Annual Report 2014

IV. Notes to the Consolidated Income Statement

18) Revenue

Revenue is recognised if the risks and rewards associated with ownership of the products sold have been transferred to the buyer. For deliveries, revenue is therefore realised in accordance with the agreed terms of delivery; for services, it is realised when the service has been performed.

Revenue is shown broken down by division in the segment report. € 95.6 million is the result of the sale of goods including sales of parts, and € 16.8 million from the provision of services. The geographical composition of revenue in 2014 was Germany € 61.9 million, rest of Europe € 24.2 million, America € 15.4 million and Asia € 10.9 million.

19) Cost of Sales

The cost of sales comprises the cost of traded products and the cost price of merchandise sold. In accordance with IAS 2, it includes both costs which can be directly allocated, such as cost of materials and cost of labour, and also overheads, including pro rata depreciation and amortisation on property, plant and equipment used for production and on intangible assets. The amount for inventories recognised as an expense in the period under review broadly corresponds to the cost of materials. The costs of the field service and the expense arising in connection with warranty obligations are likewise reported under cost of sales. The other cost of sales mainly comprises translation costs and maintenance expense.

  2014 2013
  € '000 € '000
Cost of materials 43,838 41,341
Cost of labour 20,619 19,697
Subcontractors, personnel leasing 5,074 5,165
Travel expenses 1,388 1,404
Warranty 765 712
Tenancy and leasing costs 655 748
Depreciation and amortisation 601 747
Operating requirements 546 551
Other 1,464 1,718
74,950 72,083

20) Distribution Costs

The distribution costs include costs for the Distribution Department and for in-house services, and also the costs of advertising and logistics. This item also includes sales-related expenditure for commissions and impairment of receivables.

  2014 2013
  € '000 € '000
Cost of labour 9,848 8,866
Logistics costs 2,035 1,856
Depreciation and amortisation 826 849
Travel expenses 813 782
Tenancy and leasing costs 458 455
Promotional and exhibition costs 396 566
Sales commissions 366 327
Impairment of receivables 187 210
Other 1,271 1,114
16,200 15,025

The other distribution costs for the financial year consist primarily of entertainment expenses as well as repair and maintenance costs related to distribution activities.

21) Administrative Expenses

The administrative expenses comprise personnel and material costs for management and administration, insofar as not charged to other cost centres as internal services.

  2014 2013
  € '000 € '000
Cost of labour 6,925 6,303
Depreciation and amortisation 1,343 1,457
IT costs 1,269 1,237
Consultancy, audits 949 946
Tenancy and leasing costs 617 582
Insurances 525 560
Other 922 1,136
12,550 12,221

In the 2014 financial year, the fees for the auditors recorded as an expense pursuant to Section 319 (1) first and second sentences of German Commercial Code amounted to € 245 thousand (2013: € 257 thousand).

  2014 2013
  € '000 € '000
fees for    
Auditing of the financial statements 210 236
Tax consultancy services 35 21
245 257

The figures for the 2014 financial year include the fees and expenses of the auditors of the Consolidated Financial Statements, KPMG AG Wirtschaftsprüfungsgesellschaft, for the auditing of the Consolidated Financial Statements and the auditing of the annual financial statements of technotrans AG and KLH Kältetechnik GmbH.

22) Development Costs

No research costs were incurred. Development costs are charged as ongoing expenses until the criteria of IAS 38.57 are satisfied cumulatively. From that point on, development costs are recognised as an intangible asset (see Section 3 “Intangible Assets”).

23) Other Operating Income

  2014 2013
  € '000 € '000
Income unrelated to the account period    
Book profits on the disposal of assets 61 47
Reversal of provisions 54 112
Other income unrelated to the accounting period 145 75
260 234
Other operating income    
Foreign currency gains 1,316 488
Income from tenancy agreements 195 292
Personnel-related revenue 139 144
Insurance payments 26 273
Other 856 1,429
2,532 2,626
  2,792 2,860

The income unrelated to the accounting period comprises mainly cash receipts from previously impaired receivables, and the other operating income includes development cost contributions from customers. Exchange rate gains mainly constitute unrealised changes in the measurement of intragroup assets and liabilities.

24) Other Operating Expenses

  2014 2013
  € '000 € '000
Expenses unrelated to the accounting period    
Book losses on the disposal of assets 62 55
Other expenses unrelated to the accounting period 17 35
79 90
Other operating expenses    
Foreign currency losses 738 779
Other operating taxes 168 151
Other 266 107
1,172 1,037
1,251 1,127

25) Net finance costs

  2014 2013
  € '000 € '000
Financial income 103 30
Financial charges -670 -918
Net finance costs -567 -888

The interest income relates predominantly to bank credit balances. Interest income of € 8 thousand (2013: € 10 thousand) from the compounding of the corporation tax credit balance has in addition been recognised. The interest expenses comprise mainly interest charged on the group’s financial liabilities. The interest expenses moreover include the gains attributable to the non-controlling interests in gds-Sprachenwelt GmbH (€ 66 thousand). Furthermore, interest expenses from the compounding of the conditional purchase price payments amounting to € 11 thousand (2013: € 6 thousand) are recognised within this item. In the previous year this item also included the compounding of the partial retirement obligations amounting to € 1 thousand. No borrowing costs were capitalised in the reporting period.

