My Annual Report
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My Annual Report
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VII. Other Particulars
32) Financial Instruments
The financial instruments (financial assets and liabilities) are allocated to the following categories. No offsetting of financial assets and liabilities was performed.
|€ '000||€ '000|
|Hedging instruments and liabilities reported at fair value|
|Market value of interest rate swaps||17||33||83|
|Non-current conditional purchase price||12||1,065||1,104|
|Loans and receivables|
|Receivables from suppliers||8||265||192|
|Other financial assets||8||319||390|
|Cash and cash equivalents||9||14,798||23,929|
|Financial liabilities measured at amortised cost|
|Other non-current financial liabilities||12||8||7|
|Assumption of debt company acquisition GWK||12/17||248||496|
|Debtors with credit balances||17||418||434|
|Other current financial liabilities||17||586||764|
Net Gains or Losses on Financial Instruments by Measurement Category
|From interest||From subsequent measurement||2017||2016|
|At fair value||Currency translation||Impairment|
|€ '000||€ '000||€ '000||€ '000||€ '000||€ '000|
|Hedging instruments and liabilities reported at fair value||-25||64||0||0||39||166|
|Loans and receivables||14||0||-584||-312||-882||-280|
|Financial liabilities measured at amortised cost||-586||0||0||0||-586||-458|
Classifications and Fair Values
The following table shows the carrying amounts of financial assets and liabilities, including their levels in the fair value hierarchy. It does not contain any information on the fair value for financial assets and financial liabilities that were not measured at fair value if the carrying amount represents a suitable approximation of the fair value. The various levels are as follows:
|Level 1:||Quoted prices in active markets for identical assets and liabilities|
|Level 2:||Valuation factors other than quoted market prices that are observable directly (i.e. as prices) or indirectly (i.e. derived from prices) for assets or liabilities|
|Level 3:||Valuation factors for assets and liabilities that are not based on observable market data|
|Carrying amount||Fair value||Carrying amount||Fair value||Fair value hierarchy|
|€ '000||€ '000||€ '000||€ '000|
|Financial liabilities measured at fair value|
|Market value of interest rate swaps||-33||-33||-83||-83||Level 2|
|Conditional long-term purchase price||-1,065||-1,065||-1,104||-1,104||Level 3|
|Financial assets and liabilities not
measured at fair value
|Rent deposits||243||243||234||234||Level 2|
|Receivables from suppliers||265||265||192||192|
|Cash and cash equivalents||14,798||14,798||23,929||23,929|
|Other non-current liabilities||-8||-8||-7||-7||Level 2|
|Assumption of debt company
|Debtors with credit balances||-418||-418||-434||-434|
|Other current liabilities||-586||-586||-764||-764|
|Gains (+) or losses (-) not entered||-56||-110|
There were no transfers between the fair value hierarchy levels in the financial year.
The carrying amounts for the financial instruments (for example, cash and cash equivalents, trade receivables and payable as well as other receivables and liabilities) fundamentally reflect their fair values. For receivables with a maturity of up to one year, their nominal value less the reductions for impairment applied provide the most reliable estimate of the fair value. The fair value of receivables with a maturity of over one year is indicated by their discounted cash flows.
The financial liabilities are an exception, because differences exist between the carrying amounts and fair values. The fair value of interest-bearing liabilities is indicated by the discounted cash flows from repayments and interest payments. The current reference interest rates of banks at the balance sheet date were requested and used in determining fair values. In accordance with the term, the reference interest rates were between 1.10 percent and 2.80 percent. An appropriate risk premium was added.
The market values of the interest rate swaps are calculated on the basis of observable expected returns of major German banks on the basis of the expected present value of the future cash flows.
In the context of the acquisition of the shares of Ovidius GmbH in the 2016 financial year, put/call options were agreed with the remaining minority shareholders. The calculation of the purchase price is fixed until 2021. The purchase price is dependent on the average revenue and earnings performance (EBIT) of the acquired company in the years 2017 to 2020. The fair value was determined on the basis of the multiples method, taking account of the planned financial indicators of the acquired companies for this period. From 2022, the purchase price is determined on the basis of the company valuation according to DCF methodology. The conditional purchase price was discounted using a risk-free cost-of-capital rate. The participating interest of gds GmbH in Ovidius GmbH may be increased to 100 percent through exercise. technotrans opted for the “anticipated acquisition method” to reflect the acquisition in accounting terms. Accordingly, the acquisition of the outstanding non-controlling interests was recognised upon initial consolidation in the form of a conditional purchase price liability of € 1,090 thousand. The adjustments to the conditional purchase prices are effected through profit or loss.
