Work ing for the best Annual Report 2014
Annual Report 2014
Contents
MEGATECH Annual Report
Page
6
Highlights of 2014
Page
8
Executive and Supervisory Board
Page 14
Interview with the Executive Board of MEGATECH
Page 16
Overview of MEGATECH’s most important products
Page 26
Worldwide locations of the MEGATECH Group
Page 28
The Selfie-World of MEGATECH
Page 30
Joint Management Meeting
Page 32
Megahoney
Page 36
Report of the Supervisory Board
Page 37
Consolidated Financial Statements as of 31/12/2014
Page 39
Management Report
Page 113
Auditor‘s Report
Page 125
Imprint
Page 126
Annual Report 2014 | Page 3
Megatech Industries Hlinsko manufactures the lower frame of the rear door cover, the rear window frame, and sill panel for the third generation of the Audi TT CoupĂŠ.
Annual Report 2014 2014| |Page Page44
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We look back in joy at the past financial year 2014 2014 has been the most successful financial year in the history of MEGATECH Industries AG since 2009 The superlative at the start of our review results from the gratitude and respect towards all those who share our path, who shoulder our joint responWe were able to gain sibilities, who partake in four prominent bearing decisions, and who strive to achieve tonew costumers with gether with us. We thereshare the success and Opel, Porsche, Bentley, fore pride of the following and Volkswagen superlative: 2014 was the successful year in Commercial Vehicles. most the history of MEGATECH Industries AG. What has pleased and encouraged us about the past financial year: The order intake situation on the European market Our European plants worked close to full capacity and gained a profit after tax, thanks to many successful operational improvements. We started the production for three models of Audi – the A3 Cabrio, the TT, and TT Cabrio. We are producing, inter alia, the lower frame of the rear door cover, the rear window frame, sill pa-
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nel, and boot cover for these models. We were able to gain four prominent new costumers with Opel, Porsche, Bentley and Volkswagen Commercial Vehicles. The Tech Center is expanding steadily under new leadership, and, thanks to the ongoing good order situation, is thereby running to full capacity. In our annual average, 1,400 employees had a safe and promising workplace within the different units of the MEGATECH Group. Successful structural improvements Our Tech Center’s research and development team moved to the Automotive Intelligence Center in Boroa close to Bilbao where it can finally develop, regulate project settlements, and manufacture the necessary prototypes under the same roof. The structurally outdated plant Liberec was closed and the production, as far as we continue it, has been relocated to the plants Hlinsko and Jablonec. The production hall “Hall 100” at Hlinsko was inaugurated with a doors open day in September. More than 1,000 visitors streamed into the plant that day.
MAXIMILIAN GESSLER Member of the executive board of MEGATECH Industries AG
The solid financing basis We have found a new financing partner for our Czech plants in Česká spořitelna – thereby setting a solid, long-term basis for the financing of current and future projects. In Spain, the financing of tools and project handling has made favorable developments.
The positive trend is also reflected in the 2014 update of our corporate design and web performance with an optimized and improved homepage. In October 2014, the supervisory board of the company appointed Gerhard Pesout as third member of the executive board. He has been part of the management as country manager of our Czech team since September 2013. Furthermore, the systematic strengthening of our management in all units and countries has been continued. Well aware that such proud messages of success are primarily snapshots and in fact merely a depiction of the past, let us turn to the present and the future – and thus, considerable challenges: Although the financial year 2015 started well for our European plants and the Tech Center, our location in Brazil remains a main concern. The difficult economic situation and the declining automobile production in Brazil have undone our past endeavors and, as a result, another loss was registered for 2014.
Although Brazil is a strategically important market in the long run, we must reserve ourselves to review all options in the face of the currently difficult market environment and the strained economic climate. Our international goals of expansion remain unimpaired: we want to further equip our enterprise with organic growth and acquisition, and increasingly strive for international cooperation to operate in countries with products, and in markets we have not yet entered.
We have set ambitious goals for 2015: Great effort will be necessary to achieve them, but the success of the past financial year is encouraging.
We have set ambitious goals for 2015: Great effort will be necessary to achieve them, but the success of the past financial year is encouraging. We say a big thank you to all our colleagues who contributed to our success with their personal effort.
Maximilian Gessler Member of the executive board
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the Highlights of 2014 An eventful financial year as a strong foundation for the upcoming years Megatech Industries AG The past year was the most successful in the history of MEGATECH Industries AG. All plants – with the exception of the plant in Brazil – finished with a profit after tax. The controlling and reporting processes that were built and initiated in 2013 as well as an own consolidation and planning software for all locations could be finished in 2014. Consequently, all our locations are on a capital market compatible level in the areas of controlling and reporting. From a financial perspective, 2014 was a particularly fortunate year. Due to a successful debt restructuring of the credit portfolio in the Czech Republic, a refinancing was accomplished.
The newsletter appears on a monthly basis and provides worthwhile information from our plants across the world. For external communication, we published our first annual report and redesigned our website.
Megatech Tech Center & Sales (Spain) At the start of the year, the Tech Center was relocated to Boroa, near Bilbao, into the AIC-Automotive Intelligence Center – a research and development center for companies in the automobile sectors. It thereby became possible to concentrate research, planning, project handling, and prototype manufacturing at one location. On account of the good order intake situation, the Tech Center was booked to capacity and able to employ additional employees.
In the area of recruitment, the management teams in all countries and units were strengthened. Gerhard Pesout was appointed as third member of the executive board in November 2014. Before, Mr. Pesout had been country manager for MEGATECH in the Czech Republic. In 2014, the MEGAWATT system was continuously expanded – a program in which all employees are invited to submit innovative ideas. The best proposals are regularly selected directly within the plants, implemented, and awarded with prizes. Furthermore, we started and expanded the company newsletter “Megazin Insider” to improve the internal communication within the MEGATECH Group.
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AIC – Automotive Intelligence Center
Megatech Industries Czech Republic
MEGATECH Industries Jablonec
During the first half-year of 2014, the plant in Liberec was closed and the production, as far as it was continued, relocated to the plants in Hlinsko and Jablonec. An outplacement program was designed for the workforce of the plant MEGATECH Industries Liberec to provide support in the search for a new workplace. Some employees could continue working at other locations of MEGATECH Industries. The plant in Hlinsko registered various new order intakes from Peugeot, Volkswagen, Audi, Seat, Škoda, the new customers Porsche and Volkswagen Commercial Vehicles as well as from Automotive Lighting and Mahle Behr. After several years of losses, both plants registered a profit in 2014, and in this year, the plant in Hlinsko was able to increase its number of employees for the first time. In September 2014, MEGATECH Industries in Hlinsko welcomed more than 1,000 visitors at its doors open day – in a town of 10,000 residents. The mayoress officially inaugurated the renovated production hall “Hall 100”. The plant became official sponsor of the ice-hockey team HC Hlinsko and of the town’s cultural center.
Caption: Official inauguration of “Hall 100” at the doors open day
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MEGATECH Industries Peninsula Iberica (Spain/Portugal) A manifold of improvements were conducted in our plants in Spain and Portugal to increase quality as well as productivity, while also reducing the inventory. The gratifying profits of our plants in Orense (Spain) and Marinha Grande (Portugal) must be emphasized. The plants on the Iberian Peninsula received order intakes from Peugeot for the development of an innovative, multifunctional VIP table – a central console for vehicles with sophisticated furnishing. A further positive development is the expansion of our customers by the two notable auto manufacturers of Bentley and Opel, for which we manufacture important scopes of the vehicle interiors.
Production hall MEGATECH Industries Marinha Grande (Portugal)
Apart from the optimization of operations, we invested in the improvement of facilities.
Production hall MEGATECH Industries Orense (Spain)
MEGATECH Industries Brazil Despite the extremely difficult overall economic situation in Brazil, MEGATECH Industries Brazil received order intakes from Renault and Volkswagen, as well as Samvardhana Motherson Peguform (SMP).
Production Area Brazil
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A skilled employee at our location in Portugal guarantees reliable quality.
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Our facility MEGATECH Industries Hlinsko also manufactures rear door cover parts for the recently started production of the Audi TT Cabrio.
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BOARD OF DIRECTORS Dr. Georg Flandorfer was elected chairman of the supervisory board of MEGATECH Industries AG on November 14, 2011. He is a former member of the executive board of Volkswagen AG.
Mag. Ulrike Gessler-Wolfinger is a notary in Vienna. She has been a member of the supervisory board of MEGATECH Industries AG since November 26, 2009.
Mag. Herbert Houf was elected into the supervisory board of MEGATECH Industries AG on February 24, 2012. He is its deputy of the supervisory board and member of the examination board. Mag. Houf works as financial auditor and tax consultant in Vienna.
Matthias Ăœbel, BA, MBA was elected into the supervisory board of MEGATECH Industries AG on April 4, 2013. He is member of the executive board of Endurance Capital AG in Munich.
The office term of all members of the supervisory board ends at the end of the general assembly that decides about the outcome of the annual statements of 2014.
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Management Board Dr. Maximilian Gessler has been a member of the executive board since November 26, 2009, and is responsible for the areas of strategy, sales, development, HR, communications, and business development.
Dkfm. Rainer Dieck was appointed member of the executive board on April 1, 2013, and is responsible for the areas of finance, controlling, IT, purchasing, as well as M&A.
Dipl. Ing. Gerhard Pesout was appointed member of the executive board on November 10, 2014, and focuses on the areas of production, quality, logistics, and the MEGATECH Excellence System.
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Rainer DieCk CFO of MEGATECH Industries AG since April 2013. Before that, Rainer Dieck worked in a leading position at KPMG Advisory AG, Vienna. He holds a degree in business administration and has been working as advisor and manager in different positions since 1993.
MAXIMILIAN GESSLER CEO of the MEGATECH Group since July 2008. Active in the industry since 1986 – since 1989, he has been working as entrepreneur in the metal and plastics industry.
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MEGATECH BECAME MORE ATTRACTIVE IN ALL AREAS Maximilian GESSLER, Rainer DIECK, and Gerhard PESOUT in the in-depth management interview
Gehard Pesout COO of MEGATECH Industries AG since June 2014. Since 1978, he has worked in leading positions in the automobile industry and most recently was plant manager of Faurecia in Peine, Germany.
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The executive board of MEGATECH Industries AG, Maximilian Gessler (Group CEO), Rainer Dieck (Group CFO), and Gerhard Pesout (Group COO) in a conversation on the past financial year, current plans, and future challenges. A short review of the financial year 2014 ‌ Maximilian Gessler: Fortunately, 2014 was a very successful financial year, as we were able to realize a large part of our plans. With a single exception, we managed to make a profit in all our facilities, but we were also successful in non-operatioIn 2014, nal areas: with the acquithe incoming orders sition of new assignments, refinancing, or the improapplied to solely new vement of all processes.
models, which will result in respectively strong growing sales at the start up of productions in 2015 and 2016.
Rainer Dieck: This has been an especially fortunate year in terms of refinancing, as we successfully managed a debt restructuring of a 25 million Euro credit portfolio in the Czech Republic. Through this refinancing, as well as the good business
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development in the past year, the requirements for a stable financial structure in the entire group have clearly improved. Meanwhile, the banks can see MEGATECH as a reliable partner again. Unfortunately, the development of our location in Brazil proceeded critically. In February 2014 a market slump occurred, which could not have been foreseen in this form. GERHARD PESOUT: Although I only recently joined MEGATECH in 2014, the optimization of the organization in the Czech Republic with its corresponding results and the preparation for the now running and upcoming new orders were positive highlights for me in comparison with 2013. Through our improved efforts, we became attractive for clients and last but not least for banks. How does a corporation recognize its own attractiveness? GESSLER: On the basis of job applications – that we are attractive for interesting people. Over the past year we have been able to notice that people who have worked at A-List corporations are aware of us as interesting employers. That is how Gerhard Pesout joined us, who is now continuing his career with us after a long lasting occupation with Ford, Volvo, Bosch and, finally, Faurecia.
Where did the main focus with investments lie in 2014? Gessler: In 2014, we received order intakes exclusively for new models, which will result in respectively strong growing sales at the start up of production in 2015 and 2016. In the development and preparation phase, such new orders require a corresponding investment volume, as in development, tools, machines, or buildings – just as it happened in Hlinsko within the past year. Dieck: One focus point, from my perspective, was that we could increasingly invest again from our own cash flow. The necessary internal financing strength for this was compiled through good operative results in the individual plants. Apart from investments in machines and buildings, we were able to execute widespread improvements in the IT-areas of our Czech and Spanish plants throughout the past year. This is also the direction we are going to continue working in during 2015. From today’s perspective, we can discern that all necessary investments
for 2015 have been largely ensured by appropriate financial commitments. PESOUT: I came to MEGATECH with experience in the area of Lean Management, and I consider the investments of 2014 as a milestone in the realization of the principals of Lean Management. Operational excellence at all locations is our set goal. For which of the models on the market in 2014 was MEGATECH a supplier?
Audi TT Coupé and TT Cabrio were probably the most sensational models in 2014, and production is just about to start on the Audi Q7, which also receives its supplies from us.
Gessler: Audi TT Coupé and TT Cabrio were probably the most exciting models in 2014, and production is just about to start for the Audi Q7, which also receives its supplies from us. Furthermore, we are also producing parts for Tier 2 suppliers at our location in Hlinsko.
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Has the new controlling, which was put into action in 2013, taken full effect within the past year or is the process still in development? DIECK: The processes, which were constructed and initiated in 2013 – including the implementation of a consolidation and planning software for In terms of reporting all locations – are practically quality, we have concluded. In terms of reporting quality, we have thus thus achieved what achieved what I like to refer as “Capital Market StanI like to call to dard”. That is not common “Capital Market for a medium-sized company. Already today we can Standard”. show monthly profit or loss statements, balances, or cash flows on a facility, country, or group level. Regionally, there is room for improvement, especially in accounting processes. We will additionally focus on IT-security and risk management this year.
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Which new developments or applications were realized product-wise in 2014? PESOUT: Improvements in lightweight construction are a special, ongoing issue and are often treated with a lengthy lead-time, as the insights from the high volume tests must still be realized. The new European legislation is currently forcing automobile manufacturers to reduce weight seriously. Nowadays MEGATECH is capable of offering products in the area of plastic mold injection with decorative requirements in viewing range, in which weight reductions up to 30% are possible. We consider this process as a major potential in our production. Apart from this, we are actively working on further new developments for the upcoming years. Have there been changes in the ownership of shares within the past year? GESSLER: I bought out two of my three former partners and acquired their shares in 2014. I assume that I will be able to acquire the remaining shares within the current year – an important point for the long-term planning and stability of the company.
Do fluctuations in the new car business in Europe affect the order situation? DIECK: Our economic cycles cannot be directly compared with those perceived by the automotive industry. Our business is not affected by the fluctuations OEMs have to cope with to the same extent. It all depends on which models we are supplying parts for, and from which facility. Here, every facility has its own business cycle that does not necessarily follow global developments. GESSLER: Despite the economic crisis in Spain and Portugal over the past three years, we were able to increase the volume of our production thanks to order intakes for the Volkswagen Golf, the Polo, and the Seat Leon. The PSA Group most recently did not always make pleasant headlines. For us, however, the collaboration through the manufacturing of parts for the Citroën Picasso
proceeds completely favorably. Other models such as Citroën C-Elysée, Peugeot 301, and Citroën Cactus provide capacities. According to that, the expectations regarding the start-up of new assignments have been fulfilled? GESSLER: We were able to conclude the contracts we negotiated in the previous year. We are now in the product development phase. Start of production will be between 2015 and 2017.
Despite the economic crisis in Spain and Portugal over the past three years, we have done very well there volume-wise thanks to our supply orders for the Volkswagen Gold, the Polo, and the Seat Leon.
