Quarterly Report • Nov 30, 2009
Quarterly Report
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| 01.01.- | 01.01.- | |
|---|---|---|
| Earnings | 30.09.2009 | 30.09.2008 |
| Revenues in EUR thousands | 32,097 | 97,098 |
| EBIT in EUR thousands | - 16,304 | - 11,658 |
| EBT in EUR thousands | - 37,157 | - 9,415 |
| Group net loss in EUR thousands | - 41,849 | - 11,719 |
| Return on sales in % | - 130.38 | - 12.07 |
| EBIT margin in % | - 50.80 | - 12.01 |
| Earnings per share in EUR | - 1.74 | - 0.49 |
| Placed equity in EUR million | 100.3 | 507.8 |
| Balance sheet | 30.09.2009 | 31.12.2008 |
| Total assets in EUR thousands | 127,881 | 174,521 |
| Equity in EUR thousands | 46,569 | 87,647 |
| Equity ratio in % | 36.42 | 50.22 |
| Staff | 30.09.2009 | 30.09.2008 |
| Average employees | 288 | 305 |
| Personnel costs in EUR thousands | 17,244 | 21,927 |
| Personnel costs in % of revenue | 53.7 | 22.6 |
Hint: Rounding differences likely to occur.
The general economic trend has shown a slight improvement in recent months, as has business sentiment. There are some signs that the recession has bottomed out. These are positive signals that indicate an improvement in the prospects for a reversal of the trend. It must nonetheless be noted that the market environment for providers of closed-end funds still showed no perceptible signs of recovery in the third quarter of 2009. The repercussions of the international fi nancial and economic crisis are still very much in evidence in a number of fund market segments, such as ship markets. Investors continue to opt for safety and prefer fi xed-interest bonds and investments that are seen in the current environment as being stable in value. The general restraint that investors are otherwise exercising toward new investments is plain to see in nearly all asset classes, including the market for closed-end funds, which suffered a serious year-on-year decline in new business in the fi rst nine months of 2009.
The HCI Group adjusted at an early stage to the challenges in this diffi cult market environment and developed a comprehensive package of measures aimed at achieving three fundamental objectives: to secure sales, reduce costs and provide protection from risks. These are the decisive preconditions for tackling the crisis successfully and extending our position as one of the leading providers of closed-end funds. Over the past weeks and months we have reached key milestones in this process.
Over the past two months the HCI Group largely completed the negotiations with its house banks and the banks fi nancing HCI projects on the subject of a restructuring concept that consists of a long-term moratorium agreement and a statement of intent on release from contigent liabilities. The concept has been submitted to the banks for board approval.
The sharp decline in industry fi gures for equity placement testifi es to just how diffi cult the current market environment is for providers of closed-end funds. With the exception of individual products in which there is a special boom at present, equity placement fi gures have declined continuously in the fi rst nine months of 2009 compared with the fall-off of business in the fourth quarter of 2008. Despite these diffi cult conditions the HCI Group is able to report continuous placement activity totalling around EUR 100.3 million in the fi rst nine months of 2009. This fi gure is signifi cantly lower than the EUR 507.8 million placed in the same period last year, but we are evidently still able, with the alignment of our products to investors' current needs, to achieve placements on a signifi cant scale even in diffi cult market segments. In the fi rst nine months of 2009, for example, we succeeded in raising about EUR 64.5 million in equity, especially in the ship fund segment, with classic closed-end funds, asset creation plans, guarantee products and certifi cates. In addition, new products such as the HCI Energy 1 Solar fund, which we were able to close after a very short period with a total volume of EUR 10.2 million, contributed toward our placement success.
The weak overall course of business and substantial value adjustments (mainly without effect on liquidity) that the HCI Group was obliged to make mainly on a number of investments and receivables in the fi rst half of 2009 had a signifi cant negative impact on the 2009 nine-month result. Due mainly to market-related value impairment and other special effects totalling EUR -34.7 million, the consolidated result after taxes was EUR -41.8 million and thus even poorer than the previous year's EUR -11.7 million negative result, which was also impaired by special effects. Yet we were able to reduce personnel and non-personnel expenses by around 14%. Including the cost of purchased services, costs have been cut by over 52%. Furthermore, we almost broke even in our operating cash fl ow. As at 30 September 2009 the HCI Group's cash and cash equivalents amounted to EUR 18.0 million.
The markets will recover, but after such a far-reaching international crisis that we have undergone since last year we must come to terms with the idea that recovery will be a lengthy process. We have put in place decisive measures to take the HCI Group through this diffi cult phase.
In this context the moratorium to be agreed with the banks is an essential aspect. We have also realigned our fund management in controlling and communication to reinforce our investors' confi dence in existing funds despite the diffi cult market developments. And, fi nally, we have adjusted the products we offer to the changed market and will continue to develop them accordingly in the year ahead.
The closed-end fund sector must adjust to market conditions and will, we are fi rmly convinced, undergo major changes. Anyone who wants to play an active part in shaping this process will need to be strong on innovation. This is one of the crucial core competences that HCI has repeatedly demonstrated with a wide range of new product ideas over its history, which stretches back nearly 25 years. It is also why we feel we are well prepared to cope with the crisis successfully and regain momentum fast as soon as the market picks up.
Best wishes,
Hamburg, November 2009
Dr. Ralf Friedrichs (Chairman of the Management Board)
Against the backdrop of the ongoing international fi nancial and economic crisis, developments in global stock markets have been characterised by volatility since the beginning of the year. After a sharp fall in prices in the fi rst quarter, the indices recovered markedly toward the end of the second quarter. After a further upward trend the German DAX index closed on 30 September 2009 at 5,675 points. In the course of this trend the MDAX index of midrange companies closed on 30 September 2009 at 7,358 points, while the SDAX rose to 3,495 points by the end of the reporting period.
The HCI share price began the third quarter of 2009 with a marked improvement from EUR 1.45 at the beginning of July to EUR 2.44 at the end of August 2009. In all, the share price has fl uctuated between EUR 1.10 at the beginning of March and EUR 2.44 in August, with daily trading very low. The price on 30 September 2009 was EUR 1.75.
Five analysts currently follow HCI Capital AG's progress with regular assessments of the HCI share. Two analysts currently give the share a Hold or Neutral rating, while the others recommend selling or underweighting.
After the worldwide economic slump at the end of 2008 and the worst international economic recession of the post-war period, the fi rst signs of a recovery have been in evidence since mid-2009. All the indicators now point to an incipient worldwide economic recovery. Thanks to enormous interest rate cuts by central banks and to government economic stimulus programmes, pressure on economies has started to ease off throughout the world. Compared to their spring 2009 forecasts, Germany's leading economic research institutes have revised their prognoses upward with the result that the decline in gross domestic product they forecast for the United States and the euro zone in 2009 is now only 2.7% and 3.9% respectively. Forecasts for the threshold countries China and India were revised upward yet again to economic growth of 8.5% and 5.4% respectively for 2009.
The German economy also seems likely to have bottomed out. In the second quarter of 2009 Germany's gross domestic product showed slight growth (0.3%) on the previous quarter for the fi rst time since the fi rst quarter of 2008. This positive trend continued, with 0.7% growth in the third quarter.
In the shipping markets, in contrast, there are still no signs of recovery. Charter and freight rates for container ships reached a historic low in nearly all size segments in the fi rst half of 2009. At the end of the reporting period the Container Ship Time Charter Rate Index was down by about 28.6% on the end of 2008. In the bulk carrier markets a gradual recovery in charter rates was noted in the fi rst nine months of 2009, but charter rates continue to be at a much lower level than before the shipping crisis began and are also highly volatile. The Baltic Dry Index, a price index for shipping bulk goods, stood at 2,357 points at the end of September 2009, which was an improvement of 1,694 points on its low-water mark at the beginning of December 2008. The reason for this latterly positive overall trend is almost entirely to be found in China. Falling commodity prices, declining inventories and China's multi-billion economic stimulus package led to more iron ore being imported from the second quarter of 2009 than in the previous year. In the tanker markets too, which initially were affected less by the crisis, rate levels took a turn for the worse in the reporting period, with time charter rates falling markedly in most market segments. The overall decline in demand for oil and oil products has hit tanker markets especially hard. An easement in surplus shipping capacity in this segment is to be expected in the years ahead as single-hulled tankers are taken out of service.
