Selected notes to the consolidated statement of financial position

Goodwill and other intangible assets

The increase in goodwill during the first six months of 2018, a rise of €24.3 million to €3,406.8 million (31 December 2017: €3,382.5 million), was mainly the result of currency effects.

At €944.5 million, the value of the brand names was virtually unchanged (31 December 2017: €944.6 million). The total carrying amount for technology and development assets went up by €10.9 million to €681.2 million (31 December 2017: €670.3 million). Currency effects contributed an increase of €9.7 million. The other factors contributing to the change are described in the ‘Research and development’ section of the interim group management report.

At €680.2 million, other intangible assets were well below their carrying amount as at 31 December 2017 (€719.0 million). Unlike the ongoing write-downs on the customer relationships acquired as part of the Dematic acquisition and on the order book, currency effects increased the carrying amount of the customer relationships acquired (by €12.4 million).

Other property, plant and equipment

Other property, plant and equipment, which totalled €1,012.4 million (31 December 2017: €994.9 million), included a figure of €368.7 million for right-of-use assets related to procurement leases (31 December 2017: €347.4 million). Of this figure, €261.0 million was attributable to land and buildings (31 December 2017: €247.6 million) and €107.7 million to plant, machinery, and office furniture and equipment (31 December 2017: €99.8 million).

Inventories

Inventories increased compared with 31 December 2017, mainly because of bottlenecks at suppliers in the Industrial Trucks & Services segment. Work in progress was up by 32.7 per cent, while finished goods rose by 23.7 per cent. Write-downs of €4.3 million were recognised on inventories in the second quarter of 2018 (Q2 2017: €5.5 million) and of €8.8 million in the first half of 2018 (H1 2017: €9.1 million). Reversals of write-downs had to be recognised in the amount of €0.9 million in the second quarter of 2018 (Q2 2017: €2.5 million) and in the amount of €2.6 million in the first half of 2018 (H1 2017: €3.1 million) because the reasons for the write-downs no longer applied.

Trade receivables

The rise in trade receivables compared with 31 December 2017 was predominantly due to the increase of €46.1 million in receivables due from third parties. Receivables due from non-consolidated subsidiaries, equity-accounted investments and other equity investments rose by €1.1 million. Valuation allowances of €36.0 million were recognised for trade receivables (31 December 2017: €51.1 million; 1 January 2018: €36.4 million).

Equity

As at 30 June 2018, the Company’s share capital amounted to €118.1 million, which was unchanged on 31 December 2017, and was fully paid up. It was divided into 118.1 million no-par-value shares.

The total number of shares outstanding as at 30 June 2018 was 117,929,171 no-par-value shares (31 December 2017: 117,929,171 no-par-value shares). At the reporting date, KION GROUP AG held 160,829 treasury shares, as it had at 31 December 2017.

The distribution of a dividend of €0.99 per share (H1 2017: €0.80 per share) to the shareholders of KION GROUP AG resulted in an outflow of funds of €116.8 million (H1 2017: €86.9 million).

Retirement benefit obligation

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 2017 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 36.

The change in estimates in relation to defined benefit pension entitlements resulted in an increase in equity of €1.7 million as at 30 June 2018 (after deferred taxes). Overall, the net obligation under defined benefit pension plans rose to €998.5 million (31 December 2017: €978.5 million). This consisted of €1,020.4 million recognised under the retirement benefit obligation (31 December 2017: €1,002.7 million) less an amount of €21.9 million (31 December 2017: €24.2 million) recognised under other non-current assets.

Financial liabilities

In January 2018, the term of the revolving credit facility of €1,150.0 million agreed under the SFA was extended by a year, which means the KION Group can now utilise this credit facility until February 2023. As at 30 June 2018, an amount of €333.9 million – including other loan liabilities and contingent liabilities (31 December 2017: €184.7 million) – had been drawn down from the revolving credit facility. The drawdowns under the revolving credit facility are classified as short term.

In June 2018, the KION Group issued a promissory note for €200.0 million to partly refinance the floating-rate long-term tranche of €1,000.0 million due to mature in October 2021 that was drawn down under the AFA. The repayment reduced the loan’s nominal amount to €800.0 million. As a result of the early repayment, deferred borrowing costs of €1.0 million were recognised under financial expenses.

The promissory note for €200.0 million issued in June 2018 will mature in June 2025 and is divided into a tranche with a floating-rate coupon and a tranche with a fixed coupon. Directly attributable transaction costs of €0.5 million were incurred in connection with the issuance of the promissory note. These were deducted from the fair value on initial recognition and will be expensed over subsequent periods. In June 2018, the KION Group entered into an interest-rate derivative to hedge the risk of a change in the fair value of the tranche with a fixed coupon. The derivative is accounted for as a fair value hedge.

The promissory note issued in 2017 in an amount of €1,010.0 million is divided into three tranches with different maturities and floating-rate or fixed coupons: a tranche of €746.0 million maturing in May 2022, a tranche of €236.5 million maturing in April 2024 and a tranche of €27.5 million maturing in April 2027.

The KION Group continued to comply with all covenants as at the end of the half-year period.

Liabilities from financial services

Of the total liabilities from financial services, a sum of €772.3 million related to the funding of long-term leasing business (31 December 2017: €437.4 million) and a sum of €170.2 million to the funding of industrial trucks for the short-term rental fleet (31 December 2017: €0.0 million). The funding of the long-term direct end customer financing business consists of liabilities of €226.3 million for long-term leases (31 December 2017: €0.0 million) and, among other items, residual value obligations of €330.9 million resulting from indirect end customer financing (31 December 2017: €340.7 million), liabilities of €152.2 million from lease facilities (31 December 2017: €85.7 million) and liabilities of €55.7 million from the use of securitisations (31 December 2017: €0.0 million).

Other financial liabilities

Other financial liabilities, which totalled €813.1 million (31 December 2017: €962.2 million), included liabilities of €393.3 million from procurement leases (31 December 2017: €369.1 million). Liabilities of €358.3 million from sale and leaseback transactions used to finance the short-term rental fleet were also included in other financial liabilities (31 December 2017: €515.7 million).