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A careful forecast for new businesses in 2015 for which a conclusion can be expected? GESSLER: We want to position ourselves more strongly in the German premium segment and are operating accordingly. However, we are currently speaking of strategic planning, where productions are concerned that might start up 2018/2019. The collaboration with BMW/Mini is prominent, the relationship with the Volkswagen Group and Peugeot are further expandable as well as those with our strategically important system suppliers. DIECK: Furthermore, the trend is that our costumers tend to nominate suppliers for larger order intake packages for vehicle groups produced on the same platform or for several different vehicles. This results in higher capacities, but also greater challenges in the areas of capacity planning and financing. PESOUT: At this point one might note that we also have a non-automotive customer, Schneider Electric, for who we inter alia manufacture electric coils, a stable business relationship of many years’ standing that equally offers expan-
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sion possibilities. The advantage is that these products, in comparison with automotive parts, have long-lasting production periods; changes to switchboards are made only very rarely. Is supplying of one of the big players with a high market share a hindrance in acquiring new customers or a recommendation? GESSLER: It is a recommendation, because the extraordinary quality standards of a major customer are well known in the industry. Whoever can meet these standards in the long run and with great quantities – and has a product portfolio ranging from utility to luxury class vehicles – can automatically be advised to all clients. Since the Golf IV, we have managed to meet the quality and logistics challenges for more than 600,000 vehicles per year, and therefore other customers have such confidence in us. PESOUT: To be the preferred supplier for a big corporation is certainly a reference; it looks good on the CV of a supplier. That, too, is a plus in raising our attractiveness.
How will the financing of the MEGATECHHolding and its subsidiaries be regulated henceforth? GESSLER: Locating the large-volume financing in the area of the Holding and thereby retrieving it from local entities is a project that we started in the past year. DIECK: We want to pursue this part even further. However, a marketable rating at a group level is a prerequisite. We are on the right way there. Nonetheless, we are also keeping some options open – under particular prerequisites, it can be advantageous to find funding locally. Overall, we are aiming at the highest possible flexibility at the least possible financial costs, both in reference to the entire financing structure and every single financing contract. Great financing volumes, however, will henceforth probably be placed on the Holding-level.
A vision for MEGATECH until 2025 … GESSLER: We have a series of practical tasks. The consolidation of the location in Brazil can only succeed when going hand in hand with a recovery of the entire Brazilian economy. After all, we are dealing with a market of 200 million people and a reSince the Golf IV, spective demand for vehicles – the potential is clearly there. we’ve managed to meet Furthermore there is the dethe quality and logistics velopment of our Spanish and Czech companies according to challenges for more than our excellence-standards. Also, 600,000 vehicles per year, we want to fortify our team of highly qualified employe- and therefore other es, who come from renowned customers have such companies. We regard the initial business contact with furt- confidence in us. her global manufacturers as an equally exciting challenge. In the expansion of business areas, the balance between assignment focus and a too-great split must nevertheless be maintained – with these tasks, we are busy and prepared for the future until 2025.
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At our plant MEGATECH Industries Hlinsko, we are producing the back wall cover consisting of two parts for the Audi A3 Cabrio.
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PRODUCTS OF
MEGATECH At a glance: our most important products – organized by product categories with all the information on car brands, models, and model codes
B-pillar cover left-hand side | SEAT | Leon III 5T | SE 370
A-pillar cover left-hand side | SKODA | Rapid | SK 251
B-pillar cover left-hand side | SKODA | Rapid | SK 251
Door step trim | VW | Golf VII + Golf Variant | VW 370 + VW 372
A-pillar cover right-hand side | SEAT | Leon III 5T | SE 370
CD-pillar cover right-hand side | SEAT | Leon III 5T | SE 370
C-pillar cover left-hand side | SKODA | Rapid | SK 251
CD-pillar cover left-hand side | SKODA | Rapid Spaceback | SK 253
A-pillar cover white left-hand side | VW | CC | VW 469
A-pillar cover left-hand side | VW | Golf VII + Golf Variant | VW 370 + VW 372
A-pillar cover black left-hand side | VW | CC | VW 469
Interior A-pillar cover white right-hand side | VW | CC | VW 469
A-pillar cover right-hand side | VW | Golf VII + Golf Variant | VW 370 + VW 372
B-pillar cover white right-hand side | VW | CC | VW 469
B-pillar cover white left-hand side | VW | CC | VW 469
B-pillar cover black right-hand side | VW | CC | VW 469
A-pillar cover black right-hand side | VW | CC | VW 469
B-pillar cover black left-hand side | VW | CC | VW 469 A-pillar cover left-hand side | VW | Polo V | VW 250
C-pillar cover with sun blind white right-hand side | VW | CC | VW 469
C-pillar cover with sun blind white left-hand side | VW | CC | VW 469
C-pillar cover black right-hand side | VW | CC | VW 469
C-pillar cover black left-hand side | VW | CC | VW 469 A-pillar cover right-hand side | VW | Polo V | VW 250
B-pillar cover right-hand side | VW | Polo V | VW 250 |
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B-pillar cover left-hand side | VW | Polo V | VW 250
C-pillar cover right-hand side | VW | Polo V | VW 250
C-pillar cover left-hand side | VW | Polo V | VW 250
Rear door cover upper frame | rear door cover lower frame | AUDI | Q3 | AU 316
Boot Components Roof console | CITROËN | Citroën Berlingo | B9
Boot shelf support | SEAT | Leon III ST | SE 373 Still panel | AUDI | Q3 | AU 316
Engine & Technical 3-components air conduct | CITROËN | C4 Picasso | B78
e-box | MERCEDES | Vito | NCV2
Electric coil | Schneider Electric
Middle console | CITROËN | Citroën Berlingo | B9
B-pillar cover right-hand side | VW | Golf VII + Golf Variant | VW 370 + VW 372
Seat Components
Modules & Consoles
Exterior Components Exterior B-pillar cover | SEAT | Leon III 5T | SE 370
2-components cowl top | CITROËN | Elysée | M3 | PEUGEOT | 301 | M4 2-components cowl top | SEAT | Leon III 5T/ST | SE 370 + SE 373
Seat storage drawer | CITROËN | C4 Picasso | B78
Wheel arch cover | CITROËN | C4 Picasso | B78
Wheel cover | SKODA | Octavia 3 | SK 371
Lower seat cover | CITROËN C4 Picasso | B78 Wheel cover | SKODA | Superb B5 | SK 451
Wheel cover | VW | Passat | VW 461
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The World of
megatech The worldwide locations of the MEGATECH Group at a glance: all plants, all R&D centers, and all sales offices in Europe and overseas.
1.
MEGATECH Industries AG Austria
2.
All strings of the MEGATECH world merge in Vienna’s fourth municipal district. Apart from the CEO and CFO, nine other employees work in the company headquarters where they are in charge of strategic planning, marketing, and controlling.
4.
MEGATECH Industries Amurrio, S.L. Spain The facility in the Basque country employs around 240 people. It has a broad production spectrum and manufactures various parts for a manifold of notable customers in the automobile industry.
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Geschäftsbericht 2014 | Seite 28
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MEGATECH Industries Hlinsko s.r.o. Czech Republic
3.
MEGATECH Industries Jablonec s.r.o. Czech Republic
In the Czech city of Hlinsko, around 440 employees are working in the swiftly expanding, newly equipped plant of the MEGATECH Group. Visible vehicle interior parts, technical parts for the air conditioning and ventilation system, headlight reflectors, and electronic components are produced here.
5.
MEGATECH Industries Orense, S.L. Spain In this Galician city, around 130 employees work in the most modern facility of the group, which counts as model for all plants of the MEGATECH Group. The factory tests the majority of new processes and specializes in the production of sophisticated, visible interior and technical parts.
Around 270 people are employed in the glass and jewelry production city in the north of the Czech Republic. The plant was renovated from 2010 to 2012 to meet the newest industrial standard and has since then produced visible vehicle interior parts and wheel covers exclusively for OEMs. The history of the factory goes back to the 19th century.
6.
MEGATECH Brasil Componentes Automotivos Ltda., Brazil
MEGATECH has been present 2 in Brazil since 1979. The facility in Curitiba engages around 120 employees and has a broad product range. In an additional sales office in Sao Paulo, employees tend to customers directly on-site.
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MEGATECH Industries Marinha Grande, Lda. Portugal
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MEGATECH Industries Technical Center, A.I.E., Spain
Marinha Grande, one of the most important tool design building regions in Europe, is the location of the youngest factory of the MEGATECH Group. The strongly expanding facility with around 50 employees had to first be brought to the newest automotive standard after its acquisition in 2011. It now focuses exclusively on the automotive business.
9.
SC Megatech Engineering Center S.R.L Romania
The CAD-development for the products of the entire MEGATECH Group takes place in the Romanian capital of Bucharest. The ten employees also work with all simulation programs required in the development process.
The MEGATECH Group’s Tech Center is located near Bilbao. Around 70 employees develop products and tools according to customer orders. Beyond that, they focus on fundamental research and new materials. 12
10.
Megatech Industries Deutschland GmbH Germany The eight employees in Germany are in charge of project handling and distribution for all German customers. Their duties encompass both the technical support of the facilities of MEGATECH’s customers. Technical understanding and a proximity to the clients are self-evident.
11.
Megatech Sales Office France Three employees are in charge of project handling and distribution for French customers of the MEGATECH Group.
12.
Megatech Industries India Private Ltd., India To also be present on the booming Asian market, MEGATECH established a representative office in the Indian metropolis Pune, center of the Indian automobile industry in 2012.
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The Selfie-World of
megatech Over 1,350 employees of the sites in Austria, Germany, Spain, Portugal, Romania, Czech Republic, and Brazil form the backbone of our company. Here are a few photographic greetings from our various locations.
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1, 2, 3, 7, 8, 10: Employees of MEGATECH Industries Orense (Spain) 4, 5: Employees of MEGATECH Industries Amurrio (Spain) 6: Employees of MEGATECH Industries Hlinsko (Czech Republic)
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9, 11: Employees of MEGATECH Industries Marinha Grande (Portugal)
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Joint Management Meeting A focal point of the MEGATECH Group is the Joint Management Meeting (JMM) that takes place twice a year. The executive board and country managers, as well as plant managers and department heads of all locations come together.
“Best Factory 2013” while the facility in Brazil received the “Best Improvement 2013” award. During three-day workshops and round table discussions, experiences and new ideas are exchanged, current issues are dealt with, and implementation plans for further strategic projects are developed. Joint Management Meetings take place close to our production locations or offices to allow participants to follow the project realization in the factories on a regular basis.
The first Joint Management Meeting 2014 took place in May in Marinha Grande, Portugal, and was themed “Lean Development”. The strengthened synergies between the Tech Center and the plants were discussed here. During a plant tour in MEGATECH Industries Marinha Grande, the extensive work on modernizing the production was presented. Framed by the meeting, the facility MEGATECH Industries Hlinsko received the distinction
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In November 2014, the engineering department in Bucharest, Romania played host to the second Joint Management Meeting of the year. This time, a focal point was the subject of cost minimizing. In a “Smart Optimization” workshop, the ideal use of employee-resources was debated. The participants of the JMM, split into five groups, compiled optimization plans in different areas – such as purchase and contract management, the optimal use of financial resources, and risk management.
Plant visit of the Joint Management Meeting Team in MEGATECH Industries Marinha Grande (Portugal)
The Joint Management Meeting Team visiting the SC MEGATECH Engineering Center in Bucharest
“Smart Optimization� workshop during the Joint Management Meeting in Romania
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At the center of our production facilities you will always find our employees and their exceptional skills.
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Corporate Social Responsibility: Megahoney
In the fall of 2011, five colonies of bees were settled on the grounds of our plant in Hlinsko, where they are looked after by an experienced beekeeper. The honey gathered there – our Megahoney – is a popular gift for customers and visitors. Thus the year 2014 was not only a great success for the plant in its production of plastic parts, but also in its harvest of 350 glasses of fine blossom and forest honey.
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Megahoney Natural best quality product from our plant in Hlinsko
Report of the supervisory board of MEGATECH Industries AG for the financial year 2014 The executive board of MEGATECH Industries AG has informed the members of the supervisory board regularly, promptly, and comprehensively, both in written and oral form about the situation, the course of business, the financial situation of the company as well as the subsidiaries of the enterprise. In the financial year of 2014 six supervisory board meetings were held, in three of which all members of the supervisory board were participants. On April 29th, 2014, Fernando del Val was not able to attend the meeting. On July 25th, 2014, as well as August 29th, Matthias Übel not able to attend the meetings and was respectively substituted via authorization by Ulrike Gessler-Wolfinger. Within these supervisory board meetings and beyond, there is an open communication between management and directorate. The supervisory board is thereby always able to make well-grounded reviews of the business practices in the enterprise and to support the executive board with fundamental decisions. The supervisory board is aware of its incumbent duties according to law, statute, and bylaws, considering the relevant appointments. Provided that it is required, the supervisory board has made decisions in a written procedure. PwC Wirtschaftsprüfungs GmbH has undertaken an examination of the commercial law’s annual financial statement of December 31st, 2014, according to the established legal regulations of the §§ 268 ff. Austrian commercial law, as well as a voluntary exam of the IFRS consolidated financial statement of December 31st, 2014, according to the international standards on Auditing (ISA).
After its conclusion, the examination gave no reason for complaint. The annual auditor has thereby confirmed that the annual account of the MEGATECH Industries AG including the situation report from its management board as well as the consolidated financial statement along with the group management report of the managing board of the MEGATECH Industries Group according to IFRS correspond with the legal regulations. Considering proper bookkeeping, they convey a faithful image of the financial, asset, and profit situation of the company and its subsidiaries. The supervisory board agrees with the situation report of the executive board and approved the annual accounts 2014 of MEGATECH Industries AG. The annual financial statement is thereby determined. The supervisory board agrees with the executive board’s recommendation of forwarding the result of the financial year 2014 to a new account. Furthermore the supervisory board proposes ordering the PwC Österreich GmbH auditing companies to the annual general meeting of the business year 2015 as annual auditor of MEGATECH Industries. The supervisory board express great recognition and thanks to the executive board and all employees for their high achievements and great dedication in the financial year of 2015. Vienna, April 20th, 2015
Dr. Georg Flandorfer
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W i t b Annual Report 2014 | Page 38
Work ing for the best Consolidated Financial Statements as of 31/12/2014
I. Consolidated income statement in kEUR
Note
Revenue
5
Changes in inventories of finished goods and work in progress
2014
2013
124,451
131,516
-457
-45
Capitalisation of development costs
17
3,215
2,723
Raw materials and consumables used
6
-83,198
-91,948
Employee benefit expenses
7
-26,004
-26,923
Other income
8
2,051
2,385
Other expenses
22
-11,204
-9,835
10,528
7,754
-753
-949
9,775
6,805
-5,223
-5,896
4,552
909
EBITDA before non-recurring items Non-recurring items
10
EBITDA after non-recurring items Depreciation and amortisation
11
Operating result (EBIT) Interest income
12
328
304
Interest costs
12
-1,975
-2,002
Other financial result
13
2,036
-928
389
-2,626
4,941
-1,717
-507
177
4,434
-1,540
-2,413
-378
Result for the year
2,021
-1,918
in kEUR
2014
2013
2,021
-1,927
0
9
2,021
-1,918
Financial result Result before tax Income tax expense
14
Result after tax continued operations Discontinued operations
15
Result attributable to: Owner of the parent Non-controlling interests Result for the year
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation).
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II. Consolidated statement of comprehensive income in kEUR
2014
2013
Result for the year
2,021
-1,918
4
4
4
9
-8
-120
-8
-120
-4
-111
Comprehensive income for the year discontinued operations
209
-196
Other comprehensive income for the year, net of tax
205
-307
Total comprehensive income for the year
2,226
-2,225
in kEUR
2014
2013
2,226
-2,234
0
9
2,226
-2,225
Other comprehensive income for the year: Items that will not be reclassified to profit or loss Remeasurements of employment benefit obligations Items that may be subsequently reclassified to profit or loss Currency translation differences Comprehensive income for the year continued operations
Total comprehensive income attributable to: Owner of the parent Non-controlling interests Total comprehensive income for the year
Items in the statement above are disclosed net of tax. The income tax relating to each component of other comprehensive income is disclosed in note 14.1. Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation).