Governments and central banks around the world have responded to the challenges posed by the fi nancial and economic crisis with measures designed to stabilise fi nancial systems. These measures serve to recapitalise the banks' weakened capital base and to strengthen inter-bank trading by means of government guarantees. At the same time the world's leading central banks reduced their key interest rates signifi cantly during the reporting period. The US Federal Reserve cut its interest rates to between 0.00% and 0.25%. The European Central Bank reduced its interest rate to 1.00%, the lowest level since the euro was launched, while the Bank of England reduced its rate to 0.5%. Yet the crisis of confi dence in the weakened international fi nancial system continues. Restrictions on lending have made funding for companies and investors more diffi cult. The governments of the world's leading economies and the threshold countries have put substantial national economic stimulus packages in place to boost consumer demand and investment. Initial signs of recovery in these countries seem to indicate that these booster programmes are having a positive effect.
After oil prices nosedived in the course of the international economic crisis, from USD 140 per barrel to a low of about USD 40 at the end of last year, the price of oil has stabilised since the beginning of the year at a higher level of around USD 70.
After a weak phase at the beginning of 2009 the US dollar was trading at EUR 1.45 per USD at the end of the reporting period.
Against the background of ongoing economic weakness and uncertainty about the duration and extent of the fi nancial and economic crisis, the confi dence of investors in fi nancial products has been dealt a severe blow, and this has seriously affected developments in the market for closed-end funds. According to fi gures compiled by the industry association Verband Geschlossene Fonds e.V., the placement volume in the fi rst nine months of 2009 was around 54.3% down on the previous year at about EUR 2.2 billion. Apart from the energy segment, sales in all closed-end fund asset classes were down sharply on the previous year, especially in the private equity and ship areas. In addition to energy funds, demand has been relatively brisk for direct investment in real estate particularly.
In the weak market environment the HCI Group's placement volume in the fi rst nine months of 2009 was down sharply on the year at about EUR 100.3 million (previous year: EUR 507.8 million).
In individual product groups the course of equity capital placement was as follows:
The Transport and Logistics product area comprises the asset classes Ship and Aircraft. In this area the HCI Group placed EUR 66.7 million (previous year: EUR 274.0 million) in the reporting period. With a total EUR 64.5 million in equity capital placed in Ship investments the Group is able to report a signifi cant level of placement despite the especially diffi cult market environment in this asset class in particular. This total comprises EUR 36.2 million in classic investments, EUR 15.5 million in asset creation plans, EUR 8.9 million in guarantee products (HSC Shipping Protect 3 and Multi Asset Protect) and EUR 3.9 million in the Freight Rate Protect certifi cate launched in September. In the Aircraft asset class HCI Aircraft One was withdrawn from sales in the second quarter with a view to the concept being revised. In the reporting period EUR 0.8 million was invested in HCI Aircraft One and EUR 1.4 million was placed in the asset creation plan Aufbauplan 8.
In the Energy and Commodities product area a placement result of EUR 22.1 million was achieved in the fi rst nine months of 2009. A guaranteed capital version of HCI
| Product area | 01.01. - | 01.01. - | Δ | Δ % |
|---|---|---|---|---|
| 30.09.2009 | 30.09.2008 | |||
| Ship | 36,186 | 168,341 | - 132,155 | - 78.5 % |
| asset creation plan placed | 11,530 | 13,350 | - 1,820 | - 13.6 % |
| guarantee product placed | 2,640 | 20,955 | - 18,315 | - 87.4 % |
| Ship certifi cates | 3,925 | 10,237 | - 6,312 | - 61.7 % |
| Aircraft | 822 | 10,491 | - 9,668 | - 92.2 % |
| asset creation plan placed | 235 | 235 | ||
| Guarantee products | 8,899 | 51,532 | - 42,633 | - 82.7 % |
| Ship asset creation plan | 15,466 | 33,400 | - 17,934 | - 53.7 % |
| Aircraft asset creation plan | 1,381 | 1,381 | ||
| Transport and Logistics | 66,679 | 274,001 | - 207,322 | - 75.7 % |
| Real Estate | 1,029 | 112,825 | - 111,796 | - 99.1 % |
| Life insurance | 7,669 | 73,176 | - 65,507 | - 89.5 % |
| asset creation plan placed | 1,600 | 1,600 | ||
| Asset creation plan | 2,767 | 1,737 | 1,030 | 59.3 % |
| Life Insurance | 10,436 | 74,913 | - 64,477 | - 86.1 % |
| Deepsea Oil Explorer | 7,484 | 41,604 | - 34,120 | - 82.0 % |
| Guarantee products | 4,438 | 4,438 | ||
| Renewable energy | 10,219 | 10,219 | ||
| Energy and Commodities | 22,141 | 41,604 | - 19,463 | - 46.8 % |
| Private equity | 3,599 | - 3,599 | ||
| Asset creation plan | 868 | - 868 | ||
| Private Equity | 4,467 | - 4,467 | ||
| Total | 100,285 | 507,811 | - 407,526 | - 80.3 % |
Deepsea Oil Explorer was launched in the second quarter. By 30 September 2009 about EUR 4.4 million had been placed in Deepsea Oil Explorer Protect. The volume placed in the classic investment version HCI Deepsea Oil Explorer in the reporting period amounted to EUR 7.5 million. At the beginning of April 2009 the Group launched HCI Energy 1 Solar, another new product in the Energy and Commodities product area that has met with brisk demand in the current market environment. Placement of this fund was completed successfully in August 2009 with a target volume of EUR 10.2 million.
In the Real Estate product area EUR 1.0 million was placed in the reporting period in an opportunist fund, HCI Real Estate G7. As the focus of investors in the current market environment is more on direct investment in real estate, demand for HCI Real Estate G7 was slack. That is why the fund was withdrawn from sales in the second quarter of 2009 and the equity capital subscribed was returned to investors.
In the Secondary Life Insurance Market area a total of EUR 10.4 million was placed during the reporting period in the current HSC Optivita XI UK product and in asset creation plans.
Due to the sharp decline in placement results in the reporting period compared with the previous year, HCI Group revenues have also fallen signifi cantly. Totalling EUR 32.1 million from 1 January to 30 September 2009, they were well below the previous year's EUR 97.1 million. Third-quarter revenues amounted to EUR 9.4 million.
Sales and fund design revenues in the fi rst nine months of the fi nancial year totalled EUR 14.0 million and were EUR 62.4 million down on the previous year. Trust management and service fees at EUR 16.0 million and were slightly down on the previous year's EUR 16.6 million. Revenues from management fees fell from EUR 4.1 million the previous year to EUR 2.1 million in the reporting period.
Other operating income at EUR 2.0 million was well below the previous year's EUR 5.7 million and included EUR 1.0 million (previous year: EUR 1.5 million) in income from ship brokerage.
Change in inventories includes EUR 1.6 million (previous year: nil) in depreciation of work in progress and fi nished services for products withdrawn from placement.
The cost of purchased services, consisting mainly of commission paid to sales partners, was about 80.2% down on the previous year, in keeping with the decline in placement results, from EUR 52.1 million to EUR 10.3 million in the reporting period. The disproportionate decline in commission expenses compared with the fall in sales shows that income from trust management is now weighted more heavily as a percentage of sales revenues.
Personnel expenses fell by about 21.4% on the previous year in spite of substantial one-off costs totalling EUR 1.2 million in connection with personnel measures to EUR 17.2 million (previous year: EUR 21.9 million). This was largely due to last year's EUR 3.8 million in severance payments to directors and to the sharp decline in royalties.
Other operating expenses at EUR 15.4 million were insignifi cantly lower than the previous year's EUR 15.9 million. Nine-month savings in material costs as a result of the cost reduction programme totalled around EUR 3.0 million and mainly involved marketing costs and travel expenses (EUR 1.9 million). This reduction was offset by higher legal and consulting costs and an increase in other one-off expenses.
