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Annual Report 2016

Annual Financial Statements of technotrans AG (Condensed Version to 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).

Business and Economic Environment

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 21 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.

Financial Performance

technotrans AG again handled the financial year successfully under its own momentum, in a difficult economic environment. Business with the manufacturers of offset, digital and flexographic printing presses made extremely good progress in the 2016 financial year. Following the gradual retreat of the printing press market in every year from 2008 to 2014, there has been slight growth for the past three years. In recent years technotrans AG has further increased its market shares with the manufacturers of offset printing presses and also tapped into new areas of business in digital and flexographic printing. The company was consequently able to capitalise overproportionally on general growth in the past financial year. Furthermore, revenue contributions from outside the printing industry were increased further.

Condensed profit and loss account of technotrans AG

in € '000 2016 2015
Revenue 71,057 67,013
Inventory change 393 769
Other own work capitalised 0 2
Other operating income 2,117 1,801
Cost of material 32,686 29,934
Personal expenses 25,054 23,371
Depreciation and amortisation 1,391 1,434
Other operating expenses 10,704 10,762
Net finance costs 4,943 4,766
Profit from ordinary activities 8,675 8,850
Taxes 2,089 2,484
Annual net profit 6,586 6,366
Profit carried forward 2,704 2,474
Transfer to retained earnings 3,000 3,000
Net profit 6,290 5,840

Revenue overall rose by 6.0 percent compared with the previous year to € 71.1 million (€ 67.0 million). Revenue is reported according to the new definition of Section 277 (1) of the German Commercial Code, which is to be adopted for the first time for 2016. The prior-year figures were adjusted according to the new definition of the German Accounting Directive Implementation Act (BilRUG). Earnings before the financial result and income taxes (EBIT) amounted to € 3.6 million (previous year: € 4.0 million). This represents an EBIT margin of 5.1 percent. For the 2016 financial year, the Board of Management had defined revenue and earnings targets for technotrans AG involving slight revenue growth in the order of three to four percent and an EBIT margin of 6.5 percent. The non-attainment of the earnings target was attributable in particular to an increased use of materials within project-related start-up costs and non-recurring incidental acquisition costs recognised in profit or loss for the interests acquired in GWK Gesellschaft Wärme Kältetechnik mbH and the KLH companies (€ 0.4 million).

Reconciliation of net income to earnings before interest and taxes (EBIT)

in € '000 2016 2015
Net profit for the period
Income Statement
6,586 6,366
Income from write-ups of financial assets 637 3,000
Income from investments 1,609 1,794
Income from profit transfer agreement 2,923 2,323
Interest and similar income 24 25
Income from loans held as financial assets 200 202
Interest and similar expenses 451 305
Write-downs of financial assets
and marketable securities
0 2,273
Income tax expense 1,956 2,420
Earnings before interest and taxes (EBIT) 3,600 4,020

The revenue share for the Technology segment rose by € 4.4 million (+10.1 percent) to € 48.5 million compared with the previous year (€ 44.0 million). In the Services segment, revenue came to € 22.6 million compared with € 23.0 in the previous year.

The cost of purchased materials for technotrans AG rose by 9.2 percent compared with the previous year to € 32.7 million. This meant the cost of purchased materials ratio (in relation to aggregate operating performance) improved from 44.2 percent to 45.7 percent.

Personnel expenses for the 2016 financial year rose by 1.7 percent overall to € 25.1 million (previous year: € 23.4 million). The increase of 7.2 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 2016 averaging 3.0 percent. The personnel expenses ratio rose slightly from 34.5 percent to 35.1 percent. A large number of project kick-offs in the new markets necessitated an increased use of resources.

Other operating income rose by € 0.3 million, from € 1.8 million in the previous year to € 2.1 million. € 0.9 million of this amount (previous year: € 0.5 million) concerned income unrelated to the accounting period, which mainly comprised income from cash received for impaired receivables. Foreign exchange gains came to around € 0.4 million (previous year: € 0.6 million).

Other operating expenses of € 10.7 million were on a par with the previous year (€ 10.8 million). Sales commissions amounted to € 0.9 million (previous year: € 1.0 million). These flowed almost in entirety to own subsidiaries. Travel expenses remained almost unchanged from 2015 at € 0.8 million. A total of € 0.5 million (previous year: € 0.9 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 € 0.4 million (previous year: € 0.3 million).

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

technotrans AG posted a financial result of € 4.9 million (previous year: € 4.8 million). This includes on the one hand income from investments amounting to € 4.5 million (previous year: € 4.1 million), which comprises € 1.6 million in dividend payments by subsidiaries as well as € 2.9 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 € 0.6 million (previous year: € 3.0 million). There were no write-downs on financial assets in the year under review (previous year: € 2.3 million). The interest result of € -0.4 million was above the prior-year level (€ -0.3 million).

