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Annual Report 2016

III. Notes to the Consolidated Balance Sheet

Consolidated Statement of Changes in Fixed Assets

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2015   Cost Accumulated depreciation  Residual carrying amounts
    at January 1, 2015 Foreign currency translation differences Additions from corporate acquisitionAdditions Disposals Transfers At December 31, 2015  at January 1, 2015 Foreign currency translation differences Depreciation for the year Disposals at December 31, 2015 at December 31, 2015
    € '000  
Property, plant and equipment (1)    
Property* 20,577 -13 04 0 0 20,568  8,910 -16 695 0 9,589 10,979
Technical equipment and machinery 5,174 57 0232 -134 0 5,29  4,759 46 108 -134 4,779 550
Other equipment, operating and office equipment 10,231 111 01,014 -607 0 10,749  7,202 82 943 -585 7,642 3,107
Construction in progress 47 0 017 0 0 64  0 0 0 0 0 64
36,029 155 01,267 -741 0 36,710  20,871 112 1,746 -719 22,010 14,700
 
   
Intangible Assets (3)  
Goodwill (2) 5,828 0 00 0 0 5,828  0 0 0 0 0 5,828
Concessions, industrial and similar rights 11,957 44 0232 -123 19 12,129  9,151 35 1,060 -122 10,124 2,005
Development expenditure recognised as an intangible asset 8,360 25 0185 0 0 8,570  6,921 25 429 0 7,375 1,195
Prepayments 19 0 00 0 -19 0  0 0 0 0 0 0
26,164 69 0417 -123 0 26,527  16,072 60 1,489 -122 17,499 9,028
2016   Cost Accumulated depreciation  Residual carrying amounts
  at January 1, 2016 Foreign currency translation differences Additions from corporate acquisitionAdditions Disposals Transfers At December 31, 2016  at January 1, 2016 Foreign currency translation differences Depreciation for the year Disposals at December 31, 2015 at December 31, 2016
    € '000 € '000 € '000  € '000 € '000 € '000  € '000 € '000 € '000 € '000 € '000 € '000
Property, plant and equipment (1)    
Property* 20,568 19 145 -2 14 20,645  9,589 16 685 -2 10,288 10,357
Technical equipment and machinery   5,329 4 1,68565 -704 0 6,379  4,779 7 218 -699 4,305 2,074
Other equipment, operating and office equipment 10,749 -24 1,932951 -2,068 -14 11,526  7,642 -24 1,093 -1,959 6,752 4,774
Construction in progress 64 0 0465 0 0 529  0 0 0 0 0 529
36,710 -1 3,6181,526 -2,774 0 39,079  22,010 -1 1,996 -2,660 21,345 17,734
   
     
     
Intangible Assets (3)  
Goodwill (2) 5,828 0 17,3160 0 0 23,144  0 0 0 0 0 23,144
Concessions, industrial and similar rights 12,129 8 7,642116 -176 0 19,719  10,124 6 1,955 -173 11,912 7,807
Development expenditure recognised as an intangible asset 8,570 8 00 0 0 8,578  7,375 8 363 0 7,746 832
26,527 16 24,958116 -176 0 51,441  17,499 14 2,318 -173 19,658 31,783

1) Property, Plant and Equipment

2) Goodwill

3) Intangible Assets

In the 2016 financial year there was an increase in intangible assets, substantially as a result of the assets identified within the context of the purchase price allocations (cf. Note II a) “Consolidated Companies”). Depreciation and amortisation was applied to these assets in the financial year in accordance with their useful lives. Depreciation and amortisation of € 1,508 thousand (2015: € 720 thousand) concerns the intangible assets recognised in the course of purchase price allocation.

Intangible assets arising from development activities are capitalised pursuant to IAS 38 if it is probable that future economic advantage will accrue from the use of the asset and the costs of the asset can be reliably determined. Only current development work was conducted in the 2016 financial year. Therefore no (2015: € 185 thousand) intangible assets arising from development were recognised. Due to nonfulfilment of the requirements for recognition as stated in IAS 38, development costs amounting to € 5,534 thousand (2015: € 4,293 thousand) were recognised as an expense.

