HALF-YEAR REPORT 2019
notes to the half-year report
as at June 30, 2019
This unaudited, consolidated half-yearly financial statement of the Feintool Group is based on the individual financial statements of the Group companies as of June 30, 2019, which were prepared in accordance with uniform accounting policies, and released for publication by the Board of Directors on August 20, 2019.
With the exception of the changes to the accounting principles outlined below, the consolidated half-year result has been created according to the same valuation guidelines as the annual financial statement of December 31, 2018 and corresponds to the International Financial Reporting Standards (IFRS) in accordance with IAS 34 Interim Financial Reporting and the requirements of SIX Swiss Exchange. This half-yearly report does not include all the information and disclosures that are disclosed in the annual report of the Feintool Group as of December 31, 2018, and for that reason should be read in conjunction with it.
The consolidated half-yearly financial statement is shown in Swiss francs (CHF), rounded to the nearest thousand. It is produced in German and English. The half-yearly financial statement in German is the authoritative version.
CHANGES TO THE ACCOUNTING PRINCIPLES
With the exception of newly issued or revised Standards and Interpretations, which are applicable or have been modified in the reporting year, essentially the same accounting policies were applied as in the previous year.
On January 1, 2019, Feintool introduced the following new (adapted) Standards and Interpretations:
IFRS 16 – Leases
Within the scope of the transition to IFRS 16, on January 1, 2019, the rights to use leased assets were recognized as assets with a value of CHF 11.6 million. The transition to IFRS 16 was carried out according to the modified retrospective approach, whereby the company refrained from reassessing whether a contract contains a lease component for practical reasons. The comparative figures for prior-year periods have not been restated. As part of the first-time adoption of IFRS 16, Feintool is making use of the exemption and restating the value of right-of-use assets to reflect possible provisions for onerous leases, which are recognized on the Balance Sheet immediately before the date of first-time adoption. In addition, Feintool has decided not to apply the new provisions to leases that expire within twelve months of the date of initial adoption.
Based on the operating lease obligations held on December 31, 2018, the value of lease liabilities was restated on the Statement of Financial Position as of January 1, 2019, as follows:
Lease liabilities were discounted using the incremental borrowing rate as of January 1, 2019. The weighted average borrowing rate stood at 2.4%.
As of June 30, 2019, and for the reporting period, the following disclosures were made on the Balance Sheet and the Consolidated Statement of Comprehensive Income:
The right-of-use assets include assets which has been accounted as financial leases under IAS 17 until December 31, 2018.
Recognition and Measurement Methods for Leases
Upon entering into a contract, the Feintool Group will assess whether the contract should be classified as a lease or contains a lease component. In making this assessment, which requires a certain degree of discretion, the Group will assess whether a specific asset is affected, whether the Group obtains substantially all the economic benefits from the use of the asset, and whether the Group has the right to control the use of the leased asset.
The Feintool Group will recognize a right-of-use asset and a lease liability at the beginning of the lease term, except in the following two cases:
In both cases, lease payments are recognized as an expense on the Consolidated Statement of Comprehensive Income on a straight-line basis over the term of the lease.
The lease liability is initially measured at the present value of the lease payments payable over the lease term, discounted at the rate implicit in the lease. If this rate cannot be readily determined, the Feintool Group will use an incremental borrowing rate specific to the country, term, and currency of the contract. Lease payments include, for example, fixed and variable payments that depend on an index or rate known at the commencement of the lease. The lease liability is subsequently measured at cost less accumulated depreciation and accumulated impairment on the basis of the effective interest method and remeasured (with a corresponding adjustment to the right-of-use asset) if future lease payments change as a result of renegotiation, changes in an index or interest rate, or a revaluation of options.
The right-of-use asset is initially measured at the amount of the lease liability, any initial direct costs, as well as restoration obligations, less any lease incentives granted. The right-of-use asset is depreciated over the shorter of the lease term or the useful life of the underlying asset. Similar to assets held by the Group, the recoverability of the right-of-use asset is also reviewed if there are indications of impairment.
The right-of-use asset is recognized under property, plant, and equipment and the lease liability under current and noncurrent financial liabilities.
