Notes to the Separate Financial Statements for HHLA Prepared in Line with the German Commercial Code (HGB)

Unlike the Consolidated Financial Statements, the Annual Financial Statements for Hamburger Hafen und Logistik Aktiengesellschaft (HHLA AG) are not prepared in accordance with International Financial Reporting Standards (IFRS). Instead, they are based on the regulations contained in the German Commercial Code (HGB).

Company Overview

Structure and Commercial Activities

Hamburger Hafen und Logistik AG (HHLA AG) is a leading European port logistics group. HHLA AG is the parent company of the HHLA Group and runs the Group as a strategic management holding company. Its operations are carried out by the 28 domestic and 14 foreign subsidiaries that make up the consolidated Group. No significant legal or organisational changes were made to the company structure in the 2017 financial year.

HHLA AG is a legally independent company and was split into two divisions – the A division and the S division – as part of the initial public offering on 2 November 2007.

The A division represents the Port Logistics subgroup. The Class A shares, which are listed on the stock exchange, entitle shareholders merely to participate in the result and net assets of these commercial operations. The performance and financial result of the Real Estate subgroup are attributed to the S division. Class S shares are not traded on the stock exchange and are held solely by the Free and Hanseatic City of Hamburg (FHH). In the unlikely and unprecedented event of the Real Estate subgroup reporting a loss, this would be indirectly transferred to the Free and Hanseatic City of Hamburg in line with a separate agreement to assume losses.

Employees

HHLA AG had a total of 1,073 employees as of 31 December 2017 (previous year: 1,190). Of this number, 303 received wages (previous year: 349), 725 received a salary (previous year: 774) and 45 were apprentices (previous year: 67). Of the 1,073 staff members, 502 were assigned to companies within the HHLA Group in the reporting year.

Economic Environment

Industry and macroeconomic developments are largely in line with those at the HHLA Group.

Earnings Position

Key Figures

in € million

 

2017

 

2016

 

Change

Revenue

 

127.6

 

157.9

 

- 19.2 %

Other income and expenses

 

- 164.9

 

- 179.2

 

7.9 %

Operating result

 

- 37.3

 

- 21.3

 

- 75.0 %

Financial result

 

- 22.4

 

- 6.9

 

neg.

Result from equity investments

 

93.1

 

94.2

 

- 1.1 %

Income taxes

 

- 9.3

 

- 18.4

 

49.6 %

Net profit

 

24.1

 

47.6

 

- 49.4 %

The revenue recorded by HHLA AG resulted mainly from the charging of personnel expenses for holding company staff assigned to the spun-off Container and Logistics segments and from billing administrative services for IT systems which are pooled with HHLA AG. Revenue totalled € 127.6 million in the reporting year (previous year: € 157.9 million). The € 30.3 million decrease was largely due to the restructuring of the Logistics segment and the resulting income from the termination of the lease for the Übersee-Zentrum in the previous year.

Other income and expenses improved earnings by an additional € 14.3 million compared with the previous year. Following restructuring-related expenses in connection with the discontinuation of project and contract logistics in the previous year, the figure for the reporting year includes expenses for the reorganisation of the Container segment.

The year-on-year decrease in the financial result was mainly attributable to interest rate-related changes in provisions.

Income from equity investments remained virtually unchanged from the previous year. The net profits of HHLA AG’s affiliates and equity investments recognised in profit or loss declined by € 1.1 million to € 93.1 million (previous year: € 94.2 million).

The € 9.1 million decrease in income taxes stemmed mainly from a significant reduction in the operating and financial result.

The company’s annual net profit amounted to € 24.1 million in the reporting period (previous year: € 47.6 million). The A division accounted for € 14.7 million of this amount (previous year: € 38.8 million) and the S division for € 9.4 million (previous year: € 8.7 million).

Forecast and Actual Figures

in € million

 

Actual 2016

 

Forecast 2017

 

Actual 2017

Net profit

 

47.6

 

At previous year’s level

 

24.1

The differences between forecast and actual figures were mainly due to those circumstances listed in the section on the Group’s earnings position. In addition, an impairment on the amount reported for an investment and a merger loss led to a reduction in the annual net profit. see Course of Business and Economic Situation.

Assets

Balance Sheet Structure

in € million

 

31.12.2017

 

31.12.2016

Assets

 

 

 

 

Intangible assets and property, plant and equipment

 

23.2

 

17.7

Financial assets

 

376.5

 

386.7

Other assets

 

625.9

 

654.8

Balance sheet total

 

1,025.6

 

1,059.2

 

 

 

 

 

Equity and liabilities

 

 

 

 

Equity

 

474.3

 

496.9

Pension provisions

 

309.6

 

303.3

Other liabilities

 

241.7

 

259.0

Balance sheet total

 

1,025.6

 

1,059.2

Equity ratio in %

 

46.2

 

46.9

Intensity of investments in %

 

2.3

 

1.7

The carrying values of intangible assets and property, plant and equipment amounted to € 23.2 million at the end of the reporting period (previous year: € 17.7 million). Capital expenditure totalled € 8.3 million in the reporting period (previous year: € 10.3 million). Capital expenditure focused mainly on expanding the IT landscape.

