Financial position

Balance sheet analysis

Compared with the previous year, the HHLA Group’s balance sheet total increased by a total of € 137.6 million to € 1,972.9 million as of 31 December 2018.

On the assets side of the balance sheet, non-current assets rose by € 98.9 million. Property, plant and equipment grew by € 85.7 million to € 1,060.3 million (previous year: € 974.6 million). Intangible assets rose by € 20.1 million year-on-year to € 89.8 million (previous year: € 69.7 million). The rise in both of these balance sheet items is mainly due to the first-time consolidation of HHLA TK Estonia AS, Tallinn, Estonia (previously Transiidikeskuse AS). Another factor was the increase in property, plant and equipment due to capital expenditure, less amortisation and depreciation.

Current assets grew by € 38.7 million to € 526.0 million (previous year: € 487.3 million). The increase was primarily attributable to trade receivables, which grew by € 30.7 million to € 179.8 million (previous year: € 149.1 million), and an increase in receivables from related parties of € 18.7 million to € 100.2 million (previous year: € 81.5 million). By contrast, cash, cash equivalents and short-term deposits fell by € 20.0 million to € 181.5 million (previous year: € 201.5 million).

Group equity

in € million

On the liabilities side, equity rose by € 12.4 million compared to year-end 2017, taking it to € 614.8 million (previous year: € 602.4 million). This growth was mainly due to positive comprehensive income of € 147.9 million. It was offset by the distribution of dividends and the reclassification of a future financial settlement totalling € 85.3 million as a non-current financial liability, as well as the acquisition of the remaining shares in METRANS a.s., Prague, Czech Republic, amounting to € 49.9 million. The equity ratio decreased to 31.2 % (previous year: 32.8 %).

Non-current liabilities rose by € 120.9 million to € 1,114.7 million (previous year: € 993.8 million). The increase was mainly due to a rise in non-current financial liabilities of € 125.2 million to € 429.9 million (previous year: € 304.7 million) from the issuance of promissory note loans.

Current liabilities grew by € 4.3 million to € 243.4 million (previous year: € 239.1 million). This was primarily attributable to trade liabilities, which grew by € 9.8 million to € 87.0 million (previous year: € 77.2 million). By contrast, other current provisions fell by € 6.6 million to € 28.0 million (previous year: € 34.6 million).

Investment analysis

Investments, depreciation and amortisation

in € million

Capital expenditure in the 2018 financial year totalled € 141.3 million (previous year: € 142.6 million). This figure includes additions of € 2.4 million from finance leases not recognised as a direct cash expense (previous year: € 4.2 million). Capital expenditure focused on extending the Hamburg container terminals and expanding intermodal transport and handling capacities. Additionally, 100 % of the shares of HHLA TK Estonia AS were acquired. Investment projects were mainly funded by the operating cash flow generated in the financial year.

Property, plant and equipment accounted for € 117.3 million (previous year: € 131.6 million) of capital expenditure, while intangible assets accounted for € 11.1 million (previous year: € 5.5 million) and investment property for € 12.9 million (previous year: € 5.5 million).

Capital expenditure

by segment in 2018

Investments amounting to € 62.6 million were made in the Container segment (previous year: € 81.2 million). Capital expenditure was dominated by the procurement of handling equipment and storage capacities at the Hamburg container terminals. The Intermodal segment invested € 55.1 million (previous year: € 45.7 million). The METRANS Group accounted for most of this investment volume, mainly for wagons and locomotives. Capital expenditure in the Logistics segment came to € 1.4 million (previous year: € 1.4 million). The pro forma Holding/Other segment invested a total of € 14.1 million (previous year: € 8.4 million). A large proportion of capital expenditure was for the migration to a new terminal management system. The Real Estate segment invested a total of € 8.4 million (previous year: € 6.1 million) mainly for the development of the Speicherstadt historical warehouse district.

Investments in the Container segment focus on enhancing the productivity of existing terminal areas by using state-of-the-art handling technology and developing berth places for the trend in ship sizes. Meanwhile, in the Intermodal segment, the primary objective is to increase vertical integration to further improve the performance and range of its hinterland connections.