The following contract terms or depreciation periods generally apply:
Property: 3 to 10 years
Machines: 5 to 15 years
Other tangible assets: 3 to 5 years
Other new and revised standards
Feintool is either unaffected by these changes, or the changes have no material effect on its financial position, results of operations or cash flows.
FUTURE CHANGES TO ACCOUNTING PRINCIPLES
Feintool constantly examines the effects of newly published accounting principles on the Group’s financial position, results of operations or cash flows.
Feintool is assessing the impacts of the revised Standards and Interpretations. Based on its initial findings, Feintool does not foresee any significant impacts on its financial position, results of operations or cash flows.
The preparation of the consolidated half-yearly financial statements requires that the management makes assessments and assumptions which influence the amounts of assets and liabilities, the statement of contingent receivables and liabilities, as well as income and expenditure. Areas in which estimates have a significant influence on the carrying amount include the calculation of provisions, the economic useful life of the fixed assets, the assumptions of the ’value in use’ calculation for goodwill, the expected future cash flow from capitalized development costs, the valuation of long-term construction contracts, the assessment of expected and deferred taxes, and the actuarial assumptions in the calculation of pension obligations. These estimates may differ from the actual results and hence have a significant impact on the Group’s financial position, results of operations or cash flows.
Management and Board of Directors believe that the planning principles and assumptions are realistic.
CONTINGENT LIABILITIES/PURCHASE COMMITMENTS
The contingent liabilities arising from received funding, which has certain conditions attached, amount to CHF 3.7 million (previous year CHF 3.5 million).
Feintool owns properties at some locations that are either contaminated or suspected of being contaminated. Under the supervision of the local authorities, Feintool is remediating these plots of land to remove the corresponding pollution and contaminants. Based on our current assessment, these activities are not expected to have a significant impact on the Feintool Group’s net assets, financial position, or results of operations.
At one location in Switzerland, a neighbor filled a suit due to excessive noise emissions from a production site. Together with the responsible authorities, Feintool is currently examining structural and organizational modifications with the aim of reducing the effects of the emissions. Feintool does not expect these modifications to have a material impact on the Group's financial position, results of operations or cash flows.
At the end of the reporting period, Feintool was not involved in any other court proceedings. However, disputes relating to product liability, promotional activities, labor law and unfair dismissals, anti-trust law, securities trading, sales and marketing practices, health and safety, environmental and tax-related claims, state investigations and copyright law are always a possibility. Such proceedings could result in substantial claims being brought against Feintool that may not be covered by insurance policies. Feintool believes, however, that any such proceedings would not have a significant effect on the Group's financial position, operating results or cash flows.
The Feintool Group has undertaken to purchase property, plant and equipment amounting to CHF 30.0 million (previous year CHF 7.8 million).
BASIS OF CONSOLIDATION
The consolidated half-yearly financial statements encompass the half yearly financial statement of Feintool International Holding AG, Lyss (Switzerland), in addition to the half-yearly financial statements of all Group companies in which Feintool International Holding AG directly or indirectly owns more than 50 % of the voting rights or which it controls in any other way. A list of all the subsidiaries is contained in the Annual Financial Report of December 31, 2018, page 95.
On July 31, 2018, Feintool Holding GmbH, Bayreuth, Germany, acquired 100 % of the shares of the German company Stanzwerk Jessen GmbH, located in Jessen, Saxony-Anhalt, Germany, with its subsidiaries Jela GmbH, SLTJ GmbH and Stanz- und Lasertechnik Jessen GmbH. SLTJ GmbH merged after that with Stanz- und Lasertechnik GmbH. The name of Stanz- und Lasertechnik Jessen GmbH was then changed to Feintool System Parts Jessen GmbH.
Retroactive as of January 1, 2018, Feintool Equipment AG, Lyss, merged with Feintool System Parts Lyss AG.
Feintool has a syndicated loan of CHF 90 million (previous year EUR 90 million), a promissory note in the amount of EUR 65 million (previous year EUR 65 million), bilateral credit loans and several leasing and rental contracts (more details in the Annual Financial Report of December 31, 2018 note 20 and 24).
These contracts contain standard covenants, particularly
Were the Group or individual companies unable to meet these covenants, the banks would have the right to terminate the loans at short notice. As at December 31, 2018, all covenants had been met. As at June 30, 2019, Feintool had CHF 41.5 million (previous year CHF 73.1 million) in unused, confirmed credit lines at the bank.