There are no concessions, industrial and similar rights or development expenditure recognised as an intangible asset with an unlimited useful life. The useful life taken as the basis for the amortisation of software and development expenditure recognised as an intangible asset is three to five years.

In the Income Statement, the amortisation of development expenditure recognised as an intangible asset is allocated to the cost of sales using the function of expense method, according to the principle of causation. The amortisation of concessions, industrial and similar rights is allocated to the cost of sales, distribution costs, administrative expenses and development costs by means of cost centre accounting.

4) Other Financial Assets

  31/12/2016 31/12/2015
  € '000 € '000
Rent deposits 61 38
Other 31 10
92 48

5) Inventories

  31/12/2016 31/12/2015
  € '000 € '000
Raw materials and supplies 13,019 9,085
Work in progress 8,698 3,806
Finished goods and merchandise 3,892 4,656
  25,609 17,547

The significant increase in inventories is substantially the result of the increased scope of consolidation.

Of total inventories, the amount of € 5,632 thousand (2015: € 3,880 thousand) is reported at the fair value, less production costs still to be incurred and distribution costs. Impairment of inventories totalling € 1,143 thousand (2015: € 436 thousand) was recognised as an expense in the 2016 financial year. Reversals of € 946 thousand (2015: € 632 thousand) in the same period led to an income, as higher net realisable values could be assumed than in the previous year.

6) Trade Receivables

In the Technology segment, receivables outstanding are owed mainly by major OEMs (printing press, mechanical engineering companies and laser manufacturers), as well as by end customers.

In the year under review, additions to the impairment of receivables totalling € 86 thousand (2015: € 286 thousand) were booked to distribution costs in the Income Statement. Impairment was applied in order to measure the receivables at fair value. This impairment reflects the actual credit risk. Impairment is applied in particular if the debtor is experiencing considerable financial difficulties. The amounts stated for trade receivables are fundamentally adjusted via a value adjustment account. Receivables are only derecognised once the debtor has opened insolvency proceedings or the receivable has become uncollectable.

The following table provides an overview of impairment of receivables:

  31/12/2016 31/12/2015
  € '000 € '000
Opening level 1,097 1,155
Addition of company acquisition 473 0
Allocated 86 286
Derecognition of receivables -45 -307
Cash receipts for receivables written off -73 -53
Exchange differences -3 16
Closing level 1,535 1,097

7) Income Tax Receivable

This comprises ongoing income tax receivable as well as corporation tax credit balances from previous years. These rebates (Section 37 (5) of the German Corporation Tax Act) are capitalised at the present value. The rebates are being paid in ten equal annual instalments between 2008 and 2017; the income tax receivable was correspondingly allocated exclusively to current assets in the financial year.

8) Other Assets

31/12/2016 31/12/2015
  € '000 € '000
Other financial assets
Receivables from suppliers 192 19
Deposits 173 246
Other 359 201
724 466
 
Other assets
Prepaid expenses 669 558
Creditable input tax 194 157
Other 304 379
  1,167 1,094
  1,891 1,560

9) Cash and Cash Equivalents

Cash and cash equivalents comprise balances with banks and cash on hand. The fair value of cash and cash equivalents corresponds to the carrying amount. There were no marketable securities at the balance sheet date.

The development in cash and cash equivalents is shown in the Cash Flow Statement.

10) Equity

The development in equity is shown in the Statement of Movements in Equity. The equity of the group totalled € 61,880 thousand at December 31, 2016 (2015: € 51,725 thousand). Of this, € 118 thousand (2015: € 928 thousand) is attributable to non-controlling interests.

Issued Capital

At December 31, 2016 the issued capital (share capital) of technotrans AG comprised 6,907,665 issued and outstanding no par value registered shares. The shares outstanding are fully paid. Each no par value share represents a nominal amount of € 1 of the share capital. All shares carry identical rights. No special rights or preferences are granted to individual shareholders. The same applies to dividend entitlements.

  Shared issued Shares outstanding
  2016 2015 2016 2015
Position at January 1 6,907,665 6,907,665 6,530,588 6,516,434
Issurance of treasury shares 0 0 374,915 0
Issued to employees (as remuneration component) 0 0 2,162 2,187
Acquisition of tresury shares 0 0 9,254 0
Issued to employees (as Christmas bonus) 0 0 9,254 11,967
Position at December 31 6,907,665 6,907,665 6,907,665 6,530,588

Authorised Capital

The Annual General Meeting on May 15, 2014 authorised the Board of Management to raise the share capital, with the consent of the Supervisory Board, by the issuance of new shares on one or more occasions by May 14, 2019, against contributions, by up to a total of € 3,450,000. No use was made of this authorisation in 2016.

