Quarterly Report • Sep 4, 2009
Quarterly Report
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| Six months ended | Six months ended | |
|---|---|---|
| Earnings | June 30, 2009 | June 30, 2008 |
| Revenues in EUR thousands | 22,662 | 61,652 |
| EBIT in EUR thousands | - 12,091 | - 18,157 |
| EBT in EUR thousands | - 31,113 | - 18,754 |
| Group net loss in EUR thousands | - 36,100 | - 18,485 |
| Return on sales in % | - 159.30 | - 29.98 |
| EBIT margin in % | - 53.35 | - 29.45 |
| Earnings per share in EUR | - 1.50 | - 0.77 |
| Placed equity in EUR million | 73.1 | 340.5 |
| Balance sheet | June 30, 2009 | December 31, 2008 |
| Total assets in EUR thousands | 129,894 | 172,586 |
| Equity in EUR thousands | 50,554 | 86,200 |
| Equity ratio in % | 38.92 % | 49.95 % |
| Staff | June 30, 2009 | June 30, 2008 |
| Average employees | 295 | 281 |
| Personnel costs in EUR thousands | 12,320 | 15,290 |
| Personnel costs in % of revenue | 54.4 | 24.8 |
Hint: Rounding differences likely to occur.
The ongoing fi nancial and economic crisis has presented major challenges to providers of closed-end funds since the end of 2008. Investors feel insecure after the worldwide slumps in fi nancial markets and are currently tending to focus mainly on fi xed-interest bonds and investments of this kind that are seen as stable in value. The otherwise general restraint exercised by investors with regard to new investments is very noticeable in all asset classes, including the market for closed-end funds, which in the fi rst half of 2009 saw a substantial decline in new business compared with the previous year. In the ship fund segment in particular the weak market environment weighs heavily on existing funds and thus has a further negative effect on new business.
The HCI Group tackled the challenges in this diffi cult market environment at an early stage. With far-reaching cost reduction measures and restructuring of its product range it has already taken signifi cant steps to adapt to the changes in market conditions. In addition, the HCI Group has in negotiations with its principal creditor banks and shareholders reached major milestones that should give the Company the leeway it needs in the years ahead to cope successfully with the crisis and extend its leading position as a provider of closed-end funds.
After several months of negotiations a comprehensive restructuring concept was discussed and accepted by the main creditor banks HSH Nordbank AG and the Commerzbank Group and with HCI Capital AG's principal shareholders MPC Capital AG and the Döhle Group as a fi rst step toward releasing the HCI Group from all material contingent liabilities to banks and safeguarding liquidity on a lasting basis. In detail the restructuring is a multi-stage concept agreed as a fi rst step after several months of negotiations with the main creditor banks HSH Nordbank and the Commerzbank Group and the principal shareholders MPC Capital AG and the Döhle Group. It is aimed at a long-term moratorium, the simultaneous release from all material contingent liabilities to banks, a subsequent capital increase in cash, and the conversion of existing HCI Capital AG fi nancing arrangements. The two main creditor banks account for the main share (about three quarters) of the Company's contingent liabilities. The concept will need to be agreed fi nally with the other creditor banks in the weeks ahead and is subject, among other things, to unanimous consent of all other banks involved.
HCI Capital AG aims to agree with the banks an irrevocable moratorium on claims for contingent liabilities until 30 June 2013. At the same time a phased total release from the overwhelming majority of existing contingent liabilities is aimed to be concluded by 28 February 2010.
On completion of the release from liability a EUR 22 million cash capital increase is intended to be undertaken. MPC Capital AG and the Döhle Group would underwrite it, should the other shareholders not exercise their subscription rights. In addition, the banks are to receive a claim against HCI Capital AG in the form of a EUR 12.5 million debtor warrant the details of which have yet to be agreed.
Furthermore, an extension of loan repayments to banks until 30 September 2010 was agreed to ensure short-term liquidity. Conversion of the deferred liabilities into equity or, alternatively, into long-term funding is being considered to ensure that the HCI Group's cash fl ow is not impaired with lasting effect.
How diffi cult the current market environment is for providers of closed-end funds is shown very clearly by the sharp decline in the volume of equity capital placed by the industry. With the exception of individual products that are currently bucking the general trend, in the fi rst two quarters of 2009 the market continued to decline after the tumble it took in the fourth quarter of 2008. The HCI Group did not escape this trend, and the volume of equity capital placed in the fi rst half of 2009 was, at around EUR 73.1 million, signifi cantly lower than the previous year's EUR 340.5 million. The Group was, however, able to go against the trend of general decline by increasing the volume of its placements to EUR 43.0 million in the second quarter of 2009 compared with the fi rst quarter's EUR 30.1 million. In the fi rst half of 2009, for example, we succeeded in placing a signifi cant volume of around EUR 48.2 million in classic closed-end funds, asset creation plans and guaranteed products, especially in the ship fund category. In addition, new products such as HCI Energy 1 Solar and a guaranteed capital version of HCI Deepsea Oil Explorer contributed toward this placement success.
The weak overall economic trend and substantial impairments that the HCI Group was obliged to make, mainly on a number of investments and receivables, had a signifi cant negative impact on the fi rst-half result for 2009. Due mainly to market-related impairments and other special effects totalling EUR -30.2 million, the consolidated result after taxes was EUR -36.1 million and therefore even poorer than the previous year's EUR -18.5 million, which was also affected by special effects. As at 30 June 2009 the HCI Group has an equity ratio of 38.9 %. In addition, in the fi rst half of 2009 the Group earned a positive cash fl ow from operating activities and held EUR 22.6 million in cash and cash equivalents as at 30 June 2009.
The market environment will continue in the foreseeable future to be diffi cult for issuing houses. The major upsets in ship markets in particular will for the time being pose a serious challenge for new business and for existing funds. In the course of these developments the industry faces changes and will need to develop considerably in the years ahead:
Regardless of this, closed-end funds are and will remain a cornerstone of the fi nancial system. That applies especially to the fi nancing of ships and real estate that for decades has been a regular feature of the product range in this investment segment. In shipping alone, a third of the world's container shipping fl eet is fi nanced by German investors via closed-end funds. We are convinced that the closed-end fund will continue to be a mainstay of the fi nancial system and make the fi nancing of investment in tangible assets possible.
The HCI Group is one of the leading issuing houses, has 24 years of experience and can lay claim to innovation and fl exibility without equal among our competitors that we have repeatedly demonstrated in recent years. We are therefore one of the few issuing houses that are in a position to actively shape the change that our industry needs. The agreements now under completion with the banks can provide the decisive basis for this change. The comprehensive restructuring concept that we have developed jointly with HCI Capital AG's principal banks and shareholders would give us the leeway needed in the years ahead to cope with the most serious crisis the industry has ever experienced and provide major stimuli for sustainable further development of business in closedend investment models. That is why we will do our utmost in the weeks and months ahead to ensure that this concept is brought to a successful conclusion with all of the banks involved.
