Financial position

Balance sheet analysis

Compared to the previous year, the HHLA Group’s balance sheet total increased by a total of € 637.1 million to € 2,610.0 million as of 31 December 2019.

On the assets side of the balance sheet, non-current assets rose by € 677.4 million. Property, plant and equipment grew by € 617.0 million to € 1,677.3 million (previous year: € 1,060.3 million). Deferred taxes rose year-on-year by € 41.9 million to € 124.1 million (previous year: € 82.1 million). The rise in both these balance sheet items is mainly due to the first-time application of IFRS 16. Initial application effects of € 571.2 million related to rights of use amounting to € 542.8 million and deferred taxes amounting to € 28.4 million. The increase in property, plant and equipment due to capital expenditure, less amortisation and depreciation, also contributed to the rise in non-current assets.

Current assets decreased by € 40.3 million to € 485.7 million (previous year: € 526.0 million). This decline was primarily attributable to a decrease in trade receivables of € 11.7 million to € 168.1 million (previous year: € 179.8 million), and in cash, cash equivalents and short-term deposits of € 23.5 million to € 158.0 million (previous year: € 181.5 million).

Equity

in € million

On the liabilities side, equity declined by € 35.9 million compared to year-end 2018 to € 578.9 million (previous year: € 614.8 million). The decrease was largely due to the effects of the initial application of IFRS 16 amounting to € 58.5 million, the interest rate-related change of € 30.9 million in actuarial losses including tax effects outside profit or loss, the distribution of dividends and the reclassification of a future financial settlement totalling € 93.2 million as a non-current financial liability. Profit after tax for the reporting period of € 137.1 million had an opposing effect. The equity ratio decreased to 22.2 % (previous year: 31.2 %),

Non-current liabilities rose by € 635.2 million to € 1,749.8 million (previous year: € 1,114.7 million). This increase is largely due to the effects of the initial application of IFRS 16 amounting to € 589.4 million. Primarily as a result of the interest rate adjustments, pension provisions increased by € 54.3 million compared to 31 December 2018.

Current liabilities rose by € 37.9 million to € 281.3 million (previous year: € 243.4 million), also primarily due to effects from the initial application of IFRS 16 amounting to € 40.3 million. The decrease in trade liabilities had an opposing effect.

Investment analysis

Investments, depreciation and amortisation

in € million

Capital expenditure in the 2019 financial year totalled € 224.9 million (previous year: € 141.3 million). This figure includes additions of € 55.3 million from rights of use (rent and leases) not recognised as a direct cash expense (previous year: € 2.4 million in finance leases). Capital expenditure focused on extending the Hamburg container terminals and expanding intermodal transport capacities. Investment projects were mainly funded by the operating cash flow generated in the financial year.

Property, plant and equipment accounted for € 207.0 million (previous year: € 117.3 million) of capital expenditure, while intangible assets accounted for € 10.0 million (previous year: € 11.1 million) and investment property for € 8.0 million (previous year: € 12.9 million).

Capital expenditure

by segment in 2019

Investments totalling € 72.8 million were made in the Container segment (previous year: € 62.6 million). Capital expenditure was dominated by the procurement of handling equipment and storage capacities at the Hamburg container terminals. The Intermodal segment invested € 130.9 million (previous year: € 55.1 million). The METRANS Group accounted for most of this investment volume, mainly for the expansion of the terminal network, wagons and locomotives. Capital expenditure in the Logistics segment amounted to € 4.3 million (previous year: € 1.4 million). The pro forma Holding/Other segment invested a total of € 7.5 million (previous year: € 14.1 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 € 10.0 million (previous year: € 8.4 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, investments primarily aim 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 € 99.6 million (previous year: € 107.0 million). This figure includes € 70.4 million (previous year: € 69.6 million) for the capitalisation of property, plant and equipment.

Liquidity analysis

Cash flow from operating activities rose year-on-year from € 232.7 million to € 322.7 million. The increase of € 90.0 million is due to the € 47.2 million increase in depreciation and amortisation which resulted mainly from the initial application of IFRS 16. In contrast to the previous year, a decrease in trade receivables owing to changing customer payment behaviour and a € 42.5 million decrease in current financial assets also led to an increase. At the same time, the improvement in EBIT of € 17.0 million contributed to the increase in cash flow from operating activities. There was an opposing effect from the € 17.8 million, largely due to the first-time application of IFRS 16.

Cash flow from investing activities (outflow) of € 193.8 million was below the prior-year figure of € 203.4 million. This € 9.5 million decrease in cash outflow was mainly due to payments in the previous year for the acquisition of all shares in HHLA TK Estonia AS, Tallinn, Estonia. The year-on-year increase in payments for investments in property, plant and equipment and higher payments for short-term deposits had an opposing effect.