Conditional Capital

At the Annual General Meeting on May 15, 2014 the Board of Management was, with the consent of the Supervisory Board, authorised to issue bearer and/or registered bonds with a term of a maximum of five years on one or more occasions up until May 14, 2019 of an aggregate nominal amount of up to € 10 million and to grant the bearers of bonds conversion options on up to 690,000 no par value registered treasury shares in accordance with the respective terms of the bonds (convertible bond terms).

The conversion options granted to the bearers of the bonds may cover shares in the company representing an amount of up to € 690,000.00 of the share capital. As well as in euros, the convertible bonds may be issued in the legal currency of an OECD country, limited to the corresponding euro countervalue.

The shareholders have a fundamental right to subscribe to bonds. The bonds may also be accepted by a bank or a consortium of banks with the obligation to offer them to the shareholders for subscription. In addition, however, the Board of Management is, with the consent of the Supervisory Board, authorised to exclude the statutory subscription right of the shareholders to the bonds within the limits laid down individually and specifically by the authorisation.

The Board of Management is authorised, with the consent of the Supervisory Board, to specify the further details of the issuance and features of the convertible bonds and their terms itself, meaning in particular the currency, interest rate, issuing amount, term and denomination of the convertible bonds, the conversion price and period, the exchange ratio and payment of the countervalue in money instead of exchange for treasury shares. This authorisation was not used in the 2016 financial year.

Capital Reserve

The premium from the past share issues from the issuance of shares under conversion options from conditional capital and from the issuance of ordinary shares from authorised capital (capital increase for contribution in kind) was paid into the capital reserve. The costs of the share issues were deducted.

In the financial year, the remaining 377,077 treasury shares were released at a price that was above the original cost. The difference of € 6,169 thousand between the cost of the shares and their fair value at the time of issuance, resulting from the release of treasury shares, was allocated to the capital reserve. The IFRS capital reserve corresponds to the capital reserve of the parent company according to the German Commercial Code. As a result of the change in 2009 to comply with the German Accounting LawModernisation Act (BilMoG), in the event of disposal of treasury shares those amounts that would not have been allocated to the capital reserve under a purely IFRS approach must, after the change, likewise be allocated to the German Commercial Code capital reserve (devaluation from the period prior to the change). To maintain the German Commercial Code and IFRS capital reserves at identical levels, appropriate amounts are therefore withdrawn from the retained earnings and allocated to the capital reserve.

Retained Earnings

The retained earnings include profit carried forward and additional other reserves. Of these, an amount of € 691 thousand (2015: € 691 thousand) relates to the legal reserve of technotrans AG pursuant to Section 150 (2) of German Stock Corporation Act. The reserve for treasury shares of technotrans AG (2015: € -5,426 thousand) was fully wound up with the disposal of the remaining shares.

Pursuant to Section 268 (8) of German Commercial Code, an amount of € 9 thousand (2015: € 108 thousand) due to the capitalisation of deferred taxes as well as an amount of € 16 thousand (2015: € 0 thousand) attributable to the difference pursuant to Section 253 (6) of German Commercial Code from the measurement of the provision for pensions may not be distributed from the other retained earnings of the parent company.

Other Reserves

  31/12/2016 31/12/2015
  € '000 € '000
Exchange differences -3,721 -3,338
Reserve for net investments in a foreign operation -2,047 -2,584
Hedging reserve -58 -100
Treasury shares 0 -5,426
-5,826 -11,448

Pursuant to IAS 39, the negative market value of the interest rate swaps used was recognised in the hedging reserve with no income effect, following deduction of deferred taxes (cf. Note 32 “Financial instruments”). In the 2016 financial year, a gain of € 60 thousand (2015: loss of € 49 thousand) was reported within equity with no effect on income. As in the previous year, no gains were realised. In return, deferred tax of € 18 thousand (2015: € 15 thousand) was booked with no effect on income.

technotrans AG has extended loans to its subsidiaries that are to be regarded as net investments in foreign businesses. Pursuant to IAS 21.32 and IAS 12.61A, the accumulated translation differences up to the balance sheet date and any taxes on these are netted directly within equity. Exchange rate differences are only recognised through profit or loss upon liquidation or partial liquidation of the company.