For our employees, sales and business partners, investors and not least our shareholders the current trend at the HCI Group constitutes without doubt a severe endurance test, and we are fully aware of the fact. We are also convinced, however, that in the fi rst half of 2009 we have put in place fundamental measures to ensure development prospects for the Company. At the same time there are also signs of an improvement in overall economic development once more. If this trend is consolidated and the economy regains momentum in the years ahead, that too will take our operating business forward again. All of the HCI Group's stakeholders should benefi t, in the medium and the long term.
Best wishes,
Hamburg, August 2009
Dr. Ralf Friedrichs (Chairman of the Management Board)
In an environment still characterised by uncertainties about where the world economy was heading, global stock markets continued to show volatile development in the reporting period. After an initial sharp decline in market indices at the beginning of the year, stock markets have latterly recovered perceptibly. After the latest upward trend the German DAX index closed on 30 June 2009 at 4,808 points. In the course of this development the MDAX index of midrange companies closed on 30 June 2009 at 5,754 points, while the SDAX ended the reporting period at 2,904 points.
In this environment the HCI share began by falling further but regained ground from the middle of the reporting period. In the reporting period the share traded at very low daily levels in a price range that varied between EUR 1.10 at the beginning of March and EUR 2.09 at the beginning of January. The share price on 30 June 2009 was EUR 1.45.
Five analysts currently follow HCI Capital AG's progress with regular reports and assessments on the HCI share. One analyst currently gives the share a "Hold" rating, while the recommendations of the others are Reduce, Underweight and Sell.
After the recession in the fourth quarter of 2008 the world economy's downward trend continued overall in the fi rst half of 2009 and only showed signs of bottoming out at the end of the reporting period. After a worldwide slump in manufacturing, trading and investment activity at the beginning of the year there was a slight recovery in industrial production at the end of the second quarter. The gross domestic product in the United States and the euro zone showed only a slight fall of 0.3 % and 0.1 % respectively in the second quarter. In the fi rst quarter of 2009 the fi gures were -1.6 % in the US and -2.5 % in the euro zone. Only the emerging market countries China and India continued to report economic growth in the fi rst half of 2009, albeit at a much lower rate than in previous years.
In Germany too the recession continued in the fi rst quarter, with negative growth of 3.5 %. Exports were especially hard hit and made a substantial contribution toward the real decline in gross domestic product as the German economy relies heavily on its trade balance. The increasingly poor orders position prompted many companies to introduce short time or to lay off employees. Cancellations of existing orders initially led to a signifi cant rise in inventories, but the demand backlog at the end of the reporting period ushered in a strong increase in orders and a partial stabilisation of export business. In the second quarter of 2009 the German economy reported slight 0.3 % growth on the previous quarter for the fi rst time since the fi rst quarter of 2008 and was able to end the recession, at least for the time being, sooner than expected.
Against the background of international economic setbacks there are no signs yet of recovery in shipping markets. The level of 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 June the Clarkson Container Ship Time Charter Rate Index was down by about 23.4 % compared with the end of 2008. As a rule, business is no longer profi table at this level. In the bulk carrier markets a gradual recovery in charter rates was noted in the fi rst half of 2009. The Baltic Dry Index, a price index for shipping bulk goods, stood at 4,291 points at the beginning of June 2009. That was an improvement of 3,628 points on its historic low at the beginning of December 2008. The reason for this development was 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 in the second quarter of 2009 than in the same period the previous year. In tanker markets too, which were initially affected less by the crisis, rate levels took a turn for the worse in the fi rst half. Time charter rates, still profi table as a rule, are down signifi cantly in a number of market segments. The overall decline in demand for oil and oil products hit tanker markets especially hard.
The measures undertaken around the world by governments and central banks contributed greatly to stabilising the fi nancial system. They consist of recapitalising the banks' weakened capital base and government guarantees to strengthen inter-bank trading. At the same the world's leading central banks shifted their focus from maintaining monetary stability to boosting the economy. As a result the US Federal Reserve reduced interest rates to between 0.00 % and 0.25 %. In addition, the European Central Bank reduced its interest rate to 1.00 %, the lowest level since the euro was launched, while the Bank of England cut its rate to 0.5 %. Furthermore, governments of leading industrial and emerging market countries announced substantial national economic stimulus packages to boost consumer demand and investment and thereby counteract the economic downturn or prevent a longer-term depression.
A further positive factor is the low oil price, which has fallen from a peak of about USD 140 per barrel in 2008 to around USD 40. Toward the end of the reporting period oil prices were tending to rise again, however. The price per barrel at the end of June was around USD 70. The signifi cant overall decline in commodity-driven infl ation has strengthened consumer purchasing power and eased pressure on the manufacturing industry.
After a weak phase at the beginning of the year the US dollar ended the reporting period at EUR 1.41 once more.
Against the backdrop of further weak economic development and an ongoing high level of uncertainty about the extent and duration of the fi nancial and economic crisis, investors continued to show marked restraint regarding investment products in the reporting period. This also affected development of the market for closed-end funds considerably. After the market had initially stabilised in the fi rst quarter of 2009 compared with the weak 2008 fourth quarter, according to fi gures compiled by the industry association Verband Geschlossene Fonds e.V. (VGF), due to low transaction numbers, especially for direct investment in real estate, the second quarter showed a further signifi cant decline in placement volume on the two previous quarters. Placements were down 19.3 % on Q1 2009 and 18.3 % on Q4 2008. The only areas that reported an increase on the previous quarter were the secondary life insurance market and energy funds. In all other asset classes, especially ship funds, aircraft funds and real estate funds too, the fi gures for the second quarter of 2009 showed a marked decline. In keeping with this trend the ScopeAnalysis surveys show the total volume of new closed fund issues in the reporting period to have fallen by about 38.6 % on the previous year.
Against the background of a weak market environment the HCI Group sustained a signifi cant fi rst-half decline in placement volume to about EUR 73.1 million (previous year: EUR 340.5 million). Due to the regional alignment of sales and intensive dialogue with sales partners, HCI has, however, succeeded in placing equity capital in nearly all asset classes and in doing so continuously. In addition, compared with the fi rst quarter and bucking the general market trend, placement volume in the second quarter rose from EUR 30.1 million to EUR 43.0 million. So the Group's placement volume is well above the average that is currently achieved by issuing houses in the market. VGF surveys show these to have been EUR 20.4 million in the fi rst quarter and only EUR 16.4 million in the second quarter of 2009.