Free cash flow – the total cash flow from operating and investing activities – increased to € 128.9 million (previous year: € 29.3 million).

Cash flow from financing activities (outflow) amounted to € 176.9 million in the reporting period (previous year: € 31.5 million) and was therefore € 145.4 million above the prior-year figure. In contrast to the same period the previous year, no payments were received from the take-up of loans in the reporting period. As a result of the initial application of IFRS 16, there were higher payments for the redemption of lease liabilities compared to the previous year. There was an opposing effect from the payment made to acquire all minority interests in METRANS a.s., Prague, Czech Republic in the previous year.

The HHLA Group had sufficient liquidity as of year-end 2019. There were no liquidity bottlenecks in the course of the financial year. Financial funds totalled € 208.0 million as of 31 December 2019 (31 December 2018: € 254.0 million). Including all short-term deposits, the Group’s available liquidity as of year-end 2019 came to a total of € 253.0 million (previous year: € 276.4 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 leases to achieve funding with matching maturities. Pension provisions are also available for long-term internal financing.

At € 331.8 million as of the balance sheet date, liabilities to banks were below the prior-year figure of € 369.7 million. The Group did not draw on any additional external financing in the 2019 financial year (previous year: € 136.9 million). During the reporting year, payments for the redemption of loans amounted to € 39.7 million (previous year: € 27.9 million). Due to the maturities agreed and its stable liquidity position, the company had no significant refinancing requirements.

Maturities of bank loans

by year and in € million

As of the balance sheet date, liabilities from bank loans were denominated exclusively in euros. In terms of conditions, approximately 77 % have fixed interest rates and some 23 % 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 22 % of bank loans. These covenants were met at all agreed audit points throughout the reporting year.

As of the balance sheet date, HHLA disclosed non-current liabilities to related parties totalling € 485.4 million (previous year: € 105.0 million), mainly resulting from the recognition of the leasing liability to the Hamburg Port Authority (HPA). The year-on-year increase was due to the initial application of the new IFRS 16 lease standard.

The 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 € 158.0 million (previous year: € 181.5 million) as of the balance sheet date. 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 € 3.1 million (previous year: € 2.7 million). The credit line utilisation rate was 69.4 % in the period under review (previous year: 72.9 %). 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 as of the balance sheet date, an amount of € 9.1 million (previous year: € 14.5 million) was subject to restrictions in Ukraine relating to the transfer of currency abroad.

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 the participation and shareholder agreement of 20 December 2018, HHLA acquired 25.1 % of the shares in Spherie UG (haftungsbeschränkt), Hamburg, as of the transfer date on 1 January 2019. The object of the company is the development, production and distribution of aerial systems exclusively for the capture of 360° sensor data, as well as services connected with the aerial systems to capture 360° sensor data. The company was included in HHLA’s consolidated financial statements in the first quarter of 2019 using the equity method and is assigned to the Logistics segment.

On 22 March 2019, HHLA signed a share purchase agreement to acquire 50.1 % of the shares in Bionic Production AG, a non-listed company based in Lüneburg, Germany. The company is active in the construction, design and manufacturing of components using laser additive 3-D printing technologies. The closing of the transaction (corresponding to the acquisition date) was tied to various closing conditions and took place on 31 July 2019. The first-time consolidation of the company took place on the acquisition date. The company was therefore fully consolidated for the first time on 30 September 2019. Effective 29 August 2019, the company changed its legal status to that of a private limited company (“Gesellschaft mit beschränkter Haftung”) and is now registered as Bionic Production GmbH.

On 18 November 2019, HHLA and Hyperloop Transportation Technologies, Inc., Culver City, USA, founded the Hamburg-based company Hyperport Cargo Solutions GmbH i. G. Each company holds 50.0 % of the shares. The company’s objective is to develop, manufacture, implement, market, sell and distribute hyperloop technology and related technologies for transporting sea freight containers in the field of seaport and hinterland container transport. The joint venture was included in HHLA’s consolidated financial statements at year-end using the equity method and is assigned to the Logistics segment.

There were no further acquisitions or disposals of shares in subsidiaries during the reporting year. Notes to the consolidated financial statements, no. 3 Composition of the Group

Changes in the group of consolidated companies

The company TIP Žilina, s.r.o., Dunajska Streda, Slovakia, was included in the HHLA group of consolidated companies for the first time in the first quarter of 2019. This company was founded in 2017 and began operating in the second quarter of 2019.

There were no other changes to the group of consolidated companies. Notes to the consolidated financial statements, no. 3 Composition of the Group