA’s other financial
assets mainly include cash and unrealised gains on
financial contracts. The credit risk is related to default of
the counterparty with a maximum risk corresponding to the
carrying amount of the assets. It is PANDORA’s policy for
Group Treasury to monitor and manage these credit risks.
Liquidity risk
Liquidity risk is the risk of PANDORA’s cash not covering
PANDORA’s payables due.
The aim of liquidity management is to maintain optimal
cash resources to fund PANDORA’s commitments at all
times, to minimise interest and bank costs and to avoid
financial distress. PANDORA’s Group Treasury is responsible
for monitoring and managing PANDORA’s total liquidity
position. PANDORA currently does not use cash pools, but
intercompany loans exist between PANDORA A/S and its
subsidiaries. Whenever possible, liquidity is accumulated in
PANDORA A/S.
PANDORA’s cash resources comprise cash and
unutilised committed and uncommitted credit facilities. It is
Management’s opinion that the cash resources of the Group
and the Parent Company are adequate. It is PANDORA’s
policy to ensure adequate cash resources in case of
unforeseen cash fluctuations.
PANDORA has revolving credit facilities of DKK 3,500
million, which are committed until July 2018. Furthermore,
PANDORA has minor local uncommitted credit facilities
to ensure efficient and flexible local liquidity management.
These credits are facilitated by PANDORA’s Group Treasury.
Interest rate risk
Interest rate risk is the risk of interest rate fluctuations
resulting in additional costs. Most of PANDORA’s interest
rate risk is related to floating-rate loans. It is PANDORA’s
policy to minimise interest rate risk by managing the overall
duration of interest rate-sensitive assets and liabilities. At
the reporting date, all interest-bearing loans and borrowings
were unhedged.
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 91
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
FINANCIAL INSTRUMENTS4.5
Carrying Hedge
DKK million Assets Liabilities amount reserve
2014
Commodities 9 -133 -124 -122
Foreign exchange 90 -135 -45 -34
Total financial instruments 99 -268 -169 -156
2013
Commodities - -127 -127 -127
Foreign exchange - -21 -21 -16
Total financial instruments - -148 -148 -143
Financial assets and liabilities are measured at cost with the
exception of financial instruments (forward contracts etc.),
which are measured at fair value.
PANDORA uses a number of financial instruments to
hedge its exposure to fluctuations in commodity prices,
Classification according to the fair value hierarchy
The fair value at 31 December 2014 and 2013 of
PANDORA’s financial instruments was measured in
accordance with level 2 in the fair value hierarchy (IFRS 7).
Level 2 is based on non-quoted prices, observable either
directly (i.e. as prices) or indirectly (i.e. derived from prices).
PANDORA uses third-party valuation specialists to quote
prices for the unrealised financial instruments. The value
of unrealised silver and gold instruments are tested against
the prices observable at LBMA (London Bullion Market
Association). The value of unrealised foreign exchange
instruments are tested against observable foreign exchange
forward rates.
Accounting policies
Financial instruments are initially recognised at fair
value at the date on which a contract is entered into and
are subsequently measured at fair value. For financial
instruments not traded in an active market, the fair value
is determined using appropriate valuation methods. Such
methods may include comparison with recent arm’s length
market transactions, reference to the current fair value
of another instrument that is substantially the same or
discounted cash flow analysis.
exchange rates and interest rates. Financial instruments
include forward commodity contracts, forward currency
contracts and interest rate swaps.
PANDORA has designated certain financial instruments
as cash flow hedges as defined under IAS 39. Hedge
accounting is classified as cash flow hedge when hedging
variability in cash flow is attributable to a highly probable
forecast transaction. PANDORA uses a range of 80% to
125% for hedge effectiveness and any relationship which
has effectiveness outside this range is deemed to be
ineffective and hedge accounting is suspended. PANDORA
designates and documents all hedging relationships
between commodity contracts and transactions.
Financial instruments that qualify for cash
flow hedge accounting
The effective portion of the unrealised gain or loss on
all hedging instruments is recognised directly as other
comprehensive income in the equity hedging reserve. The
ineffective portion is recognised in net financials.
The effective part of the realised gain or loss on a com-
modity hedging transaction is recognised in Group invento-
ries whereas the ineffective part is realised in net financials.
The realised gain or loss on all forward exchange contracts
is recognised in net financials.
NOTES
92 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 4: CAPITAL STRUCTURE AND NET FINANCIALS, CONTINUED
NET FINANCIALS4.6
Finance income
DKK million 2014 2013
Finance income from financial assets and liabilities measured at fair value through the income statement:
Fair value adjustments, financial instruments - 9
Total finance income from financial instruments - 9
Finance income from loans and receivables measured at amortised cost:
Foreign exchange gains 7 154
Interest income, bank 1 2
Interest income, loans and receivables 6 2
Total finance income from loans and receivables 14 158
Total finance income 14 167
Finance costs
DKK million 2014 2013
Finance costs from financial assets and liabilities measured at fair value through the income statement:
Fair value adjustments, financial instruments 50 -
Total finance costs from financial instruments 50 -
Finance costs from financial liabilities measured at amortised cost:
Foreign exchange losses 89 54
Interest on loans and borrowings 4 5
Other finance costs 71 47
Total finance costs from loans and borrowings 164 106
Total finance costs 214 106
Accounting policies
Finance income and costs comprise interest income and
expenses, realised and unrealised gains and losses on
payables/receivables and transactions in foreign currencies.
For all financial instruments measured at amortised cost,
interest income or expenses are recognised using the
effective interest rate, which is the rate that discounts the
estimated future cash payments or receipts through the
expected life of the financial instrument or a shorter period,
where appropriate, to the net carrying amount of the
financial asset or liability.
SECTION 5
OTHER DISCLOSURES
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 93
SECTION 5
OTHER DISCLOSURES
This section includes other statutory notes, which are of
secondary importance to the understanding of the finan-
cial performance of PANDORA.
NOTES
94 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
BUSINESS COMBINATIONS5.1
Acquisitions in 2014
Acquisition of a net total of 22 concept stores from
Hannoush
On 22 September 2014, PANDORA acquired 27 stores
from US jeweller Hannoush in a business combination.
With the acquisition of the 27 stores PANDORA will
execute its strategy to refresh its network in the Northeast
region of the US.
The purchase consideration was DKK 162 million and
was paid in cash. There were no other significant terms or
payments related to the acquisition. The transaction costs,
DKK 1 million, have been recognised as administrative
expenses in profit or loss for 2014.
Five of the acquired stores located outside the Northeast
region were re-sold to an existing franchisee on 22
September 2014. The sale did not have any effect on profit or
loss. The net cash effect from the Hannoush acquisition was
an outflow of DKK 143 million.
