Selected notes to the consolidated statement of financial position

The rise in inventories compared with 31 December 2016 was largely attributable to the increase in work in progress (up by 15.3 per cent) and finished goods (up by 23.3 per cent). Write-downs of €5.5 million were recognised on inventories in the second quarter of 2017 (Q2 2016: €5.5 million) and of €9.1 million in the first half of 2017 (H1 2016: €9.0 million). Reversals of write-downs had to be recognised in the amount of €2.5 million in the second quarter of 2017 (Q2 2016: €0.7 million) and in the amount of €3.1 million in the first half of 2017 (H1 2016: €1.2 million) because the reasons for the write-downs no longer existed.

The rise in trade receivables compared with 31 December 2016 was largely due to the increase of €15.0 million in receivables due from third parties and the increase of €25.9 million in construction contracts with a net credit balance due from customers. Receivables due from non-consolidated subsidiaries, equity-accounted investments and other equity investments rose by €10.1 million. Valuation allowances of €42.9 million (31 December 2016: €40.4 million) were recognised for trade receivables.

With the consent of the Supervisory Board, the Executive Board of KION GROUP AG decided on 22 May 2017 to utilise the authorised capital created by the 2017 Annual General Meeting. The purpose of the capital increase was to partly refinance the bridge loan taken out for the acquisition of Dematic. The Company’s share capital was increased by 8.55 per cent in return for cash contributions; shareholders’ pre-emption rights were disapplied. 9.3 million new shares were issued, which increased the total number of shares from 108.79 million to 118.09 million. The gross proceeds from the capital increase came to €602.9 million. An amount of €593.6 million was paid into the capital reserves. The capital increase was entered in the commercial register on 23 May 2017.

The transaction costs of €2.9 million (net) that were directly attributable to the capital increase were recognised under capital reserves.

The total number of shares outstanding as at 30 June 2017 was 117,925,514 no-par-value shares (31 December 2016: 108,625,514 no-par-value shares). At the reporting date, KION GROUP AG held 164,486 treasury shares (31 December 2016: 164,486 treasury shares).

The distribution of a dividend of €0.80 per share (H1 2016: €0.77 per share) to the shareholders of KION GROUP AG resulted in an outflow of funds of €86.9 million (H1 2016: €76.0 million).

For the purposes of the interim report, a qualified estimate of the defined benefit obligation was made based on the change in actuarial parameters in the period under review.

The retirement benefit obligation was lower than it had been at the end of 2016 owing to actuarial gains resulting mainly from higher discount rates in the eurozone. The present value of the defined benefit obligation was calculated on the basis of the discount rates shown in > TABLE 25.

The change in estimates in relation to defined benefit pension entitlements resulted in an increase in equity of €37.1 million as at 30 June 2017 (after deferred taxes). Furthermore, in June 2017, employer contributions of €5.5 million were made to plan assets for a defined benefit pension plan in the USA due to the statutory minimum funding provisions that apply. Overall, the net defined benefit obligation decreased to €935.5 million (31 December 2016: €978.7 million).

The KION Group undertook two financing measures to partly refinance the bridge loan (acquisition facilities agreement, AFA), drawn down in an amount of €2,543.2 million, that it had taken out to fund the Dematic acquisition. In the first quarter of 2017, a promissory note with a nominal value totalling €1,010.0 million was issued. Then in May 2017, a capital increase generated gross proceeds of €602.9 million. The funds from these financing measures were used to fully repay tranche A2 of the AFA of €343.2 million and tranche B of the AFA of €1,200.0 million. The third tranche of the bridge loan, which has a volume of €1,000.0 million, matures in October 2021.

The promissory note for €1,010.0 million is divided into several tranches that mature in May 2022, April 2024 and April 2027 and have floating-rate as well as fixed coupons. Directly attributable transaction costs of €3.1 million were incurred in connection with the issuance of the promissory note. These were deducted from the fair value of each tranche on initial recognition and will be expensed over subsequent periods. In the first quarter of 2017, the KION Group entered into a number of interest-rate derivatives in order to hedge the interest-rate risk resulting from the floating-rate tranches. The interest-rate derivatives were recognised using cash flow hedge accounting.

In the second quarter of 2017, 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. As at 30 June 2017, an amount of €160.4 million had been drawn down from the revolving credit facility agreed under the SFA, which includes other loan liabilities and contingent liabilities. The drawdowns under the revolving credit facility are classified as short term.

All covenants were complied with as at the end of the half-year period.