Annual Report • Apr 30, 2019
Annual Report
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2018 Annual Report Strategy Orientation
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sales revenues in € 000s 341,145 388,793 408,809 407,720 402,115 618,469 638,394 639,815 689,651 698,977
| Germany Earnings per share in € Rest of Europe America Dividend per share in € Asia |
Number of shares at 31/12 25 52 (by weighted average of shares issued) 20 3 Dividend payout in € 000s |
11,075,522 11,075,522 11,075,522 11,075,522 0.83 St rategic 1.96 1.13 1.36 0.40 0.90 0.45 0.45 Business Unit 4,430 9,968 4,984 4,984 |
|---|---|---|
| Decorative printing Foils PROF ITAB I L I Impregnated products Return on sales in % Edgebandings Return on equity in % Release papers Other |
26 31 T Y IN D ICATORS 20 13 8 Total return on total equity in % 2 |
Paper 5.1 8.2 5.6 5.3 50 % 4.9 10.8 5.9 6.9 per c entage o f total Sales 6.2 8.9 6.8 6.6 |
| Germany Rest of Europe America Australia Asia Other |
24 41 21 9 4 1 |
St rategic Business Unit Pla stic s |
| Edgebandings Skirtings Technical extrusions Foils Commercial products/ Other 7 |
61 14 10 8 |
50 % per c entage o f total Sales |
| € million | 2017 | 2018 | ∆ % |
|---|---|---|---|
| Sales revenues | 689.7 | 699.0 | +1 |
| Foreign sales ratio in % | 75 | 76 | |
| EBITDA | 83.1 | 72.8 | -12 |
| EBITDA margin in % | 12.0 | 10.4 | |
| Depreciation and amortization | -38.4 | -40.6 | |
| EBIT | 44.7 | 32.2 | -28 |
| EBIT margin in % | 6.5 | 4.6 | |
| Financial result | -11.2 | -5.1 | |
| EB T |
33.5 | 27.1 | -19 |
| Consolidated net profit | 26.2 | 18.6 | -29 |
| Earnings per share in € | 1.69 | 1.20 | -29 |
| Number of shares | 15,505,731 | 15,505,731 | |
| Additions to fixed assets | 42.7 | 47.5 | |
| Balance sheet total | 842.6 | 844.5 | - |
| Equity | 349.2 | 353.2 | +1 |
| Equity ratio in % | 41.4 | 41.8 | +0.4 pts |
| Net financial debt at 31 December | 190.0 | 197.5 | +4 |
| Gearing (level of debt) at 31 December in % |
54 | 56 | +2 pts |
| Average number of employees for the year | 3,091 | 3,329 | +8 |
| Number of employees at 31 December | 3,295 | 3,304 | - |
| Return on sales | 4.8 | 3.8 |
|---|---|---|
| Return on equity | 7.8 | 5.5 |
| Total return on total equity | 5.0 | 4.1 |
| Germany | 24 |
|---|---|
| Rest of Europe | 47 |
| America | 20 |
| Australia | 5 |
| Asia | 3 |
| Other | 1 |
Edgebandings 37 Foils 19 Decorative printing 13 Impregnated products 10 Skirtings Technical extrusions Release papers Other 3
| America | Europe | germany | Asia / Oceania |
|---|---|---|---|
| Agawam, US Brampton, CA Chihuahua, MX East Longmeadow, US Greensboro, US Myrtle Beach, US São José dos Pinhais, BR Tultitlán, MX |
Angers, FR Ashbourne, UK Burnley, UK Gislaved, SE Greenhithe, UK Istanbul, TR Madrid, ES Mindelo, PT Moscow, RU Prague, CZ Sosnowiec, PL Stourport-on-Severn, UK Venice, IT |
Bad Oeynhausen Buttenwiesen Bönen Dunningen Gladbeck Halle (Saale) Heroldstatt Hüllhorst Laichingen Sassenberg Weimar Willich |
Batam, ID Brisbane, AU Melbourne, AU Perth, AU Singapore, SG Sydney, AU Tokyo, JP |
Kröning DöllkenProfiles Nenplas Chapacinta Polyplas
We are striving to achieve worldwide market leadership by bringing together the best brands for surfaces.
23 production and sales locations
17 additional assembly and sales locations
Edgebandings based on paper and plasticS
DECORATIVES
Finish foils based on paper Decorative printing Release papers
BUSINESS UNIT
Impregnated products Plastic foils Hybrid and genuine metal foils
Skirtings Technical extrusions BUSINESS UNIT Profiles
| Decoratives | TECHNICALS | PRO FILES |
|
|---|---|---|---|
| Surteco GmbH | Surteco Beteiligungen | Döllken Profiles | |
| BauschLinnemann North America |
Surteco Australia |
Kröning | Döllken Poland |
| Surteco UK |
Surteco Asia |
Dakor | Döllken Czech Republic |
| Surteco Italy |
Surteco France |
Gislaved Folie | Nenplas Group UK 85% |
| SÜDDEKOR USA |
Surteco Turkey |
||
| Surteco art | Surteco Russia |
||
| Surteco USA/Canada |
Surteco Spain |
||
| Canplast Mexico 50% |
PROBOS Portugal |
||
| Proadec Brazil |
|||
| Proadec UK |
|||
| Chapacinta Mexico |
In future, the SURTECO 2025+ strategy plans for the operating management of the Group to be based on a cross-product sector approach. The Business Unit DECORATIVES offers a holistic approach for the wood-based and furniture industry while the Business Unit PROFILES with its skirtings and technical plastic profiles concentrates on the interior furnishing sector. The companies for individual special applications are grouped in the Business Unit TECHNICALS.
The Business Unit Decoratives comprises SURTECO GmbH and its subsidiaries and offers a holistic system and a product portfolio supplying professional solutions from a single source that is unique in the world.
wood-based materials living kitchen office doors flooring Caravan
The Business Unit Profiles combines the manufacture of plastic-based skirtings, extruded LED tapes and technical plastic extrusions (profiles). The supplied sectors are also as diverse as the product and design selection.
interior design craft trade ships industry Caravan
As a specialist supplier, Kröning GmbH markets styling elements for interior design. Technically sophisticated position prints, patina designs and strass effects (rhinestone) based on paper, plastics or genuine metal are examples of the strong product range.
individual prints hybrid products small series
The thermoplastic foils from Gislaved are found in a wide range of different sectors. They may be used as technical foils for medical or industrial products, in ship's cabins or woven into plastic carpets. The products of the specialist provider are found on every ocean and on every continent.
foils for plastic carpets customer-specific industrial and medical applications fire-retardant decor foils
As one of the leading manufacturers of surface refinements, Dakor completes the Business Unit Technicals. Melamine overlays and printed flooring decor and furniture decor films provide premium and resistant surfaces. Balancing and core-layer papers complete the product range as a full-service provider.
anti-scratch and abrasion-resistant surface refinement
balancing materials
core-material paper
Executive Officers of SURTECO GROUP SE
Dr.-Ing. Jürgen Großmann Chairman Shareholder of the GMH Group, Hamburg
Björn Ahrenkiel Vice Chairman Lawyer, Hürtgenwald
Dr. Markus Miele Deputy Chairman Industrial engineer, Gütersloh
Dr. Christoph Amberger Independent businessman, Utting am Ammersee
Andreas Engelhardt Managing and personally liable shareholder of Schüco International KG, Bielefeld from 28 June 2018
Employee Representative Chairman of the Works Council, Buttenwiesen
Christa Linnemann Honorary Chairwoman Businesswoman, Gütersloh
Wolfgang Moyses Chairman of the Management Board of SIMONA AG, Munich
Employee Representative Chairman of the Works Council Essen until 21 January 2019
Employee Representative Chairman of the Works Council Essen from 5 February 2019
Dr.-Ing. Walter Schlebusch Advisory Board of Giesecke & Devrient GmbH, Munich until 28 June 2018
Thomas Stockhausen
Employee Representative Chairman of the Works Council, Sassenberg
Andreas Riedl Chief Financial Officer (CFO) Graduate in Business Administration, Donauwörth
Dr.-Ing. Gereon Schäfer Engineer, Kempen until 31 March 2018
| SURT ECO GMBH Buttenwiesen |
Dieter Baumanns Maximilian Betzler Andreas Pötz Peter Schulte |
|---|---|
| BAUSCHLINN EMANN NORTH AMERICA INC. Myrtle Beach, USA |
Mike Phillips |
| Probos Plásticos S.A. Mindelo, PT |
Antonio Cardona Joao Pedro Cunha Paulo Moutinho Joao Nogueíra |
| SURT ECO Art GmbH Willich |
Bernd Poliwoda Dieter Baumanns |
| SURT ECO ASIA (SURT ECO PTE LTD. + PT DÖLLK EN BINTAN ) Singapore + Batam, Indonesia |
Hans Klingeborn |
| SURT ECO AUSTRALIA PTY LTD. Sydney |
Jade Weiss |
| SURT ECO CANADA LTD. Brampton/Ontario |
Tim Valters |
| SURT ECO DEKOR A.Ş. Istanbul, Turkey |
Emre Özbay |
| SURT ECO FRANC E S.A.S. Beaucouzé |
Gilbert Littner |
| SURT ECO Iberia S.L. Madrid, Spain |
Peter Schulte |
| SURT ECO ITALIA S.R.L. Martellago |
Marco Francescon |
| Süddekor LLC Agawam, USA |
Mike Phillips |
| SURT ECO OOO Moscow, Russia |
Rashid Ibragimov |
| SURT ECO UK LTD. Burnley |
David Doulin Kim Hughes |
| SURT ECO USA INC. Greensboro |
Tim Valters |
| DAKOR MELAMIN IMPR ÄGNIERUNG EN GMBH Heroldstatt |
Michael Metzmaier |
|---|---|
| GISLAV ED FOLIE AB Gislaved, Sweden |
Per Gustafsson |
| KRÖNING GMBH Hüllhorst |
Wolfgang Gorißen |
| BU PRO FILES |
|
| DÖLLK EN Profiles GMBH Nohra |
Hartwig Schwab Wolfgang Breuning |
|---|---|
| DÖLLK EN CZ s.r.o. Prague, Czech Republic |
Jan Vitu |
| DÖLLK EN SP. Z O.O. Sosnowiec, Poland |
Rafael Pospiech |
| Nenplas Ltd. Ashbourne, UK Polyplas Ltd. Stourport-on-Severn, UK |
Robert James Butcher Gary Horrobin Stephen Jones |
As we look back on the business year 2018, the old adage springs to mind: "Things never turn out as you expect". At the beginning of the year, sales were rising and earnings were developing with double-digit increases in line with expectations. This performance, the full-year consolidation of the Probos companies acquired in June 2017 and the initial successes from implementation of our strategy SURTECO 2025+ provided a sound basis for publishing an optimistic forecast. However, our most important sales regions were beset by increasing uncertainty from the middle of the year. As the year progressed, this developed into a global economic downturn. For us as a supplier of durable goods such as furniture and flooring, declining growth is very quickly reflected in falling demand. This meant that with a bottom line of € 699 million at yearend 2018, we were only able to achieve a small increase in sales for 2018. The lower EBIT of € 32.2 million after € 44.7 million in the previous year is due firstly to significantly increased prices for raw materials in the paper segment. It is extremely difficult to pass these increased costs on to customers against the background of a drop in dynamic
performance in the sectors. Secondly, we responded rapidly to the weakening market conditions and set up an optimization programme to adjust our processes and structures, which is reflected in provisions of € 6 million and impacts negatively on earnings for 2018. Earnings adjusted for these one-off expenses are around € 38 million.
However, the development of 2018 confirms the need to drive forward our growth strategy SURTECO 2025+ consistently. We are thereby pursuing a cross-product sector initiative designed to ensure that we can meet customer needs even better and generate value added. The amalgamation of the three biggest companies in Germany to create SURTECO GmbH, and the formation of the Decoratives, Profiles and Technicals Business Units revealed the initial impacts of the strategy. This process also embodies a new culture within these Business Units and entails closely dovetailed workflows. In conjunction with our optimization programme, we are therefore in a comfortable initial position provided that demand increases once again in the near future.
Even though the business year 2018 proved to be unexpectedly challenging, SURTECO is continuing to share the profit generated appropriately with its shareholders. The dividend proposal from the Management Board and the Supervisory Board amounting to € 0.55 per share is based on our long-term dividend strategy. The payout ratio is at 46 percent of the consolidated net profit amounting to € 18.6 million. Based on the closing price of € 22.30 for the share at the end of 2018, the proposed dividend represents a dividend yield of 2.5 percent.
From our present perspective, there is currently no prospect of support from the markets of our large-volume mass-production business for organic growth in 2019. In fact, the framework conditions are tending to deteriorate. We are therefore cautious about our sales prospects. Nevertheless, we are confident of being able to increase our earnings of € 38 million adjusted by one-off expenses.
We would like to express our warmest thanks to our employees for their high level of commitment and also extend our thanks to our customers and business partners. Our very special thanks also go to you, our valued shareholders. We would be delighted if you continued to support us on our journey with your confidence and trust.
Dr.-Ing. Herbert Müller
Dipl.-Kfm. Andreas Riedl
In the business year 2018, the Supervisory Board d carried out all the functions allocated to it under statutory regulations and the Articles of Association. We advised the Management Board regularly on the management of the company and monitored the measures it took. In this process, we were involved in all the fundamental decisions taken. The Management Board regularly kept us informed in comprehensive written and verbal reports. We were notified promptly about the key aspects of the performance of the business and about significant business transactions. We were also given detailed information about the current income situation and planning, as well as the risks and risk management. The economic situation presented in the reports by the Management Board and the development perspectives of the Group, the individual business areas and important participations in Germany and abroad, as well as the general economic environment were the subject of careful and detailed discussion in the Supervisory Board. Resolutions were adopted as far as this was necessary in compliance with statutory regulations or the Articles of Association.
The Supervisory Board convened for a total of four meetings during the course of the business year 2018. No member of this governance body took part in fewer than half the meetings. The Chairman of the Supervisory Board furthermore remained in regular contact with the Management Board outside these meetings.
In the business year 2018, the Supervisory Board intensively addressed the reporting of the Management Board in detail and discussed the position of the company and the business strategy on the basis of the latest business figures available for the company. The most recent relevant indicators of the Strategic Business Units in the SURTECO Group (SBU Paper and SBU Plastics) and the subsidiary companies and participations were presented by the Management Board at the meetings of the Supervisory Board, where they were analyzed and compared with the projected figures.
The economic environment in which the company is operating was subject to particularly intensive discussion. These deliberations continued with the themes of raw material prices and the availability of raw materials, as well as exchange rates and energy costs. The situation with the most important customers, the divisions of the foreign companies, and the conduct of the key competitors in the market were also considered, and the impacts of digitalisation on the business model of the company.
At its meeting on 25 April 2018, the Supervisory Board continued to engage intensively with the "Strategy SURTECO 2025+" and approved individual implementation measures. As part of a realignment of the previous product orientation to a focus on sectors, one of the key elements was a merger of the three Group companies BauschLinnemann GmbH, Döllken-Kunststoffverarbeitung GmbH and SURTECO DECOR GmbH, which had previously been managed separately, into a new unit under the name SURTECO GmbH. Other restructuring measures included the merger of other investment companies under the newly established SURTECO Beteiligungen GmbH as a direct subsidiary of the company and the merger of Döllken-Profiltechnik GmbH to form Döllken Profiles GmbH (formerly: Döllken-Weimar GmbH) in order to simplify the Group structure. Approval was also given to the conclusion of various controlling and profit transfer agreements, in order to ensure a single entity for income tax and sales tax purposes. Furthermore, a decision was taken to submit a proposal to the Annual General Meeting in respect of the renaming of the company into "SURTECO GROUP SE". In connection with approval of implementation of the "Strategy 2025+", the Supervisory Board also agreed to conclude contracts of service with the Managing Directors of SURTECO GmbH.
The Supervisory Board engaged on an ongoing basis with the medium and long-term strategic direction of the group of companies at meetings and in analyses together with the Management Board. At the same time, common ground was established in that the Supervisory
Chairman of the Supervisory Board Dr.-Ing. Jürgen Großmann rection intended by the Management Board for the company.
At its meeting held on 25 April 2018, the Supervisory Board audited and adopted the Nonfinancial Report for the business year 2017 drawn up by the Management Board for the first time in relation to the CSR Directive Implementation Act.
The plans (budget and investment plan) submitted by the Management Board for the business year 2019 were discussed, reviewed and adopted by the Supervisory Board at its meeting held on 19 December 2018, and the capital expenditure put forward by the Management Board was approved with some modifications.
At its meeting held on 25 April 2018, the Supervisory Board adopted the proposals for the agenda of the Ordinary General Meeting 2018.
The Supervisory Board approved the variable compensation elements of the Members of the Management Board for the business year 2017 at its meeting held on 25 April 2018.
Board was in favour of the overall strategic di- d to § 12 (3) of the Articles of Association at a total amount of € 37,500.00 plus sales tax, which does not breach the upper limit of € 40,000.00 defined in the Articles of Association. The amount of € 37,500.00 was allocated to the individual members of the Audit Committee on the basis of their respective time commitment.
At its meeting on 25 April 2018, the Supervisory Board agreed the conclusion of a settlement agreement with Dr. Ing. Gereon Schäfer, whose period of office as a Member of the Management Board came to an end on 31 March 2018. At the same meeting, the Supervisory Board resolved to adopt an amendment to the Business Allocation Plan for the Management Board taking account of the departure of Dr.-Ing. Schäfer.
At its meeting on 19 December 2018, the Supervisory Board agreed with the Chairman of the Management Board of the company, Dr.-Ing. Herbert Müller, that he would prematurely end his contract of service scheduled to end on 30 June 2021 in the course of the year 2019, and
The period of office of the Member of the Supervisory Board Dr. Walter Schlebusch came to an end at the close of the ordinary Annual General Meeting held on 28 June 2018. The Supervisory Board thanks Dr. Walter Schlebusch for his work and for his many years of association with the company.
The Annual General Meeting held in 2018 voted to appoint Mr. Andreas Engelhardt to replace Dr. Walter Schlebusch on the Supervisory Board. No other personnel changes took place on the Supervisory Board during the period under review.
The Supervisory Board formed an Audit Committee and a Personnel Committee whose members are listed in the Notes of the Annual Report. The committees have the function of preparing issues, topics and resolutions for the meetings of the Supervisory Board. There is also a Presiding Board in accordance with the Rules of Procedure of the Supervisory Board.
The Presiding Board of the Supervisory Board prepares the resolutions of the Supervisory Board if they relate to measures requiring the consent of the Supervisory Board. In urgent cases, the Rules of Procedure permit the Presiding Board to take the place of the Supervisory Board and grant consent to specific measures and transactions requiring approval. The Presiding Board did not need to make any decisions in the reporting period.
further agreed the important key points for such a termination. In the meantime, an agreement has been agreed with Dr. Müller, which the Supervisory Board established and agreed in writing in March 2019.
Up until 2001, Dr. Müller was Managing Director of the Döllken Group, which was acquired by the former SURTECO AG and current SURTECO GROUP SE in 2000/2001. Following this acquisition in 2001, Dr. Müller was appointed as a Member of the Management Board of our company. As a Member of the Management Board, Dr. Müller had specific responsibility for the Strategic Business Unit Plastics. With effect from 1 July 2015, he was also appointed as Chairman of the Management Board. The Supervisory Board would like to take this opportunity to thank Dr. Müller for his work over a period of more than 30 years for the company and its predecessor companies, his services to the SURTECO Group, his loyalty and many years of long association with the company, and his good cooperation with the Supervisory Board, the shareholder representatives and in the Management Board of the company.
At the meeting referred to above, the Supervisory Board of the company agreed to the conclusion of a contract of service for the Management Board with Mr. Wolfgang Moyses, Dipl.-Bw. (FH). Mr. Moyses is currently the Chairman of SIMONA Aktiengesellschaft, Kirn, and Member of the Supervisory Board of SURTECO GROUP SE. He is due to commence his appointment as Chairman of the Management Board of SURTECO GROUP SE with effect from 1 November 2019 or, if possible, at an earlier date, for a period of office of five years. Mr. Moyses will step down from his role as Member of the Supervisory Board of the company before he starts his period of office as Chairman of the Management Board.
At its meeting on 19 December 2018, the Supervisory Board defined the compensation for the members of its Audit Committee pursuant The Audit Committee addressed issues relating to accounting and risk management, the Annual Financial Statements and the quarterly figures, the mandatory independence of the auditor, the appointment of the auditor to carry out the audit, the determination of the focuses of the audit and the agreement of the fee. The Chairman of the Audit Committee and from time to time the other members of the committee were in regular contact with the Management Board and the auditors. The Chairman of the Audit Committee kept the other Members of the Audit Committee informed about individual issues in writing. The Audit Committee was convened once during the course of the business year. The auditors carrying out the audit on the consolidated financial statements were present at this meeting and reported on the result of their audit.
The Personnel Committee held six meetings during the year under review. In particular, the Personnel Committee addressed the proposal to calculate the variable compensation elements of the Members of the Management Board for the business year 2017, the proposal relating to a settlement agreement for the former Member of the Management Board, Dr. Ing. Gereon Schäfer, and the premature ending of the contract of service of Dr. Müller, and the conclusion of a contract of service with Mr. Moyses. The Personnel Committee drew up appropriate proposals for resolutions, and resolutions were passed by the plenary Supervisory Board at the relevant meetings of the Supervisory Board.
Reports on the meetings convened by the committees were submitted to the plenary session of the Supervisory Board.
The Supervisory Board addressed the ongoing development of the corporate governance principles in the company in 2018 and also took account of the regulations of the German Corporate Governance Code made on 7 February 2017. Within the scope of the efficiency audit, the Supervisory Board regu larly carries out a self-assessment of its mem bers and discusses the results in the plenary session of the Supervisory Board. In view of only slight deviations in the individual selfassessments during previous years, the self-assessment will be carried out in a twoyear cycle, most recently in December 2017 for the business years 2016 and 2017. The results of this self-assessment were present ed and discussed at the first meeting of the Supervisory Board in 2018.
On 19 December 2018, the Management Board and the Supervisory Board submitted a new Declaration of Compliance, which was includ ed in the Declaration on Corporate Govern ance pursuant to § 289a German Commercial Code (HGB) and may be viewed on the Internet site of the company.
The Annual Financial Statements of the com pany were drawn up in accordance with Ger man accounting principles. The Consolidated Financial Statements for the business year 2018 were prepared on the basis of the In ternational Financial Reporting Standards (IFRS). The Management Board submitted to the Supervisory Board the Annual Financial Statements, and the Consolidated Financial Statements and the Management Report and the Consolidated Management Report with its recommendation for the appropriation of the net profit to be submitted to the Annual Gen eral Meeting. The auditor, Pricewaterhouse - Coopers GmbH, Munich, audited the Consol idated Financial Statements and the Annual Financial Statements of SURTECO GROUP SE, as well as the Management Report and the Consolidated Management Report and grant ed each of the documents an unqualified au dit opinion. The Annual Financial Statements and Management Report, and the Consolidat ed Financial Statements and the Consolidated Management Report, and the audit reports of the auditor, and the recommendation for the appropriation of the net profit were submit ted punctually to all the Members of the Su pervisory Board. Intensive discussions on the financial statements were carried out in the Audit Committee meeting and at the Balance Sheet Meeting of the Supervisory Board held on 29 April 2019 in the presence of the auditor and following a report by the auditor pursuant to § 171 (1) sentences 2 and 3 Stock Corpora tion Act (AktG).
We examined the submitted documents. Fur thermore, we took note of the report by the auditor. We have no objections. We there fore concur with the result of the audit. The Supervisory Board approves the Annual Finan cial Statements and the Consolidated Finan cial Statements prepared by the Management Board. The Annual Financial Statements have therefore been adopted. We are in agreement with the Management Reports and in particu lar with the assessment of the ongoing devel opment of the company. We agree with the proposal by the Management Board for the appropriation of net profit that recommends payment of a dividend of € 0.55 for each nopar-value share.
The Audit Committee submitted a proposal for the appointment of the auditor of the ac counts for the business year 2019 and the Su pervisory Board also accepted this proposal.
The Supervisory Board would like to thank the Management Board, the executive managers, the members of the Works Councils, and all the members of staff for the work they have carried out and for their commitment during the business year 2019.
Buttenwiesen, April 2019.
The Supervisory Board
Dr.-Ing. Jürgen Großmann Chairman
The SURTECO Group is a Group of mutually complementary companies operating on the global stage. It has primarily specialized in the manufacture of decorative surface coatings for furniture, flooring and interior design. The SURTECO GROUP SE (formerly SURTECO SE) serves within this structure as the holding company with a controlling function. The manufactured products of the SURTECO Group are mainly used in the international flooring, wood-based and furniture industry, as well as by carpenters and artisan businesses.
Paper and plastic-based edgebandings constitute the product group produced by the SURTECO Group generating the strongest sales. These products are used to refine the narrow edges and the cut edges of woodbased boards. The offering ranges from paper-based edgebandings – also known as melamine edgebandings – in different versions through to thermoplastic edgebandings which are manufactured from a range of different plastics tailored to the area of application.
The Group also ranks as one of the world's leading suppliers in the product area of finish foils. These are used for coating large areas of wood-based materials and therefore play a major role in the visual and haptic appraisal of finished products such as items of furniture or panelling. Just as in the case of edgebandings, the finish foils are based on specialist technical papers and on plastics. The Group therefore has a unique selling proposition in the market place. Finish foils based on paper are supplied in two different versions with fully impregnated and pre-impregnated materials. Fully impregnated finish foils are saturated in a resin bath within the Group and subsequently dried, whereas the raw paper for pre-impregnates has already been impregnated at the paper manufacturer. The Group seals both versions with a layer of lacquer and, if required, refines the surface with haptic textures depending on the design version.
The products are generally used to coat wood-based materials such as chipboard and fibreboard. These materials thereby gain their final surface with appealing visual and haptic properties. These coated wood-based materials serve as the starting material for the manufacture of furniture, doors, laminated flooring and other products used for interior furnishings and fittings. The Group also offers an appropriate complementary product for flooring requirements, with skirtings for professional floorlayers, and for the retail and professional sectors of the interiordesign industry. Technical extrusions (profiles) made of plastic for all industrial sectors and roller-shutter systems are also included in the product range.
Finish foils based on paper are typically used to manufacture doors, furniture for living areas, bedrooms and teenage settings. They are also used for profile wrappings and for the manufacture of panellings. Plastic-based finish foils from the Group are used to cater for special applications, such as interior design for ships or for furniture surfaces requiring particularly hard-wearing properties.
The SURTECO Group is also one of the world's biggest producers of decorative papers. These specialist papers are printed with wood, stone or fantasy decors and they are used as a material for providing a decorative finish. These papers are used within the Group for the manufacture of finish foils and impregnates. They are also supplied directly to customers from the flooring, furniture and wood-based materials industry. Decor development takes place at the Group's in-house design studio, which also produces the printing cylinders necessary for production.
Similar to finish foils, impregnates from SURTECO are used to refine large areas of wood-based materials. However, the final surface for impregnates is only formed in the compression stage at the manufacturer of the refined product. The base is formed by the printed or single-colour decor paper, overlay or release paper, which is impregnated, dried and cut in formats. The product range is mainly deployed for surfaces subject to particularly heavy-duty usage, such as laminate also includes release papers, which are required for the compression of impregnates. This product forms a protective layer between the impregnate and the hot pressed board. It additionally gives the melamine surface the desired texture and level of gloss finish.
The skirtings produced by the SURTECO Group are primarily sold by the specialist flooring and wholesale trade. These high-quality products are either manufactured entirely of plastic or they are wrapped with a wood-fibre core in a special three-part extrusion process. These products are mainly processed by professional floorlayers. Plastic skirtings are also produced especially for trade and industry in the interior design sector. They are then marketed together with commercial products as a complete product range. The Group also has a long track record in the manufacture of a wide range of extrusion products for interior design, for roller-shutter systems and for a broad spectrum of industrial applications. The products are either marketed by direct
sales or shipped to customers through the Group's own sales locations, and through a dense network of dealers and agents on all continents of the world. The Group is increasingly using e-commerce as a sales channel. The most important sales markets for the Group include Germany, Europe, and North and South America. Production and sales facilities in Europe, North and South America, and Australia and Asia ensure reliable and fast delivery tailored to the target market.
Central controlling for the Group is carried out by the holding company SURTECO GROUP SE with registered office in Buttenwiesen, Bavaria, Germany. The holding company implements strategic planning and controlling, group-wide finance, investment and risk management, human resources strategy, Group accounting, IT management and investor relations activities. The individual subsidiary companies of the Group manage their business on the basis of group-wide parameters. Up impregnating business are situated in the sales activities as specialist manufacturers in niche markets.
flooring or worktops. The product portfolio d until the business year 2018, the subsidiaries were organized in the Strategic Business Units (SBU) Paper and Plastics in line with the base materials used. As part of the growth strategy SURTECO 2025+, the focus of the Group has been shifted even more strongly onto customer requirements by an improvement of the positioning in the market and differentiation with respect to competitors. Up to now, the Group was managed on the basis of products. This has been restructured into a sectororiented management. In this connection, the organizational structure was streamlined in the business year 2018 and the three biggest German subsidiary companies BauschLinnemann GmbH, SURTECO DECOR GmbH and Döllken-Kunststoffverarbeitung GmbH were merged to form SURTECO GmbH. Furthermore, the specialist for technical extrusions (profiles), Döllken-Profiltechnik GmbH, was merged with Döllken Profiles GmbH (formerly Döllken-Weimar GmbH). Together with the British subsidiary companies of the Nenplas Group, Döllken Profiles forms the second biggest mainstay of the SURTECO Group.
Sales revenues and earnings before financial result and income tax (EBIT) are the most important financial controlling parameters for the SURTECO Group. The Group also uses a summarized true and fair view of a number of indicators, the covenants, as a key financial controlling parameter. These are comprised of the indicators equity ratio, level of debt (gearing) and interest cover factor. The covenants define threshold values which the Group does not intend to exceed or fall short of. Compliance or non-compliance with these covenants is monitored, and reports are regularly submitted. Non-financial controlling parameters are not used as key controlling parameters at Group level or within the holding company. For SURTECO GROUP SE as an individual company, financial and non-financial performance indicators and thus their forecast play a subordinate role. Compliance with statutory requirements is not affected.
The SBU Paper comprises the paper-based businesses of SURTECO GmbH, including their subsidiary companies and Kröning GmbH and Dakor Melamin Imprägnierungen GmbH*. SURTECO GmbH (formerly at this location: BauschLinnemann GmbH) produces edgebandings and finish foils at its production facility in Sassenberg. Meanwhile, the production facility in Buttenwiesen (formerly BauschLinnemann GmbH) has focused entirely on the manufacture and refining of finish foils.
Semi-finished products are delivered to the sales companies located in the United Kingdom (SURTECO UK Ltd., Burnley) and in Italy (SURTECO Italia s.r.l., Martellago) and Russia (SURTECO OOO, Moscow). They are then finished to customers' specific orders and supplied there. In the USA, the subsidiary company, BauschLinnemann North America, Inc., Myrtle Beach, SC, produces and sells products specially tailored to the North American market.
From the business year 2019, the management of the company and hence the segment reporting will be carried out through the new Business Units Decoratives, Profiles and Technicals, which are replacing the previous Paper and Plastics Strategic Business Units. SURTECO GmbH is positioned in the Decoratives Segment including all subsidiary companies and it serves customers in the woodbased, flooring and furniture industry, and in the caravan sector. The Profiles Segment comprises Döllken Profiles GmbH including its subsidiary companies and supplies professional floorlayers and the interior-design industry. Technical extrusions (profiles) are also manufactured in this segment by the same type of production processes. They are used for a wide range of applications such as mobile homes or commercial vehicles. The commonalities between the companies of the Technicals Segments, Kröning GmbH, Dakor Melamin Imprägnierungen GmbH and Gislaved Folie AB, alongside the North American SURTECO GmbH will take over the manufacture of decor papers in Germany at its main site in Buttenwiesen (formerly SURTECO DECOR GmbH). At the production location in Laichingen, finish foils and release papers are also manufactured. The subsidiary company SUDDEKOR LLC, Agawam, manufactures decor papers for the USA and also maintains a production site there for impregnates in East Longmeadow. Dakor Melamin Imprägnierungen GmbH based in Heroldstatt carries out the manufacture and sale of impregnates in
Kröning GmbH in Hüllhorst is a specialist supplier for surface coatings with exceptional requirements. The product portfolio comprises edgebandings, finish foils and hybrid
Germany. products.
SURTECO art GmbH in Willich is responsible for the development of new decorative designs and engraving new print cylinders.
The SBU Plastics includes the plastics processing businesses of SURTECO GmbH and Döllken Profiles GmbH, each with their subsidiary companies*, and Gislaved Folie AB in
Sweden.
The manufacture of plastic edgebandings is carried out at the business of SURTECO GmbH in Gladbeck (formerly at this location: Döllken-Kunststoffverarbeitung GmbH) and in the USA (SURTECO USA Inc., Greensboro, NC), in Canada (SURTECO Canada Ltd., Brampton, Ontario), in Australia (SURTECO Australia Pty Limited, Sydney) and Indonesia (PT Doellken Bintan Edgings & Profiles, Batam). The Probos Group produces plastic edgebandings at its head office in Portugal (Probos - Plásticos, S. A., Mindelo) and in Brazil (Proadec Brasil Ltda., São José dos Pinhais). Sales companies operated by the Probos Group are located in Germany (Proadec Deutschland GmbH, Bad Oeynhausen), in the United Kingdom (Proadec UK Ltd., Greenhithe), and in Mexico (Chapacinta, S. A. de C. V., Tultitlán). Another sales location of SURTECO Canada Ltd. in Mexico (Canplast Mexico S.A. de C.V.,
General economic development is a good indicator across all countries for the operating business activity of the SURTCO Group, because economic growth impacts on the purchasing and investment affinity of customers. This in turn drives the demand for our products and solution packages. Key geographical markets are Europe, North and South America, and Australia. Including Germany, the proportion of these regions in Group sales amounts to 96 %. There has been a significant acquisition-related increase in the importance of Latin America, in particular Brazil, since 2017. As far as customer industries are concerned, demand from the furniture, flooring and woodbased industries continues to dominate, while the Group also generates sales in the interior-design industry, with the caravan industry and as a supplier to cruise ships
According to reports by the International Monetary Fund (IMF) in its publication of January 2019 entitled "World Economic Outlook", global economic growth went down slightly from 3.8 % to 3.7 % in a twelve-month comparison. At the beginning of the reporting year, the forecasts of the IMF at plus 3.9 % were still based on a more optimistic scenario. The impacts of the trade war between China and the USA, uncertainties in some European countries, in particular Italy, and the continuing Brexit discussions led to significantly more moderate projections by experts. The developed economies posted robust economic growth of 2.3 %, although this was below growth for the previous year (+2.4 %). The economies in the emerging economic and developing countries also eased their expansion with growth at 4.6 %
(2017: +4.7 %).
In 2018, the US economy showed robust growth of 2.9 % on the back of the tax breaks and economic programmes. The eurozone lagged significantly behind the USA and development in the previous year (+2.4 %) with plus 1.8 %. In Germany, development was disappointing, primarily due to weakness in the automobile industry (+1.5 % after +2.5 % in the previous year). France (+1.5 % after +2.3 %), Italy (+1.0 % after 1.6 %) and Spain (+2.5 % after +3.0 %) showed similar trends. The United Kingdom only achieved growth of 1.4 % (2017: +1.8 %) owing to the uncertainties surrounding Brexit. Development in Central and Eastern Europe was also significantly less dynamic (+3.8 % after +6.0 %). Even China as the locomotive for Asia and increasingly also the global economy throttled back a gear, although expansion of 6.6 % compared with 2017 (+6.9 %) still provided testimony to
Chihuahua) supports as a joint venture the market in Mexico. The subsidiary companies of SURTECO GmbH also act as sales companies for global delivery in Singapore (SURTECO PTE Ltd.), France (SURTECO France S.A.S., Beaucouzé), Spain (SURTECO Iberia S.L., Madrid), Turkey (SURTECO DEKOR A. Ş., Istanbul), Italy (SURTECO Italia s.r.l., Martellago) and Russia (SURTECO OOO, Moscow).
