Quarterly Report • Nov 19, 2007
Quarterly Report
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| Nine months ended | Nine months ended | |
|---|---|---|
| Earnings | September 30, 2007 | September 30, 2006 |
| Revenues in EUR thousands | 89,314 | 84,434 |
| EBIT in EUR thousands | 28,477 | 34,072 |
| EBT in EUR thousands | 32,645 | 38,171 |
| Group net earnings in EUR thousands | 27,244 | 27,314 |
| Return on sales in % | 30.5 | 32.3 |
| EBIT margin in % | 31.9 | 40.4 |
| Earnings per share in EUR | 1.14 | 1.14 |
| Placed equity in EUR million | 434.6 | 375.7 |
| Balance sheet | September 30, 2007 | December 31, 2006 |
| Total assets in EUR thousands | 188,605 | 227,086 |
| Equity in EUR thousands | 116,590 | 123,347 |
| Equity ratio in % | 61.8 | 54.3 |
| Staff | September 30, 2007 | September 30, 2006 |
| Average employees | 251 | 231 |
| Personnel costs in EUR thousands | 20,970 | 16,082 |
| Personnel costs in % of revenue | 23.5 | 19.0 |
These documents contain certain forward-looking statements and information regarding future developments that are based on the opinions of the Management Board of HCI Capital AG, as well as on assumptions and information currently available to HCI Capital AG. Words such as "expect", "estimate", "assume", "intend", "plan", "should", "could" and "project" as well as similar terms related to the company, are intended to indicate such forward-looking statements, which are therefore subject to a level of uncertainty.
A number of factors could cause the actual results of the HCI Group to differ materially from the projections for the future as made in such forward-looking statements.
HCI Capital AG assumes no obligation to the public to update or correct forward-looking statements. All forward-looking statements are subject to various risks and uncertainties that could cause the actual results to vary from expectations. The forward-looking statements refl ect the perspective as of the date on which they were made.
Note: Rounding differences likely to occur.
During the fi rst three quarters of the fi nancial year 2007, HCI Capital AG successfully continued to expand its business activities corresponding with the ongoing diversifi cation of products.
In the fi rst three quarters of 2007, HCI Capital AG placed equity volume totaling approximately EUR 434.6 million, equivalent to a 15.7-percent rise against the same period for the previous year (EUR 375.7 million). Revenue earnings rose to EUR 89.3 million for the period ended September 30, 2007 (EUR 84.4 million for the same period 2006). As expected, earnings before interest and taxes (EBIT) with a total amount of EUR 28.5 million dropped against the previous year's EUR 34.1 million for the same period due primarily to other operating income that was higher as a result of intermediary ship trade during the fi rst two quarters of 2006. Consolidated net earnings totaled EUR 27.2 million, thereby corresponding approximately to last year's fi gure (EUR 27.3 million).
The ship segment accounted for a major increase in placement volume during the current reporting period with the HCI Group's investment volume from classic closed-end ship funds, asset creation plans and structured products totaling EUR 280.3 million, a rise of approximately 50 percent against last year's total EUR 186.9 million. The placement volume in HCI's closed-end real estate funds gained considerable momentum during the period under review generating a 14.3-percent rise to EUR 71.1 million for the period ended September 30, 2007 (same period 2006: EUR 62.2 million), a very positive development trend compared to the decreased result for the fi rst two quarters of 2007. Placement results in the secondary life insurance market and in the private equity fund of funds segments for the fi rst three quarters of 2007 are below forecast. For the period under review, equity capital for the secondary life insurance market totaled EUR 71.3 million, a 23.9-percent drop against last year's fi gure (EUR 93.8 million). Investor demand in the private equity fund of funds segment has been slow due particularly to the turmoil in the fi nancial market. Placement volume in equity capital dropped by 63.7 percent against the same period for 2006 (EUR 32.8 million) to a volume totaling EUR 11.9 million.
The positive development of structured products in the ship and secondary life insurance market segments right from the start after the introduction early 2007, is noteworthy and attributed proportionately to each of the segments. Placement volume totaling EUR 62.7 million was paid in on an innovative freight rate certifi cate (HCS Frachtraten Protect Zertifi kat) and a guarantee product (HSC Shipping Protect I), both in the ship segment, and a certifi cate on a secondary life insurance market index, accounting altogether for an appreciable contribution to the expansion and diversifi cation of HCI's range of products.
By expanding its business activities the HCI Group has opened up a new market of clients and investors. In a joint venture with the U.S. real estate investor Behringer Harvard during the third quarter of 2007, investments at an amount of EUR 17.6 million were realised and due diligence was initiated for a number of interesting real estate projects. The number of institutional investors in the ship segment is also gaining signifi cantly in importance. The newly structured HCI Hammonia Shipping AG offers institutional investors access to this highly attractive asset class. As per October 30, 2007, equity of EUR 150 million was placed. HCI Hammonia Shipping AG is scheduled to go public in at the end of November 2007 and will be listed on the Hanseatic Stock Exchange in Hamburg.
The joint fi nancing of an oil platform for exploratory drilling (Deepsea Oil Explorer) by HCI Capital AG and MPC Münchmeyer Petersen Capital AG, scheduled to start in early 2008, not only opens up an entirely new and interesting product category, but is also a crucial step for both issuing houses towards joint structured fund fi nancing of major projects.
HCI Capital AG will continue to pursue its strategy course, focusing on steady business growth based on innovation and diversifi cation. Given this development HCI is confi dent that the goals set for the 2007 fi nancial year will all in all be reached.
Sincerely,
Wolfgang Essing (Chairman of the Board) Hamburg, November 2007
During the fi rst three quarters of 2007, HCI stock refl ected the general stock-market development – volatile across the board – closing on September 30, 2007 at EUR 15.20, approximately 1.7 percent above the closing price on the fi rst trading day of 2007. By comparison, the SDAX rose by 1.2 percent during the same period. HCI stock traded highest on February 20, 2007 at EUR 18.80. Due to the turmoil in the U.S. real estate market stock quotations came under pressure, particularly in the fi nancial segment, a development which naturally affected HCI stock as well. HCI stock traded lowest on August 16, 2007 at EUR 14.11. The daily trading volume on the electronic stock exchange Xetra averaged approximately 66,000 shares for the period under review (same period 2006: 64,000), refl ecting satisfactory trading liquidity among the companies listed on the Prime Standard.
