Annual Report 2014

Non-Financial Performance Indicators and Other Particulars

As well as financial ratios, the following non-financial performance indicators play a decisive role in the sustained success of the technotrans Group.

Sustainability

technotrans subscribes to the principles of sustainable business development. The group parent and its subsidiaries treat employees, suppliers and business partners in a fair and respectful manner. They advocate the protection of the environment and of the earth’s resources, and are mindful of their social responsibility. They bind their employees into a culture of unfailing regard for the law and for ethical standards.

At technotrans we accept that responsibility worldwide in a variety of ways, for instance through our commitment to the Global Compact initiative of the United Nations (UN), or through the group-wide code of behaviour introduced in 2011. We always base our actions on the THINK-LEARN-ACT corporate philosophy that is actively practised throughout the entire group.

The UN Global Compact is a strategic initiative that seeks to promote corporate social responsibility and sustainability in organisations and enterprises. Its centrepiece is ten universally acknowledged principles spanning human rights, labour standards, environmental protection and anti-corruption measures.

technotrans has been a member of the initiative since 2006. We want to play an active role in furthering its long-term goal of defining the social and ecological aspects of globalisation, while also consciously measuring our activities and strategies against these standards. Implementing the ten principles is a permanent challenge in our day-to-day work.

technotrans promotes and protects human rights. We advocate compliance with worldwide labour standards, and are involved in the fight against child and forced labour. By offering approved student internships, we offer young people an opportunity to get to know the world of work during the school holidays through arrangements that meet all the statutory requirements, so that they can form a better picture of their own career direction. Within our company we tolerate no discrimination (gender, skin colour, nationality, religion, social background, disability, etc.) of employees, nor any form of harassment in the workplace. We have also set ourselves the goal of making family and working life compatible. Our employees are appointed solely on the basis of their qualifications – and nothing else. Checks are regularly carried out to assess whether the guidance to that effect, as laid down for instance in management manuals or compliance guidelines, has been followed. This audit of our group again brought to light no departures from the application of the principles in respect of labour standards and human rights in 2014. As part of the German Engineering Federation’s "We’re Taking Things On" action week, technotrans AG again demonstrated its strong commitment to corporate responsibility. In partnership with MINT-EC, Berlin, an association that promotes centres of excellence in mathematics and natural sciences at schools, and the MEET battery research centre in Münster, technotrans held a workshop with school students from all over Germany on the topic of “Modern Battery Technology – From Research to Product”.

We (technotrans) are successful internationally. But all over the world there are the weak, who will have no future prospects if we do not join together to support them. Children and young people are in an even more precarious position. They need our help particularly urgently. That is why technotrans has been an active supporter of Friedensdorf International (Aktion Friedensdorf e.V.) since 2011; it performs constructive work with long-term benefits for the future. This charity attends to children from war-torn and crisis zones, supporting them with medical and psychological help, education, projects and relief supplies.

In its economic activity, technotrans consciously seeks to help the environment by preserving resources. We develop technologies that redefine the benchmark and are designed for energy-saving components and low-emission solutions. We will continue to give environmental protection and sustainability primacy throughout our development of products and use of resources. We are currently exploring a highly promising solution for sustainable energy storage technology in stationary and mobile applications.

Corruption is a danger to everyone. It hampers development, deepens poverty and has a devastating effect on society, both economically and socially. High quality and reliability have built up our good reputation in the markets and repeatedly facilitate our access to new customers. To protect our group against potential losses, we maintain transparency and implement internal control mechanisms. In particular, we have adopted a worldwide, binding set of anti-corruption guidelines.

Much remains to be done, all over the world. For that reason, we will continue to do all in our power to support the Global Compact through our business activities and strategies, which we will adjust as necessary to bring them into line with these principles.

Employees

Total and Changes

The number of employees in the technotrans Group at the end of the financial year increased only minimally from 777 to 781. Of the average total of 771 employees in 2014, there were 62 working part-time; that represents a 7.9 percent share.

technotrans was again able to respond flexibly to temporary fluctuations in the level of orders in 2014 by means of time accounts and temporary employees, with time credits then earned or used as necessary. The current imbalance between revenue volume and the number of employees reflects the start-up investment in projects through which we aim to tap into additional sales markets, but which are not yet bringing in the volume of revenue being targeted. Taking account of the planned growth, we consequently only plan to adjust capacity in isolated cases.