In the 2016 financial year, currency translation gains from the above loans in the amount of € 537 thousand (2015: € 655 thousand loss) were netted directly within equity; because their liquidation or partial liquidation are not planned for the foreseeable future, as in the previous year no deferred taxes on these exchange rate losses were netted income-neutrally within equity in the financial year.

The exchange differences include differences from the translation of the subsidiaries’ equity to be consolidated at the historical rate and at the rate on the balance sheet date. This item furthermore includes the differences resulting from the translation of the assets and liabilities of the international subsidiaries at the closing rate and from the translation of the expenses and income at the average rate for the year.

Treasury Shares

At the Annual General Meeting on May 15, 2014 the shareholders authorised the Board of Management to buy back treasury shares in accordance with Section 71 (1) No. 8 of German Stock Corporation Act. The scope of this authorisation is for the buying back of a portion of up to € 690,000.00 of the share capital (690,000 no par value shares, corresponding to 9.98 percent of the share capital at the time of the resolution) and is valid until May 14, 2019. Pursuant to IAS 32.33 the shares bought back are deducted from equity at their cost (including incidental costs). The buy-back is in line with the strategic objectives of the company. 9,254 shares were bought back during the period January to December 2016 for issuing to employees. In the 2016 financial year, a total of 11,416 no par value shares (2015: 14,154 no par value shares) with a fair value of € 262 thousand (2015: € 247 thousand) were issued to employees by way of a remuneration component. The remaining 374,915 shares were sold at a fair value of € 8,154 thousand. At the balance sheet date of December 31, 2016 no (2015: 377,077) ordinary shares were held by technotrans AG.

Capital Management

At December 31, 2016 the equity ratio was 51.0 percent (2015: 68.0 percent). One of the most important financial objectives for technotrans AG is to assure its solvency at all times, and increase the long-term value of the group.

The creation of adequate liquidity reserves is very important in this respect. The aim is always to have liquidity reserves amounting to at least 5 percent of annual revenue. This objective is achieved by implementing various measures in order to reduce capital costs and optimise the capital structure, alongside practising effective risk management.

Methodologically, technotrans’ capital management approach is based on financial market oriented indicators, such as the return on sales (long-term target margin for EBIT: 10 percent), the equity ratio (target: > 50 percent) and gearing. technotrans is not subject to capital requirements laid down in the articles of incorporation. A sound capital structure provides technotrans with the stability that serves as the basis for a business model focusing on sustainability, and thus in the long term meets both the requirements of customer and supplier relations and serves the needs of the employees and shareholders.

An unsecured loan carries the obligation to adhere to certain financial indicators (financial covenants). The financial ratios, equity ratio, gearing and EBITDA margin are determined for the Consolidated Financial Statements and were complied with in the 2016 financial year.

11) Financial Liabilities

  31/12/2016 31/12/2015
  € '000 € '000
Short-term borrowings 5,068 1,997
Long-term borrowings 23,024 6,061
28,092 8,058

An amount of € 20,000 thousand of the rise in financial liabilities results from the raising of new loans to finance the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH and from the provision of financing for the acquisition of the business premises in Meinerzhagen planned for 2017. The companies acquired in the financial year account for € 2,031 thousand of the financial liabilities at the reporting date.

There were no hedged liabilities at the balance sheet date. Interest rate hedges exist only in the case of financial liabilities.