As of year-end, there were other financial liabilities for outstanding purchase commitments totalling € 107.0 million (previous year: € 110.6 million). This figure includes € 69.6 million (previous year: € 77.3 million) for the capitalisation of property, plant and equipment.

Liquidity analysis

Cash flow from operating activities fell year-on-year from € 275.5 million to € 232.7 million. This decline of € 42.8 million is mainly due to an increase in trade receivables and other assets of € 53.0 million against previous year. At the same time, an increase of € 19.0 million in balances of provisions contributed to the decrease in cash flow from operating activities. There was an opposing effect from the increase in EBIT of € 31.0 million.

Cash flow from investing activities (outflow) of € 203.4 million was above the prior-year figure of € 131.2 million. This increase of € 72.2 million in cash outflow was mainly due to payments of € 72.0 million made for the acquisition of all shares in Transiidikeskuse AS, excluding acquired cash and cash equivalents.

Free cash flow – the total cash flow from operating and investing activities – decreased to € 29.3 million (previous year: € 144.3 million).

Cash flow from financing activities (outflow) amounted to € 31.5 million in the reporting period (previous year: € 119.0 million) and was therefore € 87.5 million below the prior-year figure. One of the main reasons for the lower cash outflow was proceeds from the issue of bonds and the raising of (financial) loans. This was offset by the payment made to acquire all minority interests in METRANS a.s., Prague, Czech Republic.

The HHLA Group had sufficient liquidity as of year-end 2018. There were no liquidity bottlenecks in the course of the financial year. Financial funds totalled € 254.0 million as of 31 December 2018 (31 December 2017: € 255.6 million). Including all short-term deposits, the Group’s available liquidity as of year-end 2018 came to a total of € 276.4 million (previous year: € 275.6 million).

Financing analysis

Financial management at the HHLA Group is handled centrally and serves the overriding objective of ensuring the Group’s long-term financial stability and flexibility. Group clearing pools the Group’s financial resources, optimises net interest income and substantially reduces dependency on external sources of funding. Derivative financial instruments can be used to reduce the risk of changes in interest rates and, to a minor extent, to reduce currency and commodity price risks.

HHLA’s business model is dominated by a large proportion of property, plant and equipment with long useful lives. For this reason, HHLA mainly uses medium- and long-term loans and finance leases to achieve funding with matching maturities. Pension provisions are also available for long-term internal financing.

At € 369.7 million as of the balance sheet date, amounts due to banks were above the prior-year figure of € 256.9 million. The Group drew on additional external financing totalling € 136.9 million in the 2018 financial year (previous year: € 0.0 million). New borrowing was offset by loan repayments of € 27.9 million (previous year: € 41.9 million). A promissory note loan was the main reason for the increase in liabilities from bank loans. Due to the maturities agreed and its stable liquidity position, the company had no significant refinancing requirements.

The majority of the liabilities from bank loans are denominated in euros, with a small proportion in US dollars. In terms of conditions, approximately 76 % have fixed interest rates and some 24 % have floating interest rates. As a result of borrowing, certain affiliated companies had covenants linked to key balance sheet figures, which mostly require a minimum equity ratio to be met. Covenants are currently in place for approximately 23 % of bank loans. These covenants were met at all agreed audit points throughout the reporting year.

Maturities of bank loans

by year and in € million

As of the balance sheet date, HHLA disclosed non-current liabilities to related parties totalling € 105.0 million (previous year: € 105.5 million). These resulted from the recognition of the leasing liability to the Hamburg Port Authority (HPA) in connection with quay walls for the mega-ship berths at the HHLA Container Terminal Burchardkai (CTB) and the HHLA Container Terminal Tollerort (CTT).

With the exception of operating leases, there are no significant off-balance sheet financial instruments. These operating leases relate primarily to long-term agreements between the HHLA Group and either the Free and Hanseatic City of Hamburg or HPA for leasing land and quay walls in the Port of Hamburg and the Speicherstadt historical warehouse district.