Assets acquired and liabilities assumed mainly comprise
inventories, equipment and obligations to restore the leased
premises. Inventories have been measured at market value
based on the saleability of the individual items.
Goodwill from the acquisition amounted to DKK 81
million (excluding goodwill of DKK 6 million related to
the five stores that were re-sold), and is attributable to the
expected synergies from an increased presence in the region,
including the effect from a refreshed network. None of the
goodwill recognised is deductible for income tax purposes.
The 22 stores contributed approximately DKK 95 million
in revenue and DKK 22 million in net profit since the
acquisition on 22 September 2014. If the stores had been
acquired on 1 January 2014, revenue and net profit would
have been DKK 115 million and DKK 4 million higher
respectively.
Other business combinations in 2014
PANDORA acquired concept stores in the UK, Germany
and the Netherlands in 2014. These were accounted for as
business combinations. Assets acquired mainly consist of
key money and other assets relating to the stores. Of the
purchase price, DKK 6 million was allocated to goodwill.
None of the goodwill recognised is deductible for income
tax purposes.
The impact on revenue and net profit for 2014 from
the acquired stores was insignificant. If the stores had
been owned from the beginning of the year, the impact
on PANDORA’s revenue and net profit would have been
equally insignificant.
2014 2013
DKK million Hannoush Other Total Brazil
Other intangible assets - 1 1 13
Property, plant and equipment 4 5 9 9
Receivables 2 - 2 3
Inventories 77 - 77 12
Other current assets - - - 4
Assets acquired 83 6 89 41
Non-current liabilities 3 - 3 5
Payables 3 - 3 18
Other non-current liabilities 2 - 2 5
Deferred tax - - - 3
Liabilities assumed 8 - 8 31
Total identifiable net assets acquired 75 6 81 10
Goodwill arising from acquisition 87 6 93 30
Purchase consideration 162 12 174 40
Cash movements on acquisition:
Purchase consideration transferred 162 12 174 40
Deferred payment - - - -2
Net cash flows on acquisition 162 12 174 38
Cash flow sale of businesses
1
19 - 19 -
Net cash flow from business combinations 143 12 155 38
1
The sale of businesses included mainly inventories, DKK 12 million, assets related to stores, DKK 1 million, and goodwill, DKK 6 million.
SECTION 5: OTHER DISCLOSURES, CONTINUED
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 95
SECTION 5: OTHER DISCLOSURES, CONTINUED
Acquisitions in 2013
Acquisition of the distribution in Brazil
On 24 October 2013, PANDORA acquired 100% of the
share capital of City Time do Brasil Comércio e Importação
Ltda. (the name has subsequently been changed to
PANDORA do Brasil Comércio e Importação Ltda.),
based in São Paulo, obtaining control of the company.
The company is a retail company with eight stores and an
e-store operating in five cities in Brazil.
With the acquisition, PANDORA has strengthened its
presence in a country with great potential. A base in Brazil
will provide PANDORA with the opportunity to directly
affect distribution in Brazil and other South American
markets.
The above table summarises the consideration paid for
City Time do Brasil Comércio e Importação Ltda., and the
fair value of assets acquired and liabilities assumed at the
acquisition date.
The purchase price was DKK 40 million, of which DKK
2 million was deferred. The deferred payment was due on 1
January 2018, but the amount was paid in full in 2014.
Acquisition-related costs of DKK 1 million were
recognised as administrative expenses in the consolidated
income statement for the year ended 31 December 2013.
Assets and liabilities assumed mainly comprise
key money, property, plant and equipment related to
the acquired stores, inventories and accounts payable.
Themarket value of key money is calculated annually
by the centre operators and is deemed to have an
indefinitelife.
Japan/
DKK million Bluebell
Other intangible assets 29
Property, plant and equipment 3
Inventories 6
Assets acquired 38
Total identifiable net assets acquired 38
Goodwill arising from acquisition 17
Purchase consideration 55
Cash movements on acquisition:
Earn-out -55
Net cash flows on acquisition -
BUSINESS COMBINATIONS, CONTINUED5.1
The goodwill of DKK 30 million arising from the
acquisition is attributable to the expected synergies from
a strengthened presence and increased opportunities to
improve both the retail and wholesale markets in South
America while maintaining control of the PANDORA
brand. None of the goodwill recognised is deductible for
income tax purposes.
Other acquisitions in 2013
In 2013, PANDORA acquired concept stores that have
been accounted for as business combinations and are
also recognised in the line acquisition of subsidiaries and
activities.
Impact on the consolidated financial statements
The acquisitions have neither individually nor in
combination had any significant impact on the Group’s
revenue or net profit. If the acquired companies had been
owned by the Group from the beginning of the year, there
would have been no significant impact on Group revenue
or Group net profit.
Acquisition after the reporting period
Strategic alliance in Japan
On 1 January 2015, PANDORA acquired assets related
to the distribution of PANDORA jewellery in Japan from
Bluebell in a business combination. In addition to the
distribution rights, assets included branded stores – one
concept store and nine shop-in-shops. The acquisition was
part of a strategic alliance with Bluebell in Japan with the
intent to jointly distribute PANDORA jewellery in Japan.
NOTES
96 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
BUSINESS COMBINATIONS, CONTINUED5.1
The agreement initially has a five-year term. On termination
of the agreement, PANDORA will take over the full
distribution of PANDORA jewellery in Japan. The total
amount to be paid to Bluebell will depend on the realised
revenue in 2019. The discounted fair value of the earn-out
is DKK 55 million.
Intangible assets comprise reacquired distribution rights
(remaining lifespan approximately three years) of DKK
29 million. The fair value is based on comparison of peer
markets similar to the Japanese market and the EBITDA that
can be expected from similar stores in these markets.
Inventories, DKK 6 million, have been measured at
market value based on the saleability of the individual items.
Goodwill is attributable to the expected synergies from
combining PANDORA’s willingness and ability to invest in
the Japanese market with Bluebell’s in-depth knowledge of
the Japanese retail market, Japanese consumers and insight
into the Japanese real estate market, to build a considerable
presence in Japan. None of the goodwill recognised is
deductible for income tax purposes.
Transaction costs, DKK 3 million, have been recognised
as administrative expenses in profit or loss for 2014.
Acquisition of Pan Me A/S
On 16 January 2015, PANDORA acquired 100% of the
shares in Pan Me A/S. Pan Me A/S holds the rights to
distribute PANDORA jewellery in the UAE, Bahrain, Qatar
and Oman.
PANDORA has paid the purchase price of DKK
110 million primarily related to the rights to distribute
PANDORA jewellery in the UAE, Bahrain, Qatar and
Oman, as well as non-current assets and inventories related
to 11 concept stores and three shop-in-shops in the UAE.
An amount of DKK 1 million is withheld until fulfilment of
certain conditions related to inventories.