Notable changes in shareholder structure took place during the fi rst three quarters and in October 2007. At the beginning of 2007, senior shareholder HCI SICAR A.G. sold its share in HCI completely. In an off-exchange transaction HCI SICAR A.G.'s 31.7-percent share was transferred to a group of experienced investors from the same line of business – MPC Münchmeyer Petersen Capital AG, the Peter Döhle Group and the Corsair Capital LLC investment group. In October 2007, Christ Capital GmbH sold its 10-percent share off-exchange to Corsair Capital LLC, thus raising the latter's total share in HCI Capital AG to 20 percent. Corsair Capital LLC and MPC Capital AG simultaneously revoked an agreement which, until now, permitted both shareholders the mutual assignment of the voting rights of their HCI shares. The new shareholder structure is as follows:
| Corsair Capital LLC | 20.0 % |
|---|---|
| MPC Capital AG | 15.1 % |
| Peter Döhle Schiffahrts-KG | 10.0 % |
| Free fl oat | 54.9 % |
| (of which Fidelity retains 4.99 % and Schroders plc 2.98 %) |
The majority of institutional investors holding HCI free-fl oating stock are from Germany and Anglo-Saxon countries. The number of private single shareholders totaled 19,510 as per September 30, 2007, a considerable rise in comparison to the same period last year (9,700), and accounts for approximately 38.8 percent of the capital stock. Altogether, a highly satisfactory development and proof that the shareholder structure is continuing to diversify.
Independent research analysts continue to rate HCI stock positively. Thirteen analysts are currently monitoring and rating the stock on the basis of company studies on a regular basis. In 10 cases, analysts recommend buying HCI stock, three give a hold recommendation on the stock. On average, analysts estimate a target price of EUR 18.80.
During the period under review, several road shows and capital market conferences in Germany, Switzerland, Great Britain, Scandinavia and the Benelux gave company management the opportunity to present HCI Capital AG's strategy and business development to institutional investors. Furthermore, various meetings with investors took place at the company's head offi ces in Hamburg.
During the last quarter of 2007, more presentations on capital market conferences and road shows focusing on institutional investors as well as presentations on events and conferences for private shareholders are scheduled in order to continue the dialogue with the capital market.
HCI Capital AG does not own any stock in the company.
According to leading economic institutes the global economic situation is expected to continue developing positively, despite problems in the fi nancial market triggered by the U.S. real-estate crisis. The strong dynamics of the global economy are generated to a major extent by high growth rates in the developing countries and emerging markets of Asia, most especially China.
The German economy is still on a growth path, its pace, however, was also affected by several factors during 2007, among them a restrictive fi nancial policy, the rising price of oil, the strong Euro and recent developments in the fi nancial markets. Nevertheless, experts forecast a stable economic situation in Germany and estimate that fundamental data have improved markedly despite the aforementioned factors.
The crisis in the U.S. subprime mortgage sector is directly impacting the banking sector and the international fi nancial markets. Interbank transactions suffered from a sizable liquidity squeeze and intervention on the part of the Federal Reserve and central banks. Both the U.S. Federal Reserve and the European Central Bank either lowered or at least refrained from raising their prime rates. As a result, interest rates will not continue to rise for the time being. It is evident that banks will be tightening their loan policies due to the current situation.
Oil prices rose considerably during the fi rst three quarters of 2007, particularly towards the end of the third quarter, with prices climbing to just below USD 80.00 per barrel by September 30, 2007. The Euro has increased its strong position, with an exchange rate of USD 1.42 to the EUR as per September 30, 2007.
The development of the closed-end fund market is showing differential characteristics during the current fi nancial year. Whereas certain product segments, among them the ship and, in part, the real estate segment have experienced a positive development, the private equity fund of funds segment has developed poorly compared to last year due to the strained situation in the fi nancial markets. Independent market analysts estimate an overall stable development in placement volume of investment funds for the fi nancial year 2007.
Infl uenced by the positive development during the fi rst three quarters of 2007, the HCI Group placed an equity volume totaling EUR 434.6 million, thereby considerably exceeding the placement result for the same period of the previous year (EUR 375.7 million) and marking a signifi cant rise of 15.7 percent against the fi rst three quarters of 2006. Whereas this increase is largely due to the resounding placement success in the closed-end ship fund segment, it is also well-founded in the quick success of the recently introduced structured products (guarantee products, certifi cates) as well as in the growing demand for closed-end real estate funds issued by the HCI Group. This trend more than compensated the decline in placement results for the secondary life insurance market fund and private equity fund of funds for the period under review.
Approximately EUR 25.5 million in equity were placed outside Germany during the current reporting period (same period 2006: EUR 17.0 million), with the Austrian market accounting for the majority of sales activities.
Placement in the individual product categories developed as follows:
There was a marked increase in the ship segment against the same period of the previous fi nancial year. Placement volume during the fi rst three quarters of 2007 totaled EUR 280.3 million, a 50.0-percent increase over the results for the same period in 2006 (EUR 186.9 million), and was generated primarily by classic ship funds, asset creation plans, a structured product guaranteeing the capital invested (HSC Shipping Protect I), and a certifi cate representing the development of freight rates for raw materials on different shipping routes and in varying shipping classes (HSC Frachtraten Protect Zertifi kat). The placement volume percentage for structured products in this product category totaled EUR 46.4 million for the period under review.
In the segment of closed-end real estate funds, equity capital placement during the fi rst three quarters of 2007 picked up considerably, increasing by 14.3 percent against last year's results to EUR 71.1 million (2006: EUR 62.2 million). The placement of the opportunity fund HCI Real Estate Growth I USA contributed signifi cantly to business growth. This opportunity fund has been closed in October 2007 with a total equity volume of approximately USD 110 million, which was considerably higher than expected.
The secondary life insurance market segment generated an equity capital placement volume totaling EUR 71.3 million with secondary life insurance market funds, a certifi cate for developing a portfolio of British and German secondary life insurance policies (HSC Optivita Europe LV Index Zertifi kat) and asset creation plans, corresponding to a 23.9-percent drop against the same period for the previous year (EUR 93.8 million). The placement percentage of structured products in this segment accounted for EUR 16.3 million for the period under review.
