Annual Report • Jan 23, 2018
Annual Report
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| FIGURES IN € k | 2016/2017 | 2016 | Change | |
|---|---|---|---|---|
| Revenues | 18,540 | 12,091 | 53 % | |
| of which segment1 | Digital Mammography | 12,462 | 9,519 | 31 % |
| Other Diagnostics | 6,078 | 2,572 | 136 % | |
| of which billing currency1,2 | Euro | 2,944 | 712 | 313 % |
| US-Dollar | 15,596 | 11,379 | 37 % | |
| EBITDA | 9,179 | 5,246 | 75 % | |
| EBITDA margin | 50 % | 43 % | ||
| EBIT | 7,962 | 3,928 | 103 % | |
| EBIT margin | 43 % | 32 % | ||
| Net financial result | -794 | -503 | -158 % | |
| EBT | 7,168 | 3,425 | 110 % | |
| Net profit | 5,622 | 3,425 | 64 % | |
| Earnings per share in € (diluted) | 3.09 | 1.86 | 66 % | |
| Equity capital | 32,511 | 32,889 | -1 % | |
| Intangible assets | 11,722 | 12,718 | -8 % | |
| Non-current and current liabilities | 16,568 | 10,114 | 64 % | |
| Total assets and liabilities | 49,079 | 43,003 | 14 % | |
| Equity ratio in % | 66 % | 76 % | ||
| Liquid funds3 | 29,735 | 24,356 | 22 % | |
| Employees4 | 93 | 89 | 4 % |
1 Excluding intersegment revenues.
2 Revenues are allocated to the currency according to the location of the customer; comprising indirect sales via medical technology companies as well as sales to clinical end customers in the segment Distant Services.
3 Cash
4Average of full-time equivalents in the reporting period.
| As at September 30, 2017 | |
|---|---|
| Industry sector | Software / Medical Technology |
| Subscribed capital | € 1,820,000.00 |
| Number of shares | 1,820,000 |
| Last quotation on September 29, 2017 | € 39.11 |
| Last quotation on September 30, 2016 | € 35.90 |
| High/low in 2017 | € 41.00 / € 35.90 |
| Market capitalization | € 71.180 m |
| Treasury stock | 0 (0 %) |
| Free float | 17.8 % |
| Prime Standard (Regulated market) | Frankfurt and Xetra |
| Over-the-counter markets | Berlin, Dusseldorf, Munich, Stuttgart |
| Indices | CDAX, PrimeAS, TechnologyAS, DAXsector Software, DAXsubsector Software, GEX |
| ISIN / WKN / Ticker symbol | DE000A0LBFE4 / A0LBFE / M3V |
| KEY FIGURES (IFRS)1 | |
|---|---|
| KEY SHARE DATA1 | |
| LETTER TO THE SHAREHOLDERS4 | |
| REPORT OF THE SUPERVISORY BOARD FOR THE FISCAL YEAR 2016/20176 | |
| CORPORATE GOVERNANCE REPORT (INCL. DECLARATION OF CONFORMITY)9 | |
| THE MEVIS SHARE14 | |
| MANAGEMENT REPORT FOR THE FISCAL YEAR 2016/201717 | |
| Preamble17 | |
| Company overview17 | |
| Business activities17 | |
| Research and development 19 | |
| Reporting segments 20 | |
| Economic report21 | |
| Macroeconomic and industry-specific conditions 21 | |
| Performance / Sales report 23 | |
| Earnings position24 | |
| Financial position 25 | |
| Net asset position25 | |
| Control system 26 | |
| Non-financial performance indicators26 | |
| Overall statement 28 | |
| Corporate disclosures (Section 289 (4) HGB)29 Corporate Governance statement (Section 289a HGB)30 |
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| Remuneration report 30 | |
| Opportunities and risks report 31 | |
| Risk Management 35 | |
| Accounting and Auditing 36 | |
| Accounting risk management system and internal control system36 | |
| Outlook37 | |
| INCOME STATEMENT38 | |
| STATEMENT OF COMPREHENSIVE INCOME38 | |
| STATEMENT OF FINANCIAL POSITION39 | |
| STATEMENT OF CASH FLOWS40 | |
| STATEMENT OF CHANGES IN EQUITY 41 | |
| NOTES FOR THE FISCAL YEAR 2016/2017 42 | |
| Basic information on MMS AG 42 | |
| 1. General disclosures 42 |
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| 2. Business activities of MMS AG 43 |
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| 3. Reporting segments of MMS AG 43 |
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| Basic principles of the financial statements43 | |
| 4. Joint ventures43 |
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| 5. Currency translation44 |
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| Accounting and measurement policies45 | |
| 6. Accounting and measurement policies 45 |
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| 7. Material judgments and estimates 49 |
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| 8. Effects of new accounting standards 50 |
| Notes to the income statement 52 | ||
|---|---|---|
| 9. | Revenues52 | |
| 10. | Other operating income 53 | |
| 11. | Cost of materials/services purchased 53 | |
| 12. | Staff costs 53 | |
| 13. | Other operating expenses53 | |
| 14. | Depreciation, amortization and impairment of intangible assets and property, plant and | |
| equipment 54 | ||
| 15. | Interest income / interest expense and other net financial result as well as earnings from Equity companies54 |
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| 16. | Income tax 54 | |
| 17. | Earnings per share55 | |
| Notes to the statement of financial position56 | ||
| 18. | Intangible assets and property, plant and equipment56 | |
| 19. | Trade receivables, other financial assets and other assets 57 | |
| 20. | Cash 58 | |
| 21. | Shareholders' equity 58 | |
| 22. | Provisions 59 | |
| 23. | Other current liabilities 60 | |
| 24. | Deferred income 61 | |
| 25. | Miscellaneous other liabilities61 | |
| 26. | Contingent liabilities 61 | |
| 27. | Financial obligations 61 | |
| 28. | Management of financial risks61 | |
| 29. | Disclosures on the statement of cash flows 65 | |
| 30. | Segment reporting 65 | |
| 31. | Related parties66 | |
| 32. | Notification of changes in voting rights in accordance with the german securities trading act (WpHG)66 |
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| 33. | Corporate bodies of MeVis Medical Solutions AG 69 | |
| 34. | Remuneration of Executive Board and Supervisory Board 70 | |
| 35. | Stock option plans72 | |
| 36. | German Corporate Governance Codex 73 | |
| 37. | Fees paid for services of the statutory auditor 73 | |
| 38. | Events after the reporting date73 | |
| 39. | Appropriation of profits / Pay compensation 74 | |
| CHANGES IN FIXED ASSETS75 | ||
| AUDITOR'S REPORT 79 | ||
| RESPONSIBILITY STATEMENT ("BILANZEID") 85 | ||
| DISCLAIMER86 | ||
| FINANCE CALENDAR 2017/201887 |
from left: Marcus Kirchhoff, Dr. Robert Hannemann
The fiscal year 2016/2017 was another very successful year for MeVis. Revenues could be increased significantly, although their composition has changed significantly. Due to changes in business and price models in the medical technology IT landscape (cloud-based systems, software as a service, pay-per-use models, etc.), one-off transactions and services to be billed on a cost basis have become increasingly important. At the same time, the license business declined sharply - compared with both the previous year and in its significance for total revenues. With costs remaining stable overall, the company was able to increase its profit significantly. Thanks to the selective hiring of new employees, we are well positioned for future projects.
Revenues in the past fiscal year 2016/2017 amounted to € 18.5 million (compared to € 12.1 million in the short fiscal year 2016). The improvement in sales compared with the previous year is mainly attributable to the Other Diagnostics segment. The sale of extensive usage rights to the MeVisLab tool for the development of software prototypes amounting to € 1.8 million contributed to this increase. In addition, business with a number of products and services developed very positively, such as higher license sales of LungCAD and increased activities in MeVis Online Services. Business with Hologic, which forms the Digital Mammography segment, thus contributed 67 % to sales this year (compared with 79 % in the previous year); the share of sales accounted for by the Other Diagnostics segment rose sharply from 21 % to 33 %. The share of the licensing business has declined significantly from 46 % of total revenues in 2016 to 30 % in 2016/2017. The share of maintenance business remained largely constant at 45 % of total sales (2016: 46 %). Accordingly, the share of the services business (including the sale of usage rights to MeVisLab) rose sharply from 9 % to 29 % of sales.
The results are still very satisfactory. EBIT (earnings before financial result and taxes) of € 8.0 million was generated in 2016/2017, compared to € 4.0 million in the first nine months of 2016, which corresponds to an increase in the EBIT margin from 32 % to 43 %.
The financial result of MeVis is significantly impacted by the exchange rate development of the US\$ between the reporting dates, as most of the available liquidity is held in US\$. Due to the further weakening of the US\$ in the past fiscal year, expenses from exchange rate differences increased from € 0.5 million to € 1.5 million. The financial result was positively influenced by the very encouraging development of our joint venture with Siemens, MBC, whose prorated earnings rose sharply from € 7 k to € 0.5 million.
Income taxes of € 1.5 million incurred in fiscal year 2016/2017. As a result of the fiscal unity for income tax purposes in the previous year, no taxes incurred in the short fiscal year 2016.
This results in a net profit for the fiscal year 2016/2017 of € 5.6 million (30 % margin), compared to € 3.4 million (28 % margin) in 2016, which corresponds to undiluted earnings per share of € 3.09, compared to € 1.88 in 2016.
For the fiscal year 2017/2018, a significant decline in revenues to between € 14.5 million and € 15.0 million is expected. In addition to the non-recurring effect of € 1.8 million reported in Q1 2016/2017 from the sale of MeVisLab usage rights, a declining business expectation of the Digital Mammography segment is contributing to this development, although this segment will still be the main revenue driver. Earnings before financial result and taxes (EBIT) should also decline significantly to between € 3.0 million and € 3.5 million as a result of the expected sales development.
The medium- and long-term perspectives for the future remain significantly clouded by the change in the cooperation with MeVis initiated by Hologic and the associated expected decline in sales to and activities for Hologic, although we expect this decline to be partially offset by products of the Other Diagnostics segment.
MeVis is facing several major challenges: Although our dependence on Hologic has slightly decreased in 2016/2017 with a 67 % share of sales compared to 79 % in the previous year, it is still extremely high. The situation with Hologic described above will have a significant negative impact on sales and earnings in the medium and long term. In addition, new business with our lung cancer screening products failed to meet expectations in 2016/2017. Nevertheless, we are encouraged by the projects initiated in 2016 as part of our cooperation with Varian Medical Systems, which have already led to initial sales in the Other Diagnostics segment in 2016/2017. In addition, there are more and more synergies for joint projects and products with Varex Imaging. But we continue to see a sustained trend in the market towards total solutions from PACS providers that are fully integrated into the existing IT landscape, making it increasingly difficult to provide added value with our dedicated workflow and diagnostics software that convinces clinical end customers of the need for separate software applications. Here it will be more and more important that we manage to offer products in the area of cloud-based systems, online training products, software as a service, imaging modules and services.
However, we remain confident that MeVis is well prepared for future challenges. The most valuable element of our sustainable competitiveness continue to be our experienced, highly qualified employees, who are our guarantee for continued great innovation potential. In addition, with Varex Imaging we have a strong majority shareholder from the medical industry at our side, who supports us in mastering the upcoming challenges in any way.
We would like to take this opportunity to thank all our employees for their extraordinary efforts and to thank our business partners, customers and shareholders for their confidence in us!
Marcus Kirchhoff Dr. Robert Hannemann
Chairman Member of the Executive Board
With both its past and present members, the Supervisory Board of MeVis Medical Solutions AG continued its close and focused cooperation with the Executive Board in fiscal year 2016/2017. It diligently performed the duties incumbent on it under the law, its Articles of Association and rules of procedure to monitor and advise the Executive Board on its management of the Company.
The Supervisory Board examined in detail the business and financial development of the Company, as well as the strategic focus, in order to secure its future in the long term. In the reporting period, the main emphasis was on the Company's net assets, liabilities, financial position and earnings situation, as well as the expansion of the product portfolio, especially in terms of new technologies, the sales channels, the general market development and the opportunities this creates for the Company.
The Executive Board provided regular and comprehensive reports to the Supervisory Board in oral and written form about the development of MeVis Medical Solutions AG. In particular, the Supervisory Board was briefed by the Executive Board on the current performance and business situation of the Company, including its net assets, liabilities, financial position and earnings situation; corporate planning; strategic development and potential risks. The reports of the Executive Board were discussed in detail and critically examined at Supervisory Board meetings. The Chairman of the Supervisory Board, in particular, maintained constant communication with the Executive Board on business-related matters and events outside of Supervisory Board meetings.
The Supervisory Board was involved at an early stage in all matters and decisions of fundamental importance to the Company and advised the Executive Board on these matters in advance. Transactions requiring the approval of the Supervisory Board were presented to it by the Executive Board in the proper manner during Supervisory Board meetings, and the Supervisory Board made decisions after thorough review and discussion. Where necessary, the Supervisory Board also passed resolutions by circulation outside meetings.
The Supervisory Board held a total of four ordinary meetings during fiscal year 2016/2017, at each of which the Executive Board was present: on December 14, 2016, and on January 11, March 8 and July 12, 2017. The Declaration of Conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), which is to be issued annually, was passed via written procedure.
The subject of extensive discussion at the first meeting of the new fiscal year was the Company's business situation, including the current risk report. Discussion focused in particular on the new technologies and the product portfolio's related expansion. As part of the financial update, the tender process for the audit of the annual financial statements for fiscal year 2016/2017 and its current status with regard to the new regulations under the EU Audit Reform for the audit of public interest entities were also the subject of in-depth discussion, especially the more important role that the Supervisory Board now plays in selecting and monitoring the statutory auditor.
The primary objective of this meeting was to review and approve the annual financial statements and management report of the Company for the short fiscal year 2016, which were prepared in accordance with the accounting provisions of the German Commercial Code (HGB), as well as the individual financial statements and management report of the Company for the short fiscal year 2016, which were prepared voluntarily in accordance with the International Financial Reporting Standards (IFRS). To this end, the Executive Board submitted the annual financial statements and management report of MeVis Medical Solutions AG, which were prepared in accordance with the provisions of the German Commercial Code (HGB), as well as the individual financial statements and management report of the Company for the short fiscal year 2016, which were prepared in accordance with the International Financial Reporting Standards (IFRS). The relevant individuals from the firm of statutory auditors took part in the meeting alongside the Executive Board and reported in depth to the Supervisory Board on the material results of the audit. Mr. Maar, Mr. Hilton and Mr. Kirchhoff could not attend the meeting in person due to their schedules, but participated via videoconference. The documents pertaining to the financial statements were discussed by the Executive Board and the auditors, KPMG AG Wirtschaftsprüfungsgesellschaft, Bremen. Both sets of financial statements were approved by the Supervisory Board. Furthermore, the report of the Supervisory Board was adopted, as was the agenda for the Annual General Meeting of MeVis Medical Solutions AG on March 8, 2017, and the proposals to the Annual General Meeting for required resolutions were agreed. The Company's business situation, including the current risk report, was also discussed in depth.
The third meeting of the Supervisory Board in fiscal year 2016/2017 was held as a face-to-face meeting immediately following the Annual General Meeting, in which new members were elected to the Supervisory Board. Topics included the election of a chairperson and his or her deputy by the members of the Supervisory Board. Those in attendance elected Ms. Honeysett to serve as chair and elected Mr. Verhoef as her deputy. Subsequently, the Executive Board reported at length on the current business situation of the Company, including providing an overview of the market and the competition, existing business relations as well as new marketing activities. Furthermore, the Executive Board gave an overview of the various approaches to reporting under the German Commercial Code (HGB), IFRS and US GAAP, the financial calendar and the schedule of events until the end of the year.
Besides reports by the Executive Board on the business situation of the Company, including its net assets, liabilities, financial position and earnings situation for the first nine months, the main focus of the fourth meeting of the Supervisory Board, which was held as a videoconference, related to the contents of the updated Corporate Governance Code, the pending update of the Declaration of Conformity and the adoption of targets for the share of women sitting on the Supervisory and Executive Boards beginning in July 2017.
Jörg Fässler, Glen Hilton and Holger Maar, who were elected to the Supervisory Board by the Annual General Meeting, stepped down from their posts with effect as of the end of the Annual General Meeting on March 8, 2017. It was therefore necessary to elect all new Supervisory Board members for the remainder of the departing members' terms. Kimberley Honeysett, Matthew Lowell and Clarence Verhoef were elected to the Supervisory Board. The new Supervisory Board would like to take this opportunity to once again thank the members who stepped down in the reporting period for their dedication.
Committees were not set up, as the Supervisory Board has only three members in total, and to date there has been no need for committees.
The Executive Board and the Supervisory Board support the initiatives of the Government Commission on the German Corporate Governance Code, which summarizes the principles of good and responsible corporate governance, and issue joint Declarations of Conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), which are regularly updated. A comprehensive description of corporate governance at MeVis, including the wording of the targets of the Supervisory Board for its future composition and the latest Declaration of Conformity issued jointly by the Supervisory Board and the Executive Boards dated September 9, 2017, can be found in the Corporate Governance Report in this Annual Report. In addition, all relevant information is available online at www.mevis.de/en/investor-relations/corporate-governance.
Here, the Supervisory Board would like to point out that since the election of the new Supervisory Board in March 2017, the Supervisory Board comprises three members who are all employed by Varex Imaging Corporation. The Varex Imaging Corporation owns a majority shareholding in the Company through Varex Imaging Deutschland AG. The control and profit-and-loss transfer agreement with the Company likewise passed over to Varex Imaging Deutschland AG as part of the spin-off. The Supervisory Board accordingly no longer has any independent members. Given that the Company is part of the Varex Group, the Company thinks it is appropriate that all the members of the Supervisory Board belong to the majority shareholder. Furthermore, the members of the Supervisory Board whose mandates begin after January 1, 2016 do not receive any remuneration from the Company. It should be pointed out as a precautionary measure that in accordance with the aforementioned, in the upcoming fiscal year contrary to Section 5.4.6 (1) Sentence 2 of the German Corporate Governance Code (DCGK), the chairperson and vice chairperson of the Supervisory Board are not taken into account in the remuneration, and contrary to Section 5.4.6 (3) Sentence 1 of the German Corporate Governance Code (DCGK), remuneration of the Supervisory Board cannot be disclosed on an individual basis in the notes to the financial statements or in the management report.
In accordance with the recommendation of Item 5.6 of the German Corporate Governance Code, the Supervisory Board will once more examine the efficiency of its activities this year. This takes place annually by means of a questionnaire without external support. No conflicts of interest of Executive Board and Supervisory Board members that require disclosure to the Supervisory Board arose during fiscal year 2016/2017.
The annual financial statements and management report of MeVis Medical Solutions AG for fiscal year 2016/2017, which were prepared in accordance with the accounting provisions of the German Commercial Code (HGB), were audited by the auditing firm, PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Bremen, which was elected by the Annual General Meeting and engaged by the Supervisory Board and an unqualified auditor's report was issued. The same applies to the individual financial statements and management report of the Company for fiscal year 2016/2017 prepared voluntarily in accordance with the International Financial Reporting standards (IFRS). The annual financial statements and the management reports according to the German Commercial Code (HGB) and IFRS, as well as the statutory auditor's reports, were provided to all Supervisory Board members within the required time. The Supervisory Board examined the annual financial statements and management reports for fiscal year 2016/2017 prepared by the Executive Board. The relevant individual from the firm of statutory auditors took part in the applicable meeting of the Supervisory Board alongside the Executive Board and reported in depth to the Supervisory Board on the material results of the audit. The Supervisory Board approved the annual financial statements prepared by the Executive Board according to the German Commercial Code (HGB) and the individual IFRS financial statements voluntarily prepared by the Executive Board as of September 30, 2017, following the meeting by circular resolution. The annual financial statements according to the German Commercial Code (HGB) are duly adopted. The disclosures stipulated by Section 289 (4 and 5) of the German Commercial Code (HGB) are included in the management reports according to the German Commercial Code (HGB) and IFRS. The Supervisory Board has examined and endorsed these disclosures and declarations, which it considers to be complete.
The Supervisory Board thanks the members of the Executive Board as well as all Company employees for their outstanding performance. The Supervisory Board thanks clients and shareholders for the confidence shown in the Board during fiscal year 2016/2017.
Bremen, January 19, 2018
On behalf of the Supervisory Board
Kimberley E. Honeysett (Chairperson)
(INCL. DECLARATION OF CONFORMITY)
Corporate governance means responsible, transparent management and control geared to long-term creation of value. The following contains the Corporate Governance Report pursuant to section 3.10 of the German Corporate Governance Code (GCGC) and the Corporate Governance Statement issued by the Executive Board and Supervisory Board pursuant to Section 289a of the German Commercial Code (HGB). The report forms a supplementary part of the management report. The principles of corporate governance and the Declaration of Conformity are also available on the Company website.
The Executive Board and Supervisory Board of MeVis Medical Solutions AG declared on September 9, 2017 pursuant to Section 161 of the German Stock Corporation Act (AktG) that the recommendations of the "German Corporate Governance Code Government Commission" in the version of February 7, 2017 have been and will in future be met with the following exceptions:
According to section 5.4.2 GCGC the Supervisory Board shall include an appropriate number of independent members. The Supervisory Board consists of three members. Since the previous Supervisory Board election all Supervisory Board seats are filled with persons who are employed by Varex Imaging Corporation. The Varex Imaging Corporation currently holds the majority of shares in the Company via the Varex Imaging Deutschland AG. Deviating from section 5.4.2 GCGC the Supervisory Board includes no independent members. For this reason, a number of independent members cannot be taken into account when naming the objectives for the composition of the Supervisory Board pursuant to section 5.4.1 GCGC. The Company considers the complete occupation of the Supervisory Board with members that are employed by companies of the majority shareholder as appropriate in view of the integration of the company into the Varex Group.
Pursuant to a shareholders resolution dated June 7, 2016 and the corresponding amendment to the bylaws the Supervisory Board members, whose mandates begin after January 1, 2016, do not receive any remuneration from the Company. As a purely precautionary measure, it is pointed out that accordingly as opposed to section 5.4.6 (1) sentence 2 of the GCGC the Chair and Deputy Chair positions in the Supervisory Board are not reflected in the remuneration and as opposed to section 5.4.6 (3) sentence 1 of the GCGC no Supervisory Board remuneration can be reported individually in the notes or management report.
The Executive Board, Supervisory Board and shareholders' meeting are the bodies of the Company according to law and statutes. As a public company, the MeVis Medical Solutions AG has a dual management system, which is characterized by a clear separation between the Executive Board, as the management body and the Supervisory Board as the supervisory body.
The Executive Board manages the Company on its own responsibility with the aim of creating sustainable value. It runs the Company in accordance with the statutory provisions, the Company's articles of association and the rules of procedure for the Executive Board, and works in good faith with the other executive bodies. The Executive Board sets out the corporate objectives and strategies and, based on them, determines the corporate policy.
Currently, the Executive Board of MeVis Medical Solutions AG consists of two male members with contract durations until December 2020 and March 2021. Personnel changes or the expansion of the Executive Board are currently neither planned nor foreseen. Therefore, the Supervisory Board has specified the target for the percentage of women on the Executive Board to 0 % until December 31, 2020. For any future appointments of Executive Board members, the Supervisory Board will of course include qualified women early in the selection process for potential candidates.
The principle of overall responsibility applies: the members of the Executive Board share responsibility for management. The Executive Board works in a cooperative manner and the members keep each other up-todate on important measures and events in their respective areas. In addition, internal meetings between the entire Executive Board and mid-level management take place at least once a month. The Supervisory Board has issued rules of procedure for the Executive Board, which documents all the rules of procedure and transactions that require approval.
The Supervisory Board consists of three members, elected by the shareholders, pursuant to the Company's statutes and convenes at least twice in the half year. The members of the Executive Board generally take part in the meetings of the Supervisory Board and report verbally and in writing on the individual items on the agenda, and answer the Supervisory Board members' questions. The members of the Supervisory Board also discuss certain matters outside the official Supervisory Board meetings or pass resolutions by circulation. The Supervisory Board has issued itself rules of procedure and regularly reviews the efficiency of its activities. On an annual basis the Supervisory Board report sums up the activities in the past fiscal year. Executive and Supervisory Boards work closely together in the Company's best interests. During the fiscal year there were no conflicts of interest.
Pursuant to Section 5.4.1 GCGC, the Supervisory Board must specify concrete objectives regarding its composition, which are reviewed at regular intervals and which will be taken into account when proposing candidates at the Annual General Meeting either in regular elections and in replacement elections of the Supervisory Board:
Given its current composition, the Supervisory Board believes that it has largely fulfilled These goals. The diversity of the Supervisory Board is mainly reflected in the varying professional careers and activities as well as the varying experiences of the individual members, who complement each other very well in their entirety.
Currently the Supervisory Board consists of three members with a 33 % female representation. The members have been elected until the Annual General Meeting in 2021. Personnel changes are currently neither planned nor foreseen. At the next regular Supervisory Board election in 2021, the aim is that the Supervisory Board should consist of at least 30 % women and 30 % men.