Döllken Profiles GmbH (formerly Döllken-Weimar GmbH) based in Nohra near Weimar and its subsidiary in Bönen manufacture floor strips and skirtings as well as wall edging systems for professional floorlayers, and for trade and industry in the interior design sector. The accessories and other products required for laying the products relating to all aspects of flooring are also supplied as product ranges for resale. The company maintains sales locations in Poland (Döllken Sp. z o.o., Sosnowiec) and the Czech Republic (Döllken CZ s.r.o., Prague) and a production business for technical extrusions in Dunningen (formerly Döllken-Profiltechnik GmbH). Nenplas Ltd., including its subsidiary company Polyplas Extrusions Ltd., both located in Ashbourne, UK, (Nenplas Group) also manufacture technical extrusions (profiles) for a wide range of industrial applications.
Gislaved Folie AB in Gislaved, Sweden, produces finish foils based on plastic and technical plastic foils for further processing to form panelling for ships' cabins, carpets and for other industrial sectors.
As laid down in the rules and regulations applicable to a Societas Europaea (SE), the Ordinary General Meeting of the company is held during the first six months after the end of a business year. Any amendments to the Articles of Association can only be made with legal effect following consent by the shareholders at the Annual General Meeting and subsequent entry in the Company Register. The Supervisory Board monitors and advises the Management Board on the running of the company. It is made up of nine members. Six members are appointed by the Annual General Meeting as representatives of the shareholders. Three members are appointed by the Works Councils of the three domestic companies with the largest number of employees as representatives of the workforce.
The management of the SURTECO Group operates on the basis of the dual management and controlling system in which the Members of the Management Board are appointed by the Supervisory Board and manage the affairs of the company in accordance with the statutory regulations, the Articles of Association, and the rules of procedure governing the Management Board and the Supervisory Board. The Management Board and the Supervisory Board gear their actions and their decisions to the interests of the company. They are committed to the objective of increasing the value of the company in accordance with the interests of the shareholders, the business partners, the employees and the general collectivity of stakeholders.
Source: International Monetary Fund (IMF), World Economic Outlook, Update January 2019.
| World +3.7 Germany +1.5 Eurozone +1.8 United Kingdom +1.4 USA +2.9 Central and Eastern Europe +3.8 Latin America +1.1 Asia +6.5 |
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ates as a contract manufacturer for impreg- d nates, which has been particularly strongly affected by the slackening demand. Sales for melamine edgings also underwent downward development (-5 %) because this product is increasingly being substituted in the market by thin plastic edgings. However, the Group is benefiting from this trend through the products of the Probos companies in the plastics line. In the case of paper-based finish foils, which are primarily supplied to the furniture, door and caravan industries, the picture was divided. While the preimpregnated finish foils finished the business year 2018 slightly below the level for the previous year (-3 %), sales were generated to the level of the previous year with fully impregnated finish foils. Business with release papers experienced a very positive development. This product enabled the company to benefit from the sustained trend towards haptic surfaces. Correspondingly, sales rose here by 13 %. Generally speaking, satisfactory business was transacted in the paper line with special products in niche markets, whereas volume business suffered as a result of a drop in demand occasioned by the economic cycle.
Overall, the Strategic Business Unit Paper generated sales revenues amounting to € 351.6 million after € 368.0 million in the previous year. As a consequence of this fall of 4 %, the anticipated slight increase in sales was not achieved. This sales development was distributed over the biggest regional markets of the paper line Germany (-6 %), the rest of Europe (-1 %) and North America (-14 %). On the basis of a lower starting point, sales rose in South America (+12 %), Asia (+23 %) and Australia (+3 %). The foreign sales ratio remained constant at 75 % at the level of the previous year.
The sales revenues of the Strategic Business Unit Plastics rose by € 25.7 million to € 347.4 million (2017: € 321.7 million) in the business year 2018. Although the company had anticipated even more marked growth, this increase of 8 % complied with the
forecast for a substantial increase, particularly since the sales volume would have been € 359 million with exchange rates at the level of the previous year, and sales at the value of the previous year still included sales at the level of € 2.5 million from the shareholding in Canplast SUD in Chile, which was sold in December 2017. Growth in the reporting period was generated from the full-year consolidation of the Probos companies acquired in June 2017 and from organic growth in plastic foils, skirtings and technical extrusions (profiles). Business with plastic foils increased by 10 % and sales with skirtings and related products went up by 5 %. Growth in technical extrusions (profiles) amounted to 2 %. Essentially on account of the full-year consolidation of the Probos companies, sales with plastic edgebandings climbed by 11 % owing to the full-year consolidation of the Probos companies. Only transactions with roller-shutter systems were 17 % down on the previous year, from a low starting position. In the Strategic Business Unit Plastics, the general slowdown in demand was also tangible in the product groups of SURTECO GmbH. This was particularly evident in the domestic market, which remained at the level of the previous year with € 83.3 million, whereas in the rest of Europe transactions increased by 9 % supported by acquisitions. The full-year consolidation of the Probos companies was also reflected in growth of 58 % in South America. Sales in North America remained almost exactly at the value of the previous year, although organic growth was generated in local currency. Business transactions in Asia rose by 8 % and Australia was also able to generate some organic growth in the local currency, whereas after conversion to euros, sales remained stubbornly at the level of the previous year. On account of the full-year consolidation of the Probos companies, which generate their sales virtually exclusively abroad, the foreign sales ratio of the plastics line increased by two percentage points to 76 %.
impressive growth. The other BRIC countries of Brazil (+1.3 % after +1.1 %) and Russia (+1.7 % after +1.5 %) by contrast showed a positive development, even though these economies were starting from a significantly lower absolute level. India's economy continued its upward development with an increase of 7.3 % after 6.7 % in the previous year.1
The business year 2018 started positively for the SURTECO Group, still in line with expectations on the basis of sales growth of 10 % in the first quarter. However, business development lost significant impetus as the year progressed. A gradual slowdown in economic growth gradually exerted an impact, particularly in the important sales markets in Germany and Europe. Since the Group largely supplies products to sectors which are vulnerable to the economic cycle, such as the furniture industry, this resulted in a tangible weakening in demand. For example, the Trade Association for Furniture and Kitchens (BVDM) is also assuming a decline in sales development for the German furniture, kitchen and interior furniture sector in 2018. The Association of the German Furniture Industry (VDM) similarly reported a fall in demand for classic household furniture for the business year 2018, whereas the German furniture industry as a whole succeeded in slightly increasing its export-driven sales by 0.7 %.
The SURTECO Group was able to bring about a modest rise in sales during the business year 2018 on account of full-year consolidation of the Probos companies acquired in June 2017. The Group also generated organic growth in specialized niche markets, although this was at a low level. Nevertheless, the falls in demand for the large-volume business operations could not be compensated so the results fell significantly short of the projected target of € 725 million to € 750 million published in the Annual Report 2017. After the forecast was already classified as uncertain in August 2018, the Management Board provided concrete figures relating to expected sales in October 2018 and gave a new corridor of € 685 million to € 695 million. Sales of the SURTECO Group were slightly above this range at € 699.0 million after € 689.7 million in the previous year. On the basis of exchange rates from the previous year, the business volume would have been approximately € 714 million. In particular, the development of the exchange rates for the US dollar, the Brazilian real and the Australian dollar resulted in negative impacts. In view of the falling dynamic economic performance, sales of the Group in the domestic market lost ground by 3 %, falling to € 170.0 million (2017: € 175.7 million). Various political uncertainties in Europe, such as Brexit and the budgetary dispute with Italy, exerted pressure on sentiment. Nevertheless, the Group was able to increase sales revenues in this region by 3 % owing to the full-year consolidation of the European Probos operations. The first-time, full-year consolidation of the Probos companies is also reflected in the sales increase of 1 % in North and South America. The rise of 14 % in Asia was generated by organic growth against the background of robust framework conditions. Sales in euros in Australia remained at the level of the previous year, whereas organic growth was generated in the local currency. Foreign sales went up from € 514.0 million in the previous year to € 529.0 million. The foreign sales ratio went up to 76 % (2017: 75 %).
The sales development at the Strategic Business Unit Paper was subject to a significant downturn in demand for important sales sectors in the business year 2018. For example, global sales of members of the Association of European Laminate Floor Layers fell back by 22 million square metres or by 4.6 % compared with 2017. In this market, the paper line is represented with the products decor papers and impregnates and this business fell by 3 % and 13 % respectively compared with the previous year. Furthermore, the paper line oper-
1 Source: International Monetary Fund (IMF), World Economic Outlook, 16 Update January 2019. 17
In the business year 2018, the internal financing of the SURTECO Group amounted to € 57.8 million after € 61.2 million in the previous year. Essentially, payments for income taxes changed here owing to higher advance payments (€ -14.8 million in 2018 after € -9.2 million in 2017) and other expenses/income with no effect on liquidity (€ -3.7 million after € -9.7 million in 2017). Gains/losses from disposal of fixed assets amounted to € 3.0 million after € -0.1 million in 2017. The change in assets and liabilities (net) in the business year 2018 amounted to € 2.9 million after € 21.7 million in 2017. In the previous year, assets and liabilities (net) were influenced by the acquisition of the Probos companies, whereas a change in inventories amounting to € -7.2 million (2017: € -0.1 million) was set against provisions amounting to € 7.6 million (2017:
In the business year 2018, sales revenues of the SURTECO Group went up from € 689.7 million to € 699.0 million. Other income – comprising other own capitalized work, other operating income, changes in inventories, interest income and other financial income – increased from € 10.3 million in 2017 to € 14.2 million. Consequently, the corporate performance rose from € 700.0 million in the previous year to € 713.2 million. The cost of materials increased significantly to € 349.6 million compared with the previous year (€ 335.0 million) on the back of the higher level of sales and owing to higher purchase prices. In spite of higher total output, the other expenses at € 103.5 million were
below the value for the previous year of € 110.5 million. The acquisition of the Probos Group in June 2017 is also reflected in the increased depreciation and amortization amounting to € 40.6 million (2017: € 38.4 million). Total value added for the Group amounted to € 219.5 million in the business year 2018 after € 216.1 million in 2017. When the value added was allocated, the payment to employees increased on account of the full-year acquisition of the Probos Group and provisions for an optimization programme from € 174.5 million in the previous year to € 185.3 million, while a dividend payment was made to shareholders of € 12.4 million at the level of the previous year. Taxes amounting to € 8.2 million (2017: € 7.2 million) were payable to the fiscal authorities and interest payments of € 7.5 million were payable to lenders after € 8.4 million in the previous year. Overall, value added of € 6.1 million (2017: € 13.6 million) was retained within the company.
€ 0.4 million) during the year under review. Earnings before income tax amounting to € 27.2 million (2017: € 33.5 million) consequently yields a cash flow from current business operations of € 60.7 million (2017: € 82.9 million). The cash flow from investment activities was € -49.5 million after € -115.5 million in 2017, because the acquisition of the Probos Group was included last year. This therefore results in free cash flow of € 11.2 million for 2018 after € -32.6 million in the previous year. Cash flow from financing activities at € -24.2 million was below the year-earlier value of € 106.5 million, which was influenced by the assumption of non-current financial liabilities and the settlement of a tranche from the US Private Placement (USPP).
| € million | 2017 | in % | 2018 | in % |
|---|---|---|---|---|
| Sales revenues | 689.7 | 699.0 | ||
| Other income | 10.3 | 14.2 | ||
| Corporate performance | 700.0 | 100.0 | 713.2 | 100.0 |
| Cost of materials | -335.0 | -47.9 | -349.6 | -49.0 |
| Depreciation and amortization | -38.4 | -5.5 | -40.6 | -5.7 |
| Other expenses | -110.5 | -15.8 | -103.5 | -14.5 |
| Creation of value added (net) | 216.1 | 30.9 | 219.5 | 30.8 |
| Shareholders (dividends) | 12.4 | 5.7 | 12.4 | 5.6 |
| Employees (personnel expenses) | 174.5 | 80.7 | 185.3 | 84.4 |
| Government (taxes) | 7.2 | 3.3 | 8.2 | 3.7 |
| Lenders (interest) | 8.4 | 3.9 | 7.5 | 3.4 |
| Distribution of value added | 202.5 | 93.7 | 213.4 | 97.2 |
| Remaining in the company (value added) | 13.6 | 6.3 | 6.1 | 2.8 |
At 31 December 2018, the balance sheet total of the SURTECO Group at € 844.5 million was approximately at the level of the previous balance sheet date (€ 842.6 million). On the assets side, current assets increased from € 326.2 million to € 343.7 million at the end of 2018. Meanwhile, cash and cash equivalents decreased from € 133.4 million in the previous year to € 121.0 million. A planned disposal of part of a business is reflected in the assets
| € million | 1/1/-31/12/2017 | 1/1/-31/12/2018 |
|---|---|---|
| Cash flow from current business operations | 82.9 | 60.7 |
| Purchase of property, plant and equipment | -40.8 | -45.0 |
| Purchase of intangible assets | -1.9 | -2.5 |
| Proceeds from disposal of property, plant and equipment | 0.5 | -2.5 |
| Acquisition of companies | -82.8 | 0 |
| - net of cash acquired | 8.7 | 0 |
| Disposal of participations | 0.4 | 0 |
| Share of profit of companies accounted for using | ||
| the equity method | 0.4 | 0.5 |
| Cash flow from investment activities | -115.5 | -49.5 |
| Free cash flow | -32.6 | 11.2 |
| € million | 31/12/2017 | Percentage of the balance sheet total in % |
31/12/2018 | Percentage of the balance sheet total in % |
|---|---|---|---|---|
| Assets | ||||
| Current assets | 326.2 | 38.7 | 343.7 | 40.7 |
| Non-current assets | 516.4 | 61.3 | 500.8 | 59.3 |
| Balance sheet total | 842.6 | 100.0 | 844.5 | 100.0 |
| Liabili ties |
||||
| Current liabilities | 106.4 | 12.6 | 177.9 | 21.1 |
| Non-current liabilities | 387.0 | 45.8 | 313.4 | 37.1 |
| Equity | 349.2 | 41.4 | 353.2 | 41.8 |
| Balance sheet total | 842.6 | 100.0 | 844.5 | 100.0 |
| 2017 | 2018 | |
|---|---|---|
| Equity ratio in % | 41.4 | 41.8 |
| Level of debt (gearing) in % | 54 | 56 |
| Working capital in € million | 114.4 | 119.4 |
| Interest cover factor | 10.8 | 12.0 |
| Debt-service coverage ratio in % | 34.0 | 30.0 |
held for sale amounting to € 17.1 million (2017: € 0 million). Inventories rose from € 119.7 million at year-end 2017 to € 127.0 million. Property, plant and equipment at € 255.8 million remained slightly below the year-earlier value of € 258.2 million. Intangible assets were subject to scheduled write-down and fell from € 66.7 million in 2017 to € 59.3 million. Goodwill at € 162.9 million on 31 December 2018 remained at approximately the level of the previous year, whereas other non-current financial assets of € 6.3 million in the previous year fell back to € 2.1 million. Overall, non-current assets amounted to € 500.8 million at year-end 2018 after € 516.4 million in the previous year.
On the liabilities side, transfer of the tranche from a US Private Placement amounting to € 60 million due in August 2019 led to an increase in short-term financial liabilities to € 65.9 million (2017: € 5.7 million). This tranche completely repays the private placement floated in 2007. Trade accounts payable rose slightly
from € 63.2 million in 2017 to € 65.1 million and short-term provisions increased primarily as a result of the optimization programme to € 11.6 million (2017: € 4.0 million). While other current financial liabilities at € 29.6 million were above the year-earlier value of € 26.2 million, other current non-financial liabilities fell back from € 4.2 million to € 2.5 million. Cumulatively, current liabilities therefore increased from € 106.4 million in the previous year to € 177.9 million at year-end 2018. Long-term financial liabilities came down from € 317.7 million to € 252.6
tranche from the US Private Placement. The pensions and other personnel-related obligations at € 12.8 million remained almost exactly at the level of the previous year. The non-current liabilities of € 386.9 million therefore came down to € 313.4 million. Total equity at € 353.2 million was slightly above the value at year-end 2017 (€ 349.2 million). Consequently, equity ratio rose by 0.4 percentage points to 41.8 % in conjunction with a barely changed balance sheet total. Net financial debt rose from € 190.0 million in the previous year to € 197.5 million at year-end 2018 and the level of debt (gearing) therefore also went up from 54 % to 56 %. The covenants (-> internal corporate controlling system) were complied with during 2018. On 31 December 2018, the SURTECO Group had external credit lines amounting to € 35.4 million. At this point, € 0.9 million had been drawn on these lines.
Since production requires extremely intensive use of materials, the cost of materials is the most critical expense item in the two Strategic Business Units. The companies in the plastics line primarily process the plastics acryl nitrile butadiene styrene (ABS), polyvinyl chloride (PVC), polypropylene (PP) and polymethyl acrylate (PMMA). In the business year 2018, the price development of these raw materials varied very significantly according to region. However, the total reported costs for plastics were above the already very high year-earlier level and significantly above the anticipated values. The price development for technical raw papers in the paper line was extremely challenging. Although a significant increase had already been budgeted, the average price underwent an additional increase and was more than 10 % above the previous year. In particular, the intermediate product cellulose and persistent high prices for titanium dioxide were responsible for this development. Small quantities of the latter raw material are also processed directly by a number of subsidiaries in the Group. The costs for printing inks and impregnating resins in the
million in accordance with the transfer of the d attributable to property, plant and equipment and an addition of € 2.5 million (2017: € 1.9 million) to intangible assets. Additions for the Strategic Business Unit Paper amounted to € 25.3 million (2017: € 17.9 million) for fixed assets and € 22.1 million (2017: € 24.6 million) for the Strategic Business Unit Plastics.
Strategic Business Unit Paper and for chemical additives in both segments increased significantly compared with the previous year. The increase in the cost of materials from € 335.0 million in the previous year to € 349.6 million in the business year 2018 results on the one hand from full-year consolidation of the Probos companies, following the previous year when only half-year results were included, and on the other hand from the increases in purchase prices described above. These also led to a rise in the cost of materials ratio from 48.4 % in the previous year to 49.5 % in the reporting year. In the business year 2018, personnel expenses rose accordingly to € 185.3 million after € 174.5 million in the previous year. The main reasons for this increase lie in the full-year consolidation of the Probos companies, the increase agreed under collective agreements for wages and salaries, and the provisions for an optimization programme to adjust the processes and structures to the changed conditions in the marketplace amounting to a total of € 6.1 million. The personnel expenses ratio rose accordingly to 26.2 % (2017: 25.2 %). Owing to an arbitration decision handed down
against the company (-> Risk and Opportunities Report), the company had to make an unexpectedly payment in the amount of € 1.5 million. In spite of this unscheduled negative impact and the increased total output, other operating expenses came down to € 103.5 million (2017: € 104.8 million on the back of the cost-reduction measures introduced at an early stage following the increasingly fraught framework conditions. The ratio in relation to total output fell back from 15.1 % in the previous year to 14.7 %
Investments in fixed assets of the SURTECO Group in the business year 2018 amounted to € 47.5 million after € 42.7 million in the previous year. The majority of these investments were channelled into investments related to expansion, particularly in new production machinery, printing cylinders for new decors, buildings, and furniture and fittings. As a result, an addition of € 45.0 million (2017: € 40.8 million) was
The total output of the Group increased to € 706.5 million (2017: € 692.9 million) including changes in inventories amounting to € 2.3 million after € -1.9 million in 2017 and other own capitalized work amounting to € 5.2 million (2017: € 5.1 million). The expense items amounting to a total of € 638.4 million (2017: € 614.3 million) were influenced by the full-year consolidation of the Probos companies and by one-off expenses amounting to € 6.1 million. In conjunction with other operating income of € 4.3 million (2017: € 4.5 million) and impairment expenses / impairment reversal income in accordance with IFRS 9 amounting to € 0.5 million, the operating result (EBITDA) therefore fell back from € 83.1 million in the business year 2017 to € 72.8 million. After adjustment by one-off expenses, EBITDA was still below the year-earlier value on account of decreased demand while the cost of materials ratio continued to climb. Elevated depreciation and amortization owing to acquisitions amounting to € 40.6 million after € 38.4 million leads to earnings before financial result and income tax (EBIT) of € 32.2 million (2017: € 44.7 million). The drop resulted from the effects described above and is substantially below the original forecast from the last Annual Report. The latter projection was corrected downwards to between € 37 million and 39 million – less provisions for an optimization programme in October 2018 and achieved with the adjusted EBIT of € 38.3 million. The financial result of € -5.1 million after € -11.2 million in the previous year received a boost from positive currency effects arising from balance sheet valuations and by a new valuation for the purchase option on the residual shareholding of 15 percent in the Nenplas Group. As a result of these effects,
pretax earnings (EBT) at € 27.1 million (2017: € 33.5 million) were not as strong as EBIT. After deduction of income tax amounting to € -8.2 million (2017: € -7.2 million), net income of € 18.9 million after € 26.3 million in the previous year remains. € 0.3 million (2017: € 0.1 million) were attributable to non-controlling interests. Accordingly, consolidated net profit in the business year 2018 amounted to € 18.6 million after € 26.2 million in the previous year. On the basis of an unchanged number of shares amounting to 15,505,731 no-par-value shares, earnings per share amount to € 1.20 (2017: € 1.69).
The Annual Report 2017 projected a substantial increase in EBIT (2017: € 24.6 million) for the Strategic Business Unit Plastics, not least on account of the full-year consolidation of the Probos companies with effect from 2018. The segment result of € 25.5 million in the business year 2018 was significantly above the result for the previous year. However, adjusted by oneoff expenses in the amount of € 2.7 million for the optimization programme, a substantial increase would have been achieved. EBIT of the Strategic Business Unit Paper amounted to € 13.3 million in 2018 and this figure was significantly below the value for the previous year of € 26.9 million. Even including one-off expenses from the optimization programme of € 3.4 million and from the decision rendered by the court of arbitration amounting to € 1.5 million, the original forecast from last year's Annual Report (significant increase) was not achieved.
The financial statements of the holding company SURTECO GROUP SE were prepared on the basis of the accounting principles in accordance with the Third Book of the German Commercial Code (§§ 242 ff. and 264 ff. German HGB) in the version of the Balance Sheet Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetz, BiLRUG) for large jointstock companies and the Stock Corporation Act (Aktiengesetz, AktG).
On 31 December 2018, the balance sheet total of the SURTECO GROUP SE at € 647.0 million was slightly below the year-earlier value of € 659.8 million. On the assets side of the balance sheet, fixed assets at € 314.7 mil lion remained around the year-earlier value (€ 315.5 million). Current assets of € 343.5 million in the previous year came down to € 331.6 million on the balance sheet date 2018 with receivables from affiliated enterprises at € 221.4 million after € 228.8 million in the pre vious year, other assets of € 8.1 million (2017: € 5.6 million) and cash in hand of € 102.1 mil lion after € 109.1 million in the previous year. The decline in receivables from affiliated en terprises reflects lower income from profit and loss transfer agreements. On the liabilities side of the balance sheet, liabilities were reduced slightly from € 345.6 million in the previous year to € 343.3 million. This involved a reduc tion of liabilities to banks falling from € 308.0 million in the previous year to € 304.9 million due to ongoing payments, while liabilities to affiliated enterprises rose slightly to € 33.3 million (2017: € 32.4 million). Equity at € 297.6 million was also below the year-earlier value of € 309.2 million. Owing to the likewise reduced balance sheet total, the equity ratio at 46.0 % was slightly below the previous year (46.9 %). The sales revenues of SURTECO GROUP SE in the amount of € 2.2 million in 2018, after € 1.7 million in the previous year, are comprised entirely of intragroup reallocations owing to the fact that the holding company does not car ry out any operating business. The economic situation described for the Group companies means that the income from profit and loss transfer agreements at € 14.7 million was below the year-earlier level of € 30.7 million. Personnel expenses for the SURTECO GROUP SE amount ing to € -6.6 million after € -5.0 million in the previous year were influenced by provi sions for the change in the Management Board (-> Compensation report). Conversely, other operating expenses essentially fell on ac count of exchange-rate effects arising from the balance sheet revaluation of bank deposits and receivables from affiliated enterprises in US Dollars from € -7.7 in the previous year to
€ -4.5 million in the business year 2018. In terest income improved from € -6.4 million in the previous year to € -5.2 million. Income tax rose to € -1.6 million (2017: € -0.7 million). Net income for SURTECO GROUP SE in the business year 2018 therefore amounted to € 0.8 million after € 14.1 million in the previous year.
The business development in 2018 was defined overall by declining demand, particularly in the furniture, flooring and wood-based sector. This impacted equally on both Strategic Business Units. However, the plastics line was able to mitigate this fall as a result of the full-year con solidation of the Probos companies acquired in June 2017, and it is in any case active in differentiated sectors alongside its production of plastic edgings with technical extrusions (profiles), skirtings and plastic foils. This con trasted with increased costs for the most im portant raw materials in both segments. These could only be partly passed on and therefore exerted a negative impact on the result. The Group countered this development with strict cost discipline and an optimization programme to adjust the processes and structures to mod ified market conditions. The provisions for this were already formed in the business year 2018 as a one-off charge. Since these measures were adopted at an early stage and the Group continues to have a robust equity platform and liquidity, the Management Board assess es the economic situation of the Group and the SURTECO GROUP SE as satisfactory at the present juncture.
The comprehensive product range of the SURTECO Group requires manufacturing con cepts with appropriate centres of competence. Each production location has therefore special ized in the manufacture of a specific product
or group of products. The Research and development Departments (R&D) therefore work locally in order to strategically meet the special requirements for each application. The main functions of R&D Departments are geared to advanced development of the technical characteristics of the products and a further advance in their resilience and long service life, new surface variations with optical and haptic effects, and a further improvement in their processing capability. The companies are also continually carrying out research into new products and applications that can be processed using the existing production facilities. However, R&D activities also focus on optimization of process safety in production and research into alternative raw materials as well as raw materials with improved environmental characteristics. A total of 212 employees were working in the R&D Departments during the business year 2018 (2017: 187). The personnel and non-personnel costs for Research and development amounted
to € 4.7 million after € 5.3 million in the previous year. The personnel costs are included in the personnel expenses of the Group.
3,304 employees were in the workforce on 31 December 2018 and the number of employees on the balance sheet date was therefore in line with the level of the previous year (3,295). However, an analysis over the period of a year – 3,329 employees in 2018 after 3,091 in 2017 – reveals that the figure was influenced by the acquisition of the Probos companies in June 2017. As a result, the number of people employed on average in the Strategic Business Unit Plastics rose from 1,724 in 2017 to 1,944 in 2018, while the number in the Strategic Business Unit Paper at 1,365 was only slightly above the figure for the previous year (1,347). The holding company
| Location | 31/12/2017 | 31/12/2018 | Change |
|---|---|---|---|
| Germany | 1,860 | 1,847 | -13 |
| Portugal | 269 | 268 | -1 |
| USA | 247 | 247 | - |
| United Kingdom | 188 | 178 | -10 |
| Brazil | 150 | 154 | +4 |
| Canada | 131 | 130 | -1 |
| Asia | 102 | 115 | +13 |
| Sweden | 112 | 108 | -4 |
| Australia | 91 | 99 | +8 |
| Poland | 37 | 41 | +4 |
| Mexico | 32 | 32 | - |
| Italy | 28 | 28 | - |
| France | 20 | 24 | +4 |
| Russia | 12 | 13 | +1 |
| Turkey | 10 | 11 | +1 |
| Czech Republic | 6 | 9 | +3 |
| 3,295 | 3,304 | +9 |
continued to employ 20 people unchanged. While the average length of service continued unchanged at 12.7 years, the average age of all employees fell from 43.1 years to 42.5 years in the business year 2018. The average number of apprentices increased from 116 in the previous year to 124 in the year under review. As a function of the number of employees in Germany, the training ratio amounted to 6.7 % after 6.3 % in the previous year.
The SURTECO Group with its individual subsidiary companies is exposed to a large number of risks on account of global activities and intense competition. A risk is deemed to be any event or circumstance that can lead to a negative deviation for the SURTECO Group now and/or in future from the planned corporate goals. The Group deliberately enters into risks with the aim of ensuring sustainable growth and increasing the corporate value, but avoids unreasonable risks. The remaining risks are reduced and managed by taking adequate measures. Foreseeable risks are covered by taking out insurance policies and deploying derivative financial instruments, if this is feasible at reasonable commercial conditions. However,
it is not possible to exclude the possibility that insurance cover or hedging with financial instruments is inadequate in individual cases or that appropriate protection cannot be obtained for specific risks.
The Risk Management System is an integral element within the Group's strategy and planning process. It is made up of a number of modules which are integrated in the entire structural and workflow organization. The Management Board of the SURTECO Group is responsible for policy relating to risks and for the internal management and controlling system. The Management Board works together with the management of the subsidiaries to identify risks. The management of the subsidiary companies implements the instructions of the Management Board and is responsible within this framework for risks that it enters into in the course of its business activities. The management includes the employees in the Risk Management Department in the course of exercising their management functions. The Risk Management Manual applicable throughout the Group defines binding rules and conditions for the risk management process. This ensures that the identified individual risks are classified into damage and probability classes on the basis of their anticipated gross financial burden on the EBT with respect to the current and subsequent years using the following tables. Overcoming individual risks up to € 0.5 million is deemed to be the responsibility of the individual companies.
| Damage class | Qualitative | Quantitative |
|---|---|---|
| 1 | Minor | > € 0.5 million - € 0.75 million |
| 2 | Moderate | > € 0.75 million - € 1.5 million |
| 3 | Major | > € 1.5 million - € 3.0 million |
| 4 | Threat to existence as a going concern | > € 3.0 million |
| Probability class | Qualitative | Quantitative |
|---|---|---|
| 1 | Slight | 0 % - 24 % |
| 2 | Moderate | 25 % - 49 % |
| 3 | Likely | 50 % - 74 % |
| 4 | Very Likely | 75 % - 100 % |
to risk categories to which the SURTECO Group is fundamentally exposed. The following risk and opportunities report explains these risk categories in general terms and provides information about the recorded individual risks in each category.
Appropriate measures for reducing and overcoming the risks are defined and implemented with minimum costs for purposes of risk control and risk management. This may involve, for example, the tools of risk avoidance, risk limitation, risk transfer and the creation of adequate potential coverage. Since risks are continuously changing, the Risk Management System is also subject to continuous implementation of monitoring, documentation and reporting of the risks. Apart from regular reporting to the Management Board and the Supervisory Board, managers have a duty to report risks that occur unexpectedly without delay. The usefulness and efficiency of risk management and the controlling systems are monitored at regular intervals by the Management Board and the management of the subsidiary companies. The Group is continually developing measures directed towards risk avoidance, risk reduction and risk hedging while also taking advantage of any business opportunities that arise. Opportunities essentially arise on account of positive developments from outside influences of the kind that are described in the risk categories. Any opportunities identified are also recorded and documented, although they are not generally allocated to classes.
The ICS comprises the accounting-based processes and controls which are significant for consolidated financial statements. The SURTECO Group bases the structure of its internal controlling system on the relevant publications of the Institute of Auditors (Institute der Wirtschaftsprüfer, IDW). There were no significant amendments to the accounting-based ICS between the balance sheet date and the preparation of the management report.
The identified individual risks are also allocated d and the high proportion of foreign sales. The economic development of the countries is therefore analyzed as an indicator for the business performance since the manufactured products are primarily processed to create durable goods, such as furniture and flooring. Experience tells us that the inclination of consumers to purchase these goods increases when there is an economic upswing. Furthermore, the performance of the flooring, furniture and wood-based industry, and construction activity in the individual countries and markets is important for the business development of the Group. Both Strategic Business Units operate in more or less the same countries and sectors.
The preparation of the accounts and the financial statements is primarily carried out locally and in accordance with local standards. The consolidated financial statements are drawn up in accordance with the International Financial Reporting Standards (IFRS). A uniform chart of accounts and the use of accounting policies form the basis for these documents. The Group holding company supports the companies on issues relating to accounting and manages the consolidated accounting process.
The subsidiary companies are included in the consolidated financial statements using a partly integrated accounting and consolidation system and on the basis of reporting packages. Consolidation is initially carried out as a multistage process at the level of the subsidiary companies, then at the level of segments and finally at Group level. The consolidated financial statements are prepared using a permanent structured process based on a calendar for the financial statements.
The plausibility of the figures is ensured at every level by manual and systematic checks. Transparent responsibilities and access rules for IT systems relevant to the financial statements are significant elements in this process. The controlling principles of separation of functions, double-check principle and approval and release procedures are applied to the annual financial statements and the consolidated financial statements. Information from external service providers is checked for plausibility.
The business development of the SURTECO Group depends significantly on macroeconomic conditions due to the Group's global activities A local profile and cost leadership are key factors for market position and economic success in the market for coating products for furniture and interior design. This entails a product portfolio tailored to the market and control of operating processes and costs. The Group has production locations and additional sales locations on four continents, and this places the Group in the position of being able to supply its customers worldwide quickly as well as being able to identify trends in regional markets at an early stage. This gives the opportunity to gain first-mover advantage when participating in trends. The qualitative and quantitative data from the markets and the subsidiary companies are recorded and evaluated in a differentiated system of internal reporting. This highlights and analyses any deviations from budgets, compliance with plans, and the emergence of new monetary and non-monetary risks. The business is then managed on the basis of the information gathered. The most relevant geographical markets are located in Europe, in North and South America, and Australia. The UK does not play a significant role as a single market. However, unregulated Brexit could lead to higher expenses and influence demand through general economic development. The Group may be able to benefit from an economic upswing in individual markets that stimulates demand for furniture. This would enable the companies to participate indirectly in the upturn as a supplier. On the other hand, a global or local recession could result in consumers refraining from
making investments in durable goods such as furniture, which could entail a drop in orders at the SURTECO Group.
Similar to the development of geographical markets, the Group also monitors the dynamic performance of relevant sectors. The focus of this analysis is essentially on the flooring, furniture and wood-based industry. The Group will also be able to benefit from an upswing in sector development but equally will also be affected by an adverse development.
A number of individual risks with a damage potential of less than € 0.5 million were identified in the category of market risks in the Strategic Business Unit Plastics and beyond the threshold of € 0.5 million, a risk of damage class 1 and probability class 2, and a risk of damage class 1 and probability class 3 was identified. A market risk below the threshold of € 0.5 million was identified in the Strategic Business Unit Paper. In the category of market opportunities, several individual opportunities were identified with a weighted overall potential of € 0.4 million.
An increased production depth has been observed in the market over recent years. This may lead to excess capacities and tougher competition. New local competitors may also enter the market at any time, particularly in the plastics sector. Conversely, the barriers to entry in the paper segment are relatively high on account of the investment sums required. The Group is countering the high level of competitive pressure by expansion and reinforcement of existing business, innovative products, and not least a further increase in efficiency and productivity.
Since the SURTECO Group is represented worldwide through its network of sales companies and already holds a strong market position in its most important divisions, there is an opportunity to achieve further market penetration, for example on the back of integration of sales and marketing activities as part of the restructuring of the two Strategic Business Units. There is also an opportunity to play a proactive role in future consolidation within the sector.
No individual risks were identified in this risk
class.
The Group is dependent on outsourcing from suppliers and partners for the procurement of semi-finished products and services. Inclusion of third parties in the equation creates risks, for example unexpected supply difficulties or unforeseeable price increases resulting from market consolidation, market bottlenecks or currency effects which could impact negatively on results. The Group meets risks associated with supply by a process of continuous material and supplier management. The measures involve analyzing the market intensively, carrying out in-depth quality inspection on the basis of jointly agreed specifications, arranging supply contracts, and detailed research into alternative raw materials.
