GROUP MANAGEMENT REPORT Financial Situation
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The Group had no short-term financing facilities as of the balance sheet date on February 29, 2012. The current finan-cial debt (up to 1 year) of € 24.6 million (2010/2011:
€ 101.3 million) consists of interest deferrals of € 5.7 million (2010/2011: € 5.5 million), liabilities of € 5.7 million relating to the measurement of derivative financial instruments (2010/2011: € 2.5 million), and the portion of long-term financing facilities maturing in the short term, amounting to
€ 13.3 million (2010/2011: € 93.3 million).
Solid capital structure
HORNBACH enjoys great flexibility in terms of its financing and draws on a wide range of different financing instruments.
Since November 2004, HORNBACH-Baumarkt-AG has thus had a corporate bond of € 250 million issued on the European capital market with an interest coupon of 6.125% and a term running until November 2014. The costs associated with the corporate bond, amounting to € 10,714k in total, have been spread over the term using the effective interest method.
The second tranche of a promissory note bond of
€ 80.0 million already concluded by HORNBACH-Baumarkt-AG in the previous year was disbursed as of June 30, 2011. The new promissory note bond has a term running until June 30, 2016 and serves to provide follow-up financing for the previous promissory note bond of the same amount ma-turing as of June 30, 2011. In addition, the Group still has the two promissory note bonds from the first tranche already disbursed in the previous year. These bonds, amounting to
€ 20 million each and denominated in CHF and CZK respec-tively, have terms running until August 31, 2015. Forward swaps with congruent terms were concluded to hedge the interest rate. The swaps enable the half-yearly interest to be secured for the entire term.
The value of the financing facilities secured by land charges amounted to € 50.7 million at the balance sheet date (2010/2011: € 64.0 million). Land charges of € 146.5 million had been provided as of February 29, 2012 as security for mortgage loans (2010/2011: € 146.7 million).
At the balance sheet date on February 29, 2012, the HORN-BACH-Baumarkt-AG Group had free credit lines amounting to
€ 313.8 million (2010/2011: € 279.9 million) at customary market conditions. These include a newly concluded syndi-cated credit line of € 250 million with a term running until December 14, 2016. The previous syndicated credit line of
€ 200 million dating from 2006 was thus prematurely re-deemed. The credit line may also be drawn down in foreign currencies, particularly CHF, SEK and CZK, up to an amount of
€ 25 million. Furthermore, supplementary bilateral loan agreements of up to € 50 million may also be concluded within the credit framework (also in foreign currencies). Upon utilization, the interest is based on the 3-month or 6-month Euribor, or the equivalent Ibor, plus an interest margin. The applicable interest margin is determined by reference to the company rating granted to HORNBACH-Baumarkt-AG by an internationally recognized rating agency. Margin premiums apply should the level of utilization exceed specified threshold values and when the facility is drawn down in foreign curren-cies. A provision fee dependent on the respective interest margin is charged for the unutilized portion of the credit line.
To ensure the maximum possible degree of flexibility, all major group companies have credit lines denominated in their local currencies, generally at local banks.
No assets have been provided as security for the credit lines, the promissory note bonds, or the bond. The relevant contrac-tual arrangements nevertheless require compliance with customary bank covenants, non-compliance with which could lead to a premature repayment obligation. These regularly involve pari passu clauses and negative pledge declarations.
In the case of the bond, the syndicated credit line at HORN-BACH-Baumarkt-AG, and the promissory note bond agree-ments at the HORNBACH-Baumarkt-AG Group, they also re-quire compliance with specific financial ratios. These key financial ratios are based on consolidated figures at the HORNBACH-Baumarkt-AG Group and require interest cover of at least 2.25 times and an equity ratio of at least 25%. In the case of the promissory note bonds and the syndicated credit line, maximum limits for financing facilities secured by land charges and financing facilities taken up by subsidiaries were
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GROUP MANAGEMENT REPORT Financial Situationalso agreed. The interest cover, net debt/EBITDA ratio, equity ratio, agreed financing limits, and company liquidity (cash and cash equivalents, plus unutilized committed credit lines) are regularly monitored within the internal risk management framework. Further key figures are calculated quarterly.
