Financial position

The principles and objectives applicable to financial management as at 30 June 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. The new senior facilities agreement 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). As part of this restructuring and optimisation, the syndicated loan dating from 2006 and the corporate bond (€450.0 million) were repaid.

KION GROUP AG has issued guarantees to the banks for all of the payment obligations under the new senior facilities agreement and for compliance with the related covenants. All covenants were complied with as at 30 June 2016.

A firm agreement has been reached with a group of banks for a bridge loan of €3.0 billion as funding for the planned acquisition of Dematic. This bridge loan is to be refinanced partly by long-term capital-market and bank debt and partly by equity.

Analysis of capital structure

The total financial debt recognised as at 30 June 2016 came to €805.6 million, which was higher than the figure at the end of 2015 of €676.5 million. After deduction of cash and cash equivalents of €84.3 million, net financial debt amounted to €721.2 million, compared with €573.5 million at the end of last year. Net debt as at 30 June 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 €993.8 million as at 30 June 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 €904.3 million (31 December 2015: €855.6 million) on the back of the expansion of financial services activities. Of this total, €650.4 million related to non-current lease liabilities and €253.9 million to current lease liabilities. Other financial liabilities also included liabilities of €418.9 million from sale and leaseback transactions used to finance the short-term rental fleet (31 December 2015: €403.2 million).

Equity was lower overall than at the end of 2015, falling by €158.2 million to €1,690.5 million as at 30 June 2016 (31 December 2015: €1,848.7 million). This decrease was largely attributable to a significantly lower interest rate level for pensions. Further negative effects recognised in other comprehensive income and the dividend payment were largely offset by the level of net income. The equity ratio reduced to 25.1 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 €64.3 million, compared with €59.8 million in the first half of 2015. The main areas of spending in the second quarter were again 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 €191.5 million, which was higher than the comparable prior-year figure of €171.2 million. Even though the volume of business went up, the KION Group further optimised its working capital, which, along with the rise in EBIT, significantly boosted the cash position. However, as a result of the higher tax prepayments of €56.2 million (H1 2015: €28.1 million), the net cash provided by operating activities improved by just €20.3 million year on year.

The net cash used for investing activities rose to €202.0 million as a result of acquisitions (H1 2015: €161.9 million). Cash payments for capital expenditure on property, plant and equipment and on intangible assets and the rental business totalled €179.2 million in the first six months of 2016, representing a year-on-year increase (H1 2015: €160.9 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 – was down year on year at minus €10.5 million (H1 2015: €9.2 million).

Cash flow from financing activities amounted to minus €7.1 million in the reporting period (H1 2015: minus €49.6 million). The distribution of a dividend of €0.77 per share resulted in an outflow of funds of €76.0 million (H1 2015: €54.3 million). 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 €1,020.4 million, whereas repayments came to €917.2 million. Net cash of €40.4 million was used for regular interest payments (H1 2015: €26.0 million). The year-on-year rise in interest payments was attributable to the early repayment charge of €15.2 million resulting from the early repayment of the bond. > TABLE 14