Increased costs of raw materials were already anticipated in the Strategic Business Unit Paper over the business year 2018 by comparison with the previous year. Ultimately, however, the costs for technical raw papers, impregnating resins and chemical additives underwent steeper growth than originally anticipated and ended up above the projected values. Overall, prices for the plastics in the Strategic Business Unit Plastics were also over budget and above the values for the previous year.
In the category of procurement risks, a risk below the threshold of € 0.5 million and an individual risk in the damage class 2 and probability class 3 were identified in the Strategic Business Unit Plastics. No significant procurement risk was identified for the Strategic Business Unit Paper.
The company will be presented with opportunities if there is an unexpected reduction in the price of raw materials since this would exert a significantly positive impact on the earnings situation. The research and development departments have a rolling programme of continuously carrying out research into alternative raw materials and additives so that there is a possibility of identifying cheaper or higher quality substitute products.
Ensuring secure operation of all business processes requires constant monitoring and adaptation of the information technologies used in the Group. Against the background of a growing potential for risk based on increasing integration of computer-supported business processes in communication between the Group companies and in communication with customers, suppliers and business partners, ongoing development of the measures used to make information secure are a top priority. Risks relating to the availability, dependability and efficiency of information technology systems are limited by making strategic investments and as appropriate by commissioning specialist companies. The Group reacts selectively to increased demands placed on the security of our systems within the scope of comprehensive security management. These include, for example, investment in current firewall, antivirus and high-availability systems. Potential risks can also be avoided through implementation of uniform software systems where all aspects relating to production and business administration are integrated and efficiently processed.
No individual risks were identified in this risk class.
The success of the company is dependent on having a workforce of qualified personnel at all levels. Shorter innovation cycles and increasingly international links place ever more stringent demands on the skills of technical specialists and managers. Employees receive regular basic and advanced training inside the company and with external providers in order to ensure staff have the appropriate qualifications in the relevant functions and countries.
No individual personnel risks were identified in the SURTECO Group.
An efficient and smooth-running production process is the enabler for the delivery capability of the companies. This entails the risk that machines or equipment may break down or the production workflow may be disrupted in some other way. To a certain extent, the companies of the Group are able to distribute production over several sites and thereby effectively minimize the risk of downtime. Production processes that cannot be distributed, or only with difficulty, are protected against production outage with standard measures such as subdivision into different fire zones. Furthermore, the systems and equipment are carefully maintained and the employees receive intensive training. If there are any complaints, extensive investigations are carried out in order to ascertain the causes. It is not possible to exclude the possibility that complaints may actually be traced to intermediate products, and when this is the case it is not always effective to seek recourse with the supplier. Environmental officers apply defined standards and regulations to monitor the environmental safety of products and production.
Several risks in this risk category were recorded for the Strategic Business Unit Plastics below the threshold of € 0.5 million and one risk in damage class 1 and the probability class 2 and a risk in damage class 1 and probability class 3. No production risk was identified in the Strategic Business Unit Paper.
The production area also offers opportunities. A continuous improvement process was therefore implemented to identify and continuously realize any established potential for efficiency increases. The development of new production techniques and improvements in the existing processes also offer the opportunity of further improving the profitability of the company.
The global nature of the business activities of the SURTECO Group results in delivery and payment flows in different currencies. Conversion of business figures and balance sheets from foreign subsidiaries into euros may entail risks which can only be hedged to a certain extent. For example, the Probos Group generates around one third of its sales revenues in Brazil denominated in the historically volatile currency of the Brazilian real. The biggest proportion of sales in foreign currency within the SURTECO Group was represented by the US dollar with approximately 15 % in 2018. Opportunities may arise from correspondingly positive developments in currencies.
Interest risks are mainly incurred for short-term financial liabilities. The majority of longterm financial liabilities are structured with fixed-interest rates. The company meets the remaining interest and currency risks by hedging positions with derivative financial instruments, and regular and intensive analysis of a range of early-warning indicators.
Hedging of individual risks is discussed by the central Treasury with the Management Board and the responsible Managing Directors, and decisions are arrived at jointly.
One individual risk below the threshold of € 0.5 million was identified in the Strategic Business Unit Plastics for interest and exchange-rate risks. No risk in this class was identified in the Strategic Business Unit Paper.
The Corporate Treasury Department in the holding company SURTECO GROUP SE is responsible for monitoring and controlling the liquidity of the Group and the major subsidiary companies. This provides an up-to-date picture of liquidity development at any time. The high levels of operating cash flow and the short payment targets mean that the companies have adequate liquid funds continuously available. There is also the option of drawing on open credit lines and on factoring agreements.
Nevertheless, there is a risk that earnings d and liquidity can be compromised by default on accounts receivable and non-compliance with payment targets. The Group counters this risk by regularly reviewing the credit ratings of contracting parties and carefully monitoring default with customers. The risk arising from debit balances in accounts payable is low on account of the broadly-based customer structure and cover provided by appropriate trade credit insurance policies.
No individual risks were identified in this category in the SURTECO Group.
The refinancing of the Group and the subsidiary companies is generally carried out centrally by SURTECO GROUP SE. The majority of the financial liabilities of the Group have residual terms of up to five years (➞ maturity structure in item 32.3 of the Notes to the Consolidated Financial Statements) and primarily have fixed interest rates. The Group operates with a wide base of lenders comprising insurance companies and banks. Financial indicators were agreed with the lenders at standard market conditions in loan agreements, for example the ratio of EBITDA to interest income, and these have to be complied with. These indicators are continuously monitored by the Management Board and the Supervisory Board. If there is an impending breach of any of the indicators, consultations on individual measures take place as necessary. If the indicators are breached, the lenders have the right to serve notice on the loan agreements. The financial indicators were complied with during the business year 2018. From today's perspective, the financial indicators can also be complied with in the business year 2019.
No individual risks were identified for the financing risks in the SURTECO Group.
The SURTECO Group recognizes goodwill in the balance sheet. The values in use for the cash generating units of the Group were assessed as being higher than the book values within the scope of the impairment test for the business year 2018. As a consequence, no impairments were carried out. There was also no requirement for adjustments in any of the participations of SURTECO GROUP SE. However, the possibility that planned targets may not be reached in the future cannot be excluded; there may also be a requirement to carry out an impairment.
No individual risks were identified from fluctuations in participations in the SURTECO Group.
Changes in supervisory requirements, customs regulations or other barriers to trade, as well as possible restrictions on price or foreign currency could impact negatively on the sales and the profitability.
The companies in the Group have formed adequate provisions to meet warranty claims. Part of the warranty risks have been covered by commercially effective insurance policies. Risks are reduced by the high level of production certainty, and the outstanding quality standard for the manufactured products reduce risk.
SURTECO GmbH filed an arbitration claim against the seller of the Süddekor companies. The subject of the arbitration proceeding was in particular claims arising from the original contract of purchase for the company relating to the infringement of environmental warranties. The court of arbitration rejected the arbitration claim. The costs to be borne by SURTECO GmbH defined by the arbitration judgement rendered were already paid in 2018. After the arbitration judgement was handed down, SURTECO GmbH submitted an appeal to rescind this arbitration judgement with the Higher Regional Court Frankfurt am Main (Oberlandesgericht) on grounds of breach of constitutional procedural rights. The Higher Regional Court has not handed down a decision yet. If the arbitration judgement were rescinded, the arbitration proceeding would be resumed and continued. If this is the case, the additional costs still to be incurred cannot currently be forecast.
Otherwise, the SURTECO Group is not currently involved in any court or arbitration proceedings that could exert a significant negative influence on the commercial situation of the Group.
When business activities are carried out in third-party countries and at foreign locations of the Group, there are risks of social unrest and economic and political instability. This may also involve nationalization proceedings relating to private assets.
A risk below the materiality threshold of € 0.5 million, two risks in damage class 2 and probability class 3, and a risk in damage class 1 and probability class 2 were identified in this risk category for the Strategic Business Unit Plastics. No risk in this class was identified in the Strategic Business Unit Paper.
Furthermore, there is a general risk that unexpected fiscal risks may occur on account of the international alignment of the Group and the large number of subsidiaries. However, no individual fiscal risks have been identified in the SURTECO Group.
The Group regularly monitors the attainment of business targets and the risks and risk-limiting measures. The Management Board and the Supervisory Board are informed of risks at an early stage. There are no risks which alone or in combination with other risks could pose a threat to the continued existence of the company as a going concern. Future risks posing a threat to the continued existence of the company as a going concern cannot currently be identified.
The analysis of all risks and opportunities leads to the conclusion that the material influencing factors for the business operations of the SURTECO Group come from the procurement markets and arise from the framework conditions for the global economy and the relevant sectors. Consequently, the main potential for risk relates to an unexpected price increase or shortage of raw materials, and in a recession in the global economy or in individual markets and sectors relevant for the Group. By the same token, an economic upswing or more favourable purchasing conditions also offer the most significant opportunities for more positive business development.
An overall assessment of all the risks and opportunities carried out in the business year 2018 indicated a rise in the weight damage potential of all identified individual risks and opportunities compared with the previous
The opportunities and risks described can exert a significant effect on the net assets, financial position and results of the Group's operations. Additional risks that are unknown at the moment and that are believed to be very low at the current point in time could also impact negatively on business activities.
On the basis of concerns about the sustained trade dispute between the USA and China, the concern about a disorderly exit from the EU by the United Kingdom and increasing geopolitical uncertainties, the experts at the IMF are predicting a further weakening of global economic growth to 3.5 % in 2019. While dynamic growth in the developed economies is expected to fall back to 2.0 %, the emerging economies and developing countries can anticipate an increase of 4.5 %, slightly below the figure for the previous year. The IMF is projecting an expansion of just 1.6 % for the eurozone. In particular, the German (+1.3 %) and the Italian (+0.6 %) economies are experiencing dwindling confidence. Surprisingly, the economy of the United Kingdom is undergoing relatively robust development with an increase of 1.5 % notwithstanding Brexit. By contrast, the upward trend in the USA continues to weaken further to 2.5 % as a result of the dispute with China and other trade barriers imposed by the US government. A similar situation prevails in Asia, where the dynamic performance has also come down at plus 6.3 %. The principal factor for this is development in China, where growth is likely to slow to a modest figure of 6.2 % in a year-on-year comparison.1
| World | +3.5 |
|---|---|
| Germany | +1.3 |
| Eurozone | +1.6 |
| United Kingdom | +1.5 |
| USA | +2.5 |
| Central and Eastern Europe | +0.7 |
| Latin America | +2.0 |
| Asien | +6.3 |
Source: International Monetary Fund (IMF), World Economic Outlook, Update January 2019.
The demand for long-term capital goods, such as furniture and other fittings, and hence indirectly for products from SURTECO, is primarily based on the general economic growth in the individual countries. In the most important geographical markets of the SURTECO Group, a less dynamic performance for economic development needs to be anticipated in the business year 2019. This relates in particular to the European markets, which are in any case saturated. Accordingly, the signs for declining demand in the sector are increasing. The trade conflict between the USA and China remains unsolved, and the lack of resolution to the Brexit discussions are causing additional uncertainties in the markets.
The earnings development of the Group is to a large extent dependent on the purchase prices of the most important raw materials. After plastic prices rose once again in the business year 2018 from what was already a very high level, there is no expectation of any easing in the situation in 2019. Plans have likewise been laid for a further increase in relation to purchase prices for technical raw papers, impregnating resins and chemical additives.
On the basis of pro-forma1 sales of the Business Unit Decoratives of € 519.1 million for the business year 2018, sales revenues for 2019 are expected to be slightly below the year-earlier level for this segment. The anticipated sales for the Business Unit Technicals are likely to be slightly below the pro-forma value for 2018 amounting to € 113.8 million. The sales of the Business Unit Profiles should be situated slightly above the year-earlier value (pro-forma 2018: € 87.6 million). After deduction of the consolidations of sales between the Business Units, sales revenues in the Group are projected to be € 670 million to € 700 million. This includes approximately € 33 million from the business segment held for sale.
One-off expenses amounting to a total of € 6.1 million are included in the amount of € 32.2 million in EBIT for the business year 2018. Insofar, Group EBIT should rise and be in the range from € 38 million to € 40 million. The business segment held for sale is not likely to exert any significant impact on EBIT. In the case of the Business Unit Decoratives (pro-forma EBIT 2018 including € 5.4 million provisions for the optimization programme: € 25.5 million), a substantial increase is anticipated. The pro-forma EBIT of € 3.9 million for the Business Unit Technicals was negatively impacted by provisions amounting to € 0.7 million in 2018. The management expects a slight increase in 2019. The company is assuming a slight increase in earnings for the Business Unit Profiles (pro-forma EBIT 2018: € 9.3 million) in 2019.
As in previous years, the company expects that the covenants will be complied with once more in the business year 2019.
Overall, the company expects a tense situation in relation to demand for 2019. This is caused by the general economic situation prevailing in the relevant geographical markets and the framework conditions in the wood-based and furniture sector along with their suppliers. The improvement in earnings is generated almost exclusively from reduced personnel costs and the elimination of one-off expenses.
This report describes the compensation system for the Management Board and the Supervisory Board, as well as explaining the structure and the level of compensation for individual executive officers. It takes into account the recommendations of the German Corporate Governance Code with the exception of the deviations published in the Declaration of Compliance and observes the requirements of the German Commercial Code (HGB) in the version of the Act on the Disclosure of Management Board Compensation, (VorstOG), and the Stock Corporation Act (AktG) in the version of the Act on the Appropriateness of Executive Compensation (VorstAG).
The compensation structure and the level of compensation for the Members of the Management Board are defined on the basis of the proposal of the Supervisory Board's Personnel Committee and are regularly reviewed. The existing compensation system guarantees a level of remuneration appropriate to the activity and responsibility of the Members of the Management Board. Alongside the functions of the individual Members of the Management Board and their personal performance, further factors taken into account include the economic situation, the success and future prospects of the company, and the commensurate nature
1 Source: International Monetary Fund (IMF), World Economic Outlook, Update January 2019. 2 Pro-forma = Sales and earnings of the Business Units from 2018 in 34 accordance with the new structure. 35
| 2017 | 20182 | 2018 (Min) |
2018 (Max) |
2017 | 2018 | 2018 (Min) |
2018 (Max) |
2017 | 20183 | 2018 (Min) |
2018 (Max) |
|---|---|---|---|---|---|---|---|---|---|---|---|
| 360 | 360 | 360 | 360 | 100 | 280 | 280 | 280 | 360 | 90 | 90 | 90 |
| 49 | 48 | 0 | 1 | 18 | 39 | 0 | 1 | 40 | 27 | 0 | 1 |
| 409 | 408 | 360 | 1 | 118 | 319 | 280 | 1 | 400 | 117 | 90 | 1 |
| 679 | 220 | 0 | 1 | 222 | 158 | 0 | 1 | 561 | 279 | 0 | 1 |
| 227 | 74 | 0 | 1 | 74 | 53 | 0 | 1 | 187 | - | 0 | 1 |
| 1,315 | 702 | 360 | 1 | 414 | 530 | 280 | 1 | 1,148 | 396 | 90 | 1 |
| 100 | 100 | 100 | 100 | - | - | - | - | - | - | - | - |
| 1 | 1 | 1 | |||||||||
| 1,415 | 802 | Dr.-Ing. Herbert Müller Chairman, Group Strategy, Strategic Business Unit Plastics 460 |
414 | Andreas Riedl from 1 July 2017 530 |
Chief Financial Officer (CFO) 280 |
1,148 | until 31 March 2018 396 |
Dr.-Ing. Gereon Schäfer Strategic Business Unit Paper 90 |
2 An agreement on a one-time payment of € 000s 2,450 was concluded with Dr.-Ing. Herbert Müller (see section "Premature termination of the contract of service with the Chairman of the Management Board Dr.-Ing. Herbert Müller" in this report). 3 In 2018, Dr. Schäfer received € 000s 450 as an ex gratia payment (see section "Ex gratia payment for post-contractual competition prohibition" in this report).
| Cash inflow | Dr.-Ing. Herbert Müller | Andreas Riedl | Dr.-Ing. Gereon Schäfer | |||
|---|---|---|---|---|---|---|
| Chairman, Group Strategy, | Strategic Business Unit Plastics | Chief Financial Officer (CFO) from 1 July 2017 |
until 31 March 2018 | Strategic Business Unit Paper | ||
| € 000s | 2018 | 2017 | 2018 | 2017 | 2018 | 2017 |
| Fixed compensation | 360 | 360 | 280 | 100 | 90 | 360 |
| Fringe benefits | 48 | 49 | 39 | 18 | 27 | 40 |
| Total | 408 | 409 | 319 | 118 | 117 | 400 |
| Variable compensation for one year |
679 | 781 | 222 | - | 561 | 650 |
| Variable compensation over several years (target attainment dependent on the average bonuses of the past three years) |
192 | 1 | 1 | 1 | 154 | 1 |
| Miscellaneous | - | - | - | - | - | - |
| Total | 1,279 | 1,190 | 541 | 118 | 832 | 1,050 |
| Pension expenses | 100 | 100 | - | - | - | - |
| Total compensation | 1,379 | 1,290 | 541 | 118 | 832 | 1,050 |
three years. See section on "Bonuses" in the Compensation Report for more information on this.
of the compensation in view of the comparative environment and the compensation structure otherwise applicable within the SURTECO Group.
The Supervisory Board reviewed the compensation system against the background of the Act on the Appropriateness of Management Board Compensation that came into force on 5 August 2009 (VorstAG) with the assistance of external expert consultants, and has come to the conclusion that it complies with the applicable statutory regulations and the recommendations of the German Corporate Governance Code with the exception of the deviations published in the Declaration of Conformity.
The compensation system is described below for the reporting year.
The total cash compensation is comprised of a fixed compensation (basic salary) that is independent of any performance element and a performance-based variable component (bonus). The compensation for Members of the Management Board also includes non-cash benefits and other payments.
The relevant basic salary of the Members of the Management Board is paid in equal monthly instalments. It amounts to € 360,000 p.a. for the Members of the Management Board Dr.-Ing. Herbert Müller and Dr.-Ing. Gereon Schäfer (Board Member until 31 March 2018) and € 280,000 p.a. for Andreas Riedl (2017: € 200.000 p.a.).
Furthermore, none of the Members of the Management Board has undertaken separately remunerated functions as executive officers at the consolidated subsidiary companies.
The applicable compensation system provides for variable bonuses, which the Supervisory Board defines at its discretion on the basis of the consolidated result before tax (EBT) – adjusted by additions/curtailments to be carried out as appro-
pension funds, etc.) will come to an end when the employment relationship ceases, with the exception of the transfer of the company car, which Dr. Müller will be able to use up until the regular end of his appointment on 30 June 2021.
A Directors' and Officers' Liability Insurance ("D&O" insurance) is provided for the Members of the Management Board. Pursuant to the requirements of § 93 Section 2 Sentence 3 of the Stock Corporation Act (AktG), the excess (deductible) amounts to 10 % of the loss or damage up to an amount of one and a half times the fixed annual compensation of the Board Member.
During the business year under review, no Member of the Management Board received payments or equivalent plan benefits from
third parties (including companies with which the SURTECO Group maintains business relations) in relation to their activity as a Member of the Management Board.
Loans to Members of the Management Board During the period under review, no advances or loans were granted to Members of the Management Board of SURTECO GROUP SE.
The contracts of service currently valid for the Members of the Management Board automatically come to an end when the period of appointment for the relevant Member of the Management Board is concluded. If the appointment of a Member of the Management Board is revoked during the term of their contract of service, the Board Member affected can be placed on administrative leave for the remaining term of the contract and the com-
| in € | Total compensation 2017 |
Total compensation 2018 |
Basic salary | Compensation for work carried out on the Audit Committee |
|---|---|---|---|---|
| Dr.-Ing. Jürgen Großmann Chairman |
73,000 | 52,000 | 44,000 | 8,000 |
| Björn Ahrenkiel Vice Chairman |
60,000 | 49,000 | 33,000 | 16,000 |
| Dr. Markus Miele Vice Chairman |
48,000 | 33,000 | 33,000 | - |
| Dr. Christoph Amberger from 29 June 2017 |
16,000 | 22,000 | 22,000 | - |
| Andreas Engelhardt from 28 June 2018 |
- | 11,200 | 11,200 | - |
| Markus Kloepfer until 29 June 2017 |
16,000 | - | - | - |
| Jens Krazeisen | 32,000 | 22,000 | 22,000 | - |
| Wolfgang Moyses | 37,000 | 31,000 | 22,000 | 9,000 |
| Udo Sadlowski | 32,000 | 22,000 | 22,000 | - |
| Dr.-Ing. Walter Schlebusch until 28 June 2018 |
40,000 | 15,300 | 10,800 | 4,500 |
| Thomas Stockhausen | 32,000 | 22,000 | 22,000 | - |
| Summe | 386,000 | 279,500 | 242,000 | 37,500 |
priate – in accordance with IFRS taking account of the return on sales. The correlation with a sustainable company performance and a basis of assessment over several years pursuant to § 87 (1) sentences 2 and 3 Stock Corporation Act (AktG) are guaranteed by the fact that 75 % of the bonus for the affected business year are paid in the following year and 25 % are retained without payment of interest. The retained 25 % are paid out after three years, and they are decreased or increased proportionately as a percentage if the average bonuses of the last three business years fall short of, or exceed, the bonuses of the third last business year. The retention cannot be a negative value. If a loss in the previous year has already reduced the ceiling of assessment, no retention is made. If a Board Member steps down from their office, the contracts of service make provision that the Board Member either (i) waits for the regular calculation of the retention after expiry of the reference period or (ii) the retention can be paid out with a flat-rate deduction of 10 % – the latter with the provision that the amount paid out may not be higher than the amount which was calculated for the last reference period. The retained 25 % of the retention will be paid out after expiry of the reference period for the former Member of the Management Board Dr.-Ing. Gereon Schäfer.
The Members of the Management Board receive benefits in the form of non-cash benefits that fundamentally entail values to be recognized from the tax guidelines for use of a company car and various insurance premiums. Dr.-Ing. Herbert Müller also receives a limited supplement for accommodation in Buttenwiesen and reimbursement for the costs of a weekly journey home. He additionally receives an allowance amounting to € 000s 100 p.a. for his private retirement provision.
The former Member of the Management Board Dr.-Ing. Gereon Schäfer, whose appointment and contract of service came to an end on 31 March 2018, receives half of the fixed salary paid in 2017 and half of the variable compensation received in the last twelve months prior to the ending of his contract of service each year for a period of 24 months after ending his employment relationship, in respect of his post-contractual competition prohibition. For the months of April to December 2018, the ex-gratia compensation amounted to a total of € 000s 450.
In March 2019, the company and Dr.-Ing. Herbert Müller reached an agreement to terminate the contract of service of Dr. Müller as Chairman of the Management Board with effect at the latest from 30 October 2019 (or an earlier end of month, but at the earliest with effect from 30 June 2019). The agreement provides for continuation of the payment of the fixed salary of Dr. Müller (€ 000s 360 p.a. gross) as previously in monthly instalments until the end of the contract. A bonus for 2018 will also be defined in accordance with the previously applicable principles and paid out in order to safeguard sustainable corporate governance. The provisions defined in the contract of service will continue to apply unchanged in respect of the retentions for previous years. The option of paying the retentions prematurely with a flat-rate deduction of 10 % was not taken up. Diverging from this, a bonus for the business year 2019 will be defined on the basis of the half-year financial statement for the first half of 2019 and paid out without the aforementioned retentions. Dr. Müller will furthermore receive a one-off payment of € 2.45 million gross in compensation for the remaining period of his contract of service. This is payable by 31 July 2019 and an appropriate provision has been formed for this in the annual financial statements for 2018. The payment and other benefits under the agreement also cover the ex-gratia compensation for the post-contractual competition prohibition relating to Dr. Müller, which applies until 30 June 2021. The other contractual fringe benefits (insurance policies, reimbursement of expenses, contributions to private case, notice of termination can be served on the contracts of service by both sides for good cause. If a Member of the Management Board is temporarily incapacitated and unable to work, the basic salary will be paid in the case of Dr. Müller for a period of up to 12 months and in the case of Mr. Riedl up to six months. If death occurs during the period of the employment relationship, the heirs of the relevant Board Member have the right to continued payment.
If there is a "change of control", the Board Member Dr.-Ing. Herbert Müller had the right within the space of 12 months to serve notice on his contract of service to the end of the month specified following the month of his submitting the notice of termination. He was entitled to payment of the outstanding fixed annual remuneration for the remaining term of the contract as a lump sum and an amount in the sum of € 500,000 for each year of the contract term commenced for which a bonus has not yet been paid. In accordance with subsection 4.2.3 of the German Corporate Governance Code, the obligation to make payments arising from the premature termination of the position as Member of the Management Board should not exceed 150 % of the cap for severance pay. With the premature termination of the service contract, the change of control clause was repealed. There is no change of control clause for the Board Member Andreas Riedl.
pensation will continue to be paid. In each d compensation is paid, but a minimum of € 18,000.00. If the dividend exceeds 90 eurocents per share, the compensation per eurocent shall only be € 200.00 for the part of the dividend which exceeds 90 eurocents. The compensation increases by a factor of two times for the Chairman of the Supervisory Board and by one and a half times for each deputy chairman. The members of the Audit Committee also receive a further remuneration amounting to a total of up to € 40,000.00 annually. The Supervisory Board decides on the amount and allocation of this further remuneration based on the proposal by the Audit Committee, at their discretion taking into account the time taken by each of the members of the Audit Committee to carry out their functions.
The compensation for Members of the Supervisory Board is regulated in § 12 of the Articles of Association. Accordingly, the Members of the Supervisory Board receive, apart from reimbursement of their expenses, compensation payable after the business year has come to an end and after the resolution on the appropriation of the profit has been passed by the Annual General Meeting. The compensation is € 400.00 per eurocent dividend per share for the year for which
A Directors' & Officers' liability insurance for purely financial losses ("D&O" insur-ance) is provided for Members of the Supervisory Board. The excess (deductible) amounts to € 50,000 for each insurance claim and year.
Members of the Supervisory Board receive no other amounts in remuneration above the compensation presented above or any other benefits for personally provided services, in particular for consultancy or mediation services.
During the period under review, no advances or loans were granted to Members of the Supervisory Board of SURTECO GROUP SE.
| Name, place | Voting rights in % |
|---|---|
| Klöpfer & Königer Verwaltungs-GmbH, Garching, Deutschland |
15.00 |
| ECCM Bank plc, Malta | 12.28 |
The subscribed capital (capital stock) of SURTECO GROUP SE is € 15,505,731.00 and is fully paid up. it is divided into 15,505,731 nopar-value bearer shares (ordinary shares) corresponding to a proportion of the capital stock of € 1.00 in each case. Each share guarantees one vote at the Annual General Meeting of the company. Apart from the statutory restrictions in certain cases, there are no restrictions on the voting right. There are no different categories of voting rights.
The Management Board is authorized to increase the capital stock of the company once or in partial amounts by up to € 1,500,000.00 overall with the consent of the Supervisory Board through the issue of no-par-value bearer shares, for a cash consideration (Authorized Capital i) and once or in partial amounts by up to € 6,200,000.00 overall through the issue of no-par-value bearer shares, for a cash consideration or non-cash contributions (Authorized Capital ii). Further information on capital stock is provided in the notes to the consolidated financial statements (item 28) or in the notes of SURTECO GROUP SE (item 6).
The Management Board is aware that shareholders of SURTECO GROUP SE have joined together to form an association under civil law entitled "Share pool SURTECO SE". The objective of this pool is to jointly exercise the voting rights of 5,406,475 no-par-value shares in SURTECO GROUP SE (status 31 December 2018). Dispositions over shares in SURTECO
GROUP SE in the share pool are only permissible in accordance with the conditions of the pool agreement or with the consent of the other pool members.
The following shareholders have notified us of a direct or indirect participation in our company that is greater than 10 % of the voting
rights:
The appointment and dismissal of Members of the Management Board is carried out pursuant to §§ 84 ff. Stock Corporation Act (AktG). Changes to the Articles of Association are made in accordance with the regulations of §§ 179 ff. Stock Corporation Act (AktG).
The Non-financial Group Report for the business year 2018 pursuant to § 315b German Commercial Code (HGB) is published on the Internet portal age of the company at www.surteco-group.com.
The Declaration on Corporate Management pursuant to § 289f German Commercial Code (HGB) in the form of the Corporate Governance Report including details on defining the promotion of women in management positions in accordance with § 76 (4) and § 111 (5) Stock Corporation Act, the description of the diversity concept in relation to the composition of the body authorized to represent the company and the Supervisory Board, the Declaration of Compliance with justification and archive, the information on the practices of company management, the composition and working methods of the Management Board and the Supervisory Board including its committees, the Articles of Association (statutes), and the auditor for 2018, can be accessed on the home page of the company by going to www.surteco-group.com and clicking on the menu item "Corporate Governance".
The Management Board and Supervisory Board of SURTECO GROUP SE will recommend that the Annual General Meeting of the company to be held on 27 June 2019 in Munich adopt a resolution that the net profit of SURTECO GROUP SE amounting to € 8,528,152.05 should be distributed as follows: payment of a dividend per share amounting to € 0.55 (2017: € 0.80). This corresponds to a total amount distributed as dividend of € 8,528,152.05 for 15,505,731 shares.
After six years with partially significant successive price gains, the increasing economic uncertainties in the reporting year gave rise to painful price losses for the majority of German shares. Key factors for this were the increasingly aggravated trade dispute between the USA and China at the year-end, uncertainties in relation to Brexit, and political dissonances coming from important EU countries like Italy. This meant that economically sensitive and export-dependent stock companies especially had posted some very substantial losses in the year 2018 and the German DAX lead index collapsed by nearly 18 % to just over 10,500 points. Development in the MDAX showed a
similarly bleak performance. This was despite the fact that both indexes had remained comparatively stable during the first half of the year. In the middle of June, the SDAX index of small stocks had even managed to post a positive. However, by the end of the year investors here had to absorb painful losses of 20 %. The European EuroStoxx50 lead index scarcely fared better with a plunge of 14 %. The positive economic sentiment prevailing in the USA for most of the year ensured that the indexes there held up significantly better with the Dow Jones sustaining a drop of just under 6 % and the Nasdaq undergoing virtually stable development.
| Cost of materials in % | Cost of materials/Total output |
|---|---|
| Debt-service coverage ratio in % | (Consolidated net profit + Depreciation and amortization)/Net debt |
| Dividend yield at year end in % | Dividend per share/Year-end share price |
| Earnings per share in € | Consolidated net profit/ Weighted average of the issued shares |
| EBIT margin in % | EBIT/Sales revenues |
| EBITDA margin in % | EBITDA/Sales revenues |
| Equity ratio in % | Equity/Total equity (= balance sheet total) |
| Free cash flow in € | Cash flow from current business operations – (Acquisition of property, plant and equipment + Acquisition of intangible assets + Acquisition of companies + Proceeds from disposal of property, plant and equipment + Dividends received) |
| Interest cover factor | EBITDA/(Interest income – Interest expenses) |
| Level of debt in % | Net debt/Equity |
| Market capitalization in € | Number of shares x Closing price on the balance sheet date |
| Net debt in € | Short-term financial liabilities and Long-term financial liabilities – Cash and cash equivalents |
| Personal expense ratio in % | Personnel expenses/Total output |
| Return on equity in % | Consolidated net profit/(Equity – non-controlling interests – Appropriation of profit) |
| Return on sales % | (Consolidated net profit + Income tax)/Sales revenues |
| Total return on total equity in % | (Consolidated net profit + Income tax + Interest expense)/Total equity (= Balance sheet total) |
| Value added in € | (Sales revenues + Other income) – (Cost of materials + Depreciation and amortization + Other expenses) |
| Value added ratio (net) in % | Value added (net)/Corporate performance |
| Working capital in € | (Trade accounts receivables + Inventories) – Trade accounts liabilities |
Shares in SURTECO GROUP SE were negatively impacted during the course of the year by economic uncertainties and by the weak stock-market environment. After a positive start to the year under review, when the share price climbed from € 26.90 at the end of 2017 to more than € 28 and achieved a high for the year at € 28.55 on 19 January, the first round of profit-taking took place in view of the increasingly restrained expectations in the capital market. From February to the end of June, the share price underwent relatively stable development in a corridor between € 24.15 and € 27.60 and ended the first half of the year at € 25.15. The restrained customer demand necessitated adjustments to sales and earnings forecasts on 10 August and on 26 October, leading to significant drops in share price down to below the € 20 threshold. The low for the year was reached on 30 October at € 19.56. The entrance of two large investors in the fourth quarter resulted in stabilization of the price while speculation through further purchases of investor groups generated a rise in price to more than € 22. SURTECO GROUP SE ended the stock-market year on 28 December with a closing price of € 22.30, as a result of which the share posted a negative performance of 17 % over the entire year or, taking the dividend into account, a fall of just under 14 %. Since the speculation concerning intensified engagement by the new major investor was maintained into the beginning of the new year, the SURTECO price underwent a significant increase to around € 25 by the editorial closing date of the annual report at the end of March.
* (Proposal by the Management Board and the Supervisory Board)
Market capitalization of SURTECO GROUP SE shadowed the share-price development and decreased significantly from € 417 million at year-end 2017 to around € 346 million on 31 December 2018. While the number of shares remained stable at 15,505,731 no-par-value shares in a year-on-year comparison, the new commitment of two large shareholders led to a decline in the proportion of shares held in free float from 44.5 % to 26.5 %. Whereas 55.5 % of the shares remain in the hands of the founding shareholders of SURTECO GROUP SE, ECCM Bank plc held 12.3 % by the end of the reporting year and the Rudolf Ostermann Foundation held 5.7%.
Payout ratio of 46 %
The SURTECO shareholders should continue to be able to participate appropriately in the success of the company. Following the operating development in 2018, the Management Board and the Supervisory Board will propose a dividend payout of € 0.55 per share to the shareholders at the Annual General Meeting to be held in Munich on 27 June 2019. That will mean the company will pay out around 46 % of the consolidated net profit. On the basis of the proposed dividend, this represents a dividend yield of 2.5 % based on the year-end closing price for the year 2018.
In 2018, the Management Board of SURTECO GROUP SE once again sought to engage in a close dialogue in an atmosphere of trust with institutional and private investors by participating in roadshows and capital market conferences, and conducting numerous individual conversations. During the course of the reporting year, SURTECO was regularly analysed and evaluated by the equity research analysts of Berenberg Bank, Hauck & Aufhäuser, Pareto Securities and Sphene
Capital. Alongside exchange through the Investor Relations Department on a daily basis, an important highpoint of communication with private investors was undoubtedly the Annual General Meeting held on 28 June 2018. Furthermore, the company continues to maintain regular communication with the financial media, which is documented in numerous interviews and press roadshows, along with resulting articles.