Corporate governance of MeVis Medical Solutions AG, as a German stock corporation listed in the Prime Standard, is dictated first and foremost by the German Stock Corporation Act and the recommendations of the current Corporate Governance Code.
Being a manufacturer of medical software products, the statutory provisions of the German Medical Devices Act (MPG), the European directive on medical products (93/42/EEC), the Canadian Medical Devices Regulation (SOR/98-282), the US Code of Federal Regulations (21 CFR Part 820 - Quality System Regulation) as well as the requirements of the ISO 13485 standard (Medical devices - Quality management systems - Requirements for regulatory purposes) apply to the Company.
Quality and quality management are cornerstones of our corporate governance. The quality management system is geared toward meeting our quality objectives as well as the quality requirements and expectations of our customers in relation to safety and performance, handling, availability, efficiency and punctuality.
The Company's quality management system is certified to EN ISO 13485:2012 + AC 2012 by the notified body MEDCERT (ID-number 0482) in the development, manufacturing, final inspection and sale of software for diagnostic evaluation of medical image data as well as intervention support.
The management of MeVis Medical Solutions AG is also characterized by flat hierarchies with only one management level below the Executive Board, quick decision-making and team-oriented cooperation.
When filling management positions the qualification of candidates is the decisive criterion for the Executive Board of MeVis Medical Solutions AG. However, MeVis Medical Solutions AG pays attention to diversity and in particular the appropriate consideration of women when filling management positions. MeVis Medical Solutions AG welcomes efforts to increase the proportion of women in management positions and will continue to promote female employees according to their qualifications and skills in all levels and areas of responsibility. The proportion of women of the total number of employees of MeVis Medical Solutions AG is currently approximately 30 %. Already, 27 % of the leadership positions of the management level below the Executive Board are occupied with women. Our goal by the end of 2020 is to fill 30 % of the management positions with women.
MeVis Medical Solutions AG follows the recommendation of the German Corporate Governance Code to disclose individually the remunerations for the Executive Board and the Supervisory Board. The remuneration report is an integral part of the management report and also forms part of the Corporate Governance Report.
Further explanation on the remuneration of the Executive Board and Supervisory Board are disclosed in the remuneration report in the notes.
To ensure maximum possible transparency, MeVis Medical Solutions AG regularly and promptly informs the capital market, the shareholders and the general public of the Company's financial situation as well as new circumstances and events of importance.
The financial statements and any interim reports are published within the deadlines stipulated for companies listed in the Prime Standard of the regulated market: within a period of four months for the annual financial statements and within a period of three months in the case of the semi-annual financial reports. The Company continues to publish quarterly reports instead of quarterly releases and publishes them within a period of two months.
Insider information that concerns the Company is published immediately pursuant to Section 15 of the German Securities Trading Act (WpHG). Shareholders and potential investors can obtain current information about topical events and recent developments on the internet. All press releases and ad-hoc announcements of MeVis Medical Solutions AG are available online at the Company website. In addition, MeVis Medical Solutions AG takes part in at least one analyst conference per year. Significant and semi-regular events in the financial calendar are published on the Company website.
The Annual General Meeting of MeVis Medical Solutions AG is called at least once a year and resolves on all such matters as provided by law, such as appropriation of profit, approval of the actions of the Executive Board and Supervisory Board and the statutory auditor with binding effect upon all shareholders and the Company. Each share carries one vote in shareholders' resolutions.
Each shareholder who registers in time is entitled to attend the Annual General Meeting or has an option of exercising his or her right to vote through a credit institution, association of shareholders, a proxy engaged by and bound by the instructions of Medical Solutions AG or a different proxy.
The invitation to the Annual General Meeting as well as the reports and information required for resolutions are published in accordance with the provisions of the German Stock Corporation Act and made available online on the Company website.
For MeVis Medical Solutions AG, dealing with risks in a responsible manner is a key element of good corporate governance. The Executive Board has installed an appropriate risk management and risk control system in the Company in order to identify, evaluate, monitor and control the risks arising from operating activities at an early stage. The Executive Board informs the Supervisory Board regularly about the current status of significant risks. The risk management system is continuously reviewed in accordance with the latest developments and adjusted where necessary. Further details and information on risk management can be found in the risk report.
MeVis Medical Solutions AG prepares its statutory financial statements and management report in accordance with the German Commercial Code (HGB). The Company also prepares voluntarily individual IFRS financial statements in accordance with International Financial Reporting Standards (IFRS). The half-year financial report and the interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU.
The financial statements are prepared by the Executive Board and reviewed by the Supervisory Board. The Supervisory Board engaged PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Bremen, as the auditors elected by the Annual General Meeting for the fiscal year 2016/2017, to audit the statutory financial statements for the fiscal year 2016/2017 and the the individual IFRS financial statements. This approach ensures that no conflicts of interest affect the work of the auditors.
The audits of the financial statements for the short fiscal year 2016 were conducted by KPMG AG Wirtschaftsprüfungsgesellschaft, Bremen, in accordance with the generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors (IDW).
Pursuant to Article 19 of the Market Abuse Regulation (EU) No. 596/2014 (MAR), members of the Company's Executive and Supervisory Boards and related parties are required to announce all own transactions involving shares and debt securities of MeVis Medical Solutions AG that are traded on the stock market or related financial instruments (e.g. derivatives) where such transactions total or exceed € 5,000 in a calendar year. The following transactions with shares/securities or rights that are subject to notification were reported to MeVis Medical Solutions AG by the persons obliged to provide notification:
| Date/ | Person obliged | Other | Price per | Total | ||
|---|---|---|---|---|---|---|
| place | to report | disclosures | Transaction | unit | Quantity | volume |
| Carrying out stock | ||||||
| March 27, 2017 | options against | |||||
| over-the-counter | Marcus Kirchhoff | Executive body | cash settlement | € 39.01 | 5,000 | € 195,050.00 |
| Carrying out stock | ||||||
| March 27, 2017 | options against | |||||
| over-the-counter | Dr. Robert Hannemann | Executive body | cash settlement | € 39.01 | 3,500 | € 136,535.00 |
As of the reporting date, neither the members of the Executive Board nor the members of the Supervisory Board hold shares of MeVis Medical Solutions AG.
On the back of a roller-coaster ride for stock market prices in 2016, which was due to uncertainty from unfavorable economic data, a persistent slump in oil prices, the Brexit referendum, the election in the United States and other factors, a period of greater calm returned to the stock markets in the first nine months of 2017. Distinct optimism, good economic data and forecasts, and interest rates that continued to remain at a low level led to the stable development of prices trending slightly upward with only small fluctuations upwards and downwards. The United States in particular, where there are hopes of tax cuts, investments in infrastructure, the creation of jobs and new trade agreements, is a source of promise for investors.
In the first nine months of 2017, the German stock market gained around 11 % as measured by the German benchmark index DAX, closing at around 12,828 points at the end of September 2017. In a twelve-month view, as compared with the end of our last fiscal year on September 30, 2016, this corresponds to growth of around 22 %. The SDAX, with gains of approximately 27 %, and the TecDAX with even more impressive gains of 34 %, also saw growth rates that were similar or better in the last fiscal year.
From the beginning to the end of fiscal year 2016/2017, specifically October 1, 2016, through September 30, 2017, the share price moved within a range between € 35.90 and € 41.00. The peak price of the share in electronic XETRA trading was € 41.00 in fiscal year 2016/2017, while the lowest price stood at € 35.90. MeVis Medical Solutions AG ended the fiscal year on September 30, 2017, at a closing price of € 39.11, compared to € 35.90 as of September 30, 2016. This represents an increase of approximately 9 % in the value of MeVis shares at the end of fiscal year 2016/2017 compared to the closing price at the end of the short fiscal year 2016, which is somewhat below SDAX and TecDAX benchmarks. Market capitalization stood at approximately € 71.2 million, taking into account 1,820,000 shares outstanding. The number of registered securities accounts increased only slightly from 624 as of September 30, 2016, to 664 as of September 30, 2017.
VMS Deutschland Holdings GmbH took over the majority shareholding of 73.52 % of the total share capital in MeVis Medical Solutions AG in April 2015 after a voluntary public tender offer. The control and profit-andloss transfer agreement signed on August 10, 2015, between VMS Deutschland Holdings GmbH and MeVis Medical Solutions AG was entered into the commercial register of the Bremen local court on October 20, 2015, and thus went into legal effect. As part of the control and profit-and-loss transfer agreement, VMS Deutschland Holdings GmbH undertook to acquire upon the request of any outside shareholder the latter's MeVis shares in return for a cash settlement in the amount of € 19.77 per share. Alternatively, VMS Deutschland Holdings GmbH guaranteed those outside shareholders of MeVis Medical Solutions AG who do not wish to make use of the settlement offer, for the duration of the control and profit-and-loss transfer agreement, the annual payment of a compensatory amount per fiscal year of MeVis Medical Solutions AG for every registered share of MeVis Medical Solutions AG with a pro rata share in the share capital of € 1.00 per share in the amount of € 1.13 gross / € 0.95 net.
With the spin-off agreement dated December 28, 2016, the transfer of MMS AG shares from VMS Deutschland Holdings GmbH to Varex Imaging Deutschland AG was resolved with economic effect as of December 30, 2016. The object of the spin-off agreement is also the control and profit-and-loss transfer agreement between MMS AG and VMS Deutschland Holdings GmbH. Varex Imaging Deutschland AG is managed by the Varex Imaging Corporation, Salt Lake City, Utah, USA, which has emerged as a spin-off from Varian Medical Systems, Inc., Palo Alto, California, USA. The spin-off went into legal effect upon entry into the commercial register after the balance sheet date. As a result, Varex Imaging Deutschland AG has taken over the obligations listed above.
| 2017 | 2016 | 2015 | |
|---|---|---|---|
| Year-end closing price in € | 39.11 | 35.90 | 24.00 |
| Annual high in € | 41.00 | 37.00 | 24.50 |
| Annual low in € | 35.90 | 24.00 | 17.65 |
| Market capitalization in million € (XETRA year-end) | 71.2 | 65.3 | 43.7 |
| Number of shares | 1,820,000 | 1,820,000 | 1,820,000 |
| Treasury stock | 0 | 0 | 0 |
| Price-to-earnings ratio (XETRA year-end) | 12.66 | 14.32 | 6.38 |
| Earnings per share in € (basic) | 3.09 | 1.88 | 3.76 |
| Earnings per share in € (diluted) | 3.09 | 1.86 | 3.72 |
As of the balance sheet date, VMS Deutschland Holdings GmbH headquartered in Darmstadt, an indirect subsidiary of Varian Medical Systems, Inc., Palo Alto, California, USA, held 73.65 % of the share capital of MeVis Medical Solutions AG. With the spin-off agreement dated December 28, 2016, the transfer of MeVis Medical Solutions AG shares from VMS Deutschland Holdings GmbH to Varex Imaging Deutschland AG was resolved with economic effect as of December 30, 2016. In addition, Varex Imaging Deutschland AG, an indirect subsidiary of the Varex Imaging Corporation, received the power to exercise voting rights in MeVis Medical Solutions AG, Bremen, Germany, from VMS Deutschland Holdings GmbH on December 31, 2016. This proxy is not subject to instructions provided by VMS Deutschland Holdings GmbH and has been issued for an indefinite period of time. The spin-off was entered into the commercial register after the balance sheet date.
Other institutional shareholders include HANSAINVEST Hanseatische Investment-GmbH, which holds approximately 5.51 % of the share capital in MeVis Medical Solutions AG, and Oppenheim Asset Management Services S.à.r.l., which holds approximately 3.01 %, according to shareholder notifications that we have received. As a result, around 17.83 % of shares are currently in free float.
Fig.: Shareholder structure as at September 30, 2017 (In accordance with the shareholder notifications received by us.)
This management report has been prepared in addition to the individual IFRS financial statements.
As resolved during the Annual General Meeting on June 7, 2016, MeVis Medical Solutions AG, Bremen (hereinafter: "MMS AG" or "Company"), changed the fiscal year to the reporting period that begins on October 1 of a given year and ends on September 30 of the following year. The present report therefore covers the reporting period from October 1, 2016, to September 30, 2017. The amounts from the prior year provided below refer to the short fiscal year from January 1 to September 30, 2016. For this reason, a comparison of the present individual IFRS financial statements and management report for fiscal year 2016/2017 with the prior year (for period-related statements) will only be possible to a limited extent.
MMS AG and its affiliate MBC KG (hereinafter also collectively: "MeVis" or the "Companies") develop innovative software for analyzing and evaluating image data and marketing it to equipment manufacturers of medical devices and providers of medical IT platforms.
Clinical focuses are image-based early detection and diagnosis of epidemiologically important diseases such as breast, lung, liver and prostate cancer, as well as neurological disorders. The software applications support many of the imaging modalities available. These not only include X-ray modalities such as computed tomography, digital mammography or digital tomosynthesis, but also magnetic resonance imaging, digital sonography and the simultaneous use of multiple modalities (multimodality). MeVis supplies technologies and software applications for global medical industry leaders, meeting their needs and helping them to strengthen their technological leadership positions.
Besides the sale of software licenses, maintenance contracts and services in the field of software development for medical technology companies, MeVis also offers services to clinical end customers. These include three-dimensional technical visualizations ("MeVis Distant Services"), interactive online training options to improve the diagnostic capabilities of clinicians and special online applications in teleradiology ("MeVis Online Services).
Whereas in the early years MeVis devoted its attention to image-based early detection and diagnosis of breast cancer, today MeVis uses its clinical expertise, specialist knowledge in the field of breast cancer, technological market leadership and its broad network of partner companies to successively develop software applications for use in other oncological diseases. The individual product areas are described in detail below:
The various MeVis software products for breast cancer diagnostics support the analysis and presentation of images from mammography screening and other imaging processes for an early, rapid and reliable diagnosis. Developed through many years of experience in the field of software-based analysis of imaging studies and expertise in workflow, computer-aided diagnosis and system integration, these applications offer optimal conditions for detecting and treating breast cancer as early as possible. Aimed at meeting customer needs especially in terms of display and reading speed even when many patients and large amounts of data are involved, MeVis provides programmable workflow capabilities through special keyboards, computer-aided diagnosis and an optional organization of separate diagnostic opinions linked to RIS and PACS systems. In addition to digital mammography for both screening and diagnosis, other methods such as 3D ultrasound, magnetic resonance imaging (MRI), computed tomography (CT), and tomosynthesis are optimally supported. In particular, the importance of support from tomosynthesis as a three-dimensional development of digital mammography has grown significantly in the last few years due to successful market positioning by the respective equipment manufacturers.
MeVis software solutions pertaining to lungs are used to automatically detect anomalies such as lung tumors or pulmonary embolism in computed tomographic images. In this field, multi-slice computed tomography (MSCT) constitutes the state of the art in three-dimensional medical X-ray imaging. Thanks to improved detail resolution, it now plays an important role in modern pulmonary diagnostics. Within a few seconds, the smallest details of the entire lung are mapped in three dimensions. Evaluation of the growing volumes of data sets poses a growing challenge, however. MeVis software enables a time-efficient and safe radiological diagnosis of these MSCT images in clinical practice. State-of-the-art image processing and pattern recognition algorithms for computer-aided diagnosis of diseases of the chest make it possible to conduct a detailed segmentation of the anatomical structures of the lung, to fully automate the detection of anomalies (CAD), and to assess and quantify them. MeVis CAD technology offers radiologists a supportive, independent and reproducible evaluation of image data and is used worldwide for applications in the early detection, clinical diagnosis and treatment of lung diseases.
A more advanced version of the lung-cancer screening product was launched on the market based on this technology and on expertise in the area of breast cancer screening. This is aimed specifically at the efficient analysis of the large volumes of data sets accruing in connection with the CT-based lung cancer screening for heavy smokers introduced in the United States. Thanks to the consistent and close interfacing of the components for workflow support, comparison with preliminary images, integration of CAD results, automatic, reproducible measurement of lesion parameters and reporting in accordance with the Lung-RADS standard, this software provides significant advantages for the diagnosing radiologist, not only with respect to the time required for the diagnosis, but also to the quality of the results and integration with other clinical systems such as patient management.
With its MeVis Distant Services, MeVis creates technical visualizations, especially of the liver, that are used in further training, publications and presentations, as well as for research purposes. Medical technology companies and trained radiology and surgery personnel use MeVis Distant Services (MDS) to obtain comprehensive professional visualizations of their cases. Instead of static 2D representations, they obtain interactive 3D visualizations, which they can use for presentations and publications in leading professional journals and other media.
MeVis software for neurological diseases is capable of evaluating highly complex neuroradiological data, providing the basis for the safe and careful planning of brain surgery. Functional magnetic resonance imaging (fMRI) and diffusion tensor imaging (DTI) are able to capture functional areas, such as motor or linguistic regions, and make fiber tracts visible. Through the simultaneous display (fusion) of such data with other anatomical images, relations to brain tumors can be displayed, so that complex relationships are made visible. As a result, the MeVis software solution helps neurosurgeons plan for the best and least invasive access to tumors, allowing for the safe and reliable treatment of patients with neurological diseases. In addition, dynamic imaging allows for the flow of blood to the brain to be measured. The application calculates various metrics (rCBV, rCBF, TTP, etc.) and displays them in color maps, aiding the diagnosis of primary disorders of cerebral circulation (stroke), assessment of tumor malignancy and follow-up exams.
When it comes to prostrate examinations in suspected cancer cases, MeVis software evaluates dynamic images from magnetic resonance imaging (MRI) and thereby makes an important contribution to the differential diagnosis. Currently, one of the most frequent preventive care procedures is to determine the PSA level (prostate specific antigen). This procedure is not very specific, however, meaning that an abnormality does not necessarily point to cancer. As a result, magnetic resonance imaging has become increasingly popular in such evaluations to provide added clarity. A contrast agent is utilized to diagnose prostate cancer using MRI. Dynamic volume data imaging sets are recorded, whereby a tumor is indicated by altered blood flow properties in contrast to healthy tissue. This makes a very accurate characterization and localization of even the smallest tumors (5 mm) possible.
Through the MeVis Online Academy, MeVis offers interactive online training for faster and more accurate diagnoses both directly for clinical end users and indirectly through medical technology companies. Webbased radiological case collection provides the basis for this. Specifically adapted hanging protocols and interactive radiological examination and diagnostics tools round out the training portfolio for digital mammography, tomosynthesis, computed tomography (CT), magnetic resonance imaging (MRI) and sonography. Clinicians have round-the-clock access from any location to a wide variety of clinical case collections of recognized experts, including their solutions. This represents a unique, high-quality tool for further education, continuous radiological training and performance monitoring. In addition, MeVis developed software components in cooperation with Deutsche Röntgengesellschaft for online collaboration through networks of radiological experts and for multidisciplinary collaboration. Radiological image data can be securely shared online with colleagues from various fields, prepared as needed and made accessible worldwide through mobile devices. Innovative special applications for medical technology companies in the area of digital image acquisition, planning procedures for radiation therapy and additive production processes (3D printing), as well as the related software infrastructure for the global operation of cloud applications, round out the product portfolio.
The market for software products for use with digital medical imaging processes is characterized by high quality requirements and, in some cases, short innovation cycles in tandem with rising technical complexity. Along the way, the software's user-friendliness and easy integration into the clinical IT environment are becoming increasingly important. For this reason, the product ranges developed by MeVis call for ongoing and forward-looking adjustment in light of new medical and technological developments and the constant increase in data volumes to be processed.
The company has limited research capacities of its own. The majority of the Company's employees are working in the development of software applications. The company therefore commissions the Fraunhofer Institute for Image-Based Medicine MEVIS (hereinafter also referred to as "Fraunhofer MEVIS" or "FME") or other renowned research institutes to perform the necessary research services. This could be the procurement or licensing of existing research results or a mandate to work on a new research topic.
In the period under review, the Company's research and development activities focused on the development of software for tapping into new areas of application, such as solutions for CT-based lung cancer screening. In addition, emphasis was placed on the further development of existing software products in order to remain competitive in segments that are currently successful and to secure maintenance sales in the long term.
MeVisLab is the Company's in-house research and development environment for the rapid and effective development of software prototypes and products. This unique software development tool allows the methods and workflows developed to be quickly tested, evaluated and optimized ("rapid prototyping") in clinical settings and distributed through a range of channels. By being linked to product development software technologies, the prototypes developed based on MeVisLab can advance in the value chain and be converted into marketable products in a short time, which leads to significantly shorter development and product release periods. This development method was used with great success in the reporting period in the development of various software products, particularly in the further development of the product Veolity for efficient diagnosis of lung CT studies, new image-based planning tools for additive production/3D printing, the MeVis Online Academy training platform, as well as special applications for online multidisciplinary collaboration and teleradiology ("MeVis Online Services").
MeVisAP, a proprietary technology platform, provides basic services such as integration into the hospital network, license management, the management of studies and work lists, automated preparation of 2D, 3D and 4D image data and the creation of visually appealing reports and structured findings. Thanks to the client-server technology, users can work on their own cases from any station, seek the advice of other experts and pause or resume work at any time. The modular concept allows MeVis to quickly put together combinations of different clinical questions or imaging procedures required by the customer and link them with one another. On the one hand, MeVisAP serves as a complete diagnostics platform; on the other hand, partial functions from existing systems (RIS, PACS, system platforms) can be integrated into it as well.
For reporting purposes and internal governance, MeVis has two operating segments ("Digital Mammography" and "Other Diagnostics").
The Digital Mammography segment develops and markets software products which support breast diagnostic imaging and intervention. Aside from the original products for digital mammography, new software applications for other imaging modalities such as ultrasound, magnetic resonance imaging and tomosynthesis were added. These products are sold to the medical technology company Hologic.
In addition to the breast diagnostics business based on magnetic resonance imaging conducted with the customer Invivo Corporation, the Other Diagnostics segment also includes digital radiology products (e.g. magnetic resonance imaging (MRI), computed tomography (CT), etc.) for other types of diseases such as lung, prostate and intestinal disorders as well as general image-based analysis and diagnostics of radiology images. Furthermore, the business with Vital Images for lung diagnostics and general analysis of MR-image data is included in this segment. Other main activities in this segment include the services of "MeVis Distant Services" for technical visualizations, which are used in training, for publications, presentations and for research purposes. In addition, this segment includes MeVis Online Services, e.g. interactive online trainings ("MeVis Online Academy") to improve the diagnostic capabilities of clinical end customers.
In the course of the year to date, the global economy has continued to recover. In October 2017, the International Monetary Fund (IMF) forecast global growth of 3.6 % for 2017 and 3.7 % for 2018. This development reflects the positive developments in the Euro region, Japan, Russia, Canada and emerging countries, whereas the UK and the US were slightly weaker than expected, particularly in the first half of 2017. For the US, MeVis' most important economic area, the IMF has therefore lowered its expectations, following its higher forecast in April, for growth to 2.2 % for 2017 and 2.3 % in 2018. The reason is the assessment of political risks and the currently uncertain development of government spending and tax revenues in the US, with growth risks predominating in the medium term.
For Germany, the IMF forecasts in October 2017 growth of 2.0 % for 2017 and 1.8 % for 2018. After strong expansion in the first half of the year, the second half showed slightly less momentum. The ECB's quantitative easing, low interest rates and the resulting stimulus for private consumption are still making a substantial contribution to growth. By contrast, foreign trade was somewhat weaker, mainly due to the appreciation of the Euro.
Spectaris (German Hightech Industry Association) currently estimates the total global market for medical technology, including diagnostics systems, at approximately 364 billion US dollars. With a share of approximately 9 %, Germany was in third place behind the US (39 %) and China (12 %), but well ahead of Japan and Mexico.
Within the European Union, German medical technology companies account for the largest share by a large margin. Total sales at medical technology manufacturing companies (with over 20 employees) in Germany rose by some 5.8 % to € 29.2 billion, with an export rate of around 65 %. Approximately 51 % of those exports went to European countries. In Germany, the medical technology sector is considered to be particularly innovative, fast growing and promising. Medical products make an important contribution to an efficient healthcare system, plus they are a significant factor in the economy and the labor market. The German healthcare sector is posting higher rates of growth than the overall economy. The medical technology sector will remain a growth market thanks to medical and technological advancements, demographic development and patients' growing demands for better services. As a result, the need for healthcare services will continue to grow.
A study by Hamburgisches WeltWirtschaftsInstitut (the Hamburg Institute of International Economics – HWWI) indicates that demand for medical technology in industrialized nations will continue to grow by 3 % to 4 %, according to general assumptions. Emerging markets are forecast to achieve growth rates of between 9 % and 16 % between now and 2020. Especially in developing countries and emerging markets with high population densities, population growth and the rapidly increasing per capita income are the main causes of rising investments in healthcare and medical technology.
Due to political realignment, there is a considerable amount of uncertainty regarding the future and the focus of the healthcare system in MeVis' most important sales market, the US. In our opinion, the significance of medical imaging, a sub-segment of medical technology, has seen and will continue to see above-average growth. Multi-modal and functional imaging, diagnostics support and model-based therapy, as well as new
2 Sources: German Medical Technology Association – BVMed: Industry Report Medical Technologies 2017 Study on behalf of the HSH Nordbank AG: Global sales markets of the German Medical Technology / Trends and Forecasts 2020 (2009 & 2013) Spectaris-yearbook 2016 / Facts & Figures
1 Sources: International Monetary Fund - World Economic Outlook (WEO) Updates 2016/2017
Federal Ministry of Economics and Energy, Health Care Industry / Facts & Figures 2016
and optimized workflows, computer assistance and automation, are areas of innovation with above-average growth potential for the sector.