In the 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 49.9 million in the fi rst half of 2009 (previous year: EUR 199.0 million). With a EUR 48.2 million total equity capital
| Δ % | |||
|---|---|---|---|
| 29,595 | 131,969 | - 102,374 | - 77.6 % |
| 9,230 | 13,350 | - 4,120 | - 30.9 % |
| 2,440 | 18,455 | - 16,015 | - 86.8 % |
| 5,463 | - 5,463 | ||
| 822 | 822 | ||
| 235 | 235 | ||
| 7,893 | 40,938 | - 33,045 | - 80.7 % |
| 10,663 | 20,635 | - 9,973 | - 48.3 % |
| 899 | 899 | ||
| 49,872 | 199,005 | - 149,134 | - 74.9 % |
| 1,029 | 80,150 | - 79,121 | - 98.7 % |
| 5,315 | 57,206 | - 51,891 | - 90.7 % |
| 700 | 700 | ||
| *) | |||
| 1,804 | 1,463 | 341 | 23.3 % |
| 7,119 | 58,669 | - 51,550 | - 87.9 % |
| 5,740 | 5,740 | ||
| 2,618 | 2,618 | ||
| 6,768 | 6,768 | ||
| 15,126 | 15,126 | ||
| 1,929 | - 1,929 | ||
| 731 | - 731 | ||
| 2,660 | - 2,660 | ||
| 73,145 | 340,484 | - 267,339 | - 78.5 % |
| HY 2009 | HY 2008 | Δ |
*) Regrouping of Multi Asset Protect to T&L due to main investments in ship products.
placement in Ship investments this continues to be the largest asset class in the HCI portfolio. It includes EUR 29.6 million in classic participation models, EUR 10.7 million in participations in asset creation plans and EUR 7.9 million in guarantee products (HSC Shipping Protect 3 and Multi Asset Protect). In the asset class Aircraft HCI Aircraft One was withdrawn from sales temporarily in the second quarter with a view to the concept being revised. In the reporting period EUR 0.8 million was placed in HCI Aircraft One participations and EUR 0.9 million in Aufbauplan 8.
In the Energy and Commodities product area a signifi cant EUR 2.0 million placement increase was achieved compared with the fi rst quarter, taking the fi rst-half total to EUR 15.1 million. Deepsea Oil Explorer Protect, a guaranteed capital version of HCI Deepsea Oil Explorer, was launched at the beginning of May 2009 and reached a placement volume of EUR 2.6 million by 30 June 2009. Placement of the classic product, HCI Deepsea Oil Explorer, amounted to EUR 5.7 million in the reporting period. At the beginning of April 2009 the HCI Group launched HCI Energy 1 Solar, another new product that has met with brisk demand in the current market environment. By 30 June 2009 EUR 6.8 million of the EUR 10 million target volume had already been placed. Placement of this fund was completed successfully in August 2009.
In the Real Estate product area a volume of EUR 1.0 million was placed in the reporting period in an opportunist fund, HCI Real Estate G7. Against the background of exceptional market activity in direct real estate investment, demand for HCI Real Estate G7 was slack, however. That is why the fund was withdrawn from sales and the EUR 1.3 million in equity capital subscribed was returned to the investors.
In the Secondary Life Insurance Market product area a total of EUR 7.1 million was placed in the reporting period in the current HSC Optivita UK XI product and asset creation plans.
Due to the sharp decline in placement results achieved in the fi rst half of 2009 compared with the previous year, the HCI Group's revenues dropped substantially in the reporting period. Totalling EUR 22.7 million, they were well below the previous year's EUR 61.7 million. Compared with the fi rst quarter's EUR 10.0 million, the second quarter of 2009 saw a 27.0 % rise in revenues.
Sales and fund design revenues rose from EUR 4.1 million in the fi rst quarter to EUR 6.3 million in the second, but the EUR 10.4 million total for the fi rst half of 2009 was well below the previous year's EUR 48.9 million. Trust management and service fees totalled EUR 10.7 million and were therefore slightly below the previous year's EUR 11.3 million. Revenues from management fees were up a little on the year from EUR 1.4 million to EUR 1.5 million.
In the fi rst half of 2009 no signifi cant other operating income was earned in ship or real estate brokerage. The fi gure for the previous year included EUR 1.8 million in compensation payments received for breach of shipbuilding contracts. Other operating income was thus lower at EUR 0.7 million than the previous year's EUR 4.0 million.
Changes in Inventory include EUR 1.3 million (previous year: nil) in impairment charges on capitalised 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, in keeping with the decline in placement results, about 76.7 % down on the previous year from EUR 32.5 million to EUR 7.6 million in the reporting period. The disproportionate decline in commission expenses compared with the fall in revenues shows that revenues from trust management is weighted more heavily in revenues. The 61.7 % gross yield margin in the fi rst half of 2009 was signifi cantly higher than the previous year's 47.5 %. The gross yield margin in the sales and fund design segment, adjusted for the impairment on work in progress and fi nished services, showed no signifi cant change on the previous year.
Personnel expenses fell by about 20.0 % on the previous year in spite of EUR 1.3 million in one-off expenses in connection with personnel measures in the second quarter of 2009 to EUR 12.3 million (previous year: EUR 15.3 million). This was largely due to last year's EUR 3.8 million in severance payments to management board members and to the sharp decline in bonuses. The average number of employees rose to 295 (previous year: 281). In the fourth quarter of fi nancial year 2008 the number of employees was 303 and has therefore fallen by eight.
Other operating expenses as at the reporting date amounted to EUR 10.1 million and were 9.6 % below the previous year's EUR 11.1 million. First-half savings in non-personnel costs as a result of the cost reduction programme totalled around EUR 2.0 million and were achieved mainly in travel expenses and marketing costs. The HCI Group also incurred one-off expenses totalling EUR 2.0 million to 30 June 2009 (previous year: EUR 1.0 million) that consisted mainly of legal and consulting expenses.
Investment income from associated and joint ventures accounted for under the equity method amounted to EUR -3.2 million in the reporting period compared with the previous year's EUR -23.4 million. The main special effect that led to this signifi cantly negative result in the previous year was the EUR 24.8 million impairment charge on the investment in NY Credit Operating Partnership LP. In the fi rst half of 2009 an impairment charge of EUR 1.6 million on the investment in eFonds Holding AG and EUR 0.9 million in impairment charges on ship ordering companies operated jointly with shipowners led to the negative result. There were no signifi cant positive earnings contributions from other shareholdings.
Due to the course of business outlined above and to EUR -12.1 million in one-off special effects, earnings before interest and taxes (EBIT) for the period 1 January to 30 June 2009 were well above the previous year's EUR -18.2 million.
The fi nancial result at EUR -19.0 million was EUR 18.4 million below the previous year's EUR -0.6 million. Interest income was down by EUR 0.3 million to EUR 0.9 million. Interest expenses were also down, from EUR -2.3 million to EUR -1.2 million. That was due mainly to a substantial repayment of debt. The remainder of the signifi cantly negative fi nancial result was due mainly to EUR 14.1 million in impairment charges on fi nancial investments, securities and non-current fi nancial receivables as a result of impairment tests and the impairment of right of recourse to a fund company that led to EUR 1.9 million in expenses. In addition, the measurement of assets held for sale at fair value less cost of sale for investments in associated and joint ventures previously accounted for under the equity methode resulted in a EUR 3.2 million burden on the result.
Earnings before taxes (EBT) totalled EUR -31.1 million in the reporting period. They were therefore well below the previous year's EUR -18.8 million.
Income taxes amounted to EUR -5.0 million in the fi rst half of 2009 (previous year: EUR 0.3 million), due mainly to the reversal of the recognition of deferred tax assets on tax loss carryforwards as a result of changes in planned scenarios.
The consolidated net result for the period was EUR -36.1 million, again lower than the previous year's EUR -18.5 million.
