Financial position

The principles and objectives applicable to financial management as at 30 June 2019 were the same as those described in the 2018 combined management report. As part of its financial management activities, the KION Group is continually optimising its financial liabilities and, to an increasing extent, the financing of the long-term leasing business.

In April 2019, KION GROUP AG issued a new floating-rate promissory note in a nominal amount of €120.5 million. In return, €20.5 million of the fixed-rate tranche of the promissory note from 2018 was repaid ahead of schedule. The liabilities in connection with the acquisition facilities agreement (AFA) were reduced by a total of €200.0 million in the first half of 2019 as a result of an early repayment of €100.0 million in both the first quarter and second quarter. The outstanding balance of the AFA, which has a floating interest rate and matures in October 2021, thus came to €400.0 million as at 30 June 2019.

The KION Group has issued guarantees to the banks for all of the payment obligations under the senior facilities agreement (SFA) and the AFA and it is the borrower in respect of all the payment obligations resulting from promissory notes. All covenants were complied with as at the end of the first half of 2019.

Analysis of capital structure

At €10,243.5 million, current and non-current liabilities had risen by €579.8 million as at the reporting date (31 December 2018: €9,663.7 million). The increased volume of business led to a rise not only in liabilities attributable to financing of the long-term leasing business but also in trade payables.

Financial liabilities totalled €2,309.0 million (31 December 2018: €2,045.2 million). Within this amount, non-current financial liabilities declined to €1,724.3 million due to partial repayment of the borrowing under the AFA (31 December 2018: €1,818.7 million). The increase of €358.1 million in current financial liabilities to €584.6 million (31 December 2018: €226.5 million) was in part attributable to the financing of the temporary rise in net working capital. As at 30 June 2019, the unused revolving credit facility under the SFA stood at €919.9 million (31 December 2018: €1,048.2 million). Net financial debt (non-current and current financial liabilities less cash and cash equivalents) thus amounted to €2,128.7 million (31 December 2018: €1,869.9 million). This equated to 1.3 times the annualised adjusted EBITDA. > TABLE 12

At €1,214.3 million, the retirement benefit obligation was significantly higher than at the end of last year (31 December 2018: €1,043.0 million), largely owing to lower discount rates.

The continuing expansion of the long-term leasing business led to an increase in the funding volume during the period under review. This volume totalled €2,164.0 million as at 30 June 2019 (31 December 2018: €1,906.0 million). Of this total, €1,602.6 million (31 December 2018: €1,165.3 million) related to the financing of the long-term direct and indirect leasing business in the form of liabilities from financial services, which also include the residual value obligations arising from the indirect leasing business in an amount of €309.6 million (31 December 2018: €319.5 million). The remaining amount of €561.4 million was attributable to lease liabilities (31 December 2018: €740.6 million).

A sum of €371.2 million (31 December 2018: €307.1 million), representing a portion of the financing of the short-term rental fleet, was recognised under liabilities from financial services. Overall, liabilities from financial services rose by €501.4 million to €1,973.8 million (31 December 2018: €1,472.4 million).

Current and non-current other financial liabilities totalled €778.7 million (31 December 2018: €813.2 million). In addition to the remaining €230.4 million (31 December 2018: €289.9 million) for the financing of the short-term rental fleet by means of sale and leaseback sub-lease transactions, they include liabilities from procurement leases amounting to €423.1 million (31 December 2018: €421.2 million).

The decline in contract liabilities, from €570.1 million as at 31 December 2018 to €394.0 million, mainly related to the progressive fulfilment of customer orders in the long-term project business.

Consolidated equity fell only slightly overall to €3,300.5 million as at 30 June 2019 (31 December 2018: €3,305.1 million). Net income for the period increased equity by €218.3 million. Conversely, equity was reduced by KION GROUP AG’s dividend payout of €141.5 million and actuarial losses of €104.4 million (after deferred taxes) arising from the measurement of defined benefit obligations due to the lower level of interest rates. The equity ratio was 24.4 per cent, which was 1.1 percentage points below the level as at 31 December 2018 (25.5 per cent) because of the increase in the volume of business and the associated increase in total assets. > 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) came to €113.0 million in the first half of 2019, compared with €103.9 million in the first six months of 2018. Spending in the Industrial Trucks & Services segment continued to be focused on capital expenditure on product development and on the expansion and modernisation of production and technology facilities. For example, a new plant in Pune, India, was acquired that will increase capacity. Capital expenditure in the Supply Chain Solutions segment mainly related to development costs.

Analysis of liquidity

Cash and cash equivalents increased slightly to €180.2 million as at 30 June 2019 (31 December 2018: €175.3 million). Taking into account the revolving credit facility that was still freely available, the unrestricted cash and cash equivalents available to the KION Group at 30 June 2019 amounted to €1,097.4 million (31 December 2018: €1,219.8 million).

Net cash provided by operating activities amounted to €70.1 million (H1 2018: €104.6 million). While the improvement in EBIT made a positive contribution, there was a negative impact from the significant increase in net working capital. In addition, the expansion of the leasing business gave rise to cash payments of €63.6 million (H1 2018: €46.9 million).

The €101.7 million in net cash used for investing activities was almost at the same level as in the first half of last year (H1 2018: €95.5 million). Within this figure, cash payments for capital expenditure on product development and on property, plant and equipment (excluding right-of-use assets related to procurement leasing) rose to €113.0 million (H1 2018: €103.9 million).

Free cash flow – the sum of cash flow from operating activities and investing activities – came to minus €31.6 million (H1 2018: plus €9.0 million).

The net cash provided by financing activities of €34.5 million (H1 2018: net cash used for financing activities of €0.4 million) was partly attributable to the issuing of a new promissory note and to drawdowns from the revolving credit facility that were partly offset by a further partial repayment of a long-term tranche under the AFA. In addition, the payment of a dividend to the shareholders of KION GROUP AG in May 2019 resulted in an outflow of funds of €141.5 million (H1 2018: net cash outflow of €116.8 million). Overall, financial debt taken on during the reporting period stood at €1,687.3 million (H1 2018: €1,215.8 million); repayments amounted to €1,431.4 million (H1 2018: €1,022.4 million). Payments made for interest portions and principal portions under procurement leases amounted to €60.1 million in the first half of 2019 (H1 2018: €55.6 million). The net cash used for current interest payments decreased from €25.7 million in the first half of 2018 to €19.9 million in the reporting period due to a year-on-year fall in average financial debt. > TABLE 13