Notes to HHLA AG 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 Aktiengesellschaft (HHLA) is a leading European port logistics group. HHLA AG is the parent company of the HHLA Group and controls the Group as a strategic management holding company. Its operating business is conducted by 36 domestic and 27 foreign subsidiaries and associated firms. In the 2022 financial year, HHLA increased its group of consolidated companies with a view to optimising its intermodal business and expanding its digital activities. As a result of insolvency proceedings, one company in the Logistics segment was deconsolidated. No other significant legal or organisational changes were made.

HHLA AG is a legally independent company that was split into two divisions – the A division and the S division – in the course 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, merely entitle shareholders 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 1,014 employees as of 31 December 2022 (previous year: 1,027). Of this number, 218 received wages (previous year: 234), 726 received a salary (previous year: 721) and 70 were apprentices (previous year: 72). Of the 1,014 staff members, 364 were assigned to companies within the HHLA Group in the reporting year.

Economic environment

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

Earnings position

The revenue generated 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 € 138.5 million in the reporting period (previous year: € 143.1 million). The decrease of € 4.6 million was mainly due to services billed to subsidiaries of HHLA AG.

Other income and expenses improved earnings by an additional € 14.3 million compared with the previous year. This primarily resulted from higher value adjustments on financial assets in the previous year, and from lower depreciation on property, plant and equipment during the reporting period.

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

The change in income from equity investments was mainly due to the termination of a profit and loss transfer agreement in response to changes in tax law. The net profits of HHLA AG’s subsidiaries and equity investments recognised in profit or loss decreased year-on-year by € 42.6 million to € 114.9 million (previous year: € 157.5 million).

Reported income tax is largely influenced by the termination of a profit and loss transfer agreement in response to changes in tax law.

As the basis for calculating the dividend, the company’s annual net profit is the key performance indicator for HHLA AG and amounted to € 47.2 million in the reporting period (previous year: € 62.0 million). The A division accounted for € 38.1 million of this amount (previous year: € 53.8 million) and the S division for € 9.1 million (previous year: € 8.2 million).

The difference between the actual annual net profit and guidance is mainly attributable to the absence of a book profit from the expected completion of a share sale.

Assets

The carrying amounts of intangible assets and property, plant and equipment totalled € 33.3 million at the end of the reporting period (previous year: € 31.5 million). Capital expenditure amounted to € 5.6 million in the reporting period (previous year: € 5.3 million). Capital expenditure focused mainly on expanding the IT landscape.

The total increase in financial assets of € 9.4 million to € 469.8 million was mainly due to the above-mentioned expansion of the consolidated group, the issuance of loans and opposing value adjustments.

Equity declined by € 12.9 million compared to year-end 2021. This reduction is due to the distribution of a cash dividend of € 60.1 million and the net profit for the year of € 47.2 million.

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 1.78 % set by Deutsche Bundesbank was applied for the reporting year (previous year: 1.87 %). In accordance with Section 253 (2) sentence 2 HGB, a remaining term of 15 years is used as a basis for provisions. Pension provisions amounted to € 334.8 million at the end of the reporting period (previous year: € 342.7 million).

Financial position

Cash flow from operating activities totalled € 117.0 million in the reporting period (previous year: € 18.0 million). This item was strongly influenced by the operating result and the income received from equity investments. Cash flow was sufficient to fund capital expenditure in the reporting period.

In connection with existing cash pooling agreements, financial funds comprised receivables from subsidiaries of € 374.5 million (previous year: € 260.9 million), cash and cash equivalents in the form of bank balances totalling € 59.7 million (previous year: € 103.3 million) – of which € 20.0 million (previous year: € 65.0 million) was short-term bank deposits – and clearing receivables of € 75.0 million (previous year: € 82.5 million) due from HGV Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH, Hamburg (HGV). The S division of HHLA AG participates in the cash clearing system operated by HGV. The A division also utilises the option of investing surplus liquidity with HGV wherever advantageous for HHLA AG.

Risk and opportunity report

Business developments at HHLA AG are generally 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) HGB. Risk and opportunity management

Business forecast

Outlook

Due to its close ties with the affiliated companies and its weight within the Group, the expectations for HHLA AG 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. In addition, HHLA AG's result next year will be determined by a book profit from the expected completion of a share sale. Business forecast

Expected earnings position in 2023

On the basis of the expected earnings position of the HHLA Group, as outlined in the business forecast for the Group, and the previous comments, HHLA AG anticipates its annual profit for the year to be on a par with the previous year overall. Due to the uncertain environment described in the Group’s business forecast, a reliable outlook for HHLA AG is also still not possible.

Expected financial position in 2023

Based on the liquidity management measures outlined in the business forecast for the Group, HHLA AG expects its financial position to remain stable.

Dividend

As in the previous year, HHLA AG’s appropriation of profits is based on 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 stated dividend policy.