All information on the company can be found on the Internet pages of SURTECO GROUP SE (www.surteco-group.com). Furthermore, the Investor Relations Department can be contracted directly at any time and will be pleased to address any questions and ideas you may have on matters you wish to discuss:
Investor Relations and Press Office Johan-Viktor-Bausch-Str. 2 86647 Buttenwiesen
Phone: +49 82 74/99 88-508 Fax: +49 82 74/99 88-515 Email: [email protected]
| € | 2017 | 2018 |
|---|---|---|
| Earnings (by weighted average of shares issued) | 1.69 | 1.20 |
| Dividend | 0.80 | (Proposal by the 0.55 Management Board and Supervisory Board) |
| Dividend yield at year-end in % | 3.0 | 2.5 |
| € | 2017 | 2018 |
|---|---|---|
| Number of shares at 31 December | 15,505,731 | 15,505,731 |
| Price at start of year | 24.22 | 26.40 |
| Year-end price | 26.90 | 22.30 |
| Price per share (high) | 27.65 | 28.55 |
| Price per share (low) | 22.40 | 19.56 |
| Stock-market turnover in shares per month | 264,503 | 426,214 |
| Market capitalization at year-end in € million | 417.1 | 345.8 |
| Free float in % | 44.5 | 26.5 |
| € million | 2017 | 2018 |
|---|---|---|
| Sales | 689.7 | 699.0 |
| EBITDA | 83.1 | 72.8 |
| EBIT | 44.7 | 32.2 |
| EBT | 33.5 | 27.1 |
| Consolidated net profit | 26.2 | 18.6 |
| Type of security | No-par-value share |
|---|---|
| Market segment | Official market, Prime Standard |
| WKN | 517690 |
| ISIN | DE0005176903 |
| Ticker symbol | SUR |
| Reuters' ticker symbol | SURG.D |
| Bloomberg´s ticker symbol | SUR |
| Date of first listing | 2/11/1999 |
| for | the business year 2018 |
|
|---|---|---|
| 57 58 64 65 65 67 68 82 88 114 120 121 |
I. III. V. VI. VII. VIII. IX. X. XI. |
Accounting Principles Consolidated Companies Consolidation Principles Currency Translation Accounting and Valuation Principles Notes to the Income Statement Notes to the Balance Sheet Supplementary Information Executive Officers of the Company |
| 122 | SURTECO Shareholdings | |
| 124 | Auditor's Report | |
| 129 | Responsibility Statement |
II. Accounting Principles in accordance with the International Financial Reporting Standards IV. Use of § 264 (3) German Commercial Code (HGB) VII. Accounting and Valuation Principles VIII. Notes to the Income Statement XI. Executive Officers of the Company XII. Declaration of Compliance with the German
Corporate Governance Code pursuant to § 161
sentence 1 Stock Corporation Act (AktG)
| € 000s | 1/1/-31/12/ 2017 |
1/1/-31/12/ 2018 |
||
|---|---|---|---|---|
| Net income | 26,327 | 18,929 | ||
| Components of other comprehensive income not to be reclassified to the income statement |
||||
| Remeasurements of defined benefit obligations | -100 | -168 | ||
| of which included deferred tax | 38 | -57 * | ||
| Other changes | 116 | 0 | ||
| 54 | -225 | |||
| Components of other comprehensive income that may be reclassified to the income statement |
||||
| Net gains/losses from hedging of net investment | ||||
| in a foreign operation | -475 | -712 | ||
| of which included deferred tax | 142 | 214 | ||
| Exchange differences translation of foreign operations | -7,872 | -408 | ||
| Financial instruments available-for-sale | ||||
| Fair valuation of cash flow hedges | -42 | 0 | ||
| of which including deferred tax | 12 | 0 | ||
| Reclassification amounts in the income statement | -79 | 0 | ||
| of which included deferred tax | 23 | 0 | ||
| -8,291 | -906 | |||
| Other comprehensive | -8,237 | -1,131 | ||
| Comprehensive income | 18,090 | 17,798 | ||
| Owners of the parent (consolidated net profit) | 18,012 | 17,499 | ||
| Non-controlling interests | 78 | 299 |
| € 000s | Notes | 1/1/-31/12/ 2017 |
1/1/-31/12/ 2018 |
|---|---|---|---|
| Sales revenues | (1) | 689,651 | 698,977 |
| Changes in inventories | (2) | -1,882 | 2,347 |
| Other own work capitalized | (3) | 5,130 | 5,162 |
| Total output | 692,899 | 706,486 | |
| Cost of materials | (4) | -335,034 | -349,622 |
| Personnel expenses | (5) | -174,513 | -185,347 |
| Other operating expenses | (6) | -104,776 | -103,506 |
| Income/Expenses due to impairments under IFRS 9 | (7) | 0 | 508 |
| Other operating income | (8) | 4,517 | 4,260 |
| EBITDA | 83,093 | 72,779 | |
| Depreciation and amortization | (18) | -38,423 | -40,577 |
| EBIT | 44,670 | 32,202 | |
| Interest income | 646 | 1,432 | |
| Interest expenses | -8,357 | -7,490 | |
| Other financial expenses and income | -3,857 | 1,019 | |
| Income/Expenses due to impairments under IFRS 9 | 0 | -570 | |
| Share of profit of investments accounted for using the equity method | 413 | 540 | |
| Financial result | (9) | -11,155 | -5,069 |
| EBT | 33,515 | 27,133 | |
| Income tax | (10) | -7,188 | -8,204 |
| Net income | 26,327 | 18,929 | |
| Of which: | |||
| Owners of the parent (consolidated net profit) | 26,192 | 18,630 | |
| Non-controlling interests | 135 | 299 | |
| Basic and diluted earnings per share (€) | (11) | 1.69 | 1.20 |
| Number of shares at 31 December | 15,505,731 | 15,505,731 |
* The reduction in the weighted domestic tax rate caused by restructuring in the current financial year leads to a devaluation of the deferred tax assets formed in previous years on the remeasurement of the defined benefit obligation, so that a total of deferred tax expense is reported.
| € 000s | Notes | 31/12/2017 | 31/12/2018 |
|---|---|---|---|
| ASSETS | |||
| Cash and cash equivalents | (12) | 133,373 | 120,954 |
| Trade accounts receivable | (13) | 57,826 | 57,519 |
| Receivables from affiliated enterprises | 731 | 676 | |
| Inventories | (14) | 119,732 | 126,969 |
| Current income tax assets | (15) | 1,377 | 5,442 |
| Other current non-financial assets | (16) | 9,457 | 7,690 |
| Other current financial assets | (16) | 3,666 | 7,378 |
| Assets held for sale | (17) | 0 | 17,124 |
| Current assets | 326,162 | 343,752 | |
| Property, plant and equipment | (19) | 258,208 | 255,751 |
| Intangible assets | (20) | 66,676 | 59,329 |
| Goodwill | (21) | 163,303 | 162,864 |
| Investments accounted for using the equity method | (22) | 1,988 | 2,378 |
| Financial assets | (22) | 830 | 30 |
| Other non-current non-financial assets | 69 | 54 | |
| Other non-current financial assets | 6,333 | 2,098 | |
| Deferred taxes | (10) | 19,027 | 18,285 |
| Non-current assets | 516,434 | 500,789 | |
| 842,596 | 844,541 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | |||
| Short-term financial liabilities | (26) | 5,656 | 65,905 |
| Trade accounts payable | 63,174 | 65,078 | |
| Contract assets under IFRS 15 | 0 | 165 | |
| Liabilities from affiliated enterprises | 3 | 0 | |
| Income tax liabilities | (23) | 3,154 | 3,096 |
| Short-term provisions | (24) | 3,966 | 11,598 |
| Other current non-financial liabilities | (25) | 4,241 | 2,468 |
| Other current financial liabilities | (25) | 26,234 | 29,578 |
| Current liabilities | 106,428 | 177,888 | |
| Long-term financial liabilities | (26) | 317,662 | 252,584 |
| Pensions and other personnel-related obligations | (27) | 12,814 | 12,828 |
| Long term provisions | 0 | 5 | |
| Other non-current non-financial liabilities | 41 | 18 | |
| Other non-current financial liabilities | 4,372 | 0 | |
| Deferred taxes | (10) | 52,043 | 48,013 |
| Non-current liabilities | 386,932 | 313,448 | |
| Capital stock | 15,506 | 15,506 | |
| Capital reserve | 122,755 | 122,755 | |
| Retained earnings | 181,861 | 193,093 | |
| Consolidated net profit | 26,192 | 18,630 | |
| Capital attributable to owners of the parent | 346,314 | 349,984 | |
| Non-controlling interests | 2,922 | 3,221 | |
| Equity | (28) | 349,236 | 353,205 |
| 842,596 | 844,541 |
| € 000s | Notes | 1/1/-31/12/ 2017 |
1/1/-31/12/ 2018 |
|---|---|---|---|
| Earnings before income tax | 33,515 | 27,133 | |
| Payments for income tax | -9,214 | -14,753 | |
| Reconciliation to cash flow from current business operations: | |||
| - Depreciation and amortization on property, plant and equipment | (18) | 38,423 | 40,577 |
| - Interest income and result for investments | (9) | 8,447 | 5,518 |
| - Gains/losses from the disposal of fixed assets | -58 | 3,027 | |
| - Change in long-term provisions | -216 | 19 | |
| - Other expenses/income with no effect on liquidity | -9,709 | -3,733 | |
| Internal financing | 61,188 | 57,788 | |
| Increase/decrease in | |||
| - Trade accounts receivable | (13) | -5,859 | 362 |
| - Other assets | 6,753 | 3,078 | |
| - Inventories | (14) | -136 | -7,237 |
| - Accrued expenses | 383 | 7,632 | |
| - Trade accounts payable | 14,289 | 1,901 | |
| - Other liabilities | 6,283 | -2,825 | |
| Change in assets and liabilities (net) | 21,713 | 2,911 | |
| CASH FLOW FROM CURRENT BUSINESS OPERATIONS | (33) | 82,901 | 60,699 |
| Acquisition of business | -82,829 | 0 | |
| -net of cash acquired | 8,699 | 0 | |
| Purchase of property, plant and equipment | (19) | -40,807 | -45,017 |
| Purchase of intangible assets | (20) | -1,900 | -2,520 |
| Proceeds/losses from the disposal of property, plant and equipment | 530 | -2,463 | |
| Dividends received from investments accounted for using the equity method | 415 | 540 | |
| Disposal of investments | 406 | 0 | |
| CASH FLOW FROM INVESTMENT ACTIVITIES | (33) | -115,486 | -49,460 |
| Dividend paid to shareholders | (28) | -12,405 | -12,405 |
| Proceed of long-term financial liabilities | (32) | 201,328 | 897 |
| Repayment of long-term financial liabilities | (32) | -1,920 | -1,919 |
| Changes in short-term financial liabilities | (32) | -72,076 | -3,806 |
| Interest received | (9) | 644 | 539 |
| Interest paid | (9) | -9,067 | -7,490 |
| CASH FLOW FROM FINANCIAL ACTIVITIES | (33) | 106,504 | -24,184 |
| Change in cash and cash equivalents | 73,919 | -12,945 | |
| Cash and cash equivalents | |||
| 1 January | 60,416 | 133,373 | |
| Effect of changes in exchange rate on cash and cash equivalents | -962 | 526 | |
| 31 December | (12) | 133,373 | 120,954 |
| € 000s | Capital stock |
Capital reserve |
Retained earnings | Consoli dated |
Noncon trolling |
Total | |||
|---|---|---|---|---|---|---|---|---|---|
| Fair value measure ment for financial instru ments |
Other compre hensive income |
Currency trans lation adjust ments |
Other retrained earnings |
net profit | interests | ||||
| 1 January 2017 | 15,506 122,755 | 86 | -1,977 | -620 183,947 | 23,867 | 2,988 346,552 | |||
| Net income | 0 | 0 | 0 | 0 | 0 | 0 | 26,192 | 135 | 26,327 |
| Other comprehensive income |
0 | 0 | -86 | 54 | -8,148 | 0 | 0 | -57 | -8,237 |
| Comprehensive income | 0 | 0 | -86 | 54 | -8,148 | 0 | 26,192 | 78 | 18,090 |
| Dividend payout SURTECO GROUP SE |
0 | 0 | 0 | 0 | 0 | -12,405 | 0 | 0 | -12,405 |
| Allocation to retained earnings |
0 | 0 | 0 | 0 | 0 | 23,867 -23,867 | 0 | 0 | |
| Changes in consolidated companies |
0 | 0 | 0 | 0 | 0 | 0 | 0 | -144 | -144 |
| Other changes | 0 | 0 | 0 | 0 | 0 | -2,857 | 0 | 0 | -2,857 |
| Changes in equity | 0 | 0 | 0 | 0 | 0 | 8,605 -23,867 | -144 -15,406 | ||
| 31 December 2017 | 15,506 122,755 | 0 | -1,923 | -8,768 192,552 | 26,192 | 2,922 349,236 | |||
| 1 January 2018 | 15,506 122,755 | 0 | -1,923 | -8,768 192,552 | 26,192 | 2,922 349,236 | |||
| Net income | 0 | 0 | 0 | 0 | 0 | 0 | 18,630 | 299 | 18,929 |
| Other comprehensive income |
0 | 0 | 0 | -225 | -906 | 0 | 0 | 0 | -1,131 |
| Comprehensive income | 0 | 0 | 0 | -225 | -906 | 0 | 18,630 | 299 | 17,798 |
| Dividend payout SURTECO GROUP SE |
0 | 0 | 0 | 0 | 0 | -12,405 | 0 | 0 | -12,405 |
| Allocation to retained earnings |
0 | 0 | 0 | 0 | 0 | 26,192 | -26,192 | 0 | 0 |
| Adjustments due to new accounting standards |
0 | 0 | 0 | 0 | 0 | -1,424 | 0 | 0 | -1,424 |
| Changes in equity | 0 | 0 | 0 | 0 | 0 | 12,363 -26,192 | 0 -13,829 | ||
| 31 December 2018 | 15,506 122,755 | 0 | -2,148 | -9,674 204,915 | 18,630 | 3,221 353,205 |
SURTECO Group SE is a company listed on the stock exchange under European law. The company is based in Buttenwiesen, Germany and is registered in the Company Register of the Local Augsburg Court (Amtsgericht Augsburg) under HRB 23000. The purpose of the companies consolidated in the SURTECO Group is the development, production and sale of coated surface materials based on paper and plastic.
The consolidated financial statements of SURTECO GROUP SE and its subsidiaries for the fiscal year 2018 have been prepared in accordance with the regulations of the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) applicable on the balance-sheet date, as they were adopted by the EU, taking into account the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the regulations to be applied in addition pursuant to § 315e (1) German Commercial Code (HGB). New standards adopted by the IASB will be applied after they have been adopted by the EU from the date on which they are first mandatory. Application and change to the valuation and accounting methods will be explained under the appropriate items in the Notes to the Consolidated Financial Statements as necessary.
Pursuant to § 315e German Commercial Code (HGB), the consolidated financial statements have been drawn up in accordance with Clause 4 of Directive (EU) No. 1606/2002 of the European Parliament and the Council dated 19 July 2002 relating to application of the International Accounting Standards (IFRS) promulgated by the International Accounting Standards Board (IASB) and were supplemented by specific information and the consolidated management report, and were adjusted in conjunction with § 315e.
The consolidated financial statements for have been drawn up in the reporting currency euros (€). Unless otherwise indicated, all amounts have been given in thousand euros (€ 000).
The reporting date of SURTECO GROUP SE and the consolidated subsidiaries is 31 December 2018.
The consolidated financial statements and the consolidated management report for 2018 will be published in the Federal Gazette (Bundesanzeiger).
Some items in the consolidated income statement and the consolidated balance sheet for the Group have been combined and stated separately in the Notes to the Consolidated Financial Statements. This is intended to improve the clarity and informative nature of presentation. The income statement has been drawn up in accordance with the cost of production method.
The auditors PricewaterhouseCoopers GmbH and other appointed auditing companies have essentially audited the financial statements or the sub-groups that form part of the consolidated financial statements.
The consolidated financial statements of SURTECO GROUP SE for the fiscal year 2018 were prepared on 18 April 2019 and forwarded to the Supervisory Board for auditing. The Supervisory Board has the function of auditing the consolidated financial statements and declaring whether it approves the consolidated financial statements. The Supervisory Board is to approve the consolidated financial statements at the meeting on 29 April 2019. The Management Board will then release the statements for publication.
With the exception of the changes presented below, the accounting and valuation methods correspond to the methods applied in the previous year.
During the business year revised standards and interpretations were applied for the first time. They give rise to no material effects on the net assets, financial position and results of operations.
Individual standards were changed in the course of the Annual Improvement Procedure (AIP 2014-2016).
The accounting standards IFRS 9 Financial instruments und IFRS 15 Revenue from contracts with customers published by the IASB are being adopted for the first time from 1 January 2018.
The SURTECO Group is applying the new regulations of IFRS 9 Financial instruments for the uniform classification and measurement of financial instruments retrospectively in the business year 2018 and is making use of the exemption regulation of not adjusting comparative information for previous periods. As consequence, only the opening balance was adjusted as at 1 January 2018.
In accordance with the new regulations of IFRS 9, the SURTECO Group classifies items in the new categories: at amortized costs, at fair value through other comprehensive income and at fair value through profit and loss. The debt instruments included in the SURTECO Group are classified at amortized costs. All equity instruments held at the transition date were classified at fair value through profit and loss. Conversely, the existing regulations for financial liabilities were largely taken over in IFRS 9, as a result of which there were no changes.
The following table shows the reconciliation of categories and book values of financial assets, and the effects on Group equity following first-time adoption:
| Standard/Interpretation | Application, obligation to apply for the business years on or from |
Adoption by the EU Commission |
Expected effects on SURTECO |
|
|---|---|---|---|---|
| IFRS 9 | Financial instruments | 01/01/2018 | yes | yes |
| IFRS 15 | Revenue from contracts with customers | 01/01/2018 | yes | yes |
| IAS 28 (A) Clarifications on investments in associates and joint ventures |
01/01/2018 | yes | none | |
| IFRS 2 (A) Classification and measurement of share-based payment |
01/01/2018 | yes | none | |
| IFRS 4 (A) Application of IFRS 9 with IFRS 4 insurance contracts |
01/01/2018 | yes | none | |
| IFRS 1 (A) First-time adoption of IFRS: removal of time-limited exemptions |
01/01/2018 | yes | none | |
| IAS 40 (A) Transfer of investment property | 01/01/2018 | yes | none | |
| IFRIC 22 | Foreign currency transactions and advance onsiderations |
01/01/2018 | yes | none |
| € 000s | Measurement categories | Book values 31/12/2017 and 1/1/2018 |
|||
|---|---|---|---|---|---|
| Category acc. to IAS 39 |
Category acc. to IFRS 9 |
Category acc. to IAS 39 |
Category acc. to IFRS 9 |
||
| Assets | |||||
| Cash and cash equivalents | LaR | AC | 133,373 | 133,373 | |
| Trade accounts receivable | LaR | AC/FVPL | 57,826 | 55,832 | |
| Receivables from affiliated companies | LaR | AC | 731 | 731 | |
| Other current financial assets | |||||
| - Further other current financial assets | LaR | AC | 3,666 | 3,666 | |
| Financial investments | |||||
| - Shares in affiliated companies | AfS | FVPL | 20 | 20 | |
| - Participations | AfS | FVPL | 10 | 10 | |
| - Loans to affiliated companies | LaR | AC | 800 | 800 | |
| Other non-current financial assets | |||||
| - Other loans | LaR | AC | 1,951 | 1,951 | |
| - Call option | FAaFV | FVPL | 4,300 | 4,300 | |
| - Further other non-current financial assets | LaR | AC | 83 | 83 | |
| Liabilities | |||||
| Short-term financial liabilities | |||||
| - Liabilities to banks | FLAC | AC | 3,643 | 3,643 | |
| - Financial liabilities from finance lease | n.a. | n.a. | 2,013 | 2,013 | |
| Long-term financial liabilities | |||||
| - Financial liabilities from finance lease | n.a. | n.a. | 12,980 | 12,980 | |
| - Liabilities to banks | FLAC | AC | 304,681 | 304,681 | |
| Trade accounts payable | FLAC | AC | 63,174 | 63,174 | |
| Other current financial liabilities | FLAC | AC | 26,235 | 26,235 | |
| Other non-current financial liabilities | |||||
| - Put option | FLaFV | FVPL | 4,300 | 4,300 | |
| - Other non-current financial liabilities | FLAC | AC | 71 | 71 |
The shares in affiliated companies amounted at € 000s 20 and the participations amounted at € 000s 10, which were classified as "Available for Sale (AfS)" on 31 December 2017, are not shown on 1 January 2018 due to immateriality. The shares in affiliated companies are shares in a non-consolidated company. There is no active market for this instrument and the fair value cannot be reliably determined. There are no plans to sell substantial shares in this company in the near future.
The financial assets defined as "Loans and Receivables (LaR)" were reclassified into the category "at amortized costs (AC)" on 1 January 2018, since their cash flows are exclusively payments of principal and interest.
Receivables that are assigned within the factoring programme are reclassified in the category "at fair value through profit and loss (FVPL)". These receivables are offered for sale and are attributed to the business model "Sales". There were no bookings in equity because the differences arising from the measurement at fair value and at amortized costs were not material.
The Nenplas call option, which is recognized under other financial assets (and other financial liabilities), is reclassified from the category FAaFV as at 1 January 2018 to the category FVPL. The value of the call option depends on various input parameters. We refer to section 32 for further explanations.
IFRS 9 introduces a new model for the measurement of allowances which is based on the expected credit defaults. In accordance with this model, allowances are recorded in respect of expected credit losses for financial assets which were classified at amortized costs or at fair value through other comprehensive income. At each reporting date, the expected credit losses will be updated based on the available information. The SURTECO Group recognizes the following types of financial assets:
The SURTECO Group has modified its impairment methodology in accordance with IFRS 9 for all categories of asset.
Cash and cash equivalents are also subject to the impairment regulations of IFRS 9. However, the identified impairment was not material.
Financial assets such as deposits are not subject to an impairment, because these are trustee assets and would not be included in the insolvency estate if there were an insolvency.
Historical experiences relating to credit defaults and current data in respect of overdues are used for the measurement of allowances on trade accounts receivable. In addition, future-based information is considered if this allows conclusions about a connection with expected credit defaults based on the historical data. The SURTECO Group used the simplified approach here as mandated.
The amount of allowances as at 31 December 2017 is reconciled as follows for the individual financial assets on the opening balance sheet amount of allowances as at 1 January 2018:
Deferred taxes of € 000s 570 were determined from the first-time effect of IFRS 9 of € 000s 1,994.
The lendings valued at amortized costs comprise loans that are issued to non-consolidated companies. The application of the general model for determining expected losses resulted in no allowances as at 1 January 2018. However, owing to changed conditions, the lendings were impaired in the amount of € 000s 1,140 as at 31 December 2018.
IFRS 9 also includes new regulations on the application of hedge accounting in order to provide an improved presentation of the risk management activities of a company, particularly in relation to the control of non-financial risks. The existing hedging relationships also continue to be formed as a hedging relationship in accordance with IFRS 9. Derivatives held for trading purposes and freestanding derivatives are valued at fair value. The SURTECO Group had already transferred profits and losses from effective cash flow hedges into the book values of non-financial underlying transactions on first-time recognition before IFRS 9. As at 1 January 2018, there were neither currency futures nor interest rate swaps.
The new standard IFRS 15 Revenue from contracts with customers brings together the large number of previous regulations and interpretations on sales recognition in a single standard. In agreement with the transitional provisions of IFRS 15, the SURTECO Group is applying retrospectively and in modified form the new regulations for sales revenues arising from customer contracts in the business year 2018. As a consequence, the previous periods were not adjusted.
IFRS 15 envisages a five-stage model which is to be applied to all contracts with customers. The sales are to be realized either over a period of time or on a specific date. In the SURTECO Group, sales are realized on a specific date, when the customer exert power of control over the goods or services. The SURTECO Group generates revenues from the sale of goods in plastic and paper sector.
In accordance with IFRS 15, any performance surpluses or obligations existing at contract level should be reported. These relate to assets and liabilities from customer contracts that depend on the relationship between the service provided by the company and the payment of the customer. In the business year 2018, qualitative and quantitative disclosures on contracts with customers were made, on material discretionary decisions and their changes that were made in the application of revenue regulations on these contracts, and on any assets that result from costs capitalized as assets for the attainment and fulfilment of a contract with a customer. Essentially, there were no effects due to the practices employed in business models (production and sales) by the subsidiary companies as a result of the introduction of IFRS 15.
| € 000s | Trade accounts receivable |
|---|---|
| Allowances as at 31 December 2017 | 4,426 |
| Retrospectively through the opening balance sheet adjusted for retained earnings | 1,994 |
| Allowances at opening balance sheet as at 1 January 2018 in accordance with IFRS 9 | 6,420 |
| Reconciliation statement | IAS 39 | IFRS 9 | Changes | |||
|---|---|---|---|---|---|---|
| € 000s | LaR | AfS | FAaFV | AC | FVPL | to equity |
| Amount as at 31/12/2017 | 198,430 | 30 | 4,300 | 0 | ||
| Reclassification of LaR in AC | -198,430 | 198,430 | 0 | |||
| Reclassification of AfS in FVPL | -30 | 30 | 0 | |||
| Reclassification of FAaFV | -4,300 | 4,300 | 0 | |||
| Amount as at 1/1/2018 | 0 | 0 | 0 | 198,430 | 4,330 | 0 |
When reporting rights of return, IFRS 15 resulted in an earlier point in time for recording them, as a result of which assets and liabilities arising from rights of return were recognized and consequently the other current assets and liabilities underwent a rise. However, this does not result in any material effect on earnings.
Furthermore, a different approach is adopted to reporting results in individual cases for repurchase agreements with customers, which lead to a shift in the date for sales recognition. Repurchase agreements are only seldom invoked. This means that there is no significant effect in reporting.
IFRS 15 envisages for separate presentation of contractual assets and liabilities. As soon as one of the parties has fulfilled their obligation, the contract is reported in the balance sheet as contractual assets or liabilities. If a customer pays a consideration or if the company has an unconditional claim to a specific consideration before transfer of the goods, the company must recognize the contract as a contractual liability, when the payment is made or falls due. A contractual liability represents the obligation of a company to transfer goods to a customer for which the company has received a consideration from the customer. In the SURTECO Group, such matters were identified in the amount of EUR 000s 231 and they were recognized as contractual assets on 1 January 2018.
The following new and revised standards and interpretations, which were not yet mandatory during the reporting period or had not yet been adopted by the European Union, are not being applied in advance.
Individual standards are changing within the framework of Annual Improvement Projects (AIP 2015- 2017). SURTECO GROUP SE is investigating the resulting effects on the consolidated financial statements.
The following accounting standard clarification published by the IASB does not yet have to be applied mandatorily and it has also not yet been applied by the SURTECO Group.
In January 2016, the IASB published IFRS 16 Leases. IFRS 16 abolishes the existing classification of leasing contracts on the lessee side in operating and finance leasing arrangements. IFRS 16 introduces a lessee accounting model, according to which the lessee is obliged to recognize assets (for the right of use) and leasing liabilities in case there are leasing contracts over a period of more than twelve months. In future, leasing arrangements that have so far not been reported have to be recognized in the balance sheet. The previous differentiation into rental leasing and finance leasing is therefore discontinued for lessees. Disclosure obligations are also more complex.
IFRS 16 applies to business years which start on or after 1 January 2019. The standard will not be adopted in advance. On 31 December 2018, there were payment obligations arising from non-cancellable rental leases amounting to € 9.1 million. These agreements meet the criteria of a leasing agreement in accordance with IFRS 16 and the SURTECO Group therefore has to report corresponding assets and liabilities as soon as IFRS 16 is applied, unless in individual cases the Group makes use of the exceptions for short-term leases or small tickets. Due to the new standard, operating expense are expected to be reduced by approximately € 2.4 million, while depreciations are projected to increase by about € 2.2 million and
| Standard/Interpretation | Application, obligation to apply for the business years on or from |
Adoption by the EU Commis sion |
Expected effects on SURTECO |
|
|---|---|---|---|---|
| IFRS 16 | Leasing | 1/1/2019 | yes | currently being analyzed |
| IFRS 9 (A) | Clarification of prepayment features with negative compensation payment |
1/1/2019 | yes | no |
| IAS 19 (A) | Clarification of plan amendments, curtailments and settlements |
1/1/2019 | yes | no |
| IFRS 3 (A) / IFRS 11 (A) |
Clarification of the measurement of shares in joint ventures |
1/1/2019 | yes | no |
| IAS 12 (A) | Clarification of income tax impacts of dividends | 1/1/2019 | yes | no |
| IAS 23 (A) | Clarification for taking account of borrowing costs | 1/1/2019 | yes | no |
| IAS 28 (A) | Long-term interest in conjunction with associated companies and joint ventures |
1/1/2019 | yes | none |
| IFRIC 23 | Tax risk positions from income tax | 1/1/2019 | yes currently being analyzed |
|
| Conceptual Framework (A) |
Changes to the conceptual framework | 1/1/2020* | no | currently being analyzed |
| IFRS 3 (A) | Clarification for definition of a business model in company mergers |
1/1/2020* | no | no |
| IAS 1 (A) & IAS 8 (A) Clarification for definition of material costs in the conceptual framework and in individual standards |
1/1/2020* | no | no | |
| IFRS 17 | Insurance contracts | 1/1/2021* | no | currently being analyzed |
| (A) Amended | ||||
| (R) Revised |
* Date of first-time application in accordance with IASB-IFRS (since these regulations have not yet been adopted in EU law)
interest expense by about € 000s 196. In the case of finance leases with the SURTECO Group as the lessee, assets and liabilities are already reported. In these cases and for leases where the Group acts as a lessor, no substantial impacts are expected on the consolidated financial statements.
SURTECO Group SE and all significant companies (including special-purpose entities), in which SURTECO GROUP SE has a controlling influence, are included in the consolidated financial statements as of 31 December 2018. Control exists if SURTECO GROUP SE has a right to receive variable returns based on the relationship with a company and possesses power of disposal over the company. The term "power" implies that SURTECO GROUP SE has existing rights enabling it to direct the relevant activities of the company and thus exert a significant influence on the variable returns. The ability to control another company generally derives from direct or indirect ownership of a majority of the voting rights. Within structured entities, control usually derives from contractual agreements. The financial statements of subsidiary companies are included in the consolidated financial statements from the point in time at which control exists until it is no longer possible to exercise such control.
Investments in associates in which the SURTECO Group exerts a significant influence (generally through a shareholding of 20 % to 50 %) and investments in joint ventures are valued according to the equity method.
As of the reporting date, two companies are not included in the consolidated financial statements (2017: two companies) as there were only minimal business activities in the course of the year under review and the influence of its aggregate value on the true and fair view of the net assets, financial positions and results of operations of the Group was not significant.
Alongside SURTECO GROUP SE, the following companies are included in the consolidated financial statements for the Group:
The companies included in the consolidated financial statements as of 31 December 2018 and disclosures on subsidiaries and participations held directly and indirectly by SURTECO GROUP SE are included in the list under "SURTECO Holdings". The annual financial statements and the management report of SURTECO GROUP SE for the business year 2018 are submitted to the Federal Gazette (Bundesanzeiger) and published there.
| 31/12/2017 | due to IFRS standards |
Changes Additions | Disposals Restructuring in the Group |
Sales / Liquidation |
31/12/2018 | |
|---|---|---|---|---|---|---|
| Consolidated subsidiaries | ||||||
| - of which in Germany * | 11 | 0 | 1 | -3 | 0 | 9 |
| - of which abroad | 30 | 0 | 0 | 0 | -2 | 28 |
| Subsidiaries reported at acquisition costs | ||||||
| - of which in Germany | 0 | 0 | 0 | 0 | 0 | 0 |
| - of which abroad | 2 | 0 | 0 | 0 | 0 | 2 |
| Companies accounted for using the equity method | ||||||
| - of which in Germany | 0 | 0 | 0 | 0 | 0 | 0 |
| - of which abroad | 1 | 0 | 0 | 0 | 0 | 1 |
| 44 | 0 | 1 | -3 | -2 | 40 |
* of which 2 special-purpose entities
The exemption clauses pursuant to § 264 (3) German Commercial Code (HGB) were applied for the following subsidiary companies included in the consolidated financial statements in order to provide them exemption from the requirement to draw up their respective management report and notes, and to audit and to disclose their annual financial statements:
The financial statements included in the consolidation process have been prepared on the basis of the accounting and valuation principles uniformly applicable – which have remained fundamentally unchanged by comparison with to the previous year – to the SURTECO Group.
The consolidated financial statements have been prepared on the basis of historic acquisition and production cost, with the exception of measuring derivative financial instruments and financial assets available for sale at their fair value or market value.
The reporting date of the consolidated financial statements coincides with the reporting date of the individual companies included in the consolidated financial statements (31 December 2018).
The accounting of business combinations is carried out by the acquisition method. The purchase costs of the acquisition correspond to the fair value of the assets provided, the equity instruments issued, and the liabilities incurred or taken over on the date of exchange. Assets, liabilities and contingent liabilities identified within the course of a first-time business combination were measured at their acquisition-date fair values. For each business acquisition, the Group decides on an individual basis whether the non-controlling shares in the acquired company should be recognized at their respective fair value or on the basis of their proportion in the net assets of the acquired company. Costs relating to the acquisition are charged to expenses at the time they occur.
| Name | Registered office |
|---|---|
| SURTECO GmbH | Buttenwiesen |
| SURTECO art GmbH | Willich |
| Dakor Melamin Imprägnierungen GmbH | Heroldstatt |
| Kröning GmbH | Hüllhorst |
| Döllken Profiles GmbH | Nohra |
| SURTECO Beteiligungen GmbH | Buttenwiesen |
Deferred income tax arising from consolidation measures recognized in the income statement has been accrued.
Intercompany trade accounts are accounted based on market prices and accounting prices that are determined according to the principle of "dealing at arm's length".
Transactions with non-controlling interests without loss of control are accounted for as transactions with the owners of the Group who act in their capacity as owners. A difference between the fair value of the consideration paid and the acquired share in the carrying value of the net assets of the subsidiary company arising from the purchase of a non-controlling interest is recognized in equity. Gains and losses which arise on the disposal in respect of non-controlling interests are also recorded in equity.
Business transactions in foreign currency are reported at the exchange rate on the date of first-time reporting. Exchange gains and losses arising from the valuation of receivables or liabilities up to the reporting date are reported at the rate on the reporting date. Gains and losses arising from changes in rates are reported with effect on earnings in the financial result (from non-operating matters) or in other operating income or other operating expenses (from operating matters).
The earnings and the balance sheet items of the foreign subsidiary companies included in the consolidated financial statements which have a different functional currency to the euro are converted into euros as follows. Assets and liabilities, as well as contingent obligations and other financial obligations, are therefore translated at the rate prevailing on the reporting date, whereas equity capital is translated at historic rates. Expenses and income and hence also the profit/loss for the year recognized in the income statement are translated at the average rate for the year. Differences arising from currency translation for assets and debts compared with translation in the previous year and translation differences between the income statement and the balance sheet are reported with no effect on income under shareholders' equity in retained earnings (currency differences). Since all consolidated companies operate their financial, business and organizational transactions independently, the relevant national currency is the functional currency.
Translation was based on the following currency exchange rates:
Any remaining positive netting difference between the purchase price and the identified assets and liabilities is recognized as goodwill. Any remaining negative difference is recognized as profit or loss in the income statement.
Goodwill arising from the acquisition of a subsidiary company or business operation are recognized separately in the balance sheet.
The shares in equity capital of subsidiary companies not attributable to the parent company are recognized in the consolidated equity capital as "non-controlling interests". Currently existing non-controlling interests were measured on the basis of the proportionate net assets.
In accordance with IFRS 3 and in conjunction with IAS 36, goodwill arising from company acquisitions is not subject to scheduled amortization, but is subject to an annual impairment test if there are any indications of declines in value.
An associated company is a company over which the Group can exert a significant influence by influencing the finance and business policy but where the Group does not exercise control. A significant influence is assumed if the Group has a share of the voting rights amounting to 20 % or more. Investments in associated companies are measured using the equity method.
The SURTECO Group has an investment in one company under jointly managed agreements. In accordance with IFRS 11, there are two forms of joint agreement: depending on the arrangement of the contractual rights and obligations of the individual investments: joint operations and joint ventures.
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net assets of the arrangement. Joint ventures are accounted for in accordance with the equity method.
The SURTECO Group has only joint agreements in the form of joint ventures.
