Koenig & Bauer AG (notes according to the German Commercial Code)

The annual financial statements of Koenig & Bauer AG were prepared in accordance with the provisions of the German Commercial Code (HGB).

As a holding company Koenig & Bauer AG does not conduct any operating business of its own but performs central and strategic functions for the Group. Central functions for the Koenig & Bauer Group include compliance/auditing, controlling, corporate development, innovation promotion, investor relations, IT, corporate accounting, patent and licensing, human resources, legal and insurance, tax and central marketing/corporate communications. In addition, Koenig & Bauer AG provides IT hardware and operates the computer centre for Group tasks and grants licences and brand rights to the subsidiaries. The number of employees on the reporting date, 31 December 2021, excluding apprentices, was 384 (2020: 291).

In addition to income from the services recharged to the operating Group companies and the fees for the use of licences and brand rights, Koenig & Bauer AG’s business performance depends on the dividend income and profit transfers received from the subsidiaries and, hence, their business performance. The direct and indirect investments held by Koenig & Bauer AG are shown in a list in the notes to the consolidated financial statements. The economic environment in which Koenig & Bauer AG operates is essentially the same as the Group’s as described in detail in the business report.

Koenig & Bauer Industrial Management GmbH was retroactively merged with Koenig & Bauer FT Engineering GmbH on 1 January 2021. The Supervisory Board of Koenig & Bauer AG unanimously approved this merger on 20 September 2021. Koenig & Bauer FT Engineering GmbH was renamed Koenig & Bauer Industrial GmbH effective 8 February 2022. The Supervisory Board of Koenig & Bauer AG unanimously approved this decision on 10 December 2021. Effective 31 December 2021 there was a further structural change under company law at Koenig & Bauer Industrial AG & Co. KG. On 10 December 2021, the Supervisory Board of Koenig & Bauer unanimously approved this change to restructure the entity, which had previously been structured in the form of a fiduciary limited partnership, to give it the status of a separate incorporated company subject to a profit and loss transfer agreement. The profit and loss transfer agreement planned between Koenig & Bauer AG and Koenig & Bauer Industrial GmbH requires the shareholders’ approval at the annual general meeting in May 2022. The streamlining of the corporate structure achieved with these two measures is expected to have a positive impact on the Group and, in addition to strengthening corporate governance and simplifying the management structure, also reduce administrative expenses. The structural changes adopted under company law have no impact on the Koenig & Bauer Group’s net assets, financial condition and results of operations under IFRS, although the change in Koenig & Bauer Industrial AG & Co. KG’s legal status as an incorporated entity will result in a slight increase in the equity reported in Koenig & Bauer AG’s single-entity financial statements.

Earnings

At €94.8m, revenue was 14.5% above the previous year’s figure of €82.8m and chiefly comprised income from transfer pricing for shared services provided by Koenig & Bauer AG for the operating Group companies and fees for the utilisation of licences and brand rights as well as land and buildings. The increase in gross profit results from the greater utilisation of shared services in the Group. On the other hand, the cost of sales increased, especially due to the reorganisation of purchasing at the holding company under the P24x programme. This led to an increase of €9.8m in the cost of sales from €-54.9 m to €-64.7m. The gross margin thus contracted to 31.8 %, down from 33.7% in the previous year. General administrative expenses decreased by €5.8m to €25.5m (2020: €31.3m). The previous year’s figure had been burdened by non-recurring personnel effects. The other operating income of €6.8m (2020: €11.8m) mainly shows the effects of the reversal of provisions. The other operating expenses of €6.2m (2020: €136.9m) mainly result from the absorption of Group transfer payments. In the previous year, expenses had arisen from the derecognition of receivables and waivers of loans to affiliated companies. Net investment income consists of dividend distributions (2021: €19.6m; 2020: €2.1m), income from profit transfers (2021: €10.9m; 2020: €3.2m) and loss absorption expenses (2021: €22.7m; 2020: €32.5m) from subsidiaries. After the high net investment income in the previous year, which had reached €218.2m primarily as a result of the legal restructuring of the Banknote Solutions business unit and, related to this, the recognition of unrealised reserves, income of €8.6m arose from the recognition of unrealised reserves in connection with the legal restructuring of the Industrial business unit in 2021.

Net interest expense rose to €-7.6m in the year under review (previous year: €-4.7m). Tax expense amounted to €2.4m (2020: €0.2m). On balance, this resulted in net profit for the year of €11.3m (2020: €42.5m). Including the profit carried forward of €29.5m (previous year: €8.3m) and the retained amount of €5.65m, the unappropriated surplus stands at €35.2m (previous year: €29.5m).

The Management Board and the Supervisory Board acting in accordance with section 58 of the German Stock Corporation Act have passed a resolution to retain half of the net profit for the year of €11.3m. The Management Board acting with the Supervisory Board’s approval proposes that the unappropriated surplus of €35.2m be retained.

Assets and finances

As of 31 December 2021, Koenig & Bauer AG’s balance sheet total stood at €658.2m, up slightly from €651.2m in the previous year. Fixed assets increased by a total of €11.9m to €529.3m (31 December 2020: €517.4m). The increase resulted mainly from the legal restructuring of Koenig & Bauer Industrial GmbH and the associated recognition of unrealised reserves. This resulted in an increase of €8.6m in shares of financial assets in affiliated companies. As of the reporting date, financial assets were valued at €408.4m, up from €399.3m in the previous year. The increase in intangible assets from €35.1m to €43.7m due to the capitalisation of IT projects is accompanied by a decline in property, plant and equipment from €83.0m to €77.2m due to higher depreciation and amortisation. The reduction in current assets from €131.8m to €126.9m was mainly due to the decline in cash and cash equivalents and bank balances from €56.1m to €35.6m due to the partial repayment of the syndicated loan. On the other hand, receivables from affiliated companies increased from €61.4m in the previous year to €77.0m. They include receivables under loans to affiliated companies of €22.9m (31 December 2020: €49.3m), receivables from offsetting cash flows of €41.0m (31 December 2020: €5.5m) as well as trade receivables of €13.0m (31 December 2020: €5.9m).

At the end of 2021, equity amounted to €306.5m (31 December 2020: €295.2m). This translates into an equity ratio of 46.6% relative to the increased balance sheet total (31 December 2020: 45.3%). Provisions rose slightly from €98.8m in the previous year to €108.6m. At €79.3m, retirement benefit provisions were virtually unchanged over the previous year’s figure of €79.4m, while other provisions increased from €19.4m to €27.0m. Liabilities to banks declined from €176.0m to €115.9m mainly due to the partial repayment of the syndicated loan. On the other hand, liabilities to affiliated companies rose from €73.9m to €121.2m.

Risk report

Koenig & Bauer AG is exposed to the risks of its subsidiaries. The extent of such exposure depends on the size of its share in the respective company. For further information, please refer to the Group’s risk report on pages 36ff. In addition, strain may arise from the contingent liabilities in existence between Koenig & Bauer AG and its subsidiaries.

Forecast

Koenig & Bauer AG’s future economic performance is closely linked to the Group’s operating performance. The opportunities report on page 44f. and the forecast on page 46ff. provide information on our prospects and plans for operating business.

Financial and non-financial performance indicators, and thus forecasts of these within the meaning of GAS 20, play only a subordinate role for Koenig & Bauer AG as an individual company. However, this does not have any impact on compliance with the requirements of corporate law.