Employees by region

Apprentices

technotrans traditionally treats training as a very important matter. On the one hand it aims to continue recruiting juniors from within its own ranks. On the other hand it is in the interests of both society and the company to respond in a timely manner to the challenges of demographic change. An ageing society and the shortages of skilled staff are already having an impact. This development will become even more marked over the next few years.

The number of apprentices in the group remained 77 at December 31, 2014, the same high level as one year earlier. The apprentice total for technotrans AG, Sassenberg, of 56 was slightly higher than at the end of 2013 (51 apprentices). The proportion of apprentices at the group parent was therefore almost 14 percent. One initiative specifically seeks to create additional apprenticeships for high-school graduates as an attractive alternative to “studying in overcrowded lecture theatres”. The range of vocations for which technotrans now provides training is correspondingly diverse: Bachelor of Science in Mechanical Engineering, Industrial Engineer/Bachelor of Engineering, Mechatronics Engineer, Mechatronics Engineer for Refrigeration Technology, Industrial Manager, Office Administrator, IT Administrator, IT Specialist for Applications Development, Technical Product Designer, Technical Systems Planner, and Warehouse Specialist.

For many years technotrans AG has been punching above its weight in the standard of training it provides for juniors. This commitment again paid dividends in the 2014 financial year. Fabian Rottmann (22), who had started training at technotrans as a Mechatronics Engineer for Refrigeration Technology in 2011 and qualified in summer 2014 as the year’s top trainee, won this year’s Refrigeration Plant Engineer category of the German Skilled Trades Competition for North Rhine-Westphalia. He has remained with the company after finishing his training and is now on a dual course of study leading to a Bachelor of Science degree in Refrigeration Systems Technology. technotrans is also proud that Tobias Künne, training for a vocational qualification as Warehouse Specialist, excelled as one of the best apprentices in the region.

In order to broaden the horizons of its apprentices during their training, technotrans encourages exchanges between the apprentices and their colleagues at neighbouring businesses. It also aims to promote specialist exchanges within the group.

Qualifications and Age Structure

technotrans is a technology company. That is reflected in the qualifications of its employees. Not counting the apprentices, 41 percent of employees have undergone training leading to qualifications, 21 percent have an engineering qualification and 22 percent have an academic background. technotrans is furthermore a young company: around 48 percent of the workforce are under 40 years old, and only 4 percent are over 60. The average age is just under 40; this figure is therefore virtually unchanged from the previous year.

Qualification of the Employees

Personnel Development

The specialist and social expertise of a company’s employees are its most valuable asset. Internal and external training as well as vital advancement measures were again provided for employees in 2014 to keep them well qualified for the challenges of the future. Over the next few years technotrans will provide systematic personnel development featuring specialist courses, and also courses aimed at management and junior management.

To make it easier for employees to strike a balance between working and family life, the flexible child care options have been significantly broadened in partnership with a municipal kindergarten. The arrangements are aimed especially at women who would like to keep pursuing their career objectives while bringing up a family.

Personnel Expenses

Personnel expenses totalled € 39.8 million in 2014 (previous year: € 37.0 million). The increase is attributable on the one hand to the moderate pay increase in the financial year and on the other to one-off payments amounting to around € 0.9 million (previous year: € < 50 thousand) for the termination of employment. The personnel costs ratio for the group (personnel expenses as a proportion of revenue) was 35.4 percent (previous year: 35.2 percent). The aim is to bring this ratio down to around 30 percent in the future.

Revenue per employee rose year on year from € 138 thousand to € 146 thousand. This key performance indicator therefore still falls short of former levels and from an operational perspective is not satisfactory. However from a strategic viewpoint it is important for technotrans to hold onto qualified expertise carriers in order to develop new markets and as a basis for future growth.

Projects in 2014

To fulfil its role as shared service centre for the group, in the past financial year the personnel department of technotrans AG handled operational personnel work for all domestic locations as well as other projects aimed at establishing an efficient and modern human resources management structure for the entire group.

It was therefore a major highlight of the year that our HR manager Timo Sterzl was presented with the HR Next Generation Award 2014, an initiative of the Haufe Group publication “personalmagazin” in collaboration with HRM Expo and the German Association for Personnel Management (DGFP). The high-ranking jury comprising ten experienced HR professionals voted Timo Sterzl among the top five finalists. From that group the jury placed him second at an awards ceremony held in Berlin: a brilliant achievement, especially considering the very strong field of contenders.