New business in the private equity fund of funds product category generated an equity capital placement volume of EUR 11.9 million in equity capital for the reporting period, dropping considerably below last year's results (EUR 32.8 million). This 63.7-percent downturn against the fi rst three quarters of 2006 is due primarily to the current turmoil in the fi nancial market, which has a negative impact on the demand for private equity investment products.
The HCI Group generated revenue earnings totaling TEUR 89,314 during the reporting period, an increase of 5.8 percent against TEUR 84,434 in the previous fi nancial year.
Revenues from the HCI Group's design and sales activities amounted to TEUR 68,000, corresponding approximately with last year's results of TEUR 67,173. Due to a continued rise in the volume of equity in trust management, earnings from these activities increased by 2.7 percent from TEUR 16,433 for the fi rst three quarters of 2006 to TEUR 16,884 for the fi rst three quarters of 2007.
During the fi rst three quarters of 2006, other operating income was unusually high due to earnings from ship brokerage. Correspondingly, this position dropped signifi cantly to TEUR 12,811 and is considerably lower for the current reporting period than TEUR 20,956 as per September 30, 2006. Other operating income primarily includes the results of HCI Group activities in the ship and real estate segments (asset trading), both of which are an integral part of the group's business model but of an opportunistic nature – therefore cannot be planned – and not necessarily recurring. For the fi rst three quarters of 2007, other operating income is constituted primarily by fi rst-time earnings from the sale of Dutch real estate (TEUR 8,722) and from ship brokerage (TEUR 2,822). In a strong seller's market with favourable market conditions the company was able to sell these assets without jeopardizing the long-term product availability of HCI Group funds.
For the current reporting period, the cost of purchased services, consisting primarily of commissions paid to sales partners, rose by 15.1 percent to TEUR 44,463 due to the higher volume of placed equity as compared to the same period for the previous year. One reason for this relatively high increase is a shift in the product mix of the equity placements during the period under review. In addition the separate settlement of a real estate fund (Hanseatischer Immobilienfonds Holland XXVI GmbH & Co. KG) during the fi rst three quarters of 2006, in which only the net margin could be recorded as sales.
Personnel expenses rose by 30.4 percent to TEUR 20,970 during the current reporting period due in particular to the signifi cant increase in personnel. The rise in personnel expenses corresponds directly to investments made in the interest of securing the HCI Group's continued growth in the future as well as special items in connection with personnel changes in the Management Board. The average number of HCI Group employees increased to 251 (same period 2006: 231) for the period under review.
Other operating expenses dropped by 8.4 percent below last year's fi gure (TEUR 15,317) to TEUR 14,027 for the period under review. This development is due basically to the fact that an increasing number of HCI Group employees are now performing the consulting services previously in the hands of external consultants.
The results of associated companies and joint venture accounted for using the equity method rose signifi cantly by TEUR 7,107 to TEUR 8,674 for the fi rst three quarters of 2007, due mainly to TEUR 8,258 from the stake in Hammonia Reederei GmbH & Co. KG.
Earnings before interest and taxes (EBIT) dropped to TEUR 28,477 during the fi rst three quarters of 2007 compared to TEUR 34,072 for the same period in 2006 as a direct result of the business development described above and the special effect itemized under other operating income.
The fi nancial result rose by 1.7 percent to TEUR 4,168 during the period ended September 30, 2007 compared to the same period in the previous year. The development of this item was largely infl uenced by a positive balance in income and expenses from the divestiture of interest rate swaps as well as the cancellation of loan commitments originally planned for a transaction in the Dutch real estate market. Property sales resulted in the dissolution of these positions. Income from secondary life insurance market funds management developed positively. In addition there was a rise in interest payable for the period under review necessary for fi nancing the acquisition of an interest in Aragon AG.
During the same period, earnings before taxes (EBT) amounted to TEUR 32,645, corresponding to a 14.5-percent decline over the previous year's TEUR 38,171.
For the period ended September 30, 2007, the Group's tax rate dropped to 16.5 percent, thereby falling below the last estimated annual 25.0-percent tax rate. The lower income tax for the third quarter is due essentially to two factors. One signifi cant effect results from the Hammonia Group's increased income calculated according to the equity method and contained in the HCI Group's consolidated interim fi nancial statements. The fact that the aforementioned income is covered by the tonnage tax and, for the most part, not subject to taxation at HCI Group level, has a signifi cant effect on HCI Capital AG's tax expenditure. The second infl uencing factor results from long-term deferred taxes, which pursuant to the corporate tax reform legislated in July 2007, were taxed at the reduced corporate tax rate of 15 percent as opposed to the previous 25-percent tax rate.
Consolidated net earnings for the fi rst three quarters of 2007, at TEUR 27,244, approximately equals the previous year's level, TEUR 27,311.
During the current reporting period, the HCI Group generated a positive cash fl ow from operating activities of TEUR 11,331 as opposed to TEUR 8,206 for the previous fi nancial year. This positive cash fl ow is due mainly to the lower amount of funds committed to working capital during the fi rst three quarters of 2007.
The fl ow of funds from investment activities totaled TEUR 4,262 as per September 30, 2007 compared to TEUR 5,867 for the same period in 2006. The higher amount during the fi rst three quarters of 2006 results primarily from the TEUR 3,000 contributed to the capital reserve of Hammonia Reederei GmbH & Co. KG for fi nancing the acquisition of a ship through the subsidiary of an associated company during the fi rst two quarters of 2006. The positive cash fl ow from investments as per September 30, 2007 resulted from the divestiture of stock in Hanseatischer Immobilienfonds Holland XXVI GmbH & Co. KG.
The TEUR 33,600 dividend payout to shareholders by the HCI Group was the main reason for the negative cash fl ow. The company's fi nancial resource fund totaled TEUR 36,899 as per September 30, 2007, a decline of TEUR 18,198 against the same period for the 2006 fi nancial year.
Total assets as per September 30, 2007 amounted to TEUR 188,605, roughly 16.9 percent lower than at December 31, 2006 (TEUR 227,086), due primarily to the reduction in accounts receivable currently totaling TEUR 32,704 compared to the amount as per December 31, 2006, and the distribution of the EUR 1.40 dividend-per-share in May 2007, thus reducing cash and cash equivalents from TEUR 58,613 as per December 31, 2006 to TEUR 36,899 as per September 30, 2007.
