Financial position

In the second quarter, the KION Group made further improvements to its funding structure and, by reducing current interest costs, created greater flexibility with which to implement its growth strategy. On 15 April 2014, the KION Group repaid two tranches of the corporate bonds early and in full (see Business performance).

Against this background, the revolving credit facility was increased by €198.0 million to a total of €1,243.0 million in April 2014. Interest rates on this higher level of bank debt are currently far lower than those on the repaid corporate bonds. The saving in interest payments is expected to be approximately €20 million per year.

Analysis of capital structure

Long-term borrowing amounted to €969.4 million as at 30 June 2014 and largely comprised the fixed-rate tranche of the corporate bond issued in 2013, which is due to mature in 2020 (€450.0 million), and the long-term portion of the revolving credit facility (€523.0 million). As at the reporting date, an amount of €170.7 million had been drawn down from the revolving credit facility on a short-term basis (31 December 2013: €184.4 million). The revolving credit facility of €1,045.0 million has a maturity date of June 2018; an increase of €198.0 million was agreed until April 2019 and has a maturity period of five years. Because most of the borrowing costs in connection with the early termination of the bond tranches were recognised as an expense, an amount of just €7.1 million was capitalised and deducted from financial debt (31 December 2013: €16.7 million). Overall, financial debt was virtually unchanged compared with the end of 2013 at €1,200.6 million. After deduction of cash and cash equivalents of €134.9 million, the remaining net financial debt came to €1,065.7 million (31 December 2013: €979.3 million). Net debt as at 30 June 2014 was slightly less than 1.5 times adjusted EBITDA for the past twelve months and was therefore unchanged as a proportion of profitability in the second quarter. >> TABLE 12

At €649.0 million, pension provisions were higher than they had been at the end of last year (31 December 2013: €560.1 million) owing to further interest rate changes. The net obligation increased to €627.6 million (31 December 2013: €537.7 million).

The lease liabilities resulting from sale and leaseback transactions used to fund long-term leases with end customers rose to €642.6 million (31 December 2013: €617.1 million) due to further growth in the volume of financial services activities. Of this total, €416.0 million related to non-current lease liabilities and €226.6 million to current lease liabilities.

Other financial liabilities also included liabilities of €338.3 million from sale and leaseback transactions used to finance the short-term rental fleet (31 December 2013: €327.5 million).

Equity went down by 1.6 per cent to €1,583.6 million (31 December 2013: €1,610.0 million) as a result of the negative impact of the change in the interest rate for pensions. The equity ratio was therefore 25.9 per cent (31 December 2013: 26.7 per cent). >> TABLE 13

Analysis of capital expenditure

The KION Group’s total capital expenditure came to €58.0 million, compared with €52.0 million in the first half of 2013. As was the case last year, this spending mainly constituted capitalised development costs in the LMH and STILL brand segments. In addition, the KION Group continued to modernise its production sites, especially in Germany, and improved its IT infrastructure as part of ongoing projects.

Analysis of liquidity

Net cash provided by the KION Group’s operating activities totalled €151.3 million (H1 2013: €124.7 million). The net cash provided from current earnings (EBIT) more than offset the growth in working capital. Furthermore, a year-on-year reduction in prepayments of trade tax led to an improvement in cash flow from operating activities.

The net cash used for investing activities came to €131.5 million (H1 2013: €112.2 million; adjusted for rental business, which was previously reported under cash flow from operating activities). Whereas cash payments for capital expenditure were in line with the growth in the KION Group’s business, net investment in relation to disposals and acquisitions in the rental business rose from €68.8 million in the first half of 2013 to €83.6 million in the reporting period. This primarily took the form of replacement investment.

Free cash flow increased year on year to €19.8 million (H1 2013: €12.5 million).

Cash flow from financing activities amounted to minus €103.5 million (H1 2013: minus €55.5 million). The distribution of a dividend of €0.35 per share to the shareholders of KION GROUP AG resulted in an outflow of funds of €34.5 million. The net outflow of funds in connection with financial debt amounted to €11.5 million in the first half of 2014. The financial debt taken up, which came to €1,007.0 million and was largely drawn down from the revolving credit facility, was more than offset by repayments totalling €1,018.6 million in the period under review. These repayments included €525.0 million in respect of the early redemption of the bond tranches. Current interest payments resulted in an outflow of funds of €58.5 million, which included the early repayment charges of €14.8 million paid in the second quarter in relation to redemption of the bond tranches. Cash and cash equivalents had declined by a total of €84.4 million to €134.9 million as at 30 June 2014. >> TABLE 14