A look at the current situation at MeVis – especially with regard to our areas of focus on breast cancer diagnostics, 2D and 3D breast screening (three-dimensional digital tomosynthesis) and lung cancer screening – reveals various trends. From an application perspective, demand for three-dimensional digital tomosynthesis systems remained a factor. The introduction of this still relatively new technology is leading to stronger demand for the relevant imaging devices. According to U.S. Food and Drug Administration (FDA) statistics3 from October 2017, there are a total of 8,726 certified breast screening centers in the US with a total of 18,061 mammography screening devices. Of the 8,726 certified centers (October 2016: 8,741), 3,694 centers (October 2016: 2,783) have also been certified for tomosynthesis diagnostics so far. These figures show that the ongoing trend towards switching from 2D to 3D continues and will increase over the years ahead. Given the ubiquity of tomosynthesis systems, however, many PACS manufacturers now likewise offer software applications for analyzing tomosynthesis data that, although not approaching the range of functions of the products developed by MeVis, are nevertheless increasingly popular with clinical end customers due to their complete integration in the IT landscape already existing in the clinical environment. As a result, the outlook for the dedicated software solutions market that is relevant to MeVis remains somewhat bleak in terms of marketing our mammography and screening solutions.
Since mid-2013, there has been an emerging trend, at least in the US, to introduce CT-based lung cancer screening programs. It has been demonstrated in national studies4 (Early Lung Cancer Action Project – ELCAP, and National Lung Screening Trial – NLST) in the US that CT lung screening is vastly superior to normal X-ray imaging for detecting lung cancer at an early stage. The United States Preventive Services Task Force (USPSTF) issued a corresponding recommendation5 for national lung screening, under certain circumstances in December 2013. Following a decision by the Centers for Medicare and Medicaid Services (CMS)6 , these measures have been refundable since January 2016 and will be reimbursed by health insurance companies in the US.
We assume that demand will consequently increase for software solutions that simplify and shorten this sophisticated form of examination while improving its quality. MeVis is already addressing this potentially growing field with the Veolity Lung Screening and Veolity Lung CAD products, as well as the MeVis Online Academy e-learning portal and the Lung Academy. The first certified lung cancer screening centers have begun investing in the new solutions that are required. However, the investment decisions remain cautious. The certified centers appear to be initially assessing for themselves just how high the demand for the offered services and the level of acceptance among high-risk groups will actually be. Other countries are joining the US and are conducting their own studies to evaluate whether a government program for the early diagnosis of lung cancer should be introduced. Studies are already under way in Canada, Australia, South Korea and the UK. The introduction of extensive lung screening is still the subject of controversial debate in Germany and the rest of Europe.
Based on its specialized product portfolio in the field of breast diagnostics, its broad research base and the existing relationships with customers, MeVis assumes that it will be able to continue to maintain and further expand its current market position in a targeted manner in some market segments in 2018. However, large PACS system suppliers and providers of vendor-neutral archives (VNAs) are continuing to develop, also with regard to the market segments relevant to the Company, meaning that it takes ongoing effort to stay ahead of the competition in terms of technology and launch new products with relevant competitive advantages over these providers. In view of the continued reluctance of clinical end users to purchase new products, the
3 US Food and Drug Administration / Scorecard Statistics (https://www.fda.gov/Radiation- EmittingProducts/MammographyQualityStandardsActandProgram/FacilityScorecard/ucm539394.htm)
4 Early Lung Cancer Action Program ELCAP / http://www.ielcap.org/lancet-1999 National Lung Screening Trial (NLST) / https://clinicaltrials.gov/ct2/show/NCT00047385
5 U.S. Preventive Services Task Force – Recommendation for Lung Cancer Screening /2013 (http://www.uspreventiveservicestaskforce.org/Page/Document/UpdateSummaryFinal/lung-cancer-screening)
6 Centers for Medicare and Medicaid Services – Decision Memo on Lung Cancer Screening /2015 (https://www.cms.gov/medicare-coverage-database/details/nca-decision-memo.aspx?NCAId=274)
future performance of the business will depend to a large degree on the ability of the Company to expand existing sales channels and tap new markets.
In addition, the further performance of the business with lung products and applications will depend highly on whether, when and to what extent the published findings regarding the clinical effectiveness of this technology lead to the appropriate remuneration of the quality-assured methods and their inclusion in clinical routine. Not least, the success of the MeVis technology in use depends on a consistently high rate of participation and access among the high-risk groups entitled to it (i.e., patient acceptance of preventive screening).
The earnings situation is only comparable with the previous year to a limited extent, as the short fiscal year in the previous year only covered a nine-month period.
Sales amounted to € 18,540 k (prev. year: € 12,091 k) in the reporting period. The new license business accounted for 30 % of revenues (prev. year: 46 %), at € 5,652 k (prev. year: € 5,527 k), and 41 % (prev. year: 45 %) was attributable to the maintenance business at € 7,528 k (prev. year: € 5,468 k).
At € 7,962 k (prev. year: € 3,928 k), earnings before financial result and taxes developed very positively.
The Company's operations consist of two core areas: the development and sale of software licenses, the maintenance business this entails and the software development for medical technology companies, as well as the provision of services for technical visualization (Distant Services) and in the context of online training.
At approximately 97 % of total sales, the software business, which includes products for the medical technology companies Hologic, Vital Images and Invivo, again made the greatest contribution to the Company's total sales in this reporting period.
In the past fiscal year, sales in the Digital Mammography segment amounted to € 12,462 k (prev. year: € 9,519 k).
License sales amounted to € 3,963 k (prev. year: € 4,508 k) in fiscal year 2016/2017, while revenues from maintenance and support services amounted to € 6.406 k (prev. year: € 4,492 k). Total Digital Mammography product sales (licenses and maintenance) amounted to € 10,369 k (prev. year: € 9,000 k), a slight downward trend can be seen here. Revenues from services in the Digital Mammography segment amounted to € 2,086 k in the reporting period (prev. year: € 516 k).
In fiscal year 2016/2017, as in the previous year, sales in the Digital Mammography segment were reported exclusively in US dollars. Revenues invoiced in US dollars stood at € 12,462 k (prev. year: € 9,519 k).
Amortization totaled € 1,049 k (prev. year: € 1,215 k), while operating expenses in the Digital Mammography segment stood at € 3,014 k (prev. year: € 2,635 k), with personnel expenses amounting to € 2,886 k (prev. year: € 2,532 k).
The operating segment result developed very positive to € 8,399 k (prev. year: € 5,669 k).
Other operating income in the Digital Mammography segment came in at € 369 k (prev. year: € 232 k). Other operating expenses totaled € 733 k (prev. year: € 721 k). As a result, net profit in the segment amounted to € 8,035 k (prev. year: € 5,180). The EBIT margin in the Digital Mammography segment rose accordingly to 64 % (prev. year: 54 %).
Relatively speaking, business volume in the Other Diagnostics segment increased to € 6,078 k (prev. year: € 2,572 k) in the reporting period, even disregarding the non-recurring revenues from the sale of MeVisLab usage rights of € 1,800 k.
License sales came in at € 1,689 k (prev. year: € 1,019 k), while sales from maintenance and support services, which consist mostly of maintenance of existing software applications, amounted to € 1,122 k (prev. year: € 976 k). Total sales with products in the Other Diagnostics segment (licenses and maintenance) amounted to € 2,811 k (prev. year: € 1,995 k). In the Other Diagnostics segment, revenues from services (development services, consulting and training) amounted to € 3,264 k (prev. year: € 575 k). Revenues from services also include the one-off revenue from the sale of MeVisLab usage rights of € 1,800 k.
In the Other Diagnostics segment, invoices are generated in both euros and US dollars; in the indirect channel, the invoice currency depends upon the headquarters of the relevant medical technology company, whereas in the direct channel it is based on the headquarters of the relevant clinical end user. Revenues invoiced in euros came in at € 2,944 k (prev. year: € 712 k), while revenues invoiced in US dollars amounted to € 3,134 k (prev. year: € 1,860 k).
No grants were used in the Other Diagnostics segment (prev. year: € 104 k), as the funded projects were completed in the course of the previous year. This resulted in total segment revenues of € 6,078 k (prev. year: € 2,676).
Amortization totaled € 168 k (prev. year: € 103 k), while operating expenses in the Other Diagnostics segment stood at € 5,430 k (prev. year: € 3,253 k), with personnel expenses amounting to € 5,052 k (prev. year: € 3,019 k).
The operating result in the segment came in at € 480 k (prev. year: € -680 k). Other operating income in the Other Diagnostics segment amounted to € 647 k (prev. year: € 277 k), while other operating expenses amounted to € 1,200 k (prev. year: € 849 k).
The segment result amounted to € -73 k (prev. year: € -1,252 k). Disregarding the one-off revenue from the sale of of the MeVisLab usage rights, the negative EBIT margin in the Other Diagnostics segment improved slightly from 49 % to 44 %.
In the fiscal year, total sales came in at € 18,540 k (prev. year: € 12,091 k), which corresponds to higher sales in relative terms. These revenues were generated by revenues from licensing sales of € 5,652 k (prev. year: € 5,527 k), revenues from maintenance contracts (software service contracts) of € 7,528 k (prev. year: € 5,468 k) and other revenues of € 5,360 k (prev. year: € 1,096 k). The improvement in revenues compared with the previous year is mainly attributable to the Other Diagnostics segment. The sale of extensive usage rights for MeVisLab, a tool for the development of software prototypes, contributed € 1.8 m. In addition, business with a number of products and services developed positively, such as higher license sales of LungCAD and increased activities in MeVis Online Services.
Other operating income increased to € 1,016 k (prev. year: € 613 k), as more costs from the provision of administrative services for Group companies were charged on in the reporting period.
The cost of materials, including the cost of services purchased, totaled € 506 k (prev. year: € 337 k), and personnel expenses amounted to € 7,938 k in the reporting period (prev. year: € 5,551 k). The average number of permanent employees expressed as full-time equivalents rose to 90 (prev. year: 86) in the reporting period, and the annual average number of student interns expressed as full-time equivalents stabilized at 3 (prev. year: 3).
Other operating expenses totaled € 1,933 k (prev. year: € 1,570 k). Other operating expenses comprised rental expenses of € 592 k (prev. year: € 414 k), legal and consulting costs of € 242 k (prev. year: € 312 k), travel expenses of € 227 k (prev. year: € 162 k) and costs for maintenance and repair of € 198 k (prev. year: € 129 k). Remaining other operating expenses amounted to € 674 k (prev. year: € 553 k).
Earnings before financial result, taxes, depreciation and amortization (EBITDA) therefore came to € 9,179 k in fiscal year 2016/2017 (prev. year: € 5,246 k). The EBITDA margin increased to 50 % compared to 43 % in the previous year.
Depreciation, amortization and impairments of intangible assets and property, plant and equipment amounted to € 1,217 k (prev. year: € 1,318 k).
Earnings before financial result and taxes (EBIT) amounted to € 7,962 k in the reporting period (prev. year: € 3,928 k). Accordingly, the EBT margin increased considerably to 43 % compared to 32 % in the previous year.
The financial result amounted to € -794 k in the reporting period (prev. year: € -503 k). This was largely due to the deterioration in the balance of income and expenses from exchange rate differences in the amount of € -1,459 k (prev. year: € -540 k).
Earnings before taxes (EBT) therefore came to € 7,168 k in the reporting period (prev. year: € 3,425 k). The EBT margin (return on sales) increased accordingly to 39 % compared to 28 % in the previous year.
In the reporting period, income taxes amounted to € 1,546 k, whereas in the previous year due to the still prevailing fiscal unity, no income taxes were incurred. Due to the fiscal unity for income tax purposes, no income taxes were incurred in the previous year. The fiscal unity with Varex Imaging Deutschland AG begins on October 1, 2017
After-tax earnings (net profit) in the reporting period therefore totaled € 5,622 k (prev. year: € 3,425 k), which represents basic earnings per share of € 3.09 (prev. year: € 1.88).
Cash flow from operating activities came to € 7,324 k (prev. year: € 3,509 k) in the reporting period. This comprised earnings before interest and taxes (EBIT) of € 7,962 k (prev. year: € 3,928 k), the redemption of share-based payments of € 750 k (prev. year: € 0 k) and the dividend payment from the investment in MBC KG of € 153 k (prev. year: € 114 k) adjusted for depreciation in the amount of € 1,217 k (prev. year: € 1,318 k), changes in provisions in the amount of € 28 k (prev. year: € -209 k), the total of all non-cash expenses and income of € 6 k (prev. year: € -246 k), the total of interest paid and received of € 177 k (prev. year: € 25 k), the total of taxes paid and received in the amount of € -795 k (prev. year: € -389 k), changes in inventories and trade receivables and other assets of € -1,085 k (prev. year: € -495 k), and changes in trade payables and other liabilities of € 411 k (prev. year: € -537 k).
Net cash flow from investing activities stood at € -221 k in the period under review (prev. year: € -179 k) and comprised spending on property, plant and equipment and intangible assets in the amount of € 221 k (prev. year: € 179 k).
Cash flow from financing activities amounted to € 0 k, as the previous year's result of € 4,166 k was not transferred in the year under review. In the previous year, on the other hand, the profit of the fiscal year 2015 (prev. year: € -4,742 k) was paid out to the majority shareholder.
The liquidity-relevant change in cash and cash equivalents came to € 7,103 k in the period under review (prev. year: € -1,412 k).
As of the balance sheet date, cash and cash equivalents amounted to € 29,735 k (prev. year: € 24,356 k). These consisted solely of cash. The company's liquidity was ensured at all times during the year under review.
Total assets and liabilities increased by € 6,076 k to € 49,079 k in the reporting year (prev. year: € 43,003 k). The increase in assets is largely due to the increase in cash and cash equivalents by € 5,379 k to € 29,735 k (prev. year: € 24,356 k) as well as an increase in trade receivables, as a result of the increase in sales revenues, by € 1,341 k to € 4,998 k (prev. year: € 3,657 k).
Non-current assets decreased by 3 % to € 15,665 k as of the reporting date (prev. year: € 16,099 k), which – for the intangible assets and property, plant and equipment of € 221 k (previous year € 179 k) and investments in equity affiliates of € 380 k (prev. year: € -107 k) – was mainly due to the scheduled depreciation and amortization of € 1,217 k.
Property, plant and equipment, which primarily consists of acquired office and business equipment, as well as spending on modern IT file server technology, remained stable at € 316 k (prev. year: € 316 k) as of the balance sheet date. The 24 % increase in current assets during the reporting period to € 33,414 k (prev. year: € 26,904 k) resulted mainly from the increase in cash and cash equivalents to € 29,735 k (prev. year: € 24,356 k), as well as the increase in current trade receivables by € 1,159 k to € 3,362 k (prev. year: € 2,203 k).
Equity declined as of the reporting date to € 32,511 k (prev. year: € 32,889 k). This is mainly due to the balance of € 750 k (prev. year: € 0 k) from the payment of the redemption of the share-based payments and the net profit for fiscal year 2016/2017 of € 5,622 k, which has been determined according to IFRS € 411 k higher compared to the annual net profit of € 5,211 k paid to the majority shareholder.
The equity ratio decreased, due to the increase in total assets and liabilities, to 66 % (prev. year: 76 %). Subscribed capital remained unchanged at € 1,820 k (prev. year: € 1,820 k). The capital reserve decreased to € 7,475 k (prev. year: € 8,219 k). Retained earnings increased by € 466 k to € 22,990 k (prev. year: € 22,524 k). This corresponds to the total of net income for the year of € 5,622 k (prev. year: € 3,425 k), changes in revaluation reserves of € 100 k (prev. year: € 78 k), the profit transfer from the domination and profit and loss transfer agreement of € 5,211 k (prev. year: € 4,166 k), and actuarial losses of € 45 k (prev. year: losses of € 111 k).
Non-current liabilities amounted to € 301 k as of the reporting date and were € 32 k above the previous year's level (prev. year: € 269 k), which is attributable to the change in interest rate for calculation purposes that relates to pension provisions.
Current liabilities increased by 65 % to € 16,267 k (prev. year: € 9,845 k), mainly due to the profit to be transferred for fiscal year 2016/ 2017 and the increase in income tax liabilities.
Other financial liabilities increased by € 5,650 k to € 11,393 k, of which € 5,211 k resulted from the recognition of the obligation to transfer profits as a liability for fiscal year 2016/2017. In addition, personnel liabilities rose by € 439 k compared with the previous year to € 2,025 k (prev. year: € 1,586 k).
Other liabilities increased to € 204 k (prev. year: € 144 k). Due to higher profits, income tax liabilities increased to € 1,224 k (prev. year: € 468 k). In the previous year, income taxes for 2015 were not yet assessed.
The Company used revenues and earnings before financiaL and taxes (EBIT) as essential financial planning tools. A deviation analysis of the applicable budget parameters is performed regularly in the light of the results of a corresponding risk situation evaluation. This analysis, together with external market and competitor information, forms the basis for ongoing review of the plan and continuous forecast adjustments.
Beyond the defined financial parameters, revenues and EBIT, non-financial performance indicators are also relevant and thus important indicators of MeVis' long-term success. These so-called non-financial performance indicators are explained below. MeVis does not provide a financial assessment of non-financial performance indicators.
MeVis' workforce is an essential part of our capital. Employee expertise and commitment translates into crucial contributions to the Company's success. Their knowledge and experience guarantees the quality of our products and serves to continually optimize processes and services. Flat hierarchies, the freedom to make decisions and a high degree of personal responsibility are an expression of our open corporate culture. Financial recognition of individual performance is as important to MeVis as the availability of flexible work time models, targeted staff development and health promotion measures.
MMS AG had 101 permanent employees as of the reporting date (prev. year: 98) as well as 3 student testers on a temporary basis (prev. year: 9). This equates to a total of 94 full-time equivalents (prev. year: 92), 93 of whom were permanent employees (prev. year: 89) and 1 of whom (prev. year: 3) were student testers on a temporary basis.
The vast majority of employees received a voluntary bonus payment in the past fiscal year as well as their fixed remuneration.
By resolution of the Annual General Meeting on June 15, 2011, the Executive Board was authorized to issue stock options to MeVis employees and members of management along with the associated conditional increase of the Company's share capital by € 130,000 on December 31, 2015. The stock options had a term of five years and were subject to a four-year vesting period. The performance target is formulated in the form of a market condition. The MMS AG stock price had to exceed the TecDAX by at least 15 % at the time the stock option is exercised. Further explanations and information on the stock option program can be found in the notes. In the course of fiscal year 2016/2017, all options were exercised, forfeited or expired, so that no more options were available at the end of the reporting period.
High-quality processes, including comprehensive expertise in international regulatory processes, is a necessary requirement for the achievement of MeVis' strategic objectives, and thus of very high value. Quality and quality management are both a regulatory requirement and an important product feature.
MeVis has installed an extensive quality management system in accordance with EN ISO 13485. MeVis is certified to EN ISO 13485:2012 + AC:2012 for the areas of development, manufacture, final inspection and sale of diagnostic software for medical image data and intervention support. Through further certifications and permissions the Company is able to develop products that meet the requirements of Directive 93/42/EEC (Europe), FDA 510k (USA), CMDCAS (Canada) and KGMP (Korea) and bring those products to approval.
This ensures that software components delivered by MeVis meet the applicable standards and legal requirements. In turn, this significantly accelerates the approval process for our customers' medical products, bringing them to market faster.
Innovation and new technologies are essential for the strategic development of MeVis. The market for software products for use with digital medical imaging processes is characterized by high quality requirements and, in some cases, short innovation cycles in tandem with rising technical complexity. For this reason, the product ranges developed by the Companies call for ongoing and forward-looking adjustment in the light of new medical and technological developments and the constant increase in data volumes to be processed. In addition to internal research and development capabilities, MeVis has a wide network of hospitals and research centers at its disposal, enabling us to identify new ideas and market trends early on.
For the rapid development of prototypes tailored to real-life application, MeVis uses its own MeVisLab research and development environment. As a result, newly developed methods and work processes can be tested, evaluated and optimized in clinical environments ("rapid prototyping") to convert developed products into marketable products in a short time. This leads to significantly shorter development and innovation cycles.
MeVis owes its leading market position to its successful long-term cooperation with major international medical technology companies. Under the umbrella of the OEM sales model, distribution of software applications is carried out under the medical technology company's respective brand names who are typically also manufacturers of imaging devices. Our major customers include Siemens, Hologic, Invivo (a subsidiary of Philips), Vital Images (a subsidiary of Canon/Toshiba) and Varian Medical Systems. Excellent customer relationships are the basis for MeVis' success. On account of their personal, efficient and competent services, our key account managers contribute to increasing customer satisfaction and promoting a long-term, profitable customer relationship. Moreover, we consider our customers a driving force for innovation, which is reflected in our continuous development of products with new or additional services at the request of our existing customers.
The fiscal year 2016/2017 was again successful for MeVis in view of the financial figures, in which MeVis continued to participate in the very good market position of Hologic for tomosynthesis. Due to the still solid cost structure, very good results could be achieved.
The middle- and long-term outlooks remain significantly dampened by the changed cooperation arrangements with MeVis introduced by Hologic and the associated decline expected in sales with and activities for Hologic.
As of the reporting date, the Company had subscribed capital of € 1,820 k, which consisted of 1,820,000 nopar-value registered shares with voting rights. Each registered share carries one vote. In accordance with the statutory provisions and the Articles of Association, the shareholders exercise their voting rights at the General Meeting.
The Executive Board has no information about any restrictions on exercising voting rights or restrictions on the transferability of the shares, which go beyond the statutory requirements of the capital market law.
Based on the information of the Company, the following direct or indirect equity interests existed, exceeding 10 % of the voting rights at the reporting date:
With the spin-off agreement dated December 28, 2016, the transfer of MeVis Medical Solutions AG shares in the amount of 73.65 % of the total share capital from VMS Deutschland Holdings GmbH, an indirect subsidiary of Varian Medical Systems, Inc., Palo Alto, California, USA, to Varex Imaging Deutschland AG was resolved. The transfer became economically effective on December 30, 2016. In addition, Varex Imaging Deutschland AG, an indirect subsidiary of Varex Imaging Corporation, received an authorization from VMS Deutschland Holdings GmbH on December 31, 2016 to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, for an unlimited period of time and not bound by instructions. The spin-off was entered in the commercial register of VMS Deutschland Holdings GmbH after the balance sheet date.
The appointment and dismissal of members of the Executive Board is governed by the provisions of Sections 84 and 85 of the German Stock Corporation Act (AktG). In addition, Section 6 (1) and (2) of the Articles of Association of MeVis Medical Solutions AG in the version dated June 7, 2016 stipulates that the Supervisory Board shall appoint the members of the Executive Board and determine their number. Amendments to the Articles of Association are governed by Sections 133 and 179 et seq. of the German Stock Corporation Act. Section 119 (1) No. 5 of that Act stipulates that any amendments to the Articles of Association require a resolution of the shareholders. Under Section 9 (5) of the Articles of Association of MeVis Medical Solutions AG in the version dated June 7, 2016, the Supervisory Board may make amendments to the wording of the Articles of Association.
At the Company's Annual General Meeting held on August 22, 2007, the shareholders passed a resolution, by amendment resolution of the Annual General Meeting on September 28, 2007, authorizing the Executive Board to issue, in one or more tranches before December 31, 2011, subject to the Supervisory Board's approval, subscription rights for a total of up to 130,000 of the Company's registered no-par-value ordinary shares to employees and members of the management of the Company and other entities in which the Company directly or indirectly holds a majority of the capital and to create conditional capital of € 130 k. The Annual General Meeting on June 15, 2011 extended this authorization until December 31, 2015. From 2016, this authorization no longer existed.
In accordance with the resolution passed by the shareholders at the Annual General Meeting on June 9, 2015, the Executive Board is authorized, subject to the Supervisory Board's approval, to increase the Company's share capital on a cash or non-cash basis by a total of up to € 910 k by issuing new registered nopar-value shares in one or more tranches on or before June 8, 2020. The shareholders must generally be granted subscription rights; the statutory subscription right may also be granted in such a way that the new shares of one or more credit institutions or those under Section 186 (5) sentence 1 of the German Stock Corporation Act, be subject to the obligation to offer them to the shareholders of MeVis Medical Solutions AG for subscription. The Executive Board is also authorized, subject to the Supervisory Board's approval, to exclude the subscription rights of shareholders in certain cases.
MeVis Medical Solutions AG has made various agreements, as listed below, consisting of rules in the event of a change-of-control, for example following a takeover bid:
The most recent Corporate Governance Statement can be accessed on the Company website of MeVis Medical Solutions AG at https://www.mevis.de/en/investor-relations/corporate-governance/corporategovernance-report/.
The remuneration for the Executive Board consists of fixed and variable components.
