Financial position

The principles and objectives applicable to financial management as at 30 September 2016 were the same as those described in the 2015 group management report. The KION Group pursues a conservative financial policy of maintaining a strong cross-over credit profile with reliable access to debt capital markets.

To partly fund the acquisition of Dematic, the KION Group increased its share capital by 10.0 per cent against cash contributions. Including the share premium, the gross issue proceeds came to €459.3 million. The costs relating to the capital increase of €2.7 million were recognised in equity after subtraction of a tax benefit of €0.8 million. An agreement was reached for a firmly committed bridge loan of originally €3.0 billion as funding for the acquisition of Dematic. The agreed funding volume was reduced by the amount of the proceeds from the issue of shares and now stands at just over €2.5 billion.

In the first quarter of 2016, the KION Group had successfully ended the financing dating back to the time before the IPO and updated its financing structure with much better terms. The current 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). 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 September 2016.

Analysis of capital structure

The total financial debt recognised came to €427.7 million as at 30 September 2016, which was considerably below the figure at the end of 2015 of €676.5 million. The proceeds from the capital increase have temporarily been used to repay current financial liabilities under the revolving credit facility until they can be put towards the funding of the Dematic acquisition in the fourth quarter. The bridge loan had still not been drawn down as at 30 September 2016.

After deduction of cash and cash equivalents of €230.2 million, net financial debt amounted to just €197.5 million, compared with €573.5 million at the end of last year. Net financial leverage as at 30 September 2016 had therefore fallen to 0.2 times adjusted EBITDA for the past twelve months. > TABLE 12

Pension provisions increased from €798.0 million as at 31 December 2015 to €1,053.2 million as at 30 September 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 €945.6 million (31 December 2015: €855.6 million) on the back of the expansion of financial services activities. Of this total, €680.6 million related to non-current lease liabilities and €265.0 million to current lease liabilities. Other financial liabilities also included liabilities of €419.8 million from sale and leaseback transactions used to finance the short-term rental fleet (31 December 2015: €403.2 million).

Equity was higher than at the end of 2015, advancing by €305.3 million to €2,154.0 million as at 30 September 2016 (31 December 2015: €1,848.7 million). This rise was predominantly attributable to the capital increase implemented in July 2016 (€457.4 million). However, the continuing low level of interest rates resulted in a €175.1 million reduction in equity in connection with pensions. Overall, items recognised directly in equity and the dividend payment decreased equity by a total of €316.6 million, which was partially offset by the good level of net income of €164.4 million. The equity ratio was 31.1 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 €100.9 million, compared with €90.5 million in the first three quarters of 2015. Once again, 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 €332.5 million, which was below the comparable prior-year figure of €341.9 million. Despite the increased volume of business, working capital did not rise as much as it had in the prior-year period. The higher level of EBIT also had a positive impact in this regard. However, higher tax payments of €77.1 million (Q1 – Q3 2015: €45.1 million) reduced the level of cash flow from operating activities.

The net cash used for investing activities amounted to €267.3 million in the first nine months (Q1 – Q3 2015: €302.6 million). In addition to the cash payments of €100.9 million for property, plant and equipment and for intangible assets, there were net cash payments of €148.3 million in relation to the expansion of the rental business (Q1 – Q3 2015: €145.9 million). Total net cash of €27.4 million was used for acquisitions, of which €23.2 million related to the acquisition of Retrotech Inc. Cash payments for acquisitions in the prior-year period of €71.3 million had largely resulted from the acquisition of Egemin Automation.

Free cash flow – the sum of cash flow from operating activities and investing activities – was up year on year at €65.2 million (Q1 – Q3 2015: €39.4 million).

Cash flow from financing activities was in positive territory at €63.9 million (Q1 – Q3 2015: minus €36.7 million). As a result of the refinancing in February 2016, financial debt totalling €1,125.4 million was taken up in the reporting period. This was more than offset by repayments of €1,398.5 million as financial liabilities were temporarily repaid at the time of the capital increase in July 2016. The distribution of a dividend of €0.77 per share resulted in an outflow of funds of €76.0 million (Q1 – Q3 2015: €54.3 million). Net cash used for regular interest payments fell to €44.8 million in the reporting period (Q1 – Q3 2015: €48.1 million). This amount included interest payments for the early repayment charge (€15.2 million) on the early repayment of the bond (€450.0 million, 6.75 per cent), which were made in connection with the reorganisation of the funding structure in February 2016. > TABLE 14