Get-togethers

The outcome of that internal review was that various managers of the trading house received extra payments or financing directly or indirectly from Blijdorp, in addition to their regular remuneration. According to the investigation, there were seven transactions in which Blijdorp passed extra money or financing to various B&S managers. For example, it was confirmed that CEO Tako de Haan, who left at the beginning of this year, had received a mortgage from a private vehicle of Blijdorp. It was a loan of millions without fixed installments, at an annual interest rate of 0.75 percent. An expert engaged by B&S confirmed that a comparable loan provided by a bank would have less favorable terms. The Financieele Dagblad previously revealed this agreement between the then CEO and Blijdorp. That media report from the end of last year prompted the wholesaler to conduct a "careful and complete investigation into internal control and governance practices", the company said at the end of February. At the same time, B&S announced a postponement of the publication of the annual results. However, it didn't stop at this one get-together between the CEO and the major shareholder. The investigation also revealed a few other cases that mainly date from 2020. For example, Blijdorp had provided a loan of two million euros to another senior B&S manager. That loan will be repaid in early 2022, according to B&S. In the same year, two other employees received a loan, one of EUR 20,000 and the other of EUR 90,000. In 2018, a statutory director of B&S also received a bonus of one million euros directly from Blijdorp. B&S did not disclose who the driver was and what the reason for that bonus was. In that year the company was listed on the Amsterdam stock exchange. At the time, the board consisted of four people. Of these, the former CEO and co-major shareholder Bert Meulman and CFO Gert van Laar no longer work for the company. The two other directors, Bas Schreuders and Niels Groen, are still directors at B&S. Schreuders is currently interim CEO after the departure of De Haan.

Not reported
According to B&S, the company itself was not harmed in any of these transactions. However, it confirmed that the course of events according to the internal procedures for preventing conflicts of interest was not acceptable. In addition, the transactions that emerged from the internal investigation should have already been reported in previous annual reports for 2020 and 2021. However, they were lacking in that.

According to the accounting rules (IFRS), in transactions between related parties, information must be included in the annual report about the nature of the relationship between the related party and the transactions. What is particularly important here is whether those transactions were concluded on arm's length grounds.

Incestuous
The results of B&S's research confirm the lack of transparency and almost incestuous management structure. The boundary between B&S and Blijdorp's private activities was thin.

That has been the case a high degree of interdependence and entanglement of interests between B&S, Blijdorp, entities affiliated with Blijdorp, and B&S staff officers is clear. The facts that have now come to light indicate that auditor Deloitte was not aware of these connections when signing off previous annual accounts. This raises questions about the depth of the book audit and about the professional skepticism of the accountant. The hint of a conflict of interest had been there for some time due to various media reports about Blijdorp and the transactions with affiliated parties that were described in previous annual reports.

An important question is therefore whether Deloitte did not rely too much on the information it received from B&S when auditing the annual accounts and whether it did not carry out sufficient research of its own.

Withdrawal
The annual results publication is the provisional conclusion of a turbulent year with a lot of turmoil at the top of the company. Founder and majority shareholder (67 percent) Willem Blijdorp tried to take the company off the stock exchange last summer. Sometime in the summer months, the exact moment has never been known, he submitted an 'indicative offer' to the independent supervisory directors at that time.

However, they refused to cooperate with Blijdorp's plans. How high the offer was, has been kept secret. This resistance led to their retreat. In a shareholders' meeting (AGM) specially arranged at the insistence of Blijdorp, he single-handedly dismissed the then chairman of the Supervisory Board Jan Arie van Barneveld.

This incident was a unique power struggle for a listed company in the Netherlands. Never before has a controlling shareholder dismissed its chairman of the board to try to push through its own takeover plan. In the meantime, Blijdorp senior has also taken a step aside. Simultaneously with De Haan's departure, he relinquished his seat on the Supervisory Board. His son Leendert is still a member of the Supervisory Board.

“Vesuvian Temperament”
B&S will hold its shareholders' meeting in Luxembourg on 22 May. Peter van Mierlo will be officially appointed chairman of the board there. Van Mierlo was CEO of the development bank FMO for two years until mid-2020. At that bank, which is 51 percent owned by the State, he left early after allegations of conducting a reign of terror and humiliating employees. In the Volkskrant, Van Mierlo was characterized as a person “blessed with a Vesuvian temperament”. Before his time at FMO, he was affiliated with PwC as a partner and CEO for thirty years. As an auditor, he was responsible for many years for auditing the annual accounts at Ahold Delhaize and Aalberts, among others. At Ahold, which had not yet merged with the Belgian Delhaize at that time, Van Mierlo had to deal with his new boss at B&S, chairman of the supervisory board Derk Doijer. Doijer started at B&S in mid-December 2022. He was a member of the audit committee at Ahold for many years. In that role, he supervised financial reporting, risk management, and compliance within Ahold and he met Van Mierlo a few times a year at meetings of that subcommittee of the Supervisory Board.

Annual figures: B&S saw interest charges to banks rise sharply in 2022
- The financial results of B&S fit the picture of other companies: considerably more turnover, but substantial pressure on profit margins because higher costs cannot be passed on. The reported EBITDA margin fell from 6.2 percent in 2021 to 4.2 percent last year. If a strange and unexpected credit loss on a customer in Dubai is not included, the profit margin drops from 6.2 percent to 5 percent. - The company sees continuing uncertainties in 2023. B&S expects sales growth to be less steep than last year (2022: around 15 percent) and takes into account a "small improvement in the gross margin". An organic growth of 7.5 percent – in line with the medium-term target – should be achievable. But the goal of also growing 7.5 percent with acquisitions on top of that is out of sight because of “higher interest rates and economic uncertainty”. The current debt position does not allow for that either.

Undoubtedly, B&S will also want to convey that the priority is to get the house in order before any takeovers can be considered again. - Many eyes are on the debt position. Net debt increased by approximately EUR 37 million to EUR 334.9 million, partly due to high inventories. Due to the lower-earning capacity, the debt ratio rose from 2.5 to 3.7 times the EBITDA profit (net debt/EBITDA) last year. Debt (as measured by the B&S financiers' definition) stands at 3.5 times EBITDA. B&S does not provide insight into the exact calculation of the banking agreements but notes that the company is “well within our covenant of 4 times the EBITDA” operates. - In the last days of 2021, B&S did a refinancing of existing debt. Since then, the agreement with lenders has been that the debt ratio may not exceed 4. Under the old conditions, this was 3.5 times (with the exception of an agreed temporary period in which ratios could be higher). -

The refinancing with five unnamed banks did result in considerably higher interest costs, according to the annual figures. Financing costs rose from 3.9 million euros in 2021 to 10.4 million euros last year. This is not in proportion to the increase in (gross) debt - around 20 percent - to 374 million euros. Financing costs as a percentage of loans increased from 1.3 percent to 2.8 percent. - In the past, B&S mainly financed itself with short-term credit to absorb fluctuations in working capital. But on the last day of 2021, “the group attracted a combination of unsecured bank loans and unsecured revolving credit facilities”, according to the 2021 annual report. At the time of writing this article, the 2022 annual report was not yet available.


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