Investments in associated companies and joint venture companies are accounted for with their acquisition costs by using the equity method and they are increased or decreased by the proportionate changes in equity. If impairments exceeding the value of the individual participation occur, any available non-current assets being associated with the participation are written down. If the book value of the participation and these assets is reduced to zero, additional losses are accounted for in the appropriate scope and recognized as a liability in case the Group has entered into legal or de facto obligations to cover losses, or makes payments instead of the associated company or joint venture.
If a Group company carries out significant transactions with an associated company or joint venture, any resulting unrealized gains or losses are eliminated in accordance with the share of the Group in the associated company or joint venture.
Adjustments to uniform consolidated accounting and valuation methods are performed as necessary.
Receivables, liabilities and loans between the Group companies are netted.
Sales, expenses and income within the Group and intercompany profits arising from sales within the Group, which have not yet been disposed of to third parties, will be eliminated if they materially affect the presentation of the current net assets, the financial position and results of operations.
| Exchange rates in euros | Rate on the reporting date | Average rate | ||||
|---|---|---|---|---|---|---|
| 31/12/2017 31/12/2018 | 2017 | 2018 | ||||
| US dollar | USD | 0.8342 | 0.8733 | 0.8873 | 0.8472 | |
| Canadian dollar | CAD | 0.6655 | 0.6412 | 0.6833 | 0.6537 | |
| Australian dollar | AUD | 0.6523 | 0.6164 | 0.6796 | 0.6331 | |
| Singapore dollar | SGD | 0.6244 | 0.6414 | 0.6422 | 0.6279 | |
| Swedish krone | SEK | 0.1017 | 0.0975 | 0.1038 | 0.0975 | |
| Sterling GBP | GBP | 1.1270 | 1.1151 | 1.1417 | 1.1303 | |
| Turkish lira | TRY | 0.2205 | 0.1651 | 0.2434 | 0.1795 | |
| Polish zloty | PLN | 0.2395 | 0.2327 | 0.2349 | 0.2347 | |
| Russian rouble | RUB | 0.0144 | 0.0125 | 0.0152 | 0.0135 | |
| Czech koruna | CZK | 0.0391 | 0.0389 | 0.0380 | 0.0390 | |
| Mexican peso | MXN | 0.0423 | 0.0444 | 0.0470 | 0.0440 | |
| Brazilian real | BRL | 0.2514 | 0.2251 | 0.2747 | 0.2319 |
The consolidated financial statements were drawn up in accordance with uniform accounting and valuation principles for similar business transactions and other events in similar circumstances.
The accounting and valuation principles have been complied with, unless defined otherwise below, by comparison with the previous year.
Assets and liabilities are recognized as non-current in the balance sheet if their residual term is more than one year or realization is expected within the normal business cycle. Liabilities are generally recognized as current if there is no unrestricted right to fulfil the obligation within the period of the next year. Shorter residual terms are recognized as current assets or liabilities. Pension provisions and other personnel-related obligations, and claims or obligations arising from deferred taxes are reported as non-current assets or liabilities.
IFRS 15 establishes the principles that an entity shall apply to report useful information about the nature, amount, timing and uncertainty of revenue and cash flows arising from a contract with a customer. The core principle is that a company shall recognize revenues to depict the transfer of promised goods and services in an amount that reflects the consideration.
Revenues should be recorded when a performance obligation is satisfied by the transfer of a promised good or promised service to a customer. An asset is deemed to have been transferred if the customer is able to exert power of disposal over the asset.
Revenues should be recognized if it is likely that the economic benefit will accrue to the Group and the amount of the income can be reliably determined. Income is valued at the fair value of the reciprocal product or service received.
Sales originating from the sale of goods have been recorded if the following conditions are fulfilled:
All revenues are realised on a specific date in the SURTECO Group.
Sales are only defined as the product sales resulting from the ordinary activities of the company. Sales revenues are recorded without value added tax and after sales reductions, such as bonuses, discounts or rebates. Provisions for customer price reductions and rebates, as well as returns, other allowances, and warranties are recognized in the same period in which the sales were reported.
Volume discounts partly acting retrospectively are agreed for the sale of products. These are based on the total sales of a 12-month period. The revenues from these sales are reported in the amount of the price defined in the contract, less the estimated volume discount. The estimate for the provision is based on experience values. Sales revenues are only reported in the scope in which it is probable that a significant cancellation of the sales is not necessary, insofar as the associated uncertainty no longer exists.
A receivable is recognized when the goods are dispatched because at this point the claim to a consideration is unconditional, i.e. the due date is defined automatically from this point in time.
Dividend income arising from financial assets available for sale is recognized if the legal right to payment of SURTECO as a shareholder has arisen.
Operating expenses are reported as expenses at the point in time at which they are incurred when the service is used, insofar as they fall within the reporting year.
Interest income and interest expenses are recorded pro rata. Income from financial assets is recorded when the legal right to payment has occurred.
EBITDA is earnings before financial result, income tax and depreciation and amortization.
EBIT is earnings before financial result and income tax.
EBT
EBT is earnings before tax.
The basic earnings per share are calculated by dividing the proportion of the share in the consolidated net profit attributable to the shareholders of SURTECO GROUP SE by the weighted average of the issued shares. Shares which have been newly issued or bought back during a period are recognized pro rata for the period in which they are in free float. There were no dilution effects during the reporting periods referred to..
In accordance with IFRS 13, the fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This applies independently of whether the price can be observed directly or has been estimated using a valuation method.
When applying valuation procedures for calculating the fair value, it is important to use as many (relevant) observable input factors as possible and as few non-observable input factors as possible.
A three-level fair value hierarchy is to be applied. The input factors used in the valuation procedures are classified as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities, where the entity drawing up the financial statements must have access to these active markets on the valuation date. Level 2 – Directly or indirectly observable input factors which cannot be classified under Level 1. Level 3 – Unobservable input factors.
The scope of IFRS 13 is far-reaching and encompasses non-financial assets and liabilities and equity instruments. IFRS 13 is always used if another IFRS prescribes or permits a valuation at fair value or information on the calculation of the fair value is requested.
In accordance with IAS 39, a financial instrument is a contract, which simultaneously leads to a financial asset for one entity and a financial liability or an equity capital instrument for another entity. Financial instruments comprise primary financial instruments such as trade accounts receivable or trade accounts payable, financial receivables, debts and other financial liabilities, as well as derivative financial instruments which are used to hedge risks arising from changes in currency exchange rates and interest rates.
First-time recognition and derecognition of financial instruments in the balance sheet is carried out on the date of fulfilment. When first-time recognition is carried out, the SURTECO Group measures a financial asset at the fair value plus the transaction costs incurred directly on the acquisition of this asset, insofar as the asset is subsequently not reported at fair value. In the case of such instruments, the transaction costs are recorded immediately in the income statement. The following exception applies to this regulation for trade accounts receivable that are first valued at their transaction price in accordance with IFRS 15. Derecognition of the receivables and other financial assets if the Group has transferred its contractual rights to cash flows from the financial assets and all opportunities and risks, which are associated with the property, were essentially transferred, or otherwise if the power of disposal over assets was transferred. If the prerequisites for derecognition of the receivables are not fulfilled, the assets are not derecognized.
Financial assets and liabilities are netted and recognized as a net amount in the balance sheet if there is a legal entitlement to this and it is intended to bring about a settlement on a net basis or release the associated liability and realize the asset simultaneously. The legal entitlement to offsetting must not depend on a future event and must be implementable in the course of normal business and in the case of a default, an insolvency or a bankruptcy.
The liabilities arising from primary financial instruments can either be recognized at the amortized costs or as "liabilities at fair value through profit and loss". SURTECO Group measures all financial liabilities at amortized costs. Financial obligations with fixed or determined payments, which are neither listed on a market arising from financial liabilities, nor derivative financial obligations, are recognized in the balance sheet under other liabilities in accordance with their remaining term. A financial liability is then derecognized when it is settled, i.e. the obligations defined in the contract have been fulfilled or have been cancelled or have expired.
The SURTECO Group is applying the new regulations in IFRS 9 for the classification and valuation of financial instruments retrospectively in the business year 2018.
IFRS 9 has introduced principle-based regulations for the classification of financial assets and distinguishes in these regulations between the following valuation criteria set out below.
The valuation of debt instruments depends on the business model of the SURTECO Group for managing the asset and the cash flows of the asset. The SURTECO Group classifies its debt instruments as follows:
• At amortized costs: Assets that are held to collect contractual cash flows, and for which payment flows are exclusively interest payments and settlement repayments, are measured at amortized costs. Interest income from these financial assets are recognized in financial income by applying the effective interest method. Profits or losses from derecognition are reported directly in other operating income or expenses. Impairments are recognized under impairment expenses
• At fair value through other comprehensive income: Assets that are held to collect contractual cash flows and for the disposal of financial assets, and for which the payment flows are exclusively interest and settlement payments. Changes to the book value are recognized in other comprehensive income, with the exception of impairment income/expenses, interest income and foreign-exchange losses/gains. Impairments do not lead to changes in the book value but are also recognized in other comprehensive income. When the financial asset is derecognized, the accumulated profit or loss from equity previously recognized in other comprehensive income is reclassified in the income statement and recognized in earnings from financial derivatives. Interest income is recognized in financial income using the effective interest method. Foreign-exchange gains/losses are shown as exchange-rate effects of the financial result in
• At fair value through profit and loss: Debt instruments that are neither measured at amortized costs or at fair value through other comprehensive income are measured at fair value through profit and loss. Gains and losses are offset under other profits/losses in the relevant period in
These regulations are to be applied to a financial asset in entirety, even if this includes an embedded derivative. The fair value option is not applied in the SURTECO Group.
In the SURTECO Group, financial instruments are classified in the following categories:
• At fair value through profit and loss for trade accounts receivable which have been assigned in
The SURTECO Group only reclassifies debt instruments if the business model used to manage such assets changes.
Equity instruments are generally measured at fair value through profit and loss. Adjustments to the fair value are reported in the income statement under the other financial expenses and income.
The SURTECO Group does not make use of the FV OCI option.
The Group uses derivative financial instruments, such as forward exchange contracts and interest/ currency swaps, in order to hedge risks associated with foreign currency and changes in interest rate which can occur in the course of ordinary business activities and with the scope of investment and financial transactions. Derivative financial instruments are used exclusively to hedge existing or held underlyings. These derivative financial instruments are recognized for the first time in the balance sheet at the fair value on the date at which the contract is closed. They are subsequently revalued at market value on the reporting date. Derivative financial instruments are recognized as assets if their fair value is positive and as liabilities if their fair value is negative.
At the beginning of the hedging transaction, the hedge between the underlying transaction and the hedging transaction and the risk management targets and Group strategy are formally defined and documented as risk management objectives and strategies in relation to hedging. The documentation includes the definition of the hedging instrument, the underlying transaction or the hedged transaction, as well as the type of hedged risk and a description of how the company calculates the effectiveness of the hedging instrument in the compensation of the risks arising from changes in the fair value or cash flow of the hedged underlying transaction.
For purposes of hedge accounting, hedging instruments are classified as follows:
In the SURTECO Group, cash flow hedges are used exclusively for hedging purposes. The effective part of the changes in fair value of derivatives is recorded in the provision for cash flow hedges as a component of equity. The profit or loss relating to the ineffective part is recorded directly through profit or loss under the other operating income or losses.
The accumulated amounts reported in equity are reclassified to the periods in which the hedged underlying transaction exerts effects on the profit or loss, as follows:
If a hedging instrument expires, is sold or terminated, or the hedging relationship no longer meets the criteria for the reporting of hedging relationships, any accumulated deferred hedging gains/losses and the deferred hedging costs remain in equity until the expected transaction occurs and then leads to recording of a non-financial asset. Deferred hedging costs are reclassified to profit or loss. If the transaction is no longer expected to occur, the accumulated hedging gains and losses and the deferred hedging costs are reallocated to profit or loss.
IFRS 9 requires expected losses to be reported. The scope of application includes all financial instruments which are reported at amortized costs and at fair value through other comprehensive income, and contractual and leasing assets. Here, a distinction is drawn between the general and simplified model used to determine impairments.
The level of impairment depends on the allocation of the financial instrument to one of the following levels:
ed loss corresponds to the amount which can arise from possible default events within the next 12 months after the reporting date. An expected loss is already recognized when the item is first reported. In the case of financial instruments whose credit risk has not increased significantly since first-time
Expected losses are a probability weighted estimate of losses. Default probabilities are determined for this which are multiplied by the nominal amount for the receivable.
The simplified approach is distinguished by the fact that there are no differences in the credit risk and the expected credit losses are always recorded from the first-time recognition. Instead, a risk provision in the amount of the total term ECL must be recorded on first-time recognition and on every subsequent reporting date. The simplified approach must be applied mandatorily for trade accounts receivable, for contractual assets and for leasing values.
The SURTECO Group only has trade accounts receivable. The expected credit losses are calculated using an provision matrix depending on the overdues of individual receivables. The underlying default rates were established on the basis of historical experience data and current expectations and are updated on each reporting date. In addition, future-oriented information (for example forecasts on economic performance
indicators) are taken into account if these imply a connection with expected credit defaults on the basis of the historical data. Depending on the diversity of the customer base, appropriate groupings (for example on the basis of geographical area, product type, etc.) can be used if previous experience with credit losses demonstrates outcome patterns with significant deviation between different customer segments. The customers of the SURTECO Group are allocated within a homogenous portfolio because no special characteristics were identified here, for example in relation to the customer's country of origin.
Receivables with significant overdues on account of the customer structure or receivables for which an insolvency or similar proceeding has been opened through their debtor continue to be checked individually for an impairment. If it is highly certain that no further incoming cash flow is to be expected, the instruments are impaired.
Cash and cash equivalents comprise liquid funds and sight deposits, as well as financial assets that can be converted into cash at any time and are only subject to minimal fluctuations in value. For the valuation category in accordance with IAS 9, the cash and cash equivalents are classified as "debt instruments at amortized costs (AC)".
Receivables and other financial assets, apart from derivative financial instruments and any receivable assigned under the factoring programme, are reported at amortized costs (AC). Allowances are carried out on a case-by-case basis in accordance with the expected default risks through an allowance account. Final derecognition is carried out if the receivable is not recoverable. Measurement of the requirement for individual allowance adjustments is based on the age structure of the receivable and the findings related to the customer-specific credit and default risk. Objective indications for an increased default risk are provided, for example, a pending insolvency, compulsory enforcement proceedings for the customer, one/several complaints and late payments by customers, an affidavit by the customer, composition proceedings or a lawsuit in connection with the customer. The payment targets for the customers are agreed individually with the customer. No predefined critical overdues are applicable in the SURTECO Group. Critical receivables are assessed on the basis of the objective evidence available. Trade accounts receivable with standard payment terms are recognized at amortized costs, reduced by bonuses, discounts and allowances. The Group sells trade accounts receivable under factoring agreements. These receivables are reported at fair value through profit and loss. The incoming payment from the sale of receivables is recognized under cash. Recognition of a short-term financial liability in the same amount is reported under short-term liabilities.
Inventories comprise raw materials, consumables and supplies, services in progress, purchased merchandise and work in progress and finished goods. They are valued at acquisition or production cost or at the lower net sale value. The net sale value corresponds to the estimated recoverable proceeds from disposal in normal business operations less the necessary variable sales expenses.
Raw materials, consumables and supplies are valued at cost prices or at the lower net sale value of the goods to be manufactured. Carrying values have been calculated by the weighted-average method. Downward valuation adjustments have been undertaken to reflect obsolescence and technically restricted application.
Finished products and work in progress have been recognized at production cost. These costs include costs directly attributable to the manufacturing process and a reasonable proportion of production-related overheads. These include production-related depreciation, proportionate administrative expenses, and proportionate social security costs. Inventory risks arising from the storage period or reduced usability have been taken into account by write-downs.
In the case of inventories, write-downs on the net sale proceeds are carried out, if the book values of the inventories are too high on the basis of the lower stock-market or market values.
Development costs for intangible assets produced within the company have been capitalized under income at directly attributable acquisition or production cost, if the following criteria are complied with:
• The technical feasibility of completing the intangible asset so that it will be available for use.
• The form and manner in which the intangible asset will generate probable future economic
• Adequate technical, financial and other resources are available in order to complete the develop-
• The expenditure attributable to the intangible asset during its development can be reliably measured.
Development costs which do not meet with these criteria are recorded as expenses in the period when they were generated. Development costs already recognized as expenses are not later capitalized as assets.
Property, plant and equipment have been recognized at acquisition or production cost, including incidental acquisition expenses, less accumulated scheduled depreciation and, if necessary, extraordinary depreciation.
Finance costs have not been capitalized under income as an element of acquisition or production costs because no manufacturing processes are involved over an extended period of time. Interest and other borrowing costs are recognized as expenses for the period.
The production costs of self-constructed plant include direct costs and an appropriate proportion of the overheads and depreciation.
If significant proportions of a non-current asset have varying useful lives, they are reported as separate non-current assets under "Property, plant and equipment" and are subject to scheduled depreciation (component accounting).
The costs for replacement of part of a fixed asset are included in the book value of the fixed asset (property, plant and equipment) at the date on which they were incurred, insofar as the criteria for recognition are fulfilled. When a major inspection is carried out, the costs are capitalized in the book value of the fixed asset as a replacement, insofar as the criteria for recognition are recognized. All other maintenance and repair costs are immediately recognized under income.
A fixed asset (property, plant and equipment) is either derecognized as a disposal if no economic benefit can be derived from further use or sale of the asset. The resulting gains or losses incurred from derecognition of the asset are calculated as the difference between the net sale proceeds and the book value of the asset and reported in the income statement for the period in which the asset is derecognized.
Leasing transactions are either classified as finance leasing or as operate leasing. Commercial ownership in lease items should be assigned to the lessee in accordance with IAS 17, if the lessee carries all major rewards and risks associated with the item (finance leasing). If commercial ownership should be assigned to the companies of the SURTECO Group, the lease item is capitalized as an asset in the amount of the fair value or the lower cash value of the future leasing rate at the point in time at which the contract was concluded and the reporting of the corresponding liabilities to the lessee as a debt. The liabilities from finance leases are recognized at the present value of the lease instalments on the basis of the interest rate used on the date when the leasing contract was concluded. Depreciation and repayment of the liability is effected according to schedule over the useful life or over the term of the lease, if this is shorter – corresponding to comparable items of property, plant and equipment acquired. The difference between the entire leasing obligation and the market value of the leased item corresponds to the finance costs that are distributed over the term and included in income, so that a uniform interest rate is applied to the remaining debt over the period. All other lease agreements, where SURTECO is the lessee, are treated as operate leasing, with the consequence that the leasing rates are reported to expenditure when they are paid. When amendments are made to finance leasing contracts, an adjustment of the present value and book value of the leasing liability is made with respect to the book value of the leasing object.
Intangible assets acquired for a consideration have been capitalized as assets at acquisition cost and amortized over their limited useful life using the straight-line method.
Scheduled depreciation of assets has been carried out exclusively by the straight-line method. The remaining useful lives and the method of depreciation are reviewed each year and adjusted to the actual circumstances. Depreciation is essentially based on the following commercial service lives applied across the Group:
The shares in unconsolidated companies recorded under financial assets are recognized at acquisition costs because fair values are not available and other valuation methods do not yield reliable results. Associated companies are recorded with their proportionate equity capital using the equity method. If there are indications that associated companies will be subject to impairments, an impairment test will be carried out on the book value of the affected participation.
On each reporting date, the Group checks the book values of intangible assets and property, plant and equipment to ascertain whether there might be grounds for carrying out an Impairment. If such grounds exist, or if an annual impairment test is necessary for an asset, the Group carries out an estimate of the recoverable value for the relevant asset. The recoverable value of an asset is the higher of the two values comprising the fair value of an asset less the sale costs and the value in use. The recoverable value should be determined for each individual asset, unless an asset does not generate cash flows which are largely independent of the cash flows of other assets or other groups of assets. In this case, the recoverable amount is determined for the cash generating unit to which the asset is allocated. If the book value of an asset exceeds its recoverable amount, the asset is impaired and is written down to its recoverable amount. In order to determine the value in use, the expected future cash flows are discounted to their present value based on a discounting rate before taxes, which reflects the current market expectations in relation to the interest effect and the specific risks of the asset. The fair value less the sales costs is calculated using a recognized valuation method. This method takes into account market data on current transactions available externally and valuations of third parties.
A test is carried out for assets, exept for goodwill, on every reporting date, to ascertain whether there are grounds indicating that a previously recorded impairment expense no longer exists or has been reduced. If such grounds exist, the Group estimates the recoverable amount. A previous recorded impairment expense is only reversed if a change in the estimates, which were used to determine the recoverable amount, has occurred since the last impairment expense was recorded. If this is the case the book value of the asset is increased to its recoverable amount. However, this amount must not exceed the book value which resulted after taking into account scheduled depreciation, if no impairment expense would have been recorded for the asset in previous years. An impairment reversal is recorded in the result for the period.
Goodwill resulting from company acquisitions is allocated to the identifiable cash generating units which are supposed to derive benefit from the synergies arising from the acquisition. Such cash generating units are the lowest reporting level in the Group at which the goodwill is monitored by the management for internal controlling purposes. The recoverable amount of a cash generating unit, which is allocated goodwill, is subjected to an annual impairment test. Reference is made to our comments under item 21 in the notes to the consolidated financial statements for further details.
The standard IFRS 3 (Business Combinations) and the standard IAS 36 (Impairment of assets) no longer permit goodwill to be subject to scheduled depreciation and amortization, rather a review of the value of these assets is carried out at regular intervals in an impairment test and if there is evidence of a potential reduction in value at other points in time.
If goodwill or intangible assets with unlimited useful life are to be allocated to the cash generating unit, the impairment test of those assets should be carried out annually or also, if events or changed circumstances result which could indicate a possible impairment, more frequently. The net asset values of the individual cash generating units are compared with their individual recoverable amount, i.e. the higher value from the net sale price and value in use. In the determination of the value in use, the present value of the future payments, which are anticipated on the basis of the ongoing use by the Strategic Business Unit, are used as the basis. The forecast of the payments is based on the current medium-term plans of SURTECO.
The cash generating units of the Group are identified in consultation with the internal reporting of the management taking into account regional allocations on the basis of strategic business units. The cash generating units of the SBU Plastics are the operating divisions under the reportable segment or in the case of the SBU Paper the reportable segment.
In the cases in which the book value of the cash generating unit is higher than their recoverable amount, the difference amounts to an impairment loss. The goodwill of the affected Strategic Business Unit is amortized in the amount of the allowance thus determined as affecting expenses in the first stage. Any remaining residual amount is distributed to the other assets of the relevant Strategic Business Unit proportionately to the book value. Any allowance carried out as necessary is recognized under other depreciation and amortization in the income statement. A subsequent write-up of the goodwill as a result of the reasons no longer being applicable is not permitted.
The actual income taxes paid or owed for the current and earlier periods are measured with the amount at the level of a rebate from the tax authorities or a payment to the tax authorities is expected. The calculation of the amount is based on the country-specific tax rates and tax regulations which are applicable on the reporting date.
| Years | |
|---|---|
| Intangible assets | 3-10 |
| Buildings | 40-50 |
| Improvements and fittings | 10-15 |
| Technical plant and machinery | 3-30 |
| Factory and office equipment | 6-13 |
The actual income tax liabilities related to the relevant tax year and any obligations arising from the previous years. The valuations are subject to the applicable statutory regulations taking into account current legal precedents and the prevailing professional opinion.
Deferred income tax is determined in accordance with IAS 12 on the basis of the liability method. According to this method, deferred taxes result from temporary differences between the carrying amount (value) of an asset or a liability in the balance sheet and the tax value.
Deferred tax assets are recorded for all deductible temporary differences, unused tax loss carry-forwards and unused tax credits to the extent it is probable that taxable earnings will be available against which the deductible temporary differences and the unused tax loss carry-forwards and tax credits can be used, with the exception of
• deductible temporary differences from first-time recognition of an asset or a liability arising from a transaction that is not a business combination and at the point in time of the transaction neither influences the result for the period in accordance with IFRS nor the taxable earnings.
Deferred tax liabilities are reported for all taxable temporary differences, with the exception of
The book value of the deferred tax assets is audited on each reporting date and as necessary reduced by the amount by which it is no longer likely that an adequate taxable result will be available against which the deferred tax assets can be at least partly applied. Unrecognized deferred taxes are audited on each reporting date and recognized in the amount at which it has become likely that a future taxable result will be available to realize the deferred tax assets. Deferred tax assets and liabilities are measured on the basis of the tax rates that are likely to be valid during the period in which an asset is realized or a debt liability is fulfilled. The tax rates (and tax laws), which are applicable or adopted on the reporting date, are used as the basis for calculation. Future changes in tax rates should be considered at the reporting date, insofar as material requirements for effectiveness are fulfilled pursuant to a legislative procedure.
Income and expenses arising from actual and deferred income taxes that relate to the items that are reported directly under equity or in other comprehensive income for the year are not reported in the income statement but are also recorded directly under equity or in other comprehensive income for the year. Deferred tax assets and deferred tax liabilities are offset, if the Group has an enforceable legal claim to netting the actual tax reimbursement claims against actual tax liabilities and these relate to income tax of the same tax subject and are levied by the same tax authority.
In accordance with IAS 1.56, deferred taxes are recognized as long term.
Current liabilities and non-financial liabilities have been recorded with their repayment or performance amount.
Contractual liabilities correspond to the obligation to transfer goods to a customer for which the SURTECO Group has already received a consideration.
Pension provisions and other personnel-related obligationsinclude obligations arising from regulations relating to company retirement provision, partial retirement and long-service awards.
Obligations arising from regulations relating to company pension provision relate to defined benefit plans which essentially cover benefit recipients employed in Germany. The arrangement depends on the legal, tax and economic relations pertaining and is generally based on the period of service and pay of the employee. The majority of pension obligations in Germany based on contractual conditions relate to life-time pension benefits, which are paid out in case of invalidity, death and attaining the age of retirement.
The pension institutions were closed in the past. New employees will be offered a company pension plan through an external welfare fund and pension scheme; they will not receive any direct commitments from the company.
Since no further obligations or risks are incurred by the company beyond the payment of the contributions, these were classified as defined contribution plans and are therefore not taken account in the determination of the provision.
The pension obligations of SURTECO are subject to various market risks. The risks essentially related to changes in market interest rates, inflation which exerts an effect on the level of pension adjustments, the longevity and on general market fluctuations.
Pensions are valued using the projected unit credit method in accordance with IAS 19. This method recognizes the pensions and projected unit credits acquired on the reporting date. It also takes account of the increases in pensions and salaries anticipated in the future with prudent estimation of the relevant parameters. The obligation is determined using actuarial methods taking into account biometric accounting assumptions. The expense of allocating pension accruals, including the interest portion contained therein, is recognized under personnel expenses. Remeasurements (actuarial gains or losses) arising from defined-benefit plans are recognized in equity (other comprehensive income for the year) with no effect on net income. The standardized income on the plan assets is generated in the amount of the discounting rate of the pension obligations at the start of the reporting period. These returns are recognized with netting of the expenses arising from the pension obligations on the basis of a standardized return. Differences between the expected income and the actual income are to be recognized with no effect on net income in equity (other comprehensive income for the year). Furthermore, the past service costs are to be recognized immediately at the point of arising with an effect on earnings.
Provisions for long-service bonuses are calculated on the basis of actuarial methods. The settlement backlogs and top-up amounts for partial retirement obligations were added pro rata for partial retirement obligations until the end of the active phase.
The obligations from defined-benefit plans principally exist in Germany and they are calculated taking the following actuarial assumptions into account:
The interest rate for the pension obligation is currently a uniform 1.87 % (2017: 1.79 %). Different interest rates were applied as necessary for similar other personnel-related obligations with shorter terms.
Provisions have been formed in accordance with IAS 37, if a legal or de facto obligation arises from a past event in respect of a third party, which is likely in the future to lead to an outflow of resources and where it can be reliably estimated. If a large number of similar obligations exist – as in the case of statutory warranty – the probability of a charge on assets is calculated on the basis of the group of these obligations. A provision is recognized under liabilities, if the probability of a charge on assets is lower in relation to an individual obligation held within this group. Provisions for warranty claims are formed on the basis of previous or estimated future claims. The provisions for legal disputes and other provisions have also been recorded in accordance with IAS 37 for all recognizable risks and uncertain obligations in the amount of their probable occurrence and not recognized with rights of recourse. A provision for restructuring measures is recognized as soon as the Group has approved a detailed and formal restructuring plan and the restructuring measures have either commenced or have been announced in the public domain. When a restructuring provision is measured, only the direct expenses for the restructuring are entered. This therefore only relates to amounts which have been caused by restructuring and are not related to the ongoing business operations of the Group.
Changes in equity without effect on income are also reported under the item Statement of changes in equity, if they are not based on capital transactions of the shareholders. This includes the difference arising from currency translation, accrued actuarial gains and losses arising from the valuation of pensions, and unrealized gains and losses arising from the fair valuation of financial assets available for sale and derivative financial instruments.
Contingent liabilities are possible obligations which result from events in the past, whereby their existence can only be confirmed through the occurrence or non-occurrence of one or more events in the future, which are not fully under the control of the SURTECO Group. Furthermore, contingent liabilities arise from current obligations which are based on past events, but which cannot yet be reported in the financial statements because the outflow of resources is not likely or the level of the obligations cannot be estimated with a sufficient level of reliability.
Presentation of the business segments is consistent with internal reporting to the main decisionmaker. The main decision-maker is responsible for decisions on the allocation of resources to the operating segments and for reviewing their earnings power. The Management Board of SURTECO was defined as the main decision-maker.
The preparation of consolidated financial statements in accordance with IFRS requires up to certain level decisions of judgement, estimates and assumptions of the management which exert effects on the recognition, measurement and reporting of assets, liabilities, income and expenses, and contingent assets and liabilities. The significant facts which are affected by such decisions of judgement and estimates relate to the definition of the period of use of fixed assets, the determination of discounted cash flows within the scope of purchase price allocations and impairment tests, accrual of cash generating units, the formation of provisions for restructuring, for legal proceedings, pension benefits for employees and corresponding deductions, taxes, inventory valuations, price reductions, product liability and warranties.
The assumptions and estimates are based on premises that rely on the knowledge available at the time. In particular, the expected future business development takes account of the circumstances prevailing at the time when the consolidated financial statements were prepared and realistic assumptions on the future development of the global and sector-specific environment. Any developments of these framework conditions deviating from these assumptions and outside the sphere of influence of the management may result in deviations of the actual amounts from the estimated values originally projected. If the actual development deviates from the projected development, the premises and, if necessary, the book values of the relevant assets and liabilities are adjusted appropriately. Further explanations are described under the appropriate items.
Reporting and valuation principles should be regarded as important if they significantly influence the presentation of the net assets, financial position, results of operations and cash flows of the SURTECO Group and require a difficult, subjective and complex assessment of facts and circumstances that are often uncertain in nature, may change in subsequent reporting periods, and whose consequences are therefore difficult to estimate. The published accounting principles, which have to be based on estimates, do not necessarily exert significant effects on reporting. There is only the possibility of significant effects. The most important accounting and valuation principles are described in the notes to the consolidated financial statements.
| 2017 | 2018 | |
|---|---|---|
| Interest rate | 1.79% | 1.87% |
| Salary increases | 2.0% | 2.0% |
| Pension increases | 2.0% | 2.0% |
| Fluctuation rate | 0.0% | 0.0% |
| Biometric data | Heubeck 2005G | Heubeck 2018G |
The sales revenues are comprised as follows:
Sales revenues of the product group edgebandings are allocated to the business segment plastics in the amount of € 000s 211,810 (2017: € 000s 190,866) and to the business segment paper in the amount of € 000s 46,725 (2017: € 000s 49,251). The product group foils are to be allocated to the business segments plastics in the amount of € 000s 26,414 (2017: € 000s 24,108) and paper in the amount of € 000s 109,428 (2017: € 000s 111,432). The sales revenues of the product group decorative printing and impregnates/release papers are attributable to the business segment paper. The sales revenues of the product groups skirtings and related products, and technical extrusions (profiles) are attributable to the business segment plastics.
The changes in inventories related to work in progress amounting to € 000s -270 (2017: € 000s 2,140) and finished products amounting to € 000s 2,617 (2017: € 000s -4,022).
Other own work capitalized are essentially self-manufactured tools and printing cylinders.
Composition of the cost of materials in the Group:
The following table shows personnel expenses:
Regarding the defined-contribution pension provision systems, the company pays contributions to state pension insurance institutions based on statutory obligations. Contributions amounting to € 000s 331 (2017: € 000s 349) are also paid to welfare funds and pension schemes. The pension costs also include payments of € 000s 8,061 (2017: € 000s 8,013) to statutory pension annuity guarantors. These payments entail no further obligations for the company to make payments.
Personnel expenses include amounts resulting from the net interest expense/income and the current service cost for pension obligations.
The average number of employees amounts to 3,329 (2017: 3,091).
The following table shows the employee structure:
The number of employees by regions is as follows:
| Business (product) € 000s |
2017 | 2018 |
|---|---|---|
| Edgebandings | 240,117 | 258,535 |
| Foils | 135,540 | 135,842 |
| Decorative printing | 93,443 | 91,002 |
| Impregnates / Release papers | 104,920 | 97,977 |
| Skirtings and related products | 46,505 | 48,793 |
| Technical extrusions | 35,802 | 36,141 |
| Other | 33,324 | 30,687 |
| 689,651 | 698,977 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Cost of raw materials, consumables and supplies, and purchased merchandise | 330,523 | 344,853 |
| Cost of purchased services | 4,511 | 4,769 |
| 335,034 | 349,622 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Wages and salaries | 146,358 | 155,665 |
| Social security contributions | 18,252 | 19,425 |
| Pension costs | 9,903 | 10,257 |
| 174,513 | 185,347 |
| 2017 | 2018 | |||||
|---|---|---|---|---|---|---|
| Industrial | Salaried | Total | Industrial | Salaried | Total | |
| Production | 1,585 | 207 | 1,792 | 1,707 | 206 | 1,913 |
| Sales | 48 | 366 | 414 | 57 | 390 | 447 |
| Engineering | 132 | 47 | 179 | 136 | 49 | 185 |
| Research and development, quality assurance |
79 | 108 | 187 | 94 | 118 | 212 |
| Administration, materials management |
147 | 372 | 519 | 166 | 406 | 572 |
| 1,991 | 1,100 | 3,091 | 2,160 | 1,169 | 3,329 |
| 2017 | 2018 |
|---|---|
| Germany 1,846 |
1,866 |
| European Union 522 |
659 |
| Rest of Europe 30 |
31 |
| Asia/Australia 182 |
204 |
| America 511 |
569 |
| 3,091 | 3,329 |
The following table shows other operating income:
In accordance with IAS 17 (leases), the proportion of interest included in finance leasing instalments is recorded in interest expenses in the amount of € 000s 390 (2017: € 000s 447).
Interest expenses on financial liabilities that were not measured at fair value in the amount of € 000s 24 (2017: € 000s 39) were included in the financial result.
We refer to section 7 and section 13 for explanations relating to the impairment expenses in accordance with IFRS 9.
The other operating expenses are composed as follows:
Uncapitalized research and development costs (personnel and materials costs) in the Group amounted to € 000s 4,721 (2017: € 000s 5,310).
The effects of changes in exchange rate through profit and loss included in other operating expenses amounted € 000s 274 (2017: € 000s 390) in the business year 2018.
IFRS 9 introduces a new model for the measurement of impairments. In the business year 2018, impairment expenses and impairment reversal incomes are recorded according to this model.
In the business year 2018, impairment reversal income in the amount of € 000s 1,078 is recorded for trade accounts receivable. These were determined on the basis of the simplified impairment model (provision matrix).
The following financial instruments are subject to general impairment recognition in accordance with IFRS 9:
On account of the slight default risk for bank balances, no allowance should be carried out for reasons of materiality.