The decline in financial assets of € 10.2 million to a total of € 376.5 million was largely due to the merger of HHLA Container Terminals Gesellschaft mit beschränkter Haftung and HHLA AG, as well as the impairment on the amount reported for an investment.

Development in Pension Provisions

in € thousand

 

2017

 

2016

*

In the year under review, HHLA Container Terminals Gesellschaft mit beschränkter Haftung merged with HHLA AG.

Carrying amount on 1 January

 

303,327

 

313,095

Merger effect*

 

5,555

 

0

Expense recognised in profit and loss

 

19,891

 

8,754

Pension payments

 

- 19,198

 

- 18,522

Carrying amount on 31 December

 

309,575

 

303,327

HHLA AG uses the projected unit credit method to value entitlements associated with existing pension obligations. Future obligations are projected based on past service and possible future service prior to the insured event occurring. Anticipated future pension and pay increases are also taken into account. An average market interest rate for the past ten years of 3.68 % set by Deutsche Bundesbank was applied for the reporting year (previous year: 4.01 %).

In accordance with Section 253 (2) sentence 2 HGB, a remaining term of 15 years is used as a basis. Pension provisions amounted to € 309.6 million at the end of the reporting period (previous year: € 303.3 million).

Financial Position

Liquidity Analysis

in € million

 

2017

 

2016

*

In the year under review, HHLA Container Terminals Gesellschaft mit beschränkter Haftung merged with HHLA AG.

Financial funds as of 01.01.

 

405.3

 

399.3

Merger effect*

 

4.6

 

0.0

Cash flow from operating activities

 

32.3

 

67.6

Cash flow from investing activities

 

- 7.1

 

- 9.6

Cash flow from financing activities

 

- 46.7

 

- 52.0

Financial funds as of 31.12.

 

388.4

 

405.3

of which receivables from subsidiaries

 

166.4

 

201.7

of which cash and cash equivalents

 

222.0

 

203.6

Cash flow from operating activities totalled € 32.3 million in the reporting year (previous year: € 67.6 million). It was dominated by the operating result. Cash flow in the reporting year was sufficient to fund capital expenditure.

In connection with existing cash pooling agreements, financial funds comprised receivables from subsidiaries in the amount of € 166.4 million (previous year: € 201.7 million), cash and cash equivalents in the form of bank balances totalling € 147.9 million (previous year: € 129.6 million) – of which € 20.0 million (previous year: € 10.0 million) was short-term bank deposits – and clearing receivables of € 74.0 million (previous year: € 74.0 million) from HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH, Hamburg (HGV). The S division of Hamburger Hafen und Logistik AG (HHLA) participates in the cash clearing system operated by HGV. The A division also utilises the option of investing surplus liquidity with HGV whenever this is advantageous for HHLA AG.

As expected, the financial position remained stable in the reporting period.

Risk and Opportunity Report

Business developments at Hamburger Hafen und Logistik AG (HHLA AG) are mostly subject to the same risks and opportunities as those of the HHLA Group. HHLA AG shares in the risks of its subsidiaries and equity investments in line with its respective shareholding.

As the parent company of the HHLA Group, HHLA AG is incorporated into the Group-wide risk and opportunity management system. The Risk and Opportunity Report contained in the Combined Management Report provides a description of the internal control system as required by Section 289 (5) of the German Commercial Code (HGB). see Risk and Opportunity Report

Business Forecast

Outlook

Due to its close ties with the affiliated companies and its weight within the Group, the expectations for Hamburger Hafen und Logistik AG (HHLA AGA) are reflected in the business forecast for the Group as a whole. It is anticipated that the statements made for the HHLA Group regarding market and revenue developments will largely be mirrored by the revenue of HHLA AG. Furthermore, the income from equity investments is expected to make a substantial contribution towards HHLA AG’s earnings. see Business Forecast

Expected Earnings Position in 2018

Based on the expected developments, HHLA AG expects a significant year-on-year improvement in its net profit for the year.

Expected Financial Position in 2018

Hamburger Hafen und Logistik AG (HHLA AG) expects its financial position to remain stable.

Dividend

As in the previous year, HHLA AG’s appropriation of profits is oriented towards the development of earnings in the financial year ended. The distributable profit and stable financial position provide the foundation for a continuation of the company’s consistent dividend policy.