Financial position

The principles and objectives applicable to financial management as at 30 June 2017 were the same as those described in the 2016 combined management report.

The bridge loan agreed for the acquisition of Dematic (AFA), which was drawn down in an amount of €2,543.2 million at the end of 2016, was reduced to a residual amount of €1,000.0 million as a result of two corporate actions in the first half of 2017. The first of these was the issuance of a promissory note with a nominal value of €1,010.0 million in the first quarter of 2017. The promissory note is divided into several tranches that mature in May 2022, April 2024 and April 2027 and have floating-rate and fixed coupons. The interest-rate risk resulting from the floating-rate tranches is hedged using various interest-rate derivatives entered into in the first quarter of 2017 (cash flow hedges). The second action was the capital increase in May 2017, which generated gross proceeds of €602.9 million. Tranche A2 of the AFA of €343.2 million and tranche B of the AFA of €1,200.0 million have been repaid in full. The long-term tranche of the bridge loan, which has a volume of €1,000.0 million, is still outstanding and is due to mature in October 2021. The fixed-term tranche of €350.0 million drawn down under the senior facilities agreement (SFA) was reduced to an outstanding amount of €270.0 million by a partial repayment of €80.0 million. The drawdowns under the revolving credit facility have also been reduced.

KION GROUP AG has issued guarantees to the banks for all of the payment obligations under the SFA and AFA; it is the borrower in respect of all the payment obligations resulting from the promissory note. All covenants were complied with as at the end of the half-year period.

Analysis of capital structure

Overall, current and non-current liabilities had fallen to €8,171.0 million as at 30 June 2017 (31 December 2016: €8,824.2 million).

The financial liabilities recognised under liabilities declined to €2,490.6 million as a result of the capital increase being carried out (31 December 2016: €3,183.0 million). After deduction of cash and cash equivalents, net financial debt amounted to €2,333.6 million compared with €2,903.4 million at the end of 2016. This equated to 2.1 times the adjusted EBITDA on an annualised basis.

Long-term borrowing (net of borrowing costs) was reduced during the second quarter and amounted to €2,270.6 million as at the reporting date. The proceeds from the capital increase were used to repay the residual amount of tranche B of the bridge loan (€536.2 million) that was still outstanding at that time. In addition to the promissory note with a volume of €1,010.0 million and the outstanding bridge loan of €1,000.0 million, long-term borrowing also comprises the long-term drawdown under the SFA of €270.0 million. The unused, unrestricted SFA loan facility stood at €989.6 million as at 30 June 2017. > TABLE 12

The retirement benefit obligation under defined benefit pension plans fell slightly to a total of €947.6 million (31 December 2016: €991.0 million). This was due to the slight rise in the discount rates in the eurozone as at 30 June 2017.

Lease liabilities arising from sale and leaseback transactions to fund the long-term leasing business with end customers amounted to €1,037.5 million (31 December 2016: €1,007.2 million). Of this total, €731.4 million related to non-current and €306.2 million to current lease liabilities.

The liabilities from the short-term rental fleet and from procurement leases are reported under other financial liabilities. As at 30 June 2017, other financial liabilities included liabilities of €451.8 million (31 December 2016: €440.0 million) arising from sale-and-leaseback transactions used to finance the short-term rental fleet. The other financial liabilities also included liabilities from residual value guarantees amounting to €17.2 million (31 December 2016: €16.7 million).

Consolidated equity had gone up by €444.1 million to €2,979.2 million as at 30 June 2017 (31 December 2016: €2,535.1 million). The capital increase resulted in a rise of €600.0 million, whereas currency translation effects (minus €268.0 million) had a significant adverse impact on equity during the six-month period. The equity ratio increased from 22.3 per cent at the end of 2016 to 26.7 per cent as at 30 June 2017. > TABLE 11


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 €92.4 million in the first half of the year, compared with €64.3 million in the first six months of 2016. Once again, the main areas of spending in the Industrial Trucks & Services segment, totalling €64.0 million, were capitalised development costs in the LMH EMEA and STILL EMEA Operating Units and the expansion and modernisation of production and technology sites. Capital expenditure in the Supply Chain Solutions segment related to capitalised development costs and, above all, to software, licences and the new production facility in the Czech Republic.

Analysis of liquidity

Cash and cash equivalents decreased from €279.6 million at the end of 2016 to €157.0 million as at 30 June 2017. Taking into account the credit facility that was still freely available, the unrestricted cash and cash equivalents available to the KION Group at the end of the half-year period amounted to €1,143.9 million (31 December 2016: €1,200.8 million).

The KION Group’s net cash provided by operating activities totalled €200.7 million, which was well above the comparable prior-year figure of €76.6 million due, among other reasons, to the increased earnings and higher margins.

The net cash used for investing activities amounted to €100.1 million in the reporting period (H1 2016: €87.0 million). Cash payments for development (R&D) and for property, plant and equipment amounted to €92.4 million (H1 2016: €64.3 million) and now also include capital expenditure by Dematic. In the prior-year period, net cash of €27.3 million used for acquisitions had been included, most of which had related to the acquisition of Retrotech Inc.

Free cash flow – the sum of cash flow from operating activities and investing activities – amounted to €100.6 million (H1 2016: minus €10.5 million).

Cash flow from financing activities, which amounted to minus €215.9 million (H1 2016: minus €7.1 million), included the dividend payment of €86.9 million. The financial debt of €1,699.3 million taken up during the reporting period was largely attributable to the issuance of the promissory note in an amount of €1,010.0 million in the first quarter of 2017. The capital increase in May generated a net inflow of €599.4 million. Total financial debt of €2,390.6 million was repaid in the period under review, predominantly in connection with repayments under the bridge loan (AFA: tranches A2 and B).

Thanks to the optimised financing structure and the implementation of the corporate actions, interest expense rose only moderately in the first half of the year – despite the overall increase in net debt. Current interest payments totalled €29.3 million (H1 2016: €25.2 million excluding the early redemption charge paid of €15.2 million). > TABLE 13