Notes to the separate financial statements for HHLA 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) 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 AG) is a leading European port logistics group. It is the parent company of the HHLA Group and runs the Group as a strategic management holding company. Its operations are carried out by the 30 domestic and 16 foreign subsidiaries that make up the consolidated group. In the 2019 financial year, HHLA AG acquired shares in companies in order to expand its digital business activities and extend its intermodal network. 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 – as part 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, entitle shareholders merely 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 1,055 employees as of 31 December 2019 (previous year: 1,045). Of this number, 271 received wages (previous year: 290), 719 received a salary (previous year: 714) and 65 were apprentices (previous year: 41). Of the 1,055 staff members, 452 were assigned to companies within the HHLA Group in the reporting year.

Economic environment

Industry and macroeconomic developments are largely in line with those at the HHLA Group. Economic environment

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 € 136.0 million in the reporting period (previous year: € 122.8 million). The rise of € 13.2 million resulted from services billed to subsidiaries of HHLA AG.

Other income and expenses reduced earnings by an additional € 7.3 million compared with the previous year. This was largely due to expenses for the development of strategic initiatives, as well as income from the reversal of provisions recognised in the previous year.

The year-on-year decrease in the financial result resulted mainly from increased interest expenses due to the issuance of promissory note loans and registered bonds.

The development of income from equity investments was primarily due to the performance of the Intermodal segment. The net profits of HHLA’s affiliates and equity investments recognised in profit or loss rose year-on-year by € 17.8 million to € 143.4 million (previous year: € 125.6 million).

The € 2.8 million increase in income taxes stemmed mainly from the rise in the operating and financial result.

The company’s annual net profit amounted to € 75.8 million in the reporting period (previous year: € 56.2 million). The A division accounted for € 66.6 million of this amount (previous year: € 47.7 million) and the S division for € 9.2 million (previous year: € 8.5 million).

The difference between the actual annual net profit and the forecast is mainly attributable to the development of income from equity investments.

Assets

The carrying amounts of intangible assets and property, plant and equipment totalled € 32.4 million at the end of the reporting period (previous year: € 29.8 million). Capital expenditure amounted to € 6.9 million in the reporting period (previous year: € 9.8 million). Capital expenditure focused mainly on expanding the IT landscape.

The increase in financial assets of € 19.7 million to € 444.5 million was primarily due to the above-mentioned expansion of digital business activities.

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 2.71 % set by Deutsche Bundesbank was applied for the reporting year (previous year: 3.21 %).

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 € 330.1 million at the end of the reporting period (previous year: € 323.9 million).

Financial position

Cash flow from operating activities totalled € 103.7 million in the reporting period (previous year: € 38.2 million). It was dominated by the operating result and the income received from equity investments. Cash flow was completely sufficient to fund capital expenditure in the reporting period.

In connection with existing cash pooling agreements, financial funds comprised receivables from subsidiaries of € 224.1 million (previous year: € 192.3 million), cash and cash equivalents in the form of bank balances totalling € 112.3 million (previous year: € 128.8 million) – of which € 45.0 million (previous year: € 20.0 million) was short-term bank deposits – and clearing receivables of € 95.0 million (previous year: € 95.0 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 whenever this is advantageous for HHLA AG.

Risk and opportunity report

Business developments at HHLA AG are mostly 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. Management of risk and opportunities

Business forecast

Outlook

Due to its close ties with the affiliated companies and its weight within the Group, the expectations for Hamburger Hafen und Logistik Aktiengesellschaft (HHLA) 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 the holding company. Furthermore, the income from equity investments is expected to make a substantial contribution towards HHLA’s earnings. Business forecast

Expected earnings position in 2020

Based on the possible effects of the global coronavirus pandemic described in the Group's business forecast on the expected earnings situation of the HHLA Group, HHLA AG expects the annual profit to decline sharply compared to the previous year. As with the Group, a reliable forecast is not possible at HHLA AG due to the current developments. Business forecast

Expected financial position in 2020

Based on the liquidity control measures described in the Group's business forecast , HHLA AG expects its financial position to remain stable. Business forecast

Dividend

As in the previous year, HHLA AG’s appropriation of profits is oriented towards 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 consistent dividend policy.