In the fi rst half of 2009 the HCI Group generated a EUR 2.1 million positive cash fl ow from operating activities. This EUR 3.6 million improvement on the previous year was due mainly to the EUR 3.8 million positive cash fl ow from the decrease in funds tied down in working capital (previous year: EUR 1.9 million increase in funds) and to EUR 4.7 million in net tax refunds received for prior periods as against the previous year's EUR 5.5 million in taxes paid.
The EUR -3.2 million negative cash fl ow from investment activities was due mainly to investments in other investments and associated companies. Compared with the previous year, cash fl ow improved by EUR 2.9 million because the shares in eFonds Holding AG were acquired in the fi rst half of 2008.
Repayment of debt led to a EUR 5.6 million negative cash fl ow from fi nancing activities. An improvement in cash fl ow from fi nancing activities on the fi rst half of 2008 was due to the dividend distribution, which reduced the previous year's cash fl ow by EUR 16.8 million.
At EUR 129.9 million total assets at 30 June 2009 were EUR 42.7 million down on the total to 31 December 2008. Noncurrent assets were down by EUR 20.3 million and thereby accounted for 48.0 % of the fall in net assets. Current assets fell by EUR 22.4 million to a total of EUR 67.5 million that accounted for 52.0 % of the balance sheet total.
The change in non-current assets is due primarily to a EUR 5.9 million decline in other investments as a result of value adjustments after impairment tests in view of the continuing diffi cult market conditions to 30 June 2009 and to a EUR 4.1 million reduction in deferred tax assets.
In addition, receivables from related parties and other fi nancial assets were down by EUR 5.2 million from EUR 14.7 million to EUR 9.5 million, while investments in associated companies and joint ventures accounted for under the equity method were down by EUR 4.1 million. This was due for one thing to EUR 3.5 million in impairments of these holdings. Also, EUR 3.3 million of interests was reclassifi ed as assets held for sale in accordance with IFRS 5. Due to the intention to dispose of it, it was then measured at fair value less cost of sale. That led to a EUR 3.2 million impairment. These changes were countervailed by a EUR 2.2 million additions in investments in associated companies and joint ventures accounted for under the equity method as a result of capital increases.
The change in current assets resulted mainly from reductions in trade receivables (EUR -7.9 million), cash and cash equivalents (EUR -6.7 million), income tax receivables (EUR -3.8 million) and other assets (EUR -2.5 million).
The decline in trade receivables is due mainly to lower revenues in the fi rst half of 2009 in accordance with the ongoing diffi cult market position outlined in the course of business.
Equity was down by EUR 35.6 million from 31 December 2008 to EUR 50.6 million as at 30 June 2009. The equity ratio fell from 49.9 % to 38.9 % as at 30 June 2009. This was due in particular to the negative consolidated net result for the period of EUR -36.1 million.
Non-current provisions and liabilities were down by EUR 23.6 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 assets as at 30 June 2009 in view of their due dates. Overall, debt was down by EUR 6.1 million and other liabilities were reduced from EUR 11.3 million to EUR 6.6 million.
The HCI Group's Management Board decided in July 2009 to withdraw the HCI Real Estate G7 GmbH & Co. KG real estate fund that had been on sale since the beginning of November 2008 and refund the placed capital to investors. The fund was intended to give investors from the general public access to established real estate markets in the world's largest industrialised countries via subscription to holdings in these countries. At the time of the decision to halt placement of the fund a fund subsidiary had signed up to a EUR 10 million investment in an appropriate real estate fund. Payment has yet to be made. The intention is to transfer the holding in the real estate fund to a third party. In addition, the HCI Group made investors who had already subscribed to the fund to buy back their shares; all investors have accepted this offer. The anticipated loss from winding up the fund amounts to EUR 1.8 million.
For the latest status of negotiations with the banks and the package of measures please see the Report on risks and opportunities.
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 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:
– As expected, a reliable assessment of charter rates is not possible at the moment. In addition, there can be no telling when the 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 very strong pressure at short notice 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'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 by the trusteeship partner would have to be pursued against each individual investor.
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 signifi cant resulting liquidity requirement can only be limited or met by means of cooperative behaviour on the part of the banks, as the HCI Group's ability to continue as a going concern is at risk.
The HCI Group is currently holding intensive talks with its principal fi nancing partners and shareholders to prevent claims for contingent liabilities or to ensure that suffi cient funding is made available. The concept currently agreed provides for the following packages of measures that are to be fi nally negotiated and implemented in the weeks ahead.
After several months of negotiations a comprehensive restructuring concept was discussed and accepted by the main creditor banks HSH Nordbank AG and the Commerzbank Group and with HCI Capital AG's principal shareholders MPC Capital AG and the Döhle Group as a fi rst step toward releasing the HCI Group from all material contingent liabilities to banks and safeguarding liquidity on a lasting basis. In detail the restructuring is a multi-stage concept agreed as a fi rst step after several months of negotiations with the main creditor banks HSH Nordbank and the Commerzbank Group and the principal shareholders MPC Capital AG and the Döhle Group. It is aimed at a long-term moratorium, the simultaneous release from all material contingent liabilities to banks, a subsequent capital increase in cash, and the conversion of existing HCI Capital AG fi nancing arrangements. The two main creditor banks account for the main share (about three quarters) of the Company's contingent liabilities. The concept will need to be agreed fi nally with the other creditor banks in the weeks ahead and is subject, among other things, to unanimous consent of all other banks involved.
HCI Capital AG aims to agree with the banks an irrevocable moratorium on claims for contingent liabilities until 30 June 2013. At the same time a phased total release from the overwhelming majority of existing contingent liabilities is aimed to be concluded by 28 February 2010.
On completion of the release from liability a EUR 22 million cash capital increase is aimed to be undertaken. MPC Capital AG and the Döhle Group would underwrite it, should the other shareholders not exercise their subscription rights. In addition, the banks are to receive a claim against HCI Capital AG in the form of a EUR 12.5 million debtor warrant the details of which have yet to be agreed.
Supplementary interim fi nancing totalling around EUR 6.0 million is to be raised by assigning future receivables.
Furthermore, an extension of loan repayments to banks until 30 September 2010 was agreed. The deferred liabilities are then to be converted into equity or, alternatively, into longterm funding to ensure that the HCI Group's cash fl ow is not impaired with lasting effect.
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:
HCI Group could derive special benefi ts from this trend with its well-fi lled and highly diversifi ed product pipeline and its strong sales network.
Overall economic development for the remainder of 2009 continues to face considerable uncertainties. Economic research institutes and fi nancial institutions are agreed that the world economy is in the throes of a downturn this year. Even though a number of economic indicators currently suggest that the recession has bottomed out, a return to slight initial growth is not anticipated until 2010. The extent and rate at which the many and in part substantial fi nancial and economic policy booster packages agreed by the world's leading economies will take effect remains hard to assess.