The bonuses for Executive Board members are always measured by the level of achievement of a target catalogue agreed upon with the Supervisory Board. For both Executive Board members the bonus is capped at 1.0 times their fixed remuneration. 75 % of the bonus is calculated according to a fixed formula of the EBITDA adjusted for income from the capitalization of development costs, while the Supervisory Board decides on remaining 25 % at its own discretion. A portion of Executive Board members' bonuses is coupled to the price of the MMS AG share within defined thresholds and deferred for three years.
As a further variable remuneration component with a long-term incentive effect, the members of the Executive Board also enrolled in a stock option program. The options had a maturity of five years from grant date. As of December 31, 2015, this stock option program had expired; therefore no stock options were issued in the reporting year, as in 2016 and 2015. In the fiscal years 2016 and 2017, all options granted to the Executive Board members in the past, were exercised.
The current employment contracts for Executive Board members, which have a term of three years, stipulate transitional payments of up to four monthly salaries should their contracts not be extended and the Company fails to comply with the termination period of four months prior to the end of the contracts. In the event of revocation of appointment, the Executive Board member receives their fixed remuneration (in one case the present value) until the end of their contractual term, unless the revocation of appointment is based on negligence on the part of the Executive Board member.
In agreement with the members of the Executive Board the Supervisory Board has decided to abolish the variable remuneration component at the beginning of fiscal year 2017/2018. This was done because the members of the Executive Board are also members of the Executive Board of Varex Imaging Deutschland AG, which holds a majority interest in the Company and with which a domination and profit and loss transfer agreement exists. At Varex Imaging Deutschland AG, the members of the Executive Board receive variable remuneration based on the Group's success. As a result of the domination and profit and loss transfer agreement, the Company's success is no longer an indicator of the success of the managerial performance, so the variable remuneration no longer seemed to be meaningful to the Supervisory Board. Also for this reason, the bonuses granted as long-term incentive components with share price-dependent leverage will be paid out after the Annual General Meeting to be held in 2018.
As explained in the financial statements (Note 34), the total remuneration paid to the Executive Board in the period under review came to € 745 k (prev. year: € 560 k).
The Executive Board of MMS AG believes that the market for medical imaging technology in the extremely important digital mammography segment will be increasingly affected by market saturation. The Executive Board therefore believes that the market environment will become progressively competitive. Key providers of PACS (picture archiving and communication systems) for the archiving and presentation of all clinical patient data are continuing to develop further in market segments relevant to the Company, meaning that it requires an increasing amount of effort to remain one step ahead and continue with its progress. As a result, ongoing activities at MMS AG are based on the conviction that global demand will remain stable, especially when it comes to medical imaging technology and diagnostics support, but that the competitive situation will become more demanding and price pressure will increase. Alongside diagnostic imaging, intervention and treatment planning will also play a more significant role in the optimization of the clinical workflow.
MeVis assumes that its customers in the computer-assisted imaging segment will be able to retain the outstanding position of their products on the global market and will be able to generate further growth. MeVis can make a decisive contribution here with its software applications. Against this backdrop of increasing competition, MeVis will continue to focus on maintaining these strong relationships with customers and expanding our customer base especially for the Other Diagnostics segment. The relevant market in the Digital Mammography segment for dedicated software applications for diagnosis of images from mammography and tomosynthesis is estimated to decline in the medium- and long-term, since the aforementioned PACS systems increasingly expand its functionality and offer seamlessly integrating more user-friendly complete systems, than would ever be possible through dedicated individual solutions. In addition, the competition for MeVis' most important customer Hologic is increasing by other modal manufacturers, especially in the USA.
Macroeconomic factors and health policy debates, such as on the importance of screening programs for early lung cancer detection, continue to play a key role in the Company's business environment. The Executive Board is therefore unable to rule out that external factors will adversely impact the market environment as well as the Company's sales and distribution expectations for 2018 and beyond.
On the other hand, the Executive Board of MMS AG continues to hope that MeVis will be able to play a leading role, for example, if large-scale lung cancer screening is introduced, even if the current level of sales fell short of expectations.
The Company's maintenance business remains strong and the Company also has an array of general oncology, neuro, prostate and virtual colonoscopy products and technologies, all with relatively moderate sales contributions. As the Company is dependent on the success of existing industrial customers, winning new customers and developing alternative sales channels, it is impossible once again in the current fiscal year to reliably forecast future sales developments. In the future, MeVis will focus on the development and marketing of software solutions and services for diagnostic imaging in breast, lung and liver cancer.
In the past fiscal year, MMS AG continued its efforts to further enhance its internal risk management processes. Regular extended management meetings continue to be an essential tool for detecting at an early stage any risks to its assets as well as changes in the business performance of the individual segments and Group members or other risks to its going-concern status.
The Company's risk management system is geared toward coordinating the processes for monitoring, early detection and managing all business risks in accordance with the Business Control and Transparency Act. The purpose is to identify at an early stage any risks, in particular risky transactions, accounting misstatements and breaches of the law with a material effect on the assets, financial and earnings of the Company and to minimize potential negative effects.
The Accounting Law Reform Act further states the mandates of Supervisory and Executive Boards of capital market companies in concrete terms. This includes in particular their responsibilities and monitoring duties in relation to internal risk management, including the internal auditing system.
A monitoring system is at the core of the risk management system of MMS AG. It ensures that existing risks are recorded, analyzed and assessed, and also that risk-related information is passed on to the right decision-maker in a systematic manner. Risks are continuously quantified in monetary terms. According to the extent of the damage, it is subdivided into four categories: small (less than € 2.5 m), medium (€ 2.5 m to less than € 5.0 m), high (€ 5.0 m to less than € 10.0 m) and critical (starting at € 10.0 m). A gross assessment is carried out, i. e. the damage assessment is based on the potential maximum amount of damage. The probability of occurrence is assessed taking into account the measures currently being taken to limit damage.
The risk management system documents and regularly updates risk scenarios arising out of operations and based on the environment. The following three main opportunities and risks were identified, ranging in size from € 2.5 m to less than € 10.0 m and with an average loss expectation:,
a) Opportunities arising from the introduction of lung cancer screening
Since mid-2013, there has been an emerging trend, at least in the USA, to introduce CT-based lung cancer screening programs. In December 2013, the US Preventive Services Task Force (USPSTF) issued a corresponding recommendation. In the course of 2014 this was defined more accurately and on February 5, 2015 the CMS (Centers for Medicare and Medicaid Services) released a memorandum containing its decision. In November 2015, the final criteria were published for reimbursement and January 4, 2016 was set as the start date of the reimbursement. Accordingly MeVis expected and expects a sharp rise in CT scans of the lung to be diagnosed since 2016 and resulting from this increasing demand for solutions that simplify, shorten and qualitatively improve this procedure. MeVis was already in a position to serve this potential growth market with its Visia™ Lung CAD product and, for this reason, MeVis launched a dedicated lung screening solution on the market in the second half of 2014 and has concluded a marketing agreement with a major medical technology company. The introduction of broad lung screening programs would result in opportunities for MeVis of a significant increase in revenues. This carries the risk that MeVis will not be able to establish itself successfully in this market and will not be able to make use of the considerable investments in one of the most promising market developments.
b) Product development-related risks
MeVis has invested heavily in new technologies and products for some years now. Some of these development costs were capitalized and reported as assets. Due to a change in the assessment of the market environment, MeVis already impaired a large portion of these investments in 2010 and 2011. This experience shows that the development of new products and enabling technologies entails a significant risk despite extensive market studies, including in cooperation with new customers. While MeVis increasingly focuses on reducing sales risks relating to the development of products, for example by the participation of large customers in the development costs, there remains a financial risk resulting from necessary technological preliminary developments. Since the issue of a release to Hologic in the fourth quarter of 2014, MeVis has not been able to activate development services, which means that the extent of this risk will be reduced even further over the next few years by amortizing the capitalized development expense.
Separated from the question of the capitalization or depreciation of development costs, MeVis could develop new technologies or products at its own expense, in which, despite extensive market studies, no economic success can be achieved, and thus use resources for projects for which only low future revenues can be achieved.
c) Exchange rate risks and opportunities
MMS AG and its affiliate offer their services on an international basis and, hence, outside the euro currency zone, particularly in the US market. The sales of MMS AG and its affiliate are invoiced in the currency of the territory in which the customer has its head office. To date, the vast majority of services of MMS AG are therefore being invoiced in US dollars, while most of the Company's expenses are to be paid in euros. Subsequently, opportunities and risks from exchange rate fluctuations could arise which may have a positive or negative effect on the profit and loss of the CompanyIn addition, a substantial part of the liquidity nominates in US dollars, which could also result opportunities and risks.
When necessary in the past, MMS AG entered into different types of currency contracts to manage exchange rate risk resulting from the cash flow from (expected) business activities denominated in foreign currencies. The transaction risk was measured in each relevant foreign currency. The Company's exchange rate exposure was due to its global business activities, particularly the sale of its products to US customers, which are invoiced in US dollars. In the future there will be no new hedging transactions due to the affiliation to the Varex Imaging group and in accordance with its corporate policy.
In addition, the Company identified the following opportunities and risks in particular. The risks are subdivided into those relating to business activities, market risks and those related to research and development. In the individual areas, the risks are presented in order of importance, beginning with the highest significance:
a) Risks arising from dependence on key customers and opportunities arising from acquiring additional key customers
The Company generates a substantial portion of its revenue from business with a small number of key customers. These customers are of considerable importance for the commercial success of MMS AG. Some of the contracts concluded with these key customers are fixed term and run for several years. If the Company does not succeed in retaining the positive business relationships with these key customers or if these key customers decide against continuing these relationship for other reasons or become insolvent, this will have a direct detrimental effect on the Company's assets, liabilities, financial position and profit or loss. For this reason, MMS AG makes every effort to increase the number of business relationships such that the existing risk is minimized without impacting the quality or profitability of individual areas.
If MeVis succeeds in acquiring one or more additional key customers and can conclude contracts for license sales of existing or new software products, this would open up new sales contributions. In addition, this would also reduce the risks from dependence on individual medical technology companies due to a broader distribution of sales among more customers.
b) Risks related to the expiry of the SecurView™ agreement with Hologic as of December 31, 2017
The existing agreement with the medical technology company Hologic for the distribution of the Secur-View™ product has been extended in October 2016 by one year and now runs until December 31, 2017. Given the solid business with this product and no visible alternative to SecurView™ for Hologic from the beginning of 2018 according to MeVis, an extension of the agreement or a follow-up contract from January 1, 2018 is assumed. A potential amendment or non-extension of the contract could in turn significantly impair the assets, liabilities, financial position and profit and loss due to the importance of this business for MeVis.
c) Opportunities and risks arising from dependence on customers' success
There are risks and opportunities in conjunction with the success of customers, even if relationships with key customers continue or they remain solvent; this is because the Company, due to existing contractual regulations, is contingent on its key customers' ability to market their own products successfully. The same applies in principle to indirect marketing through sales partners. If such products are not distributed successfully or if the customer is not able to obtain the necessary permits for its products, this will negatively impact demand for MMS AG's products as well as those of its affiliates. As a result, this
could lead to an adjustment of the value of goodwill in intangible assets. On the other hand, strong sales performance of the medical technology companies can have a positive effect on MeVis' licensing business.
d) Product liability risks
Despite consistent quality assurance, the risk of defects in MeVis' products cannot be ruled out. In such cases, MeVis may be exposed to warranty claims on the part of its contractual partners or product liability claims. In addition, disputes relating to warranty or product liability claims could result in a loss of confidence in the market and thus harm the MeVis Group's reputation.
e) Risks in connection with the utilization of brands
It is possible that there are third-party brands, names and company names which are similar to those used or registered as brands by MMS AG or its affiliate for similar or identical goods and services. Therefore there is a possibility of conflicts arising with third parties with respect to brands or designations (e.g. product or company names), which may result in MeVis not being permitted to use the designation or brand name in question. This would also entail the risk of liability for damages on the part of MMS AG or MBC KG.
f) Risks in connection with the utilization of patents and industrial property rights
MMS AG and MBC KG own a number of German, European and US patents and patent applications. In addition, MBC KG holds a German utility patent. The risk of third parties breaching the industrial property rights of the Company or its affiliate cannot be ruled out, nor can the risk of MeVis breaching thirdparty patents and industrial property rights be ruled out. By MeVis being part of an American company, the risk has increased that MeVis will be sued in the US for patent infringement and substantial legal costs will incur for the defense of these lawsuits regardless of their substance.
g) Risks associated with financial instruments
The main financial instruments used by MMS AG are cash and cash equivalents. This is intended to finance operations and purchases. The Company has various other financial instruments such as trade receivables and payables, which arise directly from operations. Significant credit and liquidity risks are so far not seen.
h) Liquidity risks
A change to the business and market environment of MMS AG and its affiliates could result in the Companies no longer being in a position to meet their financial obligations arising during the course of their operations. Such an erosion of the Company's liquidity position could result in one of the abovementioned risks, such as that with existing key customers, or significant payment delays. Securing liquidity therefore forms an integral part of the ongoing liquidity and debtor management at MMS AG and its affiliates. It is therefore just as important as financial due diligence for new customers. As of the reporting date, MMS AG reported cash and cash equivalents of € 29.7 million (previous year: € 24.4 million). The Company assumes that this liquidity will be sufficient. Additional liquidity needs may arise in years to come, if the planned sales revenues should not be achieved and at the same time the costs of the Company cannot be reduced accordingly. The Company had no credit facilities at banks as of the reporting date. The liquidity risks are significantly reduced by the obligation of Varex Imaging Deutschland AG to a possible assumption of losses, as stated in the domination and profit and loss transfer agreement, secured by comfort letters from the US parent company, Varex Imaging Corporation as well as Varian Medical Systems, Inc.
a) Risks arising from the necessity for ongoing product optimization
In order to remain competitive, MeVis must improve its products on an ongoing basis to bring them into line with market trends taking regional requirements into account, and incorporate the latest technological developments in diagnostic, therapy and intervention methods. It is not possible to exclude the risk of future technological advances that could render the software developed by MeVis obsolete. If MeVis is unable to continue updating its software products in line with the swift and dynamic technological advances in the individual areas of application, this may have an adverse effect on order intake and thus on the assets, liabilities, financial position and profit or loss of MMS AG and its affiliates.
b) Risks arising from the further development of PACS systems
If the functional scope of PACS systems should continue to develop to a significant extent in the direction of the software applications offered by MeVis, this could have a negative impact on the market for dedicated software applications operated at work stations. The market for dedicated software applications is of pivotal importance for MeVis.
c) Risks from the increasing importance of fully integrated software applications for clinical end users
If clinical end users place greater value in future on the seamless integration of the software applications used in the IT landscape existing in the hospital, this would result in a market shift from individual suppliers of dedicated applications such as MeVis in favor of fully integrated PACS solutions, with negative consequences for MeVis' assets, financial position and results.
a) Risks arising from the availability of qualified executives and staff
The internal and external availability of qualified employees in sufficient numbers to maintain and expand business operations entails a risk in light of the current situation in the relevant segment of the labor market. Particularly important to MeVis are individuals with expertise in specific areas such as software development for medical technical applications, which is essential to the business. This is especially so, given that highly-qualified and specialized employees are not widely available on the open labor market. Despite internal succession plans, knowledge sharing and incentive schemes, the loss of even one of these individuals can have a negative impact on the business and the assets, liabilities, financial position and profit or loss of MMS AG and MBC KG depending on their function.
These risks are of great importance to MeVis.
In view of the existing domination and profit and loss transfer agreement and the associated loss assumption obligation of Varex Imaging Deutschland AG as well as the letters of comfort issued by Varex Imaging Corporation and Varian Medical Systems, Inc. the Executive Board still does not see any overall risks that could impair the existence of MMS AG.
For MeVis Medical Solutions AG, dealing with risks in a responsible manner is a key element of good corporate governance. The Executive Board has installed an appropriate risk management and risk control system in the Company in order to identify, evaluate, monitor and control the risks arising from operating activities at an early stage. The Executive Board informs the Supervisory Board regularly about the current status of significant risks. The risk management system is continuously reviewed in accordance with the latest developments and adjusted where necessary. Further details and information on risk management can be found in the risk report.
MeVis Medical Solutions AG prepares its statutory financial statements and management report in accordance with the German Commercial Code (HGB). The Company also prepares voluntarily individual IFRS financial statements in accordance with International Financial Reporting Standards (IFRS). The half-year financial report and the interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU.
The financial statements are prepared by the Executive Board and reviewed by the Supervisory Board. The Supervisory Board engaged PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft, Bremen, as the auditors elected by the Annual General Meeting for fiscal year 2016/2017, to audit the statutory financial statements for fiscal year 2016/2017 and the individual IFRS financial statements. This approach ensures that no conflicts of interest affect the work of the auditors.
The audits of the financial statements for the short fiscal year 2016 were conducted by KPMG AG Wirtschaftsprüfungsgesellschaft, Bremen, in accordance with the generally accepted standards for the audit of financial statements promulgated by the German Institute of Public Auditors (IDW).
In general, the risk management system and the internal control system also include the accounting processes as well as all risks and controls in relation to accounting. This concerns all elements of the risk management system and internal control system, which may have significant impact on MMS AG's annual financial statements.
The purpose of the risk management system in relation to the accounting processes is the identification and assessment of risks that may conflict with the aim of compliance of the annual financial statements with the standards. Any risks identified must be assessed in terms of their effect on the annual financial statements and management report. The objective of the internal control system in this context is to ensure with sufficient certainty – by implementing appropriate controls – that standards-compliant annual financial statements and management report are prepared in spite of the risks identified.
The Company has an internal control and risk management system covering the accounting process, in which suitable structures and processes are defined, and implemented in the organization. Prompt and accurate accounting is ensured for all transactions. Statutory standards and accounting standards are complied with, and the relevance and impacts on the annual financial statements of amendments to the laws and accounting standards are analyzed, adopted and implemented on a continuous basis. The staff involved is regularly trained in this work.
Essential elements of risk management and control in accounting are clear assignment of responsibilities and controls in the process of preparing the financial statements, transparent guidelines on accounting and the preparation of financial statements, and appropriate access controls for the IT systems of relevance to the financial statements. The principle of dual control and the division of functions are also important control principles in MeVis' accounting process. The identified risks and measures taken as a result are updated in the quarterly reports and reported to the management. The effectiveness of internal controls for accounting is reviewed at least once a year, primarily as part of the process of preparing the financial statements.
Fiscal year 2016/2017 developed better than assumed in the forecast published in January 2017: In the original forecast, a slight increase in revenues to € 16.5 million to € 17.0 million was assumed, whereas revenues in fiscal year 2016/2017 rose significantly to € 18.5 million. The improvement in revenues compared with the original forecast is mainly due to the Other Diagnostics segment. Here, business with a number of products and services developed positively, such as higher license sales of LungCAD and increased activities in MeVis Online Services. A similar picture emerges in terms of EBIT: This key performance indicator was originally forecasted to be stable at between € 4.5 million and € 5.0 million for 2016/2017. In fact, a significant increase in EBIT of € 8.0 million was achieved. In addition to the higher revenues in the Other Diagnostics segment, the following three factors contributed to the improvement in revenues compared with the original forecast: Higher other operating income from the provision of administrative services for Group companies than originally assumed, lower personnel expenses and lower other operating expenses. As the positive development of the key figures was already apparent in the course of the 2016/2017 fiscal year, corresponding forecast increases were published in March 2017 and September 2017 as ad-hoc announcements.
For fiscal year 2017/2018, a significant decline in revenues to between € 14.5 million and € 15.0 million is expected. In addition to the non-recurring effect of € 1.8 million reported in Q1 2017 from the sale of MeVisLab usage rights, a declining business expectation of the Digital Mammography segment is contributing to this development, although this segment will still be the main generator of sales. Earnings before financial result and taxes (EBIT) should also decline significantly to between € 3.0 million and € 3.5 million as a result of the expected sales development.
As in the previous reporting period, the Executive Board will regularly review its expectations during fiscal year 2017/2018 based on current business developments.
Bremen, January 19, 2018
Marcus Kirchhoff Dr. Robert Hannemann Chairman Member of the Executive Board
for the period from October 1, 2016 to September 30, 2017 (previous year: January 1 to September 30, 2016)
| FIGURES IN € k | Notes | 2016/2017 | 2016 |
|---|---|---|---|
| Revenues | 9 | 18,540 | 12,091 |
| Other operating income | 10 | 1,016 | 613 |
| Cost of material | 11 | -506 | -337 |
| Staff costs | 12 | -7,938 | -5,551 |
| Other operating expenses | 13 | -1,933 | -1,570 |
| Earnings before interest, taxes, depreciation and amortization (EBITDA) Depreciation, amortization and impairment of |
9,179 | 5,246 | |
| intangible assets and property, plant and equipment | 14 | -1,217 | -1,318 |
| Earnings before interest and taxes (EBIT) | 7,962 | 3,928 | |
| Income from equity investments | 4 | 533 | 7 |
| Interest income | 159 | 52 | |
| Interest expenses | -8 | -12 | |
| Other net financial result | -1,478 | -550 | |
| Net financial result | 15 | -794 | -503 |
| Earnings before taxes (EBT) | 7,168 | 3,425 | |
| Income tax (prev. year: profit) | 16 | -1,546 | 0 |
| Net profit | 5,622 | 3,425 | |
| Net profit attributable to shareholders | 5,622 | 2,518 | |
| Earnings per share in € | 17 | ||
| Basic | 3.09 | 1.88 | |
| Diluted | 3.09 | 1.86 |
for the period from October 1, 2016 to September 30, 2017 (previous year: January 1 to September 30, 2016)
| FIGURES IN € k | Notes | 2016/2017 | 2016 |
|---|---|---|---|
| Net profit | 5,622 | 3,425 | |
| Items that are never recognized as profit or loss | |||
| Actuarial losses from pensions (prev. year: profits) | 21/22 | -45 | -111 |
| -45 | -111 | ||
| Other comprehensive income | -45 | -111 | |
| Total comprehensive income | 5,577 | 3,314 | |
| Total comprehensive income attributable to share | |||
| holders | 5,577 | 3,314 |
As of September 30, 2017 (previous year: September 30, 2016)
| FIGURES IN € k | Notes | 2016/2017 | 2016 |
|---|---|---|---|
| Non-current assets | |||
| Intangible assets | 18 | 11,722 | 12,718 |
| Property, plant and equipment | 18 | 316 | 316 |
| Joint venture/Equity investments | 4 | 1,991 | 1,611 |
| Trade receivables | 19 | 1,636 | 1,454 |
| 15,665 | 16,099 | ||
| Current assets | |||
| Trade receivables | 19 | 3,362 | 2,203 |
| Other financial assets | 19 | 150 | 202 |
| Other assets | 19 | 167 | 143 |
| Cash | 20 | 29,735 | 24,356 |
| 33,414 | 26,904 | ||
| ASSETS | 49,079 | 43,003 | |
| Equity capital | 21 | ||
| Subscribed capital | 1,820 | 1,820 | |
| Capital reserve | 7,475 | 8,219 | |
| Revaluation reserve | 226 | 326 | |
| Retained earnings | 22,990 | 22,524 | |
| 32,511 | 32,889 | ||
| Non-current liabilities | |||
| Pension provisions | 22 | 301 | 269 |
| 301 | 269 | ||
| Current liabilities | |||
| Provisions | 22 | 138 | 142 |
| Trade payables | 28 | 279 | 327 |
| Other financial liabilities | 23 | 11,393 | 5,743 |
| Deferred income | 24 | 3,029 | 3,021 |
| Other liabilities | 25 | 204 | 144 |
| Income tax liabilities | 1,224 | 468 | |
| 16,267 | 9,845 | ||
| EQUITY AND LIABILITIES | 49,079 | 43,003 |
for the period from October 1, 2016 to September 30, 2017 (previous year: January 1 to September 30, 2016)
| FIGURES IN € k | Notes | 2016/2017 | 2016 | |
|---|---|---|---|---|
| Earnings before financial result and tax (EBIT) | 29 | 7,962 | 3,928 | |
| - Payments for share-based remunerations |
34 | -750 | 0 | |
| + Dividend payments from joint ventures |
4 | 153 | 144 | |
| + | Depreciation, amortization and impairments | 14 | 1,217 | 1,318 |
| -/+ Decrease/increase in provisions |
22 | 28 | -209 | |
| +/- Other non-cash expenses/income |
6 | -246 | ||
| + Interest received |
177 | 33 | ||
| - Interest paid |
0 | -8 | ||
| - Tax paid |
-795 | -389 | ||
| +/- | Decrease/increase in trade receivables and other assets | -1,085 | -495 | |
| -/+ | Decrease/increase in trade payables and other liabilities | 411 | -537 | |
| = Cash flow from operating activities |
7,324 | 3,509 | ||
| - | Payments for investments in property, plant and equipment | 18 | -170 | -117 |
| Payments for investments in intangible assets (excl. devel | ||||
| - opment costs) |
-51 | -62 | ||
| = Cash flow from investing activities |
-221 | -179 | ||
| - Payments to shareholders (profit transfer) |
23 | 0 | -4,742 | |
| = Cash flow from financing activities |
0 | -4,742 | ||
| Change in cash and cash equivalents | ||||
| 7,103 | -1,412 | |||
| Effect of exchange rates on cash and cash equivalents | -1,724 | 147 | ||
| + | Cash and cash equivalents at the beginning of the period | 24,356 | 25,621 | |
| = | Cash and cash equivalents at the end of the period | 20 | 29,735 | 24,356 |
This item comprises cash.
for the period from October 1, 2016 to September 30, 2017 (previous year: January 1 to December 31, 2016)
| FIGURES IN € k | Subscribed capital |
Capital reserve |
Revaluation reserve |
Retained earnings |
Total |
|---|---|---|---|---|---|
| Note | 21 | 21 | 21 | 21 | - |
| Balance on Jan. 1, 2016 | 1,820 | 8,207 | 404 | 23,298 | 33,729 |
| Net profit | 0 | 0 | 0 | 3,425 | 3,425 |
| Other comprehensive income | 0 | 0 | 0 | -111 | -111 |
| Total comprehensive income | 0 | 0 | 0 | 3,314 | 3,314 |
| Issue of stock options | 0 | 12 | 0 | 0 | 12 |
| Payout from profit transfer agreement | 0 | 0 | 0 | -4,166 | -4,166 |
| Transfer from revaluation reserve to retained earnings based on amortiza tion |
0 | 0 | -78 | 78 | 0 |
| Balance on Sep. 30, 2016 | 1,820 | 8,219 | 326 | 22,524 | 32,889 |
| Balance on Oct. 1, 2016 | 1,820 | 8,219 | 326 | 22,524 | 32,889 |
| Net profit | 0 | 0 | 0 | 5,622 | 5,622 |
| Other comprehensive income | 0 | 0 | 0 | -45 | -45 |
| Total comprehensive income | 0 | 0 | 0 | 5,577 | 5,577 |
| Issue of stock options | 0 | 6 | 0 | 0 | 6 |
| Settlement of claims from share based remunerations |
0 | -750 | 0 | 0 | -750 |
| Payout from profit transfer agreement | 0 | 0 | 0 | -5,211 * | -5,211 |
| Transfer from revaluation reserve to retained earnings based on amortiza tion |
0 | 0 | -100 | 100 | 0 |
Balance on Sep. 30, 2017 1,820 7,475 226 22,990 32,511
* see note 39
MeVis Medical Solutions AG ("MMS AG", "MeVis" or "Company" for short) was incorporated at the end of 1997 and commenced business in 1998. It has its registered office in Bremen/Germany. Its address is Caroline-Herschel-Str. 1, 28359 Bremen. MMS AG is registered in the Commercial Register of the District Court of Bremen (HRB 23791 HB).