Terms to Maturity of Financial Liabilities

  < 1 year 1 - 5 years > 5 years Total Interest p.a. Collateral
  € '000 € '000 € '000 € '000    
€ fixed rate credit 556 2,963 1,481 5,000 1.00% None
Variable € credit 429 1,714 857 3,000 3-months EURIBOR +1.59% None
€ fixed rate credit 0 1,071 1,429 2,500 1.45% Land charge
€ fixed rate credit 0 937 1,563 2,500 1.45% Land charge
€ fixed rate credit 0 937 1,563 2,500 1.70% Land charge
Variable € credit 571 1,286 0 1,857 3-months EURIBOR via
interest rate swap
(fixed rate: 2.63%)
None
Variable € credit 1.500 0 0 1,500 3-months EURIBOR via
interest rate swap
(fixed rate: 2.70%)
Land charge
€ fixed rate credit 237 1,263 0 1,500 1.45% Land charge
Variable € credit 0 1,500 0 1,500 6-months EURIBOR +1.25% Land charge
€ fixed rate credit 300 1,200 0 1,500 1.65% Land charge
€ fixed rate credit 422 528 0 950 2.00% None
€ fixed rate credit 245 675 0 920 3.31% Land charge
€ fixed rate credit 36 143 639 818 4.50% Land charge
Variable € credit 157 432 0 589 3-months EURIBOR via
interest rate swap
(fixed rate : 3.40%)
Land charge
Variable € credit 188 140 0 328 3-months EURIBOR via
interest rate swap
(fixed rate : 2.81%)
Land charge
€ fixed rate credit 87 217 0 304 1.71% Chattel mortgage
lease purchase 48 136 0 184 3.05% Chattel mortgage
€ fixed rate credit 18 70 39 127 2.35% Chattel mortgage
€ fixed rate credit 43 71 0 114 3.10% Chattel mortgage
lease purchase 31 65 0 96 3.08% Chattel mortgage
€ fixed rate credit 12 50 28 90 2.10% Chattel mortgage
€ fixed rate credit 59 0 0 59 3.35% None
€ fixed rate credit 50 0 0 50 3.50% None
€ fixed rate credit 21 26 0 47 3.10% Chattel mortgage
€ fixed rate credit 35 0 0 35 2.70% Directly enforce-
able guarantee
€ fixed rate credit 11 1 0 12 3.15% Chattel mortgage
€ fixed rate credit 12 0 0 12 3.25% Chattel mortgage
5,068 15,425 7,599 28,092

Amounts owed to banks with a carrying amount of € 14,747 thousand (2015: € 3,880 thousand) are collateralised by land charges on the company premises in Sassenberg.

Financial liabilities of € 50 thousand (2015: € 150 thousand) relate to Termotek GmbH. No collateral was furnished for these loans.

At the reporting date KLH Kältetechnik GmbH had financial liabilities of € 589 thousand (2015: € 746 thousand) secured in full by land charges on the factory site Am Waldrand 10 in Bad Doberan.

SHT Immobilienbesitz GmbH & Co. Vermietungs KG had financial liabilities of € 818 thousand (2015: € 854 thousand). The real estate Am Waldrand 10a in Bad Doberan serves as security.

The loan of Ovidius GmbH in the amount of € 35 thousand is secured by a directly enforceable guarantee by the shareholder-manager.

Of the loans of GWK Gesellschaft Wärme Kältetechnik mbH amounting to € 1,995 thousand, the sum of € 986 thousand is secured by chattel mortgages on the plant in question. No collateral was furnished for loans amounting to € 1,009 thousand.

12) Other Financial Liabilities

  31/12/2016 31/12/2015
  € '000 € '000
Contingent purchase price Ovidius GmbH 1,104 0
Assumption of debt company acquisition GWK 248 0
Long-term liabilities from finance lease 7 14
Conditional purchase price of KLH 0 346
1,359 360

The remaining shares in the KLH companies were acquired in the 2016 financial year. The conditional purchase price still outstanding was measured at fair value at the time of acquisition and reduced by € 180 thousand. The outstanding conditional purchase price was settled through payment of the purchase price.

With regard to the conditional purchase price obligation in the context of the corporate acquisition of Ovidius GmbH and the assumption of liabilities in the context of the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH, please refer to Note II a) “Consolidated Companies”.

13) Trade Payables

All trade payables have a term of up to one year.

  31/12/2016 31/12/2015
  € '000 € '000
Trade payables 3,780 2,000
Outstanding purchase invoices 1,029 433
  4,809 2,433

14) Prepayments Received

The prepayments received originate in the main from project business. They are used for financing the finished goods included in the inventories but from which no revenue has yet been realised. Of the prepayments received, € 4,166 thousand concerns project business of GWK Gesellschaft Wärme Kältetechnik mbH.