The income taxes for the 2016 financial year totalled € 2.0 million (previous year: € 2.4 million). This figure comprised € 1.9 million in current income tax and a deferred tax expense of € 0.1 million resulting from the change in deferred tax assets and liabilities.

Net income for the year of € 6.6 million is reported for the 2016 financial year (previous year: € 6.4 million).

Net Worth and Financial Position

ASSETS 
€ '00031/12/2016 31/12/2015
Fixed assets51,586 27,933
Inventories10,470 9,778
Receivables and other assets17,382 13,286
Cash and cash equivalents13,302 11,341
Current assets41,154 34,405
Deferred items387 352
Deferred tax assets9 106
Total assets93,137 62,796
 
EQUITY AND LIABILITIES 
€ '00031/12/2016 31/12/2015
Issued capital6,908 6,531
Capital reserve19,096 13,128
Retained earnings25,706 20,862
Accumulated profit6,290 5,840
Equity58,000 46,361
Provisions5,809 5,034
Liabilities29,327 11,401
Deferred items1 0
Total equity and liabilities93,137 62,796

The balance sheet total of technotrans AG grew sharply compared with December 31, 2015 from € 62.8 million to € 93.1 million. This increase resulted mainly from the interests acquired in GWK Gesellschaft Wärme Kältetechnik mbH and the KLH companies in the course of the 2016 financial year.

Fixed assets at the balance sheet date rose from € 27.9 million to € 51.6 million, a change of € 23.7 million. While property, plant and equipment as well as intangible assets declined by a further € 1.0 million compared with the previous year to € 10.5 million, within investment assets the corporate acquisitions prompted an increase in shares in affiliated companies to € 41.1 million (previous year: € 16.4 million).

Inventories of € 10.5 million (previous year: € 9.8 million) were up 7.1 percent on the previous year’s level. The increase is above all due to the generally higher volume of business in the period under review.

Receivables and other assets climbed by € 4.1 million to € 17.4 million compared to the position at December 31, 2015, with receivables from affiliated companies accounting for € 10.8 million of this figure (previous year: € 8.3 million). Cash climbed from € 11.3 million to € 13.3 million at the balance sheet date.

Equity increased to € 58.0 million, up from € 46.4 million at the end of the previous year. The rise is mainly attributable to the net income for 2016, of which € 3.0 million was allocated to the retained earnings in agreement with Section 58 (2) of the German Stock Corporation Act. Furthermore, the disposal of treasury shares led to a rise in equity totalling € 8.2 million in the 2016 financial year. The equity ratio nevertheless fell from 73.8 percent to 62.3 percent.

Liabilities and provisions at the balance sheet date amounted to € 35.1 million (previous year: € 16.4 million). The change stems mainly from the raising of bank loans in the amount of € 20.0 million to finance the acquisition of the interest in GWK. Provisions grew by € 0.8 million compared with the position at December 31, 2015 to € 5.8 million.

The cash flow from operating activities (net cash) for the 2016 financial year reached € 0.8 million (previous year: € 3.3 million). The change in working capital resulted in a budgetary commitment totalling € 4.4 million. Of this amount, around € 3.9 million is attributable to a reporting-date-related increase in receivables, among others from affiliated companies and predominantly in the form of a loan extended to GWK Gesellschaft Wärme Kältetechnik mbH. In addition, inventories were another € 0.8 million up on the previous year as a result of business expansion.

As a result of the acquisitions acquired and moderate investing activities in fixed assets, there were substantially higher cash payments in the period under review amounting to € -25.3 million (previous year: € -1.3 million). Cash receipts from the scaling-back of loans of subsidiaries and from interest and dividend payments received came to € 3.4 million (previous year: € 2.9 million). Overall, the cash inflows and outflows produced a negative cash flow from investing activities of € -21.9 million (previous year: positive cash flow of € 1.6 million).

The cash flow from financing activities in the period under review reveals a cash inflow of € 28.2 million for the reciprocal financing of the capital investments. This comprises a liquidity inflow of € 8.2 million from the disposal of treasury shares and also from the raising of new loans amounting to € 20.0 million in connection with the interests acquired. Cash outflows amounting to € 5.1 million comprise € 1.7 million for the scheduled repayment of loans, € 0.3 million in interest payments and € 3.1 million for the distribution of the dividend to the shareholders of technotrans AG.
The net cash used for financing activities produces a cash inflow of € 23.0 million for 2016 (previous year: € 4.9 million cash outflow).

Employees

At December 31, 2016 technotrans AG had 449 employees; this was 13 more than at the end of 2015 (previous year: 436). The 2016 figure comprised 356 employees belonging to the Technology segment (previous year: 341) and 93 employees belonging to the Services segment (previous year: 95).

Opportunities and risks

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 moderate.

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

Outlook

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.