Investment income from associated and joint ventures accounted for under the equity method totalled EUR -4.8 million in the reporting period and was higher than the previous year's EUR -23.1 million. The main special effect that led to this signifi cantly negative result in the previous year was the EUR 24.8 million value adjustment on the equity investment in NY Credit Operating Partnership LP. In the period from 1 January to 30 September 2009 a value adjustment of EUR 1.6 million on the equity investment in eFonds Holding AG and EUR 1.1 million in value adjustments on ship ordering companies operated jointly with shipowners led to the negative result. In addition, EUR 2.2 million in negative pro rata results with little in the way of countervailing positive results led to this negative result in investment income from associated companies and joint ventures accounted for under the equity method.
Due to the course of business outlined above and to EUR -16.3 million in one-off special effects, earnings before interest and taxes (EBIT) for the period 1 January to 30 September 2009 were lower than the previous year's EUR -11.7 million.
The EUR -20.9 million fi nancial result was EUR 23.1 million below the previous year's EUR 2.2 million. This was due to a signifi cantly negative other fi nancial result, EUR -20.4 million (previous year: EUR 4.0 million), mainly owing to EUR 14.1 million in value adjustments on fi nancial investments, securities and non-current fi nancial receivables after impairment tests. In addition, the market value of assets held for sale less cost of disposal of investments in associated and joint ventures previously accounted for under the equity method imposed a EUR 3.2 million burden on the result. Other fi nancial results included EUR 1.7 million in losses incurred during the winding up in Q3 2009 of the umbrella real estate fund HCI Real Estate G7 GmbH & Co. KG that had been in placement since the beginning of November 2008.
Earnings before taxes (EBT) amounted to EUR -37.2 million in the reporting period. They were thus well below the previous year's EUR -10.0 million.
Income taxes totalled EUR -4.7 million in the reporting period (previous year: EUR -2.3 million), due mainly to a revision of the statement of deferred taxes on loss carryovers as a result of changes in planned scenarios.
The consolidated net result for the period was EUR -41.8 million – again lower than the previous year's fi gure of EUR -11.7 million.
In the fi rst nine months of 2009 the HCI Group generated a nearly balanced cash fl ow from operating activities of EUR -0.2 million. This EUR 8.3 million reduction on the previous year was due mainly to the drop in the placement result in 2009 and the consequently lower revenues.
The EUR -4.0 million cash fl ow from investment activities was due mainly to investment in other investments and associated companies. Compared with the previous year, cash fl ow was down by EUR 30.2 million, due mainly to payments in connection with disposals of shareholdings in associated companies (EUR 31.0 million) and to a payment received from the disposal of other investments and securities (EUR 5.3 million) in the previous fi nancial year.
Repayment of money owed to banks led to a EUR -7.1 million negative cash fl ow from fi nancing activities. An improvement in cash fl ow from fi nancing activity compared with the previous year resulted from a dividend distribution in the previous year that imposed a EUR 16.8 million burden on the cash fl ow and from the EUR -25.4 million net change in fi nancial liabilities.
At EUR 127.9 million total assets at 30 September 2009 were EUR 46.6 million down on the total as at 31 December 2008. Non-current assets were down by EUR 22.9 million and thus accounted for 49.1% of the fall in net assets. Current assets fell by EUR 23.7 million to a total EUR 68.2 million, accounting for 53.3% of the balance sheet total.
The change in non-current assets is due primarily to a EUR 5.7 million decline in other investments, a EUR 6.2 million fall in the value of investments in associated enterprises and joint ventures accounted for under the equity method as well as a EUR 4.7 million reduction in deferred tax assets.
The change in current assets resulted mainly from reductions in income tax receivables (EUR -7.1 million), in cash and cash equivalents (EUR -11.3 million) and in trade receivables (EUR -8.1 million), which was countervailed by a EUR 7.2 million increase in receivables from related parties.
Equity was down by EUR 41.1 million from 31 December 2008 to EUR 46.6 million as at 30 September 2009. The equity ratio fell from 50.2 % to 36.4 % as at 30 September 2009. This was due to the EUR 36.1 million negative consolidated net result for the period 1 January 2009 to 30 June 2009. The negative consolidated net result for the third quarter of 2009 was EUR 5.7 million.
Non-current provisions and liabilities were down by EUR 22.2 million on 31 December 2008, due especially to reclassifi cation of debt as current liabilities because of their due dates.
Current provisions and liabilities rose by EUR 16.6 million. This change was due primarily to the reclassifi cation of debt stated as non-current as at 31 December 2008 that had to be stated as current liabilities as at 30 September 2009 in view of their due dates. Overall, debt was down by EUR 8.6 million and other liabilities were reduced from EUR 11.3 million to EUR 8.0 million.
Loans granted by HSH Nordbank AG and Commerzbank AG were extended and are now due for repayment on 31 December 2010.
No further event of special signifi cance that exercise a material effect on the HCI Group's assets, fi nancial and earnings position have occurred since the balance sheet date.
The relevant business risks inherent in the HCI Group's business model and its risk management system are described in detail in the 2008 Annual Report on pp. 50–59. In principle, the risks outlined there continue to apply.
The current risk position has changed on the position described in the 2008 Annual Report in respect of the following parameters:
– There can be no telling when charter markets will start to recover and how the recovery will be distributed across different types of ship. It is now clear that charter rates have come under strong pressure due to uncertainties about international trade in goods and that in some cases we can expect ships to be laid up for longer periods. Shipowners are trying to respond to this trend with much shorter charter periods so as to benefi t as directly as possible from a forthcoming recovery in charter rates. If charter rates continue to fall, that may have serious effects on the profi tability of individual ship funds and associated companies and could lead to the insolvency of these funds or associated companies (cf. 2008 Annual Report, Section 4.1.1). Averting these risks requires the parties concerned to draw up restructuring concepts that in addition to the risk to HCI Group's reputation might require the Group to provide liquidity or reduce or even forgo trust management and service fees.
In the event of insolvency of funds in which HCI Group companies are active as trusteeship partners, distributions to limited partners that exceed the limited partner's share or the capital account can lead to a trusteeship partner becoming liable and to a substantial outfl ow of liquidity. Resulting claims for recourse by the trusteeship partner would have to be pursued against each individual investor.
– In the course of the fi nancial market crisis, investors are currently continuing to exercise restraint in respect of investment products of all kinds. This also affects investment in closed-end funds. For the HCI Group this means a signifi cantly higher sales risk for fund products either already on sale or devised and intended for sale. Most placement guarantees for which claims might currently be made against the Group run until the end of 2009. There is also, however, a possibility of extending placement guarantees if need be. In cooperation with fund companies and banks, the HCI Group has made use of this option for a number of funds with placement guarantees that would have been due in the fi rst nine months of 2009, extending the sale period and with it the placement guarantee. This is also conceivable, but not defi nite, for further funds with placement guarantees that expire before the end of 2009. Were the HCI Group to need to acquire part of the equity capital of individual funds temporarily, it would need to raise interim funding accordingly. No such funding has been pledged at present. Placement might be resumed at a later date, or other appropriate solutions such as selling off investment items might be considered.
In collaboration with the fi nancing banks we have so far succeeded in avoiding recourse claims to HCI Group and have developed at least temporary solutions for individual funding arrangements.
the risk of recourse to guarantees for interim construction period fi nancing of ships that are tied up, HCI has begun talks with the shipyards and shipowners affected or with the refi nancing banks about cancelling or postponing orders or swapping ships. The Group has already been able to reach agreement on cancellations or postponements in a certain number of cases.
Summarising the risks outlined above, the continued combination of weak shipping markets, tight credit markets and subdued investor interest, a signifi cantly higher risk of claims for contingent liabilities can be said to exist. Any recourse or signifi cant resulting liquidity requirement can only be limited or met by means of cooperative behaviour on the part of the banks; otherwise the HCI Group's ability to continue as a going concern would be at risk.
Over the past two months the HCI Group has largely completed the negotiations with its house banks and the banks fi nancing HCI projects on the subject of a restructuring concept that consists of a long-term moratorium agreement and a statement of intent on release from contigent liabilities. The concept has been submitted to the banks for board approval.
The opportunities that exist for HCI Group business in the 2009 fi nancial year were described in detail in the Report on risks and opportunities in the 2008 Annual Report (cf. pp. 50–59). They apply unchanged. Against the background of the current market development special mention must be made of the following opportunities:
− Future fi nancing arrangements will require a higher equity capital input. As a listed company the HCI Group is able to position itself better than its competitors in this environment.