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III. Consolidated balance sheet in kEUR
Note
2014
2013
Property, plant and equipment
16
41,276
43,550
Intangible assets
17
18,174
12,586
Deferred tax assets
14
707
775
60
60
Assets Non-current assets
Available-for-sale financial assets Derivative financial instruments
19
0
1
Non-current other receivables
22
11,955
12,860
72,172
69,832
Current assets Inventories
20
10,757
11,368
Trade receivables
21
10,723
20,638
Other receivables
22
4,783
4,923
Cash and cash equivalents
23
1,881
6,335
28,144
43,264
Total assets
100,316
113,096
Total equity and liabilities
100.316
113.096
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in kEUR
Note
2013
2012
Registered capital
24
7,050
7,050
Other reserves
24
34,900
41,948
641
440
-2,751
-11,824
39,840
37,614
Equity and liabilities Equity
Currency translation differences Retained earnings Non-current liabilities Non-current financial liabilities
25
13,683
4,449
Government grants
28
1,317
1,355
Non-current employee benefits
29
392
434
Non-current other provisions
30
744
1,246
Other non-current liabilities
27
1,544
0
Deferred tax liabilities
14
2,960
4,036
20,640
11,520
Current liabilities Current financial liabilities
25
12,343
28,577
Trade payables
26
20,888
26,390
Other payables
27
5,947
8,755
Government grants
28
22
24
Current provisions
30
636
216
39,836
63,962
60,476
75,482
100,316
113,096
Total liabilities Total equity and liabilities
In previous year 2013, „Trade and other receivables” and “Trade and other payables” were shown in one line. For a better understanding of the figures 2014, a split was done in both areas.
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Other reserves
Currency translation differences
Retained earnings
7,050
41,761
756
-9,901
-39
39,627
Result for the year
0
0
0
-1,927
9
-1,918
Remeasurements of employment benefit obligations
0
0
0
9
0
9
Currency translation differences
0
0
-316
0
Total comprehensive income
0
0
-316
-1,918
9
-2,225
Shareholders' contribution
0
187
0
0
75
262
Transactions with non-controlling interests
0
0
0
-5
-45
-50
Total transactions with owners
0
187
0
-5
30
212
7,050
41,948
440
-11,824
0
37,614
Result for the year
0
0
0
2,021
0
2,021
Remeasurements of employment benefit obligations
0
0
0
4
0
4
Currency translation differences
0
0
201
0
0
201
Total comprehensive income
0
0
201
2,025
0
2,226
Reclassifications
0
-7,048
0
7,048
0
0
7,050
34,900
641
-2,751
0
39,840
31 December 2012
Total equity
in kEUR
Noncontrolling interests
Registered capital
IV. Consolidated statement of changes in equity
0
-316
Transactions with owners
31 December 2013
31 December 2014
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V. Consolidated statement of cash flows in kEUR
2014
2013
EBIT
4,552
909
Depreciation and amortisation
5,223
5,896
-3
4,286
8,593
978
Change in trade payables
-4,259
1,359
Change in other current assets/liabilities
-1,047
-1,927
Change in working capital
3,284
4,696
-388
-123
-40
-54
Gain (-) / loss (+) from disposal of assets
38
-211
Interest received
22
45
-283
-643
-1,139
-343
11,269
10,172
-712
391
Total cash flow from operating activities
10,557
10,563
Investments in property, plant and equipment
-2,435
-2,274
Investments in intangible assets
-4,365
-2,972
0
-50
93
3,275
-6,707
-2,021
-954
-121
-7,661
-2,142
2,896
8,421
Change in inventory Change in trade receivables
Change in provisions Government grants
Interest paid Taxes paid Cash flow from operating activities continued operations Cash flow from operation activities discontinued operations
Transactions with non-controlling interests Proceeds from disposal of fixed assets Cash flow from investing activities continued operations Cash flow from investing activities discontinued operations Total cash flow from investing activities Free Cash flow
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in kEUR
2014
2013
Repayment of bank loans
-22,812
-1,113
Proceeds from new loans
25,992
1,008
21
0
-9,384
-2,469
-307
-369
-1,386
-1,100
0
75
-83
200
-7,959
-3,768
760
-345
Total cash flow from financing activities
-7,199
-4,113
Total cash flow
-4,303
4,308
6,335
2,257
-28
-230
-4,303
4,308
-123
0
Cash and cash equivalents at end of the year
1,881
6,335
Cash and free overdrafts
2,381
7,676
Proceeds from other financing Changes in bank overdrafts and recourse factoring Finance lease Interest paid for long-term financing Transactions with non-controlling interest Currency differences Cash flow from financing activities continued operations Cash flow from financing activities discontinued operations
Cash and cash equivalents at beginning of the year Currency differences Total cash flow Disposed cash and cash equivalents
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (see note 15 for an explanation).
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VI. Notes to the consolidated financial statements 1 General information Megatech Industries AG (‘the company’) is located in Taubstummengasse 13/9, 1040 Vienna, Austria, and is registered under the commercial registry number FN 337381z at the Vienna Commercial Court. The company is owned to the extent of 99.3% by Megatech Industries S.L. located in Amurrio, Spain. Ultimate parent is EIB Beteiligungsgesellschaft mbH, located in Taubstummengasse 13/12, 1040 Vienna, Austria, registered at the Vienna Commercial Court under the commercial registry number FN 135029y. Ultimate controlling party is Mr. Maximilian Gessler. EIB Beteiligungsgesellschaft mbH prepares the consolidated financial statements for the largest and smallest group of companies. This group report is disclosed at the Vienna Commercial Court. In first quarter 2015 the ultimate parent changed to Megatech Industries Aktiengesellschaft, Vaduz, Liechtenstein. Megatech Industries AG (‘the company’) and its subsidiaries (together, ‘the group’) develop, manufacture, assemble and supply interior and exterior plastic components for the global automotive industry. Production sites are located in Spain, Portugal and the Czech Republic, complemented by a sales company in Germany. The group owns two Tech Centers, one in Spain and one in Romania, for the design and development of products.
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Consolidated companies are as follows: Company
Place of business
Country
Vienna
Austria
Megatech Industries Amurrio. S.L.
Amurrio
Spain
100.0%
Production
Megatech Industries Orense S.L.
Orense
Spain
100.0%
Production
Megatech Perfect Plastics Marinha Grande Ltda.
Marinha Grande
Portugal
100.0%
Production
Megatech Industries Hlinsko s.r.o.
Hlinsko
Czech Republic
100.0%
Production
Megatech Industries Jablonec s.r.o.
Jablonec
Czech Republic
100.0%
Production
Bucharest
Romania
100.0%
Engineering
Megatech Industries Intellectual Property S.L.U
Amurrio
Spain
100.0%
Engineering
Megatech Industries Technical Center A.I.E.
Amurrio
Spain
100.0%
Engineering
Megatech Brasil Componentes Automotivos Ltda. *)
Curritiba
Brazil
100.0%
Production
Wolfsburg
Germany
100.0%
Sales
Vienna
Austria
100.0%
Dormant
Pune
India
100.0%
Dormant
Megatech Industries AG
SC Megatech Engineering Center S.r.l.
Megatech Industries Deutschland GmbH Megatech Automotive GmbH Megatech Industries India PL
Share in capital
Acitivites
Holding
*) Megatech Brasil Componentes Automotive Ltda, Brazil was sold as at 31 December 2014. The result is reported as result from discontinued operations (see note 15).
The consolidated financial statements as at 31 December 2014 were prepared by the managing directors and released for issue on the date when this report was signed. The entity financial statements of the parent company, which have been included in the consolidated financial statements after transition to the applicable accounting standards, will be presented to the Supervisory Board for review and approval. The consolidated financial statements were prepared in EUR. Unless stated otherwise all amounts are shown in thousands of euro (kEUR). All figures presented are rounded, so minor discrepancies may arise in the addition of these amounts.
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2 Summary of significant accounting policies The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless stated otherwise.
2.1 Basis of preparation The consolidated financial statements of the group have been prepared in accordance with International Financial Reporting Standards and IFRIC interpretations as adopted by the EU. The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of available-for-sale financial assets, and financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of applying the group’s accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in note 4.
2.2.1 Changes in accounting policy and disclosures 2.1.1.1 New standards, amendments and interpretations adopted by the group IFRS 10, ‘Consolidated financial statements’, builds on existing principles by identifying the concept of control as the determining factor in whether an entity should be included in the consolidated financial statements of the parent company. The standard provides additional guidance to assist in the determination of control where this is difficult to assess. IFRS 10 does not have a material impact on the groups consolidated financial statements. IFRS 11, ‘Joint arrangements’, focuses on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangements: joint operations and joint ventures. Joint operations arise where the investors have rights to the assets and obligations for the liabilities of an arrangement. A joint operator accounts for its share of the assets, liabilities, revenue and expenses. Joint ventures arise where the investors have rights to the net assets of the arrangement; joint ventures are accounted for under the equity method. Proportional consolidation of joint arrangements is no longer permitted. IFRS 11 does not have a material impact on the group’s consolidated financial statements. IFRS 12, ‘Disclosures of interests in other entities’, includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, structured entities and other offbalance sheet vehicles. IFRS 12 does not have a material impact on the group’s consolidated financial statements.
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2.1.1.2 New standards and interpretations not yet adopted A number of new standards and amendments to standards and interpretations are effective for annual periods beginning after 1 January 2015, and have not been applied in preparing these consolidated financial statements. None of these is expected to have a significant effect on the consolidated financial statements of the group, except the following set out below: IFRS 9, ‘Financial instruments’, addresses the classification, measurement and recognition of financial assets and financial liabilities. The complete version of IFRS 9 was issued in July 2014. It replaces the guidance in IAS 39 that relates to the classification and measurement of financial instruments. IFRS 9 retains but simplifies the mixed measurement model and establishes three primary measurement categories for financial assets: amortised cost, fair value through OCI and fair value through P&L. The basis of classification depends on the entity’s business model and the contractual cash flow characteristics of the financial asset. Investments in equity instruments are required to be measured at fair value through profit or loss with the irrevocable option at inception to present changes in fair value in OCI not recycling. There is now a new expected credit losses model that replaces the incurred loss impairment model used in IAS 39. For financial liabilities there were no changes to classification and measurement except for the recognition of changes in own credit risk in other comprehensive income, for liabilities designated at fair value through profit or loss. IFRS 9 relaxes the requirements for hedge effectiveness by replacing the bright line hedge effectiveness tests. It requires an economic relationship between the hedged item and hedging instrument and for the ‘hedged ratio’ to be the same as the one management actually use for risk management purposes. Contemporaneous documentation is still required but is different to that currently prepared under IAS 39. The standard is effective for accounting periods beginning on or after 1 January 2018. Early adoption is permitted. The group is yet to assess IFRS 9’s full impact. IFRS 15, ‘Revenue from contracts with customers’, deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognised when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18 ‘Revenue’ and IAS 11, ‘Construction contracts’, and related interpretations. The standard is effective for annual periods beginning on or after 1 January 2017, and earlier application is permitted. The group is assessing the impact of IFRS 15. There are no other IFRSs or IFRIC interpretations that are not yet effective that would be expected to have a material impact on the Group.
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2.2 Consolidation Subsidiaries are all entities (including structured entities) over which the group has control. The group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the group. They are deconsolidated from the date that control ceases. As of 31 December 2014 and 31 December 2013 the group has 100% of shares and voting rights of all subsidiaries included in the scope of consolidation. The group uses the acquisition method to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred to the former owners of the acquiree and the equity interests issued by the group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair value at the acquisition date. The group recognises any non-controlling interest in the acquiree on an acquisition-by-acquisition basis, either at fair value or at the non-controlling interest’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the group’s share of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised in the income statement. Transactions with non-controlling interests that do not result in loss of control are accounted for as equity transactions – that is, as transactions with the owners in their capacity as owners. The difference between the fair value of any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are also recorded in equity. When the group ceases to have control any retained interest in the entity is remeasured to its fair value at the date when control is lost, with the change in carrying amount recognised in profit or loss. The fair value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive income in respect of that entity are accounted for as if the group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss. Inter-company transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group.
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Global innovations: In 2014, the Tech Center relocated to the AIC-Automotive Intelligence Center near Bilbao.
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2.3 Foreign currency translation 2.3.1 Functional and presentation currency Items included in the financial statements of each of the group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in thousands of euro (kEUR), which is the group’s presentation currency. 2.3.2 Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement, except when deferred in other comprehensive income as qualifying cash flow hedges and qualifying net investment hedges. Foreign exchange gains and losses that relate to borrowings and cash and cash equivalents are presented in the income statement under ‘other financial results’. All other foreign exchange gains and losses are presented in the income statement under ‘other income’ / ‘other expenses’. Changes in the fair value of monetary securities denominated in foreign currency classified as available-for-sale are determined on the basis of translation differences resulting from changes in the amortised cost of the security and other changes in the carrying amount of the security. Translation differences relating to changes in amortised cost are recognised in profit or loss, and other changes in carrying amount are recognised in other comprehensive income. Translation differences in non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss as part of the fair value gain or loss. Translation differences in non-monetary financial assets such as equities classified as available-forsale are included in other comprehensive income. 2.3.3 Group companies The results and financial position of all the group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet; income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and all resulting exchange differences are recognised in other comprehensive income.
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On consolidation, exchange differences arising from the translation of the net investment in foreign operations, and of borrowings and other currency instruments designated as hedges of such investments, are posted to other comprehensive income. When a foreign operation is partially disposed of or sold, exchange rate differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.
2.4 Property, plant and equipment Land and buildings comprise mainly factories and offices. Property, plant and equipment is stated at historical cost less depreciation. Historical cost includes expenditure that is directly attributable to the acquisition of these items. Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the group and the cost of the item can be measured reliably. The carrying amount of a replaced part is derecognised. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred. Borrowing costs are only capitalised when they are directly attributable to the acquisition or production of a qualifying asset as part of the asset, all other borrowing costs are recognised as an expense in the period in which they occur. Land is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate their cost to their residual value over their estimated useful lives, as follows:
Buildings Machinery Forklifts Vehicles Furniture, fittings and equipment
25-33 years 5-15 years 5 years 3-5 years 3-10 years
The residual values and useful lives of assets are reviewed, and adjusted if appropriate, at the end of each reporting period. An asset’s carrying amount is written down immediately to its recoverable amount if the carrying amount is greater than the estimated recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised under ‘other income’ or ‘other expenses’ in the income statement.
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2.5 Intangible assets 2.5.1 Trademarks Acquired trademark rights are capitalised on the basis of the costs incurred to acquire and bring to use those rights. These costs are amortised over their estimated useful lives of ten years. 2.5.2 Research and development cost No intangible asset is recognised in the research phase. The expenditure is recognised as an expense when it is incurred. An intangible asset arising from development is only recognised if the company can demonstrate all of the following: the technical feasibility of completing the intangible asset so that it will be available for use or sale; its intention to complete the intangible asset and use or sell it; its ability to use or sell the intangible asset; how the intangible asset will generate probable future economic benefits; the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset; the ability to reliably measure the expenditure attributable to the intangible asset during its development. Directly attributable costs that are capitalised as part of the projects include employee costs, material costs, external costs and an appropriate portion of relevant overheads. Development costs recognised are amortised on a straight-line basis over the project period related to the development costs, usually not exceeding six years. 2.5.3 Software licences Acquired computer software licences are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives of three to five years. 2.5.4 Contractual customer relationships Contractual customer relationships acquired in a business combination are recognised at fair value at the acquisition date. The contractual customer relations have a finite useful life of 15 years and are carried at cost less accumulated amortisation. Amortisation is calculated using the straight-line method over the expected life of the customer relationship. 2.5.5 Patents Self-developed patents whose fair value can be measured reliably are capitalised based either on an expert valuation or on the expected turnover which will be generated with the patent. Amortisation is calculated using the straight-line method to allocate the cost of patents over their estimated useful life. The useful life is based on the project time period for which the patents were developed usually not exceeding six years.
