Economic development of technotrans AG (condensed version acc. German Commercial Code)

The annual financial statements of technotrans AG are prepared according to the German Commercial Code (HGB) and published in the Federal Official Gazette, unlike the Consolidated Financial Statements, which follow the International Financial Reporting Standards (IFRS as adopted in the EU). The development of technotrans AG as outlined below is based on its annual financial statements.

technotrans AG is the parent company of the technotrans Group. It is a technology company with core activities in the fields of cooling/temperature control, filtering/separating, and spraying/pumping of liquids. technotrans AG is moreover strongly influenced by its directly and indirectly held subsidiaries and participating interests. It directly and indirectly holds 19 operating companies and also encompasses the central functions of the group. The economic environment for technotrans AG is essentially the same as that for the technotrans Group. The management approach for the group parent follows the same principles as for the group.

2017 was another very successful financial year for technotrans AG. The company achieved substantial revenue growth for the fourth time since 2013, coupled with a good profit performance. External revenue with existing and new customers rose more steeply than originally expected by € 6.8 million, equivalent to a gain of 11.2 percent. Successful business expansion with manufacturers from the offset, digital and flexographic printing industry as well as higher revenue in all other markets, in particular the laser and machine tool industry, electric mobility and scanner technology, were pleasing developments. At around 16 percent, the intragroup share of overall revenue was almost at the same level as in 2016.

The revenue share for the Technology segment rose by € 6.3 million to € 54.8 million, up 13.0 percent on the previous year (€ 48.5 million). In the Services segment, revenue came to € 25.3 million compared with € 22.6 million in the previous year (+12.0 percent).

Revenue overall rose by 12.7 percent compared with the previous year, from € 71.1 million to € 80.1 million. Earnings before the financial result and income taxes (EBIT) amounted to € 5.1 million (previous year: € 3.6 million). This represents an EBIT margin of 6.3 percent. For the 2017 financial year, the Board of Management had defined revenue and earnings targets for technotrans AG envisaging slight revenue growth in the order of three to five percent and an EBIT margin of 6.5 percent.

The cost of purchased materials for technotrans AG of € 36.2 million was 10.7 percent up on the prior-year figure (previous year: € 32.7 million). This meant the cost of purchased materials ratio (in relation to aggregate operating performance) fell slightly from 45.7 percent to 45.3 percent.

Personnel expenses for the 2017 financial year rose by € 1.9 million overall to € 27.0 million (previous year: € 25.1 million). The increase of 7.8 percent is attributable on the one hand to the buildup of employees and personnel capacity in the revenue-dependent areas, and on the other hand to implementation of the planned pay increase for 2017 averaging 3.0 percent.
The personnel expenses ratio fell from 35.1 percent to 33.8 percent.

Other operating income declined by € 1.2 million, from € 2.1 million in the previous year to € 0.9 million. Income unrelated to the accounting period accounted for € 0.3 million of this amount (previous year: € 0.9 million). This mainly comprised income from cash received for impaired receivables. Foreign exchange gains came to around € 0.1 million (previous year: € 0.4 million).

Other operating expenses of € 11.1 million were slightly above the level of the previous year (previous year: € 10.7 million). Sales commissions amounted to € 0.9 million (previous year: € 0.9 million). These flowed almost in entirety to own subsidiaries. Travel expenses remained broadly unchanged from 2016 at € 0.8 million. A total of € 0.3 million (previous year: € 0.5 million) was spent on the use of temporary personnel in the financial year. Expenditure on warranties (including the allocation to the provision for guarantees) came to € 0.8 million (previous year: € 0.4 million). Other operating expenses include exchange rate losses in the amount of € 0.6 million (previous year: € 0.2 million).

Depreciation and amortisation on property, plant and equipment as well as on intangible assets totalled € 1.3 million for the financial year (previous year: € 1.4 million).

technotrans AG posted an overall financial result of € 9.7 million (previous year: € 4.9 million). This includes on the one hand income from investments amounting to € 6.6 million (previous year: € 4.5 million), which comprises € 2.3 million in distributions by subsidiaries as well as € 4.3 million in profit transfers from Termotek GmbH and gds GmbH on the basis of the existing profit and loss transfer agreements (PLTAs).