Forecasts by economic research institutes and fi nancial institutions anticipate for the world economy continued weak development and a decline in gross domestic product of around 1.5 %. Exceptions to this rule are China and India, for which lower growth of between 6.5 % and 7.5 % and between 4.2 % and 5.4 % respectively is expected for 2009. The decline in gross domestic product forecast for the euro zone in 2009 is between 4.3 % and 4.8 %. Reasons for the anticipated economic decline in the euro zone are signifi cant decreases in corporate investment, worse forecasts for world trade and the high export dependence level of Europe's largest economy, Germany. For the German economy a GDP decline of about 6 % is expected for 2009. The anticipated rise in unemployment is between 0.4 million (DIHK estimate) and 1.0 million (HWWI estimate). If there is no improvement in the order position of companies by autumn 2009, further negative infl uences on employment must be assumed. Against the backdrop of the two economic booster packages agreed, however, positive trends are also being noted and indicate that the decline in manufacturing output has bottomed out. The main early indicators have recently pointed to a pleasing upturn, meaning that slight growth seems to be on the way in the second half of the year. Lasting economic growth is still not in sight, however.
For shipping markets in particular the weak state of the world economy will continue to be burdensome. A sustainable charter rate recovery is not yet expected in the main shipping segments by the year's end. 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 are unlikely to fully offset this surplus in the prevailing environment. A clear recovery in shipping markets is at the moment not anticipated before 2010.
Due to the ongoing fi nancial and economic crisis investors will in our view continue for the present to feel uncertain about all forms of investment. This is underscored by the sentiment in the sector reported on by ScopeAnalysis in mid-2009. The business climate index compiled for the industry from issuing houses and intermediaries since 2003 has reached a new historic low. Some intermediaries and issuing houses may forecast 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 the 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 how the market will develop in 2009. It will depend mainly on the extent and duration of the economic downturn. In this market environment the outlook continues to be better for direct investment in real estate and for energy funds in particular. In addition, guarantee-backed and opportunist fund concepts, i.e. blind pools aimed at making use of favourable entry opportunities in a weak market, may stand to benefi t.
The market trend continues to be diffi cult and will pose a serious challenge to the HCI Group in the future course 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 is not possible.
In view of the challenges that it faces the HCI Group has put in place a number of measures aimed at securing revenues and reducing costs.
On the sales side the HCI Group has adapted to the current market situation by focussing its product range – especially in the closed-end ship fund area – on individually structured products with a lower placement volume and on asset creation plans and guaranteed products. In addition, in August 2009 the Group launched a new product with an opportunist concept, HCI Shipping Opportunity, that offers investors the chance to make use of entry options arising in the present situation in shipping markets. In other product areas we succeeded within a very short time in placing the HCI Energy 1 Solar fund in full in August 2009. In the real estate area the Group's aim is to put an attractive core real estate investment product on the market before the end of the year.
On the costs side the HCI Group decided on further economies in the second quarter of 2009. They consist of a reduction in personnel expenses by about EUR 1.1 million in the current year and by EUR 4.2 million in 2010. In this connection the Group is reducing employee numbers by 36 in all. In addition, it has not replaced a number of staff in the course of restructuring since October 2008. A further part of the savings package is the cost reduction programme for non-personnel expenses initiated at the beginning of the year and upgraded in June 2009 to about EUR 8.5 million in all. It does not include one-off expenses incurred due to the current diffi cult market trend. The Group anticipates overall savings this fi nancial year of around EUR 10 million on 2008 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, fi nal negotiations will be held with the other creditor banks in the weeks ahead. 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 lasting survival as a going concern. It would at the same time be an important signal that would strengthen substantially the confi dence of our business partners, especially in the area of sales.
The progress of operating business will also, incidentally, depend on how far and how fast the fi nancial sector and the economy overall recover in the course of the year from the serious collapses they have suffered. As soon as signs of recovery are apparent there will, we feel, be good prospects for the HCI Group to regain momentum with its placement business.
for the period from January 1 to June 30, 2009
| Six months ended June 30, |
Six months ended June 30, |
||
|---|---|---|---|
| EUR '000 | Note | 2009 | 2008 |
| Revenues | (3) | 22,662 | 61,652 |
| Other operating income | (4) | 663 | 4,012 |
| Change in inventories | (5) | - 1,085 | 180 |
| Cost of purchased services | - 7,591 | - 32,535 | |
| Personnel expenses | (6) | - 12,320 | - 15,290 |
| Depreciation, amortisation and impairment of property, plant and equipment and intangible assets |
(7) | - 1,162 | - 1,613 |
| Other operating expenses | - 10,062 | - 11,132 | |
| Results of associated companies and joint ventures accounted for using the equity method |
(8) | - 3,196 | - 23,431 |
| Earnings before interest and taxes (EBIT) | - 12,091 | - 18,157 | |
| Interest income | (9) | 860 | 1,191 |
| Interest expenses | (9) | - 1,172 | - 2,295 |
| Other fi nancial result | (9) | - 18,710 | 507 |
| Earnings before taxes (EBT) | - 31,113 | - 18,754 | |
| Income taxes | (10) | - 4,987 | 269 |
| Consolidated net result for the period | - 36,100 | - 18,485 | |
| Consolidated net income for the period attributable to the shareholders of the parent company |
- 36,100 | - 18,485 | |
| Earnings per share (basic) in EUR | (11) | - 1.50 | - 0.77 |
| Earnings per share (diluted) in EUR | (11) | - 1.50 | - 0.77 |
| EUR '000 | Six months ended June 30, 2009 |
Six months ended June 30, 2008 |
|---|---|---|
| Consolidated net result for the period | - 36,100 | - 18,485 |
| Income and expenses recognised directly in equity for associated companies and joint ventures | 122 | - 1,527 |
| Foreign currency translation adjustment | 332 | 2,323 |
| Change in fair value of available-for-sale fi nancial instruments | 0 | 439 |
| Other comprehensive income | 454 | 1,235 |
| Total comprehensive result | - 35,646 | - 17,250 |
| Total comprehensive result for the period attributable to the shareholders of the parent company | - 35,646 | - 17,250 |
for the second quarter ended June 30, 2009