Since April 21, 2015, MMS AG has belonged to the Varian Group under the leadership of Varian Medical Systems, Inc., Palo Alto, California, USA, through VMS Deutschland Holdings GmbH, Darmstadt. With the spin-off agreement dated December 28, 2016, the transfer of the shares in MeVis Medical Solutions AG, amounting to 73.65 % of the total share capital, from VMS Deutschland Holdings GmbH, Darmstadt, an indirect subsidiary of Varian Medical Systems, Inc. of Palo Alto, California, USA, to Varex Imaging Deutschland AG was resolved. The object of the spin-off agreement is also the control and profit-and-loss transfer agreement between MMS AG and VMS Deutschland Holdings GmbH. Varex Imaging Deutschland AG is managed by the Varex Imaging Corporation, Salt Lake City, Utah, USA, which has emerged as a spin-off from Varian Medical Systems, Inc., Palo Alto, California, USA. Varex Imaging Deutschland AG, an indirect subsidiary of Varex Imaging Corporation, received an authorization from VMS Deutschland Holdings GmbH on December 31, 2016 to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, for an unlimited period of time and not bound by instructions. The spin-off was entered in the commercial register of VMS Deutschland Holdings GmbH after the balance sheet date. Varex Imaging Corporation prepares the consolidated financial statements for the largest and smallest group of entities and MMS AG is included in these. The consolidated financial statements are filed with the U.S. Securities and Exchange Commission (SEC) and can be obtained from the head office of the group parent company.
The individual IFRS financial statements of MMS AG according to IFRS as of September 30, 2017 have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB). The provisions contained in Regulation (EC) No. 1606/2002 on the application of international accounting standards as well as the supplementary provisions of German commercial law pursuant to Section 325 (2a) (HGB) were observed. The requirements have been complied with in full and result in the presentation of a true and fair view of the assets, liabilities, financial position and profit or loss of MMS AG.
These individual IFRS financial statements have been prepared on a voluntary basis to provide a complete picture of the Company's net assets, financial position and results of operations after the subsidiaries of MMS AG were merged or consolidated on August 1, 2013. It can be seen as an additional information source next to the financial statements prepared in terms of the German commercial law.
In the individual IFRS financial statements of MMS AG as of September 30, 2017 a comparison with the previous year is only possible to a limited extent relating to period-related statements, since a change in the fiscal year at MMS AG was resolved at the Annual General Meeting on June 7, 2016 and the fiscal year 2016 was concluded with a the short fiscal year 2016 with a reporting period from January 1 to September 30, 2016.
The currency used in the individual IFRS financial statements is the Euro. Unless otherwise stated, all figures are quoted in thousands of Euros (€ k). The income statement is prepared using the total cost method. In accordance with IAS 1, the current/non-current distinction is applied to assets and liabilities. Non-current assets and liabilities are defined as those which are not due for settlement in less than one year.
The individual IFRS financial statements as of September 30, 2017 were approved for submission to the Supervisory Board by MMS AG's Executive Board on January 10, 2018. The Supervisory Board is responsible for examining the individual IFRS financial statements and approving them. The individual IFRS financial statements will be published on the Company website on January 23, 2018.
MMS AG develops innovative software for analyzing and evaluating image data and marketing it to equipment manufacturers of medical devices and providers of medical IT platforms.
MeVis' clinical focuses are image-based early detection and diagnosis of epidemiologically important diseases such as breast, lung, prostate and colon cancer as well as neurological disorders. The software applications support many of the imaging modalities available. These not only include X-ray modalities such as computed tomography, digital mammography or digital tomosynthesis, but also magnetic resonance imaging, digital sonography and the simultaneous use of multiple modalities (multimodality). MeVis supplies technologies and applications for global medical industry leaders, meeting their needs and helping them to strengthen their leadership positions.
In addition to the sale of software licenses and corresponding maintenance contracts, MeVis offers, to a lesser extent, services to clinical end customers. These include three-dimensional technical visualizations ("MeVis Distant Services") and interactive online trainings to improve the diagnostic capabilities of the clinicians ("Online Academy").
For the purpose of reporting to the Executive Board and internal management by the Executive Board, MeVis has two operating segments ("Digital Mammography" and "Other Diagnostics").
The Digital Mammography segment develops and markets software products, which support breast diagnostic imaging and intervention for the customer Hologic. Aside from the original products for digital mammography, new software applications for other imaging modalities such as ultrasound, magnetic resonance imaging and tomosynthesis were added. These products are distributed to the medical technology company Hologic.
The Other Diagnostics segment includes various products for visualization such as products from digital radiology (e. g. magnetic resonance imaging (MRI), computer tomography (CT) etc.) for other areas of disease such as the lung, prostate and colon as well as general image-supported analysis and diagnostics of radiological images. All products are software-based and are distributed to medical technology companies, associations and similar organizations in the health care sector as well as clinical end customers via a coherent sales organization. What the products have in common is that they are ready for the market, but there is still a lack of critical size and a sustained positive contribution to earnings.
MMS AG distinguishes between the geographical areas USA and Europe on the basis of the local distribution of the realized sales.
Shares in entities whose business activities are co-managed by MMS AG and another company (joint ventures) are consolidated at equity. Under the equity method, the respective carrying amount is increased or reduced by the changes in equity of the joint venture as far as they apply to the shares of MMS AG.
The financial statements included under the equity method in the individual IFRS financial statements have been prepared using uniform recognition and measurement principles.
| Name and location of the company | Share in % |
|---|---|
| MeVis BreastCare Verwaltungsgesellschaft mbH, Bremen ("MBC GmbH") | 51.0 |
| MeVis BreastCare GmbH & Co. KG, Bremen ("MBC KG") | 51.0 |
MeVis Medical Solutions AG holds 51 % of MBC KG, a joint venture with Siemens Healthcare GmbH ("Siemens").
The focus of the activities of this company is the development, marketing and distribution of software and consulting services, especially in the area of multi-modal soft copy reading systems for the screening, diagnosis and treatment of breast diseases.
As of September 30, 2017, Siemens continued to hold 49 % of the capital of MBC KG. In addition, Siemens has a call option which it may exercise at any time with respect to a further 2 % share in MBC KG. In accordance with the provisions contained in the deed of partnership, a 2/3 majority is required for material decisions, meaning that the potential exercise of this option will not have any effect on MeVis' scope for exerting influence on the Company. Accordingly, MBC KG is a joint venture and therefore accounted for using the equity method. MBC GmbH is the general partner of MBC KG. The investment ratios and accounting method correspond to those of MBC KG.
The financial information on the MeVis Breastcare GmbH & Co. KG is as follows:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Non-current assets | 52 | 147 |
| Current assets | 5,418 | 4,251 |
| Thereof: Cash and cash equivalents | (4,074) | (3,058) |
| Non-current liabilities | 23 | 49 |
| Current liabilities | 1,577 | 1,226 |
| Revenues | 5,648 | 3,371 |
| Net income / total result | 1,018 | 14 |
| Depreciation, amortization and impairment of intangible assets and property, plant and equipment |
-126 | -306 |
| Interest income | 0 | 0 |
| Interest expenses | 0 | 1 |
| Income tax | -185 | -78 |
An equity-accounted amount of € 1,974 k (2016: € 1,593 k) can be derived from the assets and liabilities of MBC KG. The difference compared with the statement of financial position relates to the equity of MBC GmbH.
In the fiscal year 2016/2017, MBC KG paid a pro rata dividend of € 153 k (prev. year: € 114 k) for the fiscal year 2016 to MMS AG.
The average exchange rates are the average exchange rates for the respective fiscal year. The USD/EUR exchange rate underlying currency translation is as follows:
| End-of-year exchange rate | exchange rate | Annual average | ||
|---|---|---|---|---|
| Oct. 1, 2016- | Jan. 1 -Sep. 30, | |||
| Currency | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | 2016 |
| USD/€ | 1.1806 | 1.1161 | 1.1046 | 1.1158 |
Transactions in currencies other than the functional currency are translated at the exchange rate prevailing on the date of the transaction. Currency translation gains and losses arising from fluctuations in exchange rates for foreign currency transactions are reported in the net financial result.
Revenues are recognized when it is likely that the economic benefits from the transactions will flow to the Company and the amount is reasonably assured. As a matter of principle, MeVis distinguishes between the recognition of revenues from the sale of licenses, the provision of services and the sale of hardware.
Revenues from the sale of goods and products are recognized when all of the following conditions are satisfied:
Revenues from the provision of services are recognized when:
As a matter of principle, the above conditions for the sale of goods and products are applied to the sale of software and licenses, i.e. the revenue is recognized once the software is sold. In some cases, contracts for the sale of software include services which are not provided until after the sale of the software. Such "multicomponent contracts" are split into revenue components and the resultant revenue recognized in accordance with the percentage of completion. Revenue components already paid but not yet recognized are deferred.
This has the following specific ramifications for MeVis:
License fees and royalties resulting from the utilization of software are recognized in accordance with the economic purpose of the agreement. In the absence of any agreement to the contrary, revenues are recognized on a straight-line basis over the duration of the license agreement. The granting of unrestricted rights of utilization for a fixed amount (single licenses) constitutes a sale for economic purposes and is recognized as revenue in full.
Revenues from the sale of hardware are recognized upon transfer of risk.
Revenues from the provision of consulting services and software development services are recognized in the period in which the service in question is provided. MMS AG entered into a contract with a customer, in which the fee is based on the revenues that the customer receives from the sale of licenses for its software, which was developed with the support of MeVis. Since it is not possible to determine the revenues for MeVis reliably when preparing the financial statements, those transactions are initially recognized on the basis of the costs incurred.
Revenues from maintenance contracts are recognized in the period in which the service in question is provided. If the selling price of software includes partial amounts for after-sales service (e.g. maintenance), these amounts are deferred and recognized on a pro rata temporis basis over the periods in which the services are provided.
As a matter of principle, the above conditions on the sale of services apply, i.e. the revenues are recognized once the service is provided.
Expenses are recognized in profit and loss in the period in which the corresponding depreciation is caused.
The costs of research activities – that is, for activities undertaken to make new scientific or technical findings – are recognized in full by MeVis as an expense. In contrast, the costs of development activities – that is, when the results of research are incorporated into a plan or a draft for the production of new products and processes – are capitalized, on condition that the development expenses can be reliably measured, that the product or process is technically and economically feasible and that future economic benefit is likely. In addition, MeVis must have the intention and sufficient resources to conclude the development and to utilize or sell the asset. Therefore, the development expenses incurred for MeVis' software products after the software specifications have been defined and agreed upon with the customer are capitalized or when the marketability of the future products has been adequately demonstrated by market analyses and agreement with the customers. In connection with this, individual and overhead costs attributable to the development activities are capitalized up until completion of the product and then written down over a period of two to four years. Developments that are not yet ready for use are subject to an annual impairment test. Impairment tests are also conducted in case of indicators of possible impairment (triggering events).
Interest income is recognized when it arises.
Borrowing costs are recognized as expense unless the borrowing costs can be directly allocated to the construction, acquisition or manufacture of a qualifying asset. An asset is regarded as qualifying if it takes more than six months to get ready for its intended use or sale. The borrowing costs of MeVis largely arise from the imputed interest on liabilities and the interest on tax liabilities.
Goodwill acquired through business combinations and continued in the individual IFRS financial statements of MMS AG are not subject to depreciation and amortization; instead, an impairment test of goodwill is carried out once a year. An impairment test is also carried out if events or circumstances (triggering events) occur, which could indicate possible impairment. Goodwill is carried at cost less any accumulated amortization for impairment. The company had previously determined the 31st of December as the date of the annual review. For the first time in 2016, the annual review took place on the 30th of September. Impairment testing of goodwill is carried out at the level of cash generating units ("CGU" for short) the lowest level at which goodwill is monitored by Company management. To test for impairment, the acquired goodwill is allocated to the CGU or group of CGUs which are expected to benefit from the synergy arising from the business combination. For the material goodwill of MeVis, the applicable CGU is identical to MMS AG's continued business with Hologic, after the accretion of MeVis BreastCare Solutions GmbH & Co. KG (hereafter: "MBS KG") in August 1, 2013. If the carrying amount of the CGU or group of CGUs to which the goodwill was allocated exceeds the recoverable value, the excess is written off. The recoverable value is the higher of the fair value less cost to sell and the value in use of the CGU. These values are essentially based on discounted cash flow valuations, on the one hand, based on historical experience, and, on the other hand, taking into account
detectable changes – especially from contract changes with important customers. No reversals of amortization of goodwill are conducted in future periods if the recoverable amount exceeds the carrying amount of the CGU or the group of CGUs to which goodwill is allocated.
Other intangible assets consist of software and other intangible assets, patents, licenses and similar rights produced by the Company. The Company amortizes intangible assets with a finite useful life on a straightline basis over the expected useful life to the estimated residual value. The expected useful life of software, patents, licenses and similar rights is generally three to five years. Intangible assets acquired through business combinations relate to customer relationships in particular. The expected useful lives for customer relationships are ten years. Intangible assets with an indefinite useful life and intangible assets not ready for use are not subject to scheduled amortization; instead, an impairment test is carried out once a year.
Property, plant and equipment are shown at acquisition or construction cost less scheduled, utilizationrelated depreciation and amortization as well as impairment losses. The cost of acquisition consists of the purchase price plus ancillary and subsequent acquisition costs less discounts received on the purchase price.
Scheduled straight-line depreciation is calculated on the basis of the following estimated useful lives of the assets:
| Useful life in years | |
|---|---|
| IT equipment | 3 |
| Business equipment | 3 - 10 |
| Leasehold improvements | 5 - 10 |
Allowance is made for any impairment losses over and above the depreciation resulting from use of the asset in question. In accordance with IAS 36, such impairment losses are calculated by reference to comparisons with discounted future cash flows. If the reasons for extraordinary depreciation and amortization cease to apply, the assets in question are written up to a maximum of their amortized cost.
A financial instrument is a contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. Financial assets consist of receivables (excluding income tax receivables) and other financial assets, cash and derivatives with a positive fair value. Accordingly, financial assets are recognized in the statement of financial position if they give MeVis the contractual right to receive cash or other financial assets from another entity. Financial assets are derecognized when the contractual obligations are settled, suspended or expire. All customary purchases and sales of financial assets are recognized on the settlement date. Financial assets are initially recognized at their fair value plus transaction costs. Transaction costs arising in connection with the acquisition of financial assets at fair value through profit or loss are immediately taken to the income statement. Receivables which bear little or no interest are initially recognized at the present value of the expected future cash flow. Subsequent measurement is determined in accordance with the following categories of financial assets:
Financial assets at fair value through profit or loss comprise financial assets held for trading or financial assets designated in this category. Derivative financial instruments are assigned to this measurement category. Changes in the fair value of financial assets in this category are recognized in the income statement upon such change arising. No assets have been allocated to this category as of the balance sheet date.
Loans and receivables (LaR) are non-derivative financial assets with fixed or determinable payments, which are not traded in an active market. Loans and receivables are recognized at amortized cost. This category includes trade receivables, financial receivables included in other financial assets and loans as well as cash. Interest income from items in this category is calculated using the effective interest rate method.
Available-for-sale (AfS) financial assets are recognized at fair value in equity. Valuation changes are recorded in a separate shareholders' equity item without affecting profit or loss until the assets are disposed of (AfS reserve). No assets have been allocated to this category as of the balance sheet date.
The Company applies IAS 12, Income Taxes. Income taxes include all taxes imposed on MeVis taxable profit. The item "income taxes" in the income statement includes current and deferred income taxes. Current income taxes primarily comprise domestic trade tax and corporation income tax. According to the liability method stipulated under IAS 12, deferred tax assets and liabilities are recognized for the future tax consequences of differences between amounts included in the financial statements (for income and expenditure and assets and liabilities) and those included in the tax assessment. MeVis recognizes in the income statement the effects of changes in tax rates on deferred taxes in the period in which the legislative process on which the change in the tax rate is based is largely concluded. We also refer to note 16.
An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Movements in the MeVis' equity capital are reported in the statement of changes in equity.
In the case of defined benefit plans, the cost of provision is determined using the projected unit credit method, and an actuarial valuation is conducted as of each reporting date. Since 2013, actuarial gains and losses are not recognized in profit or loss immediately, but recognized in equity with no effect on profits via other income or offset against this. Past service cost is recognized immediately in profit and loss. For defined benefit plans, the amount recognized in the statement of financial position is the present value of the defined benefit obligation, and reduced by the fair value of existing plan assets. If the calculation of the statement of financial position amount as set out above results in an asset, the amount recognized is limited to past service cost, plus the present value of available refunds and reductions in future contributions to the plan.
Provisions are set aside to allow for obligations resulting from past events which will probably lead to a future outflow of resources embodying economic benefits required to settle the obligations, the amount of which can be reliably estimated. Provisions are measured in accordance with IAS 37 on the basis of the best possible estimate of the cost of settling the present obligation as of the reporting date. If the outflow of economic resources required to settle an obligation is not expected to arise until after more than one year, the provisions equal the present value of the expected cash outflow.
Equity-settled share-based payments awarded to the Executive Board and the employees are recognized at the fair value of the equity instrument on the grant date. The fair value of the liability is recognized under personnel expenses. This is also allocated over the vesting period.
The fair value of the payments is calculated in each case using a Monte Carlo simulation. The main determinants of the value of staff options are the value of the shares as well as the price at which the option may be exercised, i.e. the strike price. The difference between the value of the underlying financial instrument and the strike price is the "intrinsic value" of the option.
In addition to modeling movements in the underlying financial instrument, allowance is also made in connection with the measurement of the fair value of the assets for possible exits of option holders from the Company as well as the premature exercise of the options. To cover these eventualities, the Company has derived further relevant input variables for the simulation models on the basis of statistical distribution models which model these decisions.
The Company uses so-called "exponential distribution" to calculate the probability of an option holder leaving the Company prematurely or the holder of an employee option exercising the option prior to the expiry of its term, taking into account the vesting period.
The average service periods, i.e. the service periods of members of the Executive Board and of employees, are analyzed as a basis for determining these probabilities. For this purpose, the Company has utilized freely available market studies. An average service period of 6.2 years for members of the Executive Board was assumed on the basis of this analysis. With respect to the Company's employees, an average service period of 13.3 years is assumed.
Financial liabilities comprise primary liabilities and the negative fair values of derivative financial instruments. Primary liabilities are recognized in the statement of financial position if MeVis has a contractual obligation to transfer cash or any other financial assets to another entity. A primary liability is initially recognized at the fair value of the consideration received or the value of the cash received less any transaction costs. It is subsequently measured at amortized cost using the effective interest method.
Derivative financial instruments are recognized at their fair value through profit or loss. The negative fair values of derivative financial instruments are recognized under other financial liabilities.
Financial liabilities are derecognized when the contractual obligations are settled, suspended or expire.
MeVis receives development grants from public bodies. These are recognized in the income statement as soon as the expenses for which the grants have been received are incurred by MeVis. The installments received are reported under other operating income. If eligible services exceed received grants, these are capitalized under other financial assets.
A lease is classified as an operating lease if, in principle, all risks and opportunities associated with ownership are retained by the lesser. Payments in connection with operating leases are recognized in the income statement as expense on a straight-line basis over the duration of the lease.
The preparation of the individual IFRS financial statements, as adopted in the EU, necessitates the use of estimates and judgments of individual matters by management. The estimates are based on past experience and further relevant factors on the premise of the business as a going concern.
The main items of the statement of financial position subject to management estimates are goodwill of € 10,625 k (2016: € 10,625 k) and intangible assets with a finite useful life (€ 1,097 k; 2016: € 2,093 k). In addition to the development expenses included in the intangible assets with a finite useful life with € 380 k (2016: € 1,073 k), the proceeds that can be generated through the use of these developments have to be estimated. With regard to trade receivables (€ 4,998 k; 2016: € 3,657 k), management does not expect any defaults given the limited number of customers and customers' credit ratings. The provisions (€ 439 k; 2016: € 411 k) mainly relate, in addition to pension obligations warranty costs, of which the actual amount is uncertain.
At least once a year, MeVis tests existing goodwill for impairment (€ 10,625 k; 2016: € 10,625 k). The respective carrying amount of the CGU is compared to the recoverable value of the corresponding CGU, to which the goodwill is allocated. Calculation of the recoverable value of a CGU involves estimates of the corresponding cash flow and appropriate discount interest on the part of the management.
Of the revenues of € 18,540 k reported in the company's IFRS individual financial statements, Hologic as a major customer accounts for revenues of € 12,462 k, of which € 6,406 k are revenues from maintenance contracts and € 4,052 k are revenues from the sale of licenses. The maintenance contracts are usually concluded as part of the sale of new licenses, but also subsequently as an extension of the original maintenance period. The duration of the contracts is usually 12 months, so that the amounts received in advance for the term of the contracts are deferred without affecting net income. These are released to the income statement on a monthly basis in accordance with the term of the contract. License revenues result primarily from the sale of new licenses. In addition, the Company generates revenue from license upgrades for licenses that have already been sold. Hologic pays monthly installments over a period of 12 months on the basis of a plan drawn up by Hologic and agreed with the Company for the expected number of newly concluded extensions of maintenance contracts and license upgrades. The final settlement is carried out annually, in each case for the period from May 1 to April 30 of the following year. As a result, there are no final accounts for the total sales revenue of € 736 k for the months of May to September 2017. These revenues are based on the estimates and assumptions of Hologic and its legal representatives and are therefore subject to uncertainties.
Actual amounts could differ from amounts based on estimates and assumptions.
MMS AG's individual IFRS financial statements as of September 30, 2017 including the previous year's figures have been prepared in accordance with IFRS as adopted by the European Union as of the reporting date in question.
The applied recognition and measurement principles generally correspond to the methods used in the previous year's consolidated financial statements. MeVis has also applied the following new/revised standards relevant to the business activities of the Company, for which application first became mandatory in the fiscal year 2016/2017. However, they had no or at least no material impact on the individual IFRS financial statements or the consolidated financial statements at the time of first application:
IFRS 11 includes regulations on accounting for and the recognition of the earnings of joint ventures and joint operations. While joint ventures are accounted for at equity, the reporting of joint operations foreseen by IFRS 11 is comparable with proportionate consolidation.
With the amendment to IFRS 11, the IASB regulates the accounting for an acquisition of interests in a joint operation that represents a business operation within the meaning of IFRS 3 Business Combinations. In such cases, the acquirer shall apply the principles for accounting for business combinations in accordance with IFRS 3. Furthermore, the disclosure obligations of IFRS 3 also apply in these cases.
MBC KG and MBC GmbH are also classified as joint ventures according to IFRS and accounted for using the equity method.