On the other hand write-ups within investment assets yielded income of € 3.4 million (previous year: € 0.6 million). Thanks to the continuing positive business performance of technotrans america inc., Mt Prospect, Illinois, USA, a reversal amounting to € 3.0 million was applied. The carrying amount of the participating interest was correspondingly increased. There were no write-downs on financial assets in the year under review, as in the previous year. The interest result of € -0.4 million remained steady compared with the prior-year level (€ -0.4 million).

Current income tax for the 2017 financial year totalled € 2.6 million (previous year: € 2.0 million).

Net income for the year of € 12.2 million is reported for the 2017 financial year (previous year: € 6.6 million).

The balance sheet total of technotrans AG grew by € 6.0 million (+6.4 percent) compared with December 31, 2016, from € 93.1 million to € 99.1 million.

Fixed assets at the balance sheet date rose from € 51.6 million to € 54.3 million. Property, plant and equipment and intangible assets showed a further year-on-year decrease of € 0.6 million to € 9.9 million. Within investment assets, write-ups prompted an overall rise in shares in affiliated companies of € 3.2 million to € 44.3 million (previous year € 41.1 million).

Inventories of € 10.6 million (previous year: € 10.5 million) were unchanged from the previous year’s level.

On the other hand receivables and other assets rose steeply by € 10.6 million compared with the position at December 31, 2016 to € 28.0 million. Of this amount, receivables from affiliated companies account for € 19.3 million (previous year: € 10.8 million). technotrans AG extended a loan amounting to € 7.7 million to the subsidiary GWK Gesellschaft Wärme Kältetechnik mbH, used in the main for financing the property purchase in Meinerzhagen.

Cash consequently fell from € 13.3 million to € 5.8 million at the balance sheet date.

Equity increased to € 66.4 million, up from € 58.0 million at the end of the previous year. The rise is mainly attributable to the net income for 2017, of which € 5.0 million was allocated to the retained earnings in agreement with Section 58 (2) of the German Stock Corporation Act. The equity ratio improved again from 62.3 percent to 67.0 percent.

Liabilities and provisions at the balance sheet date amounted to € 32.7 million (previous year: € 35.1 million). The change results mainly from the € 4.0 million reduction in financial liabilities. Provisions were increased by € 2.5 million compared with the position at December 31, 2016 to € 8.3 million.

The cash flow from operating activities (net cash) for the 2017 financial year reached € 3.4 million (previous year: € 0.8 million). The change in working capital resulted in a budgetary commitment totalling € 3.9 million. Around € 4.3 million of this was attributable to a reporting-date-related rise in receivables e.g. from affiliated companies, as well as other assets.

As a result of moderate investing activities in fixed assets, there were cash payments in the period under review amounting to € -0.8 million (previous year: € -25.3 million). Cash payments for loans extended to affiliated companies came to € -7.2 million in the financial year (previous year: € -0.2 million). Cash receipts from the scaling-back of loans of subsidiaries and from interest and dividend payments received came to € 5.6 million (previous year: € 3.4 million). Overall, the cash inflows and outflows produced a negative cash flow from investing activities of € -2.4 million (previous year: € -21.9 million).

The cash flow from financing activities in the period under review reveals a cash outflow of € 8.2 million (previous year: cash inflow of € 23.0 million). This comprises € 4.0 million for the scheduled repayment of loans, € 0.4 million in interest payments and € 3.8 million for the distribution of the dividend to the shareholders of technotrans AG.

At December 31, 2017 technotrans AG had a total of 469 employees; this was 20 more than at the end of 2016. For 2017, 371 employees belonged to the Technology segment (previous year: 356). There were 98 employees in the Services segment (previous year: 93).

The business performance of technotrans AG is essentially subject to the same opportunities and risks as that of the technotrans Group. Merely in the two risk categories “General and Industry-Specific Risks” and “Corporate Strategy Risks” does technotrans AG exhibit certain higher risks than for the group in view of its lower target earnings.

If the expected economic or industry-specific developments or expectations for newly developed products should prove to be inaccurate, the revenue and therefore also the earnings target could be missed. The Board of Management currently assesses this risk as low.

The opportunities and risks for the group are presented in the Combined Management Report.

In view of technotrans AG’s ties with the group companies as well as its importance within the group, the Board of Management refers to its comments in the Report on Expected Developments, which in particular reflect our expectations for the parent company.