Total equity dropped by 5.5 percent from TEUR 123,347 to TEUR 116,590 as per September 30, 2007. Due to the parallel decline of liabilities HCI Group's equity ratio increased from 54.3 percent at the end of fi nancial year 2006 to 61.8 percent at the end of the period under review.
The signifi cant drop of liabilities is due primarily to a decrease in trade payables which total TEUR 7,491 for the period currently under review compared to TEUR 26,394 as per December 31, 2007.
The high trade receivables and trade payables as per December 31, 2007 were directly linked to the expansion of the HCI Group's operational business during the last quarter of 2006.
In light of the high demand for closed-end funds products, specifi cally in the ship and real estate segments, and the successful market launch of structured products, HCI all in all expects to reach the targets for the fi nancial year 2007. Following the business cycle observed in previous years we expect the fourth quarter once again to be the strongest in terms of sales.
Given this background, the HCI Group expects equity placement volume to total approximately EUR 700 million for the current fi nancial year plus additional equity placement from the fi nalized subscription for HCI Hammonia Shipping AG totaling EUR 150 million which has not yet been featured in this fi nancial year's forecast. As equity placements during the current fi nancial year were characterized by a number of individual, customized transactions, the realised fee structures deviate from original plans. As a result and given an unvaried gross profi t, HCI forecasts revenues totaling EUR 140 million for the current fi nancial year. We expect consolidated net income amounting to at least EUR 35 million, thus generating an approximate EUR 1.46 in earnings per share. The positive development of income from asset trading, particularly noticeable in the items other operating income and results from associated companies and joint ventures accounted for using the equity method, as well as the relatively low tax rate during the course of the year encourage HCI Capital AG to confi rm this result in our forecast.
Given the current boom in demand for investments in ship funds, HCI expects equity capital placements in this segment to be considerably higher than the forecast. The HCI Group product pipeline is well stocked for the fourth quarter and features classic ship investment funds, asset creation plans and structured products such as the current HSC Shipping Protect I, which by accounting date was approximately twothirds placed, as well as another freight rate certifi cate (HSC Frachtraten Protect Zertifi kat II), poised to enter the market in November 2007. HCI expects overall placements in the ship segment to climb to EUR 450 – EUR 460 million for the fi nancial year 2007 of which an amount of EUR 380 – 390 million will account for the placement of classic ship funds and asset creation plans. EUR 70 million are estimated to be placed in structured products in this segment.
In addition capital in HCI Hammonia Shipping AG subscribed by the end of October with a volume of EUR 150 million will also contribute signifi cantly to HCI Group's year-end success. With this product the HCI Group has opened up the asset class ship to institutional investors. Banks and insurances are the main investors in HCI Hammonia Shipping AG. The company is scheduled to go public in late November 2007 and be quoted on the Hanseatic Stock Exchange in Hamburg.
The HCI Group expects equity placements to total a volume of EUR 125 million in the real estate segment in 2007. This fi gure includes approximately EUR 25 million, the HCI Group's placement result from the joint venture with U.S. real estate investor Behringer Harvard. Further, it includes EUR 100 million in opportunity funds. Following the placement of HCI Real Estate Growth I USA fi nalized in October of this year, HCI issued a new fund, the HCI Real Estate BRIC+ with an estimated placement volume of approximately USD 45 million. This fund of funds, structured as an opportunity fund in the real estate segment to invest in the growing real estate markets of Brazil, Russia, India and China, is unique on the market in its global diversifi cation structure. Because of its excellent expected rate of return and the highly rated quality of the fund management by both the HCI Group and the portfolio manager Townsend Group, the HCI Real Estate BRIC+ won the 2007 Financial Advisors Award for the best closed-end real estate fund, received a top rating by TKL and is rated "very good" by Feri Rating & Research.
Given business development and the rather slow demand for secondary life insurance market funds to date, particularly in the market for German life insurance policies, HCI continues to expect year-end placement results below last year's results. Investor interest is currently focused on secondary life insurance market funds investing in British life insurance policies. The HCI Group issued a new fund, HSC Optivita X UK, with a target equity of EUR 50 million in September 2007. A certifi cate for the development of a portfolio of British and German life insurance policies (HSC Optivita Europe LV Index Zertifi kat) with a volume of EUR 16.3 million has already been fully placed. Due to the great demand in the ship segment the focus will be directed towards issuing another freight rate certifi cate during the last quarter of 2007. In the secondary life insurance market segment, HCI Group expects to generate an overall placement volume of approximately EUR 100 – EUR 110 million, including asset creation plans and structured products.
The private equity fund of funds segment has developed below forecast during the present fi nancial year due primarily to the general market development. The tight situation in the credit markets has curtailed the demand for investment products in the private equity sector. The HCI Group issued a top-quality product this year, the HCI Private Equity VI, which in face of the diffi cult market, is not likely to be fully placed by the end of 2007. By year end, this segment is expected to generate a total placement volume of EUR 15 million.
Based on HCI Group's ongoing expansion of managed funds (trust management) and other services in asset management (ship chartering and management, insurance policy and real estate management) recurring income will continue to gain importance. During the period under review, income from this segment has increased to approximately EUR 23.2 million (2006: EUR 21.9 million), thereby positioning HCI Capital AG as the benchmark among listed closed-end funds issuing houses.
All told, the HCI Group will continue to follow its successful diversifi cation strategy during the fi nancial year 2007. The successful market entry with structured products is an important milestone enabling HCI to tap new client groups. Furthermore, the HCI Group was very successful in supplying attractive products in the ship and real estate segments for institutional investors. Together, these constitute essential steps in generating further growth for the placement of investment offers in the future.