The receivables from affiliated companies include operational receivables and a loan issued. These receivables amount to € 000s 1,659. In the business year 2018, the planned synergy effects were not achieved and the default risk for receivables increased as a result. In the business year 2018, the receivables from affiliated companies were impaired by a total of € 000s 1,140 because of the increased credit risk. This impairment expense in the amount of € 000s 570 is attributable to operating receivables (operating result) and in the amount of € 000s 570 to the loan issued (financial result).
| € 000s 2017 |
2018 |
|---|---|
| Operating expenses 29,416 |
27,305 |
| Sales expenses 48,817 |
49,883 |
| Administrative expenses 25,869 |
24,050 |
| Expenses arising from the ending of legal disputes 0 |
1,535 |
| Impairment losses on receivables 674 |
733 |
| 104,776 | 103,506 |
| Credit risk | Impairment recognition | |
|---|---|---|
| Bank balances | Slight | 12-M-Expected Credit Loss |
| Receivables from affiliated companies | Likely | 12-M-Expected Credit Loss |
| € 000s | 2017 | 2018 |
|---|---|---|
| Income tax rebates (abroad) | 0 | 938 |
| Claims for compensation | 826 | 537 |
| income from reversal of allowances | 177 | 288 |
| Income from asset disposals | 530 | 198 |
| Income from allocated charges | 129 | 67 |
| Income from commissions | 701 | 0 |
| Other operating income | 2,154 | 2,232 |
| 4,517 | 4,260 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Interest and similar income | 646 | 1,432 |
| Interest and similar expenses | -8,357 | -7,490 |
| Interest (net) | -7,711 | -6,058 |
| Income from market valuation from financial derivatives | -14 | 0 |
| Currency gains/losses, net | -2,693 | 1,725 |
| Other financial earnings | -1,151 | -706 |
| Other financial expenses and income | -3,858 | 1,019 |
| Impairment expenses in accordance with IFRS 9 | 0 | -570 |
| Share of profit of investments accounted for using the equity method | 413 | 540 |
| Financial result | -11,155 | -5,069 |
The deferred tax assets and liabilities reported in the financial statements listed below are attributable to differences in recognition and valuation of individual items on the balance sheet and to tax losses carried forward:
Non-current deferred taxes are included in the deferred tax assets in the amount of € 000s 9,124 (2017: € 000s 4,599), in the deferred tax liabilities in the amount of € 000s 56,879 (2017: € 000s 42,988).
Reconciliation between expected and actual income tax expenditure is as follows:
The average expected tax rate amounts to 28.57 % (2017: 30 %).
Income tax expense is broken down as follows:
An average overall tax burden of 28.57 % (2017: 30.0 %) results for the German companies. The tax rate takes considers the trade tax (12.75 %; previous year: 14.3 %), the corporate income tax (15.0 % unchanged by comparison with the previous year) and the solidarity surcharge (5.5 % of corporate income tax unchanged by comparison with the previous year). The applicable local income tax rates for the foreign companies vary between 17 % and 34 % as in the previous year.
Deferred tax losses carried forward have been capitalized in the consolidated financial statements on the basis of a 5-year projection of earnings before income tax at the level of the individual companies. Uncertainties relating to different projected premises and framework conditions have been taken into account.
No deferred tax assets were recognized on loss carry-forwards for foreign Group companies amounting to € 000s 5,423 (2017: € 000s 1,208) due to restricted utility. The loss carry-forwards amounting to € 000s 4,894 are expired within ten years, and € 000s 529 can be carried forward indefinitely.
Deferred tax liabilities amounting to € 000s 19,405 (2017: € 000s 5,005) were not recognized on temporary differences in connection with investments in subsidiaries, as the Group is in a position to control the timing of the reversal and these temporary differences will not be reversed in the foreseeable future.
| € 000s | 2017 | 2018 | ||
|---|---|---|---|---|
| Current income taxes | ||||
| - Germany | 863 | 1,477 | ||
| - international | 9,808 | 9,181 | ||
| 10,671 | 10,658 | |||
| Deferred income taxes | ||||
| - from time differences | -3,433 | -1,736 | ||
| - on losses carried forward | -50 | -718 | ||
| -3,483 | -2,454 | |||
| 7,188 | 8,204 |
| € 000s | Deferred tax assets Deferred tax liabilities |
|||||
|---|---|---|---|---|---|---|
| 2017 | Change | 2018 | 2017 | Change | 2018 | |
| Inventories | 1,340 | -133 | 1,207 | 370 | 648 | 1,018 |
| Receivables and other assets | 2,993 | -1,437 | 1,556 | 1,131 | 5,695 | 6,826 |
| Tax losses carried forward | 1 | 767 | 768 | -50 | 50 | 0 |
| Goodwill | 600 | -600 | 0 | 3,594 | -378 | 3,216 |
| Property, plant and equipment | 524 | 1,736 | 2,260 | 24,550 | -3,928 | 20,622 |
| Intangible assets | 1 | 44 | 45 | 12,812 | -1,391 | 11,421 |
| Other current assets | 240 | -240 | 0 | 1,155 | -1,142 | 13 |
| Other non-current assets | 227 | 281 | 508 | 5,615 | -4,504 | 1,111 |
| Financial liabilities | 4,342 | 17,428 | 21,770 | 0 | 18,439 | 18,439 |
| Pensions and other personnel-related obligations 2,007 | -543 | 1,464 | 867 | -220 | 647 | |
| Trade accounts payable | 2,476 | -1,318 | 1,158 | 5,302 | -4,641 | 661 |
| Other liabilities | 8,618 | -3,388 | 5,230 | 1,039 | 681 | 1,720 |
| 23,369 | 12,597 | 35,966 | 56,385 | 9,309 | 65,694 | |
| Netting | -4,342 | -17,681 | -4,342 | -17,681 | ||
| 19,027 | 12,597 | 18,285 | 52,043 | 9,309 | 48,013 |
| € 000s 2017 |
2018 |
|---|---|
| Earnings before Taxes (EBIT) 33,515 |
27,133 |
| Expected income tax 10,054 |
7,752 |
| Reconciliation: | |
| Changes in tax rates -1,322 |
-1,503 |
| Differences in tax rates -621 |
-716 |
| Share of profit of investments accounted for using the equity method -124 |
-131 |
| Use of loss carry-forwards not including deferred tax assets -451 |
905 |
| Expenses not deductible from taxes 1,491 |
1,308 |
| Tax-free income - |
-855 |
| Allowance on deferred tax assets 160 |
-445 |
| Tax expenses / income not related to the reporting period -1,152 |
959 |
| Permanent differences -588 |
802 |
| Other effects -259 |
128 |
| Income tax 7,188 |
8,204 |
The allowances developed as follows:
There is no significant concentration of risk in the trade accounts receivable on account of the diversified customer structure of the SURTECO Group. The current values of the trade accounts receivable essentially correspond to the book values.
The following table shows the maturity structure of receivables and the allowances due in accordance with IFRS 9:
There were no indications on the reporting date that payment defaults would occur for trade accounts receivable which were neither overdue nor impaired.
The maximum amount exposed to default in trade accounts receivable amounts to € 000s 4,122 on 31 December 2018. The receivables of the individual companies are hedged depending on the size of the company, the receivable structure and the risk profile of the receivable.
The nominal amount for all written-down assets, for which an insolvency or other proceeding is currently ongoing, amounts to € 000s 279 as at 31 December 2018.
Income tax which directly exerts a negative impact on, or was credited to, other comprehensive income for the year is comprised as follows:
The earnings per share are calculated by dividing the proportionate earnings of the shareholders of SURTECO GROUP SE by the weighted average of the issued shares.
The allowances relate to specific allowances and lump-sum allowances. The calculation of the specific allowance is carried out on the basis of the age structure, and on account of knowledge about the customer-specific credit and default risk.
| € 000s | 2017 | 2018 |
|---|---|---|
| Actuarial gains/losses | 38 | -57 |
| Fair value measurement of financial instruments | 12 | 0 |
| Reclassification into the income statement | 23 | 0 |
| Net investment in a foreign operation | 142 | 214 |
| 215 | 157 |
| 2017 | 2018 | |
|---|---|---|
| Consolidated net profit in € 000s | 26,192 | 18,630 |
| Weighted average of no-par value shares issued | 15,505,731 | 15,505,731 |
| Basic and undiluted earnings per share in € | 1.69 | 1.20 |
| € 000s | 2017 | 2018 | |
|---|---|---|---|
| Trade accounts receivable | 62,252 | 61,008 | |
| Less allowances | -4,426 | -3,489 | |
| Book value | 57,826 | 57,519 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Cash in hand and bank balances | 69,527 | 67,954 |
| Fixed-term deposits | 63,846 | 53,000 |
| 133,373 | 120,954 |
| € 000s | 2017 | 2018 | |
|---|---|---|---|
| Specific allowance |
Specific allowance |
Allowance acc. IFRS 9 |
|
| 1/1/ | 2,500 | 4,426 | - |
| First-time application in accordance with IFRS 9 | - | - | 1,994 |
| Addition to consolidation scope /disposal allowance | 2,222 | - | - |
| Recourse | -395 | -179 | - |
| Release of unused amounts | -213 | -2,198 | -1,078 |
| Addition (effect on expenses) | 270 | 430 | - |
| Exchange rate differences | 42 | 95 | - |
| 31/12/ | 4,426 | 2,574 | 915 |
| € 000s | Overdue receivables | |||||
|---|---|---|---|---|---|---|
| Total | none | up to 3 months |
3-6 months |
6-12 months |
more than 12 months |
|
| 31/12/2018 | ||||||
| 1% | 4% | 29% | 35% | 40% | ||
| Book value of trade accounts receivable | 61,339 | 51,037 | 9,365 | 330 | 169 | 439 |
| Allowance in accordance with IFRS 9 | 1,036 | 351 | 353 | 96 | 59 | 178 |
| Less lump-sum allowances | -121 | |||||
| Allowance in accordance with IFRS 9 as at 31/12/2018 |
915 | |||||
| 01/01/2018 | ||||||
| 1% | 6% | 33% | 40% | 44% | ||
| Book value of trade accounts receivable | 55,821 | 43,398 | 10,417 | 34 | 50 | 1,922 |
| Allowance in accordance with IFRS 9 | 2,062 | 521 | 671 | 11 | 20 | 839 |
| Less Lum-sum allowances | -68 | |||||
| Less Lum-sum allowances | -68 |
|---|---|
| Allowance in accordance with IFRS 9 as at 1/12/2018 |
1,994 |
The inventories of the Group are comprised as follows:
Impairments of € 000s 3,195 (2017: € 000s 2,400) were reported on inventories.
Of the inventories, € 000s 54,905 (2017: € 000s 42,515) were recognized under assets at the net disposal value.
Claims arising from income tax are recognized under current tax assets insofar as their due date is not twelve months after the reporting date.
Corporate income tax credits are recognized under non-current tax assets. These were granted when the law on tax measures to accompany the adoption of European companies and amendment to additional tax regulations (SE Introductory Act, SEStEG) came into force.
No significant allowances were carried out on the other current assets recognized.
Other current financial assets
The call option was recorded under non-current financial assets in the previous year. On the reporting date, the call option was reclassified into current financial assets due to its maturity. See section 32 for explanations of the call option.
The receivables recognized from factoring result from the sales of trade receivables of SURTECO GROUP SE to a factor. These receivable sales led to a continuing involvement. The late payment risk from the contracts sold remains with SURTECO. Apart from the continuing involvement, the receivables include the reservation amount of the factor for invoice deductions by the customer. Sales of receivables with a book value at 31 December 2018 amounting to € 000s 7,731 (2017: € 000s 11,626) led to a partial disposal. A continuing involvement asset in the amount of € 000s 112 (2017: € 000s 150) was reported for this under the receivables from factoring. The associated liability in the amount of € 000s 112 (2017: € 000s 151) was reported under current liabilities. The maximum amount of the receivables sold amounts to € 000s 19,915 (2017: € 000s 24,040; book value € 000s 22,112) in the business year.
In the case of other current financial liabilities, obligations of € 000s 3,818 (2017: € 000s 3,643) were additionally recognized with respect to the factor for receivables settled to the reporting date.
On the reporting date, the SURTECO Group has assets held for sale relating to the planned disposal of a business segment.
The conditions for allocation of non-current assets "as assets held for sale" in accordance with IFRS 5.6-8 have been complied with.
On the date of classification as "held for sale", the assets are measured in compliance with the corresponding IFRS and recognized at book value, and presented separately in the financial statements. The assets held for sale are intangible assets and property, plant and equipment.
The assets held for sale do not undergo further depreciation.
The initial and subsequent valuation of the assets held for sale did not cause any effects in the income statement or in the statement of comprehensive income during the business year 2018.
| € 000s | 2017 | 2018 | ||
|---|---|---|---|---|
| Other current non-financial assets | ||||
| Income tax assets (value added tax, wage tax) | 5,522 | 4,482 | ||
| Prepaid expenses | 2,741 | 2,735 | ||
| Other | 1,194 | 473 | ||
| 9,457 | 7,690 | |||
| Other current financial assets | ||||
| Purchase option | 0 | 4,300 | ||
| Receivable factoring | 1,248 | 799 | ||
| Bonuses receivables | 960 | 696 | ||
| Security deposits | 296 | 151 | ||
| Creditors with debit balances | 209 | 204 | ||
| Receivables from employment relationships | 119 | 99 | ||
| Other loans | 100 | 200 | ||
| Other | 734 | 929 | ||
| 3,666 | 7,378 | |||
| 13,123 | 15,068 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Raw materials, consumables and supplies | 40,395 | 43,491 |
| Work in progress | 12,772 | 12,502 |
| Finished products and goods | 66,565 | 70,976 |
| 119,732 | 126,969 |
The fixed assets are comprised as follows:
Property, plant and equipment are comprised as follows:
As at 31 December 2018, property, plant and equipment with a carrying amount of € 000s 1,221 (2017: € 000s 1,876) was pledged as collateral for existing liabilities.
| € 000s | Property, plant and equipment |
Intangible assets |
Goodwill | Total |
|---|---|---|---|---|
| Acquisition costs | ||||
| 1/1/2017 | 636,560 | 79,249 | 164,286 | 880,095 |
| Currency adjustment | -13,659 | -1,494 | -1,583 | -16,736 |
| Addition to consolidation scope | 17,353 | 39,907 | 45,370 | 102,630 |
| Additions | 40,807 | 1,900 | 0 | 42,707 |
| Disposals | -16,895 | -596 | 0 | -17,491 |
| 31/12/2017 | 664,166 | 118,966 | 208,073 | 991,205 |
| 1/1/2018 | 664,166 | 118,966 | 208,073 | 991,205 |
| Currency adjustment | 1,042 | -266 | -238 | 538 |
| Additions | 45,017 | 2,520 | 0 | 47,537 |
| Disposals | -7,546 | -26 | 0 | -7,572 |
| Reclassification to assets held for sale | -25,794 | -206 | 0 | -26,000 |
| Transfers | -304 | 304 | 0 | 0 |
| 31/12/2018 | 676,581 | 121,292 | 207,835 | 1,005,708 |
| Depreciation and amortization | ||||
| 1/1/2017 | 394,155 | 44,934 | 45,458 | 484,547 |
| Currency adjustment | -7,356 | -753 | -688 | -8,797 |
| Additions | 29,761 | 8,706 | -44 | 38,423 |
| Disposals | -10,602 | -597 | 44 | -11,155 |
| 31/12/2017 | 405,958 | 52,290 | 44,770 | 503,018 |
| 1/1/2018 | 405,958 | 52,290 | 44,770 | 503,018 |
| Currency adjustment | 341 | -80 | 201 | 462 |
| Additions | 30,618 | 9,958 | 0 | 40,576 |
| Disposals | -6,996 | -12 | 0 | -7,008 |
| Reclassification to assets held for sale | -9,091 | -193 | 0 | -9,284 |
| 31/12/2018 | 420,830 | 61,963 | 44,971 | 527,764 |
| Book value at 31/12/2018 | 255,751 | 59,329 | 162,864 | 477,944 |
| Book value at 31/12/2017 | 258,208 | 66,676 | 163,303 | 488,187 |
| € 000s | Land and buildings |
Financial leasing for land and buildings |
Technical equipment and machines |
Other equipment, factory and office equipment |
Payments on account and assets under con struction |
Total |
|---|---|---|---|---|---|---|
| Acquisition costs | ||||||
| 1/1/2017 | 137,994 | 26,245 | 376,988 | 86,137 | 9,196 | 636,560 |
| Currency adjustment | -2,965 | -3 | -9,832 | -793 | -66 | -13,659 |
| Addition to consolidation scope | 5,673 | 0 | 10,991 | 475 | 214 | 17,353 |
| Additions | 5,307 | 0 | 17,261 | 7,991 | 10,248 | 40,807 |
| Disposals | -3,248 | -734 | -7,626 | -4,905 | -382 | -16,895 |
| Transfer | 415 | 1,114 | 3,938 | 100 | -5,567 | 0 |
| 31/12/2017 | 143,176 | 26,622 | 391,720 | 89,005 | 13,643 | 664,166 |
| 1/1/2018 | 143,176 | 26,622 | 391,720 | 89,005 | 13,643 | 664,166 |
| Currency adjustment | 5 | 1 | 1,336 | -320 | 20 | 1,042 |
| Additions | 4,684 | 0 | 19,487 | 8,189 | 12,657 | 45,017 |
| Disposals | -358 | 0 | -4,833 | -2,310 | -45 | -7,546 |
| Transfers | 1,572 | -278 | 4,208 | 1,039 | -6,845 | -304 |
| Reclassification to assets held for sale |
-6,112 | 0 | -18,935 | -747 | 0 | -25,794 |
| 31/12/2018 | 142,967 | 26,345 | 392,983 | 94,856 | 19,430 | 676,581 |
| Depreciation and amortization | ||||||
| 1/1/2017 | 55,958 | 3,160 | 272,960 | 62,086 | -9 | 394,155 |
| Currency adjustment | -868 | -3 | -5,985 | -500 | 0 | -7,356 |
| Additions | 3,678 | 726 | 19,107 | 6,250 | 0 | 29,761 |
| Disposals | -221 | 0 | -6,112 | -4,283 | 14 | -10,602 |
| Transfers | -345 | 337 | 636 | -628 | 0 | 0 |
| 31/12/2017 | 58,202 | 4,220 | 280,606 | 62,925 | 5 | 405,958 |
| 1/1/2018 | 58,202 | 4,220 | 280,606 | 62,925 | 5 | 405,958 |
| Currency adjustment | -2 | 1 | 454 | -112 | 0 | 341 |
| Additions | 3,775 | 810 | 19,364 | 6,669 | 0 | 30,618 |
| Disposals | -347 | 0 | -4,529 | -2,120 | 0 | -6,996 |
| Transfers | 252 | -252 | 11 | -11 | 0 | 0 |
| Reclassification to assets | ||||||
| held for sale | -423 | 0 | -8,333 | -335 | 5 | -9,091 |
| 31/12/2018 | 61,457 | 4,779 | 287,573 | 67,016 | 5 | 420,830 |
| Book value at 31/12/2018 | 81,510 | 21,566 | 105,410 | 27,840 | 19,425 | 255,751 |
| Book value at 31/12/2017 | 84,974 | 22,402 | 111,114 | 26,080 | 13,638 | 258,208 |
Intangible assets comprise primarily IT software and assets acquired as a part of acquisitions:
Goodwill is comprised of the following amounts from the takeover of business operations and from capital consideration.
Goodwill developed as follows:
Goodwill is allocated to cash generating units (CGU Level) for purposes of carrying out annual or eventrelated (triggering events) impairment tests. These correspond to the operating divisions in Business Unit Paper and in the Business Unit Plastics.
The value of the goodwill recognized in the year under review was also evident in a variation in the discount rate and the growth rate by +/- 0.5 %.
The book value of the goodwill was attributed to the cash generating units as follows:
The value in use to be applied for carrying out the impairment test is calculated based on a company valuation model (discounted cash flow). The calculation is carried out using cash flow plans which are based on medium-term planning for a period of five years that has been approved by the Management Board and is valid at the time when the impairment test was carried out. These plans include experience and expectations relating to the future market development. Growth rates are estimated individually for each subsidiary company on the basis of the macro-economic framework data for the regional market, the market opportunities and experiences in the past. The underlying growth rates applied for the impairment test are based on medium-term planning for a period of 5 years amounted to an average of 2.8 % for sales and 7.0 % for EBITDA. For the period after the fifth year, a growth rate of 1 % was used for sales and for EBITDA, since the value in use is mainly determined by the terminal value and this responds in a particularly sensitive way to changes in assumptions with respect to its growth rate and its interest rate.
The costs of capital are calculated as a weighted average of the costs of equity and debt. As far as possible, external information from the comparator group or available market data are used. The costs of equity correspond to the expectations of return held by investors. An increased market risk was taken account by a 0.5 % point higher "additional risk" compared with the previous year. Market conditions for loans are taken into account for borrowing costs. This yielded an interest rate of 7.9 % (2017: 6.9 %) before taxes in December 2018.
| € 000s | Concessions, patents, licences and similar rights |
Customer relations, trademarks and similar values |
Development expenses |
Payments on account |
Total |
|---|---|---|---|---|---|
| Acquisition cost | |||||
| 1/1/2017 | 30,901 | 39,984 | 8,206 | 158 | 79,249 |
| Currency adjustment | -523 | -857 | -112 | -2 | -1,494 |
| Addition to consolidation scope | 5,233 | 34,674 | 0 | 0 | 39,907 |
| Additions | 36 | 0 | 1,850 | 14 | 1,900 |
| Disposals | -596 | 0 | 0 | 0 | -596 |
| Transfer | -993 | 2,440 | -1,437 | -10 | 0 |
| 31/12/2017 | 34,058 | 76,241 | 8,507 | 160 | 118,966 |
| 1/1/2018 | 34,058 | 76,241 | 8,507 | 160 | 118,966 |
| Currency adjustment | -153 | 78 | -191 | 0 | -266 |
| Additions | 2,128 | 0 | 304 | 88 | 2,520 |
| Disposals | -26 | 0 | 0 | 0 | -26 |
| Reclassification to assets | |||||
| held for sale | -206 | 0 | 0 | 0 | -206 |
| Transfers 31/12/2018 |
402 36,203 |
0 76,319 |
49 8,669 |
-147 101 |
304 121,292 |
| Depreciation and amortization | |||||
| 1/1/2017 | 24,549 | 17,075 | 3,310 | 0 | 44,934 |
| Currency adjustment | -369 | -322 | -62 | 0 | -753 |
| Additions | 3,004 | 4,604 | 1,098 | 0 | 8,706 |
| Disposals | -597 | 0 | 0 | 0 | -597 |
| Transfers | -2,150 | 2,440 | -290 | 0 | 0 |
| 31/12/2017 | 24,437 | 23,797 | 4,056 | 0 | 52,290 |
| 1/1/2018 | 24,437 | 23,797 | 4,056 | 0 | 52,290 |
| Currency adjustment | -115 | 142 | -107 | 0 | -80 |
| Additions | 4,075 | 5,624 | 259 | 0 | 9,958 |
| Disposals | -12 | 0 | 0 | 0 | -12 |
| Reclassification to assets | |||||
| held for sale | -193 | 0 | 0 | 0 | -193 |
| 31/12/2018 | 28,192 | 29,563 | 4,208 | 0 | 61,963 |
| Book value at 31/12/2018 | 8,011 | 46,756 | 4,461 | 101 | 59,329 |
| Book value at 31/12/2017 | 9,621 | 52,444 | 4,451 | 160 | 66,676 |
| € 000s | 2017 | 2018 |
|---|---|---|
| 1/1/ | 118,828 | 163,303 |
| Additions | 45,370 | 0 |
| Currency adjustment | -895 | -439 |
| 31/12/ | 163,303 | 162,864 |
| € 000s | 2017 | 2018 | |
|---|---|---|---|
| CGU edgebandings | 111,755 | 111,652 | |
| CGU skirtings | 36,281 | 36,281 | |
| CGU technical foils | 8,281 | 7,939 | |
| Strategic Business Unit Plastics | 156,317 | 155,873 | |
| Strategic Business Unit Paper | 6,986 | 6,991 | |
| 163,303 | 162,864 |
Based on the impairment tests carried out in the business year 2018, the values in use of the cash generating units are estimated higher than the net asset values. As a result, no impairments have been recognized.
The investments accounted for using the equity method relate to one joint venture in the business year 2018.
The company Canplast Mexico accounted for using the equity method is not a listed company so that no market price is available for this investment. The joint venture company exerts no significant effect on the net assets, financial position and results of operations of the SURTECO Group.
The following information presents the amounts in the financial statements of the companies accounted for using the equity method and not the corresponding shares of SURTECO GROUP SE in them. Adjustments on the basis of differences between the accounting and valuation methods with the companies accounted for using the equity method were not carried out in the Group for reasons of materiality.
Tax liabilities include the income tax due for the business year 2018 or earlier business years and not yet paid, and the anticipated tax payments for previous years.
The warranty provision was formed for warranty obligations arising from the sale of products. The valuation is made on the basis of experience values.
The legal disputes essentially relate to a protective rights agreement.
| Name | Country of | Percentage of | Type of | Type of |
|---|---|---|---|---|
| registration | shares held | business activity | participation | |
| Canplast Mexico S.A. de C.V. |
Mexico | 50% | Sale of edgebandings |
Joint-venture company |
| € 000s | Investments in joint ventures |
|---|---|
| Acquisition costs | |
| 1/1/2017 | 1,694 |
| Currency adjustment | 58 |
| Proportionate earnings | 413 |
| Payout | -177 |
| 31/12/2017 | 1,988 |
| Currency adjustment | 61 |
| Proportionate earnings | 541 |
| Payout | -212 |
| 31/12/2018 | 2,378 |
| € 000s | 1/1/2018 | Currency adjustment |
Expense | Release | Addition | 31/12/2018 |
|---|---|---|---|---|---|---|
| Warranty | 1,481 | 1 | -712 | -344 | 962 | 1,389 |
| Legal disputes | 1,417 | 0 | 0 | 0 | 870 | 2,287 |
| Restructuring | 338 | 0 | -59 | -84 | 6,113 | 6,308 |
| Impending losses | 190 | 0 | -142 | -5 | 171 | 214 |
| Other | 540 | -13 | -193 | -272 | 1,338 | 1,401 |
| 3,966 | -12 | -1,106 | -704 | 9,454 | 11,598 |
| € 000s | 2017 Joint ventures |
2018 Joint ventures |
|---|---|---|
| Current assets | 3,316 | 4,143 |
| Non-current assets | 706 | 745 |
| Current liabilities | -920 | -1,045 |
| Non-current liabilities | -112 | -23 |
| Net assets (100%) | 2,990 | 3,820 |
| Share of the Group in the net assets (50 %) | 1,495 | 1,910 |
| Book value of the share | 1,988 | 2,378 |
| Sales revenues | 6,283 | 7,890 |
| EBT | 1,186 | 1,509 |
| Profit after taxes | 826 | 1,082 |
| Other comprehensive income | - | - |
| Total income | 826 | 1,082 |
| Share of the Group in the total income | 413 | 541 |
| Payout received from joint ventures | 177 | 212 |
| € 000s | 2017 | 2018 |
|---|---|---|
| 1/1/ | 21 | 831 |
| Participations | 10 | 0 |
| Loans | 800 | -800 |
| 31/12/ | 831 | 31 |
The restructuring provision includes expenses which are used for an optimization programme to harmonize the processes and structures to the changed market conditions.
The provision for impending losses was essentially formed for risks arising from pending sales transactions. It is likely that the sale of products will be below the costs of manufacture. The time of anticipated outflow will come with fulfilment of the sales transactions.
The liabilities from employment relationships primarily include, apart from the wage and salary payments not yet paid on the reporting date, obligations arising from profit shares, bonuses, holiday and working time credits.
Obligations in respect of the factoring agent for receivables settled as at the reporting date are recognized under other current liabilities arising from factoring. Reference is made to our comments on receivables from factoring under item 16 "Other current assets" in the notes to the consolidated financial statements for further details.
The sale option was recorded under non-current financial liabilities in the previous year. On the reporting date, the sale option was reclassified because of its maturity in the current financial liabilities. We refer to section 32 for explanations of the sale option.
The financial liabilities are comprised as follows:
Long-term liabilities are essentially made up of the promissory note loans in the amount of € 000s 200,000 raised in the business year 2017. This is divided into four tranches with terms of between five and ten years. Fixed-interest agreements have been primarily agreed for the other non-current banking liabilities with interest rates in a range between 1.055 % and 5.70 %.
For collateral for financial debt, please refer to section 19.
The liabilities from finance leasing are released over the contract term and are due on the reporting date as follows:
| € 000s | 2017 | 2018 | |
|---|---|---|---|
| Other current non-financial liabilities | |||
| Tax liabilities (value added tax) | 1,725 | 1,247 | |
| Social insurance against occupational accidents | 787 | 816 | |
| Supervisory Board remuneration | 408 | 304 | |
| Deferred income | 254 | 13 | |
| Other | 1,067 | 88 | |
| 4,241 | 2,468 | ||
| Other current financial liabilities | |||
| Liabilities from employment relationships * | 16,938 | 16,637 | |
| Other current liabilities factoring | 3,796 | 3,818 | |
| Put option | 0 | 3,407 | |
| Bonuses and promotional cost | 1,906 | 1,642 | |
| Debitors with credit balances | 1,787 | 2,095 | |
| Commissions | 655 | 547 | |
| Payments on account received | 387 | 492 | |
| Other | 765 | 940 | |
| 26,234 | 29,578 | ||
| 30,475 | 32,046 | ||
| * of which social security | 1,288 | 611 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Long-term financial liabilities to banks | 304,681 | 241,522 |
| Long-term financial liabilities for finance lease | 12,980 | 11,062 |
| Long-term financial liabilities | 317,661 | 252,584 |
| Short-term financial liabilities to banks | 3,643 | 64,057 |
| Short-term financial liabilities for finance lease | 2,013 | 1,848 |
| Short-term financial liabilities | 5,656 | 65,905 |
| Financial liabilities | 323,317 | 318,489 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Leasing payments to be made in the future | ||
| in less than one year | 2,405 | 2,181 |
| between one year and five years | 13,696 | 11,440 |
| after more than five years | 28 | 17 |
| Interest share | ||
| in less than one year | -392 | -334 |
| between one year and five years | -742 | -395 |
| after more than five years | -2 | 0 |
| Present value |
| € 000s | 2017 | 2018 |
|---|---|---|
| Leasing payments to be made in the future | ||
| in less than one year | 2,405 | 2,181 |
| between one year and five years | 13,696 | 11,440 |
| after more than five years | 28 | 17 |
| Interest share | ||
| in less than one year | -392 | -334 |
| between one year and five years | -742 | -395 |
| after more than five years | -2 | 0 |
| Present value | ||
| in less than one year | 2,013 | 1,848 |
| between one year and five years | 12,954 | 11,045 |
| after more than five years | 26 | 17 |
| 14,993 | 12,910 |
Commitments for company pensions were concluded for individual employees of the SURTECO Group. The defined-benefit commitments were concluded through individual contracts and in collective agreements. They essentially provide for pension payments when an employee retires, becomes incapacitated and/or in cases of death. The level of the provision payments depends on the final salary achieved taking account of length of service with the company and fixed pension components for each year of service. The pension commitments in Germany are subject to the German Company Pensions Act.
The financing of the projected benefit obligations arising from pension obligations amounts to € 000s 10,997 (2017: € 000s 11,032) internally through the contribution to a pension provision and through pledged reinsurance amounting to € 000s 232 (2017: € 000s 228), which secures the obligations partly or fully congruently.
The pension obligations, the plan assets and the provision developed as follows:
There is no active market price quotation for the plan assets.
The Group recognizes remeasurements from defined-benefit plans in shareholder's equity (other comprehensive income). The amount included for 2018 before deferred taxes amounts to € 000s 168 (2017: € 000s 100). Up to now, a total of € 000s 3,006 (2017: € 000s 2,837) has been recognized in shareholders' equity.
The annual payments by the employee (expected pension payments) in the current business year amounted to € 000s 487.
If the other assumptions remain constant, the changes which were possible subject to an objective analysis on the reporting date would have exerted an influence on the defined-benefit obligation in the event of one of the significant actuarial assumptions set out below (sensitivity analysis):
A similar approach is adopted by determining the sensitivities and the scope of obligation. If several assumptions are changed at the same time, the overall effect does not necessarily have to correspond to the sum of the individual effects due to the changes in the assumptions. Furthermore, the effects are not linear.
The weighted average residual term of the benefit obligations is 12.7 years to 31 December 2018.
The additional personnel-related obligations include partial-retirement and long-service agreements. The partial-retirement obligations amount to € 000s 322 (2017: € 000s 297) on the reporting date and these obligations are balanced by plan assets amounting to € 000s 237 (2017: € 000s 271) because of the statutory requirement for insolvency protection. The long-service obligations amount to € 000s 1,979 on the reporting date (2017: € 000s 1,930).
Out of the non-current obligations arising from partial-retirement arrangements € 000s 80 (2017: € 000s 113) are due in 2019.
| € 000s | 2017 | 2018 | ||||
|---|---|---|---|---|---|---|
| Present value of obligation |
Fair value of plan assets Provision |
Present value of obligation |
Fair value of plan assets Provision |
|||
| 1/1/ | 10,809 | -253 | 10,556 | 11,032 | -228 | 10,804 |
| Pension payments on account | -526 | 0 | -526 | -503 | 0 | -503 |
| Payments from | ||||||
| plant settlements | 0 | 7 | 7 | 0 | 7 | 7 |
| Current service expense | 92 | 0 | 92 | 65 | 0 | 65 |
| Interest income | 0 | -5 | -5 | 0 | -6 | -6 |
| Interest expense | 195 | 0 | 195 | 234 | -4 | 230 |
| Remeasurements | ||||||
| Actuarial gains / losses | ||||||
| From changes in demo graphic parameters |
0 | 0 | 0 | 156 | 0 | 156 |
| From experience | ||||||
| adjustments | -55 | 23 | -32 | 124 | 0 | 124 |
| From changes in financial | ||||||
| parameters | 143 | 0 | 143 | -112 | 0 | -112 |
| 88 | 23 | 111 | 168 | 0 | 168 | |
| Other changes | 389 | 389 | 0 | 0 | 0 | |
| Currency adjustment | -15 | -15 | 0 | 0 | 0 | |
| 31/12/ | 11,032 | -228 | 10,804 | 10,996 | -231 | 10,765 |
| € 000s | Change in present value of pension obligation | ||||
|---|---|---|---|---|---|
| 2017 | 2018 | ||||
| Increase | Decrease | Increase | Decrease | ||
| Increase in the interest rate by 0.25% | 316 | 305 | |||
| Decrease in the interest rate by 0.25% | 333 | 321 | |||
| Increase in future pension rises by 0.25% | 285 | 256 | |||
| Decrease in future pension rises by 0.25% | 273 | 288 |
The subscribed capital (capital stock) of SURTECO GROUP SE is € 15,505,731.00 and is fully paid in. It is divided into 15,505,731 no-par-value bearer shares (ordinary shares) corresponding to a proportion of the capital stock of € 1.00 in each case.
The Management Board is authorized to increase the capital stock of the company once or in partial amounts in the period to 27 June 2019 by overall up to € 1,500,000.00, with the consent of the capital I). The Management Board is entitled, with the consent of the Supervisory Board, to exclude the pre-emptive right of shareholders up to a proportionate amount of the capital stock of € 1,500,000.00, if the new shares are issued at an issue amount, which is not significantly lower than the stock-market price. The Management Board is further authorized to have the new shares taken over by a bank, a financial services institution or a company operating pursuant to § 53 (1) Sentence 1 or § 53 b (1) Sentence 1 or (7) of the German Banking Act (KWG), with the obligation to offer them for purchase to shareholders. If the Management Board does not make use of the above authorizations to exclude pre-emptive rights, the pre-emptive right of the shareholders may only be excluded for equalization of fractions. The Management Board decides on the additional content of share rights and the conditions of issue, with the consent of the Supervisory Board.