Due to the late closing date of the acquisition, it has not
been practically possible to prepare the initial accounting
for the business combination. The purchase price allocation
for the acquisition will be included in the interim financial
report for the first quarter of 2015.
China
In February 2015, PANDORA entered an agreement with
Oracle Investment (Hong Kong) Limited (“Oracle”) about
joint distribution of PANDORA jewellery in China from
1 July 2015 to 31 December 2018. At the end of the
agreement, PANDORA will take over the full distribution of
PANDORA jewellery in China. On 1 July 2015, PANDORA
will, as part of the agreement with Oracle, purchase the
majority of Oracle’s assets in China. The agreement is
subject to certain conditions to be fulfilled.
Due to the subsequent closing date, it is not possible to
prepare the accounting for the business combination.
Accounting policies
Business combinations are accounted for using the
acquisition method. The cost of an acquisition is measured
as the aggregate of the consideration transferred, measured
at acquisition date fair value and the amount of any non-
controlling interests in the acquiree.
For each business combination, the acquirer measures
the non-controlling interests in the acquiree either at
fair value or at the proportionate share of the acquiree’s
identifiable net assets. Acquisition costs incurred are
expensed. Subsequent to initial recognition, goodwill is
measured at cost less any accumulated impairment losses.
For the purpose of impairment testing, goodwill
acquired in a business combination is allocated to those
of PANDORA’s CGUs that are expected to benefit from the
combination. Where goodwill forms part of a CGU and part
of the operation within that unit is disposed of, the goodwill
associated with the operation disposed of is recognised in
the carrying amount of the operation when determining the
gain or loss on disposal of the operation. Goodwill disposed
of in these circumstances is measured based on the relative
value of the operation disposed of and the portion of the
CGU retained.
If any part of the cost of an acquisition is contingent on
future events or achievements, this cost is recorded at fair
value at the time of acquisition.
SECTION 5: OTHER DISCLOSURES, CONTINUED
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 97
CONTINGENT LIABILITIES
Litigation
PANDORA is party to various legal proceedings, which are
not expected to significantly affect PANDORA’s financial
position or future earnings.
Contractual obligations
PANDORA is a party to a number of long-term purchase,
sales and supply contracts entered into in the course of
the Group’s ordinary business. In addition to the lease
commitments disclosed in note 3.2, contractual obligations
amounted to DKK 226 million (2013: DKK 92 million).
Apart from the liabilities already recognised in the balance
sheet, the Group does not expect to incur any significant
financial losses as a result of these contracts.
Significant accounting estimates
Litigation
The factors taken into account when estimating a potential
liability in connection with litigation include the nature
of the litigation or claim. Other factors taken into account
are the development of the case, the judgements and
recommendations of legal or other advisers, experience
from similar cases, and Management’s decision on how the
Group will react to the litigation or claim.
SECTION 5: OTHER DISCLOSURES, CONTINUED
RELATED PARTIES
FEES TO STATUTORY AUDITOR
5.2
5.3
5.4
Related parties with significant interests
At 31 December 2014, treasury shares accounted for 5.6%
of the share capital, see note 4.1. No other shareholders
held more than 5% of the share capital.
Until June 2014, Axcel Management A/S exercised
control over more than 5% of the shares in PANDORA
through its controlling interest in the following PANDORA
shareholders: Axcel III K/S 1, Axcel III K/S 2 and Axcel
IIIK/S3.
Other related parties of PANDORA with significant
influence include the Boards of Directors and the
Executive Boards of these companies and their close
family members. Related parties also include companies
in which the aforementioned persons have control or
significant interests.
Transactions with related parties
As part of the share buyback carried out in 2014,
PANDORA has purchased own shares from major
shareholders. The shares were purchased at the volume-
weighted average purchase price for the shares purchased
under the share buyback programme in the market on the
relevant day of trading.
In the third quarter, PANDORA included the full
accrual of potential severance payments through to end
of 2016 of DKK 34 million related to the agreement with
the current CEO, Allan Leighton. Besides this severance
payment, PANDORA did not enter into any significant
transactions with members of the Board of Directors or the
Executive Board, except for compensation and benefits
received as a result of their membership of the Board of
Directors, employment with PANDORA or shareholdings in
PANDORA. Reference is made to notes 2.3 and 2.4.
DKK million 2014 2013
Fee for statutory audit 4 3
Other assurance engagements 1 2
Tax consultancy 11 10
Other services 3 4
Total fees to statutory auditor 19 19
The costs are recognised in the consolidated income statement as administrative expenses.
NOTES
98 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
SECTION 5: OTHER DISCLOSURES, CONTINUED
APPROVAL OF THE ANNUAL REPORT
COMPANIES IN THE PANDORA GROUP
5.5
5.6
The Annual General Meeting adopts the approval of the
Annual Report for the financial year 2014. Management
expects the Annual Report to be approved at the Annual
General Meeting on 18 March 2015.