Wolfgang Essing
Dr. Rolando Gennari
Dr. Ralf Friedrichs
Dr. Oliver Moosmayer
interim fi nancial statements as at September 30, 2007
| Nine months ended |
Nine months ended |
||
|---|---|---|---|
| EUR '000 | Note | September 30, 2007 |
September 30, 2006 |
| Revenues | (5) | 89,314 | 84,434 |
| Other operating income | (6) | 12,811 | 20,956 |
| Change in inventories | - 39 | 96 | |
| Cost of purchased services | - 44,463 | - 38,636 | |
| Personnel expenses | - 20,970 | - 16,082 | |
| Depreciation on property, plant and equipment and amortization of intangible assets | - 2,823 | - 2,946 | |
| Other operating expenses | - 14,027 | - 15,317 | |
| Results of associated companies and joint ventures accounted for using the equity method | (7) | 8,674 | 1,567 |
| Earnings before interest and taxes (EBIT) | 28,477 | 34,072 | |
| Interest income | (8) | 5,066 | 1,904 |
| Interest and similar expenses | (8) | - 2,994 | - 419 |
| Other fi nancial result | (8) | 2,096 | 2,614 |
| Earnings before taxes (EBT) | 32,645 | 38,171 | |
| Income taxes | (9) | - 5,401 | - 10,857 |
| Consolidated net income for the year | 27,244 | 27,314 | |
| Consoldiated net income for the period attributable to the group | 27,244 | 27,311 | |
| Consolidated net income for the period atributable to minority shareholders | 0 | 3 | |
| Earnings per share (basic) in EUR | (10) | 1.14 | 1.14 |
| Earnings per share (diluted) in EUR | (10) | 1.14 | 1.14 |
interim fi nancial statements for the third quarter ended September 30, 2007
| Three months ended September 30, |
Three months ended September 30, |
|
|---|---|---|
| EUR '000 | 2007 | 2006 |
| Revenues | 25,940 | 23,925 |
| Other operating income | 2,905 | 729 |
| Change in inventories | - 68 | 584 |
| Cost of purchased services | - 13,913 | - 12,680 |
| Personnel expenses | - 7,536 | - 5,322 |
| Depreciation on property, plant and equipment and amortization of intangible assets | - 806 | - 967 |
| Other operating expenses | - 4,498 | - 4,781 |
| Results of associated companies and joint ventures accounted for using the equity method | 3,835 | 555 |
| Earnings before interest and taxes (EBIT) | 5,859 | 2,043 |
| Interest income | 3,622 | 595 |
| Interest and similar expenses | - 1,851 | - 86 |
| Other fi nancial result | 637 | 1,286 |
| Earnings before taxes (EBT) | 8,267 | 3,838 |
| Income taxes | - 28 | - 349 |
| Consolidated net income for the year | 8,239 | 3,489 |
| Consoldiated net income for the period attributable to the group | 8,239 | 3,488 |
| Consolidated net income for the period atributable to minority shareholders | 0 | 1 |
| Earnings per share (basic) in EUR | 0.34 | 0.15 |
| Earnings per share (diluted) in EUR | 0.34 | 0.15 |
as at September 30, 2007
| September 30, | December 31, | |
|---|---|---|
| EUR '000 Note |
2007 | 2006 |
| ASSETS | ||
| Non-current assets | 79,811 | 69,669 |
| Intangible assets and property, plant and equipment | 8,807 | 11,768 |
| Investments in joint ventures accounted for using the equity method | 50,028 | 39,979 |
| Other investments | 14,164 | 12,966 |
| Other fi nancial assets | 6,812 | 4,956 |
| Current assets | 107,477 | 156,036 |
| Work in progress and fi nished services | 2,044 | 2,010 |
| Trade receivables | 25,974 | 58,678 |
| Receivables from related parties (13) |
1,274 | 1,355 |
| Income tax receivables | 4,917 | 147 |
| Other current assets | 35,731 | 27,733 |
| Other fi nancial assets | 34,739 | 27,354 |
| Other miscellaneous assets | 992 | 379 |
| Liquid funds | 36,899 | 58,613 |
| Assets held for sale (3) |
638 | 7,500 |
| Deferred taxes | 1,317 | 1,381 |
| Total assets | 188,605 | 227,086 |
| EQUITY AND LIABILITIES | ||
| Equity | 116,590 | 123,347 |
| Subscribed capital | 24,000 | 24,000 |
| Capital reserve | 76,016 | 76,016 |
| Consolidated retained earnings | 31,650 | 38,006 |
| Currency translation | - 544 | - 143 |
| Net cost in excess of net assets acquired on the acquisition of companies under common control and successive share acquisitions |
- 14,532 | - 14,532 |
| Non-current provisions and liabilities | 18,203 | 626 |
| Pension provisions | 19 | 16 |
| Liabilities to banks (4) |
18,165 | 591 |
| Other fi nancial liabilities | 19 | 19 |
| Current provisions and liabilities | 51,860 | 99,155 |
| Other provisions | 2,526 | 2,402 |
| Liabilities to banks (4) |
11,741 | 33,023 |
| Trade payables | 7,491 | 26,394 |
| Payables to related parties (13) |
944 | 4,263 |
| Income tax payables | 15,642 | 20,224 |
| Other current liabilities | 13,516 | 12,849 |
| Other fi nancial liabilities | 7,909 | 4,563 |
| Other miscellaneous liabilities | 5,607 | 8,286 |
| Deferred taxes | 1,952 | 3,958 |
| Total equity and liabilities | 188,605 | 227,086 |
for the period from January 1 to September 30, 2007
| Nine months | Nine months | |
|---|---|---|
| ended September 30, |
ended September 30, |
|
| EUR '000 | 2007 | 2006 |
| Consolidated net income for the period | 27,244 | 27,314 |
| Depreciation, amortization and impairment/ write-ups of non-current assets | 2,823 | 2,946 |
| Gains from joint ventures | - 8,674 | - 1,425 |
| Gains from the disposal of intangible, tangible and fi nancial assets | - 225 | - 178 |
| Increase / Decrease in pension provisions and other long-term obligations | 2 | 2 |
| Changes in deferred taxes | - 1,941 | - 253 |
| Other non-cash income and expenses | 0 | - 687 |
| Increase in working capital | - 7,898 | - 19,513 |
| Increase in inventories | - 34 | - 96 |
| Increase / decrease in trade receivables | 32,704 | - 3,403 |
| Decrease in pre-fi nancing of limited liability partner contributions | 152 | 1,597 |
| Increase / decrease in other assets | - 14,778 | 9,743 |
| Increase in current provisions | 123 | - 1,513 |
| Decrease in trade payables | - 18,903 | - 10,630 |
| Increase / Decrease in receivables from and payables to related parties | - 3,238 | - 1,330 |