Remuneration Model

The remuneration of employees at technotrans AG is a reflection of their individual positions within the company. They are each allocated to grades, which in turn comprise a number of remuneration bands. Annual decisions on percentage pay increases are negotiated between the Board of Management and the Works Council. Pay increases averaging between 1.5 and 3.0 percent were agreed for the 2015 financial year.

The employees’ profit share is in addition tied to the EBIT margin. Upward of an EBIT margin of 5 percent, a bonus is paid out to those who are not entitled to a management bonus. Performance-related pay components e.g. for service technicians were also introduced. Employee-financed occupational health insurance cover was also introduced for all employees at German locations in 2014; this provides top-up insurance cover where there are gaps in the cover afforded by the statutory health insurance schemes. technotrans will increase its activities in the sphere of health management in future.

Throughout the group, managers receive (management) bonuses that are agreed individually in their contracts and depend half on the attainment of company targets, and half on their personal performance. They receive part of annual pay increases in the form of shares. There are no other incentive schemes involving share components.

Purchasing and Procurement

For 2014, the priority tasks created by market diversification and the new challenges that this has brought remained essentially the same for all areas of the company. To realise the many different activities and projects successfully, one priority was to implement new projects swiftly. It is clearly a matter of course for us that targets such as quality and costs are never neglected. But another performance indicator that is often relevant is time – when a customer can get hold of a first prototype or trial version. This is a very important aspect specifically for technotrans, in view of its strategic goal of developing potential in new markets.

Optimised processes, leaner structures and a high level of commitment among employees in all areas of the company are how it rises to this challenge. Professional structures coupled with pragmatism and receptiveness to new ways of doing things are therefore a fundamental element of the technotrans corporate culture. This culture pervades all areas of the company.

A major task for Purchasing in 2014 was to implement the many projects both operationally and strategically. The diversification of markets and products also entails a wide range of fresh demands in the procurement area. As well as the strategic objective of reducing variants and complexity, there is often a high level of operational urgency to source appropriate parts, including new ones, extremely rapidly and in a form that is already suitable for the application in question. New applications such as cooling systems for rail technology or medical technology also entail an array of new requirements. Special standards, specific new parts, new suppliers and contract management are just a few of the key areas that need to be taken into account in supplier management. The focus is on a structured approach that allows high flexibility, because the projects for new markets are usually under extremely high time pressure. Time to market is an important performance indicator for the entire supply chain where the objective is to enter new markets successfully.

The processes to realise further synergy potential in the group continue in parallel and are gradually being implemented.

Production, Quality and Logistics

technotrans has five production locations. Production essentially consists of assembly and testing processes. After phases of scaling back volumes in previous years, 2014 brought the first volume growth for many years, with personnel levels remaining constant. This led to a much more flexible handling of capacity adjustments, with large numbers of hours built up on flexitime accounts. Alongside the standardised processes for volume production, the spotlight is on swiftly implementing processes for new-customer business without neglecting the other goals of quality, costs and efficiency. Continuous improvements, high flexibility and a good standard of employee qualifications with an ongoing training concept are permanent tasks. Modified production and manufacturing concepts for new products are strategic tasks that need to be addressed swiftly and reliably. New markets and new products also necessitate different requirements and product specifications in production that have had to be incorporated into technotrans’ processes.

The widening of the integrated group management system, preventive QM tasks in the projects and reducing warranty costs are just a few highlight areas of Quality Management in 2014. Quality Management (QM) at technotrans is not only adapting to increasingly new requirements, but also taking on additional management functions and initiatives. Knowledge transfer in the form of internal and group-wide technology forums, project management tasks and also operational task-force meetings are initiated and implemented by QM.

Internal structures were also optimised and simplified in 2014. To create greater flexibility and optimised processes, the tasks of the CPS (Central Process Support) department were assigned to the QM and R&D areas. The priorities were to speed up process and the transfer of responsibility for tasks while reducing interfaces.

technotrans does more than merely address quality topics reactively by incorporating control loops into its processes; QM is now increasingly showing entrepreneurial initiative. In our view, a modern QM approach entails more than simply performing a “process watchdog function”; it must increasingly step into the role of a “coach” or “internal consultant”.