The table below shows information about the Group entities:
Registered Date of
Company Ownership office consolidation
AD Astra Holdings Pty Ltd. 100% Australia 1 July 2009
AD Astra IP Pty Ltd. 100% Australia 1 July 2009
PANDORA Retail Pty Ltd. 100% Australia 1 July 2009
PANDORA Jewelry Pty Ltd. 100% Australia 1 July 2009
PANDORA Property Leasing Ltd. 100% Australia 1 July 2009
PANDORA Österreich GmbH 100% Austria 23 May 2012
PANDORA do Brasil Participações Ltda. 100% Brazil 24 October 2013
PANDORA do Brasil Comércio e Importação Ltda. 100% Brazil 24 October 2013
PANDORA Jewelry Ltd. 100% Canada 7 March 2008
PANDORA Franchising Canada Ltd. 100% Canada 19 January 2011
PANDORA Ventures Canada Ltd. 100% Canada 11 January 2013
PANDORA Jewelry CR sro. 100% Czech Republic 2 December 2009
Pilisar ApS 100% Denmark 7 March 2008
PANDORA Int. ApS 100% Denmark 1 October 2009
Ejendomsselskabet af 7. maj 2008 ApS 100% Denmark 1 October 2009
PANDORA Eastern Europe A/S 100% Denmark 1 March 2009
PANDORA Jewelry Central Western Europe A/S 100% Denmark 5 January 2010
PANDORA Jewellery DMCC 100% Dubai 8 October 2014
PANDORA Finland Oy 100% Finland 1 January 2012
PANDORA France SAS 100% France 25 February 2011
PANDORA EMEA Distribution Center GmbH 100% Germany 5 December 2011
PANDORA Jewelry GmbH 100% Germany 5 January 2010
PANDORA Jewelry Asia-Pacific Limited 100% Hong Kong 1 November 2009
World Max International Trading Limited 100% Hong Kong 21 December 2010
PANDORA Jewelry Hungary Kft. 100% Hungary 2 June 2010
PANDORA Italia SRL 100% Italy 23 May 2012
PANDORA Jewelry Japan 100% Japan 29 October 2014
PANDORA Jewelry B.V. 100% Netherlands 20 September 2010
PANDORA Jewelry Ltd. NZ 100% New Zealand 1 July 2009
PANDORA Norge AS 100% Norway 17 August 2010
PANDORA Jewelry Shared Services CEE Sp. z.o.o. 100% Poland 7 February 2012
PANDORA Jewelry CEE Sp. z.o.o. 100% Poland 1 March 2009
PANDORA Jewelry Romania SRL 100% Romania 18 August 2011
PANDORA Sweden AB 100% Sweden 4 November 2013
PANDORA Schweiz AG 100% Switzerland 6 December 2011
PANDORA Production Co. Ltd. 100% Thailand 7 March 2008
PANDORA Services Co. Ltd. 100% Thailand 15 October 2010
PANDORA Jewelry Mücevherat Anonim Şirketi 100% Turkey 4 November 2013
PANDORA Jewellery UK Limited 100% UK 1 December 2008
PANDORA Jewelry Inc. 100% USA 1 July 2008
PANDORA Jewelry LLC 100% USA 7 March 2008
PANDORA Franchising LLC 100% USA 1 November 2009
PANDORA Ventures LLC 100% USA 10 May 2012
NOTES
CONSOLIDATED FINANCIAL STATEMENTS • 99
SECTION 5: OTHER DISCLOSURES, CONTINUED
FINANCIAL DEFINITIONS5.7
Key figures and financial ratios stated in the consolidated financial statements have been calculated as follows:
EBITDA Earnings before interest, tax, depreciation, amortisation and impairment losses
EBIT Earnings before interest and tax (Operating profit)
Revenue growth, % (This year’s revenue - last year’s revenue) (Rolling 12 month)
Last year’s revenue
Gross profit growth, % (This year’s gross profit - last year’s gross profit) (Rolling 12 month)
Last year’s gross profit
EBITDA growth, % (This year’s EBITDA - last year’s EBITDA) (Rolling 12 month)
Last year’s EBITDA
EBIT growth, % (This year’s EBIT - last year’s EBIT) (Rolling 12 month)
Last year’s EBIT
Net profit growth, % (This year’s net profit - last year’s net profit) (Rolling12 month)
Last year’s net profit
Gross margin, % Gross profit / revenue
EBITDA margin, % EBITDA / revenue
EBIT margin, % EBIT / revenue
Tax rate, % Income tax expense / profit before tax
Cash conversion, % Free cash flow / net profit
Capital expenditure (CAPEX) Purchase of intangible assets and property, plant and equipment for the year,
excluding acquisitions of subsidiaries
Equity ratio, % Equity / total assets
Return on invested capital (ROIC), % EBIT / invested capital
Total payout ratio Dividends for the year and value of share buyback / net profit
EPS basic Net profit / average number of shares outstanding
EPS diluted Net profit / sum of average number of shares outstanding, including the dilutive
effect of share options ‘in the money’
Like-for-like sales-out Revenue from concept stores which have been operating for more than 12 months
Forward-looking statements
The annual report contains forward-looking statements, which include estimates of financial performance and targets. These
statements are not guarantees of future performance and involve certain risks and uncertainties. Therefore, actual future
results and trends may differ materially from what is forecast in this report due to a variety of factors.
NOTES
100 • CONSOLIDATED FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
EVENTS AFTER THE REPORTING PERIOD5.8
Germany
In January 2015, PANDORA entered into an agreement
with DHG GmbH (DHG) to take over up to 78 commercial
leaseholds in Germany formerly trading under the BiBa
name (a ladies fashion brand). PANDORA will pay a
service fee to DHG for making the leaseholds available.
All 78 leaseholds concern stand-alone stores located in
prime locations in Germany that fit well with our existing
concept store expansion strategy in Germany. During 2015,
PANDORA will open owned and operated concept stores
in the new locations, some of which will be a relocation of
existing PANDORA-owned stores.
The total investment for the new owned and operated
stores, including establishment and relocation of stores
(including initial inventory in the stores), costs related to
temporarily inactive stores in the transition period, service
fees to DHG as well as all other costs related to store
implementation, is expected to be around EUR 50 million
(approximately DKK 370 million), of which the majority
will be recognised as CAPEX and inventories. The funds will
be spent over the course of 2015.
China
In February 2015, PANDORA entered an agreement with
Oracle Investment (Hong Kong) Limited (“Oracle”) about
joint distribution of PANDORA jewellery in China from
1 July 2015 to 31 December 2018. At the end of the
agreement, PANDORA will take over the full distribution of
PANDORA jewellery in China.
SECTION 5: OTHER DISCLOSURES, CONTINUED
PANDORA plans, through the cooperation, to accelerate
the store roll-out, enhance the retail focus and make
significant marketing investments in the Chinese market.
Oracle will contribute with its in-depth knowledge of the
retail market and the Chinese consumer as well as their
insight into the Chinese real estate market, which will aid
PANDORA in securing the most attractive locations.
On 1 July 2015, PANDORA will, as part of the
agreement with Oracle, purchase the majority of Oracle’s
assets in China. The term of the agreement ends December
2018. The total amount to be paid to Oracle will depend on
the realised revenue in 2018 and part of the payment will
be delayed to end of the term of the agreement. The initial
payment to Oracle is expected to be approximately HKD
120 million (or approximately DKK 100 million), depending
on the value of the assets at the time of the completion of
the agreement. The total payment will be in the range of
HKD 200-500 million (or approximately DKK 170-420
million). The agreement is subject to certain conditions to
be fulfilled.
Major shareholder announcement
On 16 February 2015 PANDORA was notified by BlackRock
Investment Management (UK) Limited that BlackRock, Inc.
has increased its holding of shares in PANDORA A/S at 13
February 2015 to 6,434,446 shares, corresponding to 5.02%
of the share capital and the voting rights.