In the 2017 financial year a minority shareholder with an interest of 4.8 percent terminated their employment at EasyBrowse GmbH, which prompted gds GmbH to exercise its call option to acquire those shares. The option conditions produced a purchase price of € 0. Based on the current planning horizon, no significant changes in the conditional purchase price from this corporate acquisition are expected.
The fair value of these put/call options is € 1,065 thousand (2016: € 1,104 thousand). For the valuations (multiplier method) an expected average revenue amounting to € 2,356 thousand for the years 2017 to 2020 and an average EBIT margin of 8.0 percent, discounted with a risk-adjusted interest rate of 2 percent, were assumed. Material non-observable factors are the average revenues, the EBIT margins and the discount rate. Due to changes in the factors over time, the fair values may turn out to be higher or lower. A reduction in the EBIT margin of one percentage point would lead to a reduction of € 103 thousand in the fair value of the conditional purchase price payment. An average 10 percent reduction in revenue would lead to a reduction of € 96 thousand. The effects of the increase in the input factors would correspondingly work against the fair value to the same extent. Changes in the discount rate by one percentage point would lead to an increase of € 39 thousand or a decrease of € 37 thousand in the fair value.
Reconciliation of Level 3 Fair Values
The following table shows the reconciliation between the opening and closing amounts for Level 3 fair values.
|Conditional purchase prices|
|Position at January 1, 2016||355|
|Loss or income recognised as financial charges|
|Change in fair value||-180|
|Position at December 31, 2016 / January 1, 2017||1,104|
|Loss or income recognised as financial charges|
|Change in fair value||-64|
|Position at December 31, 2017||1,065|
Nature and Extent of Risks Associated with Financial Instruments
The credit risk is the risk that one party to a financial instrument will cause a loss for the other party as a result of not meeting its obligations. The market risk is based on the fact that the fair value or future cash flows from a financial instrument fluctuate as a result of changes in the market prices. The market risk assumes a more specific form in interest rate risks and exchange rate risks. The liquidity risk denotes the risk of crystallising difficulties in fulfilling financial obligations, e.g. the risk of being unable to prolong loans or secure new loans to repay loans due.
A substantial part of the credit risk for technotrans relates to the risk of defaulting on trade receivables and theoretically also the risk of the banks with which technotrans has credit balances declaring bankruptcy. Banks are chosen on the basis of long-standing positive experiences and the banks’ ratings.
There are credit risks equivalent to the reported carrying amounts of € 39,807 thousand (2016: € 42,532 thousand. The trade receivables are to some extent covered by credit insurance; the insured volume at the reporting date was € 7,731 thousand.
The bad debt risk includes a degree of risk concentration because OEMs in the various industries account for a substantial portion of receivables. technotrans generates a high revenue share with the world's leading printing press manufacturers. The printing industry continues to undergo a process of consolidation. No significant bad debt losses were incurred in the financial year.
In the case of new customers, technotrans endeavours to limit the bad debt risk by obtaining credit information and monitoring credit limits with IT assistance.
In addition to observing credit limits, technotrans regularly agrees retention of title until goods or services have been paid for in full. technotrans does not usually demand security from customers.
The credit risks from trade receivables can be broken down by region, customer group and age structure as follows:
|€ '000||€ '000|
|Other eurozone countries||4,148||3,182|
|Rest of Europe||1,976||1,936|
|Asia and Middle East||3,140||1,952|
|By customer group|
|By age structure of receivables (without impairment)|
|of which: neither impaired nor overdue||18,884||14,202|
|of which: not impaired and|
|overdue by up to 30 days||3,422||2,719|
|overdue by between 31 and 60 days||703||303|
|overdue by between 61 and 90 days||290||267|
|overdue by more than 90 days||883||296|
With regard to the trade receivables that are neither impaired nor overdue, there is no indication at the balance sheet date that the debtors will not meet their obligations to pay.
technotrans AG uses rolling financial and liquidity planning to determine its liquidity requirements. It ensures that sufficient cash and cash equivalents are available at all times to settle liabilities. The group has an unsecured bank loan which is subject to an obligation to adhere to certain financial indicators (financial covenants). A future breach of those indicators could lead to the loan becoming repayable at an earlier date than indicated in the following table.