The amendments relate to various recognition issues. It is clarified that notes to the financial statements are only necessary if their content is not immaterial. This also explicitly applies when a list of minimum statements under IFRS is required. This includes explanations on aggregation and disaggregation of items in the statement of financial position and the statement of comprehensive income. It also states how shares in companies valued at equity are to be presented in other income in the statement of comprehensive income. The absence of a model structure of the notes to the financial statements is based on its relevance to a specific company.
MMS AG has implemented these changes, in particular with regard to the materiality of the notes to the financial statements, at some points in the notes.
With these amendments the IASB provides further guidelines for the determination of acceptable methods of depreciation and amortization. In accordance therewith, revenue-based depreciation and amortization methods are prohibited for property, plant and equipment, and are only permitted for intangible assets in specific exceptional circumstances (rebuttable presumption of inappropriateness).
No influence on the current fiscal year.
The amendments clarify those regulations that concern the allocation of contributions by employees or third parties to service periods in cases where the contributions are linked to the same period of service. In addition, relief is granted in cases where the contributions are independent of the number of years of service.
No influence on the current fiscal year.
The amendment standard "Investment companies - Application of consolidation entries" addresses various questions concerning the application of exceptions to the consolidation obligation for investment companies.
No influence on the current fiscal year.
Four standards were amended as part of the annual improvement project. The adjustment to the wording in individual IFRS/IAS aims to clarify the existing rules. The standards affected are IFRS 5, IFRS 7, IAS 19 and IAS 34.
MMS AG does not plan early adoption of the following new or amended standards, adoption of which will only become mandatory in later fiscal years. Unless otherwise stated, the impact on the individual IFRS financial statements is currently under investigation.
IFRS 9 adopted in July 2014 replaces the previous guidelines in IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 includes revised guidelines on rating and measuring financial instruments as well as a new model of loan losses expected to calculate impairments on financial assets as well as new general accounting guidelines for hedging transactions. It also includes guidelines on the recognition and derecognition of financial instruments under IAS 39.
Although the new standard will also be of fundamental importance to MMS AG, but since no derivative financial instruments have been used since 2015 and the key financial instruments are restricted to original receivables with interest and redemption payments and liabilities, the effects are not considered to be so comprehensive. With regard to the new method of recognizing expected credit losses, the impact is also expected to be minor, since large parts of the receivables exist against a customer without significant loan defaults in the past.
IFRS 9 is to be applied for the first time in fiscal years beginning on or after January 1,2018 and thus for MMS AG for the fiscal year beginning on or after October 1,2018.
IFRS 15 Revenues from Contracts with Customers defines a framework for determining whether, to what extent and at what point revenues are reported. It replaces the previous guidelines on reporting revenues, including IAS 18 Revenue, IAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs.
MMS AG has concluded individual contracts with various customers which, in addition to the sale of software and licenses, also include other services, which sometimes include time-related components (multicomponent contracts). The effects on the application of the new regulations on the IFRS individual financial statements are still being analyzed. The Company currently assumes that the modified transition method will be applied.
The amendments are to be applied for the first time in fiscal years beginning on or after January 1, 2018 and thus for MMS AG for the fiscal year beginning on or after October 1, 2018.
The IASB issued the final standard IFRS 16 "Leases" on January 13, 2016. The resultant amendments mainly affect the lessee and have the consequence that fundamentally all leases and the associated contractual rights and obligations have to be recognized in the statement of financial position of the lessee as right of use and lease liability.
MMS AG currently has several lease contracts with limited maturities (< 5 years) for office space as well as cars and copy stations. Due to the new provisions of IFRS 16, the balance sheet will be extended in this regard. To the extent that MMS AG is the lessor, the previous accounting standards have largely remained unchanged, in particular with regards to the classification of leasing conditions that are still required.
IFRS 16 shall be applied for the first time in fiscal years beginning on or after January 1, 2019. The Company does not currently intend to apply this standard at an early date. IFRS 16 would therefore have to be applied by MMS AG for the first time for the fiscal year beginning on October 1, 2019, so that the company will start a project to implement the new standard in the calendar year 2018.
With regard to the following new standards, the Executive Board already assumes that they will not have any significant impact on the IFRS financial statements.
Amendments IFRS 10 "Consolidated Financial Statements" and IAS 28 "Investments in Associates and Joint Ventures"
Amendments to IAS 12 "Income Taxes" (EU acquisition on November 6, 2017)
Amendments to IAS 7 "Statement of Cash Flows" (EU acquisition on November 6, 2017)
Amendments IFRS 2 "Shared based payments".
Annual Improvements Cycle 2014-2016
IFRIC 22 "Foreign Currency Translations and Advance Consideration"
Amendments to IAS 40 "Transfers of Investment Property"
IFRIC 23 "Uncertainty over Income Tax Treatments"
Amendments IFRS 9 "Financial Instruments"
Amendments IAS 28 "Investments in Associates and Joint Ventures"
Annual Improvement cycle 2015-2017
Revenues break down by type as follows:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Maintenance (software service contracts) | 7,528 | 5,468 |
| Software and licenses | 5,652 | 5,527 |
| Services | 5,350 | 1,091 |
| Hardware | 10 | 5 |
| 18,540 | 12,091 |
The breakdown by segments is disclosed in the segment report (see Note 30).
The revenues include service revenues determined using the stage-of-completion-method in the amount of € 182 k (2016: € 516 k). The accumulated costs of the service revenues deferred at the reporting date are € 1,636 k (2016: € 1,454 k).
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Income from recharges | 939 | 362 |
| Income from the release of provisions | 4 | 99 |
| Grants | 0 | 104 |
| Other | 73 | 48 |
| 1,016 | 613 |
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Cost of services purchased | 378 | 276 |
| Cost of materials | 128 | 61 |
| 506 | 337 |
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Wages and salaries | 6,763 | 4,664 |
| Social security charges and expenditure on old age pensions and sup | ||
| port | 1,175 | 887 |
| 7,938 | 5,551 |
Social security and old-age pension and related expenses include the employer contribution to the government pension plan for employees of € 543 k (2016: € 346 k). In the reporting period the average headcount was 105 (2016: 102). This is equivalent to an average of 93 full-time positions (2016: 89).
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Rental expenses/Leasing | 592 | 414 |
| Legal and consulting costs | 242 | 312 |
| Travel expenses | 227 | 162 |
| Maintenance/repairs | 198 | 129 |
| Vehicle costs | 78 | 49 |
| Energy costs | 71 | 51 |
| Internet expense | 69 | 36 |
| Training costs | 65 | 31 |
| Cleaning expense | 45 | 32 |
| Catering costs | 38 | 28 |
| Stationary | 35 | 24 |
| External work | 35 | 108 |
| Expenses of the Annual General Meeting | 33 | 21 |
| Events/Congresses | 33 | 10 |
| Others | 172 | 163 |
| 1933 | 1,570 |
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Amortization of purchased industrial property rights | ||
| and similar rights and customer base | 354 | 291 |
| Amortization of capitalized development costs | 693 | 907 |
| Depreciation of property, plant and equipment | 170 | 120 |
| Total depreciation, amortization and impairment losses | 1,217 | 1,318 |
MMS AG's financial result for the fiscal year 2016/2017 was € -794 k (2016: € -503 k). This comprises earnings from equity companies of € 533 k (2016: € 7 k), interest income from the investment of cash of € 159 k (2016: € 52 k), interest expense of € 8 k (2016: € 12 k), and the other financial result of € -1,478 k (2016: € -550 k). The other financial result consists of the balance of exchange rate gains and losses of € -1,459 k (2016: € -540 k) and other expenses in the amount of € 19 k (2016: € 13 k).
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Current income taxes reporting period | 1,532 | 0 |
| Current income taxes previous period | 14 | 0 |
| Deferred taxes | 0 | 0 |
| 1,546 | 0 |
Deferred tax assets and liabilities for temporary differences are to be calculated on the basis of an income tax rate of 31.9 % (2016: 31.9 %).
When calculating deferred tax assets on loss carryforwards, each loss carryforward is generally assessed at the relevant tax rate. In Germany (Bremen) this is 16.1 % for trade tax loss carryforwards and 15.8 % for corporation tax loss carryforwards.
On August 10, 2015, VMS Deutschland Holdings GmbH and MMS AG concluded a domination and profit and loss transfer agreement, which the Annual General Meeting approved by resolution of September 29, 2015. The fiscal unity began on January 1, 2016.
With the spin-off and takeover agreement dated December 28, 2016 as well as the approval resolutions of the Annual General Meeting of Varex Imaging Deutschland AG on December 28, 2016 and the shareholders' meeting of VMS Deutschland Holdings GmbH on December 28, 2016, VMS Deutschland Holdings GmbH has hived off its shares in MMS AG to Varex Imaging Deutschland AG. The spin-off was entered in the commercial register of VMS Deutschland Holdings GmbH on October 12, 2017. The domination and profit and loss transfer agreement was transferred to Varex Imaging Deutschland AG as part of the general legal succession.
Due to the fact that there was no full-year financial integration into Varex Imaging Deutschland AG in the fiscal year ended September 30, 2017, the Company was liable for income tax for fiscal year 2016/2017, assuming that since the transfer of economic ownership of the shares to Varex Imaging Deutschland AG as of January 1, 2017, the financial integration into Varex Imaging Deutschland AG has been in place. As of September 30, 2017, it was therefore assumed that the fiscal unity for income tax purposes would be effective in the future. In accordance with the formal approach, MMS AG therefore did not recognize any deferred taxes on temporary differences in its IFRS individual financial statements as of September 30, 2017. Deferred tax assets on loss carryforwards are recognized to the extent they are expected to be utilized, subject to the minimum tax in the foreseeable future, within 3 years. The loss carry forwards have unlimited duration. Because of the fiscal unity for income tax purposes with Varex Imaging Deutschland AG starting from October 1, 2017 the remaining trade tax loss carry forwards cannot be used in the foreseeable future.
Die Überleitung vom theoretischen zum effektiven Steueraufwand stellt sich wie folgt dar:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Earnings before taxes (EBT) | 7,168 | 3,425 |
| Theoretical tax expense 31.9 % | 2,286 | 1,093 |
| Non-tax-deductible expenses | 171 | 3 |
| Tax-free income | -102 | |
| Utilization of unrecognized tax loss carry forwards | -729 | 0 |
| Recognition of previously unrecognized (removal of previously recog nized) deductible temporary differences |
-60 | 0 |
| Effects of fiscal unity on temporary differences | 0 | -1,096 |
| Changes in estimates from previous years | 14 | |
| Other effects | -34 | 0 |
| Effective tax expense | 1,546 | 0 |
| Effective tax rate | 21.5 % | 0 % |
Deferred tax assets on loss carryforwards are calculated as follows:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Corporation tax loss carryforwards | 0 | 0 |
| Trade tax loss carryforwards | 324 | 1,053 |
| Deferred tax assets gross | 324 | 1,053 |
| Non-recognized deferred tax assets on loss carryforwards | -324 | -1,053 |
| Deferred tax assets on tax loss carryforwards net | 0 | 0 |
Deferred tax assets on loss carryforwards are recognized to the extent they are expected to be utilized, subject to the minimum tax in the foreseeable future, within 3 years. The loss carry forwards have unlimited duration. Because of the fiscal unity for income tax purposes with Varex Imaging Deutschland AG starting from October 1, 2017 the remaining trade tax loss carry forwards cannot be used in the foreseeable future.
Earnings per share equal the profit on continuing activities or profit (after tax) divided by the weighted average number of shares outstanding during the fiscal year. Earnings per share (fully diluted) are calculated on the assumption that all securities, stock options and stock awards with a potentially dilutive effect are converted or exercised.
The weighted average number of shares outstanding is calculated on the basis of shares redeemed and reissued subject to chronological weighting.
As of the balance sheet date, there were no more outstanding stock options.
| 2016/2017 | 2016 | |
|---|---|---|
| Consolidated net profit in € k | 5,622 | 3,425 |
| Weighted average of shares outstanding during the reporting period - | ||
| basic | 1,820,000 | 1,820,000 |
| Dilution through stock options | 0 | 19,237 |
| Weighted average of shares outstanding during the reporting period - | ||
| diluted | 1.820,000 | 1,839,237 |
| Basic earnings per share in € | 3.09 | 1.88 |
| Diluted earnings per share in € | 3.09 | 1.86 |
On February 18, 2015, the Company tendered its entire treasury shares of 97,553 to VMS Deutschland Holdings GmbH, Darmstadt, in the context of the takeover offer. The tender was accepted by VMS Deutschland Holdings GmbH on April 21, 2015.
The development in acquisition and production costs and cumulative amortization of intangible assets (including goodwill) as well as property, plant and equipment for the fiscal year 2016/2017 and the short fiscal year 2016 are shown in the statement of changes in fixed assets in the annexes to the notes.
| FIGURES IN € k | Assets and licenses | |||
|---|---|---|---|---|
| Acquired intangible assets with a finite useful life |
Internally generated intangible assets with a finite useful life |
Goodwill | Total | |
| Balance on Sep. 30, 2017 | 717 | 380 | 10,625 | 11,722 |
| Balance on Sep. 30, 2016 | 1,020 | 1,073 | 10,625 | 12,718 |
In accordance with IAS 38, no software development costs were capitalized in the fiscal year 2016/2017, same as in the previous year, as internally generated intangible assets with a finite useful life. As in the previous year, no services that can be capitalized were purchased. Depreciation and amortization of € 693 k (2016: € 907 k) was attributable to capitalized development costs in the period under review.
Goodwill was assigned to specific cash generating units (CGUs) on the acquisition date for the purpose of future impairment tests. The annual date for which the impairment test is to be carried out is set for the first time to the September, 30 (until 2015: December, 31). The cash generating units along with their respective goodwill as of the reporting date are shown at their carrying amounts in the following table.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Goodwill | Goodwill | |
| Digital Mammography | ||
| Hologic-Business | 10,479 | 10,479 |
| Other Diagnostics | ||
| Business unit Distant Services | 146 | 146 |
As part of the impairment test as of September 30, 2017, goodwill was tested for impairment. IAS 36 requires an impairment loss to be recognized if the recoverable amount of the cash-generating unit is lower than its carrying amount. The recoverable amount was determined as the fair value less costs to sell of the cash-generating unit using a DCF method. This was based on the realizable cash flows forecast by the Company over a detailed planning period of 5 years. The chosen planning period reflects the management expectations for short and medium-term market trends. In addition, a going-concern value was determined for the cash generating unit. The going-concern value equals the present value of the free cash flows after the end of the detailed planning period. The underlying growth rate is 0.0 % (2016: 0.0 %). Since cash flows are generated almost entirely in the US dollar area, the calculation was done in US dollars. The discount rate used in the detailed planning phase was 8.30 % after tax (2016: 5.93 % after tax). The fair value determined in this way is to be assigned to the fair value hierarchy category 3.
The impairment tests in accordance with IAS 36 for the Hologic and Distant Services CGUs did not result in any impairment losses for the fiscal year 2016/2017. An increase in the discount rate of 1.00 percentage points would not have led to an impairment.
Changes in property, plant and equipment in the fiscal year 2016/2017 were mainly influenced by investment in IT equipment. Investments in property, plant and equipment totalled € 170 k (2016: € 117 k).
Overall, the expenses for research and development totaled € 3,576 k (2016: € 2,591k) in the fiscal year 2016/2017.
An adjustment of € 9 k (2016: € 9 k) was made to trade receivables overdue as of the reporting date, which corresponds to the nominal amount of the receivable. No material change in the credit rating of the individual debtors was identified and it is therefore assumed that the unadjusted amounts owing will be paid in due course. The average age of the overdue receivables of € 235 k (2016: € 350 k) is 98 days (2016: 144 days). The Company does not hold any collateral for these outstanding items.
Of the total amount of trade receivables of € 4,998 k (2016: € 3,657 k) € 3,362 k (2016: € 2,203 k) are due for settlement within one year and € 1,636 k (2016: € 1,454 k) have a remaining term of more than one year.
| FIGURES IN € k | overdue during the following time bands | of which: not impaired as of the reporting date and | ||||||
|---|---|---|---|---|---|---|---|---|
| less | between | between | between | between | ||||
| Carrying | of which | not | than | 31 and | 61 and | 91 and | 181 and | |
| amount | impaired | overdue | 30 days | 60 days | 90 days | 180 days | 360 days |
| Trade receivables | ||||||||
|---|---|---|---|---|---|---|---|---|
| as of Sep. 30, 2017 | 4,998 | 9 | 4,772 | 59 | 27 | 4 | 5 | 140 |
| as of Sep. 30, 2016 | 3,657 | 9 | 3,316 | 48 | 13 | 4 | 132 | 153 |
As in the previous year, payments for trade receivables, already derecognized, have not been received.
Trade receivables of € 3,098 k (2016: € 2,592 k) are held in USD.
The receivables, which are neither past due nor impaired, mainly relate to the main customer Hologic, Inc. with whom long business relationships are maintained. In the past, no impairment losses were recognized, so that the default risk is considered to be low.
Trade receivables include receivables determined by using the stage-of-completion-method in the amount of € 1,636 k (2016: € 1,454 k) with a remaining term of more than one year. Discounting is not required.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Loans and receivables | 148 | 116 |
| Other | 2 | 20 |
| Eligible expenses | 0 | 66 |
| 150 | 202 |
Loans and receivables are fully due from MBC KG.
Other financial assets are due for settlement within one year within the following maturity bands:
| FIGURES IN € k | of which: with a term to maturity of |
|||||||
|---|---|---|---|---|---|---|---|---|
| Carrying amount |
of which impaired |
less than 30 days |
between 31 and 60 days |
between 61 and 90 days |
between 91 and 180 days |
between 181 and 360 days |
||
| Other financial assets | ||||||||
| as of Sep. 30, 2017 | 150 | 0 | 150 | 0 | 0 | 0 | 0 | |
| as of Sep. 30, 2016 | 202 | 0 | 136 | 0 | 0 | 66 | 0 |
With regard to other financial assets, there are no indications at the balance sheet date that the debtors will not meet their payment obligations at maturity.
Other assets mainly consist of accruals of € 167 k (2016: € 113 k).
The assets contained in this item comprise demand deposits and overnight deposits of € 29,734 k (2016: € 24,355 k) subject to interest of 0.00 % to 0.93 % p.a.. In addition, there is cash on hand of € 1 k (2016: € 1 k).
The changes in subscribed capital, the share premium, the revaluation reserve and retained earnings are shown in the statement of changes in shareholders' equity.
The share capital of MMS AG totals € 1,820,000 (2016: € 1,820,000) and comprises 1,820,000 (2016: 1,820,000) shares without par value.
As at September 30, 2017 and as at September 30, 2016 there is an authorized capital in the amount of € 910 k. In accordance with the resolution passed by the shareholders at the Annual General Meeting on June 9, 2015, the Executive Board is authorized, subject to the Supervisory Board's approval, to increase the Company's share capital by a total of up to € 910 k on or before June 8, 2020.
The capital reserve of € 7,745 k (2016: € 8,219 k) mainly results from the premium of € 28,080 k from the capital increase of MMS AG in 2007, which took place within the scope of an IPO. Net IPO expenses of € 1,139 k were deducted from equity. This includes tax relief of € 505 k. The sale of treasury stock resulted in an increase of € 1,314 k in 2007 and an amount of € 321 k (2016: € 315 k) attributable to stock options is also shown in the capital reserve. Due to the surrender of treasury stock with a value below acquisition cost, € 434 k was offset against capital reserves in 2011.
As at December 31, 2013, € 18,325 k was withdrawn from the capital reserve to compensate the accrued losses of MMS AG.
On February 18, 2015, the Company tendered its entire treasury shares based on the voluntary public takeover offer of VMS Deutschland Holdings GmbH at the offer price of € 17.50 per share. The tender was accepted by VMS Deutschland Holdings GmbH on April 21, 2015. The difference of € 1,593 k resulting from book value of treasury shares totaling € 3,300 k and the selling price in the amount of € 1,707 k, reduced the capital reserve to € 8,207 k.
In fiscal year 2016/2017, the capital reserve was reduced by € 750 k due to the redemption of claims from share-based payments.
The capital reserve of MMS AG, which amounts to € 7,475 k as of the balance sheet date, is not available for dividend distribution.
The assets and liabilities of MBS KG had to be completely revalued in connection with the acquisition of the 49 % interest in MBS KG from Siemens AG and the subsequent full consolidation of MBS KG in 2008. To the extent that this increase in value was attributable to the 51 % interest in MBS KG already held by the Company, the difference had to be allocated to the revaluation reserve. The amount of € 1,688 k allocated comprised intangible assets of € 2,411 k less deferred taxes of € 723 k thereon. Amounts corresponding with the amortization recognized on these assets are transferred proportionately to retained earnings. With the merger of MBS KG into MMS AG in the fiscal year 2013, the values from the revaluation reserve were also transferred into the individual IFRS financial statements.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Status as at Oct. 1 2016 (prev. year: Jan 1 2016) | 326 | 404 |
| Transfer to retained earnings within equity without impacting profit or loss of the amount corresponding with the amortization and the de |
||
| ferred taxes thereon | -100 | -78 |
| Status as at Sep. 30 | 226 | 326 |
Retained earnings include statutory reserves pursuant to Section 150 of the German Stock Corporation Act of € 5 k. In accordance with Section 150 (2) of the Stock Corporation Act no further statutory reserves are necessary. In addition, this item includes accumulated gains and losses from previous years and the earnings for the current fiscal year as well as actuarial gains and losses (net of deferred tax).
The change in retained earnings is shown in the following table:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Status as at Oct. 1 2016 (prev. year: Jan 1 2016) | 4,540 | 4,540 |
| Retained earnings | 0 | 0 |
| Status as at Sep. 30 | 4,540 | 4,540 |
The changes in actuarial gains and losses are shown in the following table:
| ANGABEN IN TAUSEND € | 2016/2017 | 2016 |
|---|---|---|
| Status as at Oct. 1 2016 (prev. year: Jan 1 2016) | -180 | -69 |
| Actuarial gains and losses | -45 | -111 |
| Status as at Sep. 30 | -225 | -180 |
The retained earnings were reduced by the transferred profits in favor of VMS Deutschland Holdings GmbH in the amount of € 5,211 k (2016: € 4,166 k) due to the domination and profit and loss transfer agreement effective since October 20, 2015.
Provisions for pensions reported in the statement of financial position break down as follows:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Defined benefit obligation | 688 | 635 |
| Reinsurance | -387 | -366 |
| Reported in statement of financial position | 301 | 269 |
Provisions for pensions relate to defined benefit plans. Retirement capital from reaching the age of 63 years and surviving dependents' capital have been promised. The extent of the benefits varies in principle according to the conversion of remuneration and an annual interest rate of 4 %. The underlying discount rate is 2.20 % (2016: 1.35 %). Pension and related benefits as well as the expenditure necessary to cover these obligations are valued and accounted for according to the projected unit credit method stipulated in IAS 19 "Employee Benefits". Future annual increases in income and entitlements by the time a pension can first be drawn are not taken into account if the entitled party does not have a corresponding claim. The plan was completed in 2013. Apart from the payments already made, no further payments under the plan are due before 2020. No further contributions are made to the plan.
The change in the present value of entitlements determined pursuant to IAS 19 is shown in the following table:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Defined benefit obligation at the beginning of the fiscal year | 635 | 515 |
| Interest cost of acquired rights | 8 | 9 |
| Actuarial losses | 45 | 111 |
| Defined Benefit Obligation at the end of the fiscal year | 688 | 635 |
A reduction of 0.5 percentage points in the interest rate for calculation purposes, to 1.70 % (2016: 0.85 %), would increase the defined benefit obligation (DBO) disclosed above to € 793 k (2016: € 697 k) as of the September 30, 2017 valuation date. An increase of 0.5 percentage points in the interest rate for calculation purposes, to 2.70 % (2016: 1.85 %), would decrease the defined benefit obligation (DBO) disclosed above to € 600 k (2016: € 579 k) as of the September 30, 2017 valuation date.
Total expenses on defined benefit plans reported within staff costs break down as follows:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Interest expense: interest on the entitlements already vested | 8 | 9 |
| Net pension expenditure on benefit obligations | 8 | 9 |
To secure the employees' pension claims, MeVis has taken out reinsurance, which is pledged to the individual employees. The employees are entitled to the higher of the pension claim or reinsurance coverage. As of September 30, 2017 the fair value of reinsurance amounted to € 387 k (2016: € 366 k), and thus remained as in the previous year below the defined benefit obligation amount.
The development of claims under reinsurance policies is shown in the following table:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Status at the beginning of the reporting year | 366 | 366 |
| Added value | 21 | 0 |
| Status at the end of the reporting year | 387 | 366 |
The profits from the appreciation in value of the reinsurance were charged to staff costs. Over the next five years, pension obligations are payable only to a small extent. Because of the reinsurance policies, the liquidity exposure of the Company from this is minor.
Current provisions developed as follows in fiscal year 2016/2017:
| FIGURES IN € k | Status at Oct. 1, 2016 |
Utilization | Addition | Accrued interest |
Release | Status at Sep. 30, 2017 |
|---|---|---|---|---|---|---|
| Warranty provisions | 142 | 0 | 0 | 0 | 4 | 138 |
| Other provisions | 142 | 0 | 0 | 0 | 4 | 138 |
The warranty provisions relate to contractual warranty obligations to customers.