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2.6 Impairment of non-financial assets Assets that have an indefinite useful life – for example, goodwill or intangible assets not ready for use – are not subject to amortisation and are tested annually for impairment. Assets that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
2.7 Financial assets 2.7.1 Classification The group classifies its financial assets in the following categories: at fair value through profit or loss, loans and receivables, and available for sale. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition. Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short term. Derivatives are also categorised as held for trading unless they are designated as hedges. Assets in this category are classified as current assets if expected to be settled within 12 months; otherwise, they are classified as non-current. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets. The group’s loans and receivables comprise ‘trade receivables’, ‘other receivables’ and ‘cash and cash equivalents’ in the balance sheet. Available-for-sale financial assets Available-for-sale financial assets are non-derivatives that are either designated in this category or not classified in any of the other categories. They are included in non-current assets unless the investment matures or management intends to dispose of it within 12 months after the end of the reporting period.
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2.7.2 Recognition and measurement Regular purchases and sales of financial assets are recognised on the trade date – the date on which the group commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction costs for all financial assets not carried at fair value through profit or loss. Financial assets are derecognised when the rights to receive cash flows from the investments have expired or have been transferred and the group has substantially transferred all risks and rewards of ownership. Available-for-sale financial assets and financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortised cost using the effective interest method. Financial assets carried at fair value through profit or loss are initially recognised at fair value, any transaction costs are expensed in the income statement. When securities classified as available-for-sale are sold or impaired, the accumulated fair value adjustments recognised in equity are included in the income statement as ‘gains and losses from investment securities’. Interest on available-for-sale securities calculated using the effective interest method is recognised in the income statement as part of other income. Dividends on available-forsale equity instruments are recognised in the income statement as part of financial result when the group’s right to receive payments is established. Changes in fair value are recognised as gains and losses in comprehensive income. 2.7.3 Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the company or the counterparty. The group did not offset any amounts in 2014 and 2013 except one transaction with related parties (see note 35.1 for details).
2.8 Impairment of financial assets 2.8.1 Assets carried at amortised cost The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are incurred only if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated.
Annual Report 2014 | Page 58
The criteria that the group uses to determine that there is objective evidence of an impairment loss include: significant financial difficulty of the issuer or obligor; a breach of contract, such as default or delinquency in interest or principal payments; the group, for economic or legal reasons relating to the borrower’s financial difficulty, granting to the borrower a concession that the lender would not otherwise consider; the probability that the borrower will enter bankruptcy or other financial reorganisation; the disappearance of an active market for that financial asset because of financial difficulties; or observable data indicating that there is a measurable decrease in the estimated future cash flows from a portfolio of financial assets since the initial recognition of those assets, although the decrease cannot yet be identified with the individual financial assets in the portfolio, including adverse changes in the payment status of borrowers in the portfolio; and national or local economic conditions that correlate with defaults on the assets in the portfolio. For the loans and receivables category, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying amount of the asset is reduced and the amount of the loss is recognised in the income statement. If a loan or investment held to maturity has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor’s credit rating), the reversal of the previously recognised impairment loss is recognised in the income statement.
2.8.2 Assets classified as available-for-sale The group assesses at the end of each reporting period whether there is objective evidence that a financial asset or a group of financial assets is impaired. For debt securities, the group uses the criteria referred to under ‘assets carried at amortised cost’ above. In the case of equity investments classified as available for sale, a significant or prolonged decline in the fair value of the security below its cost is also evidence that the assets are impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that financial asset previously recognised in profit or loss – is removed from equity and recognised in profit or loss. Impairment losses recognised in the consolidated income statement on equity instruments are not reversed through the consolidated income statement. If, in a subsequent period, the fair value of a debt instrument classified as available for sale increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in profit or loss, the impairment loss is reversed through the consolidated income statement.
Annual Report 2014 | Page 59
2.9 Derivative financial instruments The group does not use hedge accounting pursuant to IAS 39, therefore all derivative financial instruments are classified as derivatives. Changes in fair value are recognised as gains and losses in the income statement. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.
2.10 Inventories Inventories are stated at the lower of cost and net realisable value. Cost is determined using the firstin, first-out (FIFO) method. The cost of finished goods and work in progress comprises direct material costs, direct production costs and production overheads (based on normal operating capacity). Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.11 Trade receivables Trade receivables are amounts due from customers for merchandise and products sold or services performed in the ordinary course of business. If collection is expected in one year or less, they are classified as current assets. If not, they are presented as non-current assets. Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less provision for impairment.
2.12 Cash and cash equivalents In the consolidated statement of cash flows, cash and cash equivalents includes cash in hand, deposits held at call with banks.
2.13 Registered capital Registered capital is classified as equity.
2.14 Trade payables Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Trade accounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
Annual Report 2014 | Page 60
2.15 Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the financial liabilities using the effective interest method.
2.16 Current and deferred income tax The tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively. The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the balance sheet date in the countries where the company and its subsidiaries operate and generate taxable income. Deferred income tax is recognised, using the liability method, on temporary differences arising between the tax basis of assets and liabilities and their carrying amounts in the consolidated financial statements. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised. Deferred income tax is applied to temporary differences arising on investments in subsidiaries, except for deferred income tax liability where the timing of the reversal of the temporary difference is controlled by the group and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to settle the balances on a net basis.
Annual Report 2014 | Page 61
2.17 Employee benefits 2.17.1 Severance payments Some group companies pay a severance payment in case of retirement after an uninterrupted period of service of five years to their employees. These benefits are classified as a defined benefit obligation and accounted for accordingly using the projected unit credit method. Actuarial gains and losses are recognised in other comprehensive income in the period incurred. Legal regulations in Austria require employers to make regular contributions equal to 1.53% of their monthly salary to a statutory termination benefit scheme for all employees who joined an Austrian company during or after 2003. The company has no further obligations. Claims by employees to severance payments are filed with the statutory severance payment scheme, while the regular contributions are treated similar to those for defined contribution plans and are included in ‘employee benefit expenses’. 2.17.2 Anniversary payments Some group companies pay an anniversary bonus to their employees after an uninterrupted period of service. These benefits are classified as a defined benefit obligation and accounted for accordingly using the projected unit credit method. Actuarial gains and losses are recognised in profit or loss in the period incurred. 2.17.3 Bonus payments The group recognises a liability and an expense for bonuses based on the expected bonus payments for the relevant year. The group recognises a provision where contractually obliged or where there is a past practice that has created a constructive obligation.
2.18 Provisions Provisions for environmental restoration, legal claims, onerous contracts, etc. are recognised when: the group has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated. Provisions are not recognised for future operating losses. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as an interest expense.
2.19 Government grants Government grants relating to capital expenditure projects are treated as deferred income and released to the income statement over the expected useful lives of the assets for which the government grants are provided.
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2.20 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the sale of goods and services in the ordinary course of the group’s activities. Revenue is shown net of value-added tax, returns, rebates and discounts and after eliminating sales within the group. A sale is recognised when the significant risks and rewards of ownership have passed to the buyer. This is when title and insurance risk have passed to the customer and the goods have been delivered to a contractually agreed location. Interest income is recognised using the effective interest method. When a loan and receivable is impaired, the group reduces the carrying amount to its recoverable amount, which is the estimated future cash flow discounted at the original effective interest rate of the instrument, and continues unwinding the discount as interest income. Interest income on impaired loans and receivables is recognised using the original effective interest rate.
2.21 Non-recurring items Non-recurring items are those material items of financial performance that the group believes should be separately disclosed in the income statement to assist in the understanding of the underlying financial performance achieved by the group and its businesses. Such items are material by nature or affect the financial year’s results and require separate disclosure in accordance with IAS 1. Nonrecurring items that relate to the operating performance of the group comprise restructuring costs.
2.22 Leases Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a straight-line basis over the period of the lease. The group leases certain equipment. Leases of equipment where the group bears substantially all the risks and rewards of ownership are classified as finance leases. Finance leases are capitalised at the lease’s commencement at the lower of the fair value of the leased equipment and the present value of the minimum lease payments. Each lease payment is divided between the liability and finance charges. The corresponding rental obligations, net of finance charges, are included in other non-current liabilities. The interest element of the finance cost is charged to the income statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The equipment acquired under finance leases is depreciated over the shorter of the useful life of the asset and the lease term.
Annual Report 2014 | Page 63
Megatech Industries Hlinsko manufactured the lower frame of the rear door cover, rear window frame, and sill panel for the third generation of the Audi TT CoupĂŠ.
Annual Report 2014 | Page 64
Annual Report 2014 | Page 65
3 Financial risk management 3.1 Financial risk factors The group’s activities expose it to a variety of financial risks: market risk (including foreign exchange currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. If required, the group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out centrally by the group’s management. The following sensitivity analyses are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may be correlated.
3.1.1 Market risk Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising primarily from the Czech crown and the Brazilian real. Foreign exchange risk arises from future commercial transactions and bank loans in other currencies than the functional currency. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency with internal hedging as far as possible. Furthermore, developments in foreign currencies are passed on to customers with a certain time delay. Group management will coordinate any additional hedging that may be necessary. The following exchange rates were used:
2014
2013
Average
Closing
Average
Closing
BRL
3.1228
3.2207
2.8687
3.2576
CZK
27.5358
27.7350
25.9797
27.4270
Total foreign exchange losses in 2014 amounted to kEUR -314 (2013: kEUR -1,972). There were no hedging instruments in place in 2014 and 2013, because loss is not cash effective and management decided not to use hedging instruments that cause high cash outflows upfront. At 31 December 2014, if the exchange rate of the Czech crown had increased additionally by 5.0% with all other variables held constant, profit before tax would have been kEUR -907 lower (2013: kEUR -1,035). There are no material risks in other currencies (including BRL).
Annual Report 2014 | Page 66
Cash flow and fair value interest rate risk The group’s interest rate risk arises from non-current financial liabilities. Financial liabilities issued at variable rates expose the group to cash flow interest rate risk which is partially offset by cash held at variable rates. At the end of 2014, almost all of the group’s financial liabilities were denominated in euro. At 31 December 2014, if the EURIBOR had increased additionally by 0.5%-points with all other variables held constant, profit before tax would have been kEUR -80 lower (2013: kEUR -115). There are no material risks in any other underlying.
3.1.2 Credit risk The group’s credit risk is mainly confined to the risk of customers defaulting on sales invoices raised. Any credit risk arising from cash deposits and derivative financial instruments is deemed to be insignificant on the basis that nearly all relevant counterparties are investment grade entities recognised by international credit-rating agencies. Each local entity is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. Main customers of the group are the big automotive producers with regard to which credit risk is considered low. The maximum risk to the group is the carrying amount.
3.1.3 Commodity price risk The group is exposed to commodity price risks as main raw materials can only be purchased on the spot markets and no commodity hedges are available. Price fluctuations can partly be passed on to customers, depending on the contractual relationship.
3.1.4 Liquidity risk Liquidity risk is the risk that the group could experience difficulties in meeting its commitments to creditors as financial liabilities fall due for payment. The group manages its liquidity risk by using reasonable and retrospectively-assessed assumptions to forecast future cash-generating capabilities and working capital requirements of the businesses it operates and by maintaining sufficient reserves, committed borrowing facilities and other credit lines as appropriate. Forecast liquidity represents the group’s expected cash inflows, principally generated from sales made to customers, less the group’s contractually-determined cash outflows, principally related to supplier payments and the repayment of borrowings, plus the payment of any interest accruing thereon. The matching of these cash inflows and outflows rests on the expected ageing profiles of the underlying assets and liabilities. Current financial assets and financial liabilities are represented primarily by the group’s trade receivables and trade payables, respectively. The matching of the cash flows that result from trade receivables and trade payables takes place typically over a period of three to four months from recognition in the balance sheet and is managed to ensure the ongoing operating liquidity of the group. Financing cash outflows may be longer-term in nature. The group does not hold noncurrent financial assets to match against these commitments, but has invested significantly in noncurrent non-financial assets which generate the sustainable future cash inflows, net of future capital expenditure requirements, needed to service and repay the group’s financial liabilities. Annual Report 2014 | Page 67
The table below analyses the group’s non-derivative financial liabilities and net-settled derivative financial liabilities, dividing them into relevant maturity groupings based on the remaining period at the balance sheet date to the contractual maturity date. Derivative financial liabilities are included in the analysis if their contractual maturities are essential for an understanding of the timing of the cash flows. The amounts disclosed in the table are the contractual undiscounted cash flows. in kEUR
0-3 months
3-12 months
1-2 years
2-5 years
>5 years
Financial liabilities (excl. bank overdrafts)
2,737
8,995
2,900
7,239
4,242
Bank overdrafts incl. recourse factoring
1,056
36
0
0
0
111
333
444
904
0
Trade payables
20,764
124
0
0
0
Other payables
4,797
1,025
422
1,211
0
Other financing
2
7
9
4
0
0-3 months
3-12 months
1-2 years
2-5 years
>5 years
Financial liabilities (excl. bank overdrafts)
15,311
2,521
956
1,877
1,732
Bank overdrafts incl, recourse factoring
11,530
623
0
0
0
39
118
157
340
0
Trade payables
26,327
63
0
0
0
Other payables
1,808
174
0
0
0
Other financing
0
0
0
0
0
as of 31 December 2014
Finance lease
in kEUR
as of 31 December 2013
Finance lease
Financial liabilities with contractual undiscounted cash flows, which are due in more than one year, have been reclassified to 0-3 months in 2013 because the group management decided not to repay instalments in December 2013 due to serious legal restrictions.
Annual Report 2014 | Page 68
3.2 Capital risk management The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Consistent with others in the industry, the group monitors capital on the basis of net debt/EBITDA before non-recurring items as well as the equity ratio. Net debt is calculated as total financial liabilities (including ‘current and non-current financial liabilities’ as shown in the balance sheet) less cash and cash equivalents. Equity is calculated as ‘equity’ as shown in the balance sheet. in kEUR
31/12/2014
31/12/2013
Financial liabilities
26,026
32,715
- Cash and cash equivalents
-1,881
-6,212
24,145
26,503
10,528
7,754
2.29
3.42
Net debt EBITDA before non recurring items Net debt/EBITDA before non recurring items
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation. in kEUR
31/12/2014
31/12/2013
Total equity
39,840
37,614
Total assets
100,316
113,096
39.7%
33.3%
Equity ratio
Based on contracts with banks, the group also puts focus on tangible equity ratio. Tangible equity ratio is defined in the same way as equity ratio but includes adjustments for intangible assets, deferred tax assets and receivables and payables from or to related parties.
Annual Report 2014 | Page 69
in kEUR
31/12/2014
31/12/2013
39,840
37,614
-18,174
-12,586
-707
-775
-12,217
-13,592
2,023
26
Tangible equity
10,765
10,687
Total assets
100,316
113,096
- Intangible assets
-18,174
-12,586
-707
-775
-12,217
-13,592
2,023
26
Tangible assets
71,241
86,169
Tangible equity ratio
15.1%
12.4%
Total equity - Intangible assets - Deferred tax assets - Receivables from related parties + Payables to related parties
- Deferred tax assets - Receivables from related parties + Payables to related parties
3.3 Fair value estimation The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1); Inputs other than quoted prices included under level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (i.e., derived from prices) (level 2); Inputs for the asset or liability that are not based on observable market data (i.e., unobservable inputs) (level 3). The following table presents the group’s assets and liabilities that were measured at fair value at 31 December 2013: in kEUR
Level 2
Level 3
Total
0
0
0
0
60
60
0
60
60
Assets Financial assets at fair value through P&L Trading derivatives Available-for-sale financial assets Equity securities Total assets Annual Report 2014 | Page 70
The following table presents the group’s assets and liabilities that were measured at fair value at 31 December 2013: in kEUR
Level 2
Level 3
Total
1
0
1
0
60
60
1
60
61
Assets Financial assets at fair value through P&L Trading derivatives Available-for-sale financial assets Equity securities Total assets No transfers between levels took place in 2014 and 2013. The fair value of financial instruments that are not traded in an active market (for example, overthe-counter derivatives) is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity-specific estimates. If all significant inputs required to measure an instrument at fair value are observable, the instrument is included in level 2. If one or more of the significant inputs is not based on observable market data, the instrument is included in level 3.