The future payment streams for contingent consideration (cf. Note 12) and from the interest rate swaps may differ from the amounts shown in the following table because interest rates or the relevant conditions are subject to change.
Except in the case of these financial liabilities, it is not expected that a payment stream included in the maturity analysis might arise significantly earlier or in a significantly different amount.
The cash and cash equivalents available are kept exclusively with banks with a very good credit rating. Continuing credit facilities amounting to up to € 17.0 million (2016: € 18.4 million) were also in place at the balance sheet date.
The following table shows the contractual due dates of financial liabilities, including any interest payments.
|6 months||6-12 months||1-2 years||2-5 years||over 5 years|
|€ '000||€ '000||€ '000||€ '000||€ '000||€ '000||€ '000|
|At December 31, 2017|
|Other non-current financial liabilities||1,073||1,144||n/a||n/a||8||991||145|
|Other current financial liabilities||1,252||1,252||1,252||n/a||n/a||n/a||n/a|
|Interest rate swaps||33||70||30||22||15||3||0|
|At December 31, 2016|
|Other non-current financial liabilities||1,359||1,359||n/a||n/a||255||1,104||0|
|Other current financial liabilities||2,548||2,548||2,548||n/a||n/a||n/a||n/a|
|Interest rate swaps||83||83||38||24||18||3||0|
technotrans pursues the objective of only being exposed to interest rate risks to a limited degree. Financial liabilities of € 17,094 thousand (2016: € 19,318 thousand) were therefore raised at a fixed interest rate. Long-term, variable-rate loans are hedged by the use of interest rate swaps, which are not needed in the case of short-term loans. Variable-rate loans amounting to € 1,858 thousand (2016: € 4,274 thousand) within this global loan amount (€ 5,930 thousand; 2016: € 8,774 thousand) are converted into fixed-rate loans by means of interest rate swaps. The group does not report any fixed-rate financial assets and liabilities at fair value through profit or loss, apart from the conditional purchase prices. Derivatives (interest rate swaps) are not intended as hedging instruments for fair values. A change in the interest rate at the reporting date would therefore not influence the gain or loss. The carrying amounts of the interest rate swaps are equally exposed to an interest rate risk.
The group is exposed to exchange rate risks in the context of its operating activities. At December 31, 2017 the trade receivables as well as the cash and cash equivalents were denominated mainly in euros; other noteworthy components were denominated in US dollars, Chinese renminbi, pounds Sterling and UAE dirhams. The foreign currency holdings quoted are held essentially by technotrans AG and the local national companies within the group.
|Trade receivables||in Thousand||3,635||4,252||194||322||2,107||4,034||342||668|
|Cash and cash equivalents||in Thousand||2,343||3,049||649||1,407||3,372||1,539||658||1,232|
Financial liabilities are denominated predominantly in euros.
Net investments in a foreign business exist exclusively in Brazilian reals. Changes in exchange rates would have an equity effect.
Other foreign currency risks are limited within the technotrans Group by the fact that production takes place principally within the eurozone, and that the currency of production usually corresponds to the currency in which the customer is invoiced. Where significant discrepancies occur, this exchange risk is usually hedged against by means of derivative financial instruments. There were no currency hedging transactions at December 31, 2017.
A potential 10 percent appreciation or weakening in the principal foreign-exchange closing rates against the euro throughout the group would have had the following effects on equity and profit after tax, assuming that all other variables and in particular interest rates remain unchanged:
|Effect on equity||Effect on profit after tax|
|At December 31, 2017|
|At December 31, 2016|
The figures reflect the impact on the period under review of changes in both the closing rate and the average rate, in each case based on a 10 percent change compared with the translation rates applied in the respective consolidated financial statements.