Overall economic development in the remainder of 2009 will continue to be subject to the powerful infl uences of the fi nancial and economic crisis. Economic research institutes agree that in 2010 it will still be impossible to rule out entirely the resulting uncertainties as to how sustainable the latest upward trend is. Furthermore, the extent of the positive effect of worldwide support programmes for the economy and for fi nancial systems is very diffi cult to assess. These economic and fi nancial measures will probably be phased out again gradually from 2010. The economic research institutes do, however, agree that the worst recession of the post-war period has bottomed out and that the international economy is recovering. This recovery is driven especially by growth in the threshold countries, fi rst and foremost China and India, with GDP growth forecast at 8.5% and 5.4% respectively for 2009. Worldwide, economic output is expected to fall by 1.1% this year, including GDP declines of 2.7% and 3.9% in the United States and the euro zone respectively. Economic output is expected to fall by 5.3% in Germany, with a corresponding effect on the tense labour market situation. As short-time working is phased out, a marked increase in unemployment is anticipated at the end of the year, with unemployment set to rise to about 10% in the year ahead.
For the shipping markets in particular the weak state of the world economy will continue to be a burden. A sustainable charter rate recovery is not yet expected in the main shipping segments before the end of the year. Moreover, in view of the anticipated fl eet growth no perceptible reduction in the surplus of supply over demand is yet in sight. Current cancellations, delivery postponements and rising scrappage quotas will be able to offset this surplus in part, but the extent to which it will be able to do so cannot yet be assessed in full. A perceptible recovery in shipping markets is currently anticipated in the course of 2010 at the earliest.
Due to the ongoing fi nancial and economic crisis investors will in our view continue for the time being to feel uncertain about all forms of investment. This is underscored by sentiment in the closed-end funds industry as polled by ScopeAnalysis in mid-2009. The business sentiment index compiled for the industry since 2003 by polling issuing houses and intermediaries was found to have reached a new historic low. Some intermediaries and issuing houses may anticipate a slight improvement in the outlook for the industry in the second half of 2009, but about half of the respondents expect the market trend to be on the weak side for the rest of the year.
For providers of closed-end funds the weak market environment will continue to pose a serious challenge in respect of both new business and the management of asset pipelines and existing funds. On balance it is hard to say right now how the market will develop by the year's end and in the year ahead. It will mainly depend on when and to what extent the markets that are of relevance to closed-end funds will recover. In this market environment better opportunities continue to exist for direct real estate investment and energy funds. In addition, guaranteed funds and opportunist fund concepts such as blind pools that are geared to favourable entry opportunities in a weak market environment might stand to benefi t.
The market trend continues to be diffi cult and will pose a serious challenge to the HCI Group for the remainder of the 2009 fi nancial year. In view of ongoing uncertainty as to the general economic trend a serious full-year business forecast for 2009 continues to be impossible.
On the costs side the HCI Group decided to make further savings in the second quarter of 2009. They consist of a reduction in personnel expenses by about EUR 1.1 million this year and by EUR 4.2 million in 2010. In this connection the Group reduced employee numbers by 36 in all. In addition, it has not replaced a number of employees in the course of restructuring since October 2008. A further part of the savings plan is the cost reduction programme for materials initiated at the beginning of the year and upgraded in June 2009 to about EUR 8.5 million in all. It does not include any one-off expenses that may be incurred due to the current diffi cult market trend. The Group anticipates overall savings of around EUR 10.0 million on 2008 this fi nancial year as a result of the proposed measures.
Now that the HCI Group has agreed with its principal creditors HSH Nordbank and the Commerzbank Group and its main shareholders MPC Capital AG and the Döhle Group a comprehensive restructuring concept with its major objective a release from all material contingent liabilities to banks followed by a EUR 22 million capital increase in cash, and negotiations with the other creditor banks have been largely completed, the concept has been submitted to the banks for a decision. Implementation of this concept would ease substantially the burden of risks on the HCI Group and contribute toward safeguarding liquidity in a market environment that continues to be diffi cult, thereby helping to secure the Company's continued existence as a going concern. At the same time it is an important signal that would strengthen considerably the confi dence of our business partners, especially in the area of sales.
The progress of operating business will also, incidentally, depend on the extent to which the fi rst recognisable tendencies toward recovery are intensifi ed in the months ahead. As soon as better prospects are apparent, and with them positive stimuli for investor confi dence, we anticipate good prospects for the HCI Group to regain momentum with its placement business.
for the period from January 1 to September 30, 2009
| Nine months | |||
|---|---|---|---|
| Nine months | ended | ||
| ended | September 30, | ||
| September 30, | 2008 | ||
| EUR '000 | Note | 2009 | (restated) |
| Revenues | (4) | 32,097 | 97,098 |
| Other operating income | (5) | 2,045 | 5,676 |
| Change in inventories | (6) | - 1,248 | 815 |
| Cost of purchased services | - 10,330 | - 52,062 | |
| Personnel expenses | (7) | - 17,244 | - 21,927 |
| Depreciation, amortisation and impairment of property, plant and equipment and intangible assets |
- 1,447 | - 2,167 | |
| Other operating expenses | - 15,391 | -15,929 | |
| Results of associated companies and joint ventures accounted for using the equity method | (8) | - 4,786 | - 23,162 |
| Earnings before interest and taxes (EBIT) | - 16,304 | - 11,658 | |
| Interest income | (9) | 1,219 | 1,751 |
| Interest expenses | (9) | - 1,668 | - 3,464 |
| Other fi nancial result | (9) | - 20,404 | 3,956 |
| Earnings before taxes (EBT) | - 37,157 | - 9,415 | |
| Income taxes | (10) | - 4,692 | - 2,304 |
| Consolidated net result for the period | - 41,849 | - 11,719 | |
| Consolidated net result for the period attributable to the shareholders of the parent company |
- 41,849 | - 11,719 | |
| Earnings per share (basic) in EUR | (11) | - 1.74 | - 0.49 |
| Earnings per share (diluted) in EUR | (11) | - 1.74 | - 0.49 |
for the period from January 1 to September 30, 2009
| Nine months | ||
|---|---|---|
| Nine months | ended | |
| ended | September 30, | |
| September 30, | 2008 | |
| EUR '000 | 2009 | (restated) |
| Consolidated net result for the period | - 41,849 | - 11,719 |
| Income and expenses recognised directly in equity for associated companies and joint ventures | 524 | - 390 |
| Foreign currency translation adjustment | 247 | - 468 |
| Change in fair value of available-for-sale fi nancial instruments | 0 | 205 |
| Other comprehensive income | 771 | - 653 |
| Total comprehensive result | - 41,078 | - 12,372 |
| Total comprehensive result for the period attributable to the shareholders of the parent company | - 41,078 | - 12,372 |
for the third quarter ended September 30, 2009
| Three months | |||
|---|---|---|---|
| Three months | ended | ||
| ended | September 30, | ||
| September 30, | 2008 | ||
| EUR '000 | Note | 2009 | (restated) |
| Revenues | (3) | 9,435 | 34,851 |
| Other operating income | (4) | 1,382 | 1,664 |
| Change in inventories | (5) | - 163 | 635 |
| Cost of purchased services | - 2,739 | - 19,527 | |
