Annual Report 2014

Financial Position

Financial Management System

The task of financial management within the technotrans Group is handled centrally by the group parent. This primarily involves managing liquidity, securing borrowed capital and managing interest and foreign currency risks. It remains the goal of financial management to ensure that technotrans is of its own accord able to generate both the financial resources required to fund the organic growth of its operations, and the investments this involves. This goal was again achieved in the 2014 financial year. Selective investment spending (€ 1.4 million) was again restricted to maintenance investments.

We pursued three main goals in particular in our financial and liquidity management work in 2014: to limit risks, to assure adequate liquidity reserves, and to optimise earnings and costs.

Limiting risks encompasses all financial risks that could threaten technotrans’ survival as a going concern. technotrans makes use of selected derivative financial instruments exclusively for the hedging of interest rate risks for borrowings incurring interest at variable rates. The company also manages the group’s need for financing via the available credit facilities of technotrans AG, Termotek GmbH, KLH Kältetechnik GmbH and Taicang KLH Cooling Systems Co. Ltd. There are no exchange-rate factors affecting external borrowings. Within the group, short-term and long-term lending between the group companies is practised to some degree in order to maintain adequate liquidity locally. Substantial liquidity holdings (cash and cash equivalents) moreover exist in EUR, USD and GBP. No instruments for the hedging of foreign currency positions were used beyond the 2014 reporting date.

Capital Structure

The most important source of financing is the cash inflows from operating activities (operating cash flow). In 2014 there was merely a renewal of a loan for € 0.5 million for the financing of business expansion at Taicang KLH Cooling Systems Co. Ltd. At technotrans AG, the maturities of the credit lines newly concluded with the existing principal banks in 2013, with a total volume of € 11.5 million, were extended from one year to unlimited (indefinite). Debt finance was further reduced at KLH Kältetechnik GmbH and Termotek GmbH in the course of the year. Short-term credit lines were used only intermittently in the past financial year. All measures were implemented with varying maturities, making use of the best possible interest terms. At the end of the financial year the average weighted interest rate for borrowing was approx. 3.3 percent (previous year: 3.3 percent). Overall, the group has borrowing arrangements in place amounting to some € 25.1 million. At the balance sheet date the technotrans Group had available but unused borrowing facilities for € 13.5 million.

Off-balance-sheet financial instruments, such as leases, are of only minor significance for us.

In 2014 there were no restrictions on the availability of the loans provided. For its financial and liquidity planning, technotrans AG is working on the assumption that it will have adequate liquidity including for operating business in 2015, enabling it to meet its foreseeable payment obligations at all times and also be able to seize acquisition opportunities independently of the banks. Based on a sound equity base and a comfortable liquidity base, in conjunction with financing commitments by the banks, technotrans is able to invest flexibly at any time.

The long-standing business ties with our banks have remained steady. However, the current environment provides no guarantee that the banks will be willing or able to continue to perform the role of our financing partner to the extent to which we are accustomed. As a listed company, technotrans also has access to capital market instruments.

The Board of Management and Supervisory Board will propose to the Shareholders’ Meeting in May 2015 that a dividend of € 0.33 per share outstanding be distributed for the 2014 financial year. This marks a return by technotrans to the dividend strategy of distributing 50 percent of the consolidated net profit.

Investment, Depreciation and Amortisation

Investment came to € 1.4 million (previous year: € 2.3 million) in the 2014 financial year. In line with the business performance, spending thus remained at a reasonable minimum level. Investment spending was mainly for replacement purchases or IT equipment. Of the overall volume, € 0.8 million was attributable to the Technology segment and € 0.6 million to the Services segment. Because of the low level of manufacturing penetration, the scaling-back of investment spending has no impact on the efficiency of production capacity.

The development expenditure reported in the Income Statement came to € 3.4 million; this amounts to 3.0 percent of revenue. Development costs of € 0.2 million were also recognised as an intangible asset in the financial year; total development costs within intangible assets decreased to € 1.4 million (previous year: € 1.6 million). In the year under review, the amortisation of development expenditure recognised as an intangible asset came to € 0.3 million (previous year: € 0.1 million).

Depreciation and amortisation for the 2014 financial year totalled € 3.0 million (previous year: € 3.2 million). Of this, € 2.5 million was attributable to the Technology segment and € 0.5 million to the Services segment. The customer base acquired along with KLH and the property in Sassenberg are major sources of depreciation and amortisation.

No further definite investments that would require an exceptional level of financing are currently planned for fixed assets or intangible assets.

Investment / depreciation and amortisation in € million

Liquidity

On the basis of net income for the year of € 4.4 million (previous year: € 3.0 million), the cash flow from operating activities before working capital changes totalled € 10.2 million (previous year: € 7.6 million).

The changes in working capital had a negative cash flow effect of around € 2.8 million (previous year: € 3.4 million). The increased cash outflows were reflected especially in the buildup of receivables and inventories at the reporting date mainly as a result of the strong fourth-quarter growth. Compared to the previous year, the buildup of provisions had a positive impact on cash flow.

Overall, the net cash from operating activities amounted to € 7.1 million (previous year: € 2.7 million). This operating cash flow was sufficient to finance initially the cash outflow from investing activities of € 1.4 million (previous year: € 2.3 million) and the final conditional purchase price component for the acquisition of Termotek GmbH amounting to € 0.9 million. The overall net cash employed for investing activities came to only € 2.3 million in 2014, compared with € 6.1 million in the previous year.

The net cash employed for financing activities in the 2014 financial year came to € -4.6 million (previous year: € +1.6 million). On balance, the receipts and payments in connection with the financing of loans produced a cash outflow of € 3.3 million (previous year: € 2.4 million cash inflow). € 1.3 million (previous year: € 0.8 million) was paid out in the form of a dividend distribution to technotrans shareholders in the year under review.

As expected the free cash flow developed positively, climbing to € 4.8 million at the end of the year under review (previous year: € -3.4 million). Cash and cash equivalents at year-end thus came to € 17.2 million, just up on the prior-year level (€ 16.7 million). From a capital management perspective the group’s liquidity remains comfortable; in 2015 the group thus continues to be in a position to meet its payment obligations from business operations.

Cash flow from operating activities in € million