Financial position

The principles and objectives applicable to financial management as at 30 June 2018 were the same as those described in the 2017 combined management report.

In January 2018, the term of the revolving credit facility of €1,150.0 million agreed under the senior facilities agreement (SFA) was extended by a year, which means the KION Group can now utilise this credit facility until February 2023. In June 2018, the KION Group issued a further promissory note. It has a volume of €200.0 million and will mature in 2025. The resulting funds were used to repay part of the long-term tranche drawn down under the acquisition facilities agreement (AFA). Consequently, the only outstanding liability in connection with the AFA entered into in order to fund the acquisition of Dematic is the floating-rate long-term tranche of €800.0 million (31 December 2017: €1,000.0 million), which is due to mature in October 2021. The risk of a change in fair value has been hedged using an interest-rate swap with matching maturity. The hedging transaction is recognised as a fair value hedge.

The KION Group has issued guarantees to the banks for all of the payment obligations under the SFA and AFA and it is the borrower in respect of all the payment obligations resulting from the promissory note. All covenants were complied with as at 30 June 2018.

Analysis of capital structure

Current and non-current liabilities rose to €9,673.8 million as at the reporting date (31 December 2017: €9,345.4 million). Whereas the increase in long-term borrowing to €2,039.7 million was negligible (31 December 2017: €2,024.8 million), current financial liabilities rose to €428.2 million (31 December 2017: €243.9 million). This rise of €184.4 million was due to drawdowns under the revolving credit facility in order to fund net working capital. After deduction of cash and cash equivalents, net financial debt increased to €2,287.5 million (31 December 2017: €2,095.5 million). This equated to 1.5 times the adjusted EBITDA on an annualised basis. The unused, unrestricted SFA loan facility stood at €816.1 million as at 30 June 2018. > TABLE 12

With discount rates unchanged on average, the retirement benefit obligation of €1,020.4 million was only slightly higher than its level at the end of last year (31 December 2017: €1,002.7 million). Lease liabilities arising from sale and leaseback transactions to fund the leasing business declined significantly to €910.1 million (31 December 2017: €1,131.1 million). This reduction was offset by an increase in liabilities from financial services relating to the long-term leasing business, which rose to €772.3 million (31 December 2017: €437.4 million). Furthermore, the short-term rental fleet is funded using liabilities from financial services totalling €170.2 million (31 December 2017: €0.0 million). Current and non-current other financial liabilities came to €813.1 million (31 December 2017: €962.2 million). This included liabilities from procurement leases totalling €393.3 million (31 December 2017: €369.1 million), for which right-of-use assets were recorded. Also included were liabilities of €358.3 million from sale and leaseback transactions used to finance the short-term rental fleet (31 December 2017: €515.7 million).

Contract liabilities, of which a large proportion related to the long-term project business, were lower than at the end of 2017 at €288.6 million (31 December 2017: €324.4 million). Equity rose to €3,046.9 million as at 30 June 2018 (31 December 2017: €2,992.3 million). The addition of net income of €147.7 million was largely negated by the dividend of €116.8 million paid by KION GROUP AG in May. The equity ratio was 24.0 per cent (31 December 2017: 24.3 per cent). > TABLE 11

Analysis of capital expenditure

The KION Group’s total capital expenditure on property, plant and equipment and on intangible assets (excluding right-of-use assets from procurement leases) totalled €103.9 million in the first half of 2018 (H1 2017: €87.5 million). Spending in the Industrial Trucks & Services segment, which came to €78.0 million, continued to be focused on capital expenditure on development and on the expansion and modernisation of the Operating Units’ production and technology facilities. Capital expenditure in the Supply Chain Solutions segment amounted to €22.3 million and related to development costs and, above all, software and licences.

Analysis of liquidity

Cash and cash equivalents increased only slightly, from €173.2 million at the end of 2017 to €180.4 million as at 30 June 2018. 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 €994.1 million (31 December 2017: €1,138.0 million).

The KION Group’s net cash provided by operating activities totalled €104.6 million, compared with the figure for the prior-year period of €238.4 million. Some liquidity is temporarily tied up in inventories owing to the bottlenecks at individual suppliers and delays to deliveries. While the growth in earnings made a positive contribution, there was a negative impact from the significant increase in net working capital. Higher tax payments and prepayments also reduced the level of cash flow from operating activities.

Net cash used by investing activities amounted to €95.5 million and was therefore on a par with the first six months of last year (H1 2017: €95.4 million). It primarily comprised cash payments for capital expenditure on development (R&D) and for property, plant and equipment totalling €103.9 million (H1 2017: €87.5 million).

Free cash flow – the sum of cash flow from operating activities and investing activities – amounted to €9.0 million (H1 2017: €143.0 million).

Net cash used by financing activities amounted to €0.4 million (H1 2017: €258.4 million). Financial debt taken on during the reporting period amounted to €1,215.8 million and predominantly consisted of drawdowns under the revolving credit facility to fund the temporary increase in inventories and the inflow from the placement of the promissory note in June 2018. Repayments totalled €1,022.4 million, which included repayment of a further part of the long-term AFA tranche. Interest and principal payments for liabilities from procurement leases totalled €55.6 million during the reporting period (H1 2017: €43.0 million). As a result of the optimised financing structure and the corporate actions carried out in 2017, regular interest payments decreased to €25.7 million (H1 2017: €28.8 million). The dividend of KION GROUP AG led to an outflow of €116.8 million in the second quarter (Q2 2018: €86.9 million). > TABLE 13