26) Income Tax Expense

  2014 2013
  € '000 € '000
Actual income tax expense    
Tax expense for the period -793 -562
Tax refund unrelating to the accounting period -46 14
-839 -548
Actual income tax expense    
Tax expense for the period -1,447 -497
Tax refund unrelating to the accounting period 436 259
-1,011 -238
  -1,850 -786

Income tax expense includes corporation income tax and trade earnings tax for the domestic companies, and also comparable taxes on income for the foreign businesses. Other operating taxes are included in other operating expenses.

The deferred tax is attributable to temporally divergent valuations in the companies’ tax balance sheets and the Consolidated Balance Sheet in accordance with the balance sheet liability method. The reported deferred tax assets also include tax relief claims where it is anticipated that existing tax loss carryforwards will be used in subsequent years. The deferred tax is calculated on the basis of the tax rates applicable or expected at the time of realisation in the individual countries concerned.

The applicable tax rate in Germany of 30.08 percent (2013: 30.17 percent) calculated for the year under review is based on a corporation tax rate of 15.0 percent, a solidarity surcharge of 5.5 percent and an effective trade earnings tax rate of 14.3 percent (2013: 14.3 percent).

The following capitalised deferred tax assets and liabilities relate to recognition and measurement differences for the individual items on the Balance Sheet and to loss carryforwards which can be used in future.

  2014 2013
  Assets Liabilities Assets Liabilities
  € '000 € '000 € '000 € '000
Non-current assets 605 1,121 831 1,253
Inventories 304 30 292 38
Receivables 123 0 113 4
Provisions 171 105 160 105
Liabilities 78 2 40 14
Loss carryforwards 820 0 1,810 0
2,101 1,258 3,246 1,414
Offsetting 608 608 525 525
  1,493 650 2,721 889

The deferred tax liabilities from non-current assets include € 650 thousand (2013: € 864 thousand) in deferred tax liabilities for the customer base capitalised in the 2013 financial year in the context of the business combination. The remaining deferred tax assets and deferred tax liabilities from non-current assets result largely from temporary differences in intangible assets acquired.

The deferred tax assets from inventories in essence stem from the elimination of intercompany profits. The deferred tax assets from liabilities include deferred tax assets from cash flow hedges.

There are tax loss carryforwards amounting to € 17,871 thousand for 2014. Deferred taxes amounting to € 820 thousand were recognised as an asset on an amount of € 2,557 thousand in agreement with IAS 12.34. No deferred tax assets were recognised on the remaining loss carryforwards of € 15,313 thousand and on deductible temporary differences of € 2,048 thousand. The loss carryforwards may be carried forward for 20 years in the USA (€ 9,316 thousand), for nine years in Japan (€ 173 thousand), for five years in China (€ 117 thousand) and for an unlimited period in other cases. In view of the uncertain earnings expectations of the companies in Asia, of technotrans america inc., technotrans américa latina ltda. and technotrans scandinavia AB, no or only pro rata deferred taxes were created on the loss carryforwards.

The following table reconciles the theoretical tax expense with the actual income tax expense.

  2014 2013
  T€ T€
Applicable tax rate 30.08% 30.17%
Consolidated earnings before taxes on income 6,263 3,738
Theoretical tax expense/income -1,884 -1,128
Impairment (-) or reversal of impairment (+) on deferred tax assets on tax loss
carryforwards and temporary differences
-55 -95
Expense from the non-recognition of deferred tax assets on tax losses
occurring in the financial year and temporary differences
-229 -33
Tax effect    
from the use of deferred taxeson temporary differences and
from tax loss carryforwards following impairment
294 536
of non-deductibility of business expenses and tax-exempt income 30 -93
Differences compared with local tax rates 40 32
Changes to deferred tax resulting from tax rate changes 0 -19
Other taxes not relating to the period -46 14
Actual and deferred income tax expense -1,850 -786

Deferred tax amounting to € 23 thousand (2013: € -23 thousand) that was directly allocable to equity arose in the year under review only from the change in cash flow hedges. Exchange rate differences from net investments in a foreign business did not lead to any deferred tax in the 2014 financial year (2013: € 9 thousand).

27) Earnings Per Share

The figure for basic earnings per share is obtained by dividing the share of earnings attributable to the shareholders of technotrans AG by the weighted average number of ordinary shares outstanding in the financial year:

   2014 2013
Net profit for the periodin € thousand 4,413 2,952
of which:     
Profit attributable to technotrans AG shareholders  4,381 3,016
Profit/loss attributable to non-controlling interests  32 -64
Average number of ordinary shares outstanding in the year  6,494,943 6,465,803
Basic diluted earnings per sharein € 0.67 0.47

In the 2014 financial year there were once again no stock options that would have had a dilutive effect on earnings per share pursuant to IAS 33.