Market risks from interest rate fluctuations exist only for the interest rate swaps. A fall in the interest rate of one percentage point would have only a marginally negative impact on the valuation of the interest rate swap and therefore on equity.
At the balance sheet date, there existed the following derivative financial instruments for hedging against the interest rate risk for variable interest-bearing loans denominated in euros (see Note 11); including these derivative financial instruments, the financial assets and financial liabilities are not exposed to any significant interest rate risk.
|Nominal amount||Repaid||Balance||Fixed rate||Variable Interest||Maturity||Fair Value|
|€ '000||€ '000||€ '000||% p.a.||€ '000|
|Payer-Swap||3,688||3,548||140||2.81||3-month EURIBOR||Sep. 2018||-2|
|Payer-Swap||4,000||2,714||1,286||2.63||3-month EURIBOR||Jan. 2020||-21|
|Payer-Swap||1,100||668||432||3.40||3-month EURIBOR||Aug. 2020||-10|
The fair values are obtained from the measurement of the outstanding items, disregarding any counter-cyclical trends in value from the positions. The fair values are calculated by major German banks on the basis of discounted cash flows (Level 2 according to IFRS 13.82).
Interest Rate Swap
The nominal amount or principal amount, terms, interest payment dates, interest rate adjustment dates, due dates and currencies of the hedged item and hedging instrument are the same. In cases where a hedge exists for a future transaction, it was accounted for as a hedging relationship only if it was considered very probable that this transaction would occur. The efficiency of the hedge pursuant to IAS 39.88 (b) is high, reaching almost 100 percent. The requirements of IAS 39.88 are moreover satisfied.
The interest rate swaps are recognised as a cash flow hedge at the market price; measurement gains and losses from changes in the market price are recognised in the hedging reserve, under equity, with no effect on income. The fair value of the hedging instruments at the balance sheet date is recognised at € 33 thousand (2016: € 83 thousand) under the current “Other liabilities” (Note 17). The underlying loan transactions are measured at amortised cost, using the effective interest method.
The deferred tax on the negative market prices of € -15 thousand was netted against the hedging reserve in the financial year with no effect on income, with the result that the negative balance of the hedging reserve amounted to € 22 thousand at the reporting date.
|Opening level at January 1, 2016||-100|
|Amount transferred to the Income Statement||77|
|Change of the market values of cash flow hedges||-17|
|Deferred tax on these not affecting income||-18|
|Level at December 31, 2016 / January 1, 2017||-58|
|Amount transferred to the Income Statement||60|
|Change of the market values of cash flow hedges||-9|
|Deferred tax on these not affecting income||-15|
|Closing level at December 31, 2017||-22|
Reconciliation of Movements of Liabilities to Cash Flows from Financing Activities
|other financial liabilities||Retained earnings|
|€ '000||€ '000||€ '000|
|Cash flow from financing activities|
|Cash payments from the repayment of loans||-5,068||0||-5,068|
|Distribution to investors||0||-3,799||-3,799|
|Net cash used in financing activities||-5,068||-3,799||-8,867|
|Total other changes related to liabilities||0||0||0|
|Total other changes related to equity||0||13||13|
33) Future Payment Obligations
|up to 1 year||1 to 5 years||over 5 years||Total||Total|
|€ '000||€ '000||€ '000||€ '000||€ '000|
|Tenancy and operating lease agreements||1,886||2,592||113||4,591||5,622|
The future payment obligations are measured at their nominal amount; amounts in foreign currency were measured at the closing rate.
The maintenance agreements relate in the main to the ERP data processing system.
The future obligations from tenancy and lease agreements relate primarily to tenancy obligations for the business premises of subsidiaries and to the vehicle leasing agreements concluded. The expenditure for tenancy and lease agreements (minimum lease payments) in the year under review amounted to € 2,645 thousand (2016: € 2,484 thousand).
In the previous year the purchase price of € 7,150 thousand subject to a condition precedent agreed for GWK Gesellschaft Wärme Kältetechnik mbH for the business premises in Meinerzhagen was reported under other payment obligations. The purchase price was paid in 2017 with the fulfilment of the conditions.
