Financial position

The principles and objectives applicable to financial management as at 31 March 2016 were the same as those described in the 2015 group management report.

In the first quarter of 2016, the KION Group renewed its funding with much better terms and thus successfully ended the funding structure that had dated back to the time before the IPO. On 15 February 2016, based on the resolution adopted by the Executive Board of KION GROUP AG on 25 January 2016 to overhaul the funding structure of the KION Group, the Company used funds from the new syndicated loan (senior facilities agreement) to repay the existing syndicated loan dated 23 December 2006 that took the form of a revolving credit facility of €1,243.0 million and the KION Group corporate bond of €450.0 million that was issued in 2013 and was due to mature in 2020. The new senior facilities agreement, which was concluded with a syndicate of international banks in October 2015, comprises a revolving credit facility of €1,150.0 million maturing in February 2021 and a fixed-term tranche of €350.0 million maturing in February 2019. The conditions of the agreement reflect the KION Group’s current investment-grade standing. Repayment of the bond and syndicated loan resulted in non-recurring financial expenses of €25.7 million.

KION GROUP AG has issued guarantees to the banks for all of the payment obligations under the new senior facilities agreement. Unlike the previous syndicated loan and the repaid corporate bond, the new syndicated loan agreement is not collateralised. Following repayment of the syndicated loan from 23 December 2006, all collateral furnished under the previous loan agreement has now been released.

Among other stipulations, the contractual terms of the senior facilities agreement require compliance with certain covenants. They also contain a financial covenant that requires adherence to a maximum level of gearing (the ratio of financial liabilities to EBITDA). Non-compliance with the covenants may, for example, give lenders the right to terminate the new syndicated loan agreement. All covenants were complied with as at the reporting date.

Analysis of capital structure

The total financial debt recognised came to €743.4 million as at 31 March 2016, which was higher than the figure at the end of 2015 of €676.5 million. After deduction of cash and cash equivalents of €96.6 million, net financial debt amounted to €646.8 million, compared with €573.5 million at the end of last year. Net debt as at 31 March 2016 was 0.8 times adjusted EBITDA for the past twelve months. It had therefore held fairly steady relative to earnings. > TABLE 12

Pension provisions had increased from €798.0 million at 31 December 2015 to €879.1 million as at 31 March 2016 due to a lower level of interest rates. The lease liabilities resulting from sale-and-leaseback transactions used to fund long-term leases with end customers rose to €874.4 million (31 December 2015: €855.6 million) on the back of the expansion of financial services activities. Of this total, €629.0 million related to non-current lease liabilities and €245.3 million to current lease liabilities. Other financial liabilities also included liabilities of €397.7 million from sale-and-leaseback transactions used to finance the short-term rental fleet (31 December 2015: €403.2 million).

Taking account of the net income for the reporting period and the other comprehensive loss resulting from the change in the interest rate on pensions and other factors, equity was lower than at the end of 2015, falling from €1,848.7 million to €1,807.8 million. The equity ratio was 27.4 per cent (31 December 2015: 28.7 per cent). > TABLE 13

Analysis of capital expenditure

The KION Group’s total capital expenditure on property, plant and equipment and on intangible assets (excluding leased and rental assets) came to €27.8 million, compared with €27.4 million in the first quarter of 2015. The main areas of spending were capitalised development costs in the LMH and STILL brand segments and the expansion and modernisation of production and technology sites.

Analysis of liquidity

The KION Group’s net cash provided by operating activities totalled €78.9 million, which was significantly higher than the comparable prior-year figure of €57.1 million. Current trade receivables and trade payables had changed only marginally compared with 31 December 2015 and also made a substantial contribution to the increase in cash flow from operating activities.

The net cash used for investing activities rose to €99.3 million as a result of acquisitions (Q1 2015: €76.7 million). Cash payments for capital expenditure on property, plant and equipment and on intangible assets and the rental business totalled €73.8 million in the first quarter of 2016, representing a year-on-year increase (Q1 2015: €66.2 million). Net cash of €27.3 million was used for acquisitions, €23.2 million of which related to the acquisition of Retrotech Inc.

Free cash flow – the sum of cash flow from operating activities and investing activities – came to minus €20.4 million in the first quarter and was thus close to the prior-year level (Q1 2015: minus €19.6 million) despite the acquisition of Retrotech Inc.

Cash flow from financing activities amounted to €15.2 million in the reporting period, compared with minus €0.3 million in the prior-year period. Owing to the repayment ahead of schedule of the corporate bond and the restructuring of funding in February 2016, the financial debt taken up totalled €783.3 million, whereas repayments came to €735.3 million. Net cash of €19.9 million was used for regular interest payments (Q1 2015: €20.2 million). Furthermore, early repayment charges of €15.2 million were paid due to the repayment ahead of schedule of the bond. These charges are included in the interest payments. > TABLE 14