102 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER
DKK million Notes 2014 2013
INCOME STATEMENT
Revenue 7,891 5,917
Cost of sales -5,370 -4,149
Gross profit 2,521 1,768
Sales, distribution and marketing expenses 2.1 -247 -277
Administrative expenses 2.1 -649 -412
Operating profit 1,625 1,079
Dividends from subsidiaries 2,096 1,269
Finance income 4.3 58 466
Finance costs 4.3 -203 -325
Profit before tax 3,576 2,489
Income tax expense 2.3 -536 -396
Net profit for the year 3,040 2,093
STATEMENT OF COMPREHENSIVE INCOME
Net profit for the year 3,040 2,093
Items that may be reclassified to profit (loss) for the year
- Commodity hedging instruments:
Realised in cost of sales -5 -
Realised in net financials 12 -
- Foreign exchange hedging instruments:
Realised in net financials 38 -9
Value adjustments -62 -16
Income tax on other comprehensive income 2.3 5 5
Other comprehensive income, net of tax -12 -20
Total comprehensive income for the year 3,028 2,073
PARENT COMPANY FINANCIAL STATEMENTS • 103
BALANCE SHEET
AT 31 DECEMBER
DKK million Notes 2014 2013
ASSETS
Intangible assets
3.2 2,881 2,859
Property, plant and equipment 3.3 18 21
Investments in subsidiaries 3.1 2,367 2,215
Loans to subsidiaries 161 143
Other non-current financial assets 20 7
Total non-current assets 5,447 5,245
Inventories 3.4 810 745
Financial instruments 4.2 99 -
Trade receivables 3.5 8 10
Receivables from subsidiaries 2,549 1,901
Other receivables 82 375
Cash 527 329
Total current assets 4,075 3,360
Total assets 9,522 8,605
EQUITY AND LIABILITIES
Share capital 4.1 128 130
Share premium 1,229 1,248
Treasury shares -2,679 -738
Reserves -29 -17
Proposed dividend 1,088 823
Retained earnings 5,080 3,405
Total equity 4,817 4,851
Provisions 3.6 15 -
Deferred tax liabilities 2.3 361 469
Total non-current liabilities 376 469
Provisions 3.6 141 126
Loans and borrowings - 45
Financial instruments 4.2 268 148
Payables to subsidiaries 3,321 2,506
Trade payables 164 154
Income tax payable 329 253
Other payables 106 53
Total current liabilities 4,329 3,285
Total liabilities 4,705 3,754
Total equity and liabilities 9,522 8,605
104 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
STATEMENT OF CHANGES
IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER
Share Share Treasury Hedging Proposed Retained Total
DKK million Notes capital premium shares reserve dividend earnings equity
Equity at 1 January 2014 130 1,248 -738 -17 823 3,405 4,851
Net profit for the year - - - - - 3,040 3,040
Value adjustment of hedging instruments - - - -17 - - -17
Tax on other comprehensive income 2.3 - - - 5 - - 5
Other comprehensive income, net of tax - - - -12 - - -12
Total comprehensive income for the year - - - -12 - 3,040 3,028
Share-based payments 2.2 - - 36 - - 124 160
Purchase of treasury shares - - -2,400 - - -2 -2,402
Reduction of share capital -2 -19 423 - - -402 -
Dividend paid - - - - -823 3 -820
Proposed dividend - - - - 1,088 -1,088 -
Equity at 31 December 2014 128 1,229 -2,679 -29 1,088 5,080 4,817
Equity at 1 January 2013 130 1,248 -38 3 715 2,069 4,127
Net profit for the year - - - - - 2,093 2,093
Value adjustment of hedging instruments - - - -25 - - -25
Tax on other comprehensive income 2.3 - - - 5 - - 5
Other comprehensive income, net of tax - - - -20 - - -20
Total comprehensive income for the year - - - -20 - 2,093 2,073
Share-based payments 2.2 - - - - - 64 64
Purchase of treasury shares - - -700 - - - -700
Dividend paid - - - - -715 2 -713
Proposed dividend - - - - 823 -823 -
Equity at 31 December 2013 130 1,248 -738 -17 823 3,405 4,851
PARENT COMPANY FINANCIAL STATEMENTS • 105
CASH FLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER
DKK million Notes 2014 2013
Profit before tax 3,576 2,489
Finance income 4.3 -58 -466
Finance costs 4.3 203 325
Dividends from subsidiaries -2,096 -1,269
Amortisation, depreciation and impairment losses 73 86
Share-based payments 2.2 38 34
Change in inventories -65 -94
Change in intercompany receivables/payables 513 -295
Change in receivables 195 -71
Change in payables and other liabilities 212 57
Other non-cash adjustments -185 105
Interest etc. received 49 41
Interest etc. paid -26 -22
Income tax paid -475 -234
Cash flows from operating activities 1,954 686
Acquisition of subsidiaries and activities, net of cash acquired 3.1 -119 -116
Purchase of intangible assets 3.2 -83 -31
Purchase of property, plant and equipment 3.3 -13 -7
Change in other non-current assets -13 -3
Proceeds from sale of property, plant and equipment 4 -
Dividends received 2,096 1,269
Cash flows from investing activities 1,872 1,112
Dividend paid -820 -713
Purchase of treasury shares -2,402 -700
Proceeds from loans and borrowings 478 41
Repayment of loans and borrowings -884 -149
Cash flows from financing activities -3,628 -1,521
Net increase (decrease) in cash 198 277
Cash at 1 January 329 52
Net increase (decrease) in cash 198 277
Cash at 31 December 527 329
Unutilised credit facilities 3,567 2,708
The above cannot be derived directly from the income statement and the balance sheet.
106 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
NOTES FOR THE
PARENT COMPANY
Section 1: Basis of reporting
1.1 Supplement to Management’s review for the Group, p. 107
1.2 Basis of reporting, p. 107
Section 2: Results for the year
2.1 Staff costs, p. 108
2.2 Share-based payments and employee shares, p. 108
2.3 Taxation, p. 109
Section 3: Invested capital and
working capital items
3.1 Investments in subsidiaries, p. 110
3.2 Intangible assets, p. 111
3.3 Property, plant and equipment, p. 112
3.4 Inventories, p. 112
3.5 Trade receivables, p. 113
3.6 Provisions, p. 113
Section 4: Capital structure and
net financials
4.1 Share capital, p. 114
4.2 Financial instruments, p. 114
4.3 Net financials, p. 114
Section 5: Other disclosures
5.1 Contingent liabilities, p. 114
5.2 Related parties, p. 115
5.3 Fees to statutory auditor, p. 115
PARENT COMPANY FINANCIAL STATEMENTS • 107
Section 4: Capital structure and
net financials
4.1 Share capital, p. 114
4.2 Financial instruments, p. 114
4.3 Net financials, p. 114
Section 5: Other disclosures
5.1 Contingent liabilities, p. 114
5.2 Related parties, p. 115
5.3 Fees to statutory auditor, p. 115
NOTES FOR THE
PARENT COMPANY
SUPPLEMENT TO MANAGEMENT´S REVIEW FOR THE GROUP
Inventory CWE
The financial statements of PANDORA A/S are affected
by a transaction with the subsidiary PANDORA Jewelry
Central Western Europe A/S (CWE). Since 2012, wholesale
inventory for all European countries has been centralised and
owned by PANDORA A/S. Part of the inventory was sold by
PANDORA A/S to CWE in December 2014 at normal sales
prices at a total value of DKK 177 million. At 31 December
2014, CWE consequently owned the wholesale inventory
related to CWE markets. The transaction was completed as
a result of the earn-out agreement with PANDORA’s former
distributor in Central Western Europe in order to neutralise
the sale of the wholesale inventory in 2012.