| Personnel expenses | (6) | - 4,924 | - 6,637 |
| Depreciation, amortisation and impairment of property, plant and equipment and intangible assets |
(7) | - 285 | - 554 |
| Other operating expenses | - 5,329 | - 4,797 | |
| Results of associated companies and joint ventures accounted for using the equity method |
(8) | - 1,590 | 269 |
| Earnings before interest and taxes (EBIT) | - 4,213 | 5,904 | |
| Interest income | (9) | 359 | 560 |
| Interest expenses | (9) | - 496 | -1,169 |
| Other fi nancial result | (9) | - 1,694 | 3,449 |
| Earnings before taxes (EBT) | - 6,044 | 8,744 | |
| Income taxes | (10) | 295 | - 2,443 |
| Consolidated net result for the period | - 5,749 | 6,301 | |
| Consolidated net result for the period attributable to the shareholders of the parent company |
- 5,749 | 6,301 | |
| Earnings per share (basic) in EUR | (11) | - 0.24 | 0.26 |
| Earnings per share (diluted) in EUR | (11) | - 0.24 | 0.26 |
for the third quarter ended September 30, 2009
| Three months | ||
|---|---|---|
| Three months | ended | |
| ended | September 30, | |
| September 30, | 2008 | |
| EUR '000 | 2009 | (restated) |
| Consolidated net result for the period | - 5,749 | 6,301 |
| Income and expenses recognised directly in equity for associated companies and joint ventures | 402 | 1,137 |
| Foreign currency translation adjustment | - 85 | - 2,791 |
| Change in fair value of available-for-sale fi nancial instruments | 0 | - 234 |
| Other comprehensive income | 317 | - 1,888 |
| Total comprehensive result | - 5,432 | 4,413 |
| Total comprehensive result for the period attributable to the shareholders of the parent company | - 5,432 | 4,413 |
as at September 30, 2009
| EUR '000 Note |
September 30, 2009 |
December 31, 2008 (restated) |
January 01, 2008 (restated) |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | 59,677 | 82,614 | 130,098 |
| Intangible assets | 2,078 | 3,017 | 5,538 |
| Property, plant and equipment | 1,134 | 1,510 | 1,875 |
| Investments in associated companies and interests in joint ventures accounted | 29,871 | 36,033 | 86,226 |
| for using the equity method | |||
| Other investments | 16,955 | 22,628 | 15,834 |
| Receivables from related parties (15) |
0 | 2,542 | 0 |
| Other fi nancial assets | 9,521 | 12,114 | 19,953 |
| Deferred taxes | 118 | 4,770 | 672 |
| Current assets | 68,204 | 91,907 | 111,242 |
| Work in progress and fi nished services | 1,090 | 2,352 | 1,772 |
| Trade receivables | 17,473 | 25,610 | 33,247 |
| Receivables from related parties (15) Income tax receivables |
7,178 6,045 |
27 13,114 |
1,052 9,966 |
| Other assets | 16,044 | 18,441 | 22,965 |
| Other fi nancial assets | 15,349 | 17,642 | 22,373 |
| Other miscellaneous assets | 695 | 799 | 592 |
| Securities | 2,231 | 3,059 | 7,501 |
| Cash and cash equivalents | 18,013 | 29,304 | 34,739 |
| Assets held for sale | 130 | 0 | 0 |
| Total assets | 127,881 | 174,521 | 241,340 |
| EQUITY AND LIABILITIES | |||
| Equity | 46,569 | 87,647 | 119,016 |
| Subscribed capital | 24,000 | 24,000 | 24,000 |
| Capital reserve | 75,943 | 75,943 | 76,016 |
| Retained earnings | - 37,965 | 3,884 | 36,969 |
| Accumulated other equity (12) Net cost in excess of net assets acquired on the acquisition of companies under |
- 877 - 14,532 |
- 1,648 - 14,532 |
-3,437 -14,532 |
| common control and successive share acquisitions | |||
| Non-current provisions and liabilities | 9,609 | 31,806 | 19,085 |
| Pension provisions | 24 | 22 | 19 |
| Debts (13) |
0 | 27,636 | 16,532 |
| Liabilities due to related parties | 4,857 | 0 | 0 |
| Other miscellaneous liabilities | 0 | 19 | 19 |
| Deferred taxes | 4,728 | 4,129 | 2,515 |
| Current provisions and liabilities | 71,703 | 55,068 | 103,239 |
| Other provisions | 2,750 | 1,808 | 1,267 |
| Debts (13) |
35,854 | 16,837 | 49,514 |
| Trade payables | 5,636 | 8,457 | 19,066 |
| Liabilities due to related parties (15) |
4,208 | 1,538 | 2,206 |
| Income tax payables | 15,280 | 15,132 | 17,984 |
| Other current liabilities | 7,975 | 11,296 | 13,202 |
| Other fi nancial liabilities | 6,166 | 9,499 | 2,304 |
| Other miscellaneous liabilities | 1,809 | 1,797 | 10,898 |
| Total equity and liabilities | 127,881 | 174,521 | 241,340 |
for the period from January 30, 2009
| Accumulated other equity | ||||||||
|---|---|---|---|---|---|---|---|---|
| EUR '000 | Subscribed capital |
Capital reserve |
Retained earnings |
Income and expenses recognised directly in equity from associated companies |
Foreign currency translation adjustment |
Change in fair value of available-for sale fi nancial instruments |
Net cost in excess of net assets acquired on the acquisi tion of com panies under common con trol and suc cessive share acquisitions |
Consoli dated equity |
| Balance at 01.01.2008 | 24,000 | 76,016 | 35,987 | - 3,546 | 109 | 0 | - 14,532 | 118,034 |
| Restatement according to IAS 8 (3) | 982 | 982 | ||||||
| Balance at 01.01.2008 (restated) | 24,000 | 76,016 | 36,969 | - 3,546 | 109 | 0 | - 14,532 | 119,016 |
| Expenses for capital procurement |
- 73 | - 73 | ||||||
| Total comprehensive result | - 11,719 | - 390 | - 468 | 205 | - 12,372 | |||
| Distributions to shareholders | - 16,800 | - 16,800 | ||||||
| Balance at 30.09.2008 | 24,000 | 75,943 | 8,450 | - 3,936 | - 359 | 205 | - 14,532 | 89,771 |
| Balance at 01.01.2009 | 24,000 | 75,943 | 3,884 | - 333 | - 1,315 | 0 | - 14,532 | 87,647 |
| Total comprehensive result | - 41,849 | 524 | 247 | - 41,078 | ||||
| Balance at 30.09.2009 | 24,000 | 75,943 | - 37,965 | 191 | - 1,068 | 0 | - 14,532 | 46,569 |
for the period from January 1 to September 30, 2009
| Nine months | ||
|---|---|---|
| Nine months | ended | |
| ended | September 30, | |
| September 30, | 2008 | |
| EUR '000 | 2009 | (restated) |
| Consolidated net result for the period | - 41,849 | - 11,719 |
| Depreciation, amortisation and impairment of intangible assets and property, plant and equipment | 1,447 | 2,167 |
| Impairment on loans, interests and other fi nancial receivables | 15,923 | 0 |
| Impairment on work in progress and fi nished services | 1,557 | 0 |
| Impairment on assets held for sale | 3,178 | 0 |
| Losses(+)/Gains(-) from associated companies and joint ventures | 4,786 | 23,162 |
| Losses(+)Gains(-) from the disposal of intangible assets and property, plant, equipment and securities | 7 | - 261 |
| Increase in pension provisions | 2 | 2 |
| Elimination of income taxes | 4,692 | 2,304 |
| Elimination of net interest result and net investment result | 966 | 980 |
| Other non-cash income and expenses | - 303 | 697 |
| Decrease / Increase in working capital | 1,977 | - 10,040 |
| Increase in inventories | - 295 | - 465 |
| Decrease in trade receivables | 7,575 | 7,733 |
| Increase / Decrease in other assets | 32 | 5,764 |
| Increase in current provisions | 945 | 989 |
| Decrease in trade payables | - 2,259 | - 11,990 |
| Increase / Decrease in receivables from and payables to related parties | 230 | - 366 |
| Decrease in other liabilities | - 4,712 | - 11,915 |
| Other movements in operating activities | 427 | 210 |
| Income taxes paid | - 1,432 | - 8,140 |
| Income tax refunds | 9,210 | 10,422 |
| Interest paid | -931 | - 2,546 |
| Interest received | 549 | 888 |
| Distributions received | 40 | 157 |
| Cash fl ows from operating activities | - 215 | 8,073 |
| Proceeds from disposals of intangible assets, property, plant and equipment as well as assets held for sale | 0 | 24 |
| Net cash outfl ow from the disposal of associated companies | 0 | 31,000 |
| Proceeds from disposals of other investments and securities | 537 | 5,253 |
| Payments for intangible assets and property, plant and equipment | - 133 | - 370 |
| Payments for investments in associated companies and interest in joint ventures | - 2,195 | - 6,565 |
| Payments for investments, securities and long-term loans to related parties | - 2,215 | - 3,187 |
| Cash fl ows from investing activities | - 4,006 | 26,155 |
| Dividends paid to shareholders of HCI Capital AG | 0 | - 16,800 |
| Proceeds from additions to debts | 32 | 16,027 |
| Repayments of debts | - 7,102 | - 41,453 |
| Cash fl ow from fi nancing activities | - 7,070 | - 42,226 |
| Net Changes in cash and cash equivalents | - 11,291 | - 7,998 |