| Three months ended June 30, |
Three months ended June 30, |
|
|---|---|---|
| EUR '000 Note |
2009 | 2008 |
| Revenues (3) |
12,673 | 35,164 |
| Other operating income (4) |
281 | 3,062 |
| Change in inventories (5) |
- 1,217 | 430 |
| Cost of purchased services | - 4,251 | - 18,766 |
| Personnel expenses (6) |
- 6,275 | - 9,870 |
| Depreciation, amortisation and impairment of property, plant and equipment (7) and intangible assets |
- 903 | - 928 |
| Other operating expenses | - 5,819 | - 5,892 |
| Results of associated companies and joint ventures accounted for using the (8) equity method |
- 3,637 | - 24,391 |
| Earnings before interest and taxes (EBIT) | - 9,148 | - 21,191 |
| Interest income (9) |
491 | 514 |
| Interest expenses (9) |
- 492 | - 1,155 |
| Other fi nancial result (9) |
- 19,677 | 1,438 |
| Earnings before taxes (EBT) | - 28,826 | - 20,394 |
| Income taxes (10) |
- 4,781 | 671 |
| Consolidated net result for the period | - 33,607 | - 19,723 |
| Consolidated net income for the period attributable to the shareholders of the parent company |
- 33,607 | - 19,723 |
| Earnings per share (basic) in EUR (11) |
- 1.40 | - 0.82 |
for the second quarter ended June 30, 2009
| Three months ended June 30, |
Three months ended June 30, |
|
|---|---|---|
| EUR '000 | 2009 | 2008 |
| Consolidated net result for the period | - 33,607 | - 19,723 |
| Income and expenses recognised directly in equity for associated companies and joint ventures | - 830 | 351 |
| Foreign currency translation adjustment | 1,666 | 3,032 |
| Change in fair value of available-for-sale fi nancial instruments | 0 | 439 |
| Other comprehensive income | 836 | 3,822 |
| Total comprehensive result | - 32,771 | - 15,901 |
| Total comprehensive result for the period attributable to the shareholders of the parent company | - 32,771 | - 15,901 |
as at June 30, 2009
| June 30, | December 31, | |
|---|---|---|
| Note | 2009 | 2008 |
| ASSETS | EUR '000 | EUR '000 |
| Non-current assets | 62,412 | 82,736 |
| Intangible assets | 2,172 | 3,017 |
| Property, plant and equipment Investments in associated companies and interests in joint ventures accounted for using |
1,263 | 1,510 |
| the equity method | 31,891 | 36,033 |
| Other investments | 16,747 | 22,628 |
| Receivables from related parties (15) |
0 | 2,542 |
| Other fi nancial assets | 9,546 | 12,114 |
| Deferred taxes | 793 | 4,892 |
| Current assets | 67,482 | 89,850 |
| Work in progress and fi nished services | 1,264 | 2,352 |
| Trade receivables | 15,635 | 23,553 |
| Receivables from related parties (15) |
27 | 27 |
| Income tax receivables | 9,350 | 13,114 |
| Other assets | 15,931 | 18,441 |
| Other fi nancial assets | 15,344 | 17,642 |
| Other miscellaneous assets | 587 | 799 |
| Securities | 2,559 | 3,059 |
| Cash and cash equivalents | 22,586 | 29,304 |
| Assets held for sale | 130 | 0 |
| Total assets | 129,894 | 172,586 |
| EQUITY AND LIABILITIES | EUR '000 | EUR '000 |
| Equity | 50,554 | 86,200 |
| Subscribed capital | 24,000 | 24,000 |
| Capital reserve | 75,943 | 75,943 |
| Retained earnings | - 33,663 | 2,437 |
| Accumulated other equity (12) |
- 1,194 | - 1,648 |
| Net cost in excess of net assets acquired on the acquisition of companies under common | - 14,532 | - 14,532 |
| control and successive share acquisitions | ||
| Non-current provisions and liabilities | 7,699 | 31,318 |
| Pension provisions | 23 | 22 |
| Debts (13) |
||
| 2,836 | 27,636 | |
| Other miscellaneous liabilities | 0 | 19 |
| Deferred taxes | 4,840 | 3,641 |
| Current provisions and liabilities | 71,641 | 55,068 |
| Other provisions | 2,219 | 1,808 |
| Debts (13) |
35,556 | 16,837 |
| Trade payables | 8,815 | 8,457 |
| Liabilities due to related parties (15) |
2,682 | 1,538 |
| Income tax payables | 15,782 | 15,132 |
| Other current liabilities | 6,587 | 11,296 |
| Other fi nancial liabilities | 5,954 | 9,499 |
| Other miscellaneous liabilities | 633 | 1,797 |
| 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 |
Consolidated equity |
| Balance at 01.01.2008 | 24,000 | 76,016 | 35,987 | - 3,546 | 109 | 0 | -14,532 | 118,034 |
| Expenses for capital procurement |
- 73 | - 73 | ||||||
| Total comprehensiv result | - 18,485 | - 1,527 | 2,323 | 439 | - 17,250 | |||
| Distributions to share holders |
- 16,800 | - 16,800 | ||||||
| Balance at 30.06.2008 | 24,000 | 75,943 | 702 | - 5,073 | 2,432 | 439 | - 14,532 | 83,911 |
| Balance at 01.01.2009 | 24,000 | 75,943 | 2,437 | - 333 | - 1,315 | 0 | - 14,532 | 86,200 |
| Total comprehensiv result | - 36,100 | 122 | 332 | - 35,646 | ||||
| Balance at 30.06.2009 | 24,000 | 75,943 | - 33,663 | - 211 | - 983 | 0 | - 14,532 | 50,554 |
| EUR '000 | Six months ended June 30, 2009 |
Six months ended June 30, 2008 |
|---|---|---|
| Consolidated net result for the period | - 36,100 | - 18,485 |
| Depreciation, amortisation and impairment of intangible assets and property, plant and equipment | 1,162 | 1,613 |
| Impairment on loans, interests and other fi nancial receivables | 15,955 | 0 |
| Impairment on work in progress and fi nished services | 1,297 | 0 |
| Impairment on assets held for sale | 3,178 | 0 |
| Losses(+) / Gains(-) from associated companies and joint ventures | 3,196 | 23,431 |
| Gains(-) from the disposal of intangible assets and property, plant, equipment and securities | 10 | - 278 |
| Increase in pension provisions | 1 | 1 |
| Elimination of income taxes | 4,987 | - 269 |
| Elimination of net interest result and net investment result | 925 | 898 |
| Other non-cash income and expenses | - 113 | - 303 |
| Decrease / Increase in working capital | 3,838 | - 1,936 |
| Increase in inventories | - 208 | - 167 |
| Decrease in trade receivables | 7,917 | 5,702 |
| Increase / Decrease in other assets | - 36 | 8,981 |
| Increase in current provisions | 414 | 476 |
| Decrease in trade payables | 358 | - 7,454 |
| Increase / Decrease in receivables from and payables to related parties | - 142 | - 469 |
| Decrease in other liabilities | - 4,139 | - 9,419 |
| Other movements in operating activities | - 326 | 414 |
| Income taxes paid | - 1,340 | - 5,682 |
| Income tax refunds | 6.065 | 183 |
| Interest paid | - 1,215 | - 1,469 |
| Interest received | 266 | 674 |
| Distributions received | 32 | 107 |
| Cash fl ows from operating activities | 2,144 | - 1,515 |
| Proceeds from disposals of other investments and securities | 341 | 2,916 |
| Payments for intangible assets and property, plant and equipment | - 70 | - 206 |
| Payments for investments in associated companies and interest in joint ventures | - 1,752 | - 6,025 |
| Payments for investments, securities and long-term loans to related parties | - 1,752 | - 2,753 |
| Cash fl ows from investing activities | - 3,233 | - 6,068 |
| Dividends paid to shareholders of HCI Capital AG | 0 | - 16,800 |
| Proceeds from additions to debts | 33 | 15,986 |
| Repayments of debts | - 5,662 | - 8,803 |
| Cash fl ow from fi nancing activities | - 5,629 | - 9,617 |
| Net Changes in cash and cash equivalents | - 6,718 | - 17,200 |
| Cash and cash equivalents at beginning of period | 29,304 | 34,739 |
| Cash and cash equivalents at end of period | 22,586 | 17,539 |
| EUR '000 | Design & Sales | After Sales Services | Asset Management | ||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | ||