Gross profit
The Parent Company takes back inventory from subsidiaries
for the purpose of re-melting excess inventory. Gross profit
is significantly impacted by realised losses from re-melting
activities and unrealised losses from inventory write-downs.
Fluctuations in market prices of silver and gold have a major
impact on gross profit.
Hedging transactions
The Parent Company realised a net loss of DKK 7 million
(2013: DKK 0 million) on commodity hedge contracts. A net
loss of DKK 12 million relates to the elimination of over-
hedged positions. A net gain of DKK 5 million (2013: DKK 0
million) relates to efficient hedging of re-melt of metal.
Earn-out
Changes in the value of the earn-out provision are recognised
in the income statement as finance income or finance costs.
In 2014, there were no adjustments (2013: DKK 0 million).
1.1
1.2 BASIS OF REPORTING
Parent Company financial statements
The accounting policies for the Parent Company are
unchanged from last year and identical to the accounting
policies in PANDORA’s consolidated financial statements,
with the following exceptions:
Foreign currency translation
Foreign exchange adjustments of balances accounted for
as part of the total net investment in enterprises that have
a functional currency other than DKK are recognised in
profit for the year as net financials in the Parent Company
financial statements.
Dividends from investments in subsidiaries are recog-
nised in the financial year in which they are received.
Investments in subsidiaries
Investments in subsidiaries are measured at cost in the
Parent Company financial statements. Impairment testing
is carried out if there is any indication of impairment, as
described in PANDORA’s consolidated financial statements.
The carrying amount is written down to the recoverable
amount whenever the carrying amount exceeds the
recoverable amount. The impairment loss is recognised as
a finance cost in profit for the year. If the Parent Company
has a legal or constructive obligation to cover a deficit in
subsidiaries, a provision for this is recognised.
Significant accounting estimates
In the process of preparing the Parent Company financial
statements, a number of accounting estimates and
judgements have been made that affect assets and
liabilities at the reporting date and income and expenses
for the reporting period. Management regularly reassesses
these estimates and judgements, partly on the basis of
historical experience and a number of other factors in
the given circumstances. Management is of the opinion
that no accounting estimates or judgements are made in
connection with the presentation of the Parent Company
financial statements applying the Parent Company
accounting policies that are material to the financial
reporting, other than those disclosed in note 3.1 to the
consolidated financial statements concerning impairment
testing.
New standards and interpretations
Reference is made to the description in note 1.1 to the
consolidated financial statements.
108 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
NOTES FOR THE
PARENT COMPANY
STAFF COSTS
SHARE-BASED PAYMENTS AND EMPLOYEE SHARES
The share option programme described in note 2.4 to the
consolidated financial statements is issued by PANDORA
A/S. The value of share options granted to employees
in the Parent Company’s subsidiaries is recognised in
investments in subsidiaries. Of the total expense of DKK 71
million (2013: DKK 64 million), DKK 33 million relates to
subsidiaries (2013: DKK 29 million).
2.1
2.2
DKK million 2014 2013
Wages and salaries 269 223
Pensions 11 9
Share-based payments 38 34
Social security costs 2 4
Other staff costs 32 17
Total staff costs 352 287
Staff costs have been recognised in the income statement as follows:
Sales, distribution and marketing expenses 112 105
Administrative expenses 240 182
Total staff costs 352 287
Average number of employees during the year 250 268
Key management personnel at PANDORA A/S represent the same persons as key management personnel of the PANDORA Group. For information regarding
compensation of key management personnel of PANDORA A/S, see note 2.3 to the consolidated financial statements.
PARENT COMPANY FINANCIAL STATEMENTS • 109
NOTES FOR THE
PARENT COMPANY
TAXATION2.3
Income tax expense
DKK million 2014 2013
Current income tax charge 561 316
Adjustment concerning previous years -9 157
Impact of change in the Danish tax rate - -66
Change in deferred tax -16 -11
Total income tax expense 536 396
Tax reconciliation:
Profit before tax 3,576 2,489
Corporate tax rate in Denmark: 24.5% (2013: 25%) 876 622
Tax effect of:
Impact of change in the Danish tax rate - -66
Non-taxable income and non-deductible expenses -331 -317
Adjustment concerning previous years -9 157
Total income tax expense 536 396
Deferred tax
DKK million 2014 2013
Deferred tax at 1 January 469 551
Change in deferred tax - recognised in income statement -16 -11
Change in deferred tax - recognised in statement of comprehensive income -5 -5
Change in deferred tax - recognised in statement of changes in equity -87 -
Impact of change in the Danish tax rate - -66
Deferred tax at 31 December 361 469
Deferred tax liabilities 361 469
Deferred tax, net 361 469
Specification of deferred tax
Intangible assets 526 528
Property, plant and equipment -15 -9
Other assets and liabilities -150 -50
Deferred tax, net 361 469
See note 2.5 to the consolidated financial statements for information on significant accounting estimates.
110 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
NOTES FOR THE
PARENT COMPANY
INVESTMENTS IN SUBSIDIARIES3.1
DKK million Investments in subsidiaries
Cost at 1 January 2014 2,215
Additions 119
Additions relating to share-based payments 33
Cost at 31 December 2014 2,367
Cost at 1 January 2013 2,070
Additions 116
Additions relating to share-based payments 29
Cost at 31 December 2013 2,215
Subsidiaries Registered office
PANDORA do Brasil Participações Ltda. Brazil
PANDORA Jewelry Ltd. Canada
PANDORA Ventures Canada Ltd. Canada
Pilisar ApS Denmark
PANDORA Int. ApS Denmark
PANDORA Eastern Europe A/S Denmark
PANDORA Jewelry Central Western Europe A/S Denmark
PANDORA Jewellery DMCC Dubai
PANDORA Finland Oy Finland
PANDORA France SAS France
PANDORA EMEA Distribution Center GmbH Germany
PANDORA Jewelry Asia-Pacific Limited Hong Kong
World Max International Trading Limited Hong Kong
PANDORA Jewelry Shared Services CEE Sp. z.o.o. Poland
PANDORA Sweden AB Sweden
PANDORA Production Co. Ltd. Thailand
PANDORA Services Co. Ltd. Thailand
PANDORA Jewelry Mücevherat Anonim Şirketi Turkey
PANDORA Jewellery UK Limited UK
PANDORA Jewelry Inc. USA
See notes 5.1 and 5.6 to the consolidated financial statements for details on business combinations, ownership and date of investment.