| Cash and cash equivalents at beginning of period | 29,304 | 34,739 |
| Cash and cash equivalents at end of period | 18,013 | 26,741 |
17
for the period from January 1 to September 30, 2009
| EUR '000 | Desing & Sales (restated) |
After Sales Services | Asset Management | ||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||
| Revenues | 13,994 | 76,430 | 16,033 | 16,566 | 2,070 | 4,102 | |
| Change in inventories | - 1,248 | 841 | - 26 | ||||
| Cost of purchased services | - 10,330 | - 52,062 | |||||
| Gross Margin | 2,416 | 25,209 | 16,033 | 16,566 | 2,070 | 4.076 | |
| Other operating income | 203 | 265 | 895 | 1,065 | 1,313 | 4,691 | |
| Personnel expenses | - 7,373 | - 9,238 | - 4,238 | - 4,529 | - 1,271 | -757 | |
| Depreciation, amortisation and impairment | - 716 | - 133 | - 118 | - 925 | - 268 | -271 | |
| Other operating expenses | - 5,939 | - 7,588 | - 3,933 | - 3,310 | - 1,129 | -1,071 | |
| Results of associated companies and joint ventures accounted for using the equity method |
- 2.,351 | - 142 | - 2,435 | 3,908 | |||
| Earnings before interest and taxes (EBIT) |
- 13,760 | 8,373 | 8,639 | 8,867 | - 1,720 | 10,576 | |
| Segment assets | 19,195 | 30,388 | 27,853 | 32,759 | 28,571 | 39,524 |
| Operating Segment Total | Holding / Others (restated) |
Consolidation | HCI Gruppe | ||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| 32,097 | 97,098 | 32,097 | 97,098 | ||||
| - 1,248 | 815 | - 1,248 | 815 | ||||
| - 10,330 | - 52,062 | - 10,330 | - 52,062 | ||||
| 20,519 | 45,851 | 20,519 | 45,851 | ||||
| 2,411 | 6,022 | 2,276 | 2,492 | - 2,642 | - 2,838 | 2,045 | 5,676 |
| - 12,882 | - 14,524 | - 4,363 | - 7,403 | - 17,245 | - 21,927 | ||
| - 1,102 | - 1,329 | -345 | - 839 | - 1,447 | - 2,168 | ||
| - 11,001 | - 11,969 | - 7,031 | - 6,797 | 2,642 | 2,838 | - 15,390 | - 15,928 |
| - 4,786 | 3,766 | - 26,928 | - 4,786 | - 23,162 | |||
| - 6,841 | 27,817 | -9,463 | - 39,475 | - 16,304 | - 11,658 | ||
75,619 102,672 75,619 102,672
to the consolidated interim fi nancial statements of HCI Capital AG as at 30 September 2009
HCI Capital AG, with its registered offi ce at Bleichenbrücke 10, 20354 Hamburg, Federal Republic of Germany, is registered with the Register of Companies (Handelsregister) of the Hamburg District Court (Amtsgericht Hamburg, HRB 93324).
The Company's subscribed capital amounts to EUR 24,000,000 and is divided into 24,000,000 no-par registered shares. Since its initial public offering (IPO) in October 2005 and the related admission to trading on the regulated market, the Company has been listed in the Prime Segment of the Frankfurt Stock Exchange and on the Hamburg Stock Exchange.
HCI Capital AG and its subsidiaries (hereinafter referred to as the HCI Group) together constitute a service group operating mainly in Germany. The Group's business activities consist primarily of the design and initiation of closed-end funds in the main product areas Transport and Logistics, Real Estate, Life Insurance, Energy and Commodities, as well as the subsequent raising of funds from institutional and private investors. The Group also operates as the fi duciary manager of equity capital placed (After-Sales Services) and of fund assets (Asset Management).
HCI Capital AG's consolidated interim fi nancial statements as at 30 September 2009 were prepared in accordance with the provisions of IAS 34, with the notes presented in condensed form in accordance with the option permitted by IAS 34.10.
With the exception of the following changes, the accounting policies used in the preparation of the Group's consolidated interim fi nancial statements correspond to those used in HCI Capital AG's IFRS consolidated fi nancial statements as at 31 December 2008. The consolidated interim fi nancial statements as at 30 September 2009 must therefore be read in conjunction with the consolidated fi nancial statements as at 31 December 2008.
The consolidated fi nancial statements were prepared under the assumption of the Company's ability to continue as a going concern. As for the risks arising from contingent liabilities and their potential effects and the risks arising from the HCI Group's liquidity requirements in relation to this assumption, reference is here made to Note 16, to Note 13 and to the consolidated interim management report.
As stated in Note 4 to the consolidated IFRS fi nancial statements as at 31 December 2008, the HCI Group is applying IFRS 8 "Operating Segments" for the fi rst time in the fi nancial year 2009. Segment information for the period from 1 January to 30 September 2009 as stated in these consolidated interim fi nancial statements was prepared on the basis of this standard. Comparative information for the fi rst half of 2008 was adjusted accordingly. In accordance with IFRS 8, which is based on the management approach, segment reporting consists of a presentation of reportable operating segments that correspond to the areas of a company for which the Group's chief operating decision maker regularly assesses the earning performance and allocates resources on the basis of available fi nancial information. In line with the internal management of the areas by HCI Capital AG's Management Board, Design and Sales, After-Sales Services and Asset Management were defi ned as operating segments. With regard to segment reporting for the period from 1 January to 30 September 2009 we refer to Note 14.
In the consolidated interim fi nancial statements as at 30 September 2009, the HCI Group applies the provisions of IAS 1 "Presentation of Financial Statements" as revised in 2007. The statement of comprehensive income including gains and losses with and without an impact on profi t and loss is included as a component of the consolidated interim fi nancial statements.
In the fi rst quarter of 2009 the HCI Group changed revenue recognition for revenues from design and sales services for future fi nancial years. Until 31 December 2008, design and sales revenues were recognised from when the investor signed and the statutory or, if longer, the contractual cancellation period expired. They are now recognised when HCI accepts the signed contract, taking into account the anticipated cancellation quotas within the statutory or, if longer, the contractual cancellation period. Cancellation quotas are calculated per product category on the basis of historical values over a period of up to fi ve years, taking into account margin developments or other special factors for the relevant product category. No material changes arose from applying the new accounting method, so the fi nancial information was not adjusted retrospectively in accordance with IAS 8 and adjustments were only made in the current period.
Other standards or interpretations applied for the fi rst time had no impact on the HCI Group's assets, fi nancial and earnings position.
Application of the following standards and interpretations published by the IASB or IFRIC prior to the preparation of the consolidated interim fi nancial statements was not mandatory as at the balance sheet date either because they had not yet been endorsed by the EU or because their fi rst-time mandatory use had yet to be stated:
They will be implemented when their application becomes mandatory. The HCI Group's current assumption is that application of these standards will have no material impact on the presentation of its assets, fi nancial and earnings position.
The effects on the Group's assets, fi nancial and earnings position of the amendments to IAS 27 and IFRS 3 will depend in particular on such acquisitions or disposals of interests in companies that the HCI Group undertakes after the date of fi rst-time application of these two standards.
In 2004 the HCI Group signed charter and fi nancing brokerage contracts with various fund companies and received commission in return. Although the HCI Group provided the services agreed by the terms of these contracts in 2005 and the revenues were according to IAS 18 due to be stated in 2005, the commission earnings have yet to be collected with an effect on results. Furthermore, the revenues from brokerage services provided by the HCI Group in respect of fund shares have yet to be realised even though the HCI Group provided the services in question.