Cash, cash equivalents and short-term deposits, the bulk of which is held centrally by the holding company, totalled € 181.5 million as of the balance sheet date (previous year: € 201.5 million). These funds are mainly invested at German financial institutions with verified high credit ratings as demand deposits, call money and short-term deposits. Current credit lines play a subordinate role due to HHLA having sufficient liquid funds. As of the balance sheet date, the Group had unused credit facilities amounting to approximately € 2.7 million (previous year: € 3.2 million). The credit line utilisation rate was 72.9 % in the period under review (previous year: 67.9 %). In HHLA’s view, the Group’s solid balance sheet structure would enable more substantial credit facilities to be arranged at any time if its medium-term liquidity planning were to reveal a need. Of the total cash and cash equivalents, € 14.5 million as of the balance sheet date (previous year: € 10.4 million) was subject to restrictions in Ukraine relating to the transfer of currency abroad. In the previous year, € 11.2 million served as collateral for working lifetime accounts.

As HHLA has a large number of borrowing options at its disposal outside of the capital market, the Group currently sees no need for an external rating. Instead, it provides existing and potential creditors with comprehensive information to ensure that they can derive appropriate internal credit ratings. Furthermore, Deutsche Bundesbank once again confirmed the Group’s eligibility for central bank finance.

Public subsidies awarded for individual development projects that are subject to specific conditions are of minor importance in terms of their volume at Group level.

Acquisitions and disposals of companies

With share purchase and transfer agreements dated 2 March 2018, HHLA acquired further shares in METRANS a.s., Prague, Czech Republic, thus increasing its stake from 90.0 % to 100 %. In accordance with the entity concept, the purchase price for these shares was taken directly to equity with a corresponding reduction in non-controlling interests.

HHLA signed a contract dated 26 March 2018 for the acquisition of 100 % of shares in terminal operator Transiidikeskuse AS, headquartered in Tallinn, Estonia, in order to further expand its existing transport and logistics network in Estonia. Upon the various conditions precedent being met, HHLA took control of the company on 27 June 2018 (acquisition date within the meaning of IFRS 3 (9)). The purchase price (transferred consideration) was paid in euros. The company was renamed HHLA TK Estonia as of 24 September 2018.

HHLA founded the company HHLA Sky GmbH, based in Hamburg, on 24 July 2018. The company was included in HHLA’s group of consolidated companies as of the end of the financial year. The primary purpose of the company is to develop, organise, manage, operate, monitor and distribute airborne logistics services.

In the reporting year, there were no further substantial acquisitions or disposals of shares in subsidiaries.

Changes in the group of consolidated companies

With the share purchase agreement dated 28 December 2017 and the agreement on the transfer of company shares dated 22 January 2018, METRANS a.s., Prague, Czech Republic, acquired 100 % of shares in POLZUG Intermodal Polka sp. z.o.o., Warsaw, Poland, and renamed the acquired company METRANS (Polonia) Sp. z.o.o. This transaction has no material impact on HHLA’s consolidated financial statements.

On submission of the application for its removal from the commercial register on 25 May 2018, the company HCC Hanseatic Cruise Centers GmbH i. L., Hamburg, was deconsolidated as of 30 June 2018 and is therefore no longer included in HHLA’s group of consolidated companies.

The company POLZUG Intermodal GmbH, Hamburg, was merged with HHLA International GmbH, Hamburg, as of 1 January 2018 upon entry in the commercial register on 31 August 2018. The merger had no impact on HHLA’s consolidated financial statements.

The Czech company JPFE-07 INVESTMENTS s.r.o., Ostrava, Czech Republic, which was not previously included in HHLA’s group of consolidated companies, was merged with METRANS a.s., Prague, Czech Republic, as of 1 January 2018 upon entry in the commercial register on 12 December 2018. The merger had no material impact on HHLA’s consolidated financial statements.

There were no other significant acquisitions, purchases or disposals of shares in subsidiaries, or changes to the group of consolidated companies.  Notes to the consolidated financial statements, no. 3 Composition of the Group