PARENT COMPANY FINANCIAL STATEMENTS • 111
NOTES FOR THE
PARENT COMPANY
INTANGIBLE ASSETS3.2
Other
Distribution Distribution intangible
DKK million Goodwill Brand network rights assets Total
Cost at 1 January 2014 423 1,040 453 1,084 147 3,147
Additions - - - 3 80 83
Cost at 31 December 2014 423 1,040 453 1,087 227 3,230
Amortisation and impairment losses at 1 January 2014 - - 177 36 75 288
Amortisation and impairment losses for the year - - 30 - 31 61
Amortisation and impairment losses at 31 December 2014 - - 207 36 106 349
Carrying amount at 31 December 2014 423 1,040 246 1,051 121 2,881
Cost at 1 January 2013 423 1,040 453 1,084 116 3,116
Additions - - - - 31 31
Cost at 31 December 2013 423 1,040 453 1,084 147 3,147
Amortisation and impairment losses at 1 January 2013 - - 146 36 39 221
Amortisation and impairment losses for the year - - 31 - 36 67
Amortisation and impairment losses at 31 December 2013 - - 177 36 75 288
Carrying amount at 31 December 2013 423 1,040 276 1,048 72 2,859
No intangible assets were impaired in 2014 or 2013. See note 3.1, intangible assets, to the consolidated financial statements for a description of impairment
testing.
DKK million 2014 2013
Amortisation, depreciation and impairment losses for the year
Intangible assets 61 67
Property, plant and equipment 12 19
Total 73 86
Amortisation, depreciation and impairment losses for the year have been recognised in the income statement:
Sales, distribution and marketing expenses 31 44
Administrative expenses 42 42
Total 73 86
112 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
NOTES FOR THE
PARENT COMPANY
PROPERTY, PLANT AND EQUIPMENT3.3
3.4
Plant and Assets under
DKK million
equipment construction Total
Cost at 1 January 2014 58 1 59
Additions 13 - 13
Disposals -5 -1 -6
Cost at 31 December 2014 66 - 66
Depreciation and impairment losses at 1 January 2014 38 - 38
Depreciation for the year 12 - 12
Disposals -2 - -2
Depreciation and impairment losses at 31 December 2014 48 - 48
Carrying amount at 31 December 2014 18 - 18
Cost at 1 January 2013 54 - 54
Additions 6 1 7
Disposals -2 - -2
Cost at 31 December 2013 58 1 59
Depreciation and impairment losses at 1 January 2013 21 - 21
Depreciation for the year 19 - 19
Disposals -2 - -2
Depreciation and impairment losses at 31 December 2013 38 - 38
Carrying amount at 31 December 2013 20 1 21
INVENTORIES
DKK million 2014 2013
Finished goods 810 745
Total inventories at 31 December 810 745
Inventory write-downs at 1 January 198 113
Write-downs during the year 233 269
Utilised in the year -308 -172
Reversal of write-downs in the year -20 -12
Inventory write-downs at 31 December 103 198
Write-downs of inventories are recognised in Cost of sales DKK 193 million (2013: DKK 257 million) and Distribution expenses DKK 20 million
(2013: DKK 0 million).
PARENT COMPANY FINANCIAL STATEMENTS • 113
TRADE RECEIVABLES
DKK million 2014 2013
Analysis of trade receivables that were past due at 31 December
Up to 30 days - 2
Between 30 and 60 days 1 1
Over 90 days - -
Total past due 1 3
Not past due 7 7
Total trade receivables at 31 December 8 10
Analysis of movements in bad debt provisions
Provisions at 1 January 1 1
Additions 3 -
Provisions at 31 December 4 1
Trade receivables at 31 December 2014 include receivables of nom. DKK 12 million (2013: DKK 11 million) that have been written down to DKK 8 million
(2013: DKK 10 million). Historically, PANDORA A/S has not suffered any significant bad debt losses.
PROVISIONS
3.5
3.6
Earn-out,
acquisition of Sales
non-controlling return Other
DKK million interests provisions provisions Total
Provisions at 1 January 2014 - 126 - 126
Provisions made in 2014 - 139 15 154
Utilised in the year - -110 - -110
Unused amounts reversed - -14 - -14
Provisions at 31 December 2014 - 141 15 156
Provisions are recognised in the balance sheet:
Current - 141 - 141
Non-current - - 15 15
Total provisions at 31 December 2014 - 141 15 156
Provisions at 1 January 2013 - 153 10 163
Provisions made in 2013 - 126 - 126
Utilised in the year - -153 - -153
Unused amounts reversed - - -10 -10
Provisions at 31 December 2013 - 126 - 126
Provisions are recognised in the balance sheet:
Current - 126 - 126
Total provisions at 31 December 2013 - 126 - 126
NOTES FOR THE
PARENT COMPANY
Earn-out, acquisition of non-controlling interests
The earn-out payment provision relates to the acquisition of the non-controlling
interests in PANDORA Jewelry Central Western Europe A/S.
Sales return provisions
Provisions regarding returns of products from customers are based on historical
return percentages. Where the return prices are reduced over time, this has been
taken into account in the calculation of the provisions.
From time to time, the Parent Company takes back inventory from
subsidiaries, primarily related to discontinued items and excess inventory.
Inventory is taken back at original sales prices invoiced to the subsidiaries. The
provision represents expected losses in the Parent Company related to expected
returns from subsidiaries of discontinued products included in inventories
at subsidiaries at year end. This does not impact PANDORA’s consolidated
financial statements.
Other provisions
Other provisions include a provision for onerous contracts due to the future
relocation of PANDORA’s office in Denmark, which may lead to a period of rent
payments for an empty location.
114 • PARENT COMPANY FINANCIAL STATEMENTS PANDORA ANNUAL REPORT 2014
NET FINANCIALS
4.1
4.3
5.1
4.2
NOTES FOR THE
PARENT COMPANY
Finance income
DKK million 2014 2013
Finance income from loans and receivables measured at amortised cost:
Interest income from subsidiaries 49 41
Foreign exchange gains 9 425
Total finance income 58 466
Finance costs
DKK million 2014 2013
Finance costs from financial assets and liabilities at fair value through the income statement:
Fair value adjustments, financial instruments 50 -
Total finance costs from financial instruments 50 -
Finance costs from financial liabilities measured at amortised cost:
Foreign exchange losses 83 303
Interest on loans and borrowings 7 1
Other finance costs 63 21
Total finance costs from loans and borrowings 153 325
Total finance costs 203 325
CONTINGENT LIABILITIES
Contingent liabilities
PANDORA A/S is a party to a number of minor legal
proceedings, which are not expected to affect future
earnings.
PANDORA A/S has issued letters of support and letters
of guarantee in favour of creditors of certain subsidiaries.