| Decrease in other liabilities | - 3,914 | - 16,764 |
| Other movements in operating activities | - 10 | - 143 |
| Cash fl ows from operating activities | 11,331 | 8,206 |
| Proceeds from disposals of intangible assets and property, plant and equipment | 16 | 293 |
| Proceeds from disposal of investments | 8,012 | 290 |
| Payments for investments in intangible assets and in property, plant and equipment | - 504 | - 506 |
| Payments for subscribed shares in joint ventures | - 1,767 | - 3,019 |
| Payments for other investments | - 1,495 | - 2,925 |
| Cash fl ows from investing activities | 4,262 | - 5,867 |
| Dividends paid to shareholders of HCI Capital AG | - 33,600 | - 33,600 |
| Proceeds from additions to other fi nancing liabilities | 43,455 | 353 |
| Repayments of other fi nancing liabilities | - 47,162 | - 6,558 |
| Repayments of acquisition price deferrals in business combinations | 0 | - 2,000 |
| Cash fl ow from fi nancing activities | - 37,307 | - 41,805 |
| Changes in cash and cash equivalents | - 21,714 | - 39,466 |
| Cash and cash equivalents at the beginning of the period | 58,613 | 94,563 |
| Cash and cash equivalents at the end of the period | 36,899 | 55,097 |
for the period from January 1 to September 30, 2007
| in EUR '000 | Subscribed capital |
Capital reserve |
Consolidated retained earnings |
Foreign cur rency transla tion adjust ment |
Net cost in excess of net assets acquired on the acquisi tion of com panies under common con trol and suc cessive share acquisitions |
Total | Minority interests |
Consolidated equity |
|---|---|---|---|---|---|---|---|---|
| Balance at 01.01.2006 | 24,000 | 76,016 | 32,133 | 0 | - 14,596 | 117,553 | 101 | 117,654 |
| Consolidated net income for the period |
27,311 | 27,311 | 3 | 27,314 | ||||
| Change of currency trans lation differences |
- 145 | - 145 | - 145 | |||||
| consolidated comprehensive income |
27,311 | - 145 | 0 | 27,166 | 3 | 27,169 | ||
| Distributions to shareholders | - 33,600 | - 33,600 | - 33,600 | |||||
| Other changes | 3 | 3 | - 1 | 2 | ||||
| Balance at 30.09.2006 | 24,000 | 76,016 | 25,847 | - 145 | - 14,596 | 111,122 | 103 | 111,225 |
| Balance at 01.01.2007 | 24,000 | 76,016 | 38,006 | - 143 | - 14,532 | 123,347 | 0 | 123,347 |
| Consolidated net income for the period |
27,244 | 27,244 | 27,244 | |||||
| Change of currency trans lation differences |
- 401 | - 401 | - 401 | |||||
| Consolidated comprehensive income |
27,244 | - 401 | 0 | 26,843 | 0 | 26,843 | ||
| Distributions to shareholders | - 33,600 | - 33,600 | - 33,600 | |||||
| Balance at 30.09.2007 | 24,000 | 76,016 | 31,650 | - 544 | - 14,532 | 116,590 | 0 | 116,590 |
to the consolidated interim fi nancial statements of HCI Capital AG as at September 30, 2007 in accordance with IFRS
The unaudited consolidated interim fi nancial statements of HCI Capital AG and its subsidiaries (referred to below as: "HCI Group") as at September 30, 2007 have been prepared in accordance with IAS 34 whereby the Notes have been compiled in a condensed version in accordance with IAS 34.10 standards.
The accounting policies followed in the consolidated interim fi nancial statements of the HCI Group are those applied in preparing the IFRS consolidated fi nancial statements of HCI Capital AG as at December 31, 2006. The consolidated interim fi nancial statements as at September 30, 2007 should therefore be read in conjunction with the consolidated fi nancial statements as at December 31, 2006. Please refer to the second quarterly report as at June 30, 2007 for IASB and IFRIC standards and interpretations in effect since January 1, 2007.
The standards and interpretations listed below, as published by IASB and IFRIC in 2006 and 2007, are not yet mandatory for the compilation of the consolidated interim fi nancial statements as at September 30, 2007 for the HCI Group:
At present, the HCI Group assumes that the application of the above standards, with exception of IAS 1 and IFRS 8, at the time the application of these standards and their interpretations became mandatory, did not have any signifi cant effects on the fi nancial situation, net assets and results of the group. As IFRS 8 has not yet been endorsed by the European Commission, the company is currently in the process of appraising its possible effects. Following the amendment of IAS 1 changes in the presentation and titles of fi nancial statements are to be expected.
The consolidated balance sheet as at December 31, 2006 included long-term loan receivables amounting to TEUR 4,355 listed under other current fi nancial assets. The disclosure of maturity dates in the consolidated interim fi nancial statements as at September 30, 2007 were adjusted to the year-end consolidated balance sheet for 2006 for purposes of comparison.
During the fi rst two quarters of 2007, the HCI Group and Behringer Harvard Holland B.V. formed the B.H. & HCI Overschiestraat Holding B.V. The HCI Group holds 35 percent nominal capital in B.H. & HCI Overschiestraat Holding B.V. The purpose of the partnership is the purchase and sale of real estate, and the management of properties purchased. The share in the company will be consolidated using the equity method.
In connection with the purchase of property by the subsidiaries of BH & HCI Overschiestraat Holding B.V. HCI Group has made an equity payment to BH & HCI Overschiestraat Holding B.V. at an amount of TEUR 1,767
In accordance with IFRS 5, the interest held in Hanseatische Immobilienfonds Holland XXVI GmbH & Co. KG are classifi ed as assets held for sale. In an assignment agreement dated May 29, 2007, the total interest was sold for TEUR 7,500. Given the conditions of the assignment agreement, which got into full effect in July 2007, the divestiture of this interest became fully effective in the third quarter of 2007. There are no profi ts resulting from this sale for the HCI Group.