15) Provisions

  Obligations to personnel Payments to be made under warranty Other provisions Provisions for pensions Total
  € '000 € '000 € '000 € '000 € '000
Opening level at January 1, 2016 4,483 851 967 250 6,551
Exchange rate movements 19 3 -6 0 16
Used 3,103 684 923 11 4,721
Reversed 325 111 200 0 636
Addition of company acquisition 773 439 1,489 0 2,701
Compounding 308 0 0 4 312
Allocated 3,478 906 1,155 33 5,572
Closing level at December 31, 2016 5,633 1,404 2,482 276 9,795
Long-term provisions 898 0 15 265 1,178
Short-term provisions 4,735 1,404 2,467 11 8,617

The obligations to personnel consist largely of gratuities, bonuses and performance-related pay for employees, as well as time credits. It is in the first instance uncertain when these obligations will have to be met.

There are partial retirement employment contracts with two employees. The obligation from these partial retirement employment contracts was determined actuarially. The calculation is based on an interest rate of 1.8 percent (2015: 2.3 percent). Partial retirement obligations are covered against possible bankruptcy pursuant to Section 8a of the German Partial Retirement Act. To provide cover, cash was paid into a money market fund (Deka Investments) and pledged in favour of the employees. Under IAS 19.7 the assets constitute “plan assets” and are netted with the corresponding provision. Income from the plan assets is netted with the corresponding expenses. No income was realised in the 2015 and 2016 financial years. Cash of € 63 thousand was invested at December 31, 2016 (2015: € 42 thousand).

Provisions for warranties are created for current statutory, contractual and constructive warranty obligations towards third parties. The provisions were measured taking experience as the starting point, incorporating the circumstances at the balance sheet date.

In the course of its general business activities technotrans is involved in court and out-of-court litigation, the outcome of which cannot be predicted with certainty. Litigation may for example arise in connection with product liability cases and warranties. Where such risks arising are not already insured against, provisions are formed if a call is probable and the likely amount of the provision required can be estimated reliably. At the balance sheet date provisions of € 1,018 thousand were formed for litigation settlements from product liability and warranties.

The miscellaneous other provisions comprise costs for the preparation of the annual accounts, commission payments and other costs. In this case, too, the factor of uncertainty is principally the amount in question.

A direct pension pledge has been made to employees of the former BVS Beratung Verkauf Service Grafische Technik GmbH. Pensions are already paid for all employees. The “defined benefit obligation” (DBO) for purposes of calculating the provisions for pensions was determined on the basis of an actuarial report, using the 2005 G reference tables published by Prof Dr Klaus Heubeck. The calculation is based on an interest rate of 1.0 percent (2015: 2.1 percent) and a pension trend of 2.0 percent (2015: 2.0 percent) . The development in pay levels and employee fluctuation were not taken into account, as those eligible for pensions have since left the company. The interest costs for the DBO in 2016 amount to € 5 thousand (2015: € 5 thousand). The actuarial loss amounts to € 33 thousand (2015: € 2 thousand gain). The actuarial loss was recognised in other comprehensive income. Pension payments amounting to € 11 thousand (2015: € 11 thousand) were made in 2016.

16) Income Tax Payable

In the year under review, income tax payable relates substantially to technotrans AG and its controlled companies as well as KLH Kältetechnik GmbH.

17) Other Liabilities

  31/12/2016 31/12/2015
  € '000 € '000
Other financial liabilities
Loans 1,102 0
Debtors with credit balances 434 177
Assumption of debt company acquisition GWK 248 0
Current liabilities from derivative financial instruments 83 144
Conditional purchase price of KLH 0 9
Other financial liabilities 764 202
2,631 532
Other liabilities
Sales tax 1,073 588
Operating taxes 847 369
Liabilities in respect of social insurance 119 123
Other 637 574
2,676 1,654
  5,307 2,186

The loan of € 1,102 thousand reported here is in respect of the leasing company of GWK Gesellschaft Wärme Kältetechnik mbH. This loan is to be repaid with the acquisition of the property in the 2017 financial year.

With regard to the assumption of liabilities in the context of the corporate acquisition of GWK Gesellschaft Wärme Kältetechnik mbH, please refer to Note II a) “Consolidated Companies”.