The business segments of Feintool are subject to no significant seasonal fluctuations. The earnings arising from contract assets recognized over a specific period of time are distributed over the period.
The Feintool Group used the following exchange rates in the half-years:
1 Segment information
The following footnotes are applicable to the 2019 and 2018 half-year periods.
1) Total Net Sales include "Sales from products transferred over time" about CHF 18.5 million (prior year CHF 25.2 million). The net sales have been recognized in the Fineblanking Technology Segment. The remaining net sales in this segment mainly consist of tool sales and services.
2) The gross margin is calculated as net sales less material costs, the change in finished and semi-finished goods and work in progress, and direct personnel costs.
3) Net working capital comprises trade receivables, inventories, net assets of construction contracts and prepaid expenses and accrued income less trade payables, advance payments received from customers and accrued expenses and deferred income. The remaining receivables and liabilities is included in the calculation for “Finances/Other”.
4) Net sales is allocated to countries based on the customer's domicile.
The following explanations on the segment information apply to the financial years 2018 and 2019.
The Fineblanking Technology segment comprises the development, manufacture and sale of presses, tools, peripheral systems and all related services.
The System Parts segment develops, produces and sells high-precision system components and assemblies using fineblanking and forming technology as well as electronic sheet stamping. The segment also sells production-specific tools to third-party customers. The production and internal sale of tools is also included in this segment.
For operational reasons, the tool making business in Switzerland has been shifted from Fineblanking Technology to the System Parts segment as of June 1, 2018. This affects 68 employees and assets amounting to CHF 3.3 million.
“Finances/Other” essentially comprises the figures for Feintool International Holding AG, the German sub-holding company Feintool Holding GmbH and the real estate company included in the sub-holding company HL Holding AG.
The operating profit/loss comprises all operating income and expenses directly attributable to the individual segments. This includes all cross-segment expenses, which are charged directly on an arm’s-length basis. Feintool's financing is undertaken at the Group level. Financial expenses and income, financial liabilities as well as taxes, are therefore reported only at the Group level and do not appear in the segment reports.
There is no reconciliation of data in management reports and data contained in the financial reports, as internal and external reporting are subject to the same valuation principles.
2 Financial result and derivative financial instruments
1) Besides bank charges, other financial expenses include annual amortization of establishing cost for the promissory note/syndicated loan and market making costs.
2.3 Fair value hierarchy
Feintool has measured financial instruments at fair value and uses the following hierarchy to determine fair value:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices)
Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Feintool holds only financial instruments in Level 2. These include currency forwards. Detailed information is disclosed in part “Derivative financial instruments outstanding”.
Currency instruments primarily relate to the hedging of foreign-currency risks in euros. The life of the foreign exchange futures is a few months.
2.5 Fair Values
The carrying amounts of the financial assets and liabilities do not differ materially from their fair values.
The "authorized capital" amounting to a maximum of CHF 6 000 000 created on April 19, 2016, by issuing a maximum of 600 000 new shares with a par value of CHF 10 each expired on April 19, 2018. By resolution of the General Meeting of April 24, 2018, the Board of Directors was authorized, if required, to create authorized capital amounting to a maximum of CHF 6 000 000 by issuing a maximum of 600 000 new shares with a par value of CHF 10 each. The new shares must be paid up in full. The Board of Directors is authorized to restrict or exclude the subscription right in certain cases. The shares may be issued in one or more steps. The authorization is limited to two years. The authorized share capital will expire on April 24, 2020.
As of September 20, 2018, 451 871 new shares with a par value of CHF 10 each were issued as part of a capital increase. The shares were fully drawn from the "authorized share capital".
1) The notice dated July 15, 2013, comprised 400 285 shares or 8.97 % of the corresponding share capital. Following the capital increase on September 20, 2018, 400 285 shares correspond to a capital share of 8.14 %.
On the occasion of the Annual General Meeting of Feintool International Holding AG on April 30, 2019, the shareholders approved the distribution of a dividend of CHF 2.00 (previous year CHF 2.00) per share for financial year 2018. This led to a dividend payout of kCHF 9 805 (previous year: kCHF 8 924).
5 Events after the balance sheet date
There were no significant events after the balance sheet date.
addresses of our operating companies
as at June 30, 2019