4 Critical accounting estimates and judgements Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are addressed below.
4.1 Estimated residual values and useful economic lives The group’s objectives when managing capital are to safeguard the group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimum capital structure to reduce the cost of capital. Consistent with others in the industry, the group monitors capital on the basis of net debt/EBITDA before non-recurring items as well as the equity ratio. Net debt is calculated as total financial liabilities (including ‘current and non-current financial liabilities’ as shown in the balance sheet) less cash and cash equivalents. Equity is calculated as ‘equity’ as shown in the balance sheet.
Annual Report 2014 | Page 71
4.2 Employee benefits At 31 December 2014, the employee benefits obligation (severance and anniversary payments) amounted to kEUR 392 (2013: kEUR 434) The group’s benefit scheme liabilities are sensitive to changes in various underlying actuarial assumptions set by management. These assumptions include the discount and inflation rates to apply to scheme liabilities, the mortality rates to apply to scheme members and the rates of increase of future salaries. Further details regarding the assumptions are set out in note 29.3.
4.3 Deferred taxation At 31 December 2014, the group recognised deferred tax assets on tax loss carry-forwards in an amount of kEUR 818 (2013: kEUR 990). If future taxable profits within the 3-year plan period defined for the accounting and measurement of deferred taxes are 10% lower than the assumptions made at the balance sheet date, this would have a negative impact on the reported deferred tax assets on tax loss carry-forwards in an amount of kEUR 0 (2013: kEUR -77).
5 Revenue in kEUR
2014
2013
Sale of parts
109,080
109,685
Sale of tools
6,942
13,903
Other revenue
8,429
7,928
124,451
131,516
Total
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation). Other revenues mainly refer to sales of raw material to subcontractors.
6 Raw materials and consumables used Raw materials and consumables used include kEUR -221 (2013: kEUR -96) for the provision for impairment of inventories and write-down of inventories. It also includes kEUR 110 (2013: kEUR 33) for the reversal of provision for impairment of inventories.
Annual Report 2014 | Page 72
7 Employee benefit expenses in kEUR
2014
2013
Wages and salaries
-19,648
-20,373
Social security costs
-5,861
-6,019
0
-5
29
6
-524
-532
-26,004
-26,923
Number of employees (FTEs) as per 31 December
1,104
1,227
Average number of employees (FTEs)
1,214
1,306
Severance payment costs (note 29) Anniversary payment costs (note 29) Other employment costs Total employee costs
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation)
8 Other income in kEUR
2014
2013
278
253
Gains from disposal of assets
42
331
Rents
93
251
Other income
1,638
1,550
Total other income
2,051
2,385
Government grants
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation) Other income mainly refers to cost compensations from customers and suppliers.
Annual Report 2014 | Page 73
9 Other expenses in kEUR
2014
2013
Consultancy costs
-2,050
-2,373
Temporary workers
-1,794
-1,719
Rents and similar costs
-1,056
-1,415
Travel expenses
-922
-809
Bad debts (incl, reversals)
-345
-179
Energy non-production
-340
-452
IT services
-335
-372
Insurance costs
-298
-451
Telephone and internet costs
-264
-279
Bank charges
-212
-209
Repair and maintenance
-210
-231
Marketing
-177
-106
Others
-1,527
-1,359
Total other expenses
-9,530
-9,954
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation) Consultancy costs include kEUR 746 (2013: kEUR 1,128) for capitalised development costs. Bad debts include kEUR -483 (2013: kEUR -319) for the provision and write-off of bad debts and kEUR 138 (2013: kEUR 140) for the reversal of the provision for bad debts.
10 Non-recurring items Some group companies had restructuring programmes in 2012 and 2013 in order to improve production and administration processes. Costs for the reduction in the number of employees are shown as restructuring costs under non-recurring items. In 2014 non-recurring items mainly refer to the long-planned closing of the plant in Liberec, Czech Republic and ongoing restructuring program in Amurrio, Spain.
Annual Report 2014 | Page 74
11 Depreciation and amortisation in kEUR
2014
2013
Depreciation
-3,127
-3,775
Amortisation
-2,190
-1,757
Impairment of property, plant, equipment
-34
-364
Reversal of impairment
128
0
-5,223
-5,896
Total
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation)
12 Interest result in kEUR
2013
2012
22
45
Interest income from related parties
306
259
Interest income
328
304
-1,532
-1,960
-72
0
-371
-42
Interest costs
-1,975
-2,002
Interest result
-1,647
-1,698
Interest result Interest income from short-term bank deposits
Interest costs for bank borrowings Interest costs for related parties Other interest costs
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation) The increase in other interest costs mainly refers to increased liabilities for finance lease and to costs for non-recourse factoring that was implemented in 2014.
Annual Report 2014 | Page 75
13 Other financial result in kEUR
2014
2013
-245
-1,885
0
-571
Non-recurring financial result
2,281
1,528
Other financial result
2,036
-928
Net foreign exchange result on financing activities Changes in fair value of financial instruments
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation) The net foreign exchange result on financing activities was mainly caused by changes in the EUR/CZK exchange rate. The 2014 non-recurring financial result refers to an agreement between Megatech Group, BAWAG P.S.K Bank für Arbeit und Wirtschaft und Österreichische Postsparkasse Aktiengesellschaft (BAWAG PSK AG) and Česká Spořitelna, a.s. to refinance the loan contract to Megatech Group by BAWAG PSK AG (see also note 25.1). It includes the impact from the waiver from BAWAG PSK AG and the costs relating to this agreement. Changes in the fair value of financial instruments were caused by the negative development of inflation rate swaps. These inflation rate swaps were terminated in 2013. It was agreed with the bank to waive half of the liabilities. The impact from this agreement was reported as a non-recurring financial result in 2013.
Annual Report 2014 | Page 76
14 Income tax expense 14.1 Total tax charge in kEUR
2014
2013
-1,388
-623
-88
114
-1,476
-509
906
698
1
-12
62
0
969
686
-507
177
Current taxes Current tax on profits for the year Adjustments in respect of prior years Total current taxes Deferred taxes Origination and reversal of temporary differences Attributable to a change in the rate of domestic income tax rate Adjustments in respect of prior years Total deferred taxes Total tax charge
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation)
Annual Report 2014 | Page 77
Tax on the group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows: in kEUR
2014
2013
Profit before tax
4,941
-1,717
Tax calculated at domestic tax rates applicable to profits in the respective countries
-1,413
42
-437
-1
- Gains not taxable
105
77
- Utilisation of previously unrecognised tax losses
917
8
- Tax losses for which no deferred income tax asset was recognised
-96
-51
1
-12
- Adjustments in respect of prior years
-26
114
- Tax credits
442
0
-507
177
Tax effects of: - Expenses not deductible for tax purposes
- Re-measurement of deferred taxes - change of tax rate
Total tax charge
Reporting of figures for 2013 has been amended due to reporting of discontinued operations (See note 15 for an explanation) The weighted average applicable tax rate was 28.6% (2013: 2.4%). The change was due to a change in the profitability of the group’s subsidiaries in the relevant countries, some of them with a negative result. In 2014, no gains or losses from taxes were included in other comprehensive income (2013: kEUR 0).
Annual Report 2014 | Page 78
14.2 Deferred income tax The analysis of deferred tax assets and deferred tax liabilities including offsetting of balances within the same tax jurisdiction is as follows: in kEUR
31/12/2014
31/12/2013
Deferred tax assets to be recovered after more than 12 months
343
579
Deferred tax assets to be recovered within 12 months
364
196
Total deferred tax assets
707
775
-3,031
-3,901
71
-135
Total deferred tax liabilities
-2,960
-4,036
Net deferred tax
-2,253
-3,261
Deferred tax assets
Deferred tax liabilities Deferred tax liabilities to be recovered after more than 12 months Deferred tax liabilities to be recovered within 12 months
The gross movement on the deferred income tax account is as follows: in kEUR At 1 January Income statement charge Change in scope of consolidation Currency rate difference At 31 December
2014
2013
-3,261
-4,142
969
910
49
0
-10
-29
-2,253
-3,261
Annual Report 2014 | Page 79
Annual Report 2014 | Page 80
The heart of our work consists of our numerous employees. Our modern machines are perfectly complemented and rounded by skilled handicraft.
Annual Report 2014 | Page 81
The movement in deferred income tax assets and liabilities, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows: Deferred tax assets
Employee benefits
Provisions
Tax losses
Others
Total
in kEUR
31 December 2012
38
223
1,177
580
2,018
Charged/(credited) to income statement
-3
-81
-91
590
415
Currency difference
-3
-14
-96
-67
-180
31 December 2013
32
128
990
1,103
2,253
Charged/(credited) to income statement
-7
-19
81
737
792
Change in scope of consolidation
0
0
-247
-10
-257
Currency difference
0
-1
-6
-13
-20
25
108
818
1,817
2,768
31 December 2014
Deferred tax liabilties Fixed assets
Others
Total
in kEUR
-6,049
-111
-6,160
Charged/(credited) to income statement
510
-15
495
Currency difference
146
5
151
-5,393
-121
-5,514
Charged/(credited) to income statement
179
-2
177
Change in scope of consolidation
306
0
306
9
1
10
-4,899
-122
-5,021
31 December 2012
31 December 2013
Currency difference 31 December 2014
Annual Report 2014 | Page 82
Deferred income tax assets are recognised for tax losses carried forward to the extent that the realisation of the related tax benefit through future taxable profits is probable. No deferred tax assets for tax loss carry-forwards were recognised for entities where it currently does not appear likely that sufficient taxable income will be available against which the taxes loss carry-forwards can be utilised. The group did not recognise deferred income tax assets of kEUR 653 (2013: kEUR 2,587) in respect of losses amounting to kEUR 6,389 (2013: kEUR 10,662). Total tax loss carried forward is kEUR 11,155 (2013: kEUR 15,042), of which kEUR 870 will expire in the next year (2013: kEUR 1,373), and kEUR 4,999 (2013: kEUR 8,113) will expire in the next two to five years.
15 Discontinued operations Because of the distressed market situation in Brazil, with a drop down of the whole automotive industry by around 40% compared to the prior year, in December 2014 the management of the group decided to sell the Brazilian entity and to exit the Brazilian market at least for the next few years. As at 31 December 2014 the shares in Megatech Brasil Componentes Automotivos Ltda., Brazil, were sold to Megatech Industries Aktiengesellschaft F端rstentum Liechtenstein, Vaduz, Liechtenstein (see note 35.2). As Megatech Group lost control over the Brazilian entity, this entity was deconsolidated. In accordance with IFRS 5, the impact the deconsolidation of the Brazilian entity has on the consolidated income statement and consolidated cash flow statement is reclassified and reported as result from discontinued operations. An analysis of the result of discontinued operations and the result from the deconsolidation of the Brazilian entity is as follows: in kEUR
2014
2013
Revenue
7,409
12,121
Expenses
-9,965
-12,723
Result before tax from discontinued operations
-2,556
-602
905
224
Result after tax from discontinued operations
-1,651
-378
Disposed assets other than cash and cash equivalents
-4,326
0
-123
0
5,266
0
Provision for receivables from disposed entity
-950
0
Take-over of costs
-200
0
Provision for guarantees provided
-260
0
Currency translation difference reclassified from OCI
-169
0
Result from deconsolidation
-762
0
-2,413
-378
Taxes on income from discontinued operations
Disposed cash and cash equivalents Disposed liabilities
Total result from discontinued operations
Annual Report 2014 | Page 83
The cash flow from discontinued operations is as follows: in kEUR
2014
2013
Operating cash flows
-712
391
Investing cash flows
-954
-121
Financing cash flows
760
-345
16 Property, plant and equipment
Land and building
Machinery and vehicles
Machinery and vehicles finance lease
Furniture and equipment
Total
Historic costs
41,039
52,985
612
4,756
99,392
Additions
96
1,647
1,003
690
3,436
Disposals
-738
-1,389
-612
-422
-3,161
Transfers
250
-247
0
-3
0
Currency difference
-2,101
-1,912
-53
-97
-4,163
31 December 2013
38,546
51,084
950
4,924
95,504
Additions
37
1,370
1,807
595
3,809
Disposals
0
-248
0
-24
-272
-2,458
-5,397
0
-482
-8,337
931
-947
0
0
-16
-134
26
-24
11
-121
36,922
45,888
2,733
5,024
90,567
in kEUR
31 December 2012
Change in scope of consolidation Transfers Currency difference 31 December 2014
Annual Report 2014 | Page 84
Total
-3,527
-51,062
Depreciation
-1,161
-2,051
-56
-754
-4,022
545
175
612
387
1,719
-364
0
0
0
-364
393
1,301
3
78
1,775
31 December 2013
-7,986
-40,099
-53
-3,816
-51,954
Depreciation
-1,036
-1,623
-121
-347
-3,127
0
242
0
6
248
793
4,312
0
388
5,493
0
-34
0
0
-34
128
0
0
0
128
7
-45
1
-8
-45
-8,094
-37,247
-173
-3,777
-49,291
Disposals Impairment Currency difference
Disposals Change in scope of consolidation Impairment Reversal of impairment Currency difference 31 December 2014
Carrying amounts in kEUR
31 December 2013 31 December 2014
Total
Furniture and equipment
-612
Furniture and equipment
Machinery and vehicles finance lease
-39,524
Machinery and vehicles finance lease
Machinery and vehicles
-7,399
Machinery and vehicles
31 December 2012
in kEUR
Land and building
Land and building
Accumulated depreciation
30,560
10,985
897
1,108
43,550
28,828
8,641
2,560
1,247
41,276
Reversal of impairment of land and building refers to land and building that has been impaired in 2013. The group received an offer from a third party to buy this land and building. The fair value of these assets was adjusted to the amount offered. Reversal of impairment is included in depreciation and amortisation, as well as the impairment in 2013. For additions in machinery and vehicles finance lease, the group paid kEUR 433 for down-payments. The total amount of transfers (kEUR -16) refers to transfers between fixed assets and intangible assets (see also note 17).
Annual Report 2014 | Page 85
Development costs
Customer relationships
Trademarks
Other
Total
17 Intangible assets
31 December 2012
5,488
8,385
0
3,697
17,570
Additions
2,784
0
0
189
2,973
Disposals
-1,567
0
0
-258
-1,825
0
0
0
-130
-130
31 December 2013
6,705
8,385
0
3,498
18,588
Additions
4,186
0
3,540
179
7,905
Disposals
-92
0
0
6
-86
Change in scope of consolidation
0
0
0
-183
-183
Transfers
0
0
0
16
16
-9
0
0
-8
-17
10,790
8,385
3,540
3,508
26,223
Historic costs in kEUR
Currency difference
Currency difference 31 December 2014
in kEUR
Development costs
Customer relationships
Trademarks
Other
Total
Accumulated amortisation
31 December 2012
-222
-1,677
0
-2,604
-4,503
Amortisation
-916
-559
0
-299
-1,774
Disposals
0
0
0
197
197
Currency difference
0
0
0
78
78
31 December 2013
-1,138
-2,236
0
-2,628
-6,002
Amortisation
-1,012
-559
-354
-265
-2,190
Disposals
0
0
0
-21
-21
Change in scope of consolidation
0
0
0
160
160
Currency difference
0
0
0
4
4
-2,150
-2,795
-354
-2,750
-8,049
31 December 2014
Annual Report 2014 | Page 86
in kEUR
Development costs
Customer relationships
Trademarks
Other
Total
Carrying amounts
31 December 2013
5,567
6,149
0
870
12,586
31 December 2014
8,640
5,590
3,186
758
18,174
The category ‘Patents’ that has been reported separately in the past is now included in ‘Other’ because of its low carrying amount. Additions to trademarks refer to a related party transaction with Megatech Industries S.L., Spain. The purchase price is partly offset against (kEUR 1,610) with receivables from Megatech Industries S.L., Spain. The rest (kEUR 1,930) will be paid over the next five years (see also note 35.5). The total amount of transfers (kEUR 16) refers to transfers between property, plant and equipment and intangible assets (see also note 16).