The Management Board is authorized to increase the capital stock of the company once or in partial amounts in the period to 27 June 2019 by overall up to € 6,200,000.00, with the consent of the Supervisory Board by the issue of no-par-value bearer shares, for a cash consideration or non-cash contributions (Authorized capital II). In the case of a capital increase for a cash consideration, the shareholders should be granted a pre-emptive right, although the Management Board is authorized to exclude the fractions from shareholders' statutory pre-emptive right. The Management Board is further authorized to have the new shares taken over by a bank, a financial services institution or a company operating pursuant to § 53 (1) Sentence 1 or § 53 b (1) Sentence 1 or (7) of the German Banking Act (KWG), with the obligation to offer them for purchase to shareholders. In the case of a capital increase for a non-cash consideration, the Management Board is entitled to exclude the statutory pre-emptive right of shareholders. The Management Board decides on the additional content of share rights and the conditions of issue, with the consent of the Supervisory Board.
The capital reserve of SURTECO GROUP SE includes the amounts by which the capital investment values of investments in affiliated companies paid within the scope of capital increases against noncash considerations exceed the amounts of capital stock allocated to the SURTECO shares released for this purpose.
Netting differences capitalized as assets arising from capital consolidation on account of the pooling of interests method were netted in the consolidated financial statements of SURTECO GROUP SE against the capital reserve during the year of first-time consolidation.
The capital reserve is unchanged by comparison with the previous year and amounts to € 000s 122,755.
Retained earnings include transfers from net profit and the accumulated comprehensive income resulting from the following items:
• Unrealized gains and losses arising from foreign-currency loans to subsidiary companies which
Reconciliation of the equity components affected by comprehensive income:
The dividend payout of SURTECO GROUP SE is based on net profit reported in the financial statements of SURTECO GROUP SE in accordance with commercial law in conformity with § 58 (2) of the Stock Corporation Act (Aktiengesetz, AktG). The financial statements of SURTECO GROUP SE drawn up in accordance with commercial law have recorded a net profit of € 000s 8,528 (2017: € 000s 12,405). The Management Board and Supervisory Board of SURTECO GROUP SE propose to the Annual General Meeting that a dividend payout of € 0.55 (2017: € 0.80) per share, amounting to € 000s 8,528 (2017: € 000s 12,405) be paid out.
| € 000s | 31/12/2017 Reserve |
31/12/2018 Reserve |
||||||
|---|---|---|---|---|---|---|---|---|
| Fair value measure ment for financial instru ments |
Other compre hensive income |
Currency transla tion adjust ments |
Total other compre hensive income |
Fair value measure ment for financial instru ments |
Other compre hensive income |
Currency transla tion adjust ments |
Total other compre hensive income |
|
| Components of other com prehensive income not to be reclassified to the income statement |
||||||||
| Remeasurements of defined benefit obligations |
-62 | -225 | ||||||
| Other changes | 116 | |||||||
| Components of other com prehensive income that may be classified to the income statement |
||||||||
| Net gains / losses from a net investment in a foreign operation |
-333 | -498 | ||||||
| Exchange differences in trans lation of foreign operations |
-7,872 | -408 | ||||||
| Fair valuation of cash flow hedges |
-30 | |||||||
| Reclassification amounts in the income statement |
-56 | |||||||
| Other comprehensive income | -86 | 54 | -8,205 | -8,237 | 0 | -225 | -906 | -1,131 |
The following table provides an overview of financial information for companies with non-controlling interests which are important for the SURTECO Group.
The table presents balance sheet values at 31 December 2018 for the companies of the Nenplas Group before elimination of intragroup transactions and without the effect arising from the purchase price allocation:
For reasons of materiality, Delta Plastics Ltd., Nenplas Properties Ltd. and Nenplas Properties Holding Ltd. were not shown.
€ 000s 3,221 (2017: € 000s 2,922) were attributed to non-controlling interests in the equity of the Nenplas companies on 31 December 2018.
Contingent liabilities were recognized on 31 December 2018 amounted to € 000s 28 (2017: € 000s 71) and relate exclusively to a special-purpose entity. The probability of occurrence is assessed as low. There are no identifiable points of reference for assuming that the conditions underlying the investment allowance are no longer applicable. Furthermore, guarantees were provided for non-consolidated companies (see section 35).
Obligations arising from rental, hire and leasing contracts relate exclusively to rental contracts whereby the companies of the SURTECO Group are not the commercial owners of the leased assets in accordance with IFRS. The operate leasing contracts essentially relate to typical commercial leasing relationships on the rental of factory and office equipment. The operate leasing contracts have terms of one year to five years and partly include extension options and price adjustment clauses.
Payments from operate leasing contracts in the period are recorded in the amount of € 000s 1,987 (2017: € 000s 2,001).
Commitments amounting to € 000s 0 (2017: € 000s 6,969) were recognized arising from orders for investment projects already in progress or planned in the area of items of property, plant and equipment and intangible assets (commitments from orders).
The goals of capital management are derived from financial strategy. This includes safeguarding liquidity and guaranteeing access to the capital market. The capital is defined as the shareholders' equity recognized in the balance sheet and the net debt.
Measures for achieving the goals of capital management are optimization of the capital structure, equity capital measures, compliance with covenants, acquisitions and disinvestments, as well as the reduction of net debts. The Group is not subject to the imposition of any statutory capital requirements.
The dividend payout for the business year 2018 amounted to € 000s 12,405.
Our finance controlling is based on the indicators defined in our finance strategy. The interest cover factor was 12 (2017: 10.8) in 2018. The debt-service coverage ratio was 30.0 % (2017: 34 %) in 2018. The net debt amounted to € 000s 197,535 (2017: € 000s 189,950) on 31 December 2018 and the equity ratio was 41.8 % (2017: 41.4 %). The calculation of the indicators is presented in the management report.
The international business profile of the Group means that different legal and supervisory regulations have to be observed according to the region. The status and development of these regulations are tracked at local level and centrally, and any changes are taken into account for purposes of capital management.
The significant financial risks of the Group are described below. More extensive descriptions of the risks are included in the risk and opportunities report provided in the management report.
Due to the international activities of the SURTECO Group, changes in interest rates and currency exchange rates impacts the net assets, financial position and results of operations of the SURTECO Group. The risks result from foreign currency transactions carried out in the course of operating business, from financing and from investment.
The Corporate Treasury Department of the SURTECO GROUP SE holding company controls centrally the currency and interest-management of the Group and also the key transactions with financial derivatives and other financial instruments. In individual cases, currency hedging transactions are concluded at the foreign subsidiaries in close consultation with central treasury. Financial instruments and derivatives are used exclusively to hedge interest and currency risks. Only commercial instruments with sufficient market liquidity are used for this purpose. Derivative financial positions for trading purposes are not held as at 31 December 2018. Risk assessments and checks are carried out continuously.
| € 000s | Nenplas Holding Ltd. | Nenplas Ltd. | Polyplas Extrusion Ltd. |
|---|---|---|---|
| 31/12/2018 | 31/12/2018 | 31/12/2018 | |
| ASSETS | 5,280 | 14,455 | 5,912 |
| Current assets | 0 | 5,039 | 4,838 |
| Non-current assets | 5,280 | 9,415 | 1,075 |
| LIABILITIES | 5,280 | 14,455 | 5,912 |
| Current liabilities | 3,270 | 3,165 | 737 |
| Non-current liabilities | 0 | 699 | 82 |
| Shareholders' equity | 2,010 | 10,590 | 5,094 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Rental and operate leasing obligations due | ||
| in less than one year | 3,181 | 2,372 |
| between one year and five years | 4,785 | 2,486 |
| after more than five years | 182 | 12 |
| 8,148 | 4,870 |
The subsidiaries report on their key currency and interest-rate risks within the scope of Group reporting. These risk positions are then analyzed and evaluated on the basis of the gross burden on EBT and the likelihood of occurrence.
The refinancing of the Group and the subsidiary companies is generally carried out centrally by SURTECO GROUP SE. Most of the Group's financial liabilities have residual terms of up to seven years and they are structured with fixed interest rates (see maturity structure section (26)). The Group operates with a wide base of lenders comprising insurance companies and banks. Financial indicators were agreed with lenders at standard market conditions in loan agreements, for example the ratio of EBITDA to interest income (Interest Coverage Factor, see Notes to the Consolidated Financial Statements section (31)) and these have to be complied with by the SURTECO Group. The key figures are continuously monitored by the Management Board and the Supervisory Board. If there is an impending breach of any indicators, consultations on individual measures take place as necessary. If the indicators are breached, the lenders have the right to serve notice on the loan agreements. The financial indicators were complied with in the business year 2018.
No risk concentration was identified for financial risks.
The Corporate Treasury Department of the SURTECO GROUP SE holding company monitors and controls the development of liquidity for the major subsidiary companies. This provides an up-to-date picture of liquidity development at any time. The high levels of free cash flow and the short payment targets mean that the SURTECO Group has adequate liquid funds continuously available. There is also the option of drawing on open credit lines and on factoring agreements.
However, there is the risk that earnings and liquidity are compromised by default on accounts receivable from customers and non-compliance with payment targets. The Group counters this risk by regularly reviewing credit rating and carefully monitoring default with customers. The risk arising from debit balances in accounts payable is low due the broad customer structure and credit insurance policies.
The following table shows the undiscounted contractually agreed cash outflows and inflows from primary financial liabilities and derivative financial instruments with gross fulfilment. If the maturity date is not fixed, the liability relates to the earliest liability date.
Due to the global nature of the business activities of the SURTECO Group, delivery and payment flows result in different currencies. Conversion of business figures and balance sheets from foreign subsidiaries into euros can entail risks which can only be hedged to a certain extent.
Interest risks are mainly incurred for short-term financial liabilities. The majority of long-term financial liabilities are structured with fixed-interest rates. SURTECO GROUP SE meets the remaining interest and currency risks in the business year 2018 by hedging positions with derivative financial instruments and regular and intensive observation of a range of early-warning indicators. No derivative financial instruments are outstanding on the reporting date. Hedging of individual risks is discussed and decided by the Central Treasury with the Management Board and the responsible Managing Directors.
| 2018 € 000s |
Book value | 2019 31/12/18 Interest Repayment Interest Repayment |
2020 - 2023 | 2024 ff. Interest Repayment |
|||
|---|---|---|---|---|---|---|---|
| Financial liabilities to banks | 305,580 | 5,880 | 63,756 | 12,652 | 129,957 | 5,844 | 112,380 |
| Financial liabilities from finance lease | 12,909 | 334 | 1,848 | 395 | 11,045 | 0 | 17 |
| Financial liabilities | 318,489 | 6,214 | 65,604 | 13,047 | 141,002 | 5,844 | 112,397 |
| Trade accounts payable | 65,078 | - | 65,078 | ||||
| Other financial liabilities | 29,578 | - | 29,578 |
| 2017 € 000s |
Book value | 2018 31/12/17 Interest Repayment Interest Repayment |
2019 - 2022 | 2023 ff. Interest Repayment |
|||
|---|---|---|---|---|---|---|---|
| Financial liabilities to banks | 308,324 | 7,209 | 3,641 | 16,290 | 189,871 | 8,085 | 115,822 |
| Financial liabilities from finance lease | 14,993 | 392 | 2,013 | 742 | 12,954 | 2 | 26 |
| Financial liabilities | 323,317 | 7,601 | 5,654 | 17,032 | 202,825 | 8,087 | 115,848 |
| Trade accounts payable | 63,174 | - | 63,174 | - | - | - | - |
| Other financial liabilities | 26,235 | - | 26,235 | - | - | - | - |
The following table shows the sensitivity on the reporting date of the available derivatives and variable-interest primary financial instruments in the SURTECO Group to the rise or fall of interest rates by 100 basis points (bp):
The analysis assumes that all other variables, in particular exchange rates, remain unchanged.
The Group operates in several currency areas. In particular, effects arise from the performance of the US dollar.
A rise in the key relevant foreign currencies for SURTECO against the euro would exert the following effects:
The analysis assumes that all other variables, in particular interest rates, remain unchanged.
No risk concentration was identified for risks relating to change in interest rates and currency.
The calculation and recognition of the fair values of financial instruments is based on a fair value hierarchy which takes into account the significance of the input data used for the valuations and classifies it as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities, where the entity drawing up the financial statements must have access to these active markets on the valuation date. Level 2 – Directly or indirectly observable input factors which cannot be classified under Level 1. Level 3 – Unobservable inputs.
The following table shows the book values and fair values of financial assets and financial liabilities including their level in the fair value hierarchy.
No fair value reporting is carried out in accordance with IFRS 7.29 for short-term financial instruments or financial instruments reported at acquisition cost.
| € 000s | Income statement | Equity/Other comprehensive income | |||
|---|---|---|---|---|---|
| 100 bp Rise |
100 bp Fall |
100 bp Rise |
100 bp Fall |
||
| 31/12/2018 | |||||
| Variable interest instruments | 416 | -759 | 416 | -759 | |
| 416 | -759 | 416 | -759 | ||
| 31/12/2017 | |||||
| Variable interest instruments | 482 | -778 | 482 | -778 | |
| 482 | -778 | 482 | -778 |
| € 000s | Income statement | Equity / Other comprehensive income | |||
|---|---|---|---|---|---|
| 10% | 10% | 10% | 10% | ||
| Rise | Fall | Rise | Fall | ||
| 31/12/2018 | |||||
| Primary financial instruments | |||||
| in US dollars | 1,523 | -1,246 | 0 | 0 | |
| in other currencies | 331 | -271 | 1,836 | -1,502 | |
| 1,854 | -1,517 | 1,836 | -1,502 | ||
| 31/12/2017 | |||||
| Primary financial instruments | |||||
| in US dollars | 3,082 | -2,521 | 0 | 0 | |
| in other currencies | 962 | -788 | 1,915 | -1,567 | |
| 4,044 | -3,309 | 1,915 | -1,567 |
Notes to the Consolidated Financial Statements SURTECO Group
| 31/12/2018 € 000s |
Cate gory acc. IFRS 9 |
Book value |
(amor tized) Acqui sition costs |
Fair value not affecting affecting income income |
Carrying amount acc. IAS 17 |
Fair value (IFRS 13) |
Level |
|---|---|---|---|---|---|---|---|
| Assets | |||||||
| Cash and cash equivalents | AC 120,954 120,954 | n.a. | n.a. | ||||
| Trade accounts receivable | AC | 57,519 | 57,519 | n.a. | n.a. | ||
| Receivables from affiliated companies | AC | 676 | 676 | n.a. | n.a. | ||
| Other current financial assets | |||||||
| - Continuing Involvement | n.a. | 112 | n.a. | n.a. | |||
| - Receivable from loan issued | AC | 200 | 200 | 207 | 2 | ||
| - Other current financial assets (in the scope of IFRS 7) |
AC | 1,512 | 1,512 | - | - | ||
| - Other current financial assets (not in the scope of IFRS 7) |
n.a. | 1,254 | - | ||||
| - Call option | FVPL | 4,300 | - | 4,300 | 4,300 | 3 | |
| Financial assets | |||||||
| - Shares in affiliated companies | FVPL | 20 | 20 | 20 | 3 | ||
| - Participations | FVPL | 10 | 10 | 10 | 3 | ||
| Other non-current financial assets | |||||||
| - Other non-current financial assets | AC | 2,098 | 2,098 | n.a. | n.a. | ||
| Liabilities | |||||||
| Short-term financial liabilities | |||||||
| - Financial liabilities from finance lease | n.a. | 1,848 | 1,848 | n.a. | n.a. | ||
| - Liabilities to banks | AC | 64,057 | 64,057 | n.a. | n.a. | ||
| Trade accounts payable | AC | 65,078 | 65,078 | n.a. | n.a. | ||
| Other current financial liabilities | n.a. | n.a. | |||||
| - Continuing Involvement | n.a. | 112 | |||||
| - Contractual liabilities | n.a. | 165 | |||||
| - Other current financial liabilities (in the scope of IFRS 7) |
AC | 5,434 | 5,434 | n.a. | n.a. | ||
| - Other current financial liabilities (not in the scope of IFRS 7) |
n.a. 20,624 | - | |||||
| - Put option | FVPL | 3,407 | 3,407 | 3,407 | 3 | ||
| Long-term financial liabilities | |||||||
| - Financial liabilities from finance lease | n.a. | 11,062 | 11,062 | 11,213 | 2 | ||
| - Liabilities to banks | AC 241,522 241,522 | 249,729 | 2 | ||||
| Aggregated according to valuation categories in accordance with IFRS 9 |
|||||||
| Amortised Costs (Assets) | AC 182,959 182,959 | ||||||
| Fair Value through P&L (Asset) | FVPL | 4,330 | 4,330 | ||||
| Amortised Costs (Liabilities) | AC 376,091 376,091 | ||||||
| Fair Value through P&L (Liabilities) | FVPL | 3,407 | 3,407 |
| 31/12/2017 € 000s |
Cate gory acc. IAS 39 |
Book value |
(amor tized) Acqui sition costs |
Fair value not affecting affecting income income |
Carrying amount acc. IAS 17 |
Fair value (IFRS 13) |
Level | |
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash and cash equivalents | LaR 133,373 133,373 | n.a. | n.a. | |||||
| Trade accounts receivable | LaR | 57,826 | 57,826 | n.a. | n.a. | |||
| Receivables from affiliated companies | LaR | 731 | 731 | n.a. | n.a. | |||
| Other current financial assets | ||||||||
| - Further other current financial assets | LaR | 3,666 | 3,666 | n.a. | n.a. | |||
| Financial derivatives | ||||||||
| - Financial derivatives (with hedging) | n.a. | - | - | - | - | |||
| - Financial derivatives (without hedging) | FAaFV | - | - | - | - | |||
| Financial assets | ||||||||
| - Shares in affiliated companies | AfS | 20 | 20 | n.a. | n.a. | |||
| - Participations | AfS | 10 | 10 | n.a. | n.a. | |||
| - Loans to affiliated companies | LaR | 800 | 800 | 822 | 2 | |||
| Other non-current financial assets | ||||||||
| - Other loans | LaR | 1,951 | 1,951 | 2,069 | 2 | |||
| - Financial derivatives (with hedging) | n.a. | - | - | - | - | |||
| - Further other non-current financial assets - call option | FAaFV | 4,300 | 4,300 | 4,300 | 3 | |||
| - Further other non-current financial assets | LaR | 83 | 83 | n.a. | n.a. | |||
| Liabilities | ||||||||
| Short-term financial liabilities | ||||||||
| - Financial liabilities from finance lease | n.a. | 2,013 | 2,013 | n.a. | n.a. | |||
| - Liabilities to banks | FLAC | 3,643 | 3,643 | n.a. | n.a. | |||
| Long-term financial liabilities | ||||||||
| - Financial liabilities from finance lease | n.a. | 12,980 | 12,980 13,321 | 2 | ||||
| - Liabilities to banks | FLAC 304,681 304,681 | 319,101 | 2 | |||||
| Trade accounts payable | FLAC | 63,174 | 63,174 | n.a. | n.a. | |||
| Other current financial liabilities | FLAC 26,235 26,235 | n.a. | n.a. | |||||
| Other non-current financial liabilities - call option | FLaFV | 4,300 | 4,300 | 4,300 | 3 | |||
| Other non-current financial liabilities | FLAC | 71 | 71 | n.a. | n.a. | |||
| Key to abbreviations | ||||||||
| IFRS 9: | ||||||||
| AC | Amortized Costs | |||||||
| FVPL | At Fair Value through Profit & Loss | |||||||
| IAS 39: | ||||||||
| LaR | Loans and Receivables | |||||||
| AfS | Available for Sale | |||||||
| FAaFV | Financial Assets at Fair Value through profit/loss | |||||||
| FLaFV | Financial Liabilities at Fair Value through profit/loss | |||||||
| FLAC | Financial Liabilities at Amortised Cost |
| 31/12/2017 € 000s |
Cate gory acc. IAS 39 |
Book value |
(amor tized) Acqui sition costs |
Fair value not affecting affecting income income |
Carrying amount acc. IAS 17 |
Fair value (IFRS 13) |
Level | |
|---|---|---|---|---|---|---|---|---|
| Assets | ||||||||
| Cash and cash equivalents | LaR 133,373 133,373 | n.a. | n.a. | |||||
| Trade accounts receivable | LaR | 57,826 | 57,826 | n.a. | n.a. | |||
| Receivables from affiliated companies | LaR | 731 | 731 | n.a. | n.a. | |||
| Other current financial assets | ||||||||
| - Further other current financial assets | LaR | 3,666 | 3,666 | n.a. | n.a. | |||
| Financial derivatives | ||||||||
| - Financial derivatives (with hedging) | n.a. | - | - | - | - | |||
| - Financial derivatives (without hedging) | FAaFV | - | - | - | - | |||
| Financial assets | ||||||||
| - Shares in affiliated companies | AfS | 20 | 20 | n.a. | n.a. | |||
| - Participations | AfS | 10 | 10 | n.a. | n.a. | |||
| - Loans to affiliated companies | LaR | 800 | 800 | 822 | 2 | |||
| Other non-current financial assets | ||||||||
| - Other loans | LaR | 1,951 | 1,951 | 2,069 | 2 | |||
| - Financial derivatives (with hedging) | n.a. | - | - | - | - | |||
| - Further other non-current financial assets - call option | FAaFV | 4,300 | 4,300 | 4,300 | 3 | |||
| - Further other non-current financial assets | LaR | 83 | 83 | n.a. | n.a. | |||
| Liabilities | ||||||||
| Short-term financial liabilities | ||||||||
| - Financial liabilities from finance lease | n.a. | 2,013 | 2,013 | n.a. | n.a. | |||
| - Liabilities to banks | FLAC | 3,643 | 3,643 | n.a. | n.a. | |||
| Long-term financial liabilities | ||||||||
| - Financial liabilities from finance lease | n.a. | 12,980 | 12,980 13,321 | 2 | ||||
| - Liabilities to banks | FLAC 304,681 304,681 | 319,101 | 2 | |||||
| Trade accounts payable | FLAC | 63,174 | 63,174 | n.a. | n.a. | |||
| Other current financial liabilities | FLAC 26,235 26,235 | n.a. | n.a. | |||||
| Other non-current financial liabilities - call option | FLaFV | 4,300 | 4,300 | 4,300 | 3 | |||
| Other non-current financial liabilities | FLAC | 71 | 71 | n.a. | n.a. | |||
| Key to abbreviations | ||||||||
| IFRS 9: | ||||||||
| AC | Amortized Costs | |||||||
| FVPL | At Fair Value through Profit & Loss | |||||||
| IAS 39: | ||||||||
| LaR | Loans and Receivables | |||||||
| AfS | Available for Sale | |||||||
Cash and cash equivalents, trade accounts receivable, (not including those receivables which are separated in the framework of a factoring programme), supplies to associated companies and components of other current financial assets and current financial liabilities, trade payables and other financial liabilities that primarily have short residual terms are recognized at "Amortized Costs". The values reported therefore correspond approximately to the fair values on the reporting date.
The trade payables that are separated in the framework of the factoring programme are recognized at fair value through profit and loss.
The current financial assets recognized at fair value through profit or loss or respectively the Nenplas call option included therein corresponds to the fair value of the call option for the acquisition of the remaining 15 % of the shares in the Nenplas Group amounting to € 000s 4,300 (2017: € 000s 4,300). Correspondingly, the call option granted to the seller for the 15 % of the Nenplas shares in the amount of the fair value of € 000s 3,407 (2017: € 000s 4,300) is recognized as financial liabilities. The valuation of the option is based on the current and expected EBITDA. If the average EBITDA increases or decreases by 10 %, the value of the option rises or falls by € 000s 632. The purchase and sale option can be exercised at any time up until December 2019.
The fair value of liabilities to banks is determined as a present value taking account of the payments associated with the liabilities based on the relevant interest structure curve in each case and the credit spread curve differentiated according to currencies.
During the course of this business year and the previous business year, there were no reclassifications between the measurement categories or reclassifications within the fair value hierarchy. The SURTECO Group decides as necessary with the date of the event or the change in circumstances which have caused a regrouping whether a reclassification is necessary.
The net gains and losses in the income statement arising from financial instruments are presented in the following table:
The net gains and losses for assets recognized at amortized costs essentially relate to changes in allowances and currency translations, allowance reversals and interest income. The net gains and losses for liabilities recognized at amortized costs result from currency translation and interest expenses. The net gains for financial liabilities reported at market value through profit and loss related to the value development of the put call option.
No derivative financial instruments were held on the reporting date.
Interest income on financial instruments in the amount of € 000s 532 and interest expenses in the amount of € 000s -7,334 relate to the net gains and losses respectively.
The financial assets shown in the following table are subject to offsetting, implementable global netting agreements or similar agreements.
Balance sheet offsets occurred with trade accounts payable and on which credits are granted or received.
a. Financial assets
b. Financial liabilities
| € 000s | |
|---|---|
The amounts of financial assets and liabilities, which have led to no offsetting in the balance sheet, are subject to global netting agreements or similar agreements for which offsetting is only possible under specific prerequisites (e.g. insolvency).
| € 000s 2017 |
2018 |
|---|---|
| Gains from assets recognized at amortized costs 625 |
1,704 |
| Losses from assets recognized at amortized costs -1,064 |
-1,007 |
| Gains/losses from assets recognized at amortized costs -439 |
697 |
| Gains from liabilities recognized at amortized costs 1,716 |
2,493 |
| Losses from liabilities recognized at amortized costs -12,384 |
-8,559 |
| Gains/losses from liabilities recognized at amortized costs -10,668 |
-6,066 |
| Gains from liabilities recognized at fair value through profit and loss | - 893 |
| Loses from liabilities recognized at fair value through profit and loss | - - |
| Gains from liabilities recognized at fair value through profit and loss 0 |
893 |
| € 000s | Related amounts not set off in the balance sheet |
||||||
|---|---|---|---|---|---|---|---|
| Gross amounts of recognized financial assets |
Gross amounts of recognized financial liabilities set off in the balance sheet |
Net amounts of financial assets presented in the balance sheet |
Financial instruments |
Cash collateral received |
Net amount | ||
| 31/12/2018 | |||||||
| Trade accounts receivable | 58,633 | -1,115 | 57,518 | - | - | 57,518 | |
| 58,633 | -1,115 | 57,518 | - | - | 57,518 | ||
| 31/12/2017 | |||||||
| Trade accounts receivable | 61,421 | -3,595 | 57,826 | - | - | 57,826 | |
| 61,421 | -3,595 | 57,826 | - | - | 57,826 |
| € 000s | Gross amounts of recognized financial |
Gross amounts of recognized financial assets set off in the |
Net amounts of financial liabilities presented in the balance |
Related amounts not set off in the balance sheet Financial |
Cash collateral |
|
|---|---|---|---|---|---|---|
| liabilities | balance sheet | sheet | instruments | provided | Net amount | |
| 31/12/2018 | ||||||
| Trade accounts payable | 66,193 | -1,115 | 65,078 | - | - | 65,078 |
| 66,193 | -1,115 | 65,078 | - | - | 65,078 | |
| 31/12/2017 | ||||||
| Trade accounts payable | 66,769 | -3,595 | 63,174 | - | - | 63,174 |
| 66,769 | -3,595 | 63,174 | - | - | 63,174 |
The cash flow statement was prepared in accordance with IAS 7. It is structured on the basis of cash flows arising from operating activities, from investment such as financing activities. The effects of changes in the group of companies consolidated are eliminated in the relevant items. The cash flows arising from investment and financing activities are calculated on the basis of payments, cash flow arising from current business operations is derived indirectly.
The financial resources only include the cash and cash equivalents of the SURTECO Group reported in the balance sheet. By contrast, financial controlling in the SURTECO Group is based on the financial balance, which apart from cash and cash equivalents also includes debt.
The operating expenses and income with no effect on liquidity and results from disposal of assets, are eliminated in cash flow from current business operations.
The cash flow from financing activities is comprised of dividend payments, borrowing and repayment of debts such as interest payments from loans.
The activities of the SURTECO Group are segmented on the basis of operating segments according to IFRS 8 within the scope of segment reporting. As at 31 December 2018, the breakdown is based on internal controlling and reporting. It takes into account the product-oriented split of SURTECO into the two Strategic Business Units (SBU) Paper and Plastics. Each company within the Group is assigned to the appropriate segment essentially in accordance with the list "SURTECO Holdings".
• The SBU Paper comprises the production and sale of decor papers, finish foils, impregnates,
• The SBU Plastics includes the production and sale of thermoplastic edgings, skirtings and extrusion (profiles) for flooring wholesalers, and ranges for home-improvement and do-it-your-
• Consolidation measures, the holding company SURTECO GROUP SE and income, expenses, assets and liabilities, which are not directly attributable to the segments, are recognized in the
The segment information is based on the same recognition, accounting and valuation methods as those used in the consolidated financial statements. There are no changes in valuation methods compared with previous periods. Assets and liabilities, provisions, income and expenses, as well as earnings between the segments are eliminated in the consolidations. Internal sales within the Group are transacted at commercial prices.
The operating segment assets and the operating segment liabilities are comprised of the assets necessary for operations and borrowings – without liquid funds, interest-bearing assets and liabilities, and tax assets and liabilities.
The Management Board holds the power of decision-making with regard to the allocation of the resources and the measurement of the earnings power of the reportable segments. Uniform performance and assets values are used in the relevant business segments for this purpose.
The business relationships between the companies in the segments are organized on the basis of dealing-at-arm's-length. Administrative services are calculated as cost allocations.
| Segment information by regional markets | ||||||
|---|---|---|---|---|---|---|
| € 000s | 2017 | 2018 | ||||
| Sales | Non-current | Sales | Non-current | |||
| Revenues | assets Investments | Revenues | assets Investments | |||
| Germany | 175,653 | 231,328 | 25,872 | 169,990 | 233,139 | 30,877 |
| Rest of Europe | 315,216 | 171,475 | 10,527 | 325,193 | 166,542 | 6,928 |
| America | 140,723 | 55,351 | 4,890 | 141,648 | 47,869 | 7,932 |
| Asia/Australia | 52,151 | 30,032 | 1,419 | 54,984 | 30,394 | 1,800 |
| Other | 5,907 | 0 | 0 | 7,162 | 0 | 0 |
| 689,651 | 488,186 | 42,707 | 698,977 | 477,944 | 47,537 | |
| Non-current assets include property, plant and equipment, intangible assets and goodwill. The non-current assets were allocated to goodwill by regions. Reconciliation of balance sheet total with net segment assets |
||||||
| € 000s | 2017 | 2018 | ||||
| Balance sheet total | 842,596 | 839,921 | ||||
| Less financial assets | ||||||
| - Cash and cash equivalents | 133,373 | 120,954 | ||||
| - Financial assets and investments accounted for using the equity method | 2,887 | 2,462 | ||||
| - Tax assets / deferred tax assets | 20,404 | 19,107 | ||||
| Segment assets | 685,932 | 697,398 | ||||
| Current and non-current liabilities | 493,360 | 491,336 | ||||
| Less financial liabilities - Short-term and long-term financial liabilities |
323,317 | 318,489 | ||||
| - Tax liabilities / deferred tax liabilities | 55,197 | 51,109 | ||||
| - Pensions and other personnel-related obligations | 12,814 | 12,828 | ||||
| Segment liabilities | 102,032 | 108,910 | ||||
| Net segment assets | 583,900 | 588,488 |
| Segment information | SBU | SBU | Recon | SURTECO |
|---|---|---|---|---|
| € 000s | Paper | Plastics | ciliation | Group |
| 2018 | ||||
| External sales | 351,615 | 347,362 | 0 | 698,977 |
| Internal sales within the SURTECO Group | 705 | 4 | -709 | 0 |
| Total sales | 352,320 | 347,366 | -709 | 698,977 |
| Depreciation and amortization | -18,998 | -21,406 | -173 | -40,577 |
| Segment earnings (EBIT) | 13,307 | 25,513 | -6,618 | 32,202 |
| Interest income | 317 | 1,405 | -290 | 1,432 |
| Interest expenses | -1,363 | -1,861 | -4,266 | -7,490 |
| Segment earnings (EBT) | 12,702 | 26,756 | -12,325 | 27,133 |
| Income tax | -1,523 | -6,532 | -149 | -8,204 |
| Share of profit of investments accounted for using the equity method | 0 | 540 | 540 | |
| Segment assets | 298,806 | 373,359 | 25,233 | 697,398 |
| Segment liabilities | 160,254 | 172,788 | -224,132 | 108,910 |
| Net segment assets | 138,552 | 200,571 | 249,366 | 588,488 |
| Book value of investments accounted for using the equity method | 0 | 2,378 | 2,378 | |
| Investments in property, plant and equipment and intangible assets |
25,277 | 22,143 | 117 | 47,537 |
| Employees | 1,365 | 1,944 | 21 | 3,329 |
| 2017 | ||||
| External sales | 367,952 | 321,698 | 0 | 689,651 |
| Internal sales within the SURTECO Group | 815 | 4 | -819 | 0 |
| Total sales | 368,767 | 321,702 | -819 | 689,651 |
| Depreciation and amortization | -19,115 | -19,112 | -196 | -38,423 |
| Segment earnings (EBIT) | 26,924 | 24,570 | -6,824 | 44,670 |
| Interest income | 336 | 565 | -256 | 645 |
| Interest expenses | -1,497 | -2,125 | -4,735 | -8,357 |
| Segment earnings (EBT) | 25,761 | 24,284 | -16,530 | 33,515 |
| Income tax | -2,644 | -4,831 | 287 | -7,188 |
| Share of profit of investments account for using the equity method | 0 | 413 | 0 | 413 |
| Segment assets | 283,731 | 370,621 | 31,581 | 685,932 |
| Segment liabilities | 147,096 | 182,266 | -227,331 | 102,031 |
| Net segment assets | 136,635 | 188,354 | 258,911 | 583,901 |
| Book value of investments accounted for using the equity method | 0 | 1,988 | 0 | 1,988 |
| Investments in property, plant and equipment and intangible assets |
17,896 | 24,613 | 198 | 42,707 |
| Employees | 1,347 | 1,724 | 20 | 3,091 |
The following table shows the scope of relationships between the SURTECO Group and the company accounted for using the equity method.
The following table shows the scope of relationships between SURTECO Group and the non-consolidated companies.
Outstanding items in respective of these companies are not secured. We refer to the explanations in section (7) in relation to allowances on receivables.
The exchange of services essentially comprises the delivery of inventories at market conditions.
On 31 December 2018, the SURTECO Group issued guarantees amounting to € 000s 106 (2017: € 000s 106) to a non-consolidated company for the fulfilment of individual contracts by non-consolidated companies. It is assumed that no obligations will arise as a result of these guarantees.
Total compensation of the Supervisory Board for the business year 2018 amounted to € 000s 280 (2017: € 000s 386). It includes basic remuneration of € 000s 242 (2017: € 000s 352) and compensation for audit-committee activities of € 000s 38 (2017: € 000s 34).
Most of the remuneration for members of the Management Board is performance based. It includes a fixed element and a variable element. The variable element is a bonus based on performance and is calculated on the basis of the Earnings Before Tax (EBT) of the Group in accordance with IFRS, taking into account the return on sales. It also includes a basis of assessment over several years. The total guaranteed remuneration of the active members of the Management Board amounted to € 000s 1,728 (2017: € 000s 2,977) for the business year 2018. Out of this amount, € 000s 730 (2017: € 000s 820) were attributable to the fixed compensation, € 000s 784 (2017: € 000s 1,950) to the performance-based compensation and € 000s 114 (2017: € 000s 107) to fringe benefits and € 000s 100 (2017: € 000s 100) to pension expenses. Out of the total compensation of the active members of the Management Board, € 000s 127 are long term, € 000s 1,501 are short term and € 000s 100 are pension expenses. A contract was concluded with Dr.-Ing. Herbert Müller relating to the premature termination of his contract of service. This defines a one-off payment of € 000s 2,450. The former Member of the
The information about individual compensation and the information in accordance with IAS 24 is provided in the compensation report of the Management Report of the SURTECO Group and SURTECO GROUP SE.