In a sales agreement dated June 28, 2007, the HCI Group sold its property in Jork, however, the ownership, rights, entitlements and obligations shall not be assumed by the purchaser until October 1, 2007. Therefore, in accordance with IFRS 5, the property will be classifi ed as asset held for sale in the consolidated balance sheet as at September 30, 2007. At the time of the property's appraisal for sales purposes less expenses involved, its value was adjusted by TEUR 373 which is reported under write-offs. In this context it should be noted that the liquidation of deferred taxes amounting to TEUR 76, which were set aside according to the appraised value at the time of investment in the HCI Group's consolidation basis, has had a contrary effect.
In the third quarter 2007 HCI Group raised a loan of TEUR 22,000 to fi nance the purchase of stock in ARAGON AG due September 30, 2012. The loan is split into two tranches with an interest rate of EURIBOR +0.95 percent and of EURIBOR +0.60 percent.
Revenue consists of the following:
| Nine months ended | Nine months ended | |
|---|---|---|
| EUR '000 | September 30, 2007 | September 30, 2006 |
| Sales revenues | ||
| Ship | 49,162 | 40,420 |
| Real estate | 7,431 | 6,828 |
| Private equity | 1,268 | 3,585 |
| Secondary life insurance market | 10,139 | 16,340 |
| Total sales revenues | 68,000 | 67,173 |
| Trust and service fees | ||
| Ship | 12,972 | 12,759 |
| Real estate | 2,296 | 2,144 |
| Private equity | 291 | 338 |
| Secondary life insurance market | 1,325 | 1,191 |
| Trust and service contract fees | 16,884 | 16,432 |
| Management fees | 955 | 824 |
| Other revenues | 3,475 | 5 |
| Total revenues | 89,314 | 84,434 |
Other revenues contain performance-related revenues generated by the liquidation of funds and dependent on specifi c yield-based key fi gures for the fi rst three quarters of 2007.
Other operating income for the fi rst three quarters of 2007 includes commission income of TEUR 2,822 (fi rst three quarters 2006: TEUR 18,152) from the brokerage of ships as well as compensation payments for collateralization. Proceeds from the sale of real estate properties during the fi rst three quarters of 2007 totaled TEUR 8,722 (fi rst three quarters 2006: EUR 0).
| EUR '000 | Nine months ended September 30, 2007 |
Nine months ended September 30, 2006 |
|---|---|---|
| Hammonia Reederei GmbH & Co. KG | 8,258 | 1,680 |
| HELLESPONT HAMMONIA GmbH & Co. KG | 73 | - 113 |
| BH & HCI Real Estate Holding B.V. | 313 | 0 |
| BH & HCI Overschiestraat Holding B.V. | - 36 | 0 |
| ARAGON AG | 66 | 0 |
| Results of joint ventures accounted for using the equity method | 8,674 | 1,567 |
The HCI Group, which acquired 25 percent plus one share of Aragon AG in December 2006 and accounted for the associated company in the consolidated fi nancial statements according to the equity method, has incorporated it into the HCI Group's consolidated interim fi nancial statements as at September 30, 2007 in accordance with IAS 28.25 disclosing fi nancial information for the fi rst two quarters ended June 30, 2007, as said company's third-quarter accounts were not available at the time the consolidated fi nancial statements were drawn up.
Trademark rights, intangible assets with an indeterminate time of use, amounting to TEUR 2,353, and intangible assets with a time of use ranging between six and ten years and amounting to TEUR 2,005 were applied in calculating the purchase price allocation for ARAGON AG. The allocated goodwill amounted to TEUR 19,978 is included in the book value of ARAGON AG according to the equity-method. The depreciation on intangible assets with a determinate time of use and deferred tax items will be accounted for in the results from associated companies.
For the third quarter 2007 as a result of other property sales, the HCI Group realized an income of TEUR 2,030 from the cancellation of loan commitments and the divestiture of interest rate swaps originally planned for the fi nancing of real estate.
Other fi nancial results for the fi rst three quarters of 2007 include fees totaling TEUR 3,143 (fi rst three quarters 2006: TEUR 2,950 ) received by the HCI Group in the form of preliminary dividends from the secondary life insurance market funds.
Other fi nancial results for the period ended September 30, 2007 includes exchange losses of TEUR 1,927 (fi rst three quarters 2006: TEUR 811).
Income taxes for the period ended September 30, 2007 include income from reversal of tax provisions accounting for TEUR 1,043 (fi rst three quarters 2006: TEUR 73).
The amendments to German corporate tax law following approval of the Corporate Tax Reform by the Federal Parliament in July 2007 were taken into account in calculating long-term deferred taxes. The amendment to the law reducing the corporate tax rate from 25 percent to 15 percent and trade income tax calculation base from 5 percent to 3.5 percent as well as amendments to the additions and reductions in calculating trade income tax have resulted in a positive item of TEUR 785 for the period ended September 30, 2007.
Basic and diluted earnings per share are determined as follows:
| Nine months ended September 30, 2007 |
Nine months ended September 30, 2006 |
||
|---|---|---|---|
| Consolidated net income for the period attributable to the group | EUR '000 | 27,244 | 27,311 |
| Weighted average number of shares outstanding | '000s of shares | 24,000 | 24,000 |
| Earnings per share for the period | EUR | 1.14 | 1.14 |
As there were no dilutive instruments outstanding during the periods, presented diluted earnings per share equal basic earnings per share.
The following income taxes, interest and investment income paid and received are included in cash fl ows from operating activities:
| EUR '000 | Nine months ended September 30, 2007 |
Nine months ended September 30, 2006 |
|---|---|---|
| Interest paid | 847 | 316 |
| Interest received | 1,556 | 1,182 |
| Income taxes paid | 11,321 | 21,081 |
| Income taxes received | 34 | 102 |
| Investment income received | 342 | 683 |
There were no signifi cant non-cash transactions during the fi rst three quarters of 2007.
Segment information is determined using the accounting policies applied in the preparation of the consolidated fi nancial statements.
Revenue from external customers represents revenue from designing, initiating and distributing investments and from providing trust, after sale and management services to parties outside the group. The HCI Group uses EBIT, a metric commonly used around the world representing net earnings before interest and income taxes, to measure its segment results.