18 Financial instruments by category
Loans and receivables
at FV through P&L
Availablefor-sale
Total
Assets
Financial assets available for sale
0
0
60
60
Derivative financial instruments
0
0
0
0
Trade receivables
10,723
0
0
10,723
Other receivables
16,738
0
0
16,738
1,881
0
0
1,881
29,342
0
60
29,402
2014 in kEUR
Cash and cash equivalents Total
Annual Report 2014 | Page 87
MEGATECH Industries Hlinsko also manufactures rear door cover parts for the recently started production of the Audi TT Cabrio.
Annual Report 2014 | Page 88
Annual Report 2014 | Page 89
Loans and receivables
at FV through P&L
Availablefor-sale
Total
Assets
Financial assets available for sale
0
0
60
60
Derivative financial instruments
0
1
0
1
Trade receivables
20,638
0
0
20,638
Other receivables
17,783
0
0
17,783
6,335
0
0
6,335
44,756
1
60
44,817
2013 in kEUR
Cash and cash equivalents Total
at FV through P&L
at amortised cost
Total
Liabilities
Financial liabilities excluding finance lease
0
24,357
24,357
Financial lease liabilities
0
1,669
1,669
Trade payables
0
20,888
20,888
Other payables excluding non-financial liabilities
0
2,591
2,591
Total
0
49,505
49,505
2014 in kEUR
at FV through P&L
at amortised cost
Total
Liabilities
Financial liabilities
0
32,424
32,424
Financial lease liabilities
0
602
602
Trade payables
0
26,390
28,372
Other payables excluding non-financial liabilities
0
1,982
28,372
Total
0
61,398
61,398
2013 in kEUR
Annual Report 2014 | Page 90
19 Derivative financial instruments In 2014 all derivative financial instruments have been sold without any impact on result. Inflation rate swaps were terminated in 2013. By agreement with the bank, half of the total liability (kEUR 1,528) was converted into a long-term loan. The second half was waived and was reported as a non-recurring financial result (kEUR 1,528).
20 Inventories in kEUR
31/12/2014
31/12/2013
3,161
4,019
Unfinished goods
515
866
Tools and moulds
4,952
3,734
Finished goods
1,964
2,541
165
208
10,757
11,368
31/12/2014
31/12/2013
At 1 January
-456
-442
Provision for impairment on inventories
-221
-96
0
39
110
33
5
10
-562
-456
Inventories Raw materials
Merchandise Total inventories
in kEUR
Impairment on inventories
Use of provision for impairment on inventories Reversal of provision for impairment on inventories Currency difference At 31 December
No inventories were recorded at net realisable value in 2014 and 2013. The item ‘reversal of provision for impairment on inventories’ mainly refers to inventories impaired in the past that were sold or used in production in the year the provision was reversed.
Annual Report 2014 | Page 91
21 Trade receivables
in kEUR
31/12/2014
31/12/2013
12,205
21,398
30
719
-1,512
-1,479
10,723
20,638
Trade receivables 3rd party (gross) Trade receivables related parties (gross) Provision for impairment of trade receivables Total
The development of the provision for impairment or trade receivables is as follows: in kEUR
31/12/2014
31/12/2013
-1,479
-2,312
-483
-319
Usage
291
977
Reversal
138
152
16
0
5
23
-1,512
-1,479
At 1 January Addition
Change in scope of consolidation Currency difference At 31 December
All provisions for impairment of trade receivables refer to receivables from 3rd parties. No provision is necessary for trade receivables from related parties. Overdue trade receivables are as follows:
Provision for bad debt
Receivables gross
Provision for bad debt
31/12/2013
Receivables gross
31/12/2014
Not overdue
8,503
0
17,423
0
Overdue <3m
2,168
-21
2,875
-28
Overdue 3-6m
62
-13
438
-92
Overdue >6m
1,502
-1,478
1,381
-1,359
12,235
-1,512
22,117
-1,479
in kEUR
Total Annual Report 2014 | Page 92
The group has a number of independent customers who have no recent history of default. Taking the groupâ&#x20AC;&#x2122;s customer structure into consideration, the credit risk can be evaluated as low. The set-up and release of provisions for impaired receivables have been included in â&#x20AC;&#x2DC;other expensesâ&#x20AC;&#x2122; in the income statement. Amounts charged to the allowance account are generally written off when there is no expectation to recover the respective receivables. Certain subsidiaries of the group transferred receivable balances to a bank in exchange for cash based on a factoring agreement. At the end of the year, the receivable balances transferred amounted to kEUR 1,044 (2013: kEUR 2,531). Since certain credit risks are not transferred to banks, the derecognition criteria according to IAS 39 are not fully met, which is why related receivables have not been derecognised. Total amount of trade receivables transferred and derecognised is kEUR 5,590 (2013: kEUR 0). All trade receivables are current receivables. The fair values are the same as the carrying amounts.
22 Other receivables in kEUR
31/12/2014
31/12/2013
11,955
12,860
Current receivables related parties (gross)
1,182
14
Other receivables 3rd party (gross)
4,551
4,909
-950
0
16,738
17,783
Non-current receivables related parties (gross)
Provision for impairment of other receivables Total
The development of the provision for impairment of other receivables is as follows: in kEUR
31/12/2014
31/12/2013
0
0
Addition
-950
0
At 31 December
-950
0
At 1 January
The full amount of the provision for impairment of other receivables refers to Megatech Brasil Componentes Automotivos Ltda., Brazil, that was sold as at 31 December 2014. Additions to these provisions are included in result from discontinued operations.
Annual Report 2014 | Page 93
Overdue in other receivables are as follows:
Provision for bad debt
Receivables gross
Provision for bad debt
31/12/2013
Receivables gross
31/12/2014
17,589
-851
17,783
0
Overdue <3m
47
-47
0
0
Overdue 3-6m
0
0
0
0
Overdue >6m
52
-52
0
0
17,688
-950
17,783
0
in kEUR
Not overdue
Total
The fair values of receivables from related parties are based on cash flows discounted using a rate based on the borrowing rate of 3.75% (2013: 3.75%). The discount rate equals the refinancing rate of the group with banks. The fair value of non-current receivables from related parties is kEUR 11,310 (2013: kEUR 12,059). The valuation of the fair value is in accordance with the level 2-method (see note 3.3). Current receivable fair values equal the carrying amount. All non-current receivables from related parties will be repaid within the next six years, thereof kEUR 1.445 in 2015.
23 Cash and cash equivalents in kEUR
Cash in hand and bank accounts Cash restricted or pledged Cash and cash equivalents
31/12/2014
31/12/2013
1,881
6,271
0
64
1,881
6,335
31/12/2014
31/12/2013
1,881
6,335
500
1,341
2,381
7,676
The fair values are the same as the carrying amounts. Cash and free overdrafts are as follows: in kEUR
Cash and cash equivalents Free bank overdrafts Cash and free overdrafts Annual Report 2014 | Page 94
24 Equity
24.1 Registered capital The company increased the registered capital at 11 November 2010 by EUR 7,000,000 through a contribution in kind of 100 % of the shares in Megatech Industries Amurrio S.L., Megatech Industries Orense S.L. and Megatech Engineering Center s.r.l. and 99.99 % in Megatech Brasil Componentes Automotivos LTDA, granted by Megatech Industries S.L. in exchange for shares of the company. At year-end the company had registered capital of EUR 7,050,000. In total Megatech Industries AG issued 70,500 no-par value shares. Registered capital is fully paid in.
24.2 Other reserves Other reserves resulted from changes in the scope of consolidation in 2010 amounting to kEUR 34,356 and from capital increases in subsidiaries of the group from related parties amounting to kEUR 7,592 (2013: kEUR 7,592). In 2014 kEUR 7,048 was transferred to retained earnings to cover losses incurred in the past.
25 Financial liabilities in kEUR
31/12/2014
31/12/2013
12,393
3,982
1,277
467
13
0
13,683
4,449
1,044
11,610
10,899
16,832
392
135
8
0
Total current
12,343
28,577
Total financial liabilities
26,026
33,026
Non-current Bank loans Finance lease liabilities Other financing liabilities Total non-current Current Bank overdrafts incl, recourse factoring Bank loans Finance lease liabilities Other financing liabilities
Annual Report 2014 | Page 95
At our plant MEGATECH Industries Hlinsko, we are producing the back wall cover consisting of two parts for the Audi A3 Cabrio.
Annual Report 2014 | Page 96
Annual Report 2014 | Page 97
25.1 Bank borrowings 25.1.1 Refinancing of BAWAG PSK AG loans In July 2014, the management of Megatech Group signed an agreement with Česká Spořitelna, a.s. for the refinancing of the total BAWAG PSK AG loan volume. One part of this refinancing agreement was that Megatech Group repays the instalment outstanding in December 2013 to BAWAG PSK AG. BAWAG PSK AG waived part of the outstanding loans in an amount of kEUR 2,627. Together with an additional one-time payment by Megatech entities to BAWAG PSK AG in an amount of kEUR 800 Megatech Group has a significant deleveraging in the Czech entities from kEUR 24,200 to kEUR 19,200. Megatech Industries AG acts as guarantor of these loans. Together with the new refinancing terms and conditions the financial position of Megatech Group in the Czech Republic – and, therefore, also in the group – is significantly strengthened by substantially lower yearly instalments and interest payments for the loans which were refinanced. 25.1.2 Pledges and securities The group has pledged certain assets as collateral against certain borrowings. The carrying amounts of these assets and the secured liabilities are as follows: in kEUR
31/12/2014
31/12/2013
20,664
19,422
Pledged machinery
4,599
3,429
Pledged trade receivables
5,203
9,506
Pledged intangible assets
365
485
Total amount of pledged assets
30,831
32,842
Amount of bank borrowings secured
16,755
28,622
7,581
3,802
Pledged land & building
Amount of bank borrowings unsecured
Bank loans from Megatech Industries Jablonec s.r.o., Czech Republic and Megatech Industries Hlinsko s.r.o, Czech Republic (in total kEUR 14.219) are secured by land and building, machinery, receivables and inventories of both Czech companies. In addition, Megatech Industries AG also pledged the shares in both Czech entities and also in Megatech Industries Intellectual Property S.L.U., Spain. Bank loans in an amount of kEUR 1.286 from Megatech Industries Amurrio S.L., Spain, and Megatech Industries Orense S.L., Spain, are secured by land and building of Megatech Industries Amurrio S.L., Spain. Two minor loans (in total kEUR 206) for machinery are secured by the machinery purchased with money from these loans. Liabilities from recourse factoring (kEUR 1.044) are secured by corresponding trade receivables.
Annual Report 2014 | Page 98
25.2 Finance lease liabilities Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. in kEUR
31/12/2014
31/12/2013
444
157
1-5 years
1,348
497
> 5 years
0
0
1,792
654
-123
-52
1,669
602
in kEUR
31/12/2014
31/12/2013
0-1 year
392
135
1-5 years
1,277
467
> 5 years
0
0
1,669
602
Gross finance lease liabilitiesâ&#x20AC;&#x201C; minimum lease payments 0-1 year
Future finance charges on finance lease liabilities Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
Present value of finance lease liabilities
25.3 Fair value of financial liabilities The carrying amounts and fair value of the non-current borrowings are as follows: in kEUR
31/12/2014
31/12/2013
Carrying amount
13,683
4,449
Fair value
13,102
4,283
Financial liabilties non-current
The fair value of current borrowings equals their carrying amount, as the impact of discounting is not significant. The fair values are based on discounted cash flows using a rate based on the borrowing rate of 3.75% (2013: 3.75%). The valuation of fair value is in accordance with the level 2-method (see note 3.3).
Annual Report 2014 | Page 99
26 Trade payables All trade payables in 2014 and 2013 are payables to 3rd parties.
27 Other payables Other non-current liabilities (kEUR 1,544) fully refer to liabilities to related parties. Current other payables include as follows: in kEUR
31/12/2014
31/12/2013
1,454
2,194
Accrued bonuses
899
654
Payables to employees
879
1,109
Payables income tax
685
2,379
Payables social securities
581
806
Current Payables to related parties
479
26
Other payables
970
1,587
5,947
8,755
VAT payables
Total other payables
Other payables to related parties (non-current and current) include kEUR 1,930 with regard to the purchase price of trademark rights from Megatech Industries S.L., Spain. This amount will be paid in the next five years. See also note 35.5. The fair values of other payables to related parties are based on cash flows discounted using a rate based on the borrowing rate of 3.75% (2013: 3.75%). The discount rate equals the refinancing rate of the group with banks. The fair value of non-current other payables to related parties is kEUR 1,488 (2013: kEUR 0). The valuation of the fair value is in accordance with the level 2-method (see note 3.3). Current other payables fair values equal the carrying amount.
28 Government grants Some group companies obtained grants from public organisations for financing investments in property, plant and equipment. The group companies comply with all conditions set by the public organisations for the corresponding government grants.
Annual Report 2014 | Page 100
in kEUR
2014
2013
At 1 January
1,379
1,434
238
234
0
-36
-278
-253
At 31 December
1,339
1,379
in kEUR
2014
2013
Government grants non-current
1,317
1,355
22
24
1,339
1,379
Additions Repayments Releases
Government grants current Total
29 Non-current employee benefits 29.1 Severance payments Some group companies pay a severance donation in case of retirement after an uninterrupted period of service of 5 years to their employees. in kEUR
2014
2013
44
53
4
5
Curtailment
-4
0
Interest costs
1
1
Actuarial losses/(gains)
-4
-9
Benefits paid
-1
-2
0
-4
40
44
Total costs/(gains) included in employee benefit expenses
0
5
Total costs included in interest costs
1
1
Total costs/(gains) included in income statement
1
6
-4
-9
Development of provisions At 1 January Current service costs
Currency difference At 31 December
Total costs/(gains) included in other comprehensive income
Annual Report 2014 | Page 101
The development of the provisions equals the development of the defined benefit obligations. Actuarial losses and gains arise from changes in financial assumptions. The sensitivity of the defined benefit obligation is as follows: in kEUR
2014
2013
Increase in discount rate by 1.0%
-4
-7
Decrease in discount rate by 1.0%
5
-7
Increase in benefit levels by 0.5%
2
2
The above sensitivity analysis is based on a change in the assumption while holding all other assumptions constant.
29.2 Anniversary payments Some group companies pay an anniversary bonus after an uninterrupted period of service. in kEUR
2014
2013
390
415
12
13
-13
0
4
4
Actuarial losses/(gains)
-28
-19
Benefits paid
-12
-10
-1
-13
At 31 December
352
390
Total costs/(gains) included in employee benefit expenses
-29
-6
4
4
-25
-2
Development of provisions At 1 January Current service costs Curtailment Interest costs
Currency difference
Total costs included in interest costs Total costs/(gains) included in income statement
The development of the provision equals the development of the defined benefit obligations. Actuarial losses and gains arise from changes in financial assumptions.
Annual Report 2014 | Page 102
The sensitivity of the defined benefit obligation is as follows: in kEUR
2014
2013
Increase in discount rate by 1.0%
-34
-39
Decrease in discount rate by 1.0%
39
44
Increase in salaries by 1.0%
37
42
Decrease in salaries by 1.0%
-20
-23
5
6
Increase in benefit levels by 0.5%
29.3 Non-current employee benefits (severance and anniversary payments) Provisions for non-current employee benefits include the following actuarial assumptions: 2014
2013
Discount rate
2.0%-3.0%
3.5%
Salary increase
0.0%-2.0%
2.0%-2.75%
Retirement age
65 years
64-65 years
15%-24%
5%-20%
Labour turnover rate
Assumptions regarding future mortality expectations are made based on actuarial advice in accordance with published statistics.