In line with IAS 8 the following changes occur in connection with retrospective adjustments to the HCI Group's consolidated balance sheet:
| EUR '000 | 30.09.2009 | 31.12.2008 | 01.01.2008 |
|---|---|---|---|
| Trade receivables | -- | + 2,057 | + 1,462 |
| Deferred tax assets | -- | - 122 | - 1 |
| Deferred tax liabilities | -- | + 488 | + 479 |
| Consolidated equity capital earned | -- | + 1,447 | + 982 |
For the statement of comprehensive income the following adjustments are made to the comparative fi gures:
| EUR '000 | 01.01.- 30.09.2009 |
01.01.- 30.09.2008 |
|---|---|---|
| Revenues | -- | + 595 |
| Earnings before interest and taxes | -- | + 595 |
| Earnings before taxes | -- | + 595 |
| Income taxes | -- | - 130 |
| Net consolidated result for the period | -- | + 465 |
| Total comprehensive result | -- | + 465 |
Revenues break down as follows:
| 01.01. – | 01.01. – | |
|---|---|---|
| EUR'000 | 30.09.2009 | 30.09.2008 |
| Transport and Logistics | 8,612 | 44,915 |
| Real Estate | 554 | 12,086 |
| Energy and Commodities | 3,052 | 9,453 |
| Secondary Life Insurance Market | 1,108 | 9,559 |
| Other | 668 | 417 |
| Design and Sales | 13,994 | 76,430 |
| Transport and Logistics | 12,751 | 13,280 |
| Real Estate | 1,795 | 1,693 |
| Energy and Commodities | 177 | 300 |
| Secondary Life Insurance Market | 1,013 | 997 |
| Other | 297 | 296 |
| After-Sales Services | 16,033 | 16,566 |
| Asset Management | 2,070 | 4,102 |
| Total revenues | 32,097 | 97,098 |
Due to the changes in the segment structure in 2009, the HCI Group adjusted the presentation of revenues from Design and Sales and After-Sales Services for the corresponding period in 2008. The Transport and Logistics product area comprises the Ship and Aircraft asset classes. The Energy and Commodities product area consists of the HCI Deepsea Oil Explorer fund and is being expanded to include the HCI Energy 1 Solar fund.
Other operating income totalled EUR 2,045 thousand (previous year: EUR 5,676 thousand) and included ship brokerage income amounting to EUR 1,000 thousand (previous year: EUR 1,500 thousand).
Due to the diffi cult market environment for placing closed-end funds, write-downs totalling EUR 1,557 thousand (previous year: EUR 15 thousand) were made on work in progress and fi nished services in connection with the design of closed-end fund models.
Personnel expenses totalling EUR 17,244 thousand (previous year: EUR 21,927 thousand) include EUR 793 thousand in severance payments and EUR 450 thousand in salaries paid until the end of the employment relationship for employees laid off as part of the HCI Group's restructuring in June 2009.
The result from investment in associated companies and joint ventures accounted for under the equity method includes EUR 2,779 thousand (previous year: EUR 24,758 thousand) in impairment charges arising from impairment tests undertaken due to continued diffi cult market conditions.
In the impairment tests carried out in accordance with IAS 36, recoverable amounts were established on the basis of a DCF model taking the companies' planning data into account. Impairment charges amounted to EUR 1,645 thousand for the equity investment in eFonds Holding AG and EUR 1,134 thousand for holdings in shipbuilding companies managed jointly with shipping companies and accounted for under the equity method in the consolidated fi nancial statements.
In the second quarter of 2009 eFonds Holding AG carried out a cash capital increase. In connection with this capital increase the HCI Group exercised its subscription rights. It also exercised some of the subscription rights of another shareholder, with the result that the HCI Group's stake in eFonds Holding AG increased from 25.1 % to 28.0 %. The Group made a EUR 174,000 profi t on this transaction
Other fi nancial results include EUR 1,700 thousand (previous year: nil) in losses incurred in the third quarter of 2009 in connection with the winding-up of the umbrella real estate fund HCI Real Estate G7 GmbH & Co. KG that had been in placement since the beginning of November 2008.
Other fi nancial results also include EUR 2,143 thousand in fees (previous year: EUR 1,960 thousand) that the HCI Group received in advance distributions from the secondary life insurance market funds.
They also include EUR 13,029 thousand (previous year: EUR 97 thousand) in impairment charges on interests in one-ship companies classifi ed as fi nancial instruments held for sale in accordance with IAS 39 and of non-current fi nancial receivables from ship fund companies and a shipping company that are classifi ed as loans and receivables in accordance with IAS 39, plus EUR 989 thousand in currency losses (previous year: EUR 1,002 thousand currency profi t).
Furthermore, other fi nancial results include expenses from impairment of the HCI Group's right of recourse against a fund company. In the fi nancial year 2008 the Group issued two non-interest bearing promissory note loans in connection with the design of a fund product that that were to be transferred to the fund company once the fund product was placed. The fund company undertook to release the HCI Group from all risks and rewards arising from the notes until it took over the notes after placement. A write-down of EUR 1,438 thousand was made on this claim, as it is currently impossible to assess the fund's placement potential.
In addition, an impairment loss of EUR 866 thousand was made on the fair value of shares classifi ed as fi nancial assets held for sale.
Due to the intention to sell equity investments in BH & HCI Overschiestraat Holding B.V. and BH & HCI Real Estate Holding B.V., previously accounted for under the equity method, and in BH & HCI Tupolevlaan Building B.V., previously listed under other investments, these interests were reclassifi ed as assets held for sale in accordance with IFRS 5 as at 30 June 2009. Management considers them highly likely to be sold within 12 months of reclassifi cation. They were measured at fair value less costs of sale, leading to an impairment charge of EUR 3,178 thousand. The EUR 79 thousand in pro rata shares of the companies' profi ts until the time of reclassifi cation in accordance with IFRS 5 is stated under results from associated companies and joint ventures.
Income taxes include EUR 5,253 thousand in deferred tax expenses resulting mainly from the reversal of the recognition of deferred tax assets. This was attributable to the release of deferred tax assets for tax loss carryovers as a result of changes in plan scenarios.
At the Annual General Meeting on 31 August 2009, HCI Capital AG's Management Board proposed a control and profi t and loss transfer agreement between HCI Capital AG and HCI Treuhand GmbH with effect from 1 January 2009. The proposal was adopted at the AGM with the result that the effects on the Group's tax expenses from 1 January 2009 were included in the consolidated interim fi nancial statements as at 30 September 2009.
Basic and diluted earnings per share were as follows:
| 01.01.– 30.09.2009 |
01.01.– 30.09.2008 |
||
|---|---|---|---|
| Group share of the net result for the period | EUR'000 | - 41,849 | - 11,719 |
| Weighted average number of shares issued | Million | 24.0 | 24.0 |
| Earnings per share for the reporting period | EUR | - 1.74 | - 0.49 |
There were no dilutive instruments in the periods presented, with the result that diluted and basic earnings per share were the same.
Accumulated other equity consists of changes in fair value of fi nancial instruments held for sale and reconciling items from translating fi nancial statements denominated in a foreign currency. In addition, it includes pro rata gains and losses recognised directly in equity from associated companies and joint ventures accounted for under the equity method.
The fi nancial liabilities are amounts owed to banks by the HCI Group. The terms and conditions of the principal fi nancial liabilities to banks are as follows:
| Loans | Book value as at 30.09.2009 in EUR'000 |
Book value as at 31.12.2009 in EUR'000 |
Loan currency | Interest rate in % | Final due date |
|---|---|---|---|---|---|
| HSH Nordbank AG | 26,264 | 28,579 | USD | Three-month LIBOR +3 % | 2010 |
| Bankhaus Wölbern & Co. | 4,790 | 6,481 | USD | EURIBOR + 1.85 % | 2010 |
| Commerzbank AG | 4,200 | 5,995 | EUR | 7.50 % | 2010 |
| HSH Nordbank AG | 593 | 3,383 | EUR | 9.03 % | 2009 |
For interim fi nancing of the acquisition of the shares in eFonds Holding AG, HCI Capital AG took out a cash loan of EUR 6,000 thousand in 2008. In January 2009 the Group repaid EUR 1,500 thousand. In February 2009 an agreement was reached with Commerzbank AG (formerly Dresdner Bank AG) that the loan was to be repaid in future in quarterly instalments of EUR 150 thousand with payment of the fi nal instalment on 30 September 2010. The interest rate is 7.5%.
For details of agreements on the deferral of interest payments and capital repayments on loans out-standing please refer to the consolidated interim management report under the heading D. Report on risks and opportunities.