| Revenues | 10,446 | 48,921 | 10,739 | 11,335 | 1,477 | 1,396 | |
| Change in inventories | - 1,085 | 206 | - 26 | ||||
| Cost of purchased services | - 7,591 | - 32,535 | |||||
| Gross Margin | 1,770 | 16,592 | 10,739 | 11,335 | 1,477 | 1,370 | |
| Other operating income | 135 | 144 | 569 | 694 | 206 | 3,301 | |
| Personnel expenses | - 5,304 | - 5,523 | - 3,045 | - 2,667 | - 860 | - 745 | |
| Depreciation, amortisation and impairment | - 673 | - 89 | - 79 | - 617 | - 179 | - 181 | |
| Other operating expenses | - 3,871 | - 5,477 | - 2,479 | - 2,177 | - 572 | - 681 | |
| Results of associated companies and joint ventures accounted for using the equity method |
- 1,970 | 70 | - 1,226 | 3,227 | |||
| Earnings before interest and taxes (EBIT) | - 9,913 | 5,717 | 5,705 | 6,568 | - 1,154 | 6,291 | |
| Segment assets | 20,488 | 29,272 | 26,189 | 32,759 | 29,449 | 38,583 |
| Operating Segment Total | Holding / Others | Consolidation | HCI Gruppe | ||||
|---|---|---|---|---|---|---|---|
| 2009 | 2008 | 2009 | 2008 | 2009 | 2008 | 2009 | 2008 |
| 22,662 | 61,652 | 22,662 | 61,652 | ||||
| - 1,085 | 180 | - 1,085 | 180 | ||||
| - 7,591 | - 32,535 | - 7,591 | - 32,535 | ||||
| 13,986 | 29,297 | 13,986 | 29,297 | ||||
| 910 | 4,139 | 1,531 | 1,710 | - 1,778 | - 1,837 | 663 | 4,012 |
| - 9,209 | - 8,935 | - 3,111 | - 6,355 | - 12,320 | - 15,290 | ||
| - 931 | - 887 | - 231 | - 726 | - 1,162 | - 1,613 | ||
| - 6,922 | - 8,335 | - 4,918 | - 4,634 | 1,778 | 1,837 | - 10,062 | - 11,132 |
| - 3,196 | 3,297 | - 26,728 | - 3,196 | - 23,431 | |||
| - 5,362 | 18,576 | - 6,729 | - 36,733 | 0 | 0 | - 12,091 | - 18,157 |
| 76,126 | 100,614 | 0 | 0 | 0 | 0 | 76,126 | 100,614 |
to the consolidated interim fi nancial statements of HCI Capital AG as at 30 June 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 Standard 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 in the management of fund assets (Asset Management).
HCI Capital AG's consolidated interim fi nancial statements as at 30 June 2009 were prepared in accordance with the provisions of IAS 34, with the notes presented in a 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 June 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 hereby made to Note 16 and to the consolidated interim management report.
As stated in Note 4 to the IFRS consolidated 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 fi rst half of 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 earnings 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 fi rst half of 2009 we refer to Note 14.
In the consolidated interim fi nancial statements as at 30 June 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 includedas a component of the consolidated interim fi nancial statements.
In the fi rst quarter of 2009, the HCI Group changed the revenue recognition for revenues from design and sales services. Until 31 December 2008, design and sales revenues were recognised 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 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 because they had either not yet been endorsed by the EU or their fi rst-time mandatory use had yet to be stated:
Amendment to IAS 39 "Reclassifi cation of Financial Assets: Effective Date and Transition"
Amendment to IFRIC 9 and IAS 39 "Embedded Derivatives"
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.
Revenues break down as follows:
| EUR '000 | 01.01– 30.06.2009 |
01.01– 30.06.2008 |
|---|---|---|
| Transport and Logistics | 6,882 | 32,633 |
| Real Estate | 286 | 8,527 |
| Energy and Commodities | 2,454 | -- |
| Secondary Life Insurance Market | 785 | 7,474 |
| Other | 39 | 287 |
| Design and Sales | 10,446 | 48,921 |
| Transport and Logistics | 8,522 | 9,211 |
| Real Estate | 1,227 | 1,262 |
| Energy and Commodities | 113 | -- |
| Secondary Life Insurance Market | 679 | 664 |
| Other | 198 | 198 |
| After-Sales Services | 10,739 | 11,335 |
| Asset Management | 1,477 | 1,396 |
| Total revenues | 22,662 | 61,652 |
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 663,000 (fi rst half-year 2008: EUR 4.012 million). The previous year's fi gure included EUR 1.750 million in compensation for breach of contract in connection with shipbuilding contracts the other party failed to fulfi l. Other operating income for the fi rst half of 2008 also included brokerage income for ships (EUR 750,000) and real estate (EUR 644,000).
Due to the diffi cult market environment for placing closed-end funds, write-downs totalling EUR 1.297 million were made on work in progress and fi nished services in connection with the design of closed-end fund models.
Personnel expenses totalling EUR 12.320 million (fi rst halfyear 2008: EUR 15.290 million) include EUR 667,000 in severance payments and EUR 573,000 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.
Impairment charges on intangible assets in the fi rst half of 2009 amounting to EUR 590,000 related to the goodwill recognised in the private equity segment as a result of the HCI Group's realignment.
The result of associated companies and joint ventures accounted for under the equity method includes EUR 2.583 million (fi rst half-year 2008: EUR 24.758 million) in impairment charges arising from impairment tests undertaken due to the ongoing diffi cult market conditions as at 30 June 2009.
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 million for the investment in eFonds Holding AG and EUR 938,000 for interests in shipbuilding companies managed jointly with shipping companies and included under the quity 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 recognised a gain of EUR 174,000 on this transaction.
The other fi nancial result includes EUR 1.4 million (fi rst halfyear 2008: EUR 1.188 million) in fees received by the HCI Group as advance distributions from secondary life insurance market funds.
They also include EUR 13.227 million (fi rst half-year 2008: EUR 97,000) in impairment charges on interests in one-ship companies classifi ed as available for sale fi nancial instruments 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 653,000 (fi rst half-year 2008: EUR 1.340 million) in currency losses.
Furthermore, other fi nancial result includes an impairment of the HCI Group's right of recourse against a fund company. In the fi nancial year 2008, the Group entered into two noninterest bearing promissory note loans in connection with the design of a fund product, which 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 1.862 million was made on this claim, as it is currently impossible to assess the fund's placement potential.
In addition, an impairment loss of EUR 866,000 was made on the fair value of shares classifi ed as available for sale fi nancial assets.
Due to the intention to sell the investments in BH & HCI Overschiestraat Holding B.V. and BH & HCI Real Estate Holding B.V. accounted for under the equity method and in BH & HCI Tupolevlaan Building B.V. reported 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 that they are highly probable to be sold within 12 months of reclassifi cation. They were measured at fair value less costs of sale, leading to a impairment charge of EUR 3.178 million. The EUR 79,000 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 5.298 million 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 carryforwards as a result of changes in plan scenarios.