Severance payment
Anniversary payments
Total
The expected maturity analysis for the next ten years of undiscounted severance and anniversary payments are as follows:
<1 year
3
6
9
1-2 years
3
10
13
2-5 years
11
94
105
5-10 years
16
238
254
Annual Report 2014 | Page 103
30 Provisions
Environm. restoration
Legal claims
Onerous Contracts
Others
Total
in kEUR
515
260
861
639
2.275
- Additions
0
170
17
91
278
- Unused amounts reversed
0
-36
-307
0
-343
Used during year
-57
0
0
-546
-603
Reclassification
-17
-14
-19
50
0
Currency difference
-23
-25
-14
-83
-145
31 December 2013
418
355
538
151
1,462
- Additions
0
59
196
460
715
- Unused amounts reversed
0
0
-254
-32
-286
-42
0
-278
-1
-321
0
-189
0
0
-189
-4
4
-2
1
-1
372
229
200
579
1,380
31 December 2012 Charged/(credited) to the income statement
Charged/(credited) to the income statement
Used during year Change in scope of consolidation Currency difference 31 December 2014
Environm. restoration
Legal claims
Onerous Contracts
Others
Total
in kEUR
363
355
437
91
1,246
Current provisions
55
0
101
60
216
Total Provisions
418
355
538
151
1,462
31 December 2013 Non-current provisions
Annual Report 2014 | Page 104
Environm. restoration
Legal claims
Onerous Contracts
Others
Total
in kEUR
318
229
133
64
744
Current provisions
54
0
67
515
636
Total Provisions
372
229
200
579
1,380
31 December 2014 Non-current provisions
30.1 Environmental restoration The buildings of one group company are located in an area where the soil is historically contaminated (due to production which took place in former times). A corresponding provision for future costs to restore the area is recognised based on an expert opinion.
30.2 Legal claims The amount represents a provision for certain legal claims brought against the group by former employees. In the opinion of the managing directors, having taken appropriate legal advice, the outcome of these legal claims will not give rise to any significant loss beyond the amount provided for at 31 December 2014.
30.3 Onerous contracts With regard to onerous supply contracts in some group companies a provision was recognised which will be consumed within the next years according to the obligations arising from the contracts with customers.
30.4 Other provisions Other provisions added in 2014 mainly refer to the disposal of Megatech Brasil Componentes Automotivos Ltda., Brazil. See note 35.2
31 Contingent liabilities At the balance sheet date, the group had no contingent liabilities as in the previous year.
Annual Report 2014 | Page 105
32 Commitments 32.1 Capital commitments Capital expenditure contracted for at the end of the reporting period but not yet incurred is as follows: in kEUR
Property, plant and equipment Intangible assets Total
2014
2013
770
0
0
0
770
0
32.2 Operating lease commitments The group also leases various machinery and cars under cancellable operating lease agreements. The group is required to give a three- to six-months notice for the termination of these agreements. The lease expenditure charged to the income statement during the year amounted to kEUR 117 (2013: kEUR 147). The future aggregate minimum lease payments for non-cancellable operating lease are as follows:
in kEUR
2014
2013
<1 year
0
68
1 - 5 years
0
80
> 5 years
0
0
The non-cancellable operating lease from 2013 referred to a contract that was terminated in agreement with the lessor in 2014.
Annual Report 2014 | Page 106
33 Cash flow and non-cash transactions 33.1 Bank loans and bank overdrafts Repayment of bank loans includes kEUR -15,269 cash outflow for the refinancing of loans vis-à-vis BAWAG PSK AG. Proceeds from new loans include kEUR 19,200 cash inflow from Česká Spořitelna, a.s. referring to the refinancing of BAWAG PSK AG loans. Bank overdrafts and recourse factoring includes kEUR -8,741 cash outflow for the refinancing of bank overdrafts vis-à-vis BAWAG PSK AG. Proceed from new loans include kEUR 5,283 cash inflow from Česká Spořitelna, a.s. for a short-term loan, thereof kEUR 4,473 have already been repaid and are included in repayment of bank loans.
33.2 Non-cash transactions In 2014 kEUR 1,610 was offset between Megatech Group and Megatech Industries S.L., Spain. This transaction reduced the non-current and current receivables from related parties and also the noncurrent and current payables to related parties. In 2013 no material non-cash transactions were carried out.
34 Business combinations and changes in scope of consolidation No business combination took place in 2013 and 2014. After the management’s decision to exit the South American market in 2014, Megatech Brasil Componentes Automotivos Ltda., Brazil, was sold and deconsolidated as at 31 December 2014. The impact from deconsolidation is included in the result from discontinued operations. See also note 15.
Annual Report 2014 | Page 107
35 Related-party transactions The group is controlled by Megatech Industries S.L. (incorporated in Spain) that owns 99.3% of the company’s registered capital. On 31 December 2014 the ultimate parent was EIB Beteiligungsgesellschaft mbH, Vienna. In first quarter 2015 the ultimate parent changed to Megatech Industries Aktiengesellschaft, Vaduz, Liechtenstein. The group’s ultimate controlling party was and is Mr. Maximilian Gessler.
35.1 Purchase of trademark rights As at 1 January 2014 Megatech Industries AG, Austria, purchased trademark rights mainly for the European Union from Megatech Industries S.L., Spain. The rights transferred refer to the registered trademarks MEGATECH INDUSTRIES (CTM word trademark) and MEGATECH (CTM figurative trademark). Valuation was done by an external auditor. According to the valuators sensitivity analysis, the value range is between kEUR 2,655 and kEUR 4,425. The purchase price was set at kEUR 3,540, of which kEUR 1.610 was offset against receivables from Megatech Industries S.L., Spain, in 2014, the rest will be paid in five instalments between 2015 and 2019. Liabilities are charged with interest on an arm’s length basis.
35.2 Sale of Megatech Brasil Componentes Automotivos Ltda. As at 31 December 2014, the shares in Megatech Brasil Componentes Automotivos Ltda., Brazil, held by Megatech Industries AG, Austria, were sold to Megatech Industries Aktiengesellschaft, Vaduz, Liechtenstein. As the group lost control this entity was deconsolidated. The sales price of the shares in Megatech Brasil Componentes Automotivos Ltda., Brazil, is EUR 1.00. Megatech Industries AG, Austria, takes over the costs for the restructuring of the sold company in amount of kEUR 200. The group included a provision in same amount. If Megatech Industries Aktiengesellschaft, Vaduz, Liechtenstein, will gain any positive cash impacts from Megatech Brasil Componentes Automotivos Ltda., the buyer is obliged to pay 25% out of this impact to Megatech Industries AG, Austria, in an amount of up to kEUR 500. Megatech Industries AG, Vienna, guaranteed for a customer loan to Megatech Brasil Componentes Automotivos Ltda., Brazil, in amount of kBRL 1.000 in April 2014. In January 2015 Megatech Brasil Componentes Automotivos Ltda., Brazil, started with the repayment of the loan. See note 15 for the information on the impact on the consolidated income statement from the deconsolidation of Megatech Brasil Componentes Automotivos Ltda.; Brazil.
Annual Report 2014 | Page 108
35.3 Services to / from related parties in kEUR
2014
2013
Sale of consulting services
8
27
Purchase of consulting services
0
-66
Recharging of other costs
-21
-13
Interest income charged
306
259
Interest costs charged
-72
0
36
29
2014
2013
13,552
12,962
0
331
887
0
-1,672
0
306
259
13,073
13,552
94
40
13,167
13,592
-950
0
12,217
13,592
With controlling parties
With other related parties Purchase of consulting services All transactions were made on an armâ&#x20AC;&#x2122;s length basis.
35.4 Receivables from related parties in kEUR
Loans at 1 January Loans advanced during year Change in scope of consolidation Loans repaid/compensated with payables Interest charged Loans at 31 December Trade and other receivables against related parties Total receivables against related parties Provision for bad debt Carrying amount receivables against related parties
Loans to related parties are charged with variable interest rates depending on the development of the EURIBOR 3M. Receivables from Megatech Brasil Componentes Automotivos Ltda., Brazil, of in total kEUR 950 include a provision for bad debts. In 2013, this company was included in scope of consolidation and was deconsolidated in 2014.
Annual Report 2014 | Page 109
35.5 Payables to related parties As at 31 December 2014, Megatech Group has outstanding payables of kEUR 2,023 (2013: kEUR 26) to related parties, of which kEUR 1,930 (2013: kEUR 0) refer to the purchase of trademark rights from Megatech Industries S.L., Spain. These payables will be paid in five equal instalments over the next 5 years. Payables with regard to the purchase price of trademark rights are charged with interest on an armâ&#x20AC;&#x2122;s length basis based on the EURIBOR 3M. Remaining payables refer to interest charged on open purchase price and recharged costs.
35.6 Key management compensation Key management includes members of the Executive Board and the Supervisory Board. The compensation paid to key management for employee services is shown below: in kEUR
2014
2013
Salaries and other short term benefits paid
586
689
Bonus paid
209
0
-209
0
550
209
0
259
1,136
1,157
thereof bonus accrued in prior years Bonus accrued in current year Termination of employment (paid) Total
Annual Report 2014 | Page 110
36 Events after the reporting date In first quarter 2015 the ultimate parent changed from EIB Beteiligungsgesellschaft mbH to Megatech Industries Aktiengesellschaft Vaduz, Liechtenstein. The ultimate controlling party of both companies is Mr. Maximilian Gessler.
Vienna, 10 April 2015
Managing Directors
Dipl.-Kfm. Rainer Dieck
Dr. Maximilian Gessler
Dipl. Ing. Gerhard Pesout
Annual Report 2014 | Page 111
W i t b Over 1,350 employees in 7 locations guarantee the high production standards at MEGATECH.
Annual Report 2014 | Page 112
Work ing for the best Management Report 2014
1 Economic conditions
In fiscal year 2014, global economic growth increased slightly to 2.7% (2013: 2.6%). The economic situation in many industrialised nations improved despite the continued presence of structural obstacles. Inflation remained moderate despite the expansionary monetary policies of many central banks. Economic growth in a number of emerging economies was held in check by currency fluctuations and structural deficits. In addition, the falling oil price had a negative impact on the economy in the oil producing countries. Global new passenger car registration increased by 4.5% to 73.4 million vehicles in 2014, exceeding the previous yearâ&#x20AC;&#x2122;s record level. The primary growth drivers were the Asia-Pacific region, North America, Western Europe and Central Europe. In contrast, the overall markets for passenger cars in Eastern Europe and South America remained clearly below the prior-year level. In Western Europe, the GDP recovered compared with the previous year, growing 1.2% after 0.0%. Most northern European countries returned to a moderate growth path, while there were signs that the recession is coming to an end in most of the crisis-hit southern European countries. The unemployment rate in Europe declined slightly to 12.1% (2013: 12.5%). However, unemployment in Greece and Spain was well above this average. The stabilisation of the passenger car markets in Western Europe, which began in the second half of 2013, continued in the reporting period. The number of new registrations increased again for the first time after four years of decline. However, at 12.1 million vehicles (+4.9%), market volumes were still down substantially on the level before the financial and economic crisis (2007: 14.9 million vehicles). Whereas the French market almost stagnated (+0.5%), moderate growth was recorded in Italy (+4.9%) compared with the low prior-year volume. In Spain, the continuation of the government purchase incentive programme
Annual Report 2014 | Page 114
accelerated the recovery process (+18.3%). Sustained high demand from private customers led to a market growth of 9.3% in the United Kingdom. In Central and Eastern Europe, GDP growth decreased to an average of 1.6% (2013: 2.2%). The economic trend in Central Europe remained positive. In contrast, economic growth in Eastern Europe contracted sharply, largely due to the conflict between Russia and Ukraine and the resulting uncertainty. The demand for passenger cars decreased by 6.7% to 3.6 million vehicles. This was mainly attributable to the sharp decline in unit sales in the Russian market, which accounts for around two thirds of the regionâ&#x20AC;&#x2122;s total sales, due to the political crisis. Even the government scrapping programme - introduced in Russia on 1 September, 2014 - with the aim of promoting the purchase of locally produced new vehicles was unable to stop demand slumping by 10.0% to 2.3 million. In contrast, at 0.9 million passenger cars, EU markets in Central Europe posted a significant growth of 14.8% Brazil was skirting recession during the reporting period; after a 2.5% increase in the previous year, no growth was recorded. The number of new car registrations fell by 9.4% to 2.5 million units. Due to the weak economic environment, higher interest rates and reduced consumer confidence, market volumes in Brazil were also at the lowest level for the past five years. Brazilâ&#x20AC;&#x2122;s own vehicle exports slumped by 40.9% to 335 thousand units due to the weakness of the Argentinian market (-28.8% compared to 2013), among other factors. Although the GDP is expected to recover slightly in 2015, the automotive market is estimated for further reductions and the market volume will again decrease significantly.
2 Development of the Megatech Group
2.1 Highlights Successful refinancing of BAWAG PSK AG loans, with kEUR 2,281 impact in other financial result and significant reduction of annual cash outflows during next years EBITDA before non-recurring items increased by 35.8% Operating result (EBIT) increased from kEUR 909 to kEUR 4,552 Positive net result after three years with losses Research and Development team in Spain moved to Automotive Intelligence Center (AIC) in Boroa, Spain Opening of new production hall (“Hall 100”) in Hlinsko, Czech Republic
Successful closing of plant in Liberec, Czech Republic Start of production of Audi TT and TT Roadster High order intakes from current customers as well as from new customers (Opel, Porsche, Bentley, Volkswagen Nutzfahrzeuge) for all production facilities Downturn in Brazilian automotive market also hit Megatech Brasil and led to disposal of Brazilian entity at the end of 2014
2.2 Revenue and result in kEUR
2014
2013
Revenue
124,451
131,516
10,528
7,754
4,552
909
-1,647
-1,698
Other financial result
2,036
-928
Result before tax continued operations
4,941
-1,717
Profit (loss) for the year
2,021
-1,918
EBITDA before non-recurring items Operating result (EBIT) Interest result
While the sale of parts remained nearly unchanged in 2014 - kEUR 109,080 after kEUR 109,685 in 2013 – sale of tools decreased from kEUR 13,903 in 2013 to kEUR 6,942 in 2014. Such fluctuations are normal in our tools business as the sale of tools is highly dependent on the start of the production of new products. Other revenue (mainly sales to sub-contractors) is quite stable.
Ongoing improvements in production and purchases allowed for a reduction of rate of the raw materials and consumables used by 3.1 percentage points. In total, raw materials and consumables used fell by 9.5% to kEUR 83,198. Total employee benefit expenses were reduced by 3.4% to kEUR 26,004. As a result, EBITDA before non-recurring items again increased by 35.8% to kEUR 10,528 after an increase of 142.3% in 2013. Annual Report 2014 | Page 115
Costs for non-recurring items for restructuring accounted for kEUR -753 and mainly refer to the long-planned closing of the the plant in Liberec, Czech Republic, and further restructuring in Amurrio, Spain. After turning the operating result (EBIT) into positive in 2013, EBIT increased by 400% to kEUR 4,552 in 2014. Interest result in 2014 did not change significantly compared to 2013. The positive impact of the refinancing of BAWAG PSK AG loans in Q3 2014, that led to lower interest payments in the Czech entities, are offset by higher loan level in Spain and by higher interest costs for finance lease in the Czech entities due to new investments for upcoming projects.
The other financial result 2014 includes the kEUR 2,281 impact from the refinancing of bank loans and kEUR -245 from FX losses in EUR/CZK. In 2013, impact from EUR/CZK FX losses was kEUR -1,899. 2013 also includes the impact from waiver of 50% of the liabilities from inflation rate swaps (kEUR 1,528) and losses from inflation rate swaps (kEUR -571). The result from discontinued operations includes the net result after taxes for the Brazilian entity (kEUR -1,651) and the result from deconsolidation (kEUR -762). After three years with a negative net result, Megatech Group was able to turn the net result 2014 into positive and reached kEUR 2,021.