Should the values fall short of certain target levels, then countermeasures are initiated at an early stage. All covenants were complied with at all times in the year under report.
Further information about financial debt can be found in Note 22 of the notes on the consolidated balance sheet.
Cash and cash equivalents amounted to € 404.3 million at the balance sheet date (2010/2011: € 422.6 million). As in the past, liquidity is managed in the form of fixed deposits on the money market with maximum investment horizons of three months. In the course of the financial crisis, the Group set maximum deposit totals per bank to enhance security by spreading liquidity holdings more widely.
Key financial figures of the HORNBACH-Baumarkt-AG Group
Key figure Definition 2.29.2012 2.28.2011
Net financial debt Current financial debt + non-current financial
debt – cash and cash equivalents € million 27.7 17.8
Interest cover Adjusted(*) EBITDA / Gross interest expenses 7.6 7.1
Net debt / EBITDA Net financial debt / Adjusted(*) EBITDA 0.1 0.1
* EBITDA excluding changes in non-current provisions and gains/losses on the disposal of non-current assets as reported in the cash flow statement
Investments of € 103.8 million
The HORNBACH-Baumarkt-AG Group invested a total of
€ 103.8 million in the 2011/2012 financial year (2010/2011:
€ 67.9 million), mainly in land, buildings and plant and office equipment at existing DIY stores with garden centers, and at stores under construction. The funds required for cash-effective investments, amounting to € 103.8 million (2010/2011: € 67.9 million), were fully covered by the cash flow of € 103.8 million from operating activities (2010/2011:
€ 152.6 million).
Around 60% of total investments were channeled into new real estate, including property under construction. Around 40% of total investments mainly involved replacing and extending plant and office equipment.
The most significant investment projects related to the DIY megastores with garden centers opened in the 2011/2012 financial year in Sinsheim (Germany) and Plzeň (Czech Re-public), construction work on DIY megastores with garden centers due to be opened in subsequent financial years, the conversion and extension of existing stores, the acquisition of land for the Group's further expansion, investments in plant and office equipment, and in intangible assets, especially software.
GROUP MANAGEMENT REPORT Financial Situation
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Cash flow statement
Cash flow statement (abridged) 2011/2012 2010/2011
€ million
Cash flow from operating activities 103.8 152.6
of which: funds from operations1) 144.0 134.8
of which change in working capital2) (40.2) 17.8
Cash flow from investing activities (92.7) (29.9)
Cash flow from financing activities (30.7) 3.4
Cash-effective change in cash and cash equivalents (19.6) 126.1
(Differences due to rounding up or down to nearest € million)
1) Consolidated earnings after taxes, plus depreciation of non-current assets and changes in provisions, minus gains/plus losses on the disposal of non-current assets, plus/minus other non-cash expenses/income
2) Difference between "Change in inventories, trade receivables and other assets" and "Change in trade payables and other liabilities"
The inflow of funds from operating activities reduced from
€ 152.6 million in the previous year to € 103.8 million in the 2011/2012 financial year. Here, the inflow of funds from operations improved from € 134.8 million to € 144.0 million.
This increase was chiefly driven by like-for-like sales growth in Germany and Western Europe, as well as by a lower store expense ratio. The change in working capital (changes in inventories, trade receivables and other assets plus changes in trade payables and other liabilities) resulted in an outflow of funds of € 40.2 million, as against the inflow of funds of
€ 17.8 million in the previous year. Alongside the building up of inventories for the Group's expansion, this development was due to a balance sheet date factor resulting from the earlier settlement of liabilities to suppliers, as a result of which cash and cash equivalents and the cash flow from changes in working capital were reported around € 42 million lower than otherwise.