On the reporting date, 1,500 shares (2018: 2,000) of the company were held directly and indirectly by the members of the Management Board and 239,922 shares (2017: 242,767) were held directly or indirectly by the members of the Supervisory Board.
At the Annual General Meeting on 28 June 2018, auditing firm PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, was appointed as the auditor of the financial statements and auditor to carry out the audit inspection of the interim financial reports for the business year 2018.
The total fee for the business year amounted to € 000s 873. Out of this € 000s 661 was attributed to services for auditing the financial statements, € 000s 3 to other confirmation services, € 000s 134 to tax consultancy services and € 000s 75 to miscellaneous services. The auditing services include auditing of the consolidated financial statements and auditing of the separate financial statements of SURTECO GROUP SE and the domestic subsidiary companies. The tax consultancy services essentially relate to consultancy services for the preparation of tax returns. The other services include project-related consultancy services.
No events or developments occurred until 18 April 2019 which could have resulted in a significant change to the recognition or valuation of individual assets or liabilities at 31 December 2018.
| € 000s | 2017 | 2018 |
|---|---|---|
| Services rendered (income) | 1,306 | 1,132 |
| Services received (expense) | 0 | 0 |
| Receivables (31/12/) | 61 | 139 |
| Liabilities (31/12/) | 0 | 0 |
| € 000s | 2017 | 2018 |
|---|---|---|
| Services rendered (income) | 735 | 805 |
| Services received (expense) | 0 | 0 |
| Receivables (31/12/) | 1,441 | 537 |
| Liabilities (31/12/) | 0 | 0 |
The Management Board and the Supervisory Board of SURTECO GROUP SE have submitted the Declaration of Compliance in respect of the Corporate Governance Code pursuant to § 161 Sentence 1 Stock Corporation Act (AktG) on 19 December 2018 and made this declaration available to shareholders on the website of the company at: www.ir.surteco-group.com. These declarations are intended to demonstrate compliance with all key aspects of the recommendations on conduct promulgated by the "Government Committee on the German Corporate Governance Code".
| Management Board (in the business year 2018) |
||
|---|---|---|
| Name | Main activity | Supervisory Board Memberships of other companies and other mandates |
| Dr.-Ing. Herbert Müller Engineer, Heiligenhaus |
Chairman of the Management Board, Group Strategy, Strategic Business Unit Plastics |
• Chairman ofthe Supervisory Board of Ewald Dörken AG, Herdecke |
| Andreas Riedl Graduate in Business Administration, Donauwörth |
Board Member CFO |
- |
| Dr.-Ing. Gereon Schäfer Engineer, Kempen (until 31 March 2018) |
Board Member Strategic Business Unit Paper |
- |
| (in the business year 2018) | Members of the Supervisory Board | |||||||
|---|---|---|---|---|---|---|---|---|
| Name | Main activity | Supervisory Board Memberships of other companies and other mandates |
||||||
| Dr.-Ing. Jürgen Großmann Engineer, Hamburg (Chairman) |
Shareholder of the GMH Group, Georgsmarienhütte |
• Member of the Supervisory Board of Deutsche Bahn AG, Berlin (until 18 July 2018) • Member of the Board, Hanover Acceptances Limited, London • Chairman of the Board of Trustees of RAG Stiftung, Essen |
||||||
| Björn Ahrenkiel Lawyer, Hürtgenwald (Vice Chairman) |
Lawyer | - | ||||||
| Dr. Markus Miele Industrial Engineer, Gütersloh (Deputy Chairman) |
Managing Shareholder of Miele & Cie. KG, Gütersloh |
• Member of the Supervisory Board of ERGO Versicherungsgruppe AG, Düsseldorf • Chairman of the Advisory Board of Wilhelm Bölhoff GmbH & Co. KG, Bielefeld (from 27 June 2018) |
||||||
| Dr. Christoph Amberger Independent Businessman, Utting am Ammersee |
Independent Businessman | • Member of the Advisory Board of Frischpack GmbH, Mailling • Member of the Advisory Board of the Detia Degesch Group, Laudenbach • Deputy Chairman of the Supervisory Board of Klöpfer & Königer GmbH und Co. KG, Garching • Member of the Supervisory Board of Erber AG, Gesetzersdorf, Austria (from March 2018) |
||||||
| Andreas Engelhardt Managing Shareholder, Bielefeld (from 28 June 2018) |
Managing and personally liable shareholder of Schüco International KG, Bielefeld |
• Member of the Supervisory Board of SAINT GOBAIN ISOVER G+H AG, Ludwigshafen • Member of the Supervisory Board of BDO WPG AG, Hamburg |
| Name | Main activity | Supervisory Board Memberships of other companies and other mandates |
|||||
|---|---|---|---|---|---|---|---|
| Jens Krazeisen* Process Mechanic, Buttenwiesen |
Chairman of the Works Council of SURTECO GmbH, Buttenwiesen |
- | |||||
| Wolfgang Moyses Master of Business Administration, Munich |
Chairman of the Manage ment Board of SIMONA AG, Kirn |
• Member of the Supervisory Board of Brabender Inc., South Hackensack • Member of the Customer Advisory Board of Landesbank Rheinland-Pfalz, Mainz |
|||||
| Udo Sadlowski* Training Manager, Essen |
Chairman of the Works Council of SURTECO GmbH, Gladbeck |
- | |||||
| Dr.-Ing. Walter Schlebusch Engineer, Munich (until 28 June 2018) |
Member of the Advisory Board of Giesecke & Devrient GmbH, München |
• Member of the Advisory Board of Giesecke & Devrient GmbH, München |
|||||
| Thomas Stockhausen* Specialist in Safety at Work, Sassenberg |
Chairman of the Works Council of SURTECO GmbH, Sassenberg |
- | |||||
| * Employee Representative | |||||||
| Committees of the Supervisory Board | |||||||
| Presiding Board | |||||||
| Dr.-Ing. Jürgen Großmann (Chairman) | Björn Ahrenkiel | Dr. Christoph Amberger | Dr. Markus Miele | ||||
| Personnel Committee | |||||||
| Dr.-Ing. Jürgen Großmann (Chairman) | Björn Ahrenkiel | Dr. Christoph Amberger | Dr. Markus Miele | ||||
| Audit Committee | |||||||
| Björn Ahrenkiel (Chairman) | Dr.-Ing. Jürgen Großmann Wolfgang Moyses |
| Name | Main activity | Supervisory Board Memberships of other companies and other mandates |
||||||
|---|---|---|---|---|---|---|---|---|
| Jens Krazeisen* Process Mechanic, Buttenwiesen |
Buttenwiesen | Chairman of the Works Council of SURTECO GmbH, |
- | |||||
| Wolfgang Moyses Master of Business Administration, Munich |
Chairman of the Manage ment Board of SIMONA AG, Kirn |
• Member of the Supervisory Board of Brabender Inc., South Hackensack • Member of the Customer Advisory Board of Landesbank Rheinland-Pfalz, Mainz |
||||||
| Udo Sadlowski* Training Manager, Essen |
Gladbeck | Chairman of the Works Council of SURTECO GmbH, |
- | |||||
| Dr.-Ing. Walter Schlebusch Engineer, Munich (until 28 June 2018) |
Member of the Advisory Board of Giesecke & Devrient GmbH, München |
• Member of the Advisory Board of Giesecke & Devrient GmbH, München |
||||||
| Thomas Stockhausen* Specialist in Safety at Work, Sassenberg |
Chairman of the Works Council of SURTECO GmbH, Sassenberg |
|||||||
| * Employee Representative | ||||||||
| Committees of the Supervisory Board | ||||||||
| Presiding Board | ||||||||
| Dr.-Ing. Jürgen Großmann (Chairman) | Björn Ahrenkiel | Dr. Christoph Amberger | Dr. Markus Miele | |||||
| Personnel Committee | ||||||||
| Dr.-Ing. Jürgen Großmann (Chairman) | Björn Ahrenkiel | Dr. Christoph Amberger | Dr. Markus Miele | |||||
| Audit Committee | ||||||||
| Björn Ahrenkiel (Chairman) Dr.-Ing. Jürgen Großmann Wolfgang Moyses |
| Country | Consol idated |
Percentage of shares held by SURTECO GROUP SE |
Partici pation in no. |
||
|---|---|---|---|---|---|
| Parent Company | |||||
| 100 SURTECO GROUP SE, Buttenwiesen | Germany | ||||
| 200 Surteco Beteiligungen GmbH, Buttenwiesen | Germany | F | 100.00 | 100 | |
| Strategic Business Unit Paper | Strategic Business Unit Plastics | ||||
| 401 SURTECO GmbH, Buttenwiesen/Gladbeck/Sassenberg | Germany | F | 100.00 | 100 | |
| 321 SURTECO art GmbH, Willich | Germany | F | 100.00 | 401 | |
| 330 DAKOR Melamin Imprägnierungen GmbH, Heroldstatt | Germany | F | 100.00 | 200 | |
| 341 SÜDDEKOR LLC, Agawam | USA | F | 100.00 | 401 | |
| 405 SURTECO UK Ltd., Burnley | United Kingdom | F | 100.00 | 401 | |
| 410 Kröning GmbH, Hüllhorst | Germany | F | 100.00 | 200 | |
| 441 BauschLinnemann North America Inc., Myrtle Beach | USA | F | 100.00 | 401 | |
| 443 SURTECO North America Inc., Myrtle Beach | USA | NC | 100.00 | 401 | |
| 470 SURTECO Italia s.r.l., Martellago | Italy | F | 100.00 | 401 | |
| F = Full Consolidation E = Consolidation at Equity NC = Not Consolidated |
|||||
Participation in no.
| 501 Global Abbasi, S. L., Madrid | Spain | F | 100.00 | 401 | |
|---|---|---|---|---|---|
| 502 Probos - Plásticos, S. A., Mindelo | Portugal | F | 100.00 | 501 | |
| 503 Proadec Brasil Ltda., Sao José dos Pinhais | Brazil | F | 100.00 | 502 | |
| 504 Chapacinta, S. A. de C. V., Tultitlán | Mexico | F | 99.99 | 502 | |
| 0.01 | 501 | ||||
| 505 Proadec UK Ltd., Greenhithe (Kent) | United Kingdom | F | 100.00 | 502 | |
| 506 Proadec Deutschland GmbH, Bad Oeynhausen | Germany | F | 100.00 | 502 | |
| 512 SURTECO Australia Pty Limited, Sydney | Australia | F | 100.00 | 401 | |
| 513 SURTECO PTE Ltd., Singapore | Singapore | F | 100.00 | 401 | |
| 514 PT Doellken Bintan Edgings & Profiles, Batam | Indonesia | F | 99.00 | 401 | |
| 1.00 | 513 | ||||
| 516 SURTECO France S.A.S., Beaucouzé | France | F | 100.00 | 401 | |
| 517 | SURTECO DEKOR Ürünleri Sanayi ve Ticaret A.Ş., Istanbul | Turkey | F | 99.75 | 410 |
| 0.25 | 520 | ||||
| 518 SURTECO OOO, Moscow | Russia | F | 100.00 | 401 | |
| 519 SURTECO Iberia S.L., Madrid | Spain | NC | 100.00 | 401 | |
| 520 Döllken Profiles GmbH, Nohra (formerly Döllken-Weimar GmbH) Germany | F | 100.00 | 100 | ||
| 531 Döllken Sp.z o.o., Kattowitz | Poland | F | 100.00 | 520 | |
| 532 Döllken CZ s.r.o., Prague | Czech Republic | F | 100.00 | 520 | |
| 540 Nenplas Holdings Ltd., Ashbourne | United Kingdom | F | 85.00 | 520 | |
| 541 Nenplas Ltd., Ashbourne | United Kingdom | F | 100.00 | 540 | |
| 542 Polyplas Extrusions Ltd., Stourport-on-Severn | United Kingdom | F | 100.00 | 541 | |
| 543 Delta Plastics Ltd., Wolverhampton | United Kingdom | F | 100.00 | 541 | |
| 544 Nenplas Properties Ltd., Ashbourne | United Kingdom | F | 100.00 | 545 | |
| 545 Nenplas Properties Holdings Ltd., Ashbourne | United Kingdom | F | 100.00 | 540 | |
| 550 SURTECO USA Inc., Greensboro | USA | F | 100.00 | 401 | |
| 560 SURTECO Canada Ltd, Brampton | Canada | F | 100.00 | 401 | |
| 561 Doellken-Canada Ltd., Brampton | Canada | F | 100.00 | 560 | |
| 572 Canplast Mexico S.A. de C.V., Chihuahua | Mexico | E | 50.00 | 561 | |
| 610 SURTECO Svenska AB, Gislaved | Sweden | F | 100.00 | 100 | |
| 611 | Gislaved Folie AB, Gislaved | Sweden | F | 100.00 | 610 |
| JORNA Grundstücks-Verwaltungsgesellschaft mbH & Co. KG, Grünwald |
Germany | F | 520 | ||
| SANDIX Grundstücks-Vermietungsgesellschaft mbH & Co. Objekt Weimar KG, Düsseldorf |
Germany | F | 520 |
To SURTECO GROUP SE, Buttenwiesen
We have audited the consolidated financial statements of SURTECO GROUP SE, Buttenwiesen, and its subsidiaries (the Group), which comprise the consolidated statement of financial position as at December 31, 2018, and the consolidated statement of profit or loss, consolidated statement of comprehensive income, consolidated statement of cash flows and consolidated statement of changes in equity for the financial year from January 1 to December 31, 2018, and notes to the consolidated financial statements, including a summary of significant accounting policies. In addition, we have audited the group management report of SURTECO GROUP SE, which is combined with the Company's management report, for the financial year from January 1 to December 31, 2018. In accordance with the German legal requirements, we have not audited the content of those parts of the group management report listed in the "Other Information" section of our auditor's report.
In our opinion, on the basis of the knowledge obtained in the audit,
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reservations relating to the legal compliance of the consolidated financial statements and of the group management report.
We conducted our audit of the consolidated financial statements and of the group management report in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subsequently as "EU Audit Regulation") and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are further described in the "Auditor's Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report" section of our auditor's report. We are independent of the group entities in accordance with the requirements of European law and German commercial and professional law, and we have fulfilled our other German professional responsibilities in accordance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Audit Regulation, we declare that we have not provided non-audit services prohibited under Article 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions on the consolidated financial statements and on the group management report.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the financial year from January 1 to December 31, 2018. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit opinion on these matters.
In our view, the matter of most significance in our audit was as follows: ➊ Recoverability of goodwill
Our presentation of this key audit matter has been structured as follows: Matter and issue Audit approach and findings Reference to further information
Hereinafter we present the key audit matter:
(19.3 % of total assets or 46.1 % of equity) is reported under the "Goodwill" balance sheet item. pairment to determine any possible need for write-downs. The impairment test is carried out at the level of the groups of cash-generating units to which the relevant goodwill is allocated. The carrying ing recoverable amount in the context of the impairment test. The recoverable amount is generally determined using the value in use. The present value of the future cash flows from the respective culated using discounted cash flow models. For this purpose, the adopted medium-term business term rates of growth. Expectations relating to future market developments and assumptions about the development of macroeconomic factors are also taken into account. The discount rate used
➀ In the Company's consolidated financial statements goodwill amounting in total to EUR 162.9 million Goodwill is tested for impairment by the Company once a year or when there are indications of imamount of the relevant cash-generating units, including goodwill, is compared with the correspondgroup of cash-generating units normally serves as the basis of valuation. Present values are calplan of the Group forms the starting point which is extrapolated based on assumptions about longis the weighted average cost of capital for the respective group of cash-generating units. The impairment test determined that no write-downs were necessary. The outcome of this valuation is dependent to a large extent on the estimates made by the executive directors with respect to the future cash inflows from the respective group of cash-generating units, the discount rate used, the rate of growth and other assumptions, and is therefore subject to considerable uncertainty. Against this background and due to the complex nature of the valuation, this matter was of particular significance in the context of our audit.
➁ As part of our audit, we assessed the methodology used for the purposes of performing the impairment test, among other things. After matching the future cash inflows used for the calculation against the adopted medium-term business plan of the Group, we assessed the appropriateness of the calculation, in particular by reconciling it with general and sector-specific market expectations. In addition, we assessed the appropriate consideration of the costs of Group functions. In the knowledge that even relatively small changes in the discount rate applied can have a material impact on the value of the entity calculated in this way, we focused our testing in particular on the parameters used to determine the discount rate applied, and assessed the calculation model. In order to reflect the uncertainty inherent in the projections, we evaluated the sensitivity analyses performed by the Company. Taking into account the information available, we determined that the carrying amounts of the respective cash-generating units, including the goodwill, were adequately covered by the discounted future cash flows.
Overall, the valuation parameters and assumptions used by the executive directors are in line with our expectations and are also within the ranges considered by us to be reasonable.
➂ The Company's disclosures on goodwill are contained in section IX (21) of the notes to the consolidated financial statements.
The executive directors are responsible for the other information. The other information comprises the following non-audited parts of the group management report:
The other information comprises further the remaining parts of the annual report – excluding cross-references to external information – with the exception of the audited consolidated financial statements, the audited group management report and our auditor's report.
Our audit opinions on the consolidated financial statements and on the group management report do not cover the other information, and consequently we do not express an audit opinion or any other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the other information and, in so doing, to consider whether the other information
The executive directors are responsible for the preparation of the consolidated financial statements that comply, in all material respects, with IFRSs as adopted by the EU and the additional requirements of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial statements, in compliance with these requirements, give a true and fair view of the assets, liabilities, financial position, and financial performance of the Group. In addition the executive directors are responsible for such internal control as they have determined necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the executive directors are responsible for assessing the Group's ability to continue as a going concern. They also have the responsibility for disclosing, as applicable, matters related to going concern. In addition, they are responsible for financial reporting based on the going concern basis of accounting unless there is an intention to liquidate the Group or to cease operations, or there is no realistic alternative but to do so. Furthermore, the executive directors are responsible for the preparation of the group management report that, as a whole, provides an appropriate view of the Group's position and is, in all material respects, consistent with the consolidated financial statements, complies with German legal requirements, and appropriately presents the opportunities and risks of future development. In addition, the executive directors are responsible for such arrangements and measures (systems) as they have considered necessary to enable the preparation of a group management report that is in accordance with the applicable German legal requirements, and to be able to provide sufficient appropriate evidence for the assertions in the group management report.
The supervisory board is responsible for overseeing the Group's financial reporting process for the preparation of the consolidated financial statements and of the group management report.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the group management report as a whole provides an appropriate view of the Group's position and, in all material respects, is consistent with the consolidated financial statements and the knowledge obtained in the audit, complies with the German legal requirements and appropriately presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the consolidated financial statements and on the group management report. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally Accepted Standards for Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements and this group management report.
We exercise professional judgment and maintain professional skepticism throughout the audit. We also:
• Obtain an understanding of internal control relevant to the audit of the consolidated financial statements and of arrangements and measures (systems) relevant to the audit of the group management report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an audit opinion on the effectiveness of these systems.
• Evaluate the appropriateness of accounting policies used by the executive directors and the reasonableness of estimates made by the executive directors and related disclosures.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the relevant independence requirements, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, the related safeguards. From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter.
We were elected as group auditor by the annual general meeting on June 28, 2018. We were engaged by the supervisory board on October 22, 2018. We have been the group auditor of SURTECO GROUP SE, Buttenwiesen, without interruption since the financial year 2011. We declare that the audit opinions expressed in this auditor's report are consistent with the additional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form audit report).
The German Public Auditor responsible for the engagement is Jürgen Schumann.
Munich, 18 April 2019
| Jürgen Schumann | ppa. Bernhard Obermayr |
|---|---|
| Wirtschaftsprüfer | Wirtschaftsprüfer |
| (German Public Auditor) | (German Public Auditor) |
To the best of our knowledge, and in accordance with the applicable reporting principles, the consolidated financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the group, and the group management report includes a fair review of the development and performance of the business and the position of the group, together with a description of the principal opportunities and risks associated with the expected development of the group.
Buttenwiesen, 18 April 2019
The Management Board
Dr.-Ing. Herbert Müller Andreas Riedl
| € 000s | 31/12/2017 | 31/12/2018 |
|---|---|---|
| ASSETS | ||
| Intangible assets | 60 | 17 |
| Tangible assets | 423 | 403 |
| Investments | ||
| - Interest in affiliated enterprises | 297,742 | 297,767 |
| - Notes receivable to affiliated enterprises | 17,238 | 16,526 |
| - Participations | 1 | 1 |
| Fixed assets | 315,464 | 314,714 |
| Receivables and other assets | ||
| - Receivables from affiliated enterprises | 228,814 | 221,431 |
| - Other assets | 5,633 | 8,094 |
| Cash in hand, bank balances | 109,071 | 102,067 |
| Current assets | 343,518 | 331,592 |
| Prepaid expenses | 864 | 712 |
| 659,846 | 647,018 | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Subscribed capital | 15,506 | 15,506 |
| Additional paid-in capital | 170,177 | 170,177 |
| Retained earnings | 111,123 | 103,394 |
| Net profit | 12,405 | 8,529 |
| Equity | 309,211 | 297,606 |
| Tax accruals | 1,624 | 1,341 |
| Other accruals | 3,409 | 4,719 |
| Accrued expenses | 5,033 | 6,060 |
| Liabilities to banks | 308,033 | 304,891 |
| Trade accounts payable | 326 | 295 |
| Liabilities to affiliated enterprises | 32,391 | 33,333 |
| Other liabilities | 4,834 | 4,820 |
| Liabilities | 345,584 | 343,339 |
| Deferred income | 18 | 13 |
| 659,846 | 647,018 |
The Annual Financial Statements of SURTECO GROUP SE have been published in the Federal Gazette (Bundesanzeiger) and filed at the Company Register of the Local Court Augsburg (Amtsgericht Augsburg). The Balance Sheet and the Income Statement (short version) from these Annual Financial Statements are published here. PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Munich, audited the Annual Financial Statements and provided them with an unqualified auditor's opinion.
The Annual Financial Statements can be requested from SURTECO GROUP SE, Johan-Viktor-Bausch-Str. 2, 86647 Buttenwiesen, Germany.
| € 000s | 1/1/-31/12/ 2017 |
1/1/-31/12/ 2018 |
|---|---|---|
| Sales revenues | 1,732 | 2,161 |
| Income from profit and loss transfer agreements | 30,709 | 14,733 |
| Losses from profit and loss transfer agreements | -154 | 0 |
| Other operating income | 1,198 | 1,663 |
| Personnel expenses | -4,977 | -6,576 |
| Amortization and depreciation on intangible assets and property, plant and equipment |
-188 | -172 |
| Other operating expenses | -7,658 | -4,487 |
| Income from long-term securities and loans from financial assets | 471 | 441 |
| Interest income | -6,359 | -5,216 |
| Income taxes | -716 | -1,652 |
| Earnings after tax | 14,058 | 895 |
| Other taxes | -4 | -95 |
| Net income | 14,054 | 800 |
| Transfer to retained earnings | -1,649 | 0 |
| Transfer from retained earnings | 0 | 7,729 |
| Net profit | 12,405 | 8,529 |
Authorized capital relates to the authorization of the Board of Management to increase the capital stock up to a specified nominal amount by issuing new shares subject to the approval of the Supervisory Board. The authorization is granted by the Annual General Meeting and requires a three-quarter majority of the represented capital. The term is a maximum of five years. Furthermore, the authorized capital may not be higher than half of the capital stock. Authorized capital gives the Board of Management the opportunity to increase the equity capital of the company at a favourable time for the company and in accordance with the capital requirement and situation on the stock exchange, without having to convene an Annual General Meeting.
Calendering is used for the manufacture of plastic foils. Calenders are comprised of two or more heatable rollers which are configured in parallel and rotate in opposite directions. The polymer being processed is first mixed, then gelled (pre-heated) and finally calendered. The foil is then taken over by other rollers. This enables the thickness to be further reduced. The foil is also embossed. This is again a calender. The embossing roller is tempered, the counter-roller is cooled. After the embossing process has been carried out, the foil is cooled and rolled up.
Calenders are also used for embossing, smoothing, compressing and satinizing papers and textiles. In the paper industry, surface properties such as gloss and smoothness are improved while at the same time reducing the thickness. An array of different effects can be achieved by changing the pressure, temperature and roller speed.
The capital stock is the minimum capital defined in law which has to be provided by the shareholders of a joint-stock company or a European Company (SE). The capital stock of a joint-stock company (AG) must be at least € 50,000 (§ 7 Stock Corporation Act, AktG), the capital stock of an SE must be € 120,000 (Article 4 Section 2 SE-VO). The capital stock in an AG and a SE is divided into shares. In the case of par shares, the total of all the par values form the capital stock. In the case of no-par-value shares, each share forms a numerical share of the capital stock.
Corporate Governance relates to responsible management and control of companies directed towards long-term creation of value added and increase in the value of the company. This does not simply cover the management functions of the executive management but also involves the distribution of functions between the Board of Management and the Supervisory Board, and their relationships with the current and future shareholders, investors, employees, business partners and the public domain. Corporate Governance therefore encompasses shareholder value – the increase in income for shareholders – and stakeholder value – the value of the company for the business partners. Apart from the internal effect directed towards the increase in efficiency and control, Corporate Governance exerts a significant external effect that can be described as entailing a transparent and open policy on information. The internal and external effect are directed towards increasing the value of the company, most importantly the stock-market value.
Services between legally independent companies of a group are exchanged at intercompany prices. Intercompany prices must be subject to the test of dealing-at-arm's length, which would involve an offset of an exchange of services between affiliated companies at conditions that were agreed or would have been agreed under comparable circumstances with or among third parties.
Financial products in which the market value can be derived from classic underlying instruments or from market prices such as interest rates or exchange rates. Derivatives are used for financial management at SURTECO in order to limit risk.
Earnings before financial result and income tax
Earnings before financial result, income tax and depreciation and amortization
Earnings before income tax
Method of consolidation for presenting participations in companies whereby a controlling influence can be exerted over their business and financial policy. The participation is initially valued at acquisition cost and this value is then adjusted on a pro rata basis to reflect performance of the companies accounted for using the equity method.
The process of extrusion (from the Latin extrudere = push out, drive out) involves plastics or other thermosetting materials, e.g. rubber, being squeezed through a nozzle in a continuous procedure. The plastic – the extrudate – is initially melted as it passes through an extruder (also known as a screw extruder) by the application of heat and internal friction, and homogenized. The necessary pressure for extruding the material through the nozzle is built up in the extruder. After the plastic has been extruded from the nozzle, it generally sets in a water-cooled calibration. The application of a vacuum ensures that the extrusion is pressed against the calibre wall and the process of forming is completed in this way. This stage is often followed by a cooling phase carried out in a cooled water bath. The cross section of the geometrical component created corresponds with the nozzle or calibration used. The merging of like or unlike plastic melts before exiting from the extruder nozzle is also known as coextrusion.
During the process of full impregnation, papers are saturated in a resin bath and then dried. The impregnated papers are generally varnished and they can then be applied as finish foils to substrate materials, such as MDF boards or fibre boards.
The German Corporate Governance Code defines essential statutory regulations for managing and monitoring German companies listed on the stock exchange (corporate governance) and includes internationally and nationally recognized standards for sound and responsible corporate governance. The code is intended to make the Corporate Governance System in Germany transparent and accountable. The intention is to promote the trust of international and national investors, customers, employees and members of the general public in the management and monitoring of German companies listed on the stock exchange. The code elucidates the duties of the Board of Management and the Supervisory Board to act in harmony with the principles of the social market economy in the interests of the company and creation of the company's long-term value added (interests of the company).
This product group covers the finish foils and melamine edgings produced by the Strategic Business Unit Paper. Their applications include those for true metals, combining the technical and optical advantages of metal with the proven processing attributes of paper-based finish foils and edgings.
Periodic comparison of an asset´s book value with its fair value. A company must record an impairment charge if it determines that an asset´s fair value has fallen below its book value. Goodwill, for example, is tested for impairment on at least an annual basis.
Impregnates are special papers (generally decorative papers) which are saturated in a resin bath in the same way as fully impregnated materials. However, in contrast to these materials, the impregnates are not provided with a final varnish coating. They only receive their final surface when they are compressed with the wood-fibre boards.
IASB has been the abbreviation for the International Accounting Standards Board since 2001. The IASB is based in London and is organized and financed under private law. The function of the IASB is to draw up international accounting standards (IFRS - International Financial Reporting Standards). The goal of the IASB is to develop high-quality, comprehensible and feasible accounting standards in the interests of the public that result in the presentation of high-quality, transparent and comparable information in financial statements and other financial reports. The aim of this is to assist participants in the capital markets to make economic decisions and to create convergence between national standards and IAS / IFRS. The IASB is developing standards on an ongoing basis. Since 2000, the EU Commission has implemented many of these standards as binding EU law in a special endorsement procedure.
The IFRIC is a committee in the International Accounting Standards Committee Foundation. The group has fourteen members. The function of the IFRIC is to publish interpretations of accounting standards in cases where different or incorrect interpretations of the standard are possible, or new factual content was not adequately taken into account in the previous standards. The IFRIC meets every six weeks and initially publishes interpretations, as a draft for purposes of discussion in the public domain.
The International Financial Reporting Standards (IFRS) are international accounting standards. They comprise the standards of the International Accounting Standards Board (IASB), the International Accounting Standards (IAS), the International Accounting Standards Committee and the interpretations of the International Financial Reporting Interpretations Committee (IFRIC) and the former Standing Interpretation Committee (SIC).
In contrast to fully impregnated materials, the raw paper has already been impregnated with resin when it is supplied as a preimpregnated material. The paper is printed and then varnished.
New share segment on the Frankfurt Stock Exchange (alongside the General Standard) with uniform registration obligations. Participation in the Prime Standard entails compliance with higher international requirements for transparency than required for the General Standard. Quarterly reporting, application of international accounting standards, publication of a corporate calendar, an annual analysts' conference, publication of ad hoc press releases and ongoing reporting in English are the key obligations consequent on admission to the Prime Standard.
These are an auxiliary material used in the compression of melamine impregnates with wood-fibre boards. The release papers form a separating layer between the hot pressed boards and the material. The release paper controls the texture and the degree of gloss finish to be provided on the surface being generated.
Abbreviation for Societas Europaea – legal form of a European joint-stock company
Three-month report January – March 2019 Annual General Meeting Dividend payout Six-month report January – June 2019 Nine-month report January – September 2019
15 May 2019 27 June 2019 2 July 2019 14 August 2019 14 November 2019 2020
Annual Report 2019 Three-month report January – March 2020 Annual General Meeting Dividend payout Six-month report January – June 2020 Nine-month report January – September 2020
30 April 2020 15 May 2020 25 June 2020 30 June 2020 14 August 2020 13 November 2020
SURTECO GROUP SE Johan-Viktor-Bausch-Straße 2 86647 Buttenwiesen
Germany
Phone +49 (0)8274/9988-508 Fax +49 (0)8274/9988-505 [email protected] www.surteco-group.com
Concept and Design DesignKonzept, Mertingen
Ebbing + Partner, Iserlohn Kaloo Images, Hirschbach
Photos Z-Studio, Wertingen
Printing deVega, Augsburg
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| 2009 | 2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | 2017 | 2018 | |
|---|---|---|---|---|---|---|---|---|---|---|
| Sales revenues in € 000s | 341,145 | 388,793 | 408,809 | 407,720 | 402,115 | 618,469 | 638,394 | 639,815 | 689,651 | 698,977 |
| Foreign sales in % | 64 | 67 | 67 | 69 | 70 | 72 | 72 | 73 | 75 | 76 |
| EBITDA in € 000s | 54,317 | 62,547 | 56,116 | 51,699 | 59,660 | 62,842 | 64,957 | 74,338 | 83,093 | 72,779 |
| Depreciation and amortization in € 000s | -19,892 | -20,934 | -21,099 | -22,045 | -22,613 | -35,235 | -33,847 | -33,461 | -38,423 | -40,577 |
| EBIT in € 000s | 34,425 | 41,613 | 35,017 | 29,654 | 37,047 | 27,607 | 31,110 | 40,877 | 44,670 | 32,202 |
| Financial result in € 000s | -16,860 | -9,520 | -12,089 | -8,463 | -9,056 | -5,344 | -4,293 | -5,840 | -11,155 | -5,069 |
| EBT in € 000s | 17,565 | 32,093 | 22,928 | 21,191 | 27,991 | 22,263 | 26,843 | 35,037 | 33,515 | 27,133 |
| Consolidated net profit in € 000s | 9,239 | 21,754 | 12,484 | 15,028 | 21,876 | 18,464 | 17,721 | 23,867 | 26,192 | 18,630 |
| Balance sheet total in € 000s | 481,676 | 480,996 | 482,135 | 467,250 | 626,109 | 636,669 | 655,727 | 673,869 | 842,596 | 844,541 |
| Equity in € 000s | 191,815 | 212,969 | 216,504 | 223,178 | 311,025 | 321,101 | 334,381 | 346,552 | 349,236 | 353,205 |
| Equity ratio in % | 40 | 44 | 45 | 48 | 50 | 50 | 51 | 51 | 41 | 42 |
| Average number of employees for the year | 1,979 | 1,990 | 2,050 | 1,994 | 2,114 | 2,682 | 2,727 | 2,736 | 3,091 | 3,329 |
| Number of employees at 31/12 | 1,903 | 2,003 | 2,005 | 1,967 | 2,664 | 2,705 | 2,695 | 2,833 | 3,295 | 3,304 |
| Capital stock in € | 11,075,522 | 11,075,522 | 11,075,522 | 11,075,522 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 |
| Number of shares at 31/12 | 11,075,522 | 11,075,522 | 11,075,522 | 11,075,522 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 | 15,505,731 |
| Earnings per share in € (by weighted average of shares issued) |
0.83 | 1.96 | 1.13 | 1.36 | 1.86 | 1.19 | 1.14 | 1.54 | 1.69 | 1.20 |
| Dividend per share in € | 0.40 | 0.90 | 0.45 | 0.45 | 0.65 | 0.70 | 0.80 | 0.80 | 0.80 | 0.55* |
| Dividend payout in € 000s | 4,430 | 9,968 | 4,984 | 4,984 | 10,079 | 10,854 | 12,405 | 12,405 | 12,405 | 8,528 |
| PROFITABILITY INDICATORS | ||||||||||
| Return on sales in % | 5.1 | 8.2 | 5.6 | 5.3 | 6.9 | 3.6 | 4.2 | 5.5 | 4.8 | 3.8 |
| Return on equity in % | 4.9 | 10.8 | 5.9 | 6.9 | 7.3 | 6.0 | 5.5 | 7.2 | 7.8 | 5.5 |
| Total return on total equity in % | 6.2 | 8.9 | 6.8 | 6.6 | 5.9 | 5.1 | 5.5 | 6.5 | 5.0 | 4.1 |
| Return on sales in % | 5.1 | 8.2 | 5.6 | 5.3 | 6.9 | 3.6 | 4.2 | |
|---|---|---|---|---|---|---|---|---|
| Return on equity in % | 4.9 | 10.8 | 5.9 | 6.9 | 7.3 | 6.0 | 5.5 | |
| Total return on total equity in % | 6.2 | 8.9 | 6.8 | 6.6 | 5.9 | 5.1 | 5.5 | |
* (Proposal by the Management Board and Supervisory Board)
The paper used for this Annual Report was produced from cellulosesourced from certified forestry companies that operate responsibily and comply with the regulations of the Forest Stewardship Council.
Investor Relations and Press Office T: +49 (0)8274/9988-508 F: +49 (0)8274/9988-515 [email protected] www.surteco-group.com
SURTECO GROUP SE Johan-Viktor-Bausch-Straße 2 86647 Buttenwiesen
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