HCI Capital AG's Management Board proposes the conclusion at the annual general meeting on 31 August 2009 of a control and profi t and loss transfer agreement between HCI Capital AG and HCI Treuhand GmbH with effect from 1 January 2009. The effects on the Group's tax expenses from 1 January 2009 are already included in the consolidated interim fi nancial statements as at 30 June 2009 because the Annual General Meeting is expected to approve the proposal.
Basic and diluted earnings per share were as follows:
| 01.01.– 30.06.2009 |
01.01.– 30.06.2008 |
||
|---|---|---|---|
| Group share of the net result for the period | EUR'000 | -36,100 | -18,485 |
| Weighted average number of shares issued | In million | 24.0 | 24.0 |
| Earnings per share for the reporting period | EUR | -1.50 | -0.77 |
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 available 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 30.06.2009 in EUR'000 |
Book value as at 31.12.2008 in EUR'000 |
Loan currency | Interest rate in % | Final due date |
|---|---|---|---|---|---|
| HSH Nordbank AG | 26,978 | 28,579 | USD Three-month LIBOR +3% | 2010 | |
| Bankhaus Wölbern & Co. | 5,672 | 6,481 | USD | EURIBOR +1.85% | 2011 |
| Commerzbank AG | 4,200 | 5,995 | EUR | 7.50% | 2010 |
| HSH Nordbank AG | 1,527 | 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 6.0 million in 2008. In January 2009 the Group repaid EUR 1.5 million. 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 150,000 with payment of the fi nal instalment on 31 January 2010. The interest rate is 7.5 %.
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:
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 result and before income taxes. It is used in internal controlling as the segment management fi gure 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 the 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 875,000 as at 30 June 2009 is not allocated to segment assets.
Internal reporting does not include segment liabilities, which is why they 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 | 30.06.2009 | 31.12.2008 |
|---|---|---|
| Segment assets | 76,126 | 100,614 |
| Cash and cash equivalents | 22,587 | 29,304 |
| Securities | 2,559 | 3,059 |
| Deferred tax refunds | 793 | 4,893 |
| Property, plant and equipment | 1,263 | 1,510 |
| Intangible assets | 2,172 | 3,017 |
| Assets held for sale | 130 | 0 |
| Other assets and receivables | 23,770 | 29,583 |
| Other fi nancial assets | 494 | 606 |
| Group assets | 129,894 | 172,586 |
Receivables from and liabilities to related parties are as follows:
| EUR'000 | 30.06.2009 | 31.12.2008 |
|---|---|---|
| Receivables from associated companies and joint ventures | 23 | 2,555 |
| Receivables from unconsolidated subsidiaries | 4 | 14 |
| Receivables from related parties | 27 | 2,569 |
| Liabilities to unconsolidated subsidiaries | 585 | 687 |
| Liabilities to associated companies and joint ventures | 1,358 | 0 |
| Liabilities to HCI Group executive bodies | 739 | 851 |
| Liabilities to related parties | 2,682 | 1,538 |
Income and expenses resulting from related party transactions break down as follows:
| EUR'000 | 01.01.– 30.06.2009 |
01.01.– 30.06.2008 |
|---|---|---|
| Income from associated companies and joint ventures | 140 | 3,841 |
| Income from related parties | 140 | 3,841 |
| Expenses of members of HCI Group executive bodies | 1,591 | 5,033 |
| Expenses of associated companies and joint ventures | 3,336 | 27,272 |
| Expenses of other fi nancial results | 3,178 | - |
| Expenses of related parties | 8,105 | 32,305 |
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 million 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 million were made on the investments in associated companies BH & HCI Oversschiestraat Holding B.V. and BH & HCI Real Estate Holding B.V. due to their classifi cation in accordance with IFRS 5 as at 30 June 2009 and stated under other fi nancial results. Cf. Note 9.
As at 30 June 2009, the Company had the following contingencies and other fi nancial commitments:
| 30.06.2009 | 31.12.2008 | |||||
|---|---|---|---|---|---|---|
| EUR'000 | EUR'000 | USD'000 | EUR'000 | EUR'000 | USD'000 | |
| Guarantees | 1,487,493 | 401,930 | 1,531,077 | 1,480,102 | 343,761 | 1,578,036 |
| of which drawn | 912,895 | 257,383 | 924,533 | 941,295 | 256,918 | 950,395 |
| Placement guarantees | 641,679 | 286,397 | 501,089 | 639,182 | 263,997 | 521,019 |
| of which for funds not yet in distribution | 223,317 | 38,615 | 260,503 | 248,093 | 60,477 | 260,543 |
| Future payments under operating leases | 3,148 | 3,148 | 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 million and USD 3.5 million that run until 30 June 2012. As at 30 June 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. In case that investment and construction phase loans as well as 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 segment, 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 is called upon to a signifi cant extent, resulting in the Group's illiquidity.
The HCI Group counters this risk by 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, re-negotiating the purchase price of ships, partially deferring purchase price payments (deferred consideration), the structuring of new employment concepts, as well as adjustments of margins and distribution concepts on the sales side. If these measures are not successful, the HCI Group needs 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. Please refer to Section D, Report on Risks and Opportunities, of the consolidated interim management report for details.
The HCI Group's Management Board decided in July 2009 to withdraw from placement the HCI Real Estate G7 GmbH & Co. KG umbrella fund that had been on sale since early November 2008. The fund was intended to give investors from the general public access to established real estate markets in the world's largest industrialised countries by buying shares in real estate funds that had invested in these countries. At the time of the decision to halt placement, a fund subsidiary had invested EUR 10 million in an appropriate real estate fund. This investment has since been transferred to a third party. In addition, the HCI Group has bought back the shares in the fund that investors had acquired. The anticipated loss from winding up the fund amounts to EUR 1.8 million.
For details of agreements on deferring payments of interest and repayments on loans outstanding, please refer to Section D, Report on Risks and Opportunities, of the consolidated interim management report.
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.
"To the best of our knowledge and in accordance with the applicable reporting principles for interim fi nancial reporting, the interim consolidated fi nancial statements give a true and fair view of the assets, fi nancial and earnings position of the Group, and the interim management report of the Group includes a fair review of the development and performance of the business and the position of the Group, together with a description of the principal opportunities and risks associated with the expected development of the Group for the remaining months of the fi nancial year." Hamburg, August 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.
12.05.2009 Report on the fi rst three months of 2009
HCI CAPITAL: MEHR WERT. 28.08.2009 Half-yearly fi nancial report 2009
onshäuser in Deutschland, das die Konzeption und Realisierung geschlossener Beteiligungsangebote in zahlreichen Produktklassen anbietet. Seit ihrer Grün-31.08.2009 Annual General Meeting
dung hat die HCI Gruppe 468 Emissionen mit einem Investitionsvolumen von rund 13,3 Mrd. EUR (Stand 31. Dezember 2007) realisiert. 11.11.2009 Report on the fi rst nine months of 2009
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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