The outflow of funds for investing activities rose from
€ 29.9 million to € 92.7 million. Here, the increase in invest-ments by € 35.9 million to € 103.8 million was opposed by a lower volume of proceeds from disposals of non-current as-sets, amounting to € 11.1 million (2010/2011: € 38.0 million).
No DIY megastores with garden centers were disposed of in the framework of sale and leaseback transactions in the
2011/2012 financial year. In the previous year, by contrast, one DIY store property was sold.
The outflow of funds for financing activities totaled
€ 30.7 million in the 2011/2012 financial year, contrasting with an inflow of funds of € 3.4 million in the previous year.
Here, the scheduled repayment of non-current financial debt of € 93.1 million was opposed by the taking up of new long-term loans of € 80 million. Net financial debt increased from
€ 17.8 million in the previous year to € 27.7 million in the year under report.
Rating
Since 2004, the creditworthiness of the HORNBACH-Baumarkt-AG Group has been rated by the leading interna-tional rating agencies Standard & Poor’s and Moody’s Inves-tors Service. Following a positive outlook in February 2011, Standard & Poor's upgraded the company's rating in July 2011 to "BB+" with a stable outlook on that basis. In October 2011, Moody’s confirmed its rating at "Ba2" and amended its outlook to positive.
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GROUP MANAGEMENT REPORT Asset SituationEquity ratio rises to 48.6%
Balance sheet of the HORNBACH-Baumarkt-AG Group (abridged version)
€ million 2.29.2012 2.28.2011 Change
Non-current assets 686.9 640.6 7.2%
Current assets 941.2 951.1 (1.0)%
Assets 1,628.1 1,591.7 2.3%
Shareholders' equity 792.0 729.9 8.5%
Non-current liabilities 471.6 400.9 17.6%
Current liabilities 364.5 460.9 (20.9)%
Equity and liabilities 1,628.1 1,591.7 2.3%
(Differences due to rounding up or down to nearest € million)
Total assets at the Group rose year-on-year by € 36.4 million, or 2.3%, to € 1,628.1 million. This growth in total assets reflects the continuing expansion of the HORNBACH-Baumarkt-AG Group, which is mainly apparent in investments in non-current assets and increased inventories.
The equity of the Group as stated in the balance sheet amounted to € 792.0 million at the end of the financial year (2010/2011: € 729.9 million). The equity ratio rose from 45.9% in the previous year to 48.6%.
Non-current and current assets
Non-current assets amounted to € 686.9 million at the bal-ance sheet date (2010/2011: € 640.6 million), and thus ac-counted for around 42% of total assets (2010/2011: 40%).
Property, plant and equipment and investment property rose by € 51.2 million (8.5%) from € 599.1 million to
€ 650.3 million. Additions to property, plant and equipment of
€ 101.1 million were countered by depreciation of
€ 50.3 million, write-ups of € 1.2 million, and disposals of assets amounting to € 2.0 million. Adjustments to account for exchange rate movements led property, plant and equipment and investment property to increase by € 2.6 million. Further-more, application of IFRS 5 required real estate classified as
held for sale amounting to a net total of € 1.4 million to be reclassified out of property, plant and equipment to current assets. These items of real estate were already sold in the 2011/2012 financial year.
Non-current income tax receivables involve a claim to pay-ment of a corporate income tax credit with a present value of
€ 8.0 million. This item was capitalized in the 2007/2008 financial year and once again in the past financial year due to legislative amendments (SEStEG).
Current assets showed a slight decline of 1.0% from
€ 951.1 million to € 941.2 million, equivalent to around 58% of total assets (2010/2011: 60%). Here, the growth-driven increase in inventories was offset by a reduction in cash and cash equivalents. Inventories rose from € 459.5 million to
€ 475.7 million. Further measures taken to optimize capital committed nevertheless enabled the inventory turnover rate to be maintained consistently high at 4.0. Receivables and other assets (including income tax receivables) amounted to
€ 61.2 million (2010/2011: € 63.9 million). The non-current assets held for sale and disposal groups of € 5.1 million recognized pursuant to IFRS 5 in the previous year were sold in the past financial year.