34) Personnel Expenses
|€ '000||€ '000|
|Wages and salaries||59,000||43,830|
|Christmas bonus (Christmas shares)||0||227|
|Other compensation components (Shares)||0||35|
|Expenses for retirement benefits and maintenance payments||1,149||887|
The wages and salaries item also includes payments made in connection with the termination of employment of € 115 thousand (2016: € 335 thousand).
Social insurance comprises expenditure for defined contribution plans (employer contributions to the compulsory state pension scheme) totalling € 5,131 thousand (2016: € 3,591 thousand).
In the 2016 financial year 2,162 ordinary shares were distributed to employees in the form of remuneration components for the last time; all shares had previously been acquired on the market under the share buy-back arrangements. Furthermore, 9,254 ordinary shares in technotrans AG were distributed to employees in the previous year by way of a Christmas bonus. These ordinary shares were acquired on the market in the 2016 financial year prior to issuance. No shares were issued to employees in the 2017 financial year.
35) Total Employees, Yearly Average
|Average number of employees||1,293||990|
|of which in Germany||1,132||831|
|of which abroad||161||159|
36) Related Parties
“Related parties” include the members of the Board of Management and Supervisory Board of technotrans AG, as well as their close family members.
Since the 2011 financial year the remuneration system for the Board of Management has met the latest standards and the statutory requirements of the Act on the Appropriateness of Management Board Compensation (German VorstAG). Please refer to the “Report on the Remuneration System of the Board of Management” in the Management Report for the group for information on the payment components.
In the year under review consultancy services in the amount of € 119 thousand (2016: € 143 thousand) were obtained from the law firm Hoffmann, Liebs, Fritsch & Partner, Düsseldorf, in which Dr Norbert Bröcker is a partner. All services were procured at arm’s length terms.
Payments to Members of the Board of Management and Supervisory Board
|€ '000||€ '000|
|Board of Management|
|of which fixed||724||717|
|of which variable||673||726|
|of which fixed||79||79|
|of which variable||171||105|
In addition to the remuneration paid in the financial year, the members of the Board of Management are entitled to a profit share of € 500 thousand (2016: € 416 thousand) that is conditional on the attainment of future targets focusing on sustainability.
The regular payments to the Board of Management (fixed) include payments by the company for defined contribution plans totalling € 90 thousand (2016: € 90 thousand).
No employer’s pension commitment has been made towards the members of the Board of Management, nor have loans been granted to them or surety obligations accepted on their behalf.
The members of the Board of Management and Supervisory Board are listed separately in the section “Corporate Bodies”.
Directors’ Holdings (Board of Management and Supervisory Board Members)
|Board of Management|
|Dr. Andreas J.Schmid*||0||0|
|Dr. Christof Soest**||10,764||10,764|
|Dr. Norbert Bröcker||250||250|
|Dr. Wolfgang Höper||0||0|
|* Member of Board of Management since 01/02/2018
** Member of Board of Management until 31/12/2017
37) Corporate Governance
The Board of Management and Supervisory Board submitted the Declaration of Conformity pursuant to Section 161 of German Stock Corporation Act in September 2017 and provided permanent access to it for shareholders and interested parties on the company’s website (www.technotrans.de).
38) Events Occurring after the Balance Sheet Date
The date for release of the annual financial statements by the Board of Management pursuant to IAS 10.17 is March 5, 2018. These Consolidated Financial Statements are subject to approval by the Supervisory Board (Section 171 (2) of German Stock Corporation Act).
In January 2018 Henry Brickenkamp, member of the Board of Management of technotrans AG since 2006 and Chief Executive Officer since 2008, notified the Supervisory Board that he does not wish to extend his contract, which expires mid-way through the year, enabling him to follow up a new professional challenge. In light of the exit of Dr Soest (CTO) at the turn of 2017/2018, again in January the Supervisory Board appointed Mr Hendirk Niestert, who has been with technotrans since 2007 and was latterly in charge of Worldwide Service, as well as Dr Andreas J Schmid, previously a senior management member of the Schaltbau GmbH Group, to the Board of Management. Both took up office on February 1, 2018. Mr Niestert will be responsible primarily for the Sales, Service and Quality Management areas, and Dr Schmid for the Development, Controls, Business Units, Production, Purchasing and Logistics areas.
No further events of particular significance affecting the financial performance, financial position or net worth of the company occurred after the end of the 2017 financial year.