Segment data was prepared on the basis of fi nancial information used in internal management and corresponds to the accounting policies used for the consolidated fi nancial statements.
Reportable operating segments as per IFRS 8 are as follows:
• Asset Management – The management of investments held by funds initiated by the HCI Group in the Ship, Real Estate and Life Insurance Fund sectors and charter operations with third parties are assigned to the Asset Management segment.
In addition, there is a Holding/Other area that includes items not directly attributable to segments and expenses incurred for holding functions.
Segment results are stated as earnings before interest and taxes (EBIT), which is the result for the period before interest and other fi nancial results and before income taxes. It is used in internal controlling as the segment management tool on the basis of IFRS. In internal reporting the revenue and cost categories are included that are also shown in the consolidated statement of operations.
The segment assets held by the operating segments include the assets that are relevant for operating activities in the relevant segment. They consist of inventories, trade receivables, loans granted and loans to sales partners, funds and ordering companies along with HCI Group's interests in funds or ordering companies and in associated companies and joint ventures accounted for under the equity method. Goodwill stated at EUR 875 thousand as at 30 September 2009 is not allocated to segment assets.
Internal reporting does not include segment liabilities, which is why these are not stated in segment reporting in accordance with IFRS 8.
The reconciliation of segment assets with the Group's total assets is as follows:
| EUR'000 | 30.09.2009 | 31.12.2008 |
|---|---|---|
| Segment assets | 75,619 | 102,672 |
| Cash and cash equivalents | 18,013 | 29,304 |
| Securities | 2,231 | 3,059 |
| Deferred taxes | 118 | 4,770 |
| Property, plant and equipment | 1,134 | 1,510 |
| Intangible assets | 2,078 | 3,017 |
| Assets held for sale | 130 | 0 |
| Other assets and receivables | 27,934 | 29,583 |
| Other fi nancial assets | 624 | 606 |
| Group assets | 127,881 | 174,521 |
Receivables from and liabilities to related party are as follows:
| EUR'000 | 30.09.2009 | 31.12.2008 |
|---|---|---|
| Receivables from associated companies and joint ventures | 7,170 | 2,555 |
| Receivables from unconsolidated subsidiaries | 8 | 14 |
| Receivables from related parties | 7,178 | 2,569 |
| Liabilities to unconsolidated subsidiaries | 674 | 687 |
| Liabilities to associated companies and joint ventures | 6,000 | 0 |
| Liabilities to HCI Group executive bodies | 2,391 | 851 |
| Liabilities to related parties | 9,065 | 1,538 |
Income and expenses resulting from related party transactions break down as follows:
| EUR'000 | 01.01– 30.09.2009 |
01.01– 30.09.2008 |
|---|---|---|
| Income from associated companies and joint ventures | 87 | 4,837 |
| Income from related parties | 87 | 4,837 |
| Expenses of members of HCI Group executive bodies | 2,284 | 5,626 |
| Expenses of associated companies and joint ventures | 4,873 | 27,999 |
| Expenses of other fi nancial results | 3,178 | 0 |
| Expenses of related parties | 10,335 | 33,625 |
The expenses of members of HCI Group executive bodies consist of fi xed remuneration components for Management Board members during the stated periods plus pro rata management bonus entitlements and Supervisory Board remuneration.
In the comparative period last year the expenses of members of HCI Group executive bodies included severance payments totalling EUR 3.820 thousand made in connection with the retirement of Wolfgang Essing and Dr. Rolando Gennari from HCI Capital AG's Management Board.
Impairment losses totalling EUR 3,178 thousand were made on the investments in associated companies BH & HCI Overschiestraat Holding B.V. and BH & HCI Real Estate Holding B.V. due to their classifi cation in accordance with IFRS 5 and their corresponding measurement at fair market value less costs of sale and as stated under other fi nancial results.
By the terms of an agreement dated 27 August 2009, the HCI Group transferred the contract on the provision of services, including controlling and administrative services, with HCI HAMMONIA SHIPPING AG to HAMMONIA Reederei GmbH & Co. KG. At the same time, the HCI Group undertook to supply the services owed to HCI HAMMONIA SHIPPING AG by HAMMONIA Reederei GmbH & Co. KG. In return for the contract transfer the HCI Group will be paid a purchase price of EUR 6,000 thousand plus VAT. Realisation with an impact on results will take place successively as the services are provided.
As at 30 September 2009 the Company had the following contingencies and other fi nancial commitments:
| 30.09.2009 | 31.12.2008 | |||||
|---|---|---|---|---|---|---|
| EUR'000 | EUR'000 | USD'000 | EUR'000 | EUR'000 | USD'000 | |
| Guarantees and other commitments | 1,271,809 | 342,768 | 1,357,607 | 1,480,102 | 343,761 | 1,578,036 |
| Placement guarantees and equity guarantees |
600,249 | 260,770 | 496,082 | 639,182 | 263,997 | 521,019 |
| Future payments under operating leases | 2,603 | 2,603 | -- | 3,566 | 3,566 | -- |
The HCI Group also has provided fund companies that have invested in US life insurance policies with loan lines (or liquidity pledges) totalling EUR 7,450 thousand and USD 3,500 thousand that run until 30 June 2012. As at 30 September 2009, no use had been made of these lines. In view of the funds' current performance the fund companies seem unlikely to make use of these liquidity commitments.
In connection with the purchase of the assets underlying fund design and fund structuring by special purpose entities, in which the HCI Group and a partner hold a joint share, the HCI Group has provided guarantees to hedge construction phase loans and, on a regular basis, placement guarantees to hedge bridge fi nance facilities. If these investment or construction phase loans or the bridge fi nance facilities cannot be repaid as scheduled as a result of weak markets and pending fundraising, the HCI Group is exposed to the risk, in particular in the shipping sector, that the Group will be called upon within the scope of such contingent liabilities if the special purpose entity concerned does not obtain an extension or prolongation of the fi nancing commitment from the banks involved. The currently available liquidity of the HCI Group would not be suffi cient if it were called upon to a signifi cant extent, and this would result in the Group's illiquidity.
The HCI Group counters the risk by holding intensive negotiations with the lending banks, by analysing and valuing the potentially affected ship types and orders for new ships, and by designing an individual action plan for each ship affected. Potential measures include, above all, the cancellation of orders for new ships, delaying the scheduled date of delivery, the exchange of ships, renegotiating the purchase price of ships, partially deferring purchase price payments (deferred consideration), the structuring of new employment concepts, and the adjustment of sales margins and concepts. If these measures are not successful, the HCI Group has to obtain an equivalent fi nancing from banks. Accordingly, the HCI Group has initiated negotiations with banks in order to conclude agreements to secure liquidity.
In connection with the restructuring concept with the principal creditor banks and principal shareholders, negotiations are under way on an irrevocable moratorium with regard to contingent liabilities and on a capital increase in cash. For details please refer to the consolidated interim management report under the heading D. Report on risks and opportunities.
Loans granted by HSH Nordbank AG and Commerzbank AG were extended and are now due for repayment on 31 December 2010.
No further events of special signifi cance that exercise a material effect on the HCI Group's assets, fi nancial and earnings position have occurred since the balance sheet reporting date.
Hamburg, November 2009
HCI Capital AG The Management Board
Dr. Ralf Friedrichs Dr. Oliver Moosmayer Dr. Andreas Pres
These documents include certain forward-looking statements and information regarding future developments; these are based on the views and convictions of the Management Board of HCI Capital AG, and on assumptions and information currently available to HCI Capital AG. Words such as 'expect', 'assess', 'assume', 'intend', 'plan', 'should', 'might', 'project', or similar concepts referring to the company are designed to identify such forward-looking statements, which are subject to a number of uncertainties.
Many factors could cause the actual results achieved by HCI Group to be materially different from the forecasts expressed in such forward-looking statements.
HCI Capital AG accepts no responsibility or liability to the general public for updating or correcting any forward-looking statements. All forward-looking statements are subject to differing risks and levels of uncertainty: as a result, the actual fi gures may deviate from projected values. Forward-looking statements refl ect the prevailing opinion at the time they were made.
HCI Capital AG Bleichenbrücke 10 D-20354 Hamburg Telefon +49 40 88 88 1-125 Telefax +49 40 88 88 1-109 [email protected] oder www.hci-capital.de
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