The results for the periods presented are as follows:
| EUR '000 | Nine months ended Nine months ended September 30, 2007 September 30, 2006 |
|||
|---|---|---|---|---|
| Revenue from external customers |
EBIT | Revenue from external customers |
EBIT | |
| Ship | 65,609 | 31,271 | 53,184 | 36,763 |
| Real estate | 10,436 | 7,860 | 9,796 | 443 |
| Private equity | 1,559 | 392 | 3,923 | 441 |
| Secondary life insurance market | 11,464 | 549 | 17,531 | 4,192 |
| Total segments | 89,068 | 40,072 | 84,434 | 41,839 |
| Other / holding | 246 | - 11,595 | 0 | - 7,767 |
| Group | 89,314 | 28,477 | 84,434 | 34,072 |
Receivables from and payables to related parties consist of the following:
| EUR '000 | September 30, 2007 | December 31, 2006 |
|---|---|---|
| Receivables from joint ventures and associates | 1,270 | 1,352 |
| Receivables from non-consolidated subsidiaries | 4 | 3 |
| Receivables from related parties | 1,274 | 1,355 |
| Payables to HCI SICAR A.G., HCI Trust AG, their shareholders and to companies they control | 0 | 120 |
| Payables to joint ventures and associates | 0 | 0 |
| Payables to non-consolidated subsidiaries | 673 | 910 |
| Payables to HCI Group Management and Supervisory Board members | 271 | 3,233 |
| Payables to related parties | 944 | 4,263 |
| Provisions for bonuses due to HCI Group management | 1,361 | 0 |
| Provisions for profi t sharing | 0 | 1,543 |
| Other provisions | 2,526 | 1,543 |
Income from and expenses paid and payable to related parties are summarized as follows:
| TEUR | Nine months ended September 30, 2007 |
Nine months ended September 30, 2006 |
|---|---|---|
| Income from joint ventures and associates | 8,710 | 1,680 |
| Income from related parties | 8,710 | 1,680 |
| Expenses paid for transactions with HCI SICAR A.G., HCI Trust AG, their shareholders and to companies they control |
0 | 60 |
| Expenses paid and payable to HCI Group Management and Supervisory Board members | 5,734 | 2,862 |
| Expenses for joint ventures and associates | 36 | 113 |
| Expenses paid or payable to related parties | 5,770 | 3,035 |
During the period ended September 30, 2006, HCI SICAR A.G. fulfi lled obligations amounting to TEUR 2,000 to companies it controls. Interest payments on loans payable to HCI SICAR A.G. by companies it controls amounted to TEUR 23 during the fi rst three quarters of 2006.
As a result of the sale of its interest in the HCI Group in January 2007, HCI SICAR A.G. and its shareholders have withdrawn entirely from parties and companies related to or associated with the HCI Group.
Expenses paid and payable to HCI Group management consist of the fi xed remuneration components for the respective periods and the proportional bonus entitlements of the Management Board members as well as the remuneration of the Supervisory Board members.
The following contingent liabilities and other fi nancial commitments exist at September 30, 2007:
| EUR '000 | September 30, 2007 | December 31, 2006 | ||||
|---|---|---|---|---|---|---|
| EUR '000 | EUR '000 | USD '000 | EUR '000 | EUR '000 | USD '000 | |
| Guarantees | 1,392,786 | 305,996 | 1,537,700 | 746,891 | 94,102 | 857,764 |
| of which value dated | 916,983 | 260,755 | 928,497 | 504,721 | 82,315 | 555,042 |
| Placement guarantees | 390,496 | 85,470 | 431,582 | 283,955 | 186,040 | 128,661 |
| of which for funds not yet in distribution | 321,793 | 64,970 | 363,379 | 92,581 | 55,382 | 48,880 |
| Future payments under operating leases | 4,311 | 4,311 | 5,184 | 5,184 |
At the annual general meeting held on May 10, 2007, shareholders voted in favor of the proposal by the Management and Supervisory Boards for the payment of a dividend of TEUR 33,600 out of retained earnings of HCI Capital AG as at December 31, 2006. This represents a dividend of EUR 1.40 per share. The dividend was distributed to shareholders on May 11, 2007.
A number of share transactions took place during October 2007. Christ Capital GmbH sold its 10-percent share in HCI Capital AG to Corsair Capital LLC, thus ceasing to be a shareholder and thereby raising the latter's total share in HCI Capital AG to 20 percent. Corsair Capital LLC and MPC Capital AG simultaneously revoked an agreement which, until now, permitted both shareholders the mutual assignment of the voting rights of their HCI shares.
Due to his resignation from the management board effective from September 30, 2007, and the sale of his HCI shares in October, 2007 Harald Christ is no longer related party of the HCI Group.
In September 2007, the Supervisory board of HCI Capital AG voted in favour of a personnel change, appointing Dr. Oliver Moosmayer as a member of the Management Board. Dr. Moosmayer took over his position as CPO effective October 1, 2007, thereby succeeding Dr. Ralf Friedrichs, who will retire from the Management Board with effect of December 31, 2007 and take on new responsibilities within the HCI Group.
No further signifi cant reportable events occurred subsequent to the balance sheet date.
December 6, 2007 DSW event for private clients, Bremen
November / December 2007 Roadshows Germany and U.S.A.
November 12-14, 2007 Deutsche Börse, KfW Mittelstandsbank – Deutsches Eigenkapitalforum, Frankfurt
November 10, 2007 Stock Exchange Day , Hamburg
September 25 – 27, 2007 Unicredit German Investment Conference 2007, Munich
September 11, 2007 SRC Exchange Day Financial Services, Frankfurt
August 14, 2007 Publication second quarterly report
June 21, 2007 Citigroup Investor Jour Fixe, London
June 5, 2007 Roadshow Paris
May 24, 2007 Dresdner Kleinwort Mid & Small Cap Financial Seminar, London
May 10, 2007 Annual shareholders' meeting, Hamburg
May 8, 2007 Publication fi rst quarterly report
March 28, 2007 Road show London
March 19, 2007 HCI fi nancial analyst meeting, Frankfurt
March 7, 2007 Presentation of 2006 annual report
February 27, 2007 Presentation temporary year-end results 2006 & outlook 2007
February 6, 2007 Road show, Frankfurt
January 29-31, 2007 Road show, Benelux, London, Scandinavia
HCI Capital AG Bleichenbrücke 10 D-20354 Hamburg Telefon +49 40 88 88 1-0 Telefax +49 40 88 88 1-199 [email protected] oder www.hci-capital.de
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