In addition to the specific requirements of the new technotrans markets (e.g. medical or rail technology), aspects in the domain of social responsibility are also being actively embraced and implemented in processes. This aspect too, for example, is increasingly feeding into supplier management through audits.

Expanding and optimising the group’s Logistics processes was a major task area in 2014. technotrans AG’s Logistics area at Sassenberg also supports the logistics processes of other group companies for instance in the form of location-specific improvements, while always heeding the wider logistics picture on a group scale.

The use of mobile data capturing (scanner technology) was stepped up and also adopted in the shipping processes. This led to faster packaging processes and improved quality.

Corporate Communications

Taking part in shows and exhibitions is a key instrument of corporate communications work at technotrans. Especially when the economy is going through a difficult time, shows provide an important boost to business. What better platform is there than a show as a meeting place for businesses and customers? This is precisely where the specialists of the industry in question can all be found together in one place.

In 2014 technotrans took the opportunity to present the company and its products with a print focus at four different industry exhibitions. These included the IPEX in Birmingham (UK), which regularly takes place mid-way through the four-year drupa cycle. As expected, Britain’s major industry exhibition for printing and publishing confirmed the high demand for the expanded product portfolio for digital printing presses. Other shows attended were the ExpoPrint in São Paulo (Brazil), the GRAPH EXPO in Chicago (USA) and the World Publishing Expo in Amsterdam (Netherlands). At the Amsterdam show, technotrans placed the spotlight on the modernisation of offset printing presses. It demonstrated how incorporating new or replacing existing spray dampening systems help to make a system more cost-effective.

At a total of seven shows addressing target markets outside the printing industry, technotrans focused on nurturing ties with existing regular customers, building up customer contacts and attracting new prospective customers. At the AMB in Stuttgart – an international trade fair for metalworking – technotrans followed up its debut appearance in 2012. There was lively interest in its small and large active and passive cooling systems as well as the modular combined units for cooling, conditioning and filtering cooling lubricants. technotrans consequently presented itself as a full-liner for the machine tool industry. The EuroBLECH in Hanover provided technotrans with a platform on which to project itself as an established partner for stamping and forming technology. Two years ago, when technotrans had taken part as a newcomer, its spray lubrication systems had been unveiled to great acclaim. In 2014 we exhibited the entire product range for the lubrication of coils, blanks and profiles and demonstrated the spray.xact to an impressed audience. The portfolio of major international shows attended by technotrans was rounded off with its first appearance at the InnoTrans – the International Trade Fair for Transport Technology – held every two years in Berlin. Its presentation there focused on the mobile cooling systems for batteries and heat exchangers for charging stations and inverters. With electric mobility increasingly moving into the mainstream, technotrans’ cooling and temperature control have met with an enthusiastic reception among both manufacturers of energy storage devices and manufacturers of buses and trams.

technotrans presented its solutions for the laser and machine tool industry and for stamping and forming technology at smaller, more specialised events such as the Southern Manufacturing in Farnborough (UK) and, for the second time, the Stamping Technology Congress in Dortmund.

To reinforce the impact of its presence at such shows, we provided intensive, effective PR support in the run-up to these events. A large number of trade magazines reported on technotrans products before, during and at the shows.

The shares of technotrans AG have been traded on the stock market since March 1998. As a company listed in the Prime Standard segment, we must meet the highest possible standards of transparency. These include quarterly financial reporting in German and English, the publication of a corporate calendar, holding at least one Analysts Conference per year and the publication of ad hoc information, including in English. The shares of technotrans AG were converted from bearer to registered shares in October 2008. Since the changeover, we have been able to communicate directly with our company’s shareholders. Knowing the shareholder structure furthermore enables us to target our investor relations work even better.

Transparency and credibility are the cornerstones of our communications with the capital market. We inform shareholders, analysts, media and the general public regularly and promptly in press releases and ad hoc information about our business performance and the situation of the company. All publications are also available on the Internet. Regardless of whether someone is a shareholder or is merely interested in the company, and whether they have a large or small shareholding, in addition to providing written reports we explain individual aspects and answer questions in telephone conferences or face-to-face talks. The result of an information policy that is candid and open to scrutiny is a relationship of trust with all capital market operators, based on mutual respect, and we value it very highly.