Other financial liabilities contain the following items:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Liabilities to affiliated companies | 9,368 | 4,157 |
| Staff liabilities | 2,025 | 1,586 |
| Other financial liabilities | 11,393 | 5,743 |
Liabilities to affiliated companies relate to the commercial profits to be transferred in the fiscal years 2016 and 2016/2017.
Staff liabilities primarily comprise the cost of bonuses.
This item comprises income components paid but not recognized under multi-component contracts. In addition, payments received under maintenance contracts are deferred if the corresponding maintenance services have not yet been provided.
Miscellaneous other liabilities contain the following items:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Current tax liabilities | 142 | 84 |
| Salary liabilities | 24 | 24 |
| Payments received | 21 | 20 |
| Other | 17 | 16 |
| Miscellaneous other liabilities | 204 | 144 |
The payments received relate mainly to payments for maintenance from Hologic, Inc.. The current tax liabilities relate to income tax and church tax as well as value added tax.
MMS AG is under an obligation to grant a loan of up to € 820 k to the MBC KG joint venture at standard bank conditions in the event that the latter company's capital requirements exceed the capital contributions paid in by the partners. Given the economic situation of MBC KG a claim is currently not expected.
| less than | ||||
|---|---|---|---|---|
| FIGURES IN € k | Total | 1 year | 1 to 5 years | over 5 years |
| Rental contracts | 2,894 | 526 | 2,105 | 263 |
| Leasing contracts | 121 | 66 | 55 | 0 |
| Total financial obligations as of | ||||
| Sep. 30, 2017 | 3,014 | 592 | 2,160 | 263 |
| Rental contracts | 648 | 432 | 216 | 0 |
| Leasing contracts | 88 | 48 | 40 | 0 |
| Total financial obligations as of | ||||
| Sep. 30, 2016 | 736 | 480 | 256 | 0 |
The rental contracts are mainly leases with limited terms for office space. In addition to the option already exercised to extend the contract by 5 years, the lease for the office space has an additional option to extend it by 5 years. Rental expenses of € 526 k (2016: € 324 k) were incurred in the fiscal year, which are reported under other operating expenses.
All of the leases for passenger vehicles and copiers of MMS AG in 2016/2017 are operating leases. Economic ownership of these leased assets remains with the respective lessor. MMS AG recognizes lease payments as expense. In 2016/2017, a total of € 66 k (2016: € 28 k) was included in other operating expenses.
In the course of its operations, MMS AG is primarily exposed to exchange rate fluctuations due to its international business activities.
Besides, MMS AG is exposed to financial risks in the form of liquidity and default risk.
When necessary in the past, MMS AG entered into different types of currency contracts to manage exchange rate risk resulting from the cash flow from (expected) business activities denominated in foreign currencies. The transaction risk was measured in each relevant foreign currency. The Company's exchange rate exposure was due to its global business activities, particularly the sale of its products to US customers, which are invoiced in US dollars. Due to the affiliation to the Varian Group and in accordance with its corporate policy, no new such hedging transactions will be concluded.
The Company requires sufficient liquid funds to settle its financial obligations. Liquidity risks arise when customers are unable to meet their obligations to the Company in the course of normal business. As of the reporting date the Company has cash and cash equivalents in the amount of € 29,735 k (2016: € 24,356 k).
Liquidity risk is managed on the basis of rolling liquidity planning.
Default risk, i.e. the risk of counterparties failing to meet their payment obligations, are managed by means of credit approvals, the definition of maximum limits and monitoring processes.
To manage this risk, the Company periodically reviews its customers' solvency.
The Company does not expect any defaults on the part of those business partners with a favorable credit rating. As three customers account for most of the Company's revenues, credit risk is concentrated to a significant extent on the one customer group. As the Group has maintained business relations with these customers, all of which have a very good credit rating and enjoy high renown, for several years and no defaults have arisen to date, the Executive Board does not see any significantly enhanced risk of default. Provision has been made in the statement of financial position for the maximum default risk.
Fair value is defined as the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction (except in the case of foreclosure or liquidation proceedings).
A three-stage system is used to measure fair value, which must be implemented in this particular sequence (fair-value hierarchy):
Listed market prices (category 1) and other observable information (category 2) are currently not used by the Company. The third category applies to the other financial instruments of the Company.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Category 3 (other financial assets) | 5,148 | 3,859 |
| Financial assets | 5,148 | 3,859 |
| Category 3 (other financial liabilities) | 11,672 | 6,070 |
| Financial liabilities | 11,672 | 6,070 |
The following methods and assumptions are used to estimate the fair value of the individual classes of financial instruments:
The carrying amount of liquid assets, current trade receivables, other financial assets, trade payables and other financial liabilities essentially corresponds to the fair value due to the relatively short-term maturity of these financial instruments. Non-current trade receivables relate to receivables from development contracts, so that the carrying amount is also close to fair value. Where no quoted market prices are available, the fair values of publicly traded financial instruments are estimated on the basis of quoted market prices for identical or similar investments. For all other financial instruments, an estimate of the fair value has been made
based on the expected cash flow or the underlying net assets of each asset. All carrying amounts are more or less the same as the fair value of the items in question.
The carrying amounts, measurement and fair values of the financial instruments are presented below by valuation categories:
| Carrying | |||
|---|---|---|---|
| IAS 39 cate | amount as of Sep. 30, |
Amortized | |
| FIGURES IN € k | gory | 2017 | cost |
| Assets | |||
| Trade receivables | LaR | 4,998 | 4,998 |
| Other financial assets | LaR | 150 | 150 |
| Cash | LaR | 29,735 | 29,735 |
| Equity and liabilities | |||
| Trade payables | FLAC | 279 | 279 |
| Other current financial liabilities | FLAC | 11,393 | 11,393 |
| Of which aggregated by IAS 39 category: | |||
| Loans and Receivables | LaR | 34,883 | 34,883 |
| Financial Liabilities measured at amortised Costs | FLAC | 11,672 | 11,672 |
| FIGURES IN € k | IAS 39 cate gory |
Carrying amount as of Sep. 30, 2016 |
Amortized cost |
|---|---|---|---|
| Assets | |||
| Trade receivables | LaR | 3,657 | 3,657 |
| Other financial assets | LaR | 202 | 202 |
| Cash | LaR | 24,356 | 24,356 |
| Equity and liabilities | |||
| Trade payables | FLAC | 327 | 327 |
| Other current financial liabilities | FLAC | 5,743 | 5,743 |
| Of which aggregated by IAS 39 category: | |||
| Loans and Receivables | LaR | 28,215 | 28,215 |
| Financial Liabilities measured at amortised Costs | FLAC | 6,070 | 6,070 |
The contractually agreed (non-discounted) interest and capital payments for the primary financial liabilities break down as follows as of the reporting date.
| FIGURES IN € k | Cash flow 2018 Cash flows 2019-2022 |
Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Carrying amount Sep. 30, 2017 |
Fixed interest rate |
Floating interest rate |
Repay ment |
Fixed interest rate |
Floating interest rate |
Repay ment |
Fixed interest rate |
Floating interest rate |
Repay ment |
|
| Other financial liabilities |
11,393 | 0 | 0 | 11,393 | 0 | 0 | 0 | 0 | 0 | 11,393 |
| FIGURES IN € k | Cash flow 2017 | Cash flows 2018-2021 | Total | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Carrying amount Sep. 30, 2016 |
Fixed interest rate |
Floating interest rate |
Repay ment |
Fixed interest rate |
Floating interest rate |
Repay ment |
Fixed interest rate |
Floating interest rate |
Repay ment |
||
| Other financial liabilities |
5,743 | 0 | 0 | 5,743 | 0 | 0 | 0 | 0 | 0 | 5,743 |
Net gains/losses by category break down as follows:
| from subsequent measurement | Net result | |||||
|---|---|---|---|---|---|---|
| Derecognition | ||||||
| of receivables | ||||||
| from | Currency | and | 2016/ | |||
| FIGURES IN € k | interests | at fair value | translation | liabilities | 2017 | 2016 |
| Loans and Receivables (LaR) | 159 | 0 | -1,459 | 0 | -1,300 | -488 |
| Derivate | 0 | 0 | 0 | 0 | 0 | 3 |
| Financial Liabilities measured | ||||||
| at Amortised Costs (FLAC) | -8 | 0 | 0 | 0 | -8 | -12 |
| -1,308 | -497 |
To reflect market risks, IFRS 7 prescribes sensitivity analyses showing the effects of hypothetical changes in the relevant risk variables on earnings and shareholders' equity. MMS AG is mainly exposed to exchange rate risk. If one considers the receivables portfolio, which has a USD balance sheet value equivalent to € 3,098 k (2016: € 2,624 k) as of September 30, 2017, the resulting elasticity is € 631 k (2016: € 530 k) with a change in the US dollar exchange rate of +/-10 %. Taking into account these measurement bands, the balance of cash with a USD portfolio equivalent to € 28,517 k (2016: € 22,843 k) resulted in an elasticity of € 5,761 k (2016: € 4,615 k) as of September 30, 2017.
The objectives of capital management are derived from the financial strategy and include the provision of liquidity and access to the capital markets at all times. The capital structure is managed to take account of any changes in economic conditions and risks arising from the underlying assets.
To this end, equity is viewed in the light of prevailing risk and, if necessary, adjusted by means of dividend policy, capital repayments and equity issues. Capital is monitored by reference to the ratio of net financial liabilities/receivables to economic capital. Net financial liabilities/receivables comprise cash plus financial assets net of financial liabilities. Economic capital equals the equity reported in the statement of financial position.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Other financial liabilities | 11,393 | 5,743 |
| Gross financial liabilities | 11,393 | 5,743 |
| Cash | 29,735 | 24,356 |
| Other financial assets | 150 | 202 |
| Gross financial receivables | 29,885 | 24,558 |
| Net financial receivables | 18,492 | 18,815 |
| Economic capital | 32,496 | 32,889 |
Given the international nature of MeVis' activities, different regional legal and regulatory requirements must be observed in the individual jurisdictions. The status of and any changes in these rules are monitored both locally and centrally and taken into account in capital management.
The statement of cash flows breaks down into cash flows from operating activities, cash flows from investing activities and cash flows from financing activities. Net cash inflow from operating activities is calculated using the indirect method.
Cash and cash equivalents comprise cash on hand and demand deposits.
As of September 30, 2017, the activities of the Company continued to be subdivided into the reportable segments of Digital Mammography and Other Diagnostics. The management of each of these segments reports directly to the Executive Board of MMS AG in its function as the responsible corporate entity.
Segment net profit and loss, which corresponds to earnings before financial result and tax (EBIT), constitutes the key benchmark for assessing and controlling the earnings position of a particular segment.
Segmentation is as follows:
| Digital Mammography |
Other Diagnostics |
MMS AG | ||||
|---|---|---|---|---|---|---|
| FIGURES IN € k | 2016/2017 | 2016 | 2016/2017 | 2016 | 2016/2017 | 2016 |
| Revenues | 12,462 | 9,519 | 6,078 | 2,572 | 18,540 | 12,091 |
| Grants | 0 | 0 | 0 | 104 | 0 | 104 |
| Total segment reve nues |
12,462 | 9,519 | 6,078 | 2,676 | 18,540 | 12,195 |
| Depreciation and amortization |
-1,049 | -1,215 | -168 | -103 | -1,217 | -1,318 |
| Operating expenses | -3,014 | -2,635 | -5,430 | -3,253 | -8,444 | -5,888 |
| Result of operating activities |
8,399 | 5,669 | 480 | -680 | 8,879 | 4,989 |
| Other operating income |
369 | 232 | 647 | 277 | 1,016 | 509 |
| Other operating expenses |
-733 | -721 | -1,200 | -849 | -1,933 | -1,570 |
| Segment net profit and loss (EBIT) |
8,035 | 5,180 | -73 | -1,252 | 7,962 | 3,928 |
The assets and liabilities are no longer part of internal reporting to the Executive Board.
Revenues in the Digital Mammography are generated exclusively with the customer Hologic Inc. The segment Other Diagnostics includes a non-recurring revenue of € 1,800 k from the sale of extensive rights to use the MeVisLab tool, which is used for the efficient development of software prototypes.
Segmentation of external revenues by geographical regions is as follows:
| Digital Other MMS AG Mammography Diagnostics |
||||||
|---|---|---|---|---|---|---|
| FIGURES IN € k | 2016/2017 | 2016 | 2016/2017 | 2016 | 2016/2017 | 2016 |
| USA | 12,462 | 9,519 | 3,134 | 1,860 | 15,596 | 11,379 |
| Europe | 0 | 0 | 2,944 | 712 | 2,944 | 712 |
| External revenues | 12,462 | 9,519 | 6,078 | 2,572 | 18,540 | 12,091 |
The Company enters into transactions with related parties, the details of which are set out below. These transactions form part of its usual business activities and are subject to arm's length conditions.
Related parties and companies include the joint ventures, MBC KG and MBC GmbH, Varex Imaging Deutschland AG and, via this entity, the affiliated companies of the Varex Group, as well as the Executive Board and Supervisory Board and their close family members.
As of the reporting date, the following receivables were due from and the following liabilities owing to related parties:
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Joint Ventures | ||
| Receivables | 148 | 116 |
| Income (from services) | 1,546 | 915 |
| Expenses | 2 | 9 |
| Parent company | ||
| Liabilities (from profit and loss transfer agreement) | 9,368 | 4,157 |
| Income (from services) | 439 | 0 |
Information on the remuneration of Board members are included in note 34.
As of the reporting date, MMS AG had received the following compulsory disclosures in accordance with Section 21 et seq. of the German Securities Trading Act (WpHG) concerning changes in the voting rights held in MMS AG:
1) On March 30, 2015, Oppenheim Asset Management Services S.à.r.l., Luxembourg, Luxembourg, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 % threshold of the voting rights on March 24, 2015 and on that day amounted to 3.012 % (corresponding with 54,820 voting rights).
On March 30, 2015, TBF Gesellschaft mit beschränkter Haftung, Singen, Germany, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 % threshold of the voting rights on March 24, 2015 and on that day amounted to 3.012 % (corresponding with 54,820 voting rights). 3.012 % of voting rights (corresponding with 54,820 voting rights) are attributed to the company in accordance with Section 22 (1) Sentence 1 No. 6 in connection with sentence 2 WpHG. Attributed voting rights are held by the following shareholders, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: Oppenheim Asset Management Services S.à.r.l.
On March 30, 2015, TBF Global Asset Management GmbH, Singen, Germany, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 % threshold of the voting rights on March 24, 2015 and on that day amounted to 3.012 % (corresponding with 54,820 voting rights). 3.012 % of voting rights (corresponding with 54,820 voting rights) are attributed to the company in accordance with Section 22 (1) Sentence 1 No. 6 WpHG. Attributed voting rights are held by the following shareholders, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: Oppenheim Asset Management Services S.à.r.l.
On March 30, 2015, Mr. Peter Dreide, Germany, informed us according to Section 21 (1) WpHG that his share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 % threshold of the voting rights on March 24, 2015 and on that day amounted to 3.012 % (corresponding with 54,820 voting rights). 3.012 % of voting rights (corresponding with 54,820 voting rights) are attributed to Mr. Dreide in accordance with Section 22 (1) Sentence 1 No. 6 in connection with sentence 2 WpHG. Attributed voting rights are held by the following shareholders, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: Oppenheim Asset Management Services S.à.r.l.
2) On April 21, 2015, VMS Deutschland Holdings GmbH, Darmstadt, Germany, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the Voting Rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 Voting Rights).
On April 21, 2015, Varian Medical Systems International AG, Cham, Switzerland, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the voting rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 voting rights). 73.52 % of voting rights (corresponding with 1,337,995 voting rights) are attributed to the company in accordance with Section 22 (1) Sentence 1 No. 1 WpHG. Attributed voting rights are held by the following companies under its control, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: VMS Deutschland Holdings GmbH.
On April 21, 2015, Varian Medical Systems Nederland BV, Houten, Netherlands, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the voting rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 voting rights). 73.52 % of voting rights (corresponding with 1,337,995 voting rights) are attributed to the company in accordance with Section 22 (1) Sentence 1 No. 1 WpHG . Attributed voting rights are held by the following companies under its control, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: VMS Deutschland Holdings GmbH, Varian Medical Systems International AG.
On April 21, 2015, Varian Medical Systems Nederland Holdings BV, Houten, Netherlands, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the voting rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 voting rights). 73.52 % of voting rights (corresponding with 1,337,995 voting rights) are attributed to the company in accordance with Section 22 (1) Sentence 1 No. 1 WpHG. Attributed voting rights are held by the following companies under its control, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: VMS Deutschland Holdings GmbH, Varian Medical Systems International AG, Varian Medical Systems Nederland BV.
On April 21, 2015, Varian Medical Systems, Inc., Wilmington, Delaware, United States, informed us according to Section 21 (1) WpHG that its share of the voting rights on MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the voting rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 voting rights). 73.52 % of voting rights (corresponding with 1,337,995 voting rights) are attributed to the company in accordance Section 22 (1) Sentence 1 No. 1 WpHG. Attributed voting rights are held by the following companies under its control, whose share of the voting rights in MeVis Medical Solutions AG amounts to 3 % or more: VMS Deutschland Holdings GmbH, Varian Medical Systems International AG, Varian Medical Systems Nederland BV, Varian Medical Systems Nederland Holdings BV.
On January 5, 2017, Varex Imaging Deutschland AG, Willich, Germany, informed us according to Section 21 (1) WpHG that its share of the voting rights in MeVis Medical Solutions AG, Bremen, Germany, exceeded the 3 %, 5 %, 10 %, 15 %, 20 %, 25 %, 30 % and 50 % threshold of the Voting Rights on April 21, 2015 and on that day amounted to 73.52 % (corresponding with 1,337,995 Voting Rights).
3) On January 5, 2017, Varex Imaging Deutschland AG, Willich, Germany, informed us according to section 21 (1) WpHG that on December 31, 2016, Varex Imaging Deutschland AG, Willich, Germany, received an authorization from VMS Deutschland Holdings GmbH to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, without any instructions and for an unlimited period of time. On this date, 73.65 % of the voting rights were attributed to Varex Imaging Deutschland AG in accordance with section 22 (1) (this corresponds to 1,340,498 voting rights).
On January 5, 2017 Varex Imaging Investments BV, Dinxperlo, Netherlands, informed us according to section 21 (1) WpHG that its subsidiary, Varex Imaging Deutschland AG, Willich, Germany, received an authorization from VMS Deutschland Holdings GmbH on December 31, 2016 to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, without any instructions and for an unlimited period of time. On that day 73.65 % of the voting rights were attributed to the company according to section 22 (1) (this corresponds to 1,340,498 voting rights).
On January 5, 2017 Varex Imaging Investments Holding BV, Dinxperlo, Netherlands, informed us according to section 21 (1) WpHG that its sub-subsidiary, Varex Imaging Deutschland AG, Willich, Germany, received an authorization from VMS Deutschland Holdings GmbH on December 31, 2016 to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, without any instructions and for an unlimited period of time. On that day 73.65 % of the voting rights were attributed to the company according to section 22 (1) (this corresponds to 1,340,498 voting rights).
On January 5, 2017 Varex Imaging Corporation, Wilmington, Delaware, USA, informed us according to section 21 (1) WpHG that its sub-sub-subsidiary, Varex Imaging Deutschland AG, Willich, Germany, received an authorization from VMS Deutschland Holdings GmbH on December 31, 2016 to exercise the voting rights in MeVis Medical Solutions AG, Bremen, Germany, without any instructions and for an unlimited period of time. On that day 73.65 % of the voting rights were attributed to the company according to section 22 (1) (this corresponds to 1,340,498 voting rights).
Complete chain of subsidiaries, beginning with the ultimate controlling company: Varex Imaging Corporation, Varex Imaging International Holdings BV, Varex Imaging Investments BV, Varex Imaging Deutschland AG.
| EXECUTIVE BOARD | ||
|---|---|---|
| Marcus Kirchhoff Chairman Dassendorf Dr. Robert Hannemann Bremen |
from Mar. 1, 2012 from Oct.1, 2010 |
Member of the Shareholders' Committee of MeVis BreastCare GmbH & Co. KG Member of the Executive Board of Varex Imaging Deutschland AG (since Jan. 20, 2017) Member of the Board of Trustees of Fraunhofer-Institut für Bildgestützte Medizin MEVIS Managing Director of MeVis BreastCare GmbH & Co. KG Member of the Executive Board of Varex Imaging Deutschland AG (since Oct. 27, 2016) |
| Member of the Board of Directors of Varex Imaging Inter national AG, Switzerland (since Nov. 25, 2016) |
||
| SUPERVISORY BOARD | ||
| Kimberley E. Honeysett Chairperson Sandy, Utah, USA |
from Mar. 8, 2017 |
Senior Vice President, General Counsel and Corporate Secretary at Varex Imaging Corporation Member of the Supervisory Board of Varex Imaging Deutschland AG (since Oct. 20, 2016) Member of the Board of Directors of Varex Imaging Inter national AG, Switzerland (since Nov. 25, 2016) |
| Clarence R. Verhoef Deputy Chairman Sandy, Utah, USA |
from Mar. 8, 2017 |
Chief Financial Officer at Varex Imaging Corporation Member of the Supervisory Board of Varex Imaging Deutschland AG (since Oct. 20, 2016) Member of the Board of Directors of Varex Imaging Inter national AG, Switzerland (since Nov. 25, 2016) |
| Matthew C. Lowell Los Altos, California, USA |
from Mar. 8, 2017 |
Vice President, Finance - Treasury & Business Develop ment at Varex Imaging Corporation Member of the Supervisory Board of Varex Imaging Deutschland AG (since January 20, 2017) |
| Joerg Faessler Chairman Baar, Switzerland |
from Jun. 9, 2015 until Mar. 8, 2017 |
Senior Director Finance & Controller Europe at Varian Medical Systems International AG, Cham, Switzerland |
| Holger Maar Vice-Chairman Heddesheim |
from Jun. 7, 2016 until Mar. 8, 2017 |
Managing Director Commercial & Senior Finance Manager at Varian Medical Systems Deutschland GmbH, Darm stadt |
| Glen A. Hilton Alpine, Utah, USA |
from Jun. 9, 2015 until Mar. 8, 2017 |
Vice President / VIC Business Controller at Varian Medical Systems, Inc., Salt Lake City, Utah, USA (until Mar. 2017) |
As of September 30, 2017, members of the Executive Board and Supervisory Board held no shares in the Company.
The bonuses for Executive Board members Marcus Kirchhoff and Dr. Robert Hannemann are always measured by the level of achievement of a target catalogue agreed upon with the Supervisory Board. Part of these bonuses is linked to the MeVis share price trend in defined bandwidths and paid out after three years to provide a long-term incentive.
The minimum amount of the part of the bonus linked to the future share price trend is stated as a bonus with share price-related leverage. In the three years following the granting of the bonus this could increase by around 86 % if the share price were to develop accordingly.
In agreement with the members of the Executive Board the Supervisory Board has decided to abolish the variable remuneration component at the beginning of fiscal year 2018. This was done because the members of the Executive Board are also members of the Executive Board of Varex Imaging Deutschland AG, which holds a majority interest in the Company and with which a domination and profit and loss transfer agreement exists. At Varex Imaging Deutschland AG, the members of the Executive Board receive variable remuneration based on the Group's success. As a result of the domination and profit and loss transfer agreement, the Company's success is no longer an indicator of the success of the managerial performance, so the variable remuneration no longer seemed to be meaningful to the Supervisory Board. Also for this reason, the bonuses granted as long-term incentive components with share price-dependent leverage will be paid out after the Annual General Meeting to be held in 2018.
| FIGURES IN € | Fixed remune ration |
Performance related remu neration |
Components with long-term incentive characteristic |
Pecuniary benefits from non-cash benefits |
Stock options |
Total |
|---|---|---|---|---|---|---|
| Bonus with share price |
||||||
| Salary | Bonus | dependent lever | ||||
| Marcus Kirchhoff | 223,600.00 | 110,000.00 | 77,000.00 | 10,045.04 | 0.00 | 420,645.04 |
| Dr. Robert Hannemann | 176,400.00 | 86,700.00 | 60,690.00 | 1,132.87 | 0.00 | 324,922.87 |
| Total | 400,000.00 | 196,700.00 | 137,690.00 | 11,177.91 | 0.00 | 745,567.91 |
The members of the Executive Board received the following remuneration in the fiscal year 2016/2017:
In addition, Dr. Robert Hannemann received a bonus payment of € 23,260.00 from Varex Imaging Deutschland AG in the fiscal year 2017.