2.3 Financial position 2.3.1 Repayment of bank loans In July 2014, the management of Megatech Group signed an agreement with Česká Spořitelna, a.s. for the refinancing of the total BAWAG PSK AG loan volume. One part of this refinancing agreement was that Megatech Group pays the open instalment of December 2013 to BAWAG PSK AG. BAWAG PSK AG waived part of the outstanding loans in an amount of kEUR 2,627. Together with an additional one-time payment by Megatech entities to BAWAG PSK AG in an amount of kEUR 800, Megatech Group had a
Annual Report 2014 | Page 116
significant deleveraging in the Czech entities from kEUR 24,200 to kEUR 19,200. Megatech Industries AG acts as guarantor of these loans. Together with the new refinancing terms and conditions, the financial position of Megatech Group in the Czech Republic – and, therefore, also in the group – is significantly strengthened by substantially lower annual instalments and interest payments for the loans which were refinanced.
2.3.2 Net debt and gearing
in kEUR
2014
2013
Non-current financial liabilities
13,683
4,449
Current financial liabilities
12,343
28,577
26,026
33,026
-1,881
-6,335
Net debt
24,145
26,691
Total equity
39,840
37,614
Gearing (net debt / total equity)
60,6%
71,0%
Cash and cash equivalents
An agreement to waive outstanding loans in the amount of kEUR 2,627 together with the high redemption to be paid for bank loans and overdrafts, partly offset by new loans and finance lease liabilities, led to a reduction of financial liabilities by 21.2% in 2014. As cash and cash equivalents also reduced significantly, total net
debt fell by 9.5% in 2014 after a reduction of 14.6% in 2013. Because of the decrease in net debt and increasing equity due to the positive net result, gearing again reduced by 10.4 percentage points after -7.8 percentage points in 2013.
2.3.3 Working capital in kEUR
2014
2013
Inventories
10,757
11,368
Trade receivables
10,723
20,638
Other receivables
4,783
4,923
Trade payables
-20,888
-26,390
Other payables
-5,947
-8,755
-572
1,784
Working capital
Ongoing focus on improvement of working capital structure enabled further reduction of working capital. Working capital, excluding the Brazilian entity, in 2013 was kEUR 3,385. The
reduction to kEUR -572 mainly refers to the material reduction of trade receivables, partly by using non-recourse factoring but also by improving the management of trade receivables.
Annual Report 2014 | Page 117
2.3.4 Cash flow
in kEUR
2014
2013
Cash flow from operating activities
10,557
10,563
Cash flow from investing activities
-7,661
-2,142
Cash flow from financing activities
-7,199
-4,113
Total cash flow
-4,303
4,308
Cash flow from operating activities includes the positive impact from the working capital kEUR of 3,284 (2013: kEUR 4,696). The stable high positive cash flow from operating activities allows for necessary investments in property, plant and equipment, tools and development costs for new projects starting in 2015-2017. The cash flow from investing activities includes more than kEUR 4,000 for capitalised development costs for projects starting in 2015-2017 and kEUR 900 payment to discontinued operations. While
the 2013 cash flow from investing activities was highly influenced from disposal of property, plant and equipment (kEUR 3,275), in 2014 no material cash in was reported for the disposal of property, plant and equipment. The negative cash flow from financing activities mainly refers to the repayment of bank loans and overdrafts regarding the refinancing of BAWAG PSK AG loans (kEUR -4,810) and interest payments for long-term financing.
2.4 Discontinued operations Because of the distressed market situation in Brazil, with a drop down of the whole automotive industry by around 40% compared to prior year, the management of the group decided to sell the Brazilian entity and to exit the Brazilian market at least for the next few years. As at 31 December 2014, the shares in Megatech Brasil Componentes Automotivos Ltda., Brazil, were sold to Megatech Industries Aktiengesellschaft, Vaduz, Liechtenstein. As Megatech
Annual Report 2014 | Page 118
Group lost control over the Brazilian entity, the entity was deconsolidated. In accordance with IFRS 5, the impact from the Brazilian entity shown in the consolidated income statement and the consolidated cash flow statement is reclassified and reported as result from discontinued operations.
An analysis of the result of discontinued operations and the result from deconsolidation of the entity is as follows: in kEUR
2014
2013
Revenue
7,409
12,121
Expenses
-9,965
-12,723
Result before tax from discontinued operations
-2,556
-602
905
224
-1,651
-378
-762
0
-2,413
-378
Taxes on income from discontinued operations Result after tax from discontinued operations Result from deconsolidation Total result from discontinued operations
3 Research and development R&D activities and innovation are the major drivers of productivity and growth. In this technological area, innovation is the key for Megatech to keep its competitiveness. After one of the longest and deepest economic crises in the contemporary history, the promotion of research and innovation has become crucial. Through its research lines, Megatech has the objective to incorporate new innovative technologies in processes and products. During the year 2014, Megatech focused its research efforts on lightweight material, through the study of thermoplastic composites and physical foaming technology. On the basis of the very promising results obtained in 2014 in the weight-saving thematic, Megatech decided to proceed in this research line for the year 2015. These new developments will allow offering value-added products complying with the requirements of the future CAFE 2020 standard, hence implying a direct increase in Megatechâ&#x20AC;&#x2122;s market share.
The 2014 thermoplastic composites project not only brought Megatech a thorough knowledge of the processing of such materials in order to obtain an aesthetical finish, but also a clue about their big potential for structural parts and some specific applications. As for the study of the physical foaming technology, Megatech is now able to propose its customers foamed products, coated or not. First customer presentations attract great interest for the new products, also from new potential customers. In 2015, in addition to further developments in lightweight materials and thermoplastic composites the focus of research and development will be on the development of natural fiber composite materials obtained through thermoforming and over-injection, lightweight materials based on hollow glass spheres, and scratchproof injected parts with perfect aesthetics.
Annual Report 2014 | Page 119
4 Sustainability, health, environment Megatech Group recognises its responsibility for humans and the environment along the entire value chain and is working for innovative solutions to create long-term benefits for employees, the environment and the group. Measures have therefore been taken to guarantee and continuously improve the health and safety of employees and neighbours and to ensure stateof-the art processes to protect the environment. A systematic risk analysis of processes is an
integral task of the Executive Board. Continuous internal audits and external audits performed by authorities and customers confirm the excellent results of these processes. At the end of 2014, 1,104 employees worked for Megatech Group (2013: 1,227).
5 Risk report The group’s activities expose it to a variety of financial risks: market risk (including foreign exchange price risk, currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The group’s overall risk management programme focuses
on the unpredictability of financial markets and seeks to minimise potential adverse effects on the group’s financial performance. The group uses derivative financial instruments to hedge certain risk exposures. Risk management is carried out centrally by the group management.
5.1 Liquidity risk The group manages its liquidity risk by using reasonable and retrospectively-assessed assumptions to forecast future cash-generating capabilities and working capital requirements of the businesses it operates and by maintaining sufficient reserves, committed borrowing facilities and other credit lines as appropriate. Forecast liquidity represents the group’s expected cash inflows, principally generated from sales made to customers, less the group’s contractually-determined cash outflows, principally related to supplier payments and the repayment of borrowings, plus the payment of any interest accruing thereon. The matching of these cash inflows and outflows rests on the expected ageing profiles of the underlying assets and liabilities. Current financial assets and
Annual Report 2014 | Page 120
financial liabilities are represented primarily by the group’s trade receivables and trade payables, respectively. The matching of the cash flows that result from trade receivables and trade payables takes place typically over a period of three to four months from recognition in the balance sheet and is managed to ensure the on-going operating liquidity of the group. Financing cash outflows may be longer-term in nature. The group does not hold non-current financial assets to match against these commitments, but has invested significantly in non-current nonfinancial assets which generate the sustainable future cash inflows, net of future capital expenditure requirements, needed to service and repay the group’s financial liabilities.
5.2 Credit risk The groupâ&#x20AC;&#x2122;s credit risk is mainly confined to the risk of customers defaulting on sales invoices raised. Any credit risk arising from cash deposits and derivative financial instruments is deemed to be insignificant on the basis that nearly all relevant counterparties are investment grade entities recognised by international credit-
rating agencies. Each local entity is responsible for managing and analysing the credit risk for each of their new customers before standard payment and delivery terms and conditions are offered. Main customers of the group are the big automotive producers with regard to which credit risk is considered low.
5.3 Commodity price risk The group is exposed to commodity price risks as main raw materials can only be purchased on the spot markets and no commodity hedges are available. Price fluctuations can partly be passed
on to customers, depending on the contractual relationship.
5.4 Foreign exchange risk The group operates internationally and is exposed to foreign exchange risk arising primarily from the Czech crown and the Brazilian real. Foreign exchange risk arises from future commercial transactions and financing in foreign currencies. Management has set up a policy to require group companies to manage their foreign exchange risk against their functional currency with internal hedging as much as possible.
Furthermore, developments in foreign currencies are passed on to customers with a certain time delay. Group management will coordinate any additional hedging that may be necessary. By the end of 2014, the groupâ&#x20AC;&#x2122;s financial liabilities were mainly denominated in euro.
5.5 Interest rate risk The groupâ&#x20AC;&#x2122;s interest rate risk arises from noncurrent financial liabilities. Financial liabilities issued at variable rates expose the group to cash
flow interest rate risk which is partially offset by cash held at variable rates.
Annual Report 2014 | Page 121
6 Financial instruments If required, the Megatech Group uses interest rate swaps to hedge against negative developments
in interest rates. At the end of 2014, no interest rate swaps are used.
7 Branch offices The group does not have any branch offices.
8 Expected development 8.1 Short- and medium-term Our forecasts are based on current estimates by third-party institutions and our major customers. The global economy is assumed to grow slightly faster in 2015 than in the reporting period. It is expected that the emerging economies of Asia will record the highest growth rates. The major industrialised nations are expected to see signs of recovery in the economies, though the rates of expansion will remain moderate. In Western Europe, the economic recovery is expected to continue in 2015. However, the upturn remains contingent on structural problems being resolved. The situation of the economies in Central and Eastern Europe should remain stable, depending on how the conflict between Russia and Ukraine evolves. The situation of Megatech Group is continuing to improve. After operational turnaround in 2013 the refinancing of major bank loans in 2014 gives more leeway. Caused by the high order intake in the second half 2013 and the year 2014, focus will be on non-event launches of numerous projects:
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First half of 2015 Audi Q7, Seat Leon, Seat Ibiza, VW T6 Second half of 2015 Bentley SUV, Citroën Berlingo First half of 2016 Audi Q1, Peugeot 3008 and 5008, Porsche Boxster and Cayman, Seat Tribu Second half of 2016 BMW 5 Series, Citroën C3 Picasso and Jumpy, MINI Cooper, Opel Meriva, Peugeot Expert, Skoda Snowman and Yeti This high number of contemporaneous projects demands for excellent project management but also for a good financial situation to be able to pre-finance development costs and tools arising before SOP and also new buildings and machinery needed for higher output. The smallest production plant in Marinha Grande, Portugal is planned to be significantly extended in 2015 so turnover will be more than doubled in 2016.
Starting in 2015, Megatech Group plans to set up a third production site in the Czech Republic in Brno to be able to provide higher outputs with short ways of transportation to main customers in Central Europe. This production site will be a custom-built solution, provided by the highly
reputable project developer CTP. Megatech will rent the new facility (incl. special fit-outs). Soft opening is planned for the end of March 2016, full production start is planned for the beginning of July 2016.
8.2 Long term expectations After three years of restructuring (2012-2013 operational restructuring with operational turnaround 2013; 2014 refinancing of major bank loans and exit of the Brazilian market and a positive net result after three years with losses), Megatech Group is fully back as very reliable partner for customers, suppliers and banks. High order intakes since second half of 2013 and improving financing offers are best evidence for the good development in recent history. Megatech Group thus is prepared to strengthen its position as Tier-1 supplier without neglecting Tier-2 and non-automotive business. Research and development are prepared to implement new technologies very fast. As fast-follower Megatech Group is able to offer best products for best prices and to participate in market trends very early.
its customers and will grow to a global player step by step. The basis for globalisation will be a strong and sustainable relationship with these customers. During the next one to two years, interesting countries and markets for expansion will be evaluated. Focus will be on the takeover of existing companies instead of greenfield investments. Megatech continues and will increase the focus on being a solution provider for its customers. This means that wherever and whenever possible, Megatech will solve customer problems (e.g. to take business from struggled suppliers). To be able to reach long-term targets, the board is aware of the necessity to reach investment grade rating. Further improvements in daily business thus are necessary and already planned or have already been started.
As some of the main customers intend to have global supplier structures, Megatech will follow
8.3 Actual figures first months 2015 In the first months of 2015, all entities report at least equal financial results compared to the first months of 2014. Some of them are significantly better than last year, so the consolidated results
of Megatech Group are better than during the first months of 2014, and Megatech Group keeps on improving.
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9 Subsequent events In first quarter 2015 the ultimate parent changed from EIB Beteiligungsgesellschaft mbH to Megatech Industries Aktiengesellschaft
FĂźrstentum Liechtenstein, Liechtenstein. The ultimate controlling party of both companies is Mr. Maximilian Gessler.
Vienna, 10 April 2015
Managing Directors
Dipl.-Kfm. Rainer Dieck
Dr. Maximilian Gessler
Dipl. Ing. Gerhard Pesout
This report contains forward-looking statements on the business development of Megatech Industries Group. The statements are based on assumptions relating to the development of the economic and legal environment in individual countries and economic regions, and in particular for the automotive industry, which we have made on basis of the information available to us and which we consider to be realistic at the time of preparing this report. The estimates given entail a degree of risk, and the actual developments may differ from those forecast. Consequently, any unexpected fall in demand or economic stagnation in our key sales markets Europe and Brazil will have a corresponding impact on the development of our business. The same applies in the event of a significant shift in current exchange rates, mainly Czech crown and Brazilian real against the euro. In addition, expected business developments may vary if this reportâ&#x20AC;&#x2122;s assessments of value-enhancing factors and risk develop in a way other than we are currently expecting.
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Auditor's Report Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Megatech Industries AG, Vienna, which comprise the consolidated balance sheet as of 31 December 2014 and the consolidated income statement, the consolidated statement of comprehensive income, of changes in equity and of cash flows for the year then ended, and the notes to the consolidated financial statements. As provided under Section 275 (2) UGB (liability provision regarding the audit of financial statements of small and medium-sized companies), our responsibility and liability towards the Company and any third parties arising from the audit are limited to a total of EUR 2 million. Management’s Responsibility for the Consolidated Financial Statements The Company’s management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards as adopted by the EU, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with laws and regulations applicable in Austria and in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Group’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of Megatech Industries AG as of 31 December 2014, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the EU. Vienna, 10 April 2015 signed:
PwC Wirtschaftsprüfung GmbH
p.p. Bettina Maria Szaurer Austrian Certified Public Accountant
signed:
Christian Neuherz Austrian Certified Public Accountant
Disclosure, publication and duplication of the Consolidated Financial Statements together with the auditor’s report in a form differing from the version audited by us is not permitted. Reference to our audit may not be made without prior written permission from us. Annual Report 2014 | Page 125
Imprint Media Owner (Publisher): MEGATECH Industries AG Taubstummengasse 13/9 1040 Vienna Austria phone: +43 1 236 70 38 0 info.at@mgtindustries.com www.megatech-industries.com Concept and realization: Purtscher Relations PR gmbh, www.purtscherrelations.at GerersdorferDesign Chief Editor/Conception: Rudolph Lobmeyr, Carola Purtscher, Dina Gerersdorfer Art Direction and Graphics: Dina Gerersdorfer, Martha Ploder Photos: Kathi Bruder (Board) Miriam Hรถhne (Products) Audi AG MEGATECH Industries AG Litho: Bernsteiner Media gmbh Print: feinschliff gmbh
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