The Company is jointly taxed with Danish subsidiaries.
The Company is jointly and severally liable with other
jointly taxed Danish companies within the Group for
income tax and withholding taxes due on or after 1 July
2012 in the joint taxation.
On behalf of PANDORA A/S, a bank guarantee of EUR
37 million has been provided.
Contractual obligations
PANDORA A/S is a party to a number of long-term
purchase, sales and supply contracts entered into in the
course of the Company’s ordinary business. In addition
to the lease commitments disclosed below, contractual
obligations amount to DKK 206 million (2013: DKK 72
million). Apart from the liabilities already recognised in the
balance sheet, the Company does not expect to incur any
significant financial losses as a result of these contracts.
Other obligations
PANDORA A/S’s other financial obligations mainly relate to
leases for office premises and operating equipment.
FINANCIAL INSTRUMENTS
Reference is made to note 4.5 to the consolidated financial
statements.
SHARE CAPITAL
Reference is made to note 4.1 to the consolidated financial
statements.
PARENT COMPANY FINANCIAL STATEMENTS • 115
CONTINGENT LIABILITIES, CONTINUED
RELATED PARTIES
5.1
5.2
5.3
NOTES FOR THE
PARENT COMPANY
Besides the related parties referred to in note 5.3 to the
consolidated financial statements, related parties of
PANDORA A/S also include the subsidiaries listed in the
group structure in note 5.6 to the consolidated financial
statements.
The table below shows all transactions entered into with
related parties.
Future minimum lease payments relating to existing contracts
DKK million 2014 2013
Within 1 year 17 51
Between 1 and 5 years 70 42
After 5 years 119 9
Total 206 102
Subsidiaries
DKK million 2014 2013
Income statement:
Sales to related parties 7,861 5,669
Purchases from related parties -5,563 -4,460
Dividend 2,096 1,269
Finance income 48 41
Finance costs -4 -
Total 4,438 2,519
Balance sheet:
Receivables 2,710 2,044
Payables -3,321 -2,506
Total -611 -462
FEES TO STATUTORY AUDITOR
DKK million 2014 2013
Fee for statutory audit 1 1
Tax consultancy 2 3
Other services 2 3
Total fees to statutory auditor 5 7
Fees are recognised as an administrative expense in the income statement.
PANDORA ANNUAL REPORT 2014 116 • STATEMENTS
MANAGEMENT
STATEMENT
Today, the Board of Directors and Executive Board have discussed and approved the Annual Report of PANDORA for the finan-
cial year 1 January – 31 December 2014.
The Annual Report is prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU and
additional Danish disclosure requirements for listed companies.
In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view of
the Group’s and the Parent Company’s financial position at 31 December 2014 and of the results of the Group’s and the Parent
Company’s operations and cash flows for the financial year 1 January – 31 December 2014.
In our opinion, the Management’s Review includes a true and fair review of the development in the Group’s and the Parent
Company’s operations and financial conditions, of the results for the year and of the financial position of the Group and Parent
Company, as well as a review of the more significant risks and uncertainty facing the Group and the Parent Company.
We recommend that the Annual Report be approved at the Annual General Meeting.
Copenhagen, 17 February 2015
Executive Board
Allan Leighton Peter Vekslund
Chief Executive Officer Chief Financial Officer
Board of Directors
Peder Tuborgh Christian Frigast Andrea Alvey
Chairman Deputy Chairman
Torben Ballegaard Sørensen Per Bank Anders Boyer-Søgaard
Bjørn Gulden Michael Hauge Sørensen Nikolaj Vejlsgaard
Ronica Wang
STATEMETNS • 117
To the shareholders of PANDORA A/S
INDEPENDENT AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS AND THE
PARENT COMPANY FINANCIAL STATEMENTS
We have audited the consolidated financial statements and the Parent Company financial statements of PANDORA A/S for
the financial year 1 January – 31 December 2014, which comprise income statement, statement of comprehensive income,
balance sheet, statement of changes in equity, cash flow statement and notes, including a summary of significant accounting
policies, for the Group as well as for the Parent Company. The consolidated financial statements and the Parent Company
financial statements are prepared in accordance with International Financial Reporting Standards as adopted by the EU and
Danish disclosure requirements for listed companies.
MANAGEMENT’S RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS AND THE
PARENT COMPANY FINANCIAL STATEMENTS
Management is responsible for the preparation of consolidated financial statements and Parent Company financial
statements that give a true and fair view in accordance with International Financial Reporting Standards as adopted by the
EU and Danish disclosure requirements for listed companies and for such internal control that Management determines is
necessary to enable the preparation of consolidated financial statements and Parent Company financial statements that are
free from material misstatement, whether due to fraud or error.
AUDITORS’ RESPONSIBILITY
Our responsibility is to express an opinion on the consolidated financial statements and the Parent Company financial
statements based on our audit. We conducted our audit in accordance with International Standards on Auditing and
additional requirements under Danish audit regulation. This requires that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance as to whether the consolidated financial statements and the Parent
Company financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated
financial statements and the Parent Company financial statements. The procedures selected depend on the auditors’
judgement, including the assessment of the risks of material misstatement of the consolidated financial statements and the
Parent Company financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider
internal control relevant to the Company’s preparation of consolidated financial statements and Parent Company financial
statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but
INDEPENDENT
AUDITOR’S REPORTS
PANDORA ANNUAL REPORT 2014 118 • STATEMENTS
not for the purpose of expressing an opinion on the effectiveness of the Company’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 consolidated financial statements and the Parent Company
financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our audit has not resulted in any qualification.
OPINION
In our opinion, the consolidated financial statements and the Parent Company financial statements give a true and fair view
of the Group’s and the Parent Company’s financial position at 31 December 2014 and of the results of the Group’s and
the Parent Company’s operations and cash flows for the financial year 1 January – 31 December 2014 in accordance with
International Financial Reporting Standards as adopted by the EU and Danish disclosure requirements for listed companies.
STATEMENT ON THE MANAGEMENT’S REVIEW
Pursuant to the Danish Financial Statements Act, we have read the Management’s review. We have not performed any
further procedures in addition to the audit of the consolidated financial statements and the Parent Company financial
statements. On this basis, it is our opinion that the information provided in the Management’s review is consistent with the
consolidated financial statements and the Parent Company financial statements.
Copenhagen, 17 February 2015
Ernst & Young
Godkendt Revisionspartnerselskab
Niels-Jørgen Andersen Henrik Kronborg Iversen
State Authorised Public Accountant State Authorised Public Accountant
PANDORA A/S
Hovedvejen 2
DK-2600 Glostrup
Denmark
Phone: +45 3672 0044
Fax: +45 3673 0800
CVR no.: 28505116
www.pandoragroup.com