In the period from January 1 to September 30, 2016, the members of the Executive Board received the following remuneration:
| FIGURES IN € | Fixed remuneration |
Performance related remu neration |
Components with long-term incentive characteristic |
Pecuniary benefits from non-cash benefits |
Stock options |
Total |
|---|---|---|---|---|---|---|
| Salary | Bonus | Bonus with share price dependent lever |
||||
| Marcus Kirchhoff | 167,699.97 | 82,500.00 | 57,750.00 | 7,826.00 | 0.00 | 315,775.97 |
| Dr. Robert Hannemann | 132,300.00 | 65,025.00 | 45,517.50 | 1,132.87 | 0.00 | 243,975.37 |
| Total | 299,999.97 | 147,525.00 | 103,267.50 | 8,958.87 | 0.00 | 559,751.34 |
According to the criteria of the German Corporate Governance Code (GCGC), the Executive Board remuneration is as follows:
In the years 2016 and 2016/2017 the Executive Board members were granted the following benefits:
| FIGURES IN € k | Marcus Kirchhoff Executive Board Chairman |
Dr. Robert Hannemann Executive Board Member |
||||||
|---|---|---|---|---|---|---|---|---|
| Benefits received | 2016/ 2017 |
2016/ 2017 (Min) |
2016/ 2017 (Max) |
2016 | 2016/ 2017 |
2016/ 2017 (Min) |
2016/ 2017 (Max) |
2016 |
| Fixed remuneration | 224 | 224 | 224 | 168 | 176 | 176 | 176 | 132 |
| Additional benefits | 10 | 10 | 10 | 8 | 1 | 1 | 1 | 1 |
| Total | 234 | 234 | 234 | 176 | 177 | 177 | 177 | 133 |
| Annual variable remuneration | 110 | 0 | 110 | 82 | 87 | 0 | 87 | 65 |
| Multi-year variable remuneration | ||||||||
| Bonus on a share dependent lever | 77 | 0 | 77 | 58 | 61 | 0 | 61 | 46 |
| Stock options | 0 | 0 | n.a. | 0 | 0 | 0 | n.a. | 0. |
| Total variable remuneration | 187 | 0 | 187 | 140 | 148 | 0 | 148 | 111 |
| Pension expenses | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Total remuneration | 421 | 234 | 421 | 316 | 325 | 177 | 325 | 244 |
In the years 2016 and 2016/2017 the following inflows were received by the Executive Board members:
| FIGURES IN € k | Marcus Kirchhoff Executive Board Chairman |
Dr. Robert Hannemann Executive Board Member |
||
|---|---|---|---|---|
| Inflow | 2016/2017 | 2016 | 2016/2017 | 2016 |
| Fixed remuneration | 224 | 168 | 176 | 132 |
| Additional benefits | 10 | 8 | 1 | 1 |
| Total | 234 | 176 | 177 | 133 |
| Annual variable remuneration | 83 | 108 | 65 | 87 |
| Multi-year variable remuneration | ||||
| Bonus on a share dependent lever | 42 | 1 | 93 | 70 |
| Stock options | 152 | 0 | 107 | 76 |
| Total variable remuneration | 277 | 109 | 265 | 233 |
| Pension expenses | 0 | 0 | 0 | 0 |
| Total remuneration | 511 | 285 | 442 | 366 |
In addition, Dr. Robert Hannemann received a bonus payment of € 23 k from Varex Imaging Deutschland AG in the fiscal year 2017.
Until June 7, 2016, the remuneration for the members of the Supervisory Board was regulated in Section 10 of the Articles of Association of MMS AG. Thereafter, the members of the Supervisory Board received a fixed remuneration of € 17,500.00 payable after the end of the fiscal year. The chairman of the Supervisory Board twice this amount and his deputy one-and-a-half times this amount. Members of the Supervisory Board who have only belonged to the Supervisory Board during a part of the fiscal year received a pro rata remuneration.
Pursuant to a shareholders resolution dated June 7, 2016 and the corresponding amendment to the bylaws the Supervisory Board members, whose mandates begin after January 1, 2016, do not receive any remuneration from the Company. It is pointed out that accordingly as opposed to section 5.4.6 (1) sentence 2 of the GCGC the Chair and Deputy Chair positions in the Supervisory Board are not reflected in the remuneration and as opposed to section 5.4.6 (3) sentence 1 of the GCGC no Supervisory Board remuneration can be reported individually in the notes or management report.
The members of the Supervisory Board are reimbursed for all expenses which they incur in attending meetings of the Supervisory Board plus any VAT due on the reimbursed amount.
As members of the Supervisory Board, the members received the following remuneration for 2016/2017:
a. Jörg Faessler
As Chairman of the Supervisory Board of MMS AG until March 8, 2017, Mr. Faessler waived his remuneration in 2016/2017. He received expense reimbursements amounting to € 0 k (2016: € 0 k).
b. Holger Maar
As a Vice-chairman of the Supervisory Board of MMS AG until March 8, 2017, Mr. Maar waived his remuneration in 2016/2017. He received expense reimbursements amounting to € 0 k (2016: € 0 k).
c. Glen A. Hilton
As a member of the Supervisory Board of MMS AG until March 8, 2017, Mr. Hilton was entitled to a remuneration of € 23 k (2016: € 5 k). He received expense reimbursements amounting to € 0 k (2016: € 0 k).
d. Kimberley E. Honeysett
As Chairperson of the Supervisory Board of MMS AG since March 8, 2017, Ms. Honeysett received no remuneration. No reimbursement of expenses has been claimed.
e. Clarence R. Verhoef
As Vice-chairman of the Supervisory Board of MMS AG since March 8, 2017, Mr. Verhoef received no remuneration. No reimbursement of expenses has been claimed.
f. Matthew C. Lowell
As a member of the Supervisory Board of MMS AG since March 8, 2017, Mr. Lowell received no remuneration. No reimbursement of expenses has been claimed.
Pecuniary damage liability insurance was concluded at the expense of the Company for the benefit of the members of the Executive Board and Supervisory Board.
At MMS AG's Annual General Meeting of August 22, 2007, the shareholders passed a resolution to create contingent capital of € 130 k in order to issue up to 130,000 stock options to staff or members of the Executive Board on or before December 31, 2011. The Annual General Meeting on June 15, 2011 extended the stock option program until December 31, 2015. The vesting period was also extended from a minimum of two years to at least four years in light of new statutory requirements.
MMS AG was entitled to settle the stock options in cash form – in other words, a combination model was in place. At the date of issue, a fulfillment in equity instruments was preferred, therefore the evaluation was made based on the principles for equity-settled options. The options granted were forfeited if an employee leaves the company. All outstanding stock options had a term of five years from the date of grant. The options granted prior to 2013 have now expired or have been exercised for the first time in 2016. For options granted after 2013 a waiting period of 4 years applied, this determined the vesting period of the options. Correspondingly, the expense associated with the granting of stock options was distributed over 4 years. The fair value of the employee options granted in 2013 was determined based on a Monte Carlo simulation, estimating the normal distribution of the yield on the future stock price. The nominal distribution is described by the parameters "mean value" and "variance", which were derived from the MeVis share price trend and volatility. This simulation put the total fair value of stock options of the 28,089 options granted in 2013 at € 65 k, € 2.31 per option. Expense equaling the fair value was spread over the vesting period of four years. For fiscal year 2016/2017 the expense totals € 6 k (2016: € 12 k).
Since the stock option program of MMS AG expired on December 31, 2015, the maximum term of the outstanding options is until December 31, 2020.
In the course of the fiscal year 2016/2017, all options were exercised or forfeited or expired, so that no more options were available at the end of the reporting period.
As opposed to the method described in the half-yearly financial report, the payment of the stock options was not recognized as an expense under personnel expenses, but was offset against equity in accordance with IFRS 2.
| 2016/2017 | 2016 | ||||||
|---|---|---|---|---|---|---|---|
| Beginning of reporting period |
Change | End of reporting period |
Beginning of reporting period |
Change | End of reporting period |
||
| Outstanding stock | |||||||
| options | 0 | 0 | 0 | 0 | 0 | 0 | |
| Options granted | 71,510 | 0 | 71,510 | 71,510 | 0 | 71,510 | |
| Options forfeited | -17,600 | 0 | -17,600 | -17,600 | 0 | -17,600 | |
| Options exercised | -3,000 | -26,146 | -29,146 | 0 | -3,000 | -3,000 | |
| Options lapsed | -24,764 | 0 | -24,764 | -24,764 | 0 | -24,764 | |
| Total | 26,146 | -26,146 | 0 | 29,146 | -3,000 | 26,146 | |
| of which exercisable | |||||||
| options | 0 | 0 | 0 | 0 | 0 | 0 |
The Executive Board and Supervisory Board of MeVis Medical Solutions AG support the initiative of the "Government Commission on the German Corporate Governance Code" and thus have issued a joint declaration of conformity pursuant to Section 161 of the German Stock Corporation Act (AktG), confirming that the recommendations of the "Government Commission on the German Corporate Governance Code" in the version dated February 7., 2017 have been and will be generally complied with, disclosing which recommendations have not been and will not be followed. The current declaration of conformity is dated September 9, 2017. Shareholders can view it on the Company website as a PDF.
| FIGURES IN € k | 2016/2017 | 2016 |
|---|---|---|
| Audit of financial statements (non-period € 0 k; prev. year € 21 k) | 73 | 94 |
| Other assurance services | 0 | 8 |
| Tax advisory | 0 | 14 |
| Total | 73 | 116 |
With the spin-off agreement dated December 28, 2016, the transfer of the shares in MMS AG from VMS Deutschland Holdings GmbH to Varex Imaging Deutschland AG was resolved with economic effect as of December 30, 2016, whereby the spin-off became legally effective upon entry in the commercial register on October 12, 2017.
On October 16, 2017, MMS AG concluded a loan agreement with Varex Imaging Deutschland AG under which MMS AG granted Varex Imaging Deutschland AG a loan in the amount of \$ 19.2 million, which bears interest at 1 % p. a.
The profit according to German commercial law of € 5,211 k will be transferred to Varex Imaging Deutschland AG because of the domination and profit and loss transfer agreement effective since October 20, 2015.
Under the domination and profit and loss transfer agreement, VMS Deutschland Holdings GmbH has committed itself to pay the outside shareholders for the duration of the contract an annual compensation payment for each fiscal year starting 2015. Per fiscal year this amounts to € 1.13 gross / € 0.95 net per registered share. The obligation was transferred to Varex Imaging Deutschland AG as part of the spin-off.
Bremen, January 19, 2018
Marcus Kirchhoff Dr. Robert Hannemann Chairman & CEO Member of the Executive Board
for the period October 1, 2016 through September 30, 2017
| Cost of acquisition or construction | |||||
|---|---|---|---|---|---|
| FIGURES IN € k | Balance on Oct. 1, 2016 |
Additions | Reclassifi cations |
Disposals | Balance on Sep. 30, 2017 |
| I. Intangible assets |
|||||
| Purchased industrial property rights | |||||
| and similar rights | 2,667 | 51 | 0 | 0 | 2,718 |
| Customer base / contract relations | 4,091 | 0 | 0 | 0 | 4,091 |
| Development expenses | 11,349 | 0 | 0 | 0 | 11,349 |
| Goodwill | 10,625 | 0 | 0 | 0 | 10,625 |
| 28,732 | 51 | 0 | 0 | 28,783 | |
| II. Property, plant and equipment |
|||||
| Other equipment, furniture and | |||||
| office equipment | |||||
| IT-equipment | 1,312 | 137 | 0 | 0 | 1,449 |
| Furniture and office equipment | 449 | 33 | 0 | 0 | 482 |
| 1,761 | 170 | 0 | 0 | 1,931 | |
| 30,493 | 221 | 0 | 0 | 30,714 |
| Accumulated depreciation and amortization | Carrying amounts | |||||
|---|---|---|---|---|---|---|
| Balance on Oct. 1, 2016 |
Depreciation and amortization |
Reclassifi cations |
Disposals | Balance on Sep. 30, 2017 |
Balance on Sep. 30, 2017 |
Balance on Sep. 30, 2016 |
| 2,504 3,234 |
94 260 |
0 0 |
0 0 |
2,598 3,494 |
120 597 |
163 857 |
| 10,276 | 693 | 0 | 0 | 10,969 | 380 | 1,073 |
| 0 | 0 | 0 | 0 | 0 | 10,625 | 10,625 |
| 16,014 | 1,047 | 0 | 0 | 17,061 | 11,722 | 12,718 |
| 1,024 | 144 | 0 | 0 | 1,168 | 281 | 288 |
| 421 | 26 | 0 | 0 | 447 | 35 | 28 |
| 1,445 | 170 | 0 | 0 | 1,615 | 316 | 316 |
| 17,459 | 1,217 | 0 | 0 | 18,676 | 12,038 | 13,034 |
for the period January 1 through September 30, 2016
| Cost of acquisition or construction | |||||||
|---|---|---|---|---|---|---|---|
| FIGURES IN € k | Balance on Jan. 1, 2016 |
Additions | Reclassifi cations |
Disposals | Balance on Sep. 30, 2016 |
||
| I. | Intangible assets | ||||||
| Purchased industrial property rights | |||||||
| and similar rights | 2,605 | 62 | 0 | 0 | 2,667 | ||
| Customer base / contract relations | 4,091 | 0 | 0 | 0 | 4,091 | ||
| Development expenses | 11,349 | 0 | 0 | 0 | 11,349 | ||
| Goodwill | 10,625 | 0 | 0 | 0 | 10,625 | ||
| 28,670 | 62 | 0 | 0 | 28,732 | |||
| II. | Property, plant and equipment | ||||||
| Other equipment, furniture and | |||||||
| office equipment | |||||||
| IT-equipment | 1,213 | 101 | 0 | 2 | 1,312 | ||
| Furniture and office equipment | 433 | 16 | 0 | 0 | 449 | ||
| 1,646 | 117 | 0 | 2 | 1,761 | |||
| 30,316 | 179 | 0 | 2 | 30,493 |
| Accumulated depreciation and amortization | Carrying amounts | |||||
|---|---|---|---|---|---|---|
| Balance on Jan. 1, 2016 |
Depreciation and amortization |
Reclassifi cations |
Disposals | Balance on Sep. 30, 2016 |
Balance on Sep. 30, 2016 |
Balance on Dec. 31, 2015 |
| 2,434 3,013 |
70 221 |
0 0 |
0 0 |
2,504 3,234 |
163 857 |
171 1,078 |
| 9,369 | 907 | 0 | 0 | 10,276 | 1,073 | 1,980 |
| 0 | 0 | 0 | 0 | 0 | 10,625 | 10,625 |
| 14,816 | 1,198 | 0 | 0 | 16,014 | 12,718 | 13,854 |
| 928 | 98 | 0 | 2 | 1,024 | 288 | 285 |
| 399 | 22 | 0 | 0 | 421 | 28 | 34 |
| 1,327 | 120 | 0 | 2 | 1,445 | 316 | 319 |
| 16,143 | 1,318 | 0 | 2 | 17,459 | 13,034 | 14,173 |
We have audited the IFRS individual financial statements of MeVis Medical Solutions AG, Bremen, which comprise the statement of financial position as at 30 September 2017 and the statement of income, the statement of comprehensive income, the statement of changes in equity and the statement of cash flow for the financial year from 1 October 2016 to 30 September 2017 and the notes to the IFRS individual financial statements, including a summary of significant accounting policies. In addition, we have audited the management report of MeVis Medical Solutions AG, Bremen, for the financial year from 1 October 2016 to 30 September 2017. The Corporate Governance Statement pursuant to § (Article) 289a HGB ("Handelsgesetzbuch": German Commercial Code) have not been audited by us with regard to content according to the German legal requirements.
In our opinion, based on the findings of our audit,
According to § 322 Abs. 3 Satz (sentence) 1 HGB, we state that our audit has not led to any reservations with respect to the propriety of the IFRS individual financial statements and the management report.
We conducted our audit of the IFRS individual financial statements and the management report in accordance with § 317 HGB and the EU Audit Regulation (No 537/2014) under consideration of the German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (IDW). Our responsibilities under those provisions and standards are further described in the "Auditor's Responsibilities for the Audit of the IFRS Individual Financial Statements and of the Management Report" section of our auditor's report. We are independent of the Company in accordance with provisions under EU law as well as German commercial law and professional requirements, and we have fulfilled our other German ethical responsibilities in accordance with these requirements. Furthermore, we declare in accordance with Article 10 (2) f) of the EU Audit Regulation that we have not provided any prohibited non-audit services referred to in 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 IFRS individual financial statements and the management report.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the IFRS individual financial statements for the financial year from 1 October 2016 to 30 September 2017. These matters were addressed in the context of our audit of the IFRS individual financial statements as a whole, and in forming our audit opinion thereon, and we do not provide a separate audit opinion on these matters.
In our view, the matters of most significance in our audit were as follows:
❶ Impairment of goodwill
Our presentation of these key audit matters has been structured in each case as follows:
Hereinafter we present the key audit matters:
① In the IFRS individual financial statements of the Company, goodwill totalling € 10,625 k (21.6 % of the balance sheet total) is shown under intangible assets. Goodwill is tested for impairment once a year or on an ad hoc basis by the Company in order to determine possible impairment losses. The impairment test is performed at the level of the groups of cash-generating units to which the respective goodwill is allocated. As part of the impairment test, the book value of the respective goodwill is compared with the corresponding recoverable amount. The recoverable amount is generally determined on the basis of fair value less costs to sell. The valuation is generally based on the present value of future cash flows of the respective group of cash-generating units. The present values are determined using discounted cash flow models. The Company's medium-term planning forms the starting point, which is updated with assumptions about long-term growth rates. Expectations about future market developments and assumptions about the development of macroeconomic factors are also taken into account. Discounting is based on the weighted average cost of capital of each group of cashgenerating units. As a result of the impairment test, no impairment loss was identified.
The result of this valuation depends to a large extent on the assessment of the management with regard to the future cash inflows of the respective group of cash-generating units, the discount rate used, the growth rate and other assumptions and is therefore subject to considerable uncertainty. With this background and given the complexity of the valuation, this fact was of particular importance in our audit.
② Within the scope of our audit, we have, among other things, followed the methodical procedure for carrying out the impairment test. After comparing the future cash inflows used in the calculation with the Company's medium-term planning, we assessed the adequacy of the calculation. With the knowledge that even relatively small changes in the discount rate used can have a significant effect on the amount of the Company's value determined in this way, we dealt intensively with the parameters used in determining the discount rate used and we have reperformed the calculation scheme. In order to take account of the existing forecast uncertainties, we have reviewed the sensitivity analyses prepared by the Company and carried out our own sensitivity analyses. Based on the information available, we have determined that the respective goodwill is adequately covered by the discounted future cash balances.
The valuation parameters and assumptions applied by the management are generally in line with our expectations and within what we consider to be acceptable ranges.
③ The Company's disclosures on the balance sheet item intangible assets are included in Note 18 to the financial statements.
① The revenues of € 18,540 k reported in the IFRS individual financial statements mainly relate to revenues from services, software and licenses as well as maintenance. Hologic as a major customer accounts for revenues of € 12,462 k of which € 6,406 k are revenues from maintenance contracts and € 3,963 k are revenues from the sale of licenses.
The maintenance contracts are usually concluded as part of the sale of new licenses, but also subsequently as an extension of the original maintenance period. The duration of the contracts is usually 12 months, so that the amounts received in advance for the term of the contracts are deferred without affecting net income. These are released to the income statement on a monthly basis in accordance with the term of the contract.
License revenues result primarily from the sale of new licenses. In addition, however, the company still generates revenues from license upgrades for licenses that have already been sold.
On the basis of a forecast prepared by Hologic and agreed with the Company regarding the expected number of new renewals of maintenance contracts and license upgrades, Hologic pays monthly installments over a period of 12 months. The final settlement is carried out annually, in each case for the period from May 1 to April 30 of the following year.
As a result, there are no final accounts for the total sales revenue of € 736 k for the months of May to September 2017. These revenues are based to a large extent on the estimates and assumptions of the management and are therefore subject to considerable uncertainties. With this in mind, this fact was of particular importance in our audit.
The management is responsible for the other information. The other information includes the corporate governance statement in accordance with § 289f HGB.
The other information also includes the remaining parts of the annual report - without any further crossreferences to external information - with the exception of the audited IFRS individual financial statements, the audited management report and our audit opinion.
Our audit opinion on the IFRS individual financial statements and the management report does not extend to other information and, accordingly, we do not express an opinion or any other form of audit conclusion hereto.
In connection with our audit, it is our responsibility to read the other information and to assess whether the other information
show material inconsistencies with the IFRS individual financial statements, the management report or our knowledge gained during the audit, or
appear otherwise to be substantially inaccurately presented.
Management is responsible for the preparation of the IFRS individual financial statements, which comply, in all material respects, with IFRS, as adopted by the EU, and the additional German legal requirements applicable under § 325 Abs. 2a HGB, and give a true and fair view of the net assets, financial position and results of operations of the Company in accordance with these requirements. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation of IFRS individual financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the IFRS individual financial statements, management is responsible for assessing the Company's ability to continue as a going concern. In addition, management is responsible for disclosing, as applicable, matters related to going concern. Furthermore, management is responsible for using the going concern basis of accounting unless this is contrary to actual or legal circumstances.
Moreover, management is also responsible for the preparation of the management report, which as a whole provides a suitable view of the Company's position and is consistent in all material respects with the IFRS individual financial statements, complies with German legal requirements and suitably presents the opportunities and risks of future development. Furthermore, management is responsible for such policies and procedures (systems) as management determines are necessary to enable the preparation of a management report in accordance with the applicable German legal requirements and to provide sufficient appropriate evidence for the assertions in the management report.
The Supervisory Board is responsible for overseeing the Company's financial reporting process for the preparation of the IFRS individual financial statements and the management report.
Our objective is to obtain reasonable assurance about whether the IFRS individual financial statements as a whole are free from material misstatement, whether due to fraud or error, and whether the management report as a whole provides a suitable view of the Company's position as well as, in all material respects, is consistent with the IFRS individual financial statements as well as the findings of our audit, complies with German legal requirements and suitably presents the opportunities and risks of future development, as well as to issue an auditor's report that includes our audit opinions on the IFRS individual financial statements and the 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 under consideration of the German generally accepted standards for the audit of financial statements promulgated by the Institut der Wirtschaftsprüfer (Institute of Public Auditors in Germany) (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 economic decisions of users taken on the basis of these IFRS individual financial statements and this management report.
Throughout the audit we exercise professional judgment and maintain professional skepticism. We also:
Obtain an understanding of internal control relevant to the audit of the IFRS individual financial statements and the policies and procedures relevant to the audit of the 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 those systems.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.
We communicate with those charged with governance, 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 relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and 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 IFRS individual 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 appointed as auditor by the Annual General Meeting on 8 March 2017. We were engaged by the Supervisory Board on 8 March 2017. We have acted as auditor of MeVis Medical Solutions AG, Bremen, since financial year 2016/2017.
We confirm that the audit opinions contained in this auditor's report are consistent with the additional report to the audit committee referred to in Article 11 of the EU Audit Regulation (German Longform Report).
The auditor responsible for the audit is Thomas Dräger.
Bremen, 19 January 2018
PricewaterhouseCoopers GmbH Wirtschaftsprüfungsgesellschaft
Thomas Dräger Carsten Engelhardt Wirtschaftsprüfer Wirtschaftsprüfer
(German Public Auditor) (German Public Auditor)
Responsibility statement required by Section 37v (2) and (3) WpHG (German Securities Trading Act) in conjunction with Sections 264 (2) Sentence 3 and 289 (1) Sentence 5 HGB (German Commercial Code) for the financial statements and the management report:
"To the best of our knowledge, and in accordance with the applicable reporting principles, the financial statements give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company, and the management report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal opportunities and risks associated with the expected development of the Company."
Bremen, January 19, 2018
MeVis Medical Solutions AG
Marcus Kirchhoff Dr. Robert Hannemann Chairman & CEO Member of the Executive Board
This report contains forward-looking statements which are based on management's current estimates of future developments. Such statements are subject to risks and uncertainties, which MeVis Medical Solutions AG is not able to control or estimate with any precision, e.g. future market conditions and the general economic environment, the behavior of other market participants, the successful integration of new acquisitions and government acts. If any of these uncertainties or imponderabilities materialize or if the assumptions on which these statements are based prove to be incorrect, this may cause actual results to deviate materially from those expressly or implicitly contained in these statements. MeVis Medical Solutions AG does not intend and is under no obligation to update the forward-looking statements in the light of any events or developments occurring after the date of this report.
Deviations may occur between the accounting data contained in this report and that submitted to the Bundesanzeiger (German Federal Gazette) for technical reasons (e.g. conversion of electronic formats). In the case of any doubt, the version submitted to the Bundesanzeiger will prevail.
This report is also available in a German-language version. In case of any doubt, the German-language version takes priority over the English-language one.
The report is available for downloading in both languages on the Internet at:
http://www.mevis.de/en/investor-relations/financial-reports/
| January 23, 2018 | Annual Report 2016/2017 |
|---|---|
| February 20, 2018 | Interim Report for Q1 2017/2018 |
| March 14, 2018 | Annual General Meeting, Bremen |
| May 15, 2018 | Interim Report for H1 2017/2018 |
| Aug./Sep. 2018 | Small Cap Conference, Frankfurt am Main |
| August 21, 2018 | Interim Report for Q3 2017/2018 |
Caroline-Herschel-Str. 1 28359 Bremen Germany
Phone +49 421 22495 0 Fax +